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
------------------------
FERROFLUIDICS CORPORATION
(NAME OF SUBJECT COMPANY)
FERROTEC ACQUISITION, INC.
FERROTEC CORPORATION
(BIDDERS)
------------------------
COMMON STOCK, $.004 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
------------------------
315414 20 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
AKIRA YAMAMURA
FERROTEC CORPORATION
SUMITOMO BLDG. #6
5-24-8 HIGASHI UENO
TAITO-KU, TOKYO 110-0015, JAPAN
TELEPHONE: 03(3845)1032
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
------------------------
COPY TO:
ALAN H. ARONSON, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A.
ONE SOUTHEAST THIRD AVENUE
28TH FLOOR
MIAMI, FLORIDA 33131-1714
TELEPHONE: (305) 374-5600
<PAGE>
CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE
--------------------- --------------------
$37,298,842(1) $7,460
(1) Estimated for purposes of calculating the filing fee only. This amount
assumes the purchase of 5,574,177 shares of Ferrofluidics Corporation
common stock, including the associated preferred share purchase rights
("Shares"), which are outstanding at $6.50 per Share, and 428,330
Shares which are subject to outstanding options, at $6.50 per Share
less the exercise price of such options. The amount of the filing fee,
calculated in accordance with Rule 0-11(d) under the Securities
Exchange Act of 1934, as amended, equals 1/50 of one percent of the
value of the Shares to be purchased.
|_| Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
AMOUNT PREVIOUSLY PAID: NOT APPLICABLE.
FORM OR REGISTRATION NO.: NOT APPLICABLE.
FILING PARTY: NOT APPLICABLE.
DATE FILED: NOT APPLICABLE.
Exhibit Index on Page 10
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 315414 20 1
<TABLE>
<S> <C> <C>
1. NAME OF REPORTING PERSON: FERROTEC CORPORATION
I.R.S. IDENTIFICATION NUMBER: N/A
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) |X|
(B) |_|
3. SEC USE ONLY
4. SOURCE OF FUNDS:
BK AND WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(D) OR 2(E):
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
JAPAN
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON:
15,000 shares of Common Stock, $.004 par value, of Ferrofluidics Corporation
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES |_|
CERTAIN SHARES:
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7):
0.27%
10. TYPE OF REPORTING PERSON:
HC AND CO
</TABLE>
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 315414 20 1
<TABLE>
<S> <C> <C>
1. NAME OF REPORTING PERSON: FERROTEC ACQUISITION, INC.
I.R.S. IDENTIFICATION NUMBER: 02-0511990
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) |X|
(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:
COMMONWEALTH OF MASSACHUSETTS
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 0
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES |_|
CERTAIN SHARES:
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 0.0%
10. TYPE OF REPORTING PERSON:
CO
</TABLE>
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 315414 20 1
This Tender Offer Statement on Schedule 14D-1 (this "Statement")
relates to the offer by Ferrotec Acquisition, Inc., a Massachusetts corporation
(the "Purchaser") and a wholly owned subsidiary of Ferrotec Corporation, a
Japanese corporation (the "Parent"), to purchase all outstanding shares of the
common stock, par value $.004 per share (the "Common Stock"), including the
associated preferred share purchase rights (the "Rights," and together with the
Common Stock, the "Shares") of Ferrofluidics Corporation, a Massachusetts
corporation (the "Company"), at a price of $6.50 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Purchaser's
Offer to Purchase for Cash, dated October 26, 1999 (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 Ferrofluidics Corporation, a
Massachusetts corporation, which has its principal executive offices at 40 Simon
Street, Nashua, New Hampshire 03061.
(b) The class of equity securities being sought is all the outstanding
shares of Common Stock, par value $.004 per share, of the Company. The
information set forth in the "Introduction" and Section 1, "Terms of the Offer"
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 on
the Shares" of the Offer to Purchase are incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information concerning the name, state or other
place of organization, principal business and address of the principal office of
each of the Purchaser and Parent, 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 the Purchaser and Parent set forth in the
"Introduction," Section 9, "Certain Information Concerning the Purchaser and
Parent" and Schedule I of the Offer to Purchase are incorporated herein by
reference.
(e)-(f) During the last five years, none of the Purchaser or Parent
and, to the best knowledge of the Purchaser and Parent, 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)(1) The information set forth in Section 9, "Certain Information
Concerning the Purchaser and Parent," and Section 11, "Background of the Offer;
Contacts with the Company; the Merger Agreement," of the Offer to Purchase is
incorporated herein by reference. Except as described therein, neither the
Purchaser and Parent, nor to the best of the knowledge of the Purchaser and
Parent, any of the persons listed in Schedule I of the Offer to Purchase, has
entered into any transaction with the Company, or any of the Company's
affiliates which are corporations, since the commencement of the Company's third
full fiscal year preceding the date of this Statement, the aggregate amount of
which was equal to or greater than one percent of the consolidated revenues of
the Company for (i) the fiscal year in which such transaction occurred, or (ii)
the portion of the current fiscal year which has occurred if the transaction
occurred in such year.
<PAGE>
(a)(2) The information set forth in Section 9, "Certain Information
Concerning the Purchaser and Parent," and Section 11, "Background of the Offer;
Contracts with the Company; the Merger Agreement," of the Offer to Purchase is
incorporated herein by reference. Except as described therein, neither the
Purchaser nor Parent, nor to the best of the knowledge of the Purchaser or
Parent, any of the persons listed in Schedule I of the Offer to Purchase, has
entered into any transaction since the commencement of the Company's third full
fiscal year preceding the date of this Statement, with the executive officers,
directors or affiliates of the Company which are not corporations, in which the
aggregate amount involved in such transaction or in a series of similar
transactions, including all periodic installments in the case of any lease or
other agreement providing for periodic payments or installments, exceeded
$40,000.
(b) The information set forth in the "Introduction," Section 8,
"Certain Information Concerning the Company," Section 9, "Certain Information
Concerning the Purchaser and Parent," Section 11, "Background of the Offer;
Contacts with the Company; the Merger Agreement," and Section 12, "Purpose of
the Offer and the Merger; Plans for the Company; Other Matters," of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10, "Source and Amount of
Funds," and Section 12, "Purpose of the Offer and the Merger; Plans for the
Company; Other Matters," of the Offer to Purchase is incorporated herein by
reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction," Section 11,
"Background of the Offer; Contacts with the Company; the Merger Agreement," and
Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other
Matters," of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7, "Effect of the Offer on
the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations," of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9, "Certain Information
Concerning the 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 9, "Certain
Information Concerning the Purchaser and Parent," Section 11, "Background of the
Offer; Contacts with the Company; the Merger Agreement," and Section 12,
"Purpose of the Offer and the Merger; Plans for the Company; Other Matters," 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.
<PAGE>
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9, "Certain Information Concerning
the Purchaser and Parent," of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the "Introduction," Section 11,
"Background of the Offer; Contacts with the Company; the Merger Agreement," and
Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other
Matters," of the Offer to Purchase is incorporated herein by reference. Except
as described therein, there are no present or proposed material contracts,
arrangements, understandings or relationships between the Purchaser or Parent,
or to the best of the knowledge of the Purchaser and Parent, any of the persons
listed in Schedule I of the Offer to Purchase, and the Company, or any of its
executive officers, directors, controlling persons or subsidiaries.
(b)-(c) The information set forth in Section 15, "Certain Legal
Matters," of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7, "Effect of the Offer on the
Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations," and Section 15, "Certain Legal Matters," of the Offer to Purchase
is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the Offer to Purchase and the Letter
of Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
99(a)(1) Offer to Purchase dated October 26, 1999
99(a)(2) Letter of Transmittal with respect to the Shares
99(a)(3) Notice of Guaranteed Delivery with respect to the Shares
99(a)(4) Letter, dated October 26, 1999, from D. F. King & Co., Inc. to
Brokers, Dealers, Banks, Trust Companies and Other Nominees
99(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees to Clients
99(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99(a)(7) Press Release jointly issued by Parent and the Company on October
20, 1999.
99(a)(8) Form of Summary Advertisement dated October 26, 1999.
99(c)(1) Agreement and Plan of Merger, dated as of October 20, 1999, among
Parent, the Purchaser and the Company
99(c)(2) Confidentiality Agreement, dated as of August 16, 1999, by and
between Parent and the Company
99(c)(3) Consulting Agreement, dated as of October 20, 1999, among Parent,
the Purchaser, the Company and Paul F. Avery, Jr.
<PAGE>
99(c)(4) Employment Agreement, dated as of October 20, 1999, among Parent,
the Purchaser, the Company and William B. Ford
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.
FERROTEC ACQUISITION, INC.
By: /s/ Richard R. Cesati, II
---------------------------------
Name: Richard R. Cesati, II
Title: President
Date: October 26, 1999
<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.
FERROTEC CORPORATION
By: /s/ Akira Yamamura
---------------------------------
Name: Akira Yamamura
Title: President
Date: October 26, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. PAGE IN SEQUENTIAL NUMBERING SYSTEM
99(a)(1) Offer to Purchase dated October 26, 1999
99(a)(2) Letter of Transmittal with respect to the Shares
99(a)(3) Notice of Guaranteed Delivery with respect to the Shares
99(a)(4) Letter dated October 26, 1999, from D. F. King & Co., Inc. to
Brokers, Dealers, Banks, Trust Companies and Other Nominees
99(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees to Clients
99(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
99(a)(7) Press Release jointly issued by Parent and the Company on October
20, 1999
99(a)(8) Form of Summary Advertisement dated October 26, 1999
99(c)(1) Agreement and Plan of Merger, dated as of October 20, 1999, among
the Purchaser, Parent and the Company
99(c)(2) Confidentiality Agreement, dated as of August 16, 1999, by and
between Parent and the Company
99(c)(3) Consulting Agreement, dated as of October 20, 1999, among Parent,
the Purchaser, the Company and Paul F. Avery, Jr.
99(c)(4) Employment Agreement, dated as of October 20, 1999, among Parent,
the Purchaser, the Company and William B. Ford
EXHIBIT 99(a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(THE "SHARES")
OF
FERROFLUIDICS CORPORATION
BY
FERROTEC ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FERROTEC CORPORATION
AT
$6.50 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WHEN ADDED TO THE SHARES ALREADY OWNED BY PURCHASER REPRESENTS AT
LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14.
THE BOARD OF DIRECTORS OF FERROFLUIDICS CORPORATION UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FERROFLUIDICS CORPORATION, AND
RECOMMENDS THAT SUCH SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of his Shares
should either (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal 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 2 or (2)
request his broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for him. Any shareholder 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 he desires to tender such Shares.
<PAGE>
A shareholder 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 2.
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.
A shareholder may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D. F. King & Co., Inc.
October 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
INTRODUCTION.......................................................................................................
THE OFFER..........................................................................................................
1. Terms of the Offer...............................................................................
2. Procedure for Tendering Shares...................................................................
3. Withdrawal Rights................................................................................
4. Acceptance for Payment and Payment...............................................................
5. Certain Federal Income Tax Consequences..........................................................
6. Price Range of Shares; Dividends on the Shares...................................................
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration;
Margin Regulations...............................................................................
8. Certain Information Concerning the Company.......................................................
9. Certain Information Concerning the Purchaser and Parent..........................................
10. Source and Amount of Funds.......................................................................
11. Background of the Offer; Contacts with the Company; the Merger Agreement ........................
12. Purpose of the Offer and the Merger; Plans for the Company; Other Matters........................
13. Dividends and Distributions......................................................................
14. Certain Conditions of the Offer..................................................................
15. Certain Legal Matters............................................................................
16. Fees and Expenses................................................................................
17. Miscellaneous....................................................................................
SCHEDULE I - Directors and Executive Officers of Parent and the Purchaser..........................................
</TABLE>
<PAGE>
To the Holders of Common Stock of Ferrofluidics Corporation:
INTRODUCTION
Ferrotec Acquisition, Inc., a Massachusetts corporation (the
"Purchaser") and a wholly-owned subsidiary of Ferrotec Corporation, a Japanese
corporation ("Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $.004 per share (the "Common Stock"), including the
associated preferred share purchase rights (the "Rights", and together with the
Common Stock, the "Shares"), of Ferrofluidics Corporation, a Massachusetts
corporation (the "Company"), at a price of $6.50 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute the
"Offer").
Tendering shareholders of record who tender Shares directly 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 the Purchaser pursuant to the Offer. Shareholders
who hold their Shares through a bank or broker should check with such
institution as to whether they charge any service fees. The Purchaser will not
pay such service fees. The Purchaser will pay all charges and expenses of
American Stock Transfer & Trust Company (the "Depositary") and D. F. King &
Co., Inc. (the "Information Agent") incurred in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS
THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
Advest, Inc. ("Advest") has delivered to the Board its written opinion
that the consideration to be received by the shareholders of the Company
pursuant to each of the Offer and the Merger is fair to such shareholders from a
financial point of view. A copy of the opinion of Advest is contained in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"), which is being mailed to shareholders contemporaneously with this Offer
to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION 14, WHICH SETS FORTH
IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 20, 1999 (the "Merger Agreement"), by and among Parent, the
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 the relevant provisions of the Massachusetts
Business Corporation Law (the "MBCL"), the 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 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 will be canceled and converted automatically into
the right to receive $6.50 in cash, or any higher price that may be paid per
Share in the Offer, without interest (the "Offer Price"). The Merger Agreement
is more fully described in Section 11.
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Board as will give the Purchaser
representation on the Board equal to the product of (i) the total number of
directors on the Board multiplied by (ii) the percentage that the aggregate
number of Shares then beneficially owned by the Purchaser and its affiliates
following such purchase bears to the total number of Shares then outstanding
provided that there shall be at least two directors that are directors of the
1
<PAGE>
Company as of the date of the Merger Agreement. In the Merger Agreement, the
Company has agreed to take all actions necessary to cause the Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors or both
provided that the number of directors constituting the Company Board shall be no
less than five.
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 shareholders of the Company. See Section
11. Under the Company's Restated Articles of Organization and the MBCL, the
affirmative vote of the holders of at least a majority of the outstanding Shares
is required to approve and adopt the Merger Agreement and the Merger.
Consequently, if the Purchaser acquires (pursuant to the Offer or otherwise) at
least a majority of the outstanding Shares, the Purchaser will have sufficient
voting power to approve and adopt the Merger Agreement and the Merger without
the vote of any other shareholder.
The Purchaser presently intends to seek to cause the Company to make an
application for the termination of the registration of the Shares under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as
possible after the purchase of all validly tendered Shares pursuant to the Offer
if the requirements for termination of registration are met. See Section 7.
The Minimum Condition requires that the number of Shares validly
tendered and not withdrawn prior to the expiration of the Offer represent at
least a majority of the Shares outstanding on a fully diluted basis. According
to the Company, as of October 20, 1999, there were 5,574,177 Shares issued and
outstanding, and there were outstanding options to purchase an aggregate of
428,330 Shares. The Merger Agreement provides, among other things, that the
Company will not, without the prior written consent of Purchaser, issue any
additional Shares (except on the exercise of outstanding options and as
otherwise permitted under the Merger Agreement). Based on the foregoing and
assuming that all outstanding options are exercised, the Minimum Condition will
be satisfied if 3,007,256 Shares are validly tendered and not withdrawn prior to
the expiration of the Offer. If the Minimum Condition is satisfied, Purchaser
would be able to effect the Merger without the affirmative vote of any other
shareholder of the Company.
On August 3, 1994, the Board adopted a Shareholder Rights Plan (the
"Rights Plan"). The Rights Plan provides that one Right will attach to each
outstanding Share. The purchase price payable upon exercise of a Right is
$25.00, subject to adjustment. The distribution was payable to the shareholders
of record at the close of business on August 19, 1994 (the "Record Date") and
with respect to all Common Stock issued after the Record Date and prior to
certain events set forth in the Rights Plan. The description of the Rights Plan
and terms of the Rights are set forth in a Shareholder Rights Agreement, dated
as of August 3, 1994 (the "Rights Agreement"), by and between the Company and
American Stock Transfer and Trust Company, as Rights Agent. The Rights become
exercisable if (1) a person becomes a beneficial owner of 15% or more of the
outstanding Common Stock; (2) a tender or exchange offer, the consummation of
which would result in beneficial ownership by a person of 15% or more of such
outstanding Common Stock, is commenced; or (3) a person becomes the beneficial
owner of 10% or more of the outstanding Common Stock and the Board determines
that such beneficial ownership is intended to cause, is reasonably likely to
cause or will cause the Company to repurchase such person's Common Stock, or to
cause the Company to take action or enter into a transaction or a series of
transactions which would provide such person with short-term financial gain, or
such beneficial ownership is causing, or is reasonably likely to cause, a
material adverse impact on the business or prospects of the Company. Based on
the information disclosed by the Company in connection with and prior to the
Company entering the Merger Agreement, the Company has amended the Rights
Agreement to provide that the execution of the Merger Agreement, the taking of
any action by Parent, the Purchaser or any of their Affiliates or Associates in
accordance with the terms of the Merger Agreement, and the consummation of the
Merger will not cause (i) Parent, the Purchaser or any of their respective
Affiliates or Associates to become an Acquiring Person (as such terms are
defined in the Rights Agreement) unless the Merger Agreement has been terminated
in accordance with its terms, or (ii) a Distribution Date, a Stock Acquisition
Date, a Section 11(a)(ii) Event or a Section 13 Event (as such terms are defined
in the Rights Agreement) to occur.
The Purchaser estimates that the total funds required to purchase all
Shares validly tendered pursuant to the Offer, consummate the Merger and pay all
related costs and expenses will be approximately $ 38.8 million. The Purchaser
will obtain such funds from Parent by means of capital contributions, loans or a
combination thereof.
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<PAGE>
Parent plans to obtain the funds for such capital contributions or loans from
cash on hand and borrowings under Parent's credit facilities. See Section 10.
The information contained in this Offer to Purchase concerning the
Company was supplied by the Company, and Parent and the Purchaser take no
responsibility for the accuracy of such information. The information contained
in this Offer to Purchase concerning the Offer, the Merger, Parent and the
Purchaser was supplied by Parent and the Purchaser, and the Company takes no
responsibility for the accuracy of such information.
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.
THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment and pay for all Shares validly tendered prior
to the Expiration Date and not theretofore withdrawn in accordance with Section
3 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00
Midnight, New York City time, on Tuesday, November 23, 1999, unless and until
the Purchaser, in accordance with the terms of the Merger Agreement, shall have
extended the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of
the Minimum Condition and the expiration or termination of any applicable
waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations thereunder (the "HSR Act"). See Section
14. If such conditions are not satisfied prior to the Expiration Date, the
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Shares tendered and terminate the Offer, subject to the
terms of the Merger Agreement, (ii) waive any of the conditions to the Offer, to
the extent permitted by applicable law and the provisions of the Merger
Agreement, and, subject to complying with applicable rules and regulations of
the Securities and Exchange Commission (the "Commission"), purchase all Shares
validly tendered or (iii) extend the Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain the Shares
which will have been tendered during the period or periods for which the Offer
is extended.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time,
(i) to increase the Offer Price payable pursuant to the Offer and extend the
Offer for any period required by any rule, regulation, interpretation or
provision of the Commission or the staff thereof applicable to the Offer, and
(ii) to extend the Offer for a period of not more than 10 business days beyond
the latest Expiration Date that would otherwise be permitted under clause (i) of
this sentence if there shall not have been validly tendered and not withdrawn
pursuant to the Offer at least a majority of the then outstanding Shares and all
other conditions to the Offer shall have been satisfied or waived. In addition,
if on the initial Expiration Date any applicable waiting periods under the HSR
Act have not expired, and all other conditions to the Offer have been satisfied
or waived, Purchaser shall extend the Offer until such waiting period expires or
terminates. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer as described in
Section 14. Any extension, amendment or termination will be followed as promptly
as practicable by public announcement thereof, the announcement in the case of
an extension to be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in accordance
with the public announcement requirements of Rule 14d-4(c) under the Exchange
Act. Without limiting the obligation of the Purchaser under such Rule or the
manner in which the Purchaser may choose to make any public announcement, the
Purchaser currently intends to make announcements by issuing a release to the
Dow Jones News Service.
The Merger Agreement provides that, without the prior written consent
of the Company, neither Parent nor the Purchaser will decrease the Offer Price,
decrease the minimum number of Shares sought to be purchased pursuant to the
Offer, amend the conditions described in Section 14, or impose additional
conditions to the Offer.
3
<PAGE>
If the Purchaser extends the Offer, or if the Purchaser (whether before
or after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 3. However, the ability of
the Purchaser to delay the payment for Shares which the Purchaser has accepted
for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will disseminate additional tender offer materials and
extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. The minimum period during which the Offer must remain
open following material changes in the terms of the Offer or information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the Commission has stated that in its view, an offer must remain
open for a minimum period of time following a material change in the terms of
the Offer and that waiver of a material condition, such as the Minimum
Condition, is a material change in the terms of the Offer. The release states
that an offer should remain open for a minimum of five business days from the
date a material change is first published, sent or given to security holders and
that, if material changes are made with respect to information not materially
less significant than the offer price and the number of shares being sought, a
minimum of ten business days may be required to allow adequate dissemination and
investor response. The requirement to extend the Offer will not apply to the
extent that the number of business days remaining between the occurrence of the
change and the then scheduled Expiration Date equals or exceeds the minimum
extension period that would be required because of such amendment. As used in
this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1
under the Exchange Act.
The Company has provided the Purchaser with the Company's shareholder
lists 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 by the Purchaser to record holders of Shares and will
be furnished by the Purchaser to brokers, dealers, banks and similar persons
whose names, or the names of whose nominees, appear on the shareholder lists or,
if applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received by
the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case prior to the Expiration Date, or (ii) the tendering shareholder must comply
with the guaranteed delivery procedures set forth below.
The Depositary will establish accounts with respect to the Shares at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in any of the Book-Entry
Transfer Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with that Book-Entry Transfer Facility's procedure for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at a Book- Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents must, in any case, be transmitted to,
and received by, the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
shareholder must comply with the guaranteed delivery
4
<PAGE>
procedures described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at a Book-Entry Transfer Facility as described
above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). 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.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter
of Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion, Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In
all other cases, all signatures on Letters of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
returned to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant
to the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible
Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the
Purchaser, is received by the Depositary, as provided below, prior to
the Expiration Date; and
(iii)the certificates for all physically tendered
Shares, in proper form for transfer (or a Book-Entry Confirmation with
respect to all such Shares), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and any other required documents are
received by the Depositary within three trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is any
day on which The New York Stock Exchange, Inc. is open for business.
5
<PAGE>
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
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 (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set
forth above, the tendering shareholder will irrevocably appoint designees of the
Purchaser, and each of them, as such shareholder's attorneys-in-fact and proxies
in the manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares tendered by such shareholder and accepted for payment by the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after October 26,
1999. All such proxies will be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts for payment Shares tendered by such shareholder as
provided herein. Upon such appointment, all prior powers of attorney, proxies
and consents given by such shareholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no subsequent
powers of attorney, proxies, consents or revocations may be given by such
shareholder (and, if given, will not be deemed effective). The designees of the
Purchaser will thereby be empowered to exercise all voting and other rights with
respect to such Shares and other securities or rights, including, without
limitation, in respect of any annual, special or adjourned meeting of the
Company's shareholders, actions by written consent in lieu of any such meeting
or otherwise, as they in their sole discretion deem proper. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting, consent and other
rights with respect to such Shares and other related securities or rights,
including voting at any meeting of shareholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders of any Shares determined by it not to be in proper form or
the acceptance for payment of, or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute
right, subject to the provisions of the Merger Agreement, to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares of any particular shareholder, whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of the 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. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of U.S.
federal income tax on payments of cash pursuant to the Offer, a shareholder
surrendering Shares in the Offer must, unless an exemption applies, provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such shareholder is not subject to backup
6
<PAGE>
withholding. If a shareholder does not provide such shareholder's correct TIN or
fails to provide the certifications described above, the Internal Revenue
Service (the "IRS") may impose a penalty on such shareholder and payment of cash
to such shareholder pursuant to the Offer may be subject to backup withholding
of 31%. All shareholders surrendering Shares pursuant to the Offer should
complete and sign the main signature form and the Substitute Form W-9 included
as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Purchaser and the
Depositary). Certain shareholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Foreign shareholders, if exempt, should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after December 24, 1999.
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 of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 2, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 2 any time on or prior to the Expiration Date.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
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.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment and will pay,
promptly after the Expiration Date, for all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 3. All
determinations concerning the satisfaction of such terms and conditions will be
within the Purchaser's discretion, which determinations will be final and
binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in
its sole discretion, to delay acceptance for payment of or payment for Shares in
order to comply in whole or in part with any applicable law, including, without
limitation, the HSR Act. Any such delays will be effected in compliance with
Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay
for or return tendered securities promptly after the termination or withdrawal
of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates evidencing such Shares (or a timely Book-Entry Confirmation with
respect thereto), (ii) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any
7
<PAGE>
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and (iii) any other documents required by the Letter of
Transmittal. The per Share consideration paid to any shareholder pursuant to the
Offer will be the highest per Share consideration paid to any other shareholder
pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered to the
Purchaser and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Shares. 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 shareholders for the purpose of receiving payment
from the Purchaser and transmitting payment to tendering shareholders. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE
PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY
IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or
payment for, Shares or is unable to accept for payment or pay for Shares
pursuant to the Offer for any reason, then, without prejudice to the Purchaser's
rights under the Offer (including such rights as are set forth in Sections 1 and
14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates evidencing any such Shares will be returned, without
expense to the tendering shareholder (or, in the case of Shares delivered by
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility pursuant to the procedures set forth in Section 2, such Shares
will be credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
Subject to the terms of the Merger Agreement, the Purchaser reserves
the right to transfer or assign, in whole or from time to time in part, to
Parent, or to one or more direct or indirect wholly-owned subsidiaries of
Parent, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve the Purchaser of its obligations
under the Offer and will in no way prejudice the rights of tendering
shareholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will
be a taxable transaction for U.S. federal income tax purposes and also may be a
taxable transaction under state, local or foreign tax laws. Accordingly, a
shareholder who tenders Shares in the Offer or receives cash in exchange for
Shares in the Merger will recognize gain or loss for federal income tax purposes
equal to the difference, if any, between the amount of cash received and the
shareholder's tax basis in the Shares sold pursuant to the Offer or surrendered
for cash pursuant to the Merger. Gain or loss will be determined separately for
each block of Shares (i.e., Shares acquired at the same time and price)
exchanged pursuant to the Offer or the Merger. Such gain or loss generally will
be capital gain or loss if the Shares disposed of were held as capital assets by
the shareholder, and will be long-term capital gain or loss if the Shares
disposed of were held for more than one year at the date of sale or the
Expiration Date (in the case of the Offer) or on the date of the Merger (in the
case of the Merger), as the case may be. Capital gains recognized by an
individual (or an estate or certain trusts) upon a disposition of a Share that
has been held for more than one year generally will be subject to a maximum tax
rate of 20% or, in the case of a Share that has been held for one year or less,
will be subject to tax at ordinary income rates. Certain limitations apply to
the tax treatment of a shareholder's capital losses.
The foregoing summary constitutes a general description of certain U.S.
federal income tax consequences of the Offer and the Merger without regard to
the particular facts and circumstances of each shareholder of the Company and is
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department Regulations issued pursuant thereto and published
rulings and court decisions in effect as of the date hereof, all of which are
subject to change, possibly with retroactive effect. Special tax consequences
not described
8
<PAGE>
herein may be applicable to certain shareholders subject to special tax
treatment (including insurance companies, tax-exempt organizations, financial
institutions or broker dealers, foreign shareholders and shareholders who have
acquired their Shares pursuant to the exercise of employee stock options or
otherwise as compensation). ALL SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX
AND ANY STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES.
The Shares are traded through the Nasdaq National Market under the
symbol "FERO". The following table sets forth, for each of the fiscal quarters
indicated, the high and low sales prices per Share on the Nasdaq National Market
as reported in the Company's Annual Report on Form 10-K for the fiscal year
ended July 3, 1999.
<TABLE>
<CAPTION>
HIGH LOW
-------------------- --------------------
<S> <C> <C>
Fiscal Year Ended June 27, 1998:
First Quarter $ 8.875 $ 5.875
Second Quarter............................................ 7.8125 4.625
Third Quarter............................................. 6.4375 4.625
Fourth Quarter............................................ 5.6875 3.125
Fiscal Year Ended July 3, 1999:
First Quarter............................................. $ 4.875 $ 2.625
Second Quarter ........................................... 3.8125 2.0
Third Quarter............................................. 3.1250 2.50
Fourth Quarter ........................................... 4.5625 2.50
Fiscal Year Ended July 1, 2000:
First Quarter............................................. $ 4.688 $ 1.875
Second Quarter (through October 25, 1999)................. $ ______ $ ______
</TABLE>
On October 19, 1999, the last full trading day prior to the
announcement of the execution of the Merger Agreement and of the Purchaser's
intention to commence the Offer, the closing sales price per Share as reported
on the Nasdaq National Market was $ 3.9375. On October 25, 1999, the last full
trading day prior to the commencement of the Offer, the closing sales price per
Share as reported on the Nasdaq National Market was $____.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has never paid any dividends on the Shares. The Merger
Agreement provides that, without the prior written consent of Purchaser, the
Company will not declare, set aside or pay any dividend on or make any other
distribution in respect of its capital stock. See Section 11.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer
will reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and, depending upon the number of Shares so purchased,
could adversely effect the liquidity and market value of the remaining Shares
held by the public.
STOCK QUOTATION. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements for continued
inclusion in the Nasdaq National Market. If the Nasdaq National Market were to
cease to publish quotations for the Shares, it is possible that the Shares would
continue to trade in the over-the-counter market and that prices or other
quotations would be reported by other sources. The extent of the public market
for such Shares and the availability of such quotations would depend, however,
upon such factors as the number of stockholders and/or the aggregate market
value of such securities remaining at such time, the interest
9
<PAGE>
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.
MARGIN REGULATIONS. The Shares are presently "margin securities" under
the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status 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, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin regulations
of the Federal Reserve Board and therefore could no longer be used as collateral
for loans made by brokers.
EXCHANGE ACT REGISTRATION. The Shares currently are registered under
the Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement
pursuant to Section 14(a) in connection with shareholders' meetings and the
related requirement of furnishing an annual report to shareholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144 or
Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated. If registration of the Shares
under the Exchange Act were terminated, the Shares would no longer be "margin
securities" or be eligible for continued inclusion in the Nasdaq National
Market.
If registration of the Shares is not terminated prior to the Merger,
then the Shares will cease to be reported on the Nasdaq National Market and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Neither the 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 the
Purchaser or Parent.
GENERAL. Founded in 1968, the Company is engaged principally in
developing, manufacturing and marketing ferrofluids and products based on or
derived from its proprietary ferrofluid technology. Ferrofluids, the Company's
core technology, are stable magnetic liquids that can be precisely positioned or
controlled with a magnetic force. Ferrofluids consist of molecular-sized
magnetic particles that are surface treated so that they can be dispersed in
various fluids, usually a synthetic lubricating oil. Ferrofluids are designed to
have a choice of properties such as viscosity, magnetic strength and vapor
pressures to perform numerous specific functions such as sealing, sensing,
lubricating, damping and heat transfer. The Company's corporate offices are
located at 40 Simon Street, Nashua, New Hampshire, 03061 and its telephone
number is (603) 883-9800.
SELECTED 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 3, 1999 (the "Form 10-K"). More comprehensive financial information is
included in the Form 10-K 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.
10
<PAGE>
FERROFLUIDICS CORPORATION
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------
JULY 3, JUNE 27, JUNE 28,
1999 1998 1997
---------------- ------------------ ------------------
<S> <C> <C> <C>
Income Statement Data:
Net Sales $ 35,323 $ 52,700 $ 67,785
Net Sales from Continuing Operations 23,143 27,204 23,856
Income (Loss) from Continuing Operations (476) 1,546 260
Income (Loss) from Discontinued Operations 5,319 (5,018) 1,412
Net Income (Loss) 4,843 (3,472) 1,672
Basic Earnings (Loss) Per Share 0.79 (0.56) 0.27
Weighted average shares outstanding 6,137,192 6,198,603 6,116,176
Dividends per Share 0 0 0
</TABLE>
<TABLE>
<CAPTION>
JULY 3, 1999 JUNE 27, 1998 JUNE 28, 1997
---------------- ------------------- -- ------------------
<S> <C> <C> <C>
Balance Sheet Data:
Working Capital $ 15,095 $ 8,182 $ 13,323
Total Assets 28,923 44,019 45,001
Total Liabilities 8,394 25,818 23,420
Long-Term Debt 5,000 5,000 5,000
Shareholders' Equity 20,529 18,201 21,581
</TABLE>
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
shareholders 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., 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. In addition, such materials may be accessed electronically at the
Commission's web site on the internet at www.sec.gov.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
The Purchaser is a newly incorporated Massachusetts corporation organized
by Parent in connection with the Offer and the Merger and has not carried on any
activities other than in connection with the Offer and the Merger. The principal
offices of the Purchaser are located at Sumitomo Bldg. #6, 5-24-8 Higashi Ueno,
Taito-Ku, Tokyo 110-0015 Japan. Its telephone number is 03(3845) 1032. The
Purchaser is a wholly owned subsidiary of Parent.
Until immediately prior to the time that the Purchaser will purchase
Shares pursuant to the Offer, it is not anticipated that the Purchaser will have
any significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because
11
<PAGE>
the Purchaser is newly formed and has minimal assets and capitalization, no
meaningful financial information regarding the Purchaser is available.
Parent is a Japanese corporation. Its principal offices are located at
Sumitomo Bldg. #6, 5-24-8 Higashi Ueno, Taito-Ku, Tokyo 110-0015 Japan. Its
telephone number is 03(3845)1032.
Founded in 1980, Parent manufactures and markets ferrofluids, components
and products based on ferrofluid technology for the electronic industry, and
thermoelectric modules. Two major products based on ferrofluid technology are
computer seals utilized in hard disk drives and vacuum seals for the
semiconductor industry. The thermo-modules are small, wafer like heat pumps
which change temperature when charged with electricity. As the thermo-modules
are easily controlled at a precise temperature, their main application is as
semiconductor components.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of the Purchaser and Parent and certain other information are
set forth in Schedule I hereto.
Except as described in this Offer to Purchase, (i) none of the Purchaser,
Parent, nor, to the best knowledge of the Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of the Purchaser, Parent, or any of the persons so
listed, beneficially owns or has any right to acquire, directly or indirectly,
any Shares and (ii) none of the Purchaser, Parent, nor, to the best knowledge of
the Purchaser and Parent, 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 the Purchaser, Parent, nor, to the best
knowledge of the Purchaser and Parent, any of the persons listed in Schedule I
to this Offer to Purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or 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 June 30, 1996, neither the Purchaser nor
Parent nor, to the best knowledge of the Purchaser and Parent, 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 June 30, 1996, there have been no contacts, negotiations or
transactions between any of the Purchaser, Parent, or any of their respective
subsidiaries or, to the best knowledge of the Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase, 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.
SELECTED FINANCIAL INFORMATION. Because the only consideration in the
Offer and the Merger is cash, there is no financing condition, and all Shares
that are not tendered in the Offer will be purchased in the Merger, each of
Parent and the Purchaser believes that the financial condition of Parent is not
material to a decision by a holder of Shares whether to tender Shares pursuant
to the Offer or hold Shares. Notwithstanding the foregoing, set forth below is
certain summary selected consolidated financial information with respect to
Parent. Parent publishes its financial statements in Japanese Yen in accordance
with the laws and regulations of Japan. Such information is provided for
supplemental information purposes only and is neither intended, nor required, to
comply with the requirements of the Exchange Act.
12
<PAGE>
FERROTEC CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF YEN, EXCEPT PER SHARE DATA)
AT AND FOR THE FISCAL YEAR ENDED MARCH 31
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income Statement Data:
Net Sales (Y) 5,652,084 (Y) 5,045,365 (Y) 4,067,855
Operating Income 383,454 454,426 321,489
Income Before Income Taxes 81,541 624,086 297,767
Net Income (194,659) 314,631 122,968
Net Income Per Share (Basic) (21.41) 34.70 14.14
Net Income Per Share (Fully Diluted) (21.41) 34.19 13.83
Balance Sheet Data:
Total Current Assets (Y) 5,828,702 (Y) 4,484,298 (Y) 3,400,923
Total Assets 9,893,118 7,187,847 5,869,791
Total Current Liabilities 2,846,194 2,025,364 1,351,247
Long-Term Liabilities 3,027,839 782,278 472,443
Shareholders' Equity 4,011,314 4,275,049 4,043,306
</TABLE>
Net Income per Share is computed based upon the weighted average number of
shares of common stock outstanding during each fiscal year.
1. Prior to April 1, 1998, the enterprise tax was included in selling,
general and administrative expenses. Effective April 1, 1998, however, such
enterprise tax is included in income taxes. The effect of this change was to
increase income before income taxes for the year ended March 31, 1999, by (Y)
56,237.
2. The excess of cost over net assets of subsidiaries acquired is
amortized on a straight-line method basis over five years. Prior to April 1,
1998 such cost was shown after income before income taxes. Effective April 1,
1998, however, such cost is included in selling, general and administrative
expenses. The effect of this change was to decrease income before income taxes
for the year ended March 31, 1999, by (Y) 25,884.
<TABLE>
<CAPTION>
YEN EXCHANGE RATES PER U.S. DOLLAR 1999 1998 1997 1996
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fiscal Year end............................ 118.92 132.90 123.82 106.46
Average.................................... 127.97 122.75 112.52 96.4431
High ...................................... 147.32 133.90 124.42 107.19
Low........................................ 109.00 111.29 104.28 81.31
</TABLE>
The Yen exchange rate per U.S. Dollar was 105.26 on October 20, 1999.
DIFFERENCES IN ACCOUNTING PRINCIPLES BETWEEN JAPAN AND THE UNITED STATES.
The consolidated financial statements presented herein have been prepared in
accordance with generally accepted accounting principles ("GAAP") in Japan and
the format of such financial statements is in accordance with reporting
practices in that country. Such accounting principles and reporting practices
differ in certain respects from those prevailing in the United States. The
principal differences, which management of Parent believes may have a material
impact on Parent, are summarized below. Given the inherent differences between
Japanese GAAP and U.S. GAAP, the financial statements presented under Japanese
GAAP are not presented fairly, in all material respects, under U.S. GAAP. Parent
has not quantified these differences, nor prepared consolidated financial
statements under U.S. GAAP, nor undertaken a reconciliation of Japanese GAAP and
U.S. GAAP financial statements. Had Parent undertaken any such quantification or
preparation or reconciliation, other potentially significant accounting and
disclosure differences might have come to its attention, which are not
identified below. Accordingly, Parent can
13
<PAGE>
provide no assurance that the identified differences in the summary below
represent all of the principal differences relating to Parent. Further, no
attempt has been made to identify future differences between Japanese GAAP and
U.S. GAAP as a result of prescribed changes in accounting standards. Regulatory
bodies that promulgate Japanese GAAP and U.S. GAAP may have significant ongoing
revisions or amendments that could affect future comparisons. Finally, no
attempt has been made to identify all future differences between Japanese GAAP
and U.S. GAAP that may affect financial statements as a result of transactions
or events that may occur in the future. Although Japanese GAAP differs in
certain significant respects from U.S. GAAP, Parent believes that the
differences are not material to a decision by a holder of Shares whether to
tender Shares pursuant to the Offer or hold Shares, because the Offer is for
cash and any such difference would not affect the ability of the Purchaser to
pay for the Shares to be acquired pursuant to the Offer.
(i) Consolidation
Under Japanese GAAP, the consolidation of subsidiaries is not required
as long as the aggregate amounts of total assets, net sales, net income
and retained earnings of the subsidiaries are not significant compared
with those of the consolidated totals.
Under U.S. GAAP, the existing guidance of the Financial Accounting
Standards Board ("FASB") on consolidation policy requires the
consolidation of all entities in which the parent has a majority voting
interest. Consolidation, however, is not required where control is
expected to be temporary or does not rest with the owner of the
majority interest.
(ii) Tax-Allocation Accounting
Under Japanese GAAP, income taxes are required to be accrued based on
taxable income for the period, determined in accordance with the
applicable tax laws. Tax effect accounting had not been generally
permitted up to the fiscal year ended December 31, 1998. Due to the
amendment of the Commercial Code of Japan and the Securities and
Exchange Law of Japan, tax effect accounting is allowed for the
financial years ended or ending on January 1, 1999 and thereafter.
U.S. GAAP requires that deferred tax assets and liabilities be
recognized with respect to the differences between the financial
reporting and tax bases of such assets and liabilities, and be measured
using the enacted tax rates and laws which will be in effect when the
differences are expected to reverse.
(iii) Foreign Currency Translation
Under Japanese GAAP, long-term monetary assets and liabilities
denominated in foreign currencies are translated at the applicable
historical exchange rates prevailing at the time of the transactions,
and short-term monetary assets and liabilities denominated in foreign
currencies are translated at the exchange rate in effect at the balance
sheet date, except for assets and liabilities hedged by forward
exchange contracts which are translated at the respective contracted
exchange rates.
Under U.S. GAAP, monetary assets and liabilities denominated in foreign
currencies, whether short-term or long-term, are translated at the
exchange rate in effect at the balance sheet date.
U.S. GAAP requires that gain or loss on a forward exchange contract
intended as a hedge (other than a firm foreign currency commitment or a
net investment in a foreign entity) be measured and included in income
currently and the discount or premium be amortized to income over the
life of the contract. If a forward contract is not intended as a hedge,
the gain or loss together with the discount or premium is required to
be included in income currently.
(iv) Valuation of Securities
Under Japanese GAAP, investments in listed securities (other than those
in subsidiaries, which are carried at cost in the non-consolidated
financial statements) can be valued at the lower of cost or market.
However,
14
<PAGE>
if any significant impairment in the value of such investments in
subsidiaries is deemed permanent, the appropriate write-down is
required.
Under U.S. GAAP, investments in marketable equity securities with
readily determinable fair values and all investments in debt securities
are classified into three categories (i.e., held-to-maturity, trading
and available-for-sale) and are accounted for as follows:
(1) Investments in debt securities classified as held-to-maturity
are carried at amortized cost, and unrealized holding gains
and losses are not reported in the financial statements until
realized or until a decline in fair value below cost is deemed
to be other-than-temporary.
(2) Investments in equity securities and debt securities
classified as trading are reported at fair value, with
unrealized gains and losses included in earnings.
(3) Investments in equity securities and debt securities
classified as available-for-sale are reported at fair value,
with unrealized gains and losses excluded from earnings and
reported as other comprehensive income.
(v) Pension Costs
Under Japanese GAAP, the amount contributed to the pension fund is
recognized as pension costs, when such contribution is made.
Under U.S. GAAP, pension costs for financial reporting purposes are
accrued based on a certain actuarial computation method consistently
applied and may differ from the amount contributed to the pension fund.
(vi) Stock Options
Under Japanese GAAP, no accounting standards for compensation cost have
been issued.
Under U.S. GAAP, accounting for stock option plans is based either on
FASB Statement No. 123 (FAS 123) or on APB Opinion No. 25 (APB 25). A
Company that elects to apply the accounting provisions of APB 25 is
required to disclose the difference between compensation cost measured
by the method defined in FAS 123 and that measured by provisions of APB
25.
TRANSACTIONS BETWEEN PARENT AND THE COMPANY. Parent beneficially owns
15,000 Shares representing .27% of the issued and outstanding Shares as of
October 20, 1999 and Akira Yamamura, the President and Chief Executive Officer
of Parent, individually beneficially owns 50 Shares.
Parent is a successor to Nippon Ferrofluidics Corporation ("NFC"), which
was a wholly owned subsidiary of the Company. In 1987, Parent acquired NFC from
the Company.
Parent and the Company have had a long-standing business relationship with
each other. On May 2, 1983, the Company and NFC, then a wholly owned subsidiary
of the Company, entered into a License Agreement whereby the Company licensed to
NFC ferrofluid technology for a period of three years. On May 2, 1986, the
license was extended for one year. In connection with Parent's acquisition of
NFC in 1987, the Company and NFC, then a wholly owned subsidiary of Parent,
entered into three separate agreements whereby the Company licensed ferrofluid
technology and furnace technology to NFC and NFC licensed motor technology to
the Company.
In 1993, the Company and NFC entered into the Superseding 1993 Fluids
License Agreement (the "1993 Agreement") that superseded and replaced all prior
license agreements between the parties. Pursuant to the 1993 Agreement, all
ferrofluid technology, with certain exceptions, owned by either party was
licensed to the other party in perpetuity. At the time the 1993 Agreement was
entered into, Parent made an up-front payment to the Company in the amount of
(Y)850 million, which is being amortized in equal installments during the term
of the 1993
15
<PAGE>
Agreement. During each of fiscal 1997 and 1998, Parent incurred (Yen) 68 million
in royalty expense under the 1993 Agreement.
In March 1998, Parent obtained certain U.S. patents relating to
ferrofluids. On October 20, 1998, Parent and the Company entered into the 1998
Agreement Amending the Superseding 1993 Fluids License Agreement (the "1998
Agreement"). Pursuant to the 1998 Agreement, Parent granted to the Company the
exclusive license to make, use, sell or otherwise distribute vacuum rotary feed
through seals throughout the world other than in Asia. Pursuant to the 1998
Agreement, the Company ceased operations of its Japanese subsidiary whose
operations related solely to these seals. Under the 1998 Agreement, the Company
agreed to pay to Parent a 5% royalty on sales of vacuum rotary feed through
seals or $50,000 per quarter, whichever is greater. The 1998 Agreement
terminates on December 31, 2005, unless terminated sooner by mutual agreement of
the parties. If terminated, the rights between the parties would revert back to
the 1993 Agreement. The Company incurred $272,000 in royalty expense under the
1998 Agreement during fiscal 1999.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to consummate the
Offer and the Merger and to pay related fees and expenses is estimated to be
approximately $38.8 million (the "Total Funds Amount"). The Purchaser currently
plans to obtain all funds needed for the Offer through a combination of capital
contributions, loans, or a combination thereof, which will be made by Parent to
the Purchaser. Parent currently plans to finance funds required to effect such
capital contributions and loans from (i) approximately $15 million of its
available cash on hand, (ii) approximately $3.8 million from the proceeds of
borrowings under Parent's existing and new unsecured short-term lines of credit;
and (iii) approximately $20 million under new unsecured long-term credit
facilities.
Parent has commitments for the new short-term revolving credit facilities
with several financial institutions. The new short-term credit facilities are in
the aggregate amount of (Yen) 400 million ($3.8 million), will have terms of
three to six months, and will bear interest at the short term prime rate or
TIBOR (Tokyo Inter-Bank Rate) plus .125 - 1.625 percent.
Additionally, Parent has commitments for certain new long-term credit
facilities with several financial institutions. The first long-term credit
facility is in the amount of (Yen) 1,500 million ($14.3 million) and will have a
term of six years. Loans under this facility will bear interest at either (i)
the short-term prime rate plus one percent; or (ii) TIBOR plus two percent. The
second long-term credit facility is in the amount of (Yen) 100 million ($1.0
million), will have a term of five years, and will bear interest at the
short-term prime rate plus one half of one percent. The third long-term credit
facility is in the amount of (Yen) 200 million ($2.0 million), will have a term
of two years, and will bear interest at the long-term prime rate plus a margin
that has not yet been determined. The final long-term credit facility is in the
amount of (Yen) 300 ($2.9 million), will have a term of five years, and will
bear interest at the long-term prime rate plus one tenth of one percent.
It is anticipated that any borrowings under Parent's existing or new
credit facilities will be repaid from internally generated funds, and/or public
or private financings of Parent and the Company. The Offer is not conditioned on
Parent obtaining financing.
11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT.
BACKGROUND OF THE OFFER
The following description was prepared by Parent and the Company.
Information about the Company was provided by the Company and neither the
Purchaser nor Parent takes any responsibility for the accuracy or completeness
of any information regarding meetings or discussions in which the Purchaser,
Parent, or their representatives did not participate.
16
<PAGE>
Management of the Company and Parent were generally familiar with each
other as a result of the business relationships between the Company and Parent
discussed above. In March 1997, Salvatore J. Vinciguerra, the then President and
Chief Executive Officer of the Company, and Paul F. Avery, Jr., the then
Chairman of the Company Board, visited Japan and met with Akira Yamamura, the
President and Chief Executive Officer of Parent, to discuss a potential
transaction between the companies. Messrs. Avery and Yamamura discussed in
general terms the merits of combining the two companies and various alternative
transaction structures, including the acquisition by Parent of the Company for
cash or for stock of the Parent. Several weeks following this meeting, Messrs.
Vinciguerra, Avery and Yamamura met in Boston to further discuss a potential
transaction between the companies. However, the parties did not reach any
agreements at this time and did not continue discussions following the Boston
meeting.
In June 1999, Parent retained The Bank of Tokyo-Mitsubishi, Limited
("BTM") and Knox & Co. ("Knox") to evaluate a potential acquisition of the
Company as a part of Parent's global strategy. As a result of the evaluation by
BTM and Knox, Parent decided again to approach the Company.
On July 28, 1999, Mr. Yamamura, the then President and Chief Executive
Officer of Parent, called Mr. Avery to discuss whether the Company might have an
interest at that time in exploring a potential transaction with Parent that
would combine the companies. Based on this discussion, Messrs. Avery and
Yamamura agreed to undertake more extensive discussions and have representatives
of the Company meet with Parent's financial advisors.
On August 5, 1999, at Mr. Yamamura's request, Mr. Avery and William B.
Ford, the Vice President and Chief Financial Officer of the Company, met with
representatives of Parent's financial advisor. At this meeting, Parent's
financial advisor explained to Messrs. Avery and Ford, Parent's desire to
combine the two companies as part of Parent's global acquisition strategy. On
behalf of Parent, its financial advisor at this meeting proposed an acquisition
of the Company by Parent in a transaction in which the shareholders of the
Company would receive an aggregate of $35 million (or approximately $6.00 per
share) in cash. The proposal was subject to various conditions, including a
satisfactory due diligence investigation of the Company, negotiation of
definitive documentation acceptable to both companies and the approval of the
Boards of Directors of both companies.
On August 16, 1999, the Company and Parent entered into a Confidentiality
Agreement to permit the exchange of confidential information between the parties
for the purpose of evaluating the merits of a potential transaction between the
companies. The Confidentiality Agreement also provided that, with certain
exceptions, until the date that is two years from the date of the
Confidentiality Agreement, neither Parent nor any of its representatives would,
among other things, acquire any securities of the Company or seek to effect a
tender offer, merger or other business combination transaction involving the
Company. Pursuant to the Confidentiality Agreement, the Company thereafter
provided Parent and its financial advisors and legal counsel with certain
information concerning the Company's business, operations and financial
condition.
On August 23, 1999, Messrs. Avery and Yamamura met to continue discussions
concerning a potential transaction following a review by Parent of the
information provided to Parent by the Company. Mr. Yamamura affirmed Parent's
desire to proceed with an acquisition of the Company at an aggregate cash
purchase price of $35 million. Parent, with its representatives, conducted a due
diligence review of the Company from September 8, 1999 through September 24,
1999 in Nashua, New Hampshire. At the same time, Parent, along with its legal
representative and BTM and Knox, negotiated the specific terms of the Merger
Agreement with the Company.
On August 31, 1999, the Company Board held a meeting to discuss Parent's
proposal to acquire the Company for an aggregate cash purchase price of $35
million. At this meeting, the Company Board discussed the Company's current
business plan in view of Parent's all cash proposal, which would provide the
Company's shareholders' with full liquidity for their investment at a price
significantly greater than the recent trading price of
<PAGE>
the Company's stock. The Company Board also discussed management's discussions
with a potential strategic partner ("Company A") that had expressed an interest
in exploring a possible acquisition of the Company. Mr. Avery informed the
Company Board that representatives of Company A had informed him that Company A
was no longer interested in pursuing a possible acquisition of the Company
because Company A had concluded that certain business lines of the Company were
not a strategic fit with Company A's businesses. Following these discussions,
the Company Board authorized management to continue discussions with Parent
concerning a potential transaction with the objective of obtaining a higher
price and other favorable terms. The Company Board also authorized management to
seek bids from various financial advisors for the purpose of engaging a
financial advisor to evaluate the fairness from a financial point of view of the
consideration to be received by the Company's shareholders in any transaction
that might be considered by the Company Board. In addition, the Company Board
authorized management to continue to pursue other potential bidders through The
Bigelow Company, an investment banking concern familiar with the Company's
industry ("Bigelow").
Following the meeting of the Company Board on August 31, 1999, Parent, its
financial advisors and the Company continued discussions concerning a potential
acquisition of the Company by Parent, and, in particular, the amount of the cash
purchase price. After further negotiations between the parties, Parent increased
its proposed cash purchase price to $6.25 per share. In addition, the parties
began negotiating the terms of a draft merger agreement prepared by Parent's
legal counsel and the arrangements for senior management of the Company
following the completion of a transaction.
During this period, the Company, with the assistance of Bigelow, contacted
several other potential strategic partners to determine whether such parties
might have an interest in pursuing a transaction with the Company. The Company
also received bids from various investment banking firms to evaluate the
fairness from a financial point of view of the consideration to be received by
the Company's shareholders in any proposed transaction involving the Company.
Following the receipt of such bids, the Company retained Advest, Inc. ("Advest")
to advise the Company with respect to such matters.
On September 9, 1999, the Company Board met to discuss the status of
negotiations with Parent, including the price and other proposed terms. At this
meeting, Mr. Avery informed the Company Board that Parent had increased its
proposed cash purchase price from $6.00 per share to $6.25 per share. Management
also updated the Company Board on the progress being made by Bigelow to solicit
indications of interest from other potential strategic partners. The Company
Board then engaged in a discussion concerning the Company's current business
plan in view of Parent's latest proposal. Following this discussion, the Board
instructed management to continue negotiations of the terms of the proposed
transaction with Parent and to continue pursuing other indications of interest.
On September 21, 1999, Bigelow received a preliminary indication of
interest from another company ("Company B") within the industries in which the
Company operates. In its preliminary indication of interest, Company B expressed
a willingness to acquire the Company for an aggregate cash purchase price of not
more than $30 million. Management of the Company instructed Bigelow to inform
Company B that it would have to significantly increase its proposed purchase
price for the Company to continue to explore a potential transaction with
Company B.
On September 28, 1999, representatives of Company B met with Messrs. Avery
and Ford and other representatives of the Company to discuss the strategic fit
of the Company and Company B, although no new proposal by Company B resulted
from that meeting.
On September 29, 1999, Mr. Avery received a telephone call from a
representative of another company ("Company C") within the industries in which
the Company operates expressing an interest in exploring a potential transaction
with the Company. Following a discussion, Mr. Avery and the representative from
Company C agreed that representatives from Company C should meet in person with
Messrs. Avery and Ford to further discuss Company C's interest. Bigelow also
informed Mr. Avery the same day that Company B had decided not to pursue a
<PAGE>
transaction with the Company.
On September 30, 1999, Messrs. Avery and Ford and other representatives of
the Company met with representatives from another company ("Company D") within
the industries in which the Company operates expressing an interest in exploring
a potential transaction with the Company.
On September 30, 1999, the Company Board held a meeting to discuss the
status of negotiations with Parent and the Company's and Bigelow's efforts to
solicit additional indications of interest. At this meeting, the Company Board
discussed the terms of the draft merger agreement proposed by Parent, including
the scope of the Company's ability to terminate the merger agreement to accept a
more favorable transaction. Messrs. Avery and Ford also updated the Company
Board on the status of the discussions with Company A, Company B, Company C and
Company D.
On October 1, 1999, Bigelow informed Mr. Avery that Company D had decided
not to pursue a transaction with the Company.
On October 4, 1999, representatives of Company C met with Messrs. Avery
and Ford and other representatives of the Company to discuss Company C's
interest in pursuing a potential transaction with the Company. Following this
meeting, on October 5, 1999 Mr. Avery received a telephone call from a
representative of Company C informing him that Company C had decided not to
continue discussions with the Company concerning a possible transaction.
On October 5, 1999, Mr. Avery met with Mr. Yamamura in Manchester, New
Hampshire to discuss, among other things, employee matters, including his and
Mr. Ford's role with the Company following completion of the proposed
transaction.
On October 6, 1999, the Company Board held a meeting at which Mr. Avery
again reported on management's discussions with Company A, Company B, Company C
and Company D. The Company Board also discussed the status of negotiations with
Parent and the terms of the proposed transaction, including the purchase price.
At the meeting, the Company's legal counsel described the current terms of the
draft merger agreement and the Company Board discussed certain of them at
length.
Following the October 6 meeting of the Company Board and throughout the
week of October 11, 1999, the parties continued negotiating the terms of the
draft merger agreement. As a result of these negotiations, Parent indicated that
it was willing to agree to a purchase price of $6.50 per share if the parties
could agree on the other unresolved terms of the draft merger agreement and
related documentation.
On October 14, 1999, the Company Board met to consider the approval of the
Merger Agreement and the transactions contemplated thereby. At that meeting,
Messrs. Avery and Ford, together with the Company's legal counsel, updated the
Company Board on the status of negotiations with Parent. Messrs. Avery and Ford
updated the Company Board on the key issues under discussion and the relative
positions of the parties with respect to such issues. The Company's legal
counsel reviewed for the Company Board the terms of the Merger Agreement and the
agreements with Messrs. Avery and Ford governing their involvement with the
Company following completion of the transaction. In addition, Advest gave a
presentation to the Company Board concerning the fairness, from a financial
point of view, of the cash consideration to be received by the shareholders of
the Company in the transaction. Following this presentation, Advest delivered
its opinion to the effect that, as of the date of such opinion, the cash
consideration of $6.50 per share to be received by the Company's shareholders in
the transaction was fair, from a financial point of view, to the Company and its
shareholders. The Company Board, after considering the terms of the Merger
Agreement and after discussing and considering the analyses and opinion of
Advest, determined that the Offer and the Merger were fair to and in the best
interests of the Company and its shareholders, recommended that all shareholders
tender their shares pursuant to the Offer, and authorized management to complete
negotiations of, and execute, the Merger Agreement and related agreements.
Preparation
<PAGE>
of final version of the Merger Agreement and related agreements
continued through the evening of October 19, 1999 and into the morning of
October 20, 1999. Early in the morning of October 20, 1999, the Company, Parent
and Purchaser executed the Merger Agreement and issued a joint public
announcement of the transaction.
In reaching its determination regarding the transaction, the Company Board
considered a number of factors, including, without limitation, the following:
(i) The Company's business, assets, management,
strategic objectives, competitive position and
prospects.
(ii) The Company's historical financial information and
projected financial results, including those set
forth in the strategic plans developed annually by
the Company and management's most recent
projections.
(iii) Historical market prices and trading information
with respect to the shares of Common Stock and a
comparison of these market prices and trading
information with those of selected publicly-held
companies operating in industries similar to that of
the Company and the various price to earnings
multiples at which the shares of Common Stock and
the securities of these other companies trade.
(iv) A financial analysis of the valuation of the Company
under various methodologies, including a discounted
cash flow analysis, a selected comparable public
companies analysis and a selected comparable
transactions analysis.
(v) The prices and forms of consideration paid in
selected recent comparable acquisition transactions,
and the fact that the price to be paid under the
Merger Agreement to holders of the shares of Common
Stock compares favorably to the prices paid in other
recent acquisition transactions of companies in
similar industries.
(vi) The fact that the $6.50 per share price to be paid
in the Offer and the Merger represents (A) a premium
of 79% over $3.625, the closing price of a share of
Common Stock on the Nasdaq National Market on
October 13, 1999, and (B) a premium of 65% over
$3.942, the sixty day average of the closing price
of a share of Common Stock as of October 13, 1999.
(vii) The terms and conditions of the Merger Agreement,
including the "all cash" nature of the transaction
and the fact that (A) the Offer and Merger are not
subject to a financing condition, (B) Parent and the
Purchaser have agreed that shares of Common Stock
not purchased in the Offer will receive pursuant to
the Merger the same form and amount of consideration
as the shares of Common Stock purchased in the
Offer, and (C) the Company, under certain
circumstances and subject to certain conditions
(including the payment of liquidated damages to
Parent) may terminate the Merger Agreement in order
to execute an agreement with a third party providing
for the acquisition of the Company on terms more
favorable to the Company's shareholders than the
Offer and the Merger.
(viii) The opinion of Advest, delivered to the Company
Board on October 14, 1999, that as of such date, and
based upon and subject to the limitations set forth
therein, the cash consideration of $6.50 per share
to be received by the
<PAGE>
Company's shareholders in the transaction was fair,
from a financial point of view, to the Company and
its shareholders.
In view of the wide variety of factors considered by the Company Board,
the Company Board did not find it practicable to, and did not assign relative
weights to the factors set forth above. Rather, the Company Board reached its
determination based on the totality of the circumstances and the advice
presented to it by its financial and legal advisors.
In analyzing the Offer and the Merger, the Company's management and the
Company Board were assisted and advised by representatives of Advest and the
Company's legal counsel, who reviewed various financial, legal and other
considerations in addition to the terms of the Merger Agreement. Shareholders
are urged to, and should, read such opinion carefully and in its entirety. The
opinion was provided for the information and assistance of the Company Board in
connection with its consideration of the Offer and the Merger. Such opinion
addresses only the fairness from a financial point of view of the consideration
to be received by the shareholders of the Company in the Offer and the Merger
and does not constitute a recommendation to any shareholder as to whether to
tender shares in the Offer or to vote in favor of the Merger.
MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
The summary 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
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 8 of this Offer to Purchase. Capitalized terms used but not
defined in this summary of the Merger Agreement have the meanings given to such
terms in the Merger Agreement.
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered and not properly withdrawn pursuant to the Offer as soon as
legally permitted after the expiration of the Offer. The Merger Agreement
provides that, without the prior written consent of the Company, neither the
Purchaser nor Parent may decrease the Offer Price, decrease the minimum number
of Shares sought to be purchased in the Offer, or amend or impose conditions to
the Offer in addition to those set forth in Annex A to the Merger Agreement. The
Purchaser shall, on the terms of and subject to the prior satisfaction or waiver
of the conditions of the Offer and as soon as practicable after it is legally
permitted to do so under applicable law after expiration of the Offer, accept
for payment and pay for the Shares validly tendered and not withdrawn.
Notwithstanding, the foregoing, if on the initial Expiration Date, (which is 20
business days after the Offer is commenced) all conditions of the Offer shall
have been satisfied or waived other than the Minimum Condition, the Purchaser
shall extend the Expiration Date to the date that is ten business days
immediately following such initial Expiration Date. In addition, and
notwithstanding the foregoing but subject to Section 8.1 of the Merger
Agreement, if on such initial Expiration Date or any other Expiration Date the
applicable waiting period (and any extension thereof) under the HSR Act in
respect to the Offer shall not have expired or been terminated and all other
conditions to the Offer shall have been satisfied or waived, the Purchaser shall
be required to extend the Expiration Date until such waiting period shall have
expired or been terminated.
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<PAGE>
BOARD OF DIRECTORS. Promptly upon the purchase of Shares by the Purchaser
and from time to time thereafter, the Purchaser shall be entitled to designate
up to such number of directors, rounded up to the next whole number, on the
Company Board as will give Purchaser representation on the Company Board equal
to the number of directors which is the product of (i) the total number of
directors on the Company Board (giving effect to the directors designated by the
Purchaser pursuant to this sentence) multiplied by (ii) the percentage that the
aggregate number of Shares beneficially owned by the Purchaser or any affiliate
of the Purchaser following such purchase bears to the total number of Shares
then outstanding. In furtherance thereof, the Company shall, at such time,
promptly take all actions necessary to cause Purchaser's designees to be elected
as directors of the Company including increasing the size of its Board or
securing the resignations of such number of its incumbent directors, or both,
provided that the number of directors constituting the Company Board shall be no
less than five. At such time, the Company shall use its best efforts to cause
persons designated by the Purchaser to constitute the same percentage as is on
the Company Board of each committee of the Company Board, each board of
directors of each of the Company Subsidiaries (as hereinafter defined) and each
committee of such board, in each case to the extent permitted by law.
Notwithstanding the foregoing, in the event that the Purchaser's designees are
elected to the Company Board, until the Effective Time, the Company shall have
at least two independent directors. In the Merger Agreement, the Company has
agreed to promptly take all actions required pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its
obligations under the Merger Agreement, including mailing to shareholders the
information required by such Section 14(f) and Rule 14f-1 as is necessary to
enable the Purchaser's designees to be elected to the Company Board. The
Purchaser or Parent will supply the Company and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. As used
herein, "Company Subsidiary or Company Subsidiaries" shall mean all of the
operational subsidiaries of the Company through which the Company currently
conducts its businesses or has conducted its businesses during the two years
preceding the date of the Merger Agreement.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with the MBCL, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the surviving corporation (the "Surviving Corporation"). The Merger
shall be effected by the filing at the time of Closing of properly executed
Articles of Merger, or other appropriate documents with the Secretary of State
of The Commonwealth of Massachusetts.
The Merger Agreement provides that, at the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, the Purchaser, the
Company or the holder of Shares and except as otherwise provided in the Merger
Agreement with respect to Shares as to which appraisal rights have been
exercised, the Shares will be converted into the right to receive $6.50 in
cash, without interest thereon, as soon as is reasonably practicable upon
surrender of the certificate(s) formerly representing such Shares (other than
any Shares owned by the Purchaser or by any affiliate of the Purchaser or Shares
in the treasury of the Company, or in the treasury of any wholly-owned
subsidiary of the Company, which Shares, by virtue of the Merger and without any
action on the part of the holder thereof, shall be canceled and retired and
shall cease to exist with no payment being made with respect thereto). At the
Effective Time, all shares of common stock, par value $.01 per share, of the
Purchaser issued and outstanding immediately prior to the Effective Time will,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one-thousand (1,000) validly issued, fully
paid and nonassessable shares of common stock, par value $.004 per share, of the
Surviving Corporation.
OPTIONS AND WARRANTS; STOCK PLANS. Each option or warrant to purchase
Shares held by an employee, officer or director of the Company and other
eligible holders that is outstanding immediately prior to the Acceptance Date,
whether or not then vested or exercisable, shall, as of the Acceptance Date, be
cancelled in exchange for a single lump sum cash payment equal to the product of
(1) the number of Shares subject to such option or warrant and (2) the excess,
if any, of the Offer Price over the exercise price per share of such option or
warrant, subject to any required withholding of taxes, provided that the
warrants may only be cancelled with the consent of the holders of such warrants.
Prior to the Acceptance Date and through the Effective Time, if necessary, the
Company has agreed to use all reasonable efforts to (i) obtain consents from
appropriate holders of warrants and (ii) make any amendments to the terms of
such options, warrants or the compensation plans or arrangements related thereto
that are necessary to give effect to the transactions contemplated above.
Notwithstanding any foregoing provision, payment
18
<PAGE>
may be withheld in respect of any warrant or stock appreciation right ("SAR")
until necessary or appropriate consents are obtained.
The Merger Agreement provides that the Articles of Organization of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
Articles of Organization of the Surviving Corporation, until thereafter amended
in accordance with the provisions thereof and applicable law. The By-Laws of the
Purchaser in effect at the Effective Time will be the By-Laws of the Surviving
Corporation, until thereafter amended in accordance with the provisions thereof
and applicable law.
VOTE REQUIRED TO APPROVE THE MERGER. Pursuant to the Merger Agreement, the
Company will, if required by applicable law in order to consummate the Merger,
duly call, give notice of, convene and hold a special meeting of its
shareholders (the "Special Meeting") as soon as practicable following the
acceptance for payment and purchase of Shares by the Purchaser or its permitted
assignee pursuant to the Offer for the purpose of considering and taking action
upon the Merger Agreement. The Merger Agreement provides that the Company and
Parent will, if required by applicable law in order to consummate the Merger,
prepare and file with the Commission a definitive proxy statement (the "Proxy
Statement") relating to the Merger and the Merger Agreement and cause such Proxy
Statement to be mailed to the shareholders of the Company, provided that no
amendment or supplement to the Proxy Statement will be made without the approval
of the Company and the Parent, which approval will not be unreasonably withheld.
If the Purchaser acquires at least a majority of the outstanding Shares, the
Purchaser will have sufficient voting power to approve the Merger, even if no
other shareholder votes in favor of the Merger. The Parent and the Purchaser
have agreed to vote or use its reasonable best efforts to cause all of the
Shares owned beneficially or of record by them and their affiliates as of the
record date for the Special Meeting in favor of the Merger at the Special
Meeting.
CONDITIONS TO THE MERGER. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger and the transactions
contemplated thereby are subject to the satisfaction, at or before the Effective
Time, of certain conditions, including: (i) the shareholders of the Company
shall have duly approved the Merger and the transactions contemplated by the
Merger Agreement; (ii) any waiting period applicable to the Merger under the HSR
Act shall have expired or been terminated; (iii) the consummation of the Merger
shall not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any governmental
entity and there shall not have been any statute, rule or regulation enacted,
promulgated or deemed applicable to the Merger by any governmental entity which
prevents the consummation of the Merger, provided however, that the Company, the
Parent and the Purchaser shall have used their best efforts to prevent any such
rule, regulation, injunction, decree or other order, and to appeal as promptly
as possible any injunction, decree or other order that may be entered; (iv) all
authorizations, approvals or consents required to permit the Merger shall have
been obtained and are in full force and effect; and (v) the Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer and such Shares will satisfy the Minimum
Condition to the Offer.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations of the parties thereto, including representations by the Company
as to, among other things, (i) organization; (ii) capitalization; (iii)
authorization and validity of the Merger Agreement and necessary action; (iv)
consents and approvals; (v) Commission reports and financial statements; (vi)
undisclosed liabilities; (vii) absence of certain changes; (viii) disclosure
documents; (ix) employee benefit plans and ERISA (as defined in the Merger
Agreement); (x) litigation; (xi) compliance with applicable laws; (xii) taxes;
(xiii) real property; (xiv) intellectual property; (xv) contracts; (xvi)
environmental laws and regulations; (xvii) labor matters; (xviii) brokers or
finders; (xix) opinion of financial advisors; (xx) Board recommendation; (xxi)
insurance; (xxii) permits; (xxiii) customer relationships and warranties; and
(xxiv) year 2000.
COVENANTS. Pursuant to the Merger Agreement, the Company has covenanted
that, the Company shall use its reasonable best efforts to, and shall cause each
of the Company Subsidiaries to use its reasonable best efforts to, conduct its
operations in the ordinary and usual course of business consistent with past
practice and use all reasonable efforts to preserve intact their respective
business organizations' goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers and others having
business relationships with them. Without limiting the generality
19
<PAGE>
of the foregoing, and except as otherwise permitted by the Merger Agreement or
as required by applicable law, rule or regulation prior to the Effective Time,
without the consent of the Purchaser, which consent shall not be unreasonably
withheld, the Company will not, and will cause each of the Company Subsidiaries
not to: (a) amend or propose to amend their respective charters or bylaws; or
split, combine or reclassify their outstanding capital stock or declare, set
aside or pay any dividend or distribution in respect of any capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock, except for
dividends and distributions paid by Company Subsidiaries to other Company
Subsidiaries or to the Company; (b) (i) issue or authorize or propose the
issuance of, sell, pledge or dispose of, or agree to issue or authorize or
propose the issuance of, sell, pledge or dispose of, any additional shares of,
or any options, warrants dividend entitlement rights, or rights of any kind to
acquire any shares of, their capital stock of any class, any debt or equity
securities convertible into or exchangeable for such capital stock or any other
equity related right (including any phantom stock or stock appreciation rights
("SARs")), other than any such issuance pursuant to options, warrants, rights or
convertible securities outstanding as of the date of the Merger Agreement; (ii)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or 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 or otherwise acquire or agree to
acquire any assets, in each case which are material, individually or in the
aggregate, to the Company and the Company Subsidiaries taken as a whole; (iii)
sell (including by sale-leaseback), lease, pledge, dispose of or encumber any
assets or interests therein, which are material, individually or in the
aggregate, to the Company and the Company Subsidiaries taken as a whole, other
than in the ordinary course of business and consistent with past practice; (iv)
incur or become contingently liable with respect to any material indebtedness
for borrowed money or guarantee any such indebtedness or issue any debt
securities or otherwise incur any material obligation or liability (absolute or
contingent) other than short-term indebtedness in the ordinary course of
business and consistent with past practice or otherwise pursuant to credit
facilities as disclosed as part of the Merger Agreement; (v) redeem, purchase,
acquire or offer to purchase or acquire any (x) shares of its capital stock or
(y) long-term debt other than as required by governing instruments relating
thereto; or (vi) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing; (c) enter into or amend any employment,
severance, special pay arrangement with respect to termination of employment or
other arrangements or agreements with any directors, officers or key employees
except for (i) normal salary increases and merit bonuses, (ii) arrangements in
connection with employee transfers or (iii) agreements with new employees, in
each case, in the ordinary course of business and consistent with past practice;
or agree or implement an across the board increase in employee compensation
except in the ordinary course of business consistent with past practice; (d)
adopt, enter into or amend any, or become obligated under any new bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
healthcare, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law occurring after the date
hereof; (e) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it; (f) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in,
or contemplated by, the financial statements (or the notes thereto) of the
Company incurred in the ordinary course of business consistent with past
practice; (g) authorize, commit to or make any equipment purchases or capital
expenditures other than in the ordinary course of business and consistent with
past practice (provided, that such purchases and/or expenditures shall,
individually, be no more than $50,000, and, in the aggregate, be no more than
$250,000); or (h) except as otherwise permitted in the Merger Agreement, take or
agree to take any of the foregoing actions or any action that would, or is
reasonably likely to, result in any of its representations and warranties set
forth in the Merger Agreement becoming untrue, or in any of the conditions to
the Merger Agreement set forth in the Merger Agreement not being satisfied.
NO SOLICITATIONS. The Company has agreed that it will not, and will use
its best efforts to cause any officers, directors, employees and investment
bankers, attorneys or other agents retained by the Company or any of the Company
Subsidiaries not to, (i) initiate or solicit, directly or indirectly, any
inquiries or the making of any Acquisition Proposal (as hereinafter defined), or
(ii) except as permitted below, engage in negotiations or discussions with, or
furnish any information or data to any third party relating to an Acquisition
Proposal (other than the transactions contemplated hereby). Notwithstanding
anything to the contrary contained in the Merger Agreement, the Company, and its
officers, directors, investment bankers, attorneys or agents, may: (a)
participate in discussions or negotiations (including, as a part thereof, making
any counterproposal) with or furnish information to any third
20
<PAGE>
party making an unsolicited Acquisition Proposal (a "Potential Acquiror") if
either: (1) the Board determines in good faith, after consultation with its
financial advisor, that such third party is reasonably likely to submit an
Acquisition Proposal, which is a Superior Proposal (as hereinafter defined), or
(2) the Board determines in good faith, based upon advice of outside legal
counsel, that the failure to participate in such discussions or negotiations or
to furnish such information may be inconsistent with the Board's fiduciary
duties under applicable law, or (b) following receipt of an Acquisition
Proposal, disclose to its shareholders the Company's position contemplated by
Rules 14d-9 and 14e-2 under the Exchange Act or otherwise make any other
necessary disclosure to its shareholders related to an Acquisition Proposal.
The Company has agreed that, as of the date of the Merger Agreement, it
shall immediately cease and cause to be terminated any discussions or
negotiations with any parties (other than the Purchaser and Parent) conducted
heretofore with respect to any of the foregoing. The Company has agreed not to
release any third party from any confidentiality or standstill agreement to
which the Company is a party provided, however, that the Company can release any
third party from any such standstill agreement if the Board determines in good
faith, after consultation with its outside legal counsel, that the failure to so
release such party from the standstill agreement may be inconsistent with the
Board's fiduciary duties under applicable law. The Company also has agreed that
any non-public information furnished to a Potential Acquiror will be pursuant to
a confidentiality agreement substantially similar to the confidentiality
provisions of the confidentiality agreement entered into between the Company and
Parent. As used herein, "Acquisition Proposal" shall mean any bona fide proposal
made by a third party to acquire (i) beneficial ownership (as defined under Rule
13(d) of the Exchange Act) of a 51 percent or greater equity interest in the
Company or (ii) all or substantially all of the business or assets of the
Company (other than the transactions contemplated by the Merger Agreement). As
used herein, "Superior Proposal" means any Acquisition Proposal which the Board,
by resolution duly adopted determines, after consultation with its financial
advisor, to be more favorable to the Company and its shareholders than the
transactions contemplated by the Merger Agreement.
TERMINATION; FEES AND EXPENSES. The Merger Agreement provides that it may
be terminated and the Offer (if not then already consummated) and/or the Merger
may be abandoned at any time (the "Termination Date") prior to the Effective
Time, whether before or after shareholder approval thereof: (a) by mutual
consent of the Company, Parent and the Purchaser; (b) by either of the Company,
on the one hand, or Parent and the Purchaser, on the other hand: (i) if, without
any material breach by the terminating party of its obligations under the Merger
Agreement, the Purchaser or its permitted assignees shall not have purchased
Shares pursuant to the Offer on or prior to 60 days after the commencement of
the Offer, provided, however, that neither the Purchaser, Parent nor the Company
shall terminate the Merger Agreement prior to February 29, 2000, if all
conditions to the Offer set forth on Annex A to the Merger Agreement have been
satisfied or, to the extent permitted, waived, except that Shares shall not have
been purchased by the Purchaser by reason of any applicable waiting period under
the HSR Act in respect to the Offer not having expired or been terminated; (ii)
if there shall have been issued an order, decree or ruling or taken any other
action (which order, decree ruling or other action the parties hereto shall use
their respective reasonable best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
the Merger Agreement and such order, decree, ruling or other action shall have
become final and non-appealable; provided, however, that the party seeking
termination shall have complied fully with its obligations under Section 6.9 of
the Merger Agreement, or (iii) if the Minimum Condition shall not have been
satisfied, in which case neither the Parent, the Purchaser nor any of their
affiliates shall be permitted to accept for payment or pay for any Shares unless
and until the Company shall have provided the Purchaser with written notice
stating that the Company is not exercising its right to terminate the Merger
Agreement pursuant to its terms; (c) by the Company: (i) if the Board shall have
(A) withdrawn, modified or changed in a manner adverse to the Purchaser its
approval or recommendation of the Merger Agreement, or the Merger and (B) either
(x) determined in good faith, after consultation with its financial advisor,
that a third party has submitted to the Company an Acquisition Proposal which is
a Superior Proposal, or (y) determined in good faith, upon the advice of outside
legal counsel, that the failure to take such action as set forth in the
preceding clause (A) may be inconsistent with the Board's fiduciary duties under
applicable law; or (ii) if Parent or the Purchaser (x) breaches or fails in any
material respect to perform or comply with any of its material covenants and
agreements contained in the Merger Agreement or (y) breaches its representations
and warranties in any material respect and such breach would have a Parent
Material Adverse Effect, in such case in connection with the termination of the
Merger Agreement after the Acceptance Date such that the conditions set forth in
Section 7.1 of the Merger Agreement would not be satisfied; provided, however,
that after the Acceptance Date if any such breach is curable by the breaching
party, the Company may terminate the Merger Agreement
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pursuant to such agreement only after the passage of 30 days from the written
notification to Parent and the Purchaser by the Company of the breach, and
provided further that such breach has not been cured within the 30 day period,
provided, however, that the Termination Date shall be delayed to give the
breaching party the opportunity to cure during the 30 day period; (d) by Parent
and the Purchaser: (i) if the Company (x) breaches or fails in any material
respect to perform or comply with any of its material covenants and agreements
contained in the Merger Agreement or (y) breaches its representations and
warranties and such breach would have a Company Material Adverse Effect, in each
case such that the conditions set forth in the Merger Agreement would not be
satisfied; provided, however, that after the Acceptance Date if any such breach
is curable by the Company, then Parent or Purchaser may terminate the Merger
Agreement pursuant to the Merger Agreement only after the passage of 30 days
from the written notification to the Company by Parent or the Purchaser of the
breach, and provided further that such breach has not been cured within the 30
day period, provided, however that the Termination Date shall be delayed to give
the breaching party the opportunity to cure during the 30 day period; (ii) if
the Board shall have withdrawn, modified or changed in a manner adverse to the
Purchaser its approval or recommendation of the Merger Agreement, or the Merger
or shall have recommended an Acquisition Proposal involving the Company or shall
have executed an agreement in principal or definitive agreement relating to an
Acquisition Proposal involving the Company or similar business combination with
a person or entity other than Purchaser or its affiliates (or the Board resolves
to do any of the foregoing) provided, however, that prior to terminating the
Merger Agreement as a result of a third party Acquisition Proposal, the Company
shall give Purchaser telephonic notice of at least forty-eight hours in advance
of such termination; (iii) if for any five consecutive trading days prior to the
Effective Time, the Dow Jones Industrial Average shall be less than 6,500 on
each of such days; or (iv) if due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A to the Merger
Agreement, the Purchaser shall have failed to commence the Offer on or prior to
five days following the initial public announcement of the Merger Agreement. As
used herein, "Company Material Adverse Effect" shall mean a material adverse
effect on the current business, results of operations or financial condition of
the Company and the Company Subsidiaries taken as a whole, and "Parent Material
Adverse Effect" shall mean a material adverse effect on the current business,
results of operations or financial condition of the Parent and its subsidiaries,
taken as a whole.
In the event of the termination of the Merger Agreement, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision thereof pursuant to which such termination is made, and the Merger
Agreement shall forthwith become null and void, and there shall be no liability
on the part of Parent, the Purchaser or the Company or their respective
directors, officers, employees, shareholders, representatives, agents or
advisors other than, with respect to Parent, the Purchaser and the Company, the
obligations pursuant to the Merger Agreement. Nothing contained in the Merger
Agreement shall relieve Parent, the Purchaser or the Company from liability for
fraud or willful breach of the Merger Agreement.
If the Merger Agreement is terminated by the Company pursuant to
clause (c)(i) above or by Parent and the Purchaser pursuant to clause (d)(ii)
above, the Company shall pay to Purchaser a fee of $3,000,000 in cash.
EMPLOYEE BENEFITS. The Merger Agreement provides that the Parent will
cause the Surviving Corporation to honor all obligations under the Company's
current employment and severance agreements and the Company's general severance
policy. The Merger Agreement further provides that for a period of one year
following the Effective Time, the Company's employees will continue to
participate in the Company's benefit plans (other than stock option or stock
purchase plans) on substantially similar terms to those in effect at the time
the Merger Agreement was executed and that following such period, the Company
and any of the Company Subsidiaries and successors shall provide their employees
with employment benefits substantially similar in the aggregate to the benefits
they received prior to the Effective Time.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. For a period of six
years from the Effective Time, in the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of the Merger Agreement (except for Ronald Moskowitz and
Jan R. Kirk), or any person who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of the Company or any of the Company
Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer, employee,
fiduciary or agent of the Company or any of the Company
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Subsidiaries, or is or was serving at the request of the Company or any of the
Company Subsidiaries, or is or was serving at the request of the Company or any
of the Company Subsidiaries as a director, officer, employee, fiduciary or agent
of another corporation, partnership, joint venture, trust or other enterprise,
or (ii) the negotiation, execution or performance of the Merger Agreement or any
of the transactions contemplated thereby, whether in any case asserted or
arising before or after the Effective Time, the Company, Purchaser and Parent
agree to cooperate and use their reasonable best efforts to defend against and
respond thereto. The Company shall indemnify and hold harmless, and after the
Effective Time, Surviving Corporation and Purchaser shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement ("Losses") in connection with any such threatened
or actual claim, action, suit, proceeding or investigation, and in the event of
any such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time).
Without limiting the foregoing, in the event any Indemnified Party becomes
involved in any capacity in any Claim, then from and after the Effective Time,
the Company, the Surviving Corporation and the Purchaser shall advance to such
Indemnified Party its legal and other expenses, subject to the provision that
the Parent and/or the Purchaser may require an unsecured undertaking from the
Indemnified Parties to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto. The Indemnified Parties shall retain
Goodwin, Procter & Hoar LLP (provided that no policy for D&O Insurance, as
defined below, requires that counsel be chosen from an approved list, or if any
such policy requires counsel to be chosen from an approved list, Goodwin,
Procter & Hoar LLP is so named on the approved list) or other counsel to
represent them in such matter, provided that such choice of other counsel is
consented to by Purchaser or the Surviving Corporation (and/or the applicable
insurance carriers), and which consent shall not be unreasonably withheld, and
the Company, and the Surviving Corporation and Purchaser after the Effective
Time, shall pay all reasonable fees and expenses of such counsel within 30 days
after statements therefor are received. The Company, the Surviving Corporation
and Purchaser will use their respective reasonable best efforts to assist in the
vigorous defense of any such matter; provided that none of the Company, the
Surviving Corporation or Purchaser shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld); and provided further that the Surviving Corporation and Merger Sub
shall have no obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
Indemnified Party in the manner contemplated in the Merger Agreement is
prohibited by applicable law.
Notwithstanding the foregoing, any payment for indemnification shall be
limited to a maximum of $20,000,000. For a period of two years from the
Effective Time, Parent shall be responsible for such indemnification up to an
aggregate $10,000,000, subject to the terms and restrictions contained in the
Merger Agreement. In the event that after the Effective Time an Indemnified
Party does not receive payment for any Losses from the Surviving Corporation or
the carrier(s) of the D&O Insurance, as defined below, within ninety (90) days
after the giving of an indemnification notice, Parent shall be obligated to pay
to such Indemnified Party an amount or amounts equal to such Losses (subject to
the $10,000,000 limit described above for all Losses incurred by the Indemnified
Parties).
The Merger Agreement provides that prior to the Effective Time the Company
shall purchase extended reporting period endorsement of not less than
$20,000,000 under the Company's existing officers' and directors' liability
insurance policy ("D&O Insurance") for a period of not less than six years after
the Effective Time. To the extent the Company, Purchaser and/or Parent advances
or pays any expenses or damages related to a Claim in advance of any
reimbursement by an insurance carrier, the Company, Purchaser and/or Parent
shall be entitled to any such reimbursement by such insurance carrier; and in
the event of any claim against an insurance carrier for reimbursement for or
payment of any of said expenses or damages, Company, Purchaser and/or Parent
shall have the right to proceed against such carrier on behalf of themselves and
the Indemnified Parties.
Parent, the Purchaser and the Company have also agreed that in the event
Parent or the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then and in each such case, proper provision shall
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be made so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall assume the foregoing indemnity
obligations.
AGREEMENT WITH PAUL F. AVERY, JR. In connection with the Offer and the
Merger, the Company, the Purchaser, Parent and Mr. Avery agreed, subject to
certain modifications described below, that effective upon the acceptance for
payment by the Purchaser or an affiliate thereof of the Shares tendered pursuant
to the Offer (the date on which such acceptance occurs being referred to as the
"Acceptance Date"), Mr. Avery's employment with the Company will terminate and
that Mr. Avery will serve as a consultant and advisor to the Company pursuant to
the terms of a consulting agreement (the "Avery Consulting Agreement"). The
Avery Consulting Agreement will commence as of the Acceptance Date and will
continue for a period of three years. Under the Avery Consulting Agreement, the
parties agreed that, in addition to the consulting fee of $10,000 per month, the
Company will pay Mr. Avery $250,000 on the Acceptance Date (or, at Mr. Avery's
option, over the three-year term on a weekly basis) and an additional $50,000
per annum advisory fee for so long as Mr. Avery is retained by the Company to
provide advisory services. In addition, the Company will be required to maintain
insurance on Mr. Avery's life in an amount of $1,000,000, payable as directed by
Mr. Avery, for two years.
The foregoing description of certain terms and provisions of the Avery
Consulting Agreement does not purport to be complete and is qualified in its
entirety by reference to the text of such agreement, a copy of which is filed
with the Schedule 14D-1 as Exhibit (c)(3), and is incorporated herein by
reference.
AGREEMENT WITH WILLIAM B. FORD. In connection with the Offer and the
Merger, the Company, Parent and Mr. Ford have entered into an Employment
Agreement (the "New Ford Employment Agreement") which becomes effective only if
the Purchaser or an affiliate thereof accepts for payment Shares tendered
pursuant to the Offer. Under the New Ford Employment Agreement, the parties
agreed that Mr. Ford's employment with the Company pursuant to the Employment
Agreement dated as of September 23, 1996 will be terminated effective as of the
Acceptance Date. The New Ford Employment Agreement will be effective from the
Acceptance Date until March 31, 2000 and provides that Mr. Ford will continue to
serve the Company in an executive capacity. Under the New Ford Employment
Agreement, Mr. Ford will receive a payment of $45,000 on the Company's first
payroll date after January 1, 2000 and a further payment of $104,000 on the
Company's first payroll date after January 1, 2001. Mr. Ford will also be
compensated by the Company at the annual rate of $145,000, payable not less than
twice a month. The parties also agreed that the consideration payable to Mr.
Ford with respect to his options to purchase shares of Common Stock in
connection with the Merger would be payable in installments as follows: $50,000
on January 2, 2000, and $48,750 on January 2, 2001.
In addition, Mr. Ford will be entitled to participate in the health,
welfare, retirement and other fringe
<PAGE>
benefit plans which the Company makes available to management from time to time
and will be entitled to accrue vacation days at the rate of four weeks per year.
Mr. Ford will be given credit under all of the Company's employee benefits and
policies, including for accrued vacation time, for all services prior to the
Acceptance Date. Mr. Ford will be paid upon the termination of his employment
with the Company for all accrued vacation time as of the termination date in
accordance with the Company's policy.
If Mr. Ford dies or becomes disabled during the term of the New Ford
Employment Agreement, Mr. Ford's employment automatically terminates and he, or
his beneficiary, as the case may be, will be entitled to any earned but unpaid
salary. If Mr. Ford is terminated "for cause" (as defined in the New Ford
Employment Agreement), he will be entitled to any earned but unpaid salary at
the date of termination and the contribution by the Company to the cost of Mr.
Ford's participation in the Company's group medical and dental insurance plans
as permissible under applicable law and plan terms.
The foregoing description of certain terms and provisions of the New Ford
Employment Agreement does not purport to be complete and is qualified in its
entirety by reference to the text of such agreement, a copy of which is filed
with the Schedule 14D-1 as Exhibit (c)(4), and is incorporated herein by
reference.
ACCESS TO INFORMATION. The Company has agreed that, upon reasonable
notice, the Company shall (and shall cause each of the Company Subsidiaries to)
afford to Parent and its officers, employees, accountants, counsel, financing
sources and other representatives, access, during normal business hours during
the period prior to the earlier of the Effective Time or the date of termination
of the Merger Agreement, to all its properties, books, contracts, commitments
and records and, during such period, the Company shall (and shall cause each of
the Company Subsidiaries to) furnish promptly to Parent (a) a copy of each
report, schedule, registration statement and other documents filed or received
by it during such period pursuant to the requirements of federal securities laws
and (b) all other information concerning its business, properties and personnel
as Parent may reasonably request; provided, however, that nothing herein shall
require the Company or any of the Company Subsidiaries to disclose any
information to Parent if such disclosure would be in violation of applicable
laws or regulations of any Governmental Entity or the provisions of any
confidentiality agreement to which the Company is a party.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; OTHER MATTERS.
The purpose of the Offer, the Merger, and the Merger Agreement is for
Parent to acquire control of, and the entire equity interest in, the Company.
Upon consummation of the Merger, the Company will become a wholly-owned
subsidiary of Parent. The Offer is intended to increase the likelihood that the
Merger will be effected.
PLANS FOR THE COMPANY. Parent is conducting a detailed review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel and will consider, subject to the
terms of the Merger Agreement, what, if any, changes would be desirable in light
of the circumstances which exist upon completion of the Offer. Such changes
could include changes in the Company's business, corporate structure, charter,
bylaws, capitalization, Board, management or dividend policy, although, except
as noted in this Offer to Purchase, Parent has no current plans with respect to
any of such matters.
Except as described in this Offer to Purchase, neither Parent nor the
Purchaser has any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets, involving
the Company or any material changes in the Company's corporate structure,
business or composition of its management and personnel.
OTHER MATTERS
SHAREHOLDER APPROVAL. Under the MBCL and the Company's Restated Articles
of Organization, the affirmative vote of the holders of at least a majority of
the outstanding Shares, including the Shares held by the Purchaser and its
affiliates, are required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger.
Pursuant to the Merger Agreement, the Company has agreed to take all
action necessary under the MBCL and its Restated Articles of Organization and
Amended and Restated Bylaws to convene a meeting of its shareholders promptly
following consummation of the Offer to consider and vote on the Merger. If the
Purchaser owns a majority of the outstanding Shares, approval of the Merger can
be obtained without the vote of any other shareholder of the Company.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, shareholders of the Company who
have not tendered their Shares may have certain rights under the MBCL to dissent
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares.
Under the MBCL, shareholders who properly demand appraisal and otherwise
comply with the applicable statutory procedures will be entitled to receive a
judicial determination of the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
and to receive payment of such
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fair value in cash. Any such judicial determination of the fair value of such
Shares could be based upon considerations other than or in addition to the price
paid in the Offer and the Merger and the market value of the Shares. In Piemonte
v. New Boston Garden Corp., the Massachusetts Supreme Judicial Court approved,
but did not require, that the appraisal value of stock be determined by
assessing "the market value, the earnings value, and the net asset value of the
stock, followed by" assigning a percentage weight to each based on the relative
importance of that value to the stock in the particular circumstances.
THE FOREGOING SUMMARY OF THE RIGHTS OF SHAREHOLDERS DOES NOT PURPORT TO BE
A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING
TO EXERCISE ANY AVAILABLE RIGHTS. THE PRESENTATION AND EXERCISE OF APPRAISAL
RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
MASSACHUSETTS LAW.
RULE 13e-3. The Merger would have to comply with any applicable federal
law operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions. The Purchaser does not believe that Rule
13e-3 will 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 shareholders in such a transaction, be filed
with the Commission and disclosed to minority shareholders prior to consummation
of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Merger Agreement provides that the Company or the
Company Subsidiaries shall not, between the date of the Merger Agreement and the
Effective Time, without the prior written consent of Parent, (a) issue or
authorize or propose the issuance of, sell, pledge or dispose of, or agree to
issue or authorize or propose the issuance of, sell, pledge or dispose of, any
additional shares of, or any options, warrants, dividend entitlement rights or
rights of any kind to acquire any shares of, their capital stock of any class,
any debt or equity securities convertible into or exchangeable for such capital
stock or any other equity related right (including any phantom stock or SARs),
other than any such issuance pursuant to options, warrants, rights or
convertible securities outstanding as of the date of the Merger Agreement; or
(b) redeem, purchase, acquire or offer to purchase or acquire any (x) shares of
their capital stock or (y) long-term debt other than as required by governing
instruments relating thereto.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision 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 (a) postpone the acceptance for payment of and payment for,
Shares tendered, if (i) the Minimum Condition shall not have been satisfied as
of the Expiration Date, or (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the Expiration Date or (b)
terminate or amend the Offer or postpone the acceptance for payment of and
payment for Shares tendered if at any time on or after the date of the Merger
Agreement, and prior to the Expiration Date, any of the following conditions
shall exist which, in the sole judgment of the Purchaser in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment:
(a) there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to make
illegal, materially delaying or otherwise directly or indirectly restraining or
prohibiting the making of the Offer, the acceptance for payment of, or payment
for, any Shares by Parent, the Purchaser or any other affiliate of Parent or the
Purchaser or the consummation of any other transaction contemplated hereby or
thereby, or seeking to obtain material damages in connection with any
transaction contemplated hereby or thereby; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Parent, Purchaser or any
of their subsidiaries of all or any material portion of the business or assets
of the Company, Parent, Purchaser or any of their subsidiaries, or to compel the
Company, Purchaser or any of their subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company, Parent,
Purchaser or any of their subsidiaries, as a result of the transactions
contemplated hereby; (iii) seeking to impose or confirm limitations on the
ability of Parent, the
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Purchaser or any other affiliate of Purchaser to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by the Purchaser pursuant to the Offer or otherwise on
all matters properly presented to the Company's Shareholders, including, without
limitation, the approval and adoption of the Merger Agreement and the
transactions contemplated thereby; (iv) seeking to require divestiture by the
Parent, Purchaser or any other affiliate of Purchaser of any Shares; or (v) with
respect to any such action or proceeding relating to the Merger Agreement, the
Merger, the transactions contemplated by the Merger Agreement or the
announcement thereof, which otherwise has a Company Material Adverse Effect or a
Parent Material Adverse Effect; or
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, Purchaser, the Company or any subsidiary or affiliate of the Purchaser
or the Company or (ii) any transaction contemplated hereby, by any legislative
body, court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, other than the routine application of the
waiting period provisions of the HSR Act to the Offer or the Merger, which is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above; or
(c) there shall have occurred after the date of the Merger Agreement
any change, condition, event or development that has had a Company Material
Adverse Effect, provided, however, that (i) no event, change or effect that
primarily results from the Merger Agreement, the Merger, the Offer and the
transactions contemplated thereby or the announcement thereof, (ii) no event,
change or effect generally affecting the industries in which the Company
operates, or (iii) no event, change or effect related to a general drop in stock
prices in the United States resulting from political or economic turmoil, shall
be deemed to cause either individually or in the aggregate a Company Material
Adverse Effect; or
(d) there shall have occurred after the date of the Merger Agreement
(i) any general suspension of, trading in securities on NASDAQ for the Company
for a period in excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchange not
related to market conditions), (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, Japan, or
Canada, (iii) any limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, on, or other event that, in the reasonable judgment of the Purchaser,
is reasonably likely to materially adversely affect the extension of credit by
banks or other lending institutions, (iv) a declaration of war or armed
hostilities by either the United States or Japan or (v) in the case of any of
the foregoing existing on the date hereof, a material acceleration or worsening
thereof; or
(e) the Company (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained in
the Merger Agreement or (y) breaches its representations and warranties and such
breach would have a Company Material Adverse Effect; or
(f) the Company Board shall have withdrawn, modified or changed in any
manner adverse to Parent or Purchaser its approval or recommendation of the
Merger Agreement or the Merger or shall have recommended an Acquisition Proposal
involving the Company or shall have executed an agreement in principle or
definitive agreement relating to an Acquisition Proposal involving the Company
or similar business combination with a person or entity other than Parent,
Purchaser or its affiliates (or the Company Board resolves to do any of the
foregoing); or
(g) the Merger Agreement shall have been terminated in accordance with
its terms; or
(h) Parent, the Purchaser and the Company shall have agreed in writing
that the Purchaser shall terminate the Offer or postpone the acceptance for
payment of or payment for Shares thereunder.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser and Parent, regardless of the
circumstances giving rise to any such condition or may be waived by the
Purchaser or Parent, in whole or in part at any time and from time to time in
their sole discretion. The failure by Parent or the Purchaser 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
26
<PAGE>
waiver with respect to any other facts and circumstances; and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time. Notwithstanding anything to the contrary provided in the Merger
Agreement or in Annex A, neither the Parent nor the Purchaser shall be permitted
to waive the Minimum Condition without the written consent of the Company.
15. CERTAIN LEGAL MATTERS.
Except as described in this Section 15, based on information provided by
the Company, none of the Company, the Purchaser, nor Parent is aware of any
license or regulatory permit that appears to be material to the business of the
Company and the Company Subsidiaries, taken as a whole, that might be adversely
affected by the Purchaser's acquisition of Shares as contemplated herein or of
any approval or other action by a domestic or foreign governmental,
administrative or regulatory agency or authority that would be required or
desirable for the acquisition and ownership of the Shares by the Purchaser as
contemplated herein. Should any such approval or other action be required or
desirable, the Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase, the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of or other substantial
conditions complied with in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, the Purchaser could decline to accept for payment or
pay for any Shares tendered. See Section 14 for certain conditions to the Offer,
including conditions with respect to governmental actions.
(a) State Takeover Laws. Chapters 110C, 110D and 110F of the
Massachusetts General Laws (the "MGL") are generally applicable with respect to
any "takeover" of a Massachusetts corporation. Chapter 110D of the MGL (the
"Control Share Act") regulates "control share acquisitions," defined as the
acquisition of stock in certain "issuing public corporations" organized in
Massachusetts which increases the voting power of the acquiror above certain
specified levels (i.e., 20%, 33 1/3% and 50%). The Control Share Act
disqualifies the voting rights of Shares acquired in a "control share
acquisition" unless, among other things, such acquisition is pursuant to a
merger agreement to which the issuing public corporation is a party. In
accordance with the provisions of Chapter 110D, on October 20, 1999, the
Company's Board of Directors approved the Merger Agreement, the Offer, and the
Merger and the Purchaser's and Parent's acquisition of Shares pursuant to the
Offer and the Merger. Accordingly, the Control Share Act is inapplicable to the
Offer and the Merger.
Chapter 110C of the MGL (the "Take-Over Bid Statute") imposes procedural
requirements in connection with certain take-over bids. A take-over bid is the
acquisition or offer to acquire stock which would result in the acquiror
possessing more than 10% of the voting power of any class of an issuer's stock.
A take-over bid does not include, among other things, any offer which the board
of directors of the issuer has consented to and approved and has recommended its
stockholders accept, if the terms of such bid, including any inducements to
officers or directors which are not made available to all stockholders, have
been furnished to the stockholders. In accordance with the provisions of Chapter
110C, on October 20, 1999, the Company's Board of Directors approved the Merger
Agreement, the Offer, and the Merger and the Purchaser's and Parent's
acquisition of Shares pursuant to the Offer and the Merger. Furthermore, the
Company has furnished all of the material terms of the Offer and the Merger to
the stockholders in accordance with applicable disclosure requirements.
Accordingly, the Take-Over Bid Statute is inapplicable to the Offer and the
Merger.
Chapter 110F and the MGL (the "Business Combination Statute") limits the
ability of a Massachusetts corporation to engage in business combinations with
"interested stockholders" (defined as any beneficial owner of 5% or more of the
outstanding voting stock of the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder." On October 20, 1999, the Company's Board
of Directors approved the Merger Agreement, the Offer, and the Merger and the
Purchaser's and Parent's acquisition of Shares
27
<PAGE>
pursuant to the Offer and the Merger. Accordingly, the Business Combination
Statute is inapplicable to the Offer and the Merger.
A number of other states throughout the United States have enacted
takeover statutes that purport, in varying degrees, to be applicable to attempts
to acquire securities of corporations that are incorporated or have assets,
shareholders, executive offices or places of business in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws that made the
takeover of certain corporations more difficult, imposed a substantial burden on
interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics
Corp. of America, however, the Supreme Court of the United States held that a
state may, as a matter of corporate law and, in particular, 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 prior approval of the remaining shareholders, provided that
such laws were applicable only under certain conditions.
(b) Antitrust. The Offer and the Merger are not currently subject to
the HSR Act, which provides that certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied. Accordingly, neither the Purchaser, Parent, nor the Company is
required to furnish any information to the FTC or the Antitrust Division.
If conditions change and the Offer and Merger become subject to the HSR
Act, Parent and Purchaser would have to file Notification and Report Forms with
respect to the Offer under the HSR Act. The waiting period under the HSR Act
with respect to the Offer would expire at 11:59 p.m., New York City time, on the
15th day after the date Parent's form is filed unless early termination of the
waiting period is granted. However, the Antitrust Division or the FTC may extend
the waiting period by requesting additional information or documentary material
from Parent. If such a request is made, such waiting period would expire at
11:59 p.m., New York City time, on the tenth day after substantial compliance by
Parent with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
If the Offer and Merger become subject to the HSR Act, the Purchaser will not
accept for payment Shares tendered pursuant to the Offer unless and until the
waiting period requirements imposed by the HSR Act with respect to the Offer
have been satisfied. See Section 14.
The HSR Act requirements with respect to the Merger will not apply if
certain conditions are met. In particular, the Merger may not be consummated
until 30 calendar days after receipt by the Antitrust Division and the FTC of
the Notification and Report Forms of both Parent and the Company unless the
Purchaser acquires 50% or more of the outstanding Shares pursuant to the Offer
(which would be the case if the Minimum Condition were satisfied) or the 30-day
period is earlier terminated by the Antitrust Division and the FTC. Within such
30-day period, the Antitrust Division or the FTC may request additional
information or documentary materials from Parent and/or the Company. The Merger
may not be consummated until 20 days after such requests are substantially
complied with by both Parent and the Company. Thereafter, the waiting periods
may be extended only by court order or with the consent of Parent and the
Company.
The FTC and the Antitrust Division periodically review the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of Parent or its subsidiaries.
Private parties, as well as state governments, may also bring legal action under
the antitrust laws under certain circumstances. Based upon an examination of
publicly available information relating to the businesses in which Parent and
the Company are engaged, Parent and the Purchaser believe that the acquisition
of Shares by the Purchaser will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge
28
<PAGE>
to the Offer or other acquisition of Shares by the Purchaser on antitrust
grounds will not be made or, if such a challenge is made, of the result. See
Section 14 for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
(c) Federal Reserve Board Regulations. Regulations U and X (the "Margin
Regulations") of the Federal Reserve Board 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 all the direct and indirect collateral securing the
credit, including margin stock and other collateral. All financing for the Offer
will be in full compliance with the Margin Regulations.
16. FEES AND EXPENSES.
Knox and BTM are serving as Parent's financial advisors in connection
with the Offer and the Merger. As compensation for their services, Knox and BTM
will receive, or have received, the following amounts, payable in Japanese Yen
equivalents, to be divided equally among Knox and BTM: (i) a non-refundable
retainer fee of approximately $121,000, which has been paid by Parent, (b) a fee
of approximately $700,000 payable once Parent acquires a 51% or greater interest
in the Shares, and (iii) a fee of approximately $200,000 payable upon the
closing of the Merger. Parent will also reimburse Knox and BTM for all
reasonable out-of-pocket expenses including reasonable fees and expenses of
their legal counsel, and has also agreed to indemnify Knox and BTM and certain
related parties against certain liabilities, including certain liabilities under
the federal securities laws, arising out of the engagement. In the ordinary
course of business, BTM and its affiliates may actively trade or hold the
securities of Parent and the Company for its account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and American Stock Transfer & Trust Company to act as the Depositary in
connection with the Offer. Such firms each will receive reasonable and customary
compensation for their services. The Purchaser has also agreed to reimburse each
such firm for certain reasonable out-of-pocket expenses and to indemnify each
such firm against certain liabilities and expenses in connection with their
services, including certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent) for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will
be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Company.
The Purchaser is not aware of any jurisdiction in which the making of the Offer
or the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, the Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, the Purchaser cannot comply with any
such law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. 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 the Purchaser by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Parent or the Purchaser not contained herein or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
offices of the
29
<PAGE>
Commission in the manner set forth in Section 8 of this Offer to Purchase
(except that they will not be available at the regional offices of the
Commission).
Ferrotec Acquisition, Inc.
October 26, 1999
30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. 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. Unless otherwise indicated, the current business
address of each person is Ferrotec Corporation, Sumitomo Building #6, 5-24-8,
Higashi Ueno, Taito-ku, Tokyo 110-0015, Japan. Unless otherwise indicated, each
such person is a citizen of Japan and has held his or her present position as
set forth below, or has been an executive officer at Parent, for the past five
years. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Parent.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION AND FIVE
YEAR EMPLOYMENT HISTORY
- -------------------------------------------------- --------------------------------------------------------------
<S> <C>
Akira Yamamura Mr. Yamamura has been the President and Chief Executive
Officer of Parent for more than the past five years.
Nozomu Yamamoto Mr. Yamamoto was the President of SecomCad Inc. until
June 1994. He was then appointed as Corporate Auditor of
Parent and has been employed by Parent as Director and
Senior Managing Director since that date.
Kimiyuki Kamino Mr. Kamino was Chief Officer at Mitsubishi Seiko, Co.
Research and Development Center until June 1995. He was
then appointed as Corporate Auditor of Parent and has been
employed by Parent as Corporate Auditor for four years
and has been employed by Parent as Director since June
1999.
Isao Tsubaki Mr. Tsubaki was a Partner of Tohmatsu, LLP, a public
accounting firm until January 1997 and was a principal of
Tsubaki Accounting Firm until June 1999. Since then, he has
been employed by Parent as Director.
Takeshi Arakawa Mr. Arakawa has been employed by Parent as Director,
Managing Director, and Corporate Auditor for more than the
past five years.
Shuji Mamiya Mr. Mamiya had been employed by Parent as General Manager
until June 1999. Since then, he has been employed by Parent
as Corporate Auditor.
Koichiro Nakamoto Mr. Nakamoto had been a partner of a law firm, Anderson
and Mori, LLP until June 1999. Since then, he has been
employed by Parent as Corporate Auditor.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF 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 the Purchaser. Unless otherwise indicated, the current
business address of each person is Ferrotec Corporation, Sumitomo Building #6,
5-24-8, Higashi Ueno, Taito-ku, Tokyo 110-0015, Japan. Unless
31
<PAGE>
otherwise indicated, each such person is a citizen of Japan, and each occupation
set forth opposite an individual's name refers to employment with the Purchaser.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION AND FIVE
YEAR EMPLOYMENT HISTORY
- -------------------------------------------------- --------------------------------------------------------------
<S> <C>
Akira Yamamura Treasurer, Clerk, and Director of Purchaser. Mr.
Yamamura has been the President and Chief Executive
Officer of Parent for more than the past five years.
Nozomu Yamamoto Director of Purchaser. Mr. Yamamoto was the President of
SecomCad Inc. until June 1994. He was then appointed as
Corporate Auditor of Parent and has been employed by
Parent as Director and Senior Managing Director since that
date.
Richard R. Cesati, II President and Director of Purchaser. Mr. Cesati had been
President of Amalfi Associate, Inc. until July 1999 and has
been employed as President of Ferrotec America since that
date. Mr. Cesati is a citizen of the United States.
</TABLE>
32
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each shareholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Hand or Overnight
40 Wall Street, 46th Floor Delivery:
New York, NY 10005 40 Wall Street, 46th Floor
Attn: Reorganization New York, NY 10005
Department Attn: Reorganization
Department
By Facsimile Transmission
(for Eligible Institutions Only):
(718) 234-5001
Confirm Receipt of Facsimile by Telephone Only:
(718) 921-8200
For Information Call:
(718) 921-8200
Questions or requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent at its location and telephone numbers set
forth below. Shareholders may also contact their broker, dealer, commercial bank
or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005-4495
Banks and Brokerage Firms call collect: (212) 269-5550
All others call toll-free: (800) 207-3156
EXHIBIT 99(a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FERROFLUIDICS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 26, 1999
BY
FERROTEC ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FERROTEC CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Hand or Overnight
40 Wall Street, 46th Floor Delivery:
New York, NY 10005 40 Wall Street, 46th Floor
Attn: Reorganization New York, NY 10005
Department Attn: Reorganization
Department
By Facsimile Transmission
(for Eligible Institutions Only):
(718) 234-5001
Confirm Receipt of Facsimile by Telephone Only:
(718) 921-8200
For Information Call:
(718) 921-8200
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates are to
be forwarded herewith or if delivery of Shares (as defined below) is to be made
by book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company (hereinafter referred to as the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 2 of the Offer to
Purchase (as defined below). Shareholders who deliver Shares by book-entry
1
<PAGE>
transfer are referred to herein as "Book-Entry Shareholders" and other
shareholders are referred to herein as "Certificate Shareholders."
Shareholders whose certificates are not immediately available or who
cannot deliver their Shares and all other documents required hereby to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date (as defined in the Offer to Purchase) must tender their Shares
according to the guaranteed delivery procedure set forth in Section 2 of the
Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
|_| CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY
PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY
BOOK-ENTRY TRANSFER):
Name of Tendering Institution
-----------------------------------------------------------------------
Account Number
-----------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------
|_| CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s)
-----------------------------------------------------------------------
Window Ticket Number (if any)
-----------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
-----------------------------------------------------------------------
2
<PAGE>
IF DELIVERED BY BOOK-ENTRY TRANSFER, CHECK BOX: |_|
Account Number
-----------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
SHARE(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) TENDERED (ATTACH ADDITIONAL LIST IF
ON SHARE CERTIFICATE(S)) NECESSARY)
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED NUMBER OF
CERTIFICATE BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------- ----------------- ------------------
<S> <C> <C> <C>
----------------- ----------------- ------------------
----------------- ----------------- ------------------
TOTAL
SHARES
----------------- ------------------
</TABLE>
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by any certificate(s) delivered to the Depositary are being
tendered. See Instruction 4.
|_| CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE
ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS
LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT
YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Ferrotec Acquisition, Inc., a
Massachusetts corporation (the "Purchaser") and a wholly-owned subsidiary of
Ferrotec Corporation, a Japanese corporation ("Parent"), the above-described
shares of Common Stock, $.004 par value per share (the "Common Stock"),
including the associated preferred share purchase rights (the "Rights," and
together with the Common Stock, the "Shares"), of Ferrofluidics Corporation, a
Massachusetts corporation (the "Company"), pursuant to the Purchaser's offer to
purchase all outstanding Shares at a price of $6.50 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 26, 1999 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with the
Offer to Purchase, constitute the "Offer"). The undersigned understands that the
Purchaser reserves the right to transfer or assign, in whole or in part from
time to time, to one or more direct or indirect wholly-owned subsidiaries of
Parent, the right to purchase Shares tendered pursuant to the Offer.
The Company has distributed one Right for each outstanding share of
Common Stock pursuant to the Rights Agreement, dated as of August 3, 1994, as
amended, between the Company and American Stock Transfer and Trust Company, as
Rights Agent. The Company has taken all necessary action to make the Rights
Agreement inapplicable to Parent, the Purchaser, and their respective affiliates
and associates in connection with the transactions contemplated by the Merger
Agreement (as such terms are defined in the Offer to Purchase).
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), subject to, and effective upon, acceptance for payment
of and payment for the Shares tendered herewith, the undersigned hereby sells,
assigns, and transfers to, or upon the order of, the Purchaser all right, title
and interest in and to all the Shares that are being tendered hereby (and any
and all other Shares or other securities issued or issuable in respect thereof
on or after October 26, 1999 (collectively, "Distributions")) and irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all
Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares and all Distributions, or transfer ownership of
such Shares and all Distributions on the account books maintained by the
Book-Entry Transfer Facility, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser,
upon receipt by the Depositary, as the undersigned's agent, of the purchase
price (adjusted, if appropriate, as provided in the Offer to Purchase), (b)
present such Shares and all Distributions for cancellation and transfer on the
Company's books and (c) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Shares and all Distributions, all in accordance
with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares and all Distributions and that, when the same are accepted for payment by
the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Purchaser to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer to
the Depositary for the account of the Purchaser any such Distributions issued to
the undersigned, in respect of the tendered Shares, accompanied by documentation
of transfer, and pending such remittance or appropriate assurance thereof, the
Purchaser shall be entitled to all rights and privileges as owner of any such
Distributions and, subject to the terms of the Merger Agreement (as defined in
the Offer to Purchase), may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
4
<PAGE>
The undersigned hereby irrevocably appoints Richard R. Cesati, II or
Akira Yamamura, and each of them, and any other designees of the Purchaser, the
attorneys and proxies of the undersigned, each with full power of substitution,
to vote at any annual, special or adjourned meeting of the Company's
shareholders or otherwise act (including pursuant to written consent) in such
manner as each such attorney and proxy or his substitute shall in his sole
discretion deem proper, to execute any written consent concerning any matter as
each such attorney and proxy or his substitute shall in his sole discretion deem
proper with respect to, and to otherwise act with respect to, all the Shares
tendered hereby which have been accepted for payment by the Purchaser prior to
the time any such vote or action is taken (and any and all Distributions issued
or issuable in respect thereof) and with respect to which the undersigned is
entitled to vote. This appointment is effective when and only to the extent that
the Purchaser accepts for payment such Shares as provided in the Offer to
Purchase. This power of attorney and proxy is coupled with an interest in the
tendered Shares, is irrevocable and is granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the Offer.
Such acceptance for payment shall revoke all prior powers of attorney and
proxies given by the undersigned at any time with respect to such Shares and no
subsequent powers of attorney or proxies may be given by the undersigned (and,
if given, will not be deemed effective). The Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of such Shares, the Purchaser must
be able to exercise full voting and other rights with respect to such Shares,
including voting at any meeting of shareholders then scheduled.
The undersigned understands that the valid tender of Shares pursuant to
any one of the procedures described in Section 2 of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, the Purchaser may not be required to accept for
payment any of the tendered Shares. The Purchaser's acceptance for payment of
Shares pursuant to the Offer will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates for Shares not tendered or accepted for payment, in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased, and/or any certificates for Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of any
Shares purchased, and/or return any certificates for Shares not tendered or
accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-
entry delivery of Shares, please credit the account maintained at the Book-Entry
Transfer Facility indicated above with any Shares not accepted for payment. The
undersigned recognizes that the Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
issued in the name of someone other than the undersigned.
Issue: |_|Check |_|Certificate(s) to:
Name
------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9 Included Herein)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificate(s) for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
delivered to someone other than the undersigned or to the undersigned at an
address other than that appearing under "Description of Shares Tendered."
Deliver: |_|Check |_|Certificate(s) to:
Name
------------------------------------------------------------------------
(Please Print)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
(Include Zip Code)
6
<PAGE>
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
STOCK CERTIFICATE(S) OR ON A SECURITY POSITION LISTING OR BY PERSON(S)
AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS
TRANSMITTED HEREWITH. IF SIGNATURE IS BY TRUSTEES, EXECUTORS, ADMINISTRATORS,
GUARDIANS, ATTORNEYS-IN- FACT, OFFICERS OF CORPORATIONS OR OTHERS ACTING IN A
FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH FULL TITLE. SEE
INSTRUCTION 5. FOR INFORMATION CONCERNING SIGNATURE GUARANTEES, SEE INSTRUCTION
1.)
Dated: , 1999
------------------------------------------------------------------------
Name(s):
------------------------------------------------------------------------
(Please Print)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Daytime Area Code and Telephone Number:
-----------------------------------------
Tax Identification or Social Security Number:
-----------------------------------
- --------------------------------------------------------------------------------
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
AUTHORIZED SIGNATURE
------------------------------------------------------------
Name:
---------------------------------------------------------------------------
(Please Print)
Title:
---------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-------------------------------------------------
Dated: , 1999
--------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURE. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust
company having an office or correspondent in the United States which is a
participant in an approved Signature Guarantee Medallion Program (each an
"Eligible Institution," and collectively, "Eligible Institutions"). No signature
guarantee is required on this Letter of Transmittal (i) if this Letter of
Transmittal is signed by the registered holder(s) (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) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the facing page hereto or (ii) if such Shares are tendered for
the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by
shareholders either if certificates for Shares are to be forwarded herewith or
if a tender of Shares is to be made pursuant to the procedures for delivery by
book-entry transfer set forth in Section 2 of the Offer to Purchase. For Shares
to be validly tendered pursuant to the Offer, (i) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), 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 documents required
by this Letter of Transmittal, must be received by the Depositary at one of the
Depositary's addresses set forth herein and either certificates or a timely
Book-Entry Confirmation for tendered Shares must be received by the Depositary
at one of such addresses, in each case prior to the Expiration Date (as defined
in the Offer to Purchase), or (ii) the tendering shareholder must comply with
the guaranteed delivery procedure set forth below.
Shareholders whose certificates for Shares are not immediately
available or who cannot deliver their certificates and all other required
documents to the Depositary or complete the procedures for book-entry transfer
prior to the Expiration Date may tender their Shares by properly completing and
duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to
such procedures, (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery provided by the Purchaser (or facsimile thereof) must be received by
the Depositary prior to the Expiration Date and (iii) the certificates for all
physically tendered Shares, or a Book-Entry Confirmation with respect to all
tendered Shares, together with this properly completed and duly executed Letter
of Transmittal (or facsimile thereof) with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be received
by the Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to
Purchase. A "trading day" is any day on which The New York Stock Exchange is
open for business.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-
ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING
SHAREHOLDER AND 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. All tendering shareholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
8
<PAGE>
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If
fewer than all the Shares evidenced by any certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate box
on this Letter of Transmittal, as soon as practicable after the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. 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 certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered owner(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares tendered hereby, the certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case, signed exactly as the name(s) of the registered owner(s)
appear(s) on the certificates for such Shares. Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution. See Instruction
1.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay, or cause to be paid, any stock transfer taxes with respect
to the transfer and sale of Shares to it or its assignee pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if certificates
for Shares not tendered or accepted for payment are to be registered in the name
of, any persons other than the registered holder(s), or if tendered certificates
are registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on the account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be
issued in the name of and/or certificates for Shares not accepted for payment
are to be returned to a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Any shareholder tendering Shares by book-entry
transfer will have any Shares not accepted for payment returned by crediting the
account maintained by such shareholder at the Book-Entry Transfer Facility from
which such transfer was made.
9
<PAGE>
8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Purchaser expressly reserves the absolute right in its sole
discretion to waive any of the specified conditions of the Offer or any defect
or irregularity in the tender with regard to any Shares tendered.
9. SUBSTITUTE FORM W-9. The tendering shareholder (or other payee) is
required to provide the Depositary with a correct Taxpayer Identification Number
("TIN"), generally the shareholder's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the shareholder (or other payee) is not subject to backup withholding. If a
tendering shareholder is subject to backup withholding, he or she must cross out
item (2) of the Certification Box on Substitute Form W-9 before signing such
Form. Failure to provide the information on the Substitute Form W-9 may subject
the tendering shareholder (or other payee) to a $50 penalty imposed by the
Internal Revenue Service and to 31% federal income tax withholding on the
payment of the purchase price. If the tendering shareholder has not been issued
a TIN and has applied for a number or intends to apply for a number in the near
future, he or she should write "Applied For" in the space provided for the TIN
in Part I, sign and date the Substitute Form W-9 and sign and date the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all such payments for surrendered
Shares thereafter until a TIN is provided to the Depositary.
10. LOST OR DESTROYED CERTIFICATES. If any certificate(s) representing
Shares has been lost or destroyed, the shareholder should check the appropriate
box on the front of the Letter of Transmittal. The Company's stock transfer
agent will then instruct such shareholder as to the procedure to be followed in
order to replace the certificate(s). The shareholder will have to post a surety
bond of approximately 2% of the current market value of the stock. This Letter
of Transmittal and related documents cannot be processed until procedures for
replacing lost or destroyed certificates have been followed.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to D.F. King & Co., Inc. at its location set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF)
TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF
GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE
DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder surrendering Shares must
provide the Depositary with his correct TIN on Substitute Form W-9 on this
Letter of Transmittal. If the shareholder is an individual, his TIN is his
social security number. If the correct TIN is not provided, the shareholder may
be subject to a $50 penalty imposed by the Internal Revenue Service and payments
made in exchange for the surrendered Shares may be subject to backup withholding
of 31%.
Certain persons (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding and
reporting requirements. In order for an exempt foreign shareholder to avoid
backup withholding, that person should complete, sign and submit a Form W-8,
Certificate of Foreign Status, signed under penalties of perjury, attesting to
his exempt status. A Form W-8 can be obtained from the Depositary. Exempt
shareholders, other than foreign shareholders, should furnish their TIN, write
"Exempt" on the face of the Substitute Form W-9 and sign, date and return the
Substitute Form W-9 to the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payment made to payee. Backup withholding is not
an additional tax. Rather, the federal income tax liability of
10
<PAGE>
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup 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 Federal income tax backup withholding on payments that are
made to a shareholder with respect to Shares purchased pursuant to the Offer,
the shareholder is required to notify the Depositary of his or her correct TIN
(or the TIN of any other payee) by completing the Substitute Form W-9 included
in this Letter of Transmittal certifying (1) that the TIN provided on the
Substitute Form W-9 is correct (or that such payee is awaiting a TIN) and that
(2) the shareholder is not subject to backup withholding because (i) the
shareholder has not been notified by the Internal Revenue Service that the
shareholder is subject to federal income tax backup withholding as a result of a
failure to report all interest and dividends or (ii) the Internal Revenue
Service has notified the shareholder that the shareholder is no longer subject
to federal income tax backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the TIN, generally
the social security number or employer identification number of the record owner
of the Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering shareholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, he or
she should write "Applied For" in the space provided for the TIN in Part I, sign
and date the Substitute Form W-9 and sign and date the Certificate of Awaiting
Taxpayer Identification Number, which appears in a separate box below 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 until a TIN is provided to the Depositary.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR CORRECT TIN IN --------------------------------------------------
FORM THE BOX AT RIGHT AND CERTIFY BY SIGNING Social Security Number
W-9 AND DATING BELOW
DEPARTMENT OF THE OR
TREASURY
INTERNAL REVENUE SERVICE
--------------------------------------------------
Employer Identification Number
(If awaiting TIN, write "Applied For")
----------------------------------------------------------------------------------------------------
Payer's Request for PART II -- For Payees NOT subject to backup withholding, see the enclosed Guidelines for
Taxpayer Identification Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed
Number (TIN) therein
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATION--Under the 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 because either (a) I am exempt from backup withholding, (b) I have not been notified by
the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (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.) THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATES REQUIRED TO AVOID BACKUP WITHHOLDING.
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1999
--------------------------------------------------------- ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
SIGNATURE DATE
------------------------------------ -----------------------
Questions and requests for assistance or additional copies of the Offer
to Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Information Agent as set forth below:
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005-4495
Banks and Brokerage Firms call collect: (212) 269-5550
All others call toll-free: (800) 207-3156
12
EXHIBIT 99(a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FERROFLUIDICS CORPORATION
As set forth in Section 2 of the Offer to Purchase (as defined below),
this form or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for shares of Common Stock, $.004 par
value per share (the "Common Stock"), including the associated preferred share
purchase rights (the "Rights," and together with the Common Stock, the
"Shares"), of Ferrofluidics Corporation, a Massachusetts corporation (the
"Company"), are not immediately available, or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary at the address set forth below prior
to the Expiration Date (as defined in the Offer to Purchase). This form may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution (as defined in the Offer to Purchase). See Section 2 of the
Offer to Purchase.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Hand or Overnight
40 Wall Street, 46th Floor Delivery:
New York, NY 10005 40 Wall Street, 46th Floor
Attn: Reorganization New York, NY 10005
Department Attn: Reorganization
Department
By Facsimile Transmission
(for Eligible Institutions Only):
(718) 234-5001
Confirm Receipt of Facsimile by Telephone Only:
(718) 921-8200
For Information Call:
(718) 921-8200
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES 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.
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Ferrotec Acquisition, Inc., a
Massachusetts corporation (the "Purchaser"), which is a wholly-owned subsidiary
of Ferrotec Corporation, a Japanese corporation, upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase dated October 26,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal, receipt
of which is hereby acknowledged, the number of Shares (as such term is defined
in the Offer to Purchase) set forth below, all pursuant to the guaranteed
delivery procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares:
Certificate Nos. (if available):
- ------------------------------------------------------------------
- ------------------------------------------------------------------
(Check box if Shares will be tendered by book-entry transfer)
|_| The Depository Trust Company
Account Number:
- ------------------------------------------------------------------
Dated:
, 1999
- ------------------------------------------------------------
Name(s) of Record Holder(s):
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Please Print
Address(es):
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Zip Code
Area Code and Tel. No.:
- ------------------------------------------------------------------
- ------------------------------------------------------------------
Signature(s)
Dated:
, 1999
- ------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to
the Depositary either the certificates representing the Shares tendered hereby,
in proper form for transfer, or a Book-Entry Confirmation with respect to such
Shares, in any such case together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or an Agent's Message, and any other required documents within three
trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
All capitalized terms used herein have the meanings set forth in the Offer to
Purchase.
<TABLE>
<S> <C>
Name of Firm: -------------------------------------
------------------------------------------------------ Authorized Signature
Address:
------------------------------------------------------ -------------------------------------
Please Print
------------------------------------------------------
Zip Code
Area Code and Tel. No.: Title:
-------------------------------------------- -------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
Dated: ______________________, 1999
3
EXHIBIT 99(a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FERROFLUIDICS CORPORATION
BY
FERROTEC ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FERROTEC CORPORATION
AT
$6.50 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Banks, Trust Companies and Other Nominees: October 26, 1999
We have been engaged by Ferrotec Acquisition, Inc., a Massachusetts
corporation (the "Purchaser"), which is a wholly-owned subsidiary of Ferrotec
Corporation, a Japanese corporation ("Parent"), to act as the Information Agent
in connection with the Purchaser's offer to purchase all outstanding shares of
Common Stock, $.004 par value per share (the "Common Stock"), including the
associated preferred share purchase rights (the "Rights," and together with the
Common Stock, the "Shares"), of Ferrofluidics Corporation, a Massachusetts
corporation (the "Company"), at $6.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated October 26, 1999 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"). Please
furnish copies of the enclosed materials to those of your clients for whom you
hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. OFFER TO PURCHASE DATED OCTOBER 26, 1999;
2. LETTER OF TRANSMITTAL TO BE USED BY SHAREHOLDERS OF THE
COMPANY IN ACCEPTING THE OFFER;
3. A printed form of letter that may be sent to your clients for
whose account you hold Shares in your name or in the name of a
nominee, with space provided for obtaining such clients'
instructions with regard to the Offer;
4. NOTICE OF GUARANTEED DELIVERY; and
5. Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
1
<PAGE>
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the Expiration Date (as defined in
the Offer to Purchase) that number of Shares which represents at least a
majority of all outstanding Shares on a fully diluted basis on the date of
purchase.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment and will pay
promptly after the Expiration Date (as defined in the Offer to Purchase) for all
Shares validly tendered prior to the Expiration Date and not properly withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares. Payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares (or a timely Book-Entry
Confirmation (as defined in the Offer to Purchase) with respect thereto), (ii) a
Letter of Transmittal (or 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 (as defined in the Offer to Purchase),
and (iii) any other documents required by the Letter of Transmittal.
If holders of Shares wish to tender their Shares, but it is
impracticable for them to deliver their certificates on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 2 of the Offer to Purchase.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS
PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS EXTENDED.
Neither the Purchaser nor Parent will pay any fees or commissions to
any broker or dealer or other person (other than the Information Agent as
described in the Offer to Purchase) in connection with the solicitation of
tenders of Shares pursuant to the Offer. The Purchaser will, however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers. The Purchaser will pay all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 6 of the Letter of Transmittal.
Additional copies of the enclosed materials may be obtained by
contacting the Information Agent at its address and telephone numbers set forth
on the back cover of the enclosed Offer to Purchase.
Very truly yours,
D.F. King & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER
NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
2
EXHIBIT 99(a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FERROFLUIDICS CORPORATION
BY
FERROTEC ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FERROTEC CORPORATION
AT
$6.50 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated October
26, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the Offer by Ferrotec Acquisition, Inc., a Massachusetts
corporation (the "Purchaser"), which is a wholly-owned subsidiary of Ferrotec
Corporation, a Japanese corporation ("Parent"), to purchase for cash all
outstanding shares of Common Stock, $.004 par value per share (the "Common
Stock"), including the associated preferred share purchase rights (the "Rights,"
and together with the Common Stock, the "Shares"), of Ferrofluidics Corporation,
a Massachusetts corporation (the "Company"). We are 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 TO
TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request your instructions as to whether you wish to
tender any of 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 directed to the following:
1. The offer price is $6.50 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE OFFER AND THE MERGER AND DETERMINED THAT TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
1
<PAGE>
4. The Offer and withdrawal rights expire at 12:00 midnight, New
York City time, on Tuesday, November 23, 1999, unless
extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration
Date (as defined in the Offer to Purchase) that number of
Shares which represents at least a majority of the Shares
outstanding on a fully-diluted basis on the date of purchase.
6. Any stock transfer taxes applicable to a sale of Shares to the
Purchaser pursuant to the Offer will be borne by the
Purchaser, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
If you wish to have us tender any of or all of the Shares held by us
for your account, please so instruct us by completing, executing and returning
to us the instruction form attached to this letter. Your instructions to us
should be forwarded promptly to permit us to submit a tender on your behalf
prior to the expiration of the Offer. An envelope 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 on the reverse side of this letter.
The Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal. The Offer is not being made to, nor will tenders be
accepted from, or on behalf of, holders of Shares in any jurisdiction in which
the making or acceptance of the Offer would not be in compliance with the laws
of such jurisdiction. If the securities laws of any jurisdiction require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by one or more registered brokers or dealers
licensed under the law of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FERROFLUIDICS CORPORATION
The undersigned acknowledge(s) receipt of your letter, the enclosed
Offer to Purchase dated October 26, 1999 and the related Letter of Transmittal,
in connection with the offer by Ferrotec Acquisition, Inc., a Massachusetts
corporation and a wholly-owned subsidiary of Ferrotec Corporation, a Japanese
corporation, to purchase all outstanding shares of common stock, $.004 par value
per share (the "Common Stock"), including the associated preferred share
purchase rights (the "Rights," and together with the Common Stock, the
"Shares"), of Ferrofluidics Corporation, a Massachusetts corporation.
This will instruct you to tender the number of Shares indicated below
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in such Offer to Purchase and related Letter of
Transmittal.
Dated: __________________, 1999
NUMBER OF SHARES TO BE TENDERED* ______________ SHARES
I (we) understand that if I (we) sign this instruction form without
indicating a lesser number of Shares in the space above, all Shares held by you
for my (our) account will be tendered.
- --------------------------------------------------------------------------------
SIGNATURE(S)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINT NAME(S)
- --------------------------------------------------------------------------------
PRINT ADDRESS(ES)
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
- --------------------------------------------------------------------------------
TAX ID OR SOCIAL SECURITY NUMBER
- -----------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by
your firm for my (our) account are to be tendered.
3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ------------------------------------ ----------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals (1)
3. Husband and wife (joint The actual owner of the
account) 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 minor
account) is the only contributor, the
minor (1)
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person (3)
a designated ward, minor,
or incompetent person
7. a. A revocable savings trust The grantor-trustee(1)
account (in which grantor
is also trustee)
b. Any "trust" account that The actual owner (1)
is not a legal or valid
trust under State Law
</TABLE>
<TABLE>
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- ------------------------------------ ----------------------------------
<S> <C> <C>
8. Sole proprietorship account The owner (4)
9. A valid trust, estate, or The legal entity (Do not
pension 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 The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
</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.
(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
resident individuals), Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), or Form W-7 for International Taxpayer
Identification Number (for alien individuals required to file U.S. tax returns),
at an office of the Social Security Administration or the Internal Revenue
Service.
To complete the Substitute Form W-9, if you do not have a taxpayer
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 AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Set forth below is a list of payees that are exempt from backup withholding with
respect to all or certain types of payments. For interest and dividends, all
listed payees are exempt except the payee in item (9). For broker transactions,
all payees listed in items (1) through (13) and any person registered under the
Investment Advisors Act of 1940 who regularly acts as a broker is exempt. For
payments subject to reporting under Sections 6041 and 6041A, the payees listed
in items (1) through (7) are generally exempt. For barter exchange transactions
and patronage dividends, the payees listed in items (1) through (5) are exempt.
o A corporation.
o An organization exempt from tax under Section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, or a political subdivision, agency or instrumentality
thereof.
o An international organization or any agency or instrumentality thereof.
o A foreign central bank of issue.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A futures commission merchant registered with the Commodity Futures Trading
Commission.
o A real estate investment trust.
o An entity registered at all times under the Investment Company Act of 1940.
o A common trust fund operated by a bank under Section 584(a).
o A financial institution.
o A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
o An exempt charitable remainder trust, or a nonexempt trust described in
Section 4947(a)(1).
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under Section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and
you have not provided your correct taxpayer identification number to
the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
o Payments described in Section 6049(b)(5) to non-resident aliens. o Payments on
tax-free covenant bonds under Section 1451.
o Payments made by certain foreign organizations.
o 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, 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 Sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you
fail to include any portion of an includible payment for interest, dividends,
or patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
EXHIBIT 99(a)(7)
JOINT PRESS RELEASE
CONTACT:
For Ferrofluidics Corporation
William B. Ford, Chief Financial Officer
Phone: (603) 883-9800 Fax: (603) 883-1213
or
For Ferrotec Corporation
Wakaki Hiroo, Assistant General Manager
President Office
Phone 81-3-3845-1027 Fax 81-3-3845-1019
or
Richard R. Cesati II, President
Ferrotec Acquisition Inc.
Phone: (603) 626-0700 Fax (603) 626-0777
FERROFLUIDICS ANNOUNCES MERGER AGREEMENT WITH FERROTEC
Nashua, New Hampshire and Tokyo, Japan...October 20, 1999...Ferrofluidics
Corporation (NASDAQ:FERO-NEWS) and Ferrotec Corporation (JASDAQ 6890) today
announced that they have entered into a definitive agreement pursuant to which
Ferrotec Corporation will acquire Ferrofluidics Corporation for the cash
consideration of $6.50 per share. The transaction will take the form of a cash
tender offer by a wholly owned U.S. subsidiary of Ferrotec Corporation
("Ferrotec Acquisition, Inc.") for all of the outstanding shares of
Ferrofluidics Corporation. If the tender offer is successful, Ferrotec will
merge Ferrotec Acquisition, Inc. into Ferrofluidics and pay $6.50 per share for
the remaining untendered shares, if any, subject to applicable appraisal rights.
The tender offer is subject to customary conditions.
The Boards of Directors of Ferrofluidics and Ferrotec have both unanimously
approved the transaction, and Ferrofluidics has received a fairness opinion from
its financial advisor.
Paul F. Avery, Jr., Chairman of the Board of Ferrofluidics, commented as
follows: "The combination of Ferrofluidics and Ferrotec will result in current
holders of Ferrofluidics stock receiving full liquidity and a premium of more
than 50% over recent market values for their stock. The merger is not expected
to result in employment reductions at Ferrofluidics other than changes in
executive management."
Akira Yamamura, President and CEO of Ferrotec commented as follows: "Since 1987,
Ferrotec has grown significantly mainly in the Asian region and generated
numerous technologically advanced products based on ferrofluid (magnetic fluid)
technology. By acquiring Ferrofluidics and integrating the operations, Ferrotec,
together with Ferrofluidics, will have a world-wide distribution and marketing
network for a broader range of products, which is expected to be a significant
benefit to our global customers."
Ferrotec, which was founded in 1980, had sales of more than 5.6 billion yen in
the fiscal year which ended on March 31, 1999. Ferrotec manufactures and markets
ferrofluids, components and products based on ferrofluid technology for the
electronic industry, and thermoelectric modules. Two major products based on
ferrofluid technology are computer seals utilized in hard disk drives and vacuum
seals for the
1
<PAGE>
semiconductor industry. The thermo-modules are small wafer like heat pumps,
which change temperature when charged with electricity. As the thermo-modules
are easily controlled at a precise temperature, currently their main
applications are in semiconductor components, while multi-industrial
applications are yet to be introduced. Ferrotec is headquartered in Tokyo,
Japan, and has various manufacturing facilities in Japan and the People's
Republic of China.
Ferrofluidics Corporation is a manufacturer of Ferrofluidic(R) rotary seals,
ferrofluids and ferrofluid-based products for a variety of applications. These
products combine proprietary Ferrofluidic(R) technology with innovative
engineering to commercialize applications primarily for original equipment
manufacturers, enabling these customers' products to operate more effectively
and efficiently. Ferrofluidics is an international company serving worldwide
markets. The Company is headquartered in Nashua, New Hampshire, where it
manufactures all its ferrofluids and Ferrofluidic(R) products. It has
established sales and technical support facilities at its headquarters in the
United States, as well as in Germany and the United Kingdom.
This press release is neither an offer to purchase nor a solicitation of an
offer to sell securities. The tender offer is made only through the Offer to
Purchase and the related Letter of Transmittal, which will be mailed to
stockholders upon commencement of the tender offer.
Statements made in this news release that state the Company's or management's
intentions, hopes, beliefs, expectations or predictions for the future are
forward looking statements that involve risk and uncertainties. It is important
to note that the Company's actual results could differ materially from those
projected in such forward-looking statements. In addition to the factors set
forth above, other important factors that could cause actual results to differ
materially include, but are not limited to, projected financial results and
industry-wide market factors.
2
EXHIBIT 99(a)(8)
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 October
26, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal.
Capitalized items not defined in this notice have the respective meanings
ascribed to such terms in the Offer to Purchase. The Offer is being made to all
holders of Shares. The Purchaser is not aware of any jurisdiction where the
making of the Offer would not be in compliance with the laws of such
jurisdiction. If the Purchaser becomes aware of any jurisdiction in which the
making of the Offer would not be in compliance with applicable law, the
Purchaser will make a good faith effort to comply with any such law. If, after
such good faith effort, the Purchaser cannot comply with any such state statute,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. 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 the
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
FERROFLUIDICS CORPORATION
AT
$6.50 NET PER SHARE
BY
FERROTEC ACQUISITION, INC.,
A WHOLLY OWNED SUBSIDIARY OF
FERROTEC CORPORATION
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED. SHARES WHICH
ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
- --------------------------------------------------------------------------------
Ferrotec Acquisition, Inc., a Massachusetts corporation (the
"Purchaser") and a wholly owned subsidiary of Ferrotec Corporation, a Japanese
corporation ("Parent"), is offering to purchase all outstanding shares of common
stock, par value $.004 per share (the "Shares"), of Ferrofluidics Corporation, a
Massachusetts corporation (the "Company"), at a purchase price of $6.50 per
Share, net to the seller in cash without interest (the "Offer Price"), 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").
Parent has formed the Purchaser in connection with the Offer and the
Merger Agreement (as defined below).
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of October 20, 1999 (the "Merger Agreement"), by and among the Company,
Parent and the Purchaser. Pursuant to the Merger Agreement, and subject to the
terms and conditions thereof, the Purchaser will be merged with and into the
Company (the "Merger"). At the effective time of the Merger (i) each Share not
beneficially owned by Parent, the Purchaser or any other direct or indirect
subsidiary of Parent immediately prior thereto (other than those Shares held in
the treasury of the Company and Shares held by holders who perfect any appraisal
rights that they may have under Massachusetts law) will be canceled and retired
and be converted into the right to receive in cash an amount per Share equal to
the highest price per Share paid by the Purchaser pursuant to the Offer, without
interest thereon, and (ii) the Company will become a wholly owned subsidiary of
Parent.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY
AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER, THE MERGER AGREEMENT AND THE
MERGER, AND RECOMMENDS THAT THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of all outstanding Shares on a
fully diluted basis.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any extension
or amendment), the Purchaser will accept for payment and thereby purchase, at
the Offer Price, all Shares validly tendered prior to the Expiration Date and
not properly withdrawn.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
withdrawn as, if and when the Purchaser gives oral or written notice to American
Stock Transfer & Trust Company (the "Depositary") of the 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 purchased pursuant to the Offer
will be made by deposit of the purchase price therefore with the Depositary,
which will act as agent for the tendering shareholders for the purpose of
receiving payment from the Purchaser and transmitting such payment to tendering
shareholders whose Shares have been accepted for payment. In all cases, payment
for Shares purchased pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares, or timely
confirmation of the book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility, (ii) either a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees, or an Agent's Message, and (iii) any other required
documents.
Subject to the terms and conditions of the Merger Agreement, the
Purchaser reserves the right, at any time or from time to time, to extend for
any reason the period during which the Offer is open, by giving oral or written
notice of such extension to the Depositary. The Purchaser also expressly
reserves the right, at any time or from time to time, to delay the acceptance
for payment of, or payment for, Shares tendered pursuant to the Offer, terminate
the Offer, waive any conditions to the consummation of the Offer, or amend or
modify the terms and conditions of the Offer, in each case in accordance with
the terms of the Merger Agreement by giving oral or written notice of such
modification to the Depositary. Any such extension, delay in acceptance for
payment or payment, termination, waiver or amendment or modification will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. During any extension of the Offer, all Shares previously
tendered and not withdrawn will remain subject to the Offer and subject to the
right of the tendering holder to withdraw such holder's Shares. If the
conditions of the Offer are not satisfied prior to the Expiration Date, the
Purchaser, subject to the terms of the Merger Agreement, may (i) decline to
purchase any of the Shares tendered and terminate the Offer, (ii) extend the
Offer and retain the Shares (subject to withdrawal rights) which have been
tendered during the period for which the Offer is extended, or (iii) waive any
of the conditions of or otherwise amend the Offer. There can be no assurance
that the Purchaser will exercise its right to extend the Offer or waive any of
the conditions of the Offer.
Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
December 24, 1999. For a withdrawal to be effective, a written, telegraphic,
telex or facsimile transmission of notice of withdrawal must be timely received
by the Depositary at one of its addresses set forth in 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 names
in which the certificates evidencing the Shares to be withdrawn are registered,
if different from that of the person who tendered such Shares. If certificates
for Shares have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the tendering holder must
also submit the serial numbers shown on the particular certificates representing
the Shares to be withdrawn and the signature(s) on the notice of withdrawal must
be guaranteed by an Eligible Institution which is a participant in an approved
Signature Guarantee Medallion Program, except in the case of Shares tendered for
the account of the Eligible Institution. If Shares have been tendered pursuant
to the procedures for book-entry transfer, any notice of withdrawal must also
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares.
Pursuant to the Merger Agreement, the Company has agreed promptly to
furnish to the Purchaser a list of names and addresses of all record holders of
Shares and a security position listing of Shares held in stock depositories,
each as of a recent date, and to promptly furnish the Purchaser with such
additional information, including updated lists of shareholders, mailing labels
and security position listings, and such other assistance as the Purchaser or
its agents may reasonably request. This Offer to Purchase and the related Letter
of Transmittal will be mailed by the Purchaser to record holders of Shares and
will be furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
The Offer to Purchase and the related Letter of Transmittal contain
important information which holders of Shares are urged to read carefully before
making any decision with respect to the Offer. The information required to be
disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated in this notice by reference.
Requests for copies of the Offer to Purchase, 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 the
Purchaser's expense. The Purchaser will not pay any fees or commissions to any
broker or dealer or any other person (other than the Depositary and the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 207-3156
October 26, 1999
EXHIBIT 99(c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
FERROTEC CORPORATION
(a Japanese corporation)
FERROTEC ACQUISITION, INC.
(a Massachusetts corporation)
and
FERROFLUIDICS CORPORATION
(a Massachusetts corporation)
October 20, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (collectively, this "Agreement"), dated as
of October 20, 1999, by and among FERROTEC CORPORATION, a Japanese corporation
("Ferrotec"), FERROTEC ACQUISITION, INC., a Massachusetts corporation (the
"Merger Sub"), and FERROFLUIDICS CORPORATION, a Massachusetts corporation (the
"Company").
WHEREAS, the Merger (as hereinafter defined) and this Agreement require
the affirmative vote of at least a majority of the issued and outstanding shares
of the Company's Common Stock, par value $.004 per share (the "Common Stock"),
for the approval thereof (the "Company Shareholder Approval");
WHEREAS, the respective Boards of Directors of the Merger Sub and the
Company have approved the merger of the Merger Sub with and into the Company, as
set forth below (the "Merger"), in accordance with the Massachusetts Business
Corporation Laws (the "MBCL"), and upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, it is proposed that the Merger Sub shall make a cash tender
offer (the "Offer") to acquire all of the issued and outstanding shares of
Common Stock of the Company for $6.50 per share of Common Stock (the "Per Share
Amount"), in accordance with the terms and subject to the conditions of this
Agreement;
WHEREAS, subsequent to the consummation of the Offer, the holders,
other than Merger Sub, of shares of Common Stock issued and outstanding
immediately prior to the Effective Time (as hereinafter defined) will be
entitled, subject to the terms hereof and other than as set forth herein, to
receive the Cash Consideration (as hereinafter defined) pursuant to the Merger;
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, subject to the terms and conditions set forth herein, (i) determined that
the Offer and the Merger is in the best interests of the Company and its
shareholders, and (ii) resolved to approve and adopt this Agreement and the
transactions contemplated hereby and to recommend that the shareholders of the
Company accept the Offer, tender their shares of Common Stock pursuant to and in
accordance with the terms of the Offer and approve and adopt this Agreement; and
WHEREAS, Ferrotec, the Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger, and also to set forth various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Ferrotec, the Merger Sub and the Company agree as follows:
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ARTICLE I
THE OFFER
Section 1.1 (a) Provided this Agreement shall not have been terminated
in accordance with the terms and conditions set forth herein, the Merger Sub
shall commence the Offer as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the initial public
announcement of the Merger Sub's intention to commence the Offer (treating the
business day on which such public announcement occurs as the first business
day). The obligation of the Merger Sub to accept for payment and pay for shares
of Common Stock (the "Shares") tendered pursuant to the Offer shall be subject
to the condition (the "Minimum Condition") that at least the number of Shares
that, when added to the Shares already owned by Ferrotec and Merger Sub, shall
constitute a majority of the then outstanding Shares on a fully diluted basis
(including, without limitation, all Shares issuable upon the conversion of any
convertible securities or upon the exercise of any outstanding options, warrants
or rights) shall have been validly tendered and not withdrawn prior to the
expiration of the Offer, which shall be 20 business days after the date the
Offer is commenced, unless so extended as provided for hereinafter (the
"Expiration Date"), and also shall be subject to the satisfaction of the other
conditions set forth in Annex A, attached hereto and incorporated herein by
reference. The Merger Sub expressly reserves the right to waive any such
condition, to increase the price per Share payable in the Offer, and to make any
other changes in the terms and conditions of the Offer; provided, however, that
without the prior written consent of the Company no change may be made which
decreases the price per Share payable in the Offer, which reduces the minimum
number of Shares to be purchased in the Offer, or which amends or imposes
conditions to the Offer in addition to those set forth in Annex A hereto. The
Per Share Amount shall, subject to applicable withholding of taxes, be net to
the seller in cash, upon the terms and subject to the conditions of the Offer.
Subject to the terms and conditions of the Offer (including, without limitation,
the Minimum Condition), the Merger Sub shall pay, as soon as practicable after
it is legally permitted to do so under applicable law after expiration of the
Offer, for all Shares validly tendered and not withdrawn. Notwithstanding the
foregoing, if on the initial Expiration Date (which shall be 20 business days
after the date the Offer is commenced) all conditions of the Offer shall have
been satisfied or waived other than the Minimum Condition, Merger Sub shall
extend the Expiration Date to the date that is ten (10) business days
immediately following such initial Expiration Date. In addition, and
notwithstanding the foregoing but subject to Section 8.1 hereof, if on such
initial Expiration Date or any other Expiration Date, the applicable waiting
period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") in respect to the Offer shall not have
expired or been terminated and all other conditions to the Offer shall have been
satisfied or waived, Merger Sub shall be required to extend the Expiration Date
until such waiting period shall have expired or been terminated.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Ferrotec and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1") with respect to
the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference an
offer to purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the Offer
to Purchase and such other documents, together with all supplements and
amendments thereto,
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being referred to herein collectively as the "Offer Documents"). Ferrotec, the
Merger Sub and the Company agree to correct promptly any information provided by
any of them for use in the Offer Documents which shall have become false or
misleading, and Ferrotec and Merger Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the opportunity to
review the Schedule 14D-1 before it is filed with the SEC. In addition, Ferrotec
and Merger Sub will give the Company and its counsel a reasonable opportunity to
review and comment upon the Offer Documents and all amendments and supplements
thereto prior to the filing thereof, and will provide the Company and its
counsel in writing with any comments, whether written or oral, Ferrotec, the
Merger Sub or their counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
Section 1.2 Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents that (i) the Company's Board, at a meeting duly called and held on
October 14, 1999, has unanimously (A) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
are fair to and in the best interests of the shareholders of the Company (the
"Shareholders"), (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) resolved to recommend that the Shareholders of the
Company accept the Offer and approve and adopt this Agreement and the
transactions contemplated hereby, subject to the Company's rights under Section
6.4 hereof; and (ii) Advest, Inc. has delivered to the Company's Board a written
opinion that the consideration to be received by the holders of Shares pursuant
to each of the Offer and the Merger is fair to the holders of Shares from a
financial point of view. The Company hereby consents to the inclusion in the
Offer Documents the recommendation of the Company's Board described above and
the opinion obtained by the Company's investment bankers, described above.
(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 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing the recommendation of the Company's
Board described in Section 1.2(a), subject to the Company's rights under Section
6.4 hereof, and shall disseminate the Schedule 14D-9 to the extent required by
Rule 14d-9, promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), and any other applicable federal securities laws. The Company, Ferrotec,
and the Merger Sub agree to correct promptly any information provided by any of
them for use in the Schedule 14D-9 which shall have become false or misleading,
and the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Ferrotec, Merger Sub and their counsel shall be given the
opportunity to review and comment upon the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Ferrotec, the Merger
Sub and their counsel in writing with any comments, whether written or oral,
that the Company or its counsel may receive from time to time from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments or other communications.
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<PAGE>
(c) The Company shall promptly furnish the Merger Sub with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. In addition, the Company shall furnish the Merger
Sub with such additional information, including, without limitation, updated
listings and computer files of Shareholders, mailing labels and security
position listings, and such other assistance as the Merger Sub or its agents may
reasonably request.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the MBCL, at the Effective Time, the Merger Sub
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Merger Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
Section 2.2 Effective Time. On the Closing Date, as hereinafter
defined, the Company shall execute, in the manner required by the MBCL, and
shall deliver to the Secretary of State of the Commonwealth of Massachusetts
Articles of Merger duly executed and verified by the appropriate parties hereto,
and the parties shall take such other and further actions as may be required by
law to make the Merger effective. The Merger shall become effective at such time
as the Articles of Merger ("Articles of Merger"), accompanied by payment of the
filing fee (as provided in Chapter 156B, Section 114 of the MBCL), have been
examined by and received the endorsed approval of the Secretary of State of the
Commonwealth of Massachusetts (the "Effective Time").
Section 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the MBCL and as set forth herein.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and the Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation. Immediately
following the Effective Time, the purpose of the Surviving Corporation shall be
to perform scientific research and development and to engage in the inventing,
manufacturing and selling of useful equipment, devices, processes, machinery and
products, and in the rendering of related services, and to conduct such other
business as may be lawful under the laws of the Commonwealth of Massachusetts.
Section 2.4 Articles of Organization and By-Laws of the Surviving
Corporation.
(a) The Articles of Organization of the Merger Sub (the "Articles of
Organization"), as in effect immediately prior to the Effective Time, shall be
the Articles of Organization of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and hereof and applicable law,
or as otherwise contemplated hereby.
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<PAGE>
(b) The By-Laws of the Merger Sub in effect at the Effective Time shall
be the By-Laws of the Surviving Corporation until thereafter amended, in
accordance with the provisions thereof, hereof and applicable law.
Section 2.5 Directors and Officers. Subject to applicable law, the
directors of the Merger Sub shall be the initial directors of the Surviving
Corporation and the officers of the Company shall be the initial officers of the
Surviving Corporation and each shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
Section 2.6 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VII (the "Closing Date"), at the offices of
Akerman, Senterfitt & Eidson, P.A., One Southeast Third Avenue, 28th Floor,
Miami, Florida 33131, unless another date or place is agreed to in writing by
the parties hereto.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
Section 3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock or any shares of capital stock of the Merger Sub:
(a) Common Stock of Merger Sub. All of the shares of
common stock, par value $.01 per share, of the Merger Sub (the "Merger Sub
Common Stock"), issued and outstanding immediately prior to the Effective Time
shall be converted into one-thousand shares of Common Stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock. Each share of Common
Stock that is owned by any affiliate of the Merger Sub, the Company or by any
wholly-owned subsidiary of the Company shall automatically be canceled and
retired and shall cease to exist, and no cash or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Retention or Exchange of Shares of Common Stock.
Except as otherwise provided herein and subject to Section 3.7 with respect to
shares of Common Stock as to which appraisal rights have been exercised, each
share of Common Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into a non-transferrable right to receive $6.50 in
cash per share (the "Cash Consideration").
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Section 3.2 Options and Warrants; Stock Plans.
(a) Except as set forth on Section 3.2 (a) of the Company
Disclosure Letter, each option and warrant held by an employee, officer or
director of the Company and other persons to acquire shares of Common Stock
("Company Option" and "Company Warrant", respectively) that is outstanding
immediately prior to the Acceptance Date (as hereinafter defined), whether or
not then vested or exercisable, shall, simultaneously with the Acceptance Date,
be canceled in exchange for, and the Merger Sub shall pay to the holder thereof,
a single lump sum cash payment equal to the product of (1) the number of shares
of Common Stock subject to such Company Option or Company Warrant and (2) the
excess, if any, of the Cash Consideration over the exercise price per share of
such Company Option or Company Warrant, subject to any required withholding of
taxes, provided that with respect to Company Warrants, the parties hereto hereby
agree and acknowledge that such Company Warrants may only be cancelled with the
consent of the holders of such Warrants.
(b) Prior to the Acceptance Date, if necessary, and through
the Effective Time, if also necessary, the Company shall use all reasonable
efforts to (i) obtain consents from appropriate holders of Company Warrants and
(ii) make any amendments to the terms of such Company Options, Company Warrants
or the compensation plans or arrangements related thereto that are necessary to
give effect to the transactions contemplated by Section 3.2(a), provided,
however, that no consent shall be necessary with respect to all of the
outstanding Company Options which have been issued under stock option plans
maintained by the Company. Notwithstanding any other provision of this Section,
payment pursuant to this Section 3.2 may be withheld in respect of any Company
Warrant until necessary or appropriate consents are obtained.
Section 3.3 Exchange and Retention of Common Stock.
(a) Immediately following the Effective Time, Ferrotec and
the Merger Sub shall take all steps necessary to cause to be deposited on a
timely basis with the bank or trust company as shall be mutually acceptable to
the Merger Sub and the Company, acting as the exchange agent (the "Exchange
Agent") in an account (the "Exchange Fund") the aggregate Cash Consideration to
which holders of shares of Common Stock shall be entitled at the Effective Time
pursuant to Section 3.l(c).
(b) Promptly after the Effective Time, Merger Sub shall
cause the Exchange Agent to mail to each record holder of certificates (the
"Certificates") that immediately prior to the Effective Time represented shares
of Common Stock, a form of letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
instructions for use in surrendering such Certificates and receiving the Cash
Consideration in respect thereof.
(c) In effecting the payment of the Cash Consideration in
respect of shares of Common Stock represented by Certificates entitled to
payment of the Cash Consideration pursuant to Section 3.l(c), upon the surrender
of each such Certificate, the Exchange Agent at the time of such surrender shall
pay the holder of such Certificate the Cash Consideration multiplied by
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the number of shares of Common Stock represented by such Certificate, in
consideration therefor. Upon such payment, such Certificate shall forthwith be
canceled.
(d) Until surrendered in accordance with paragraph (c)
above, each Certificate (other than Certificates representing Dissenting Shares
(as hereinafter defined) or shares of Common Stock held by any affiliate of the
Merger Sub, in the treasury of the Company or by any wholly-owned subsidiary of
the Company) shall represent solely the right to receive the aggregate Cash
Consideration relating thereto. No interest shall be paid or accrued on the Cash
Consideration. If the Cash Consideration (or any portion thereof) is to be
delivered to any person other than the person in whose name the Certificate
formerly representing shares of Common Stock surrendered therefor is registered,
it shall be a condition to such right to receive such Cash Consideration that
the Certificate so surrendered shall be properly endorsed (with signatures
medallion guaranteed) or otherwise be in proper form for transfer and that the
person surrendering such shares of Common Stock shall pay to the Exchange Agent
any transfer or other taxes required by reason of the payment of the Cash
Consideration to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
(e) Promptly following the date which is six months after
the Effective Time, the Exchange Agent shall deliver to the Surviving
Corporation all cash, plus accrued interest thereon, if any, and other documents
in its possession relating to the transactions described in this Agreement, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a share of Common Stock entitled to the
payment of Cash Consideration may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration therefor the applicable aggregate Cash
Consideration relating thereto, without any interest thereon.
(f) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any shares of Common
Stock which were outstanding immediately prior to the Effective Time and which
are entitled to the payment of Cash Consideration. In addition, after the
Effective Time, holders of Certificates shall not be entitled to any voting
rights or other rights attributable to the ownership of an equity interest in
the Company, except as otherwise specifically set forth herein.
Section 3.4 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to shares of Common Stock entitled
to the payment of Cash Consideration with a record date after the Effective Time
shall be paid to the holder of any such unsurrendered Certificate with respect
to the shares of Common Stock represented thereby. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the Cash Consideration.
Section 3.5 No Liability. None of Ferrotec, the Merger Sub, the
Company, the Surviving Corporation, or the Exchange Agent shall be liable to any
person in respect of any Cash Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
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Effective Time (or immediately prior to such earlier date on which the Cash
Consideration would otherwise escheat to or become the property of any
Governmental Entity (as hereinafter defined)) any such distributions or cash in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
Section 3.6 Lost Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Company and/or the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Company and/or the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent shall issue in exchange
for such lost, stolen or destroyed Certificate the amount to which such person
is entitled pursuant to this Agreement.
Section 3.7 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any Shares ("Dissenting Shares") which are issued and
outstanding immediately prior to the Effective Time and which are held by
Shareholders of the Company who have filed with the Company, before the taking
of the vote of the Shareholders of the Company to approve the Merger, written
objections to such approval stating their intention to demand payment for such
Shares, and who have not voted such Shares in favor of the adoption of the
Merger will not be converted as described in Section 3.1(c) hereof, but will
thereafter constitute only the right to receive payment of the fair value of
such Shares in accordance with the applicable provisions of Chapter 156B of the
MBCL (the "Appraisal Rights Provisions"); provided, however, that all Shares
held by Shareholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such Shares under the
Appraisal Rights Provisions shall thereupon be deemed to have been canceled and
retired and to have been converted, as of the Effective Time, into the right to
receive the Cash Consideration, without interest, in the manner provided in
Section 3.1(c). Persons who have perfected statutory rights with respect to
Dissenting Shares as aforesaid will not be paid by the Surviving Corporation as
provided in this Agreement and will have only such rights as are provided by the
Appraisal Rights Provisions with respect to such Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, if the Merger Sub
abandons or is finally enjoined or prevented from carrying out, or the
Shareholders rescind their adoption of, the Merger, the right of each holder of
Dissenting Shares to receive the fair value of such Dissenting Shares in
accordance with the Appraisal Rights Provisions will terminate, effective as of
the time of such abandonment, injunction, prevention or rescission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Ferrotec and the Merger Sub in a
letter delivered to it at or prior to the execution of this Agreement (the
"Company Disclosure Letter"), the Company represents and warrants to Ferrotec
and the Merger Sub as follows:
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Section 4.1 Organization.
(a) Each of the Company and the Company Subsidiaries (as
hereafter defined) is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where failure to be so existing and in good
standing or to have such power and authority would not have a material adverse
effect on the current business, results of operations or financial condition of
the Company and the Company Subsidiaries taken as a whole (a "Company Material
Adverse Effect"). Each of the Company and the Company Subsidiaries is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business conducted by
it makes such qualification or licensing necessary, except where the failure to
be so duly qualified, licensed and in good standing would not have a Company
Material Adverse Effect. The Company has heretofore delivered to Merger Sub a
complete and correct copy of each of its Articles of Organization and By-Laws,
as currently in effect.
(b) Section 4.1(b)(i) to the Company Disclosure Letter
lists all of the operational subsidiaries of the Company through which the
Company currently conducts its businesses or has conducted its businesses during
the two years preceding the date of this Agreement (individually, a "Company
Subsidiary,"and collectively, the "Company Subsidiaries"), and their states of
incorporation or country of incorporation or organization. Section 4.1(b)(ii) to
the Company Disclosure Letter lists all of the non-operational subsidiaries of
the Company which have not conducted any operations during the two years
preceding the date of this Agreement (the "Non-Operational Subsidiaries"), and
their states of incorporation or country of incorporation or organization.
Except as set forth in Section 4.1(b)(ii) to the Company Disclosure Letter, the
Company does not own an equity interest in or control, directly or indirectly,
any other corporation, association, partnership or business organization other
than the Company Subsidiaries and the Non-Operational Subsidiaries.
Section 4.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of
the Company consists of 12,500,000 shares of Common Stock and 100,000 shares of
preferred stock, par value $.001 per share (the "Preferred Stock"), of which
100,000 shares have been designated as Series A Junior Participating Cumulative
Preferred Stock (the "Series A Preferred Stock"). Section 4.2(a) of the Company
Disclosure Letter sets forth a description of the Common Stock, the Preferred
Stock and the Series A Preferred Stock. As of October 1, 1999 (i) 6,226,280
shares of Common Stock were issued and outstanding, (ii) 652,498 shares of
Common Stock were issued and held in the treasury of the Company, and (iii) no
shares of Preferred Stock were issued and outstanding. Since such date, no
additional shares of capital stock have been issued except shares issued upon
the exercise of the Company Options pursuant to the Company's stock option
plans, pension plans and other similar employee benefit plans, all as described
in the Company Disclosure Letter (the "Company Stock Plans"). All the
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and nonassessable. Except as provided herein or as disclosed
in Section 4.2(a) of the Company Disclosure Letter and, except for the Company
Stock Plans or the Company Rights Agreement (defined in Section 6.11 of this
Agreement), as of the date hereof, there
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are no existing (i) options, warrants, dividend entitlement rights, stock
appreciation rights, stock depreciation rights, calls, subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating the Company or any of the Company Subsidiaries to issue, transfer or
sell any shares of capital stock or other equity interest in, the Company or any
of the Company Subsidiaries or securities convertible into or exchangeable for
such shares or equity interests, (ii) contractual obligations of the Company or
any of the Company Subsidiaries to repurchase, redeem or otherwise acquire any
capital stock of the Company or any of the Company Subsidiaries, or (iii) voting
trusts or similar agreements to which the Company or a Company Subsidiary is a
party with respect to the voting of the capital stock of the Company and/or a
Company Subsidiary.
(b) Except as set forth in Section 4.2(b) of the Company
Disclosure Letter, all of the outstanding shares of capital stock (or equivalent
equity interests of entities other than corporations) of each of the Company
Subsidiaries are beneficially owned, directly or indirectly, by the Company,
free and clear of all liens, pledge, security interests, claims or other
encumbrances.
Section 4.3 Authorization; Validity of Agreement; Necessary Action. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and, subject to obtaining any necessary approval of its
Shareholders, to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by it of the transactions contemplated hereby, have been duly authorized by the
Company Board and, except for the approval of its Shareholders, no other
corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the consummation by
it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, subject to approval and adoption of
the Merger by the Company's Shareholders (and assuming due and valid
authorization, execution and delivery hereof by Ferrotec and Merger Sub) is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 4.4 Consents and Approvals; No Violations. Except as disclosed
in Section 4.4 of the Company Disclosure Letter and except (a) for filings
pursuant to HSR Act, applicable requirements under the Securities Act of 1933,
as amended ("Securities Act") and the Exchange Act, (b) for the filing of the
Articles of Merger, (c) for applicable requirements under corporation or "blue
sky" laws of various states or (d) as otherwise specifically provided for in
this Agreement, neither the execution, delivery or performance of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) violate any provision of the Articles of
Organization, as amended, or By-Laws, as amended, of the Company or the Company
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement, Benefit Plan (as hereinafter defined, and with respect to
any Benefit Plan, no liability or increased expense will be incurred as a
consequence of the execution of this Agreement
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or the consummation of the transactions contemplated herein), or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (the "Company Agreements"), (iii) to the best knowledge of the Company,
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to the Company or any Company Subsidiary, any of the
Company Subsidiaries or any of their properties or assets, or (iv) require on
the part of the Company or any Company Subsidiary any filing or registration
with, notification to, or authorization, consent or approval of, any court,
legislative, executive or regulatory authority or agency (a "Governmental
Entity") or any third party; except in the case of clauses (ii), (iii) or (iv)
for such violations, breaches or defaults which, or filings, registrations,
notifications, authorizations, consents or approvals the failure of which to
obtain would not have, individually and/or in the aggregate, a Company Material
Adverse Effect or would have become applicable as a result of any acts or
omissions by, or the status of facts pertaining to, solely Ferrotec or the
Merger Sub.
Section 4.5 SEC Reports and Financial Statements. The Company has filed
all reports required to be filed by it with the SEC pursuant to the Exchange Act
and the Securities Act since June 30, 1997 (as such documents have been amended
since the date of their filing, collectively, the "Company SEC Documents"). The
Company SEC Documents, as of their respective filing dates, or if amended, as of
the date of the last such amendment, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of the consolidated balance
sheets (including the related notes) included in the Company SEC Documents
fairly presents in all material respects the financial position of the Company
and its consolidated subsidiaries as of the respective dates thereof, and the
other related statements (including the related notes) included therein fairly
present in all material respects the results of operations and cash flows of the
Company and its consolidated subsidiaries for the respective periods or as of
the respective dates set forth therein. Each of the financial statements
(including the related notes) included in the Company SEC Documents has been
prepared in all material respects in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved, except as otherwise noted therein and subject, in the case of
unaudited interim financial statements, to normal year-end adjustments. The
consolidated balance sheet of the Company and its consolidated subsidiaries at
July 3, 1999, together with the Notes thereto is herein sometimes referred to as
the "Company Balance Sheet." The Company's and Company Subsidiaries' accounts
receivables, as set forth in the Company Balance Sheet, have arisen from
bona-fide transactions in the ordinary course of business consistent with past
practice, and since July 3, 1999, have not been materially diminished in any
manner other than by cash collections, establishment of reserves and write-offs,
all in the ordinary course of business and consistent with past practice. The
Company's and Company Subsidiaries' inventory, as set forth on the Company
Balance Sheet, represents bona-fide inventory, and since July 3, 1999, has not
been materially diminished in any manner other than the sale in the ordinary
course of business consistent with past practice. Said inventory, as reflected
on the Company Balance Sheet, does not include any material amount of inventory
that is obsolete.
Section 4.6 No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business since July 3, 1999, (b) for
liabilities disclosed in the Company Balance Sheet (c) for liabilities incurred
in connection with the Merger or otherwise as contemplated by this
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Agreement and (d) as disclosed in Section 4.6 of the Company Disclosure Letter,
since July 3, 1999, neither the Company nor any of the Company Subsidiaries has
incurred any liabilities that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company and its consolidated
subsidiaries prepared in accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its consolidated subsidiaries as
of July 3, 1999, except for liabilities that would, individually and/or in the
aggregate, not have a Company Material Adverse Effect.
Section 4.7 Absence of Certain Changes. Except as (a) disclosed in
Section 4.7 of the Company Disclosure Letter or (b) contemplated by this
Agreement, between July 3, 1999 and the date of this Agreement nothing has
occurred hereunder which would be considered to constitute a Company Material
Adverse Effect.
Section 4.8 Disclosure Documents. Neither the Schedule 14D-9 nor any
information supplied by the Company for inclusion in the Offer Documents, in
each case except for information supplied by Ferrotec or Merger Sub for
inclusion therein, shall, at the respective times the Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to Shareholders of the Company, as the case may
be, 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 made therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by the
Company for inclusion in the proxy statement relating to the meeting of the
Company's Shareholders (the "Special Meeting") to be held in connection with the
Merger, as the same may be amended or supplemented from time to time (the "Proxy
Statement"), if such Proxy Statement is required by law to be filed, will,
either at the time of mailing of the Proxy Statement to Shareholders of the
Company or at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement, if
any, and Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act.
Section 4.9 Employee Benefit Plans; ERISA.
(a) Section 4.9(a) of the Company Disclosure Letter sets
forth a list of all employee benefit plans and all amendments thereto (including
but not limited to plans described in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") maintained by the Company or
the Company Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with the Company and the
Company Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(15) of ERISA other than benefit plans or arrangements mandated
by law ("Benefit Plans") and all material employment and severance agreements
with employees of the Company and the Company Subsidiaries ("Employee
Agreements"), including, without limitation, any supplemental employee
retirement plans (SERP's).
(b) With respect to each Benefit Plan, except as disclosed
in Section 4.9(b) of the Company Disclosure Letter: (i) if intended to qualify
under Section 401(a) of the Internal
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Revenue Code of 1986, as amended (the "Code"), such plan has received a
determination letter from the Internal Revenue Service stating that it so
qualifies and that its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the Company and/or the Company Subsidiaries; (iv) no
disputes are pending, or, to the knowledge of the Company, threatened that might
reasonably be expected to give rise to material liability on the part of the
Company and/or the Company Subsidiaries (other than routine claims for
benefits); (v) no prohibited transaction (within the meaning of Section 406 of
ERISA) has occurred that might reasonably be expected to give rise to material
liability on the part of the Company and/or the Company Subsidiaries; and (vi)
all contributions required to be made to such plan as of the date hereof (taking
into account any extensions for the making of such contributions) have been made
in full.
(c) No Benefit Plan is a "multiemployer pension plan,"as
defined in Section 3(37) of ERISA, nor is any Benefit Plan a plan described in
Section 4063(a) of ERISA.
(d) No liability under Title IV of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the Company or the Company
Subsidiaries or any ERISA Affiliate of incurring a material liability under such
Title.
(e) No Benefit Plan has incurred an accumulated funding
deficiency, as defined in Section 302 of ERISA or section 412 of the Code,
whether or not waived.
(f) With respect to each Benefit Plan that is a "welfare
plan" (as defined in Section 3(1) of ERISA), except as set forth in Section
4.9(f) of the Company Disclosure Letter, no such plan provides medical or death
benefits with respect to current or former employees of the Company or any of
the Company Subsidiaries beyond their termination of employment (other than to
the extent required by applicable law).
Section 4.10 Litigation. Except as disclosed in Section 4.10 of the
Company Disclosure Letter or as would otherwise not have a Company Material
Adverse Effect, as of the date hereof, there is no action, suit, proceeding
(other than any action, suit or proceeding resulting from or arising out of this
Agreement or the transactions contemplated hereby) or, to the best knowledge of
the Company, investigation pending or, to the best knowledge of the Company,
action, suit, proceeding, audit or investigation threatened, involving the
Company or any of the Company Subsidiaries, by or before any court, governmental
or regulatory authority or arbitrator, irrespective of whether such action or
proceeding is in the United States or abroad, or by any third party.
Section 4.11 Compliance with Applicable Laws. Neither the Company nor
any of the Company Subsidiaries is in default or violation of any term,
condition or provision of any statute, law, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to the Company or any of the Company
Subsidiaries, except for any such defaults or violations that would not have a
Company Material Adverse Effect.
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Section 4.12 Taxes.
(a) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, the Company and each of the Company Subsidiaries have (i)
timely filed all material Tax Returns, as defined below, required to be filed by
any of them for tax years ended prior to the date of this Agreement or requests
for extensions have been timely filed and any such request shall have been
granted and not expired and all such returns are complete in all material
respects, (ii) paid or accrued all Taxes, as defined below, shown to be due and
payable on such returns other than such Taxes as are being contested in good
faith by the Company or the Company Subsidiaries, and (iii) to the knowledge of
the Company and except as set forth in the audited financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
July 3, 1999, properly accrued in all material respects all such Taxes for such
periods subsequent to the periods covered by such returns.
(b) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, the Company is not aware of any ongoing federal, state or
local audits or examinations of any Tax Return of the Company or the Company
Subsidiaries.
(c) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, there are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any material Taxes or deficiencies against the Company or any
of the Company Subsidiaries, and to the Company's knowledge no power of attorney
granted by either the Company or any of the Company Subsidiaries with respect to
any Taxes is currently in force.
(d) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, neither the Company nor any of the Company's Subsidiaries is
a party to any agreement providing for the allocation or sharing of material
Taxes.
(e) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States Internal Revenue Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes.
Section 4.13 Real Property. Except as set forth in Section 4.13 of the
Company Disclosure Letter, the Company (including, as applicable, the Company
Subsidiaries) owns all of the real and personal property included in the Company
Balance Sheet (except assets recorded under capital lease obligations and such
property as has been disposed of during the ordinary course of the Company's
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business since the date of the Company Balance Sheet), free and clear of any
liens, claims, charges, exceptions or encumbrances ("Encumbrances"), except, in
each case, for (a) Encumbrances reflected in the Company Balance Sheet, (b)
Encumbrances or imperfections of title which are not, individually or in the
aggregate, material in character, amount or extent and which do not materially
detract from the value or materially interfere with the present or presently
contemplated use of the assets subject thereto or affected thereby, and (c)
Encumbrances for current Taxes not yet due and payable. All the real property
owned and/or leased by the Company is set forth on Section 4.13 to the Company
Disclosure Letter. Section 4.13 of the Company Disclosure Letter sets forth a
Fixed Asset Listing for the Company, Ferrofluidics, GmbH and Ferrofluidics, Ltd.
Such Fixed Assets Listings are true and accurate in all material respects.
Section 4.14 Intellectual Property. Except as disclosed in Section 4.14
of the Company Disclosure Letter or as would not have a Company Material Adverse
Effect, as of the date hereof, there are no pending or threatened claims of
which the Company or the Company Subsidiaries have been given written notice, by
any person against their use of any material trademarks, trade names, service
marks, service names, mark registrations, logos, assumed names and copyright
registrations, patents and all applications therefore which are owned by the
Company or the Company Subsidiaries and used in their respective operations as
currently conducted (collectively, the "Company Intellectual Property"). The
Company and the Company Subsidiaries have such ownership of or such rights by
license, lease or other agreement to the Company Intellectual Property as are
necessary to permit them to conduct their respective operations as currently
conducted. In addition, a list of the patents, patents pending, and registered
trademarks of the Company is set forth on Section 4.14 to the Company Disclosure
Letter.
Section 4.15 Contracts. Except as set forth in Section 4.15 of the
Company Disclosure Letter, each agreement, contract, understanding and/or
commitment to which the Company and/or the Company Subsidiaries is a party which
is material to the Company's or the Company Subsidiaries' businesses (the
"Material Contracts"), as further defined below, is in full force and effect
and, to the knowledge of the Company, is valid and enforceable by the Company or
a Company Subsidiary, as the case may be, in accordance with its terms except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth in Section 4.15 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is in default in the observance or the performance of any term or
obligation to be performed by it under any such Material Contract. To the
knowledge of the Company, no other person is in material default in the
observance or the performance of any term or obligation to be performed by it
under any of the Material Contracts. For purposes of this Section 4.15, Material
Contracts shall mean all agreements, contracts, understandings and/or
commitments to which the Company or any Company Subsidiary is a party which
either provide for the payment or receipt of payment for goods and/or services
having a value equal to or in excess of $50,000 per annum, or which during the
term thereof provide for the payment or receipt of payment for goods and/or
services having a value in excess of $250,000. In addition, with respect to
agreements, contracts, understandings and/or commitments to which the Company or
the Company Subsidiaries is a party and which are not deemed Material Contracts
hereunder (the "Other
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Contracts"), there is no breach or default by the Company and/or the Company
Subsidiaries under any of the Other Contracts that would have a Company Material
Adverse Effect; and the Other Contracts were entered into in the ordinary course
of business of the Company and/or the Company Subsidiaries.
Section 4.16 Environmental Laws and Regulations. Except as set forth in
Section 4.16 of the Company Disclosure Letter or as would otherwise not have a
Company Material Adverse Effect, (a) the Company and each of the Company
Subsidiaries is in material compliance with all applicable federal, state, local
and foreign laws and regulations relating to protection of the environment
(collectively, "Environmental Laws"), which compliance includes, but is not
limited to, the possession by the Company and the Company Subsidiaries of
material permits and other governmental authorizations required under applicable
Environmental Laws, and material compliance with the terms and conditions
thereof; (b) neither the Company nor any of the Company Subsidiaries has
received written notice of, or to the knowledge of the Company, is the subject
of, any actions, causes of action, claims, investigations, demands, notices, or
threats of any actions by any person and/or governmental and/or regulatory
agency or body alleging liability under or non-compliance with any Environmental
Law ("Environmental Claims"); and (c) the Company is not aware of and has not
received written notice of any event, condition, circumstance, activity,
practice, incident, action or plan which is reasonably likely to interfere with
or prevent continued compliance with or which is reasonably likely to give rise
to any statutory liability, or otherwise form the basis of any claim, action,
suit or proceeding under any Environmental Laws.
Section 4.17 Labor Matters. Except as set forth in Section 4.17 of the
Company Disclosure Letter, (a) neither the Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, and (b) there is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against the
Company or the Company Subsidiaries that would have a Company Material Adverse
Effect.
Section 4.18 Brokers or Finders. The Company represents, as to itself,
the Company Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder' s fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
Section 4.19 Opinion of Financial Advisors. The Company has received
the opinion of Advest, Inc. to the effect that, as of the date thereof, the Cash
Consideration is fair, from a financial point of view, to the Shareholders of
the Company, and such opinion has been supplied to Merger Sub.
Section 4.20 Board Recommendation. The Company Board, at a meeting duly
called and held, has (a) determined that this Agreement and the transactions
contemplated hereby, taken together, are advisable and in the best interests of
the Company and its Shareholders, and (b) subject to the other provisions
hereof, resolved to recommend that the holders of the shares of Common Stock
approve this Agreement and the transactions contemplated hereby, including the
Merger.
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Section 4.21 Insurance. The Company and the Company Subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, as is customarily carried by reasonably prudent persons
conducting businesses or owning or leasing assets similar to those conducted,
owned or leased by the Company or any of the Company Subsidiaries. A list of all
insurance policies and insurance coverage maintained for and on behalf of the
Company and the Company Subsidiaries (other than Ferrofluidics, S.A.R.L. and
Ferrofluidics, S.A.) is set forth in Section 4.21 of the Company Disclosure
Letter.
Section 4.22 Permits. The Company and the Company Subsidiaries are in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any court, governmental or regulatory authority necessary for the Company and
the Company Subsidiaries to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Company Permits"), and, as of
the date hereof, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company threatened, except, in each case,
where the failure to possess any such Company Permits or the existence or threat
of any such cancellation would not have a Company Material Adverse Effect.
Section 4.23 Customer Relationships; Warranties. Except as set forth on
Section 4.23 of the Company Disclosure Letter, to the best of the Company's
knowledge, the Company's and the Company's Subsidiaries' relationships with its
customers, vendors, employees, licensees, and sublicensees are in all material
respects satisfactory. Section 4.23 of the Company Disclosure Letter sets forth
the approximate amount of warranty expense of the Company for each of the last
three fiscal years.
Section 4.24 Year 2000. Except as disclosed in Section 4.24 of the
Company Disclosure Letter and as otherwise would not have a Company Material
Adverse Effect, the Company has assessed, evaluated and reviewed all areas of
the Company's and the Company Subsidiaries' business and operations that could
be adversely affected in any material respect by date sensitive functions and
has taken or will have taken prior to January 1, 2000 such action as the Company
deemed or deems necessary to assess, evaluate and correct in all material
respects all of the hardware, software, embedded microchips and other processing
capabilities and capacities, directly or indirectly involving date sensitive
functions, to ensure that its business and operations, including those of the
Company Subsidiaries, will continue accurately and without material interruption
or ambiguity using date information before, during and after January 1, 2000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Except as otherwise disclosed to the Company in a letter delivered to
it at or prior to the execution of this Agreement (the "Merger Sub Disclosure
Letter"), Ferrotec and the Merger Sub represent and warrant to the Company as
follows:
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Section 5.1 Organization. Ferrotec and the Merger Sub are corporations
duly organized, validly existing and in good standing under the laws of Japan
and the Commonwealth of Massachusetts, respectively, and each, respectively, has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not have a material adverse effect on the current business,
results of operations or financial condition of the Ferrotec and its
subsidiaries, taken as a whole (a "Ferrotec Material Adverse Effect"). Each of
Ferrotec and the Merger Sub is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a Ferrotec Material
Adverse Effect. Merger Sub has heretofore delivered to Company a complete and
correct copy of each of its Articles of Organization and By-Laws, as currently
in effect.
Section 5.2 Authorization: Validity of Agreement: Necessary Action.
Each of Ferrotec and the Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Ferrotec and the
Merger Sub of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by their respective Board of
Directors and no other corporate action on the part of Ferrotec or Merger Sub is
necessary to authorize the execution and delivery by Ferrotec or Merger Sub of
this Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Ferrotec and the
Merger Sub and, assuming due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of each of Ferrotec and
the Merger Sub, enforceable against it in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 5.3 Consents and Approvals: No Violations. Except as disclosed
in Section 5.3 of the Merger Sub Disclosure Letter and except for (a) filings
pursuant to the HSR Act, applicable requirements under the Securities Act and
the Exchange Act, (b) the filing of the Articles of Merger, (c) applicable
requirements under corporation or "blue sky" laws of various states or (d) as
contemplated by this Agreement, neither the execution, delivery or performance
of this Agreement by either Ferrotec or Merger Sub nor the consummation by
either Ferrotec or Merger Sub of the transactions contemplated hereby will (i)
violate any provision of the Articles of Organization or By-Laws of Merger Sub
or the equivalent organizational documents of Ferrotec, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which either Ferrotec or Merger Sub is a party or by
which it or any of its properties or assets may be bound (the "Ferrotec
Agreements"), (iii) to the best knowledge of either Ferrotec or Merger Sub,
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to either Ferrotec or Merger Sub or any of their
respective properties or assets, or (iv) require on the part of either Ferrotec
or Merger Sub any filing or registration with,
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notification to, or authorization, consent or approval of, any Governmental
Entity; except in the case of clauses (ii), (iii) or (iv) for such violations,
breaches or defaults which, or filings, registrations, notifications,
authorizations, consents or approvals the failure of which to obtain would not
have, individually and/or in the aggregate, a Ferrotec Material Adverse Effect
and would not materially adversely affect the ability of either Ferrotec or
Merger Sub to consummate the transactions contemplated by this Agreement or
would have become applicable as a result of any acts or omissions by, or the
status of facts pertaining to, solely the Company.
Section 5.4 Interim Operations of the Merger Sub. The Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
Section 5.5 Capitalization of the Merger Sub: Interests in the Company.
The authorized capital stock of the Merger Sub consists of 100,000 shares of
common stock, $.01 par value per share. As of the close of business on October
14, 1999, 1,000 shares of Merger Sub Common Stock were issued and outstanding,
all of which are entitled to vote, and no shares of Merger Sub Common Stock were
held in the Merger Sub's treasury. All the outstanding shares of the Merger
Sub's capital stock are duly authorized, validly issued, fully paid and
non-assessable. Except as set forth above, there will be, at the Effective Time,
(a) no other shares of capital stock or other voting securities of the Merger
Sub outstanding, (b) no securities of the Merger Sub convertible into or
exchangeable for shares of capital stock or voting securities of the Merger Sub
and (c) no outstanding options or other rights to acquire from the Merger Sub,
and no obligation of the Merger Sub to issue any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Merger Sub (the items referred to in clauses (a), (b)
and (c) being referred to collectively as the "Merger Sub Securities"). There
are no outstanding obligations of the Merger Sub to repurchase, redeem or
otherwise acquire any Merger Sub Securities. As of the date hereof, neither
Ferrotec nor the Merger Sub nor any of their respective affiliates or associates
(as those terms are defined in the Exchange Act), beneficially own any shares of
Common Stock of the Company, except as set forth in Section 5.5 of the Merger
Sub Disclosure Letter.
Section 5.6 Disclosure Documents. The Offer Documents will not, at the
time the Offer Documents are filed with the SEC or are first published, sent or
given to the Shareholders of the Company, as the case may be, 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 made therein, in the
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Ferrotec and Merger Sub make no representation or
warranty with respect to any information supplied by the Company or any of its
representatives in writing, expressly for inclusion in the Offer Documents,
which is contained in any of the foregoing documents or the Offer Documents.
None of the information supplied or to be supplied by Ferrotec or Merger Sub for
inclusion in the Proxy Statement will, either at the time of mailing of the
Proxy Statement to Shareholders of the Company, or at the time of the Special
Meeting, contain any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
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Section 5.7 Required Financing. Ferrotec and Merger Sub (i) have
commitments or credit facilities in place which, either alone or with cash
presently on hand, will provide sufficient funds to purchase and pay for the
Shares pursuant to the Offer and the Merger in accordance with the terms of this
Agreement and to consummate the transactions contemplated hereby and (ii) will
have on the Expiration Date, and at the Effective Time, sufficient funds to
purchase and pay for the Shares pursuant to the Offer and the Merger,
respectively, in accordance with the terms of this Agreement. Ferrotec's credit
facilities permit Ferrotec to borrow money under such facilities and use such
funds to purchase and pay for the Shares pursuant to the Offer and the Merger in
accordance with the terms of this Agreement and to consummate the transactions
contemplated hereby.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Company. The Company covenants
and agrees that the Company shall use its reasonable best efforts to, and shall
cause each of the Company Subsidiaries to use its reasonable best efforts to,
conduct its operations in the ordinary and usual course of business consistent
with past practice and use its reasonable best efforts to preserve intact their
respective business organizations' goodwill, keep available the services of
their respective present officers and key employees, and preserve the goodwill
and business relationships with suppliers, distributors, customers and others
having business relationships with them. Without limiting the generality of the
foregoing, and except as otherwise permitted by this Agreement or as
specifically disclosed in the Company Disclosure Letter, or as required by
applicable law, rule or regulation prior to the Effective Time, without the
consent of Merger Sub, which consent shall not be unreasonably withheld, the
Company will not, and will cause each of the Company Subsidiaries not to:
(a) amend or propose to amend their respective charters or
bylaws; or split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution in respect of any capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except for dividends and distributions paid by Company Subsidiaries to other
Company Subsidiaries or to the Company;
(b) (i) issue or authorize or propose the issuance of,
sell, pledge or dispose of, or agree to issue or authorize or propose the
issuance of, sell, pledge or dispose of, any additional shares of, or any
options, warrants, dividend entitlement rights, or rights of any kind to acquire
any shares of, their capital stock of any class, any debt or equity securities
convertible into or exchangeable for such capital stock or any other equity
related right (including any phantom stock or SAR rights), other than any such
issuance pursuant to options, warrants, rights or convertible securities
outstanding as of the date hereof, and which derivative securities are set forth
in the Company Disclosure Letter; (ii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or 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 or otherwise acquire or agree to acquire any assets in each
case which are material, individually or in the aggregate, to the Company and
the Company Subsidiaries taken as a whole; (iii) sell (including by
sale-leaseback), lease, pledge, dispose of or encumber any assets or interests
therein, which are material,
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individually or in the aggregate, to the Company and the Company Subsidiaries
taken as a whole, other than in the ordinary course of business and consistent
with past practice; (iv) incur or become contingently liable with respect to any
material indebtedness for borrowed money or guarantee any such indebtedness or
issue any debt securities or otherwise incur any material obligation or
liability (absolute or contingent) other than short-term indebtedness in the
ordinary course of business and consistent with past practice or otherwise
pursuant to credit facilities set forth in Section 6.1(b) of the Company
Disclosure Letter; (v) redeem, purchase, acquire or offer to purchase or acquire
any (x) shares of its capital stock or (y) long term debt other than as required
by governing instruments relating thereto; or (vi) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(c) enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other arrangements
or agreements with any directors, officers or key employee except for (i) normal
salary increases and merit bonuses, (ii) arrangements in connection with
employee transfers or (iii) agreements with new employees, in each case, in the
ordinary course of business consistent with past practice; or agree or implement
an across the board increase in employee compensation except in the ordinary
course of business consistent with past practice;
(d) except as set forth in Section 6.1(d) of the Company
Disclosure Letter, adopt, enter into or amend any, or become obligated under any
new bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, healthcare, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any employee
or retiree, except as required to comply with changes in applicable law
occurring after the date hereof;
(e) except as may be required as a result of a change in
law or in GAAP, change any of the accounting principles or practices used by it;
(f) otherwise than pursuant to credit facilities set forth
in Section 6.1(b) of the Company Disclosure Letter, pay, discharge or satisfy
any material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in, or contemplated by, the financial statements (or the notes
thereto) of the Company incurred in the ordinary course of business consistent
with past practice;
(g) except as set forth in Section 6.1(g) of the Company
Disclosure Letter, authorize, commit to or make any equipment purchases or
capital expenditures other than in the ordinary course of business and
consistent with past practice (provided, that such purchases and/or expenditures
shall, individually, be no more than $50,000, and, in the aggregate, be no more
than $250,000); or
(h) except as otherwise permitted by the terms of this
Agreement, take or agree to take any of the foregoing actions or any action that
would, or is reasonably likely to, result
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in any of its representations and warranties set forth in this Agreement
becoming untrue, or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
Section 6.2 Access to Information. Upon reasonable notice, the Company
shall (and shall cause each of the Company Subsidiaries to) afford to Merger Sub
and its officers, employees, accountants, counsel, financing sources and other
representatives, access, during normal business hours during the period prior to
the earlier of the Effective Time or the date of termination of this Agreement,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of the Company Subsidiaries
to) furnish promptly to Merger Sub (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as Merger Sub may
reasonably request; provided, however, that nothing herein shall require the
Company or any of the Company Subsidiaries to disclose any information to Merger
Sub if such disclosure would be in violation of applicable laws or regulations
of any Governmental Entity or the provisions of any confidentiality agreement to
which the Company is a party. Notwithstanding the foregoing, (x) the Company may
withhold any information if the Company determines in its sole discretion that
the disclosure of such information would adversely effect the Company's
competitive position within the industries which it conducts its business and
(y) if information is not being disclosed to Merger Sub, then Company shall
inform Merger Sub that such information is not being disclosed, the reasons for
such non-disclosure, and a general description of the information not so
disclosed, to the extent such description does not violate or contravene any
law, regulation or confidentiality agreement. Unless otherwise required by law
and until the Effective Time, Ferrotec, Merger Sub and their representatives
will hold any such information which is non-public in confidence in accordance
with the provisions of the Confidentiality Agreement between the Company and
Ferrotec Corporation, dated as of August 16, 1999 (the "Confidentiality
Agreement").
Section 6.3 Employee Benefit Matters.
(a) After the Effective Time, Ferrotec shall cause the
Company to honor all obligations under (i) the existing terms of the employment
and severance agreements to which the Company or any Company Subsidiary is
presently a party, and which are set forth in the Company Disclosure Letter,
except as may otherwise be agreed to by the parties thereto and (ii) the
Company's and any Company Subsidiary's general severance policy as set forth in
Section 6.3 of the Company Disclosure Letter. For a period of one year following
the Effective Time (the "Transition Period"), the Company Employees, as defined
below, will continue to participate in the Benefit Plans (other than stock
option or stock purchase plans) on substantially similar terms to those in
effect on the date hereof. Following the Transition Period, the Company
Employees will be permitted to participate in the employee benefit plans of
Merger Sub or the Surviving Corporation as in effect on the date thereof on
terms substantially similar to those provided to employees of Merger Sub or the
Surviving Corporation.
(b) If any Company Employee becomes a participant in any
employee benefit plan, practice or policy of Merger Sub, any of its affiliates
or the Surviving Corporation, such Company Employee shall be given credit under
such plan for all service prior to the Effective Time with the Company and the
Company Subsidiaries and prior to the time such Company Employee
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becomes such a participant, for purpose of eligibility (including, without
limitation, waiting periods) and vesting but not for any other purposes for
which such service is either taken into account or recognized (including,
without limitation, benefit accrual); provided, however, that such Company
Employees will be given credit for such service for purposes of any vacation
policy. In addition, if any Company Employees employed as of the Effective Time
become covered by a medical plan of Merger Sub or the Surviving Corporation,
such medical plan shall not impose any exclusion on coverage for preexisting
medical conditions with respect to these Company Employees, except as otherwise
required by the insurance carrier for such plans.
(c) All benefits described in Section 6.3(c) of the Company
Disclosure Letter shall be deemed fully vested as of the Effective Time.
(d) For purposes of this Section 6.3, the term "Company
Employees" shall mean all employees of the Company and the Company Subsidiaries
immediately prior to the Effective Time, including those on lay-off, disability
or leave of absence, paid or unpaid.
Section 6.4 No Solicitation.
(a) The Company will not, and will use its best efforts to
cause any officers, directors, employees and investment bankers, attorneys or
other agents retained by the Company or any of the Company Subsidiaries not to,
(i) initiate or solicit, directly or indirectly, any inquiries or the making of
any Acquisition Proposal (as hereinafter defined), or (ii) except as permitted
below, engage in negotiations or discussions with, or furnish any information or
data to any third party relating to an Acquisition Proposal (other than the
transactions contemplated hereby). Notwithstanding anything to the contrary
contained in this Section 6.4 or in any other provision of this Agreement, the
Company, and its officers, directors, investment bankers, attorneys or agents,
may:
(i) participate in discussions or negotiations
(including, as a part thereof, making any counterproposal) with or
furnish information or data to any third party making an unsolicited
Acquisition Proposal (a "Potential Acquiror") if either: (A) the
Company Board determines in good faith, after consultation with its
financial advisor, that such third party is reasonably likely to submit
an Acquisition Proposal which is a Superior Proposal (as hereinafter
defined), or (B) the Company Board determines in good faith, after
consultation with its outside legal counsel, that the failure to
participate in such discussions or negotiations or to furnish such
information or data may be inconsistent with the Company Board's
fiduciary duties under applicable law, or
(ii) following receipt of an Acquisition Proposal,
disclose to its Shareholders the Company's position contemplated by
Rules 14d-9 and 14e-2 under the Exchange Act or otherwise make any
other necessary or advisable disclosure to its shareholders related to
an Acquisition Proposal.
The Company agrees that any non-public information furnished to a
Potential Acquiror was or will be pursuant to a confidentiality agreement
substantially similar to the confidentiality provisions of the Confidentiality
Agreement.
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(b) For purposes of this Agreement, "Acquisition Proposal"
shall mean any bona fide proposal made by a third party to acquire (i)
beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of a 51%
or greater equity interest in the Company pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock, tender offer or
exchange offer or similar transaction involving the Company including, without
limitation, any single or multi-step transaction or series of related
transactions which is structured in good faith to permit such third party to
acquire beneficial ownership of a 51 % or greater equity interest in the Company
or (ii) all or substantially all of the business or assets of the Company (other
than the transactions contemplated by this Agreement).
(c) The term "Superior Proposal" shall mean any Acquisition
Proposal which the Company Board by resolution duly adopted, determines, after
consultation with its financial advisor, to be more favorable to the Company and
its Shareholders than the transactions contemplated hereby.
(d) The Company shall immediately cease and cause to be
terminated any discussions or negotiations existing as of the date hereof with
any parties (other than Ferrotec and the Merger Sub) conducted heretofore with
respect to any of the foregoing. The Company agrees not to release any third
party from the confidentiality obligations of such third party under any
confidentiality agreement or the standstill obligations of such third party
under any standstill agreement to which the Company is a party, provided,
however, that the Company can release any third party from any such standstill
agreement if the Company Board determines in good faith, after consultation with
its outside legal counsel, that the failure to so release such party from said
standstill agreement may be inconsistent with the Company Board's fiduciary
duties under applicable law.
Section 6.5 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to
Ferrotec and its affiliates and the Company. Thereafter, so long as this
Agreement is in effect, neither the Company, Ferrotec nor any of their
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any securities exchange or
inter-quotation system.
Section 6.6 Directors' and Officers' Insurance and Indemnification.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date hereof (except for Ronald Moskowitz and Jan R. Kirk), or
any person who becomes prior to the Effective Time, a director, officer,
employee, fiduciary or agent of the Company or any of the Company Subsidiaries
(the "Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director, officer, employee, fiduciary or agent of
the Company or any of the Company Subsidiaries, or is or was serving at the
request of the Company or any of the Company Subsidiaries, or is or was serving
at the request of the Company or any of the Company
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Subsidiaries as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (ii) the
negotiation, execution or performance of this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that the Company shall indemnify and hold harmless, and after the
Effective Time Surviving Corporation and Merger Sub shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement ("Losses") in connection with any such threatened
or actual claim, action, suit, proceeding or investigation, and in the event of
any such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), (A) the
Company, and the Surviving Corporation and Merger Sub after the Effective Time,
shall promptly pay expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the full extent
permitted by law, (B) the Indemnified Parties shall retain Goodwin, Procter &
Hoar LLP (provided that no policy for D&O Insurance, as defined below, requires
that counsel be chosen from an approved list, or if any such policy requires
counsel to be chosen from an approved list, Goodwin, Procter & Hoar LLP is so
named on the approved list) or other counsel to represent them in such matter,
provided that such choice of other counsel is consented to by Merger Sub or the
Surviving Corporation (and/or the applicable insurance carriers), and which
consent shall not be unreasonably withheld, and the Company, and the Surviving
Corporation and Merger Sub after the Effective Time, shall pay all reasonable
fees and expenses of such counsel within 30 days after statements therefor are
received, and (C) the Company, the Surviving Corporation and Merger Sub will use
their respective reasonable best efforts to assist in the vigorous defense of
any such matter; provided that none of the Company, the Surviving Corporation or
Merger Sub shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); and provided further
that the Surviving Corporation and Merger Sub shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 6.6, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify the
Company and, after the Effective Time, the Surviving Corporation and Merger Sub,
thereof; provided that the failure to so notify shall not affect the obligations
of the Company, the Surviving Corporation and Merger Sub except (i) to the
extent such failure to notify materially prejudices such party, or (ii) in the
event such failure to notify results in any insurance coverage being denied, to
the extent such denial materially prejudices such party.
(b) Merger Sub agrees that all rights to indemnification
existing in favor of, and all limitations on the personal liability of, the
directors, officers, employees and agents of the Company and the Company
Subsidiaries provided for in this Agreement and provided for in the Articles of
Organization or By-Laws of the Company as in effect as of the date hereof with
respect to matters occurring prior to or at the Effective Time, including the
Offer, the Merger and the other transactions contemplated thereby, shall
continue in full force and effect for a period of six (6) years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any claims (each a "Claim") asserted or made within such period shall
continue until the final disposition
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of such Claim. Prior to the Effective Time, the Company shall purchase an
extended reporting period endorsement under the Company's existing directors'
and officers' liability insurance coverage and/or coverage under new policies
from one or more other insurers (the "D & O Insurance") for the Company's
directors and officers in a form acceptable to the Company which shall provide
such directors and officers with coverage for six (6) years following the
Effective Time of not less than $20,000,000, and have other terms not materially
less favorable to, the insured persons than the directors' and officers'
liability insurance coverage presently maintained or currently contemplated by
the Company. To the extent the Company, Merger Sub and/or Ferrotec advances or
pays any expenses or damages related hereunder to a Claim in advance of any
reimbursement thereof by an insurance carrier, the Company, Merger Sub and/or
Ferrotec shall be entitled to any such reimbursement thereof by such insurance
carrier; and in the event of any claim against an insurance carrier hereunder
for reimbursement for or payment of any of said expenses or damages, Company,
Merger Sub and/or Ferrotec shall have the right to proceed against such carrier
on behalf of themselves and the Indemnified Parties hereunder. Notwithstanding
anything contained herein to the contrary, any payments for indemnification
provided hereunder shall be limited in the aggregate with all other payments for
indemnification (except as further limited below) to a maximum of $20,000,000.
Ferrotec agrees hereunder to pay and to be responsible only for the payment
obligations of the Surviving Corporation and the Merger Sub under this Section
6.6, provided that Ferrotec's obligation hereunder is subject to the limitations
set forth below. Notwithstanding anything contained herein to the contrary,
Ferrotec shall only pay and be responsible for the payment obligations of the
Surviving Corporation and the Merger Sub under this Section 6.6 with respect to
all Losses in connection with Claims arising within the two-year period
following the Effective Time (including any Losses arising after such two-year
period relating to such Claims and any Losses arising from Claims made after
such two-year period that (i) are joined in a judicial proceeding with any Claim
that arose within such two-year period, or (ii) arise from actions of an
Indemnified Party upon which actions a Claim that is filed within such two-year
period is based), up to an aggregate $10,000,000. With respect only to such
Claims described in the preceding sentence such responsibility of Ferrotec shall
continue until the final disposition of such Claims. In addition, if an
Indemnified Party shall seek indemnification for a specific amount of Losses
under this Section 6.6 with respect to a Claim, such Indemnified Party shall
give written notice thereof (an "Indemnification Notice") to the Company and to
any applicable insurance carrier (if prior to the Effective Time) and to
Ferrotec and the Surviving Corporation (if after the Effective Time) and to the
carriers of the D&O Insurance. In the event that after the Effective Time an
Indemnified Party does not receive payment for any such Losses from the
Surviving Corporation or the carrier(s) of the D&O Insurance within ninety (90)
days after the giving of an Indemnification Notice, Ferrotec shall be obligated
to pay to such Indemnified Party an amount or amounts equal to such Losses
(subject to the $10,000,000 limit described above for all Losses incurred by the
Indemnified Parties). In addition, pursuant to and in accordance with the
Article IV of the Company's By-Laws, Merger Sub and/or Ferrotec may require an
unsecured undertaking in form and content reasonably satisfactory to Merger Sub
and/or Ferrotec, from the Indemnified Parties, to reimburse any and all advance
payments to Merger Sub and/or Ferrotec made hereunder upon final disposition of
any action, suit or proceeding for which indemnification was sought, in the
event that upon such final disposition of such action, suit or proceeding such
Indemnified Party shall not be entitled to indemnification under this Section.
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(c) This Section 6.6 is intended for the irrevocable
benefit of, and to grant third party rights to, the Indemnified Parties and
shall be binding on all successors and assigns of the Merger Sub, Ferrotec, the
Company and the Surviving Corporation. Each of the Indemnified Parties shall be
entitled to enforce the covenants contained in this Section 6.6.
(d) In the event that Ferrotec or the Surviving
Corporation or any of its successors or assigns (i) consolidates with or merges
into any other person or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person or
entity, then, and in each such case, proper provision shall be made so that the
successors and assigns of Ferrotec or the Surviving Corporation, as the case may
be, assume its obligations set forth in this Section 6.6.
Section 6.7 Proxy Statement.
(a) The Company and Ferrotec shall prepare as soon as
practicable, following the consummation of the Offer (the "Acceptance Date"),
and shall file with the SEC the Proxy Statement. The respective parties will
cause the Proxy Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder.
(b) The Proxy Statement will be mailed to the Shareholders
of the Company as promptly as practicable after the Acceptance Date and
subsequent to the date on which the SEC has indicated that it has no comments or
no additional comments with respect to the Proxy Statement. The Company shall
include in the Proxy Statement the recommendation of the Company Board that its
Shareholders vote in favor of the approval of the Merger and the adoption of
this Agreement.
(c) The Company and Ferrotec agree that at the time that
the Proxy Statement is mailed to the Shareholders of the Company, the Proxy
Statement will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) No amendment or supplement to the Proxy Statement will
be made without the approval of each of the Company and Ferrotec, which approval
will not be unreasonably withheld or delayed.
Section 6.8 Shareholders' Meetings. As soon as practicable after the
consummation of the Offer, the Company, acting through the Company Board, shall,
in accordance with applicable law and its Articles of Organization, as amended,
and for the purpose of considering and taking action upon this Agreement and the
Merger contemplated hereby, duly call, give notice of, convene and hold a
Special Meeting of the Shareholders of the Company. Ferrotec and the Merger Sub
agree to vote or use their reasonable best efforts to cause all of the Shares
owned beneficially or of record by them and their affiliates as of the record
date for the Special Meeting in favor of the Merger at the Special Meeting.
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Section 6.9 Approvals and Consents: Cooperation.
(a) The parties hereto shall use all reasonable best
efforts, and cooperate with each other, to obtain as promptly as practicable all
governmental and third party authorizations, approvals, consents or waivers
required in order to consummate the transactions contemplated by this Agreement,
including, without limitation, the Merger.
(b) The Company, Merger Sub and Ferrotec shall take all
actions necessary to file as soon as practicable all notifications, filings and
other documents required to obtain all governmental authorizations, approvals,
consents or waivers and to respond as promptly as practicable to any inquiries
and requests received from the Federal Trade Commission, the Antitrust Division
of the Department of Justice and any other Governmental Entity for additional
information or documentation in connection therewith.
(c) The Company, Merger Sub and Ferrotec shall keep the
other apprised of the status of matters relating to the completion of the
transactions contemplated hereby and work cooperatively in connection with
obtaining governmental consents, including, without limitation: (i) promptly
notifying the other of, and if in writing, furnishing the other with copies of
(or, in the case of material oral communication, advise the other orally of) any
communications from or with any Governmental Entity with respect to the Merger
or any of the other transactions contemplated by this Agreement, (ii) permitting
the other party to review and discuss in advance, and considering in good faith
the views of one another in connection with, any proposed written (or any
material proposed oral) communication with any Governmental Entity, (iii) not
participating in any meeting with any Governmental Entity unless it consults
with the other party in advance and to the extent permitted by such Governmental
Entity gives the other party the opportunity to attend and participate thereat,
(iv) furnishing the other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it
and any Governmental Entity with respect to this Agreement and the Merger, and
(v) furnishing the other party with such necessary information and reasonable
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions of information to any
Governmental Entity. The Company and Ferrotec may, as each deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other under this Section as "outside counsel only." Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient unless express permission is obtained in
advance from the source of the materials (the Company or Ferrotec, as the case
may be) or its legal counsel. Notwithstanding the foregoing, in the event such
outside counsel deems that any such material so disclosed to outside counsel has
caused or will cause the failure of the condition set forth in paragraph (e) of
Annex A hereto, such outside counsel shall so notify the disclosing party of
such material as to the foregoing and shall also notify the other parties
hereto, without disclosing the specific information concerning the material so
designated as to the foregoing.
(d) The Company shall give prompt notice to Ferrotec of the
forgoing occurrence of any Company Material Adverse Effect, and Ferrotec shall
give prompt notice to the Company of the occurrence of any Ferrotec Material
Adverse Effect. Each of the Company and Ferrotec shall give prompt notice to the
other of the occurrence or failure to occur of an event that
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would, or, with the lapse of time would, cause any condition contained in
Article VII not to be satisfied.
Section 6.10 Further Assurances. Each of the parties hereto agrees to
use its best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, the Offer and the
Merger, which efforts shall include, without limitation, (a) Company, the Merger
Sub and Ferrotec using their best efforts to prevent any preliminary or
permanent injunction or other order by a court of competent jurisdiction or
Governmental Entity relating to consummating the transactions contemplated by
this Agreement, including, without limitation, under the antitrust laws, and, if
issued, to appeal any such injunction or order through the appellate court or
body for the relevant jurisdiction and (b) Company and the Merger Sub and
Ferrotec using their best efforts to satisfy any objections of, and accept any
conditions imposed by, any Governmental Entity, except where such objection or
condition would have a Company Material Adverse Effect. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the parties hereto shall take or cause to be taken
all such necessary action, including, without limitation, the execution and
delivery of such further instruments and documents as may be reasonably
requested by the other party for such purposes or otherwise to consummate and
make effective the transactions contemplated hereby.
Section 6.11 Rights Agreement; Stock Options, Foreign Subsidiaries.
(a) The Company shall take all necessary action prior to
the Acceptance Date to cause the dilution provisions of the Rights Agreement,
dated August 3, 1994, between the Company and American Stock Transfer and Trust
Company (the "Company Rights Agreement") to be inapplicable to the transactions
contemplated by this Agreement, without any payment to holders of preferred
stock purchase rights ("Rights") issued pursuant to such Company Rights
Agreement.
(b) Subject to the provisions of Section 3.2 hereof, the
Company shall have taken all necessary actions to cause all outstanding Company
Options to be canceled as of the Acceptance Date, against payment therefor as
provided hereunder.
(c) The Company shall use its reasonable efforts to cause
all of its foreign subsidiaries as to which the Company does not own of record
all such entity's equity to have entered into agreements as of the Acceptance
Date to transfer such equity owned by any other person directly to a designee of
Merger Sub.
Section 6.12 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by the Merger Sub of Shares
pursuant to the Offer, and from time to time thereafter, the Merger Sub shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as shall give the Merger Sub representation
on the Company Board equal to the product of the total number of directors on
the Company Board (giving effect to the directors elected pursuant to this
sentence)
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multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Merger Sub or any affiliate of the Merger Sub following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all actions necessary to cause the Merger
Sub's designees to be elected as directors of the Company, including increasing
the size of the Company Board or securing the resignations of incumbent
directors or both, provided that the number of directors constituting the
Company Board shall be no less than five. At such times, the Company shall use
its best efforts to cause persons designated by the Merger Sub to constitute the
same percentage as is on the Company's Board of (i) each committee of the
Company Board, (ii) each board of directors of each Company Subsidiary and (iii)
each committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, in the event that Merger Sub's
designees are elected to the Company Board, until the Effective Time, the
Company Board shall have at least two directors who are directors on the date
hereof (the "Independent Directors"); provided that, in such events, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there be only one remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate two persons to fill such vacancies who shall not be shareholders,
affiliates or associates of Merger Sub and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Notwithstanding anything
in this Agreement to the contrary, in the event that Merger Sub's designees are
elected to the Company Board, after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors shall be required to (a) amend or
terminate this Agreement by the Company, (b) extend the time for performance of
Ferrotec's or Merger Sub's obligations hereunder, or (c) exercise or waive any
of the Company's rights, benefits or remedies hereunder.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.12 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 such obligations. Ferrotec and the Merger Sub shall supply to the
Company and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1.
(c) The Company further agrees and acknowledges that the
current staggered Company Board and the agreement that the Company maintain such
Board under its charter documents, shall not prevent the Company from causing
the election to the Company's Board of the number of directors of Merger Sub
provided in this Section 6.12.
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ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction (or, if permissible, waiver by the party for whose benefit such
conditions exist) at or prior to the Effective Time of the following conditions:
(a) this Agreement and the Merger shall have been approved
and adopted by the requisite majority vote of the Shareholders of the Company in
accordance with applicable law and regulatory requirements and the Company's
Articles of Organization;
(b) the waiting period applicable under HSR shall have
expired or terminated;
(c) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect, and no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restricts or
makes illegal the consummation of the Merger, provided, however, that the
parties shall have used their best efforts to prevent any such rule, regulation,
injunction, decree or other order, and to appeal as promptly as possible any
injunction, decree or other order that may be entered;
(d) all authorizations, approvals or consents required to
permit the consummation of the Merger shall have been obtained and be in full
force and effect, except where the failure to have obtained any such
authorizations, approvals or consents would not, individually and/or in the
aggregate, have a Company Material Adverse Effect;
(e) The Merger Sub or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer
and the Minimum Condition to the Offer has been satisfied.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Offer (if not then
already consummated) and/or the Merger contemplated herein may be abandoned at
any time (the "Termination Date") prior to the Effective Time, whether before or
after Shareholder approval thereof:
(a) By the mutual consent of the Company, Ferrotec and the
Merger Sub.
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(b) By either of the Company, on the one hand, or Ferrotec
and the Merger Sub, on the other hand:
(i) if, without any material breach by the terminating
party of its obligations under this Agreement, Merger Sub shall not
have purchased Shares pursuant to the Offer on or prior to sixty (60)
days after the commencement of the Offer (the "Final Expiration Date"),
provided, however, that neither Merger Sub nor the Company shall
terminate this Agreement prior to February 29, 2000, if all conditions
to the Offer set forth in Annex A have been satisfied or, to the extent
permitted, waived, except that Shares shall not have been purchased by
Merger Sub by reason of any applicable waiting period (and any
extension thereof) under the HSR Act in respect to the Offer not having
expired or been terminated;
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their respective
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall
have become final and non-appealable; provided, however, that the party
seeking termination shall have complied fully with its obligations
under Section 6.9;
(iii) if the Minimum Condition shall not have been
satisfied, in which case neither Ferrotec, Merger Sub nor any of their
affiliates shall be permitted to accept for payment or pay for any
Shares unless and until the Company shall have provided Merger Sub with
written notice stating that the Company is not exercising its right to
terminate this Agreement pursuant to this Section 8.1(b)(iii);
(c) By the Company:
(i) if the Company Board shall have (A) withdrawn, or
modified or changed in a manner adverse to Merger Sub its approval or
recommendation of this Agreement or the Merger and (B) either (x)
determined in good faith, after consultation with its financial
advisor, that a third party has submitted to the Company an Acquisition
Proposal which is a Superior Proposal, or (y) determined in good faith,
after consultation with its outside legal counsel, that the failure to
take such action as set forth in the preceding clause (A) may be
inconsistent with the Company Board's fiduciary duties under applicable
law; or
(ii) if Ferrotec or Merger Sub (x) breaches or fails in
any material respect to perform or comply with any of their material
covenants and agreements contained herein or (y) breaches their
representations and warranties in any material respect and such breach
would have a Ferrotec Material Adverse Effect, in each case in
connection with the termination of this Agreement only after the
Acceptance Date such that the conditions set forth in Section 7.1 would
not be satisfied; provided, however, that after the Acceptance Date if
any such breach is curable by the breaching party, the Company may
terminate this Agreement pursuant to this Section 8.l(c)(ii) only after
the passage of thirty (30) calendar
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days from written notification to Ferrotec and Merger Sub by the
Company of such breach, and provided further that such breach has not
been so cured within said thirty-day period, provided however, that the
Termination Date shall be so delayed (if the Termination Date will have
occurred prior to the end of said thirty-day period) in order to give
such breaching party the opportunity to cure during said thirty-day
period.
(d) By Ferrotec and the Merger Sub:
(i) if the Company (x) breaches or fails in any
material respect to perform or comply with any of its material
covenants and agreements contained herein or (y) breaches its
representations and warranties and such breach would have a Company
Material Adverse Effect, in each case in connection with the
termination of this Agreement only after the Acceptance Date such that
the conditions set forth in Section 7.1 would not be satisfied;
provided, however, that after the Acceptance Date if any such breach is
curable by the Company, then Ferrotec or Merger Sub may terminate this
Agreement pursuant to this Section 8. l(d)(i) only after the passage of
thirty (30) calendar days from notification to the Company by Ferrotec
or Merger Sub of such breach and provided further that such breach has
not been so cured within said thirty-day period, provided, however,
that the Termination Date shall be so delayed (if the Termination Date
will have occurred prior to the end of said thirty-day period) in order
to give such breaching party the opportunity to cure during said
thirty-day period; or
(ii) if the Company Board shall have withdrawn,
modified or changed in any manner adverse to Merger Sub its approval or
recommendation of this Agreement or the Merger or shall have
recommended an Acquisition Proposal involving the Company or shall have
executed an agreement in principle or definitive agreement relating to
an Acquisition Proposal involving the Company or similar business
combination with a person or entity other than Merger Sub or its
affiliates (or the Company Board resolves to do any of the foregoing),
provided, however, that prior to terminating this Agreement as a result
of a third party Acquisition Proposal, the Company shall give the
Merger Sub telephonic notice of at least forty-eight hours in advance
of such termination, specifying the terms of such Acquisition Proposal
by a third party; or
(iii) if for any five consecutive trading days prior to
the Effective Time the Dow Jones Industrial Average shall be less than
6,500 on each of such days; or
(iv) if due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in
Annex A hereto, the Merger Sub shall have failed to commence the Offer
on or prior to five days following the initial public announcement of
this Agreement.
Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement as
provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying
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the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void, and there shall be no liability
on the part of Ferrotec, Merger Sub or the Company or their respective
directors, officers, employees, shareholders, representatives, agents or
advisors, other than, with respect to Ferrotec, Merger Sub and the Company, the
obligations pursuant to this Section 8.2, Article IX and the last sentence of
Section 6.2. Nothing contained in this Section 8.2 shall relieve Ferrotec,
Merger Sub or the Company from liability for fraud or willful breach of this
Agreement.
(b) If this Agreement is terminated:
(A) by the Company pursuant to Section 8. l(c)(i), or
(B) by Ferrotec and Merger Sub pursuant to Section
8.1(d)(ii),
then at the time of termination with respect to (A) or (B) above, the Company
shall pay the Merger Sub an amount equal to $3,000,000 in cash (the "Liquidated
Amount"). The parties hereto hereby agree that, in light of the difficulty of
accurately determining actual damages with respect to any termination of this
Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii), said Liquidated Amount
represents the parties reasonable estimate of said damages. Said Liquidated
Amount is not meant nor should it be deemed as a penalty, but rather as an
attempt by the parties to quantify the amount of damages sustained by Ferrotec
and Merger Sub if the transaction is not contemplated. Ferrotec and Merger Sub
hereto expressly acknowledges and agrees that, with respect to any termination
of this Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii) hereof, the
Liquidated Amount shall constitute the sole and exclusive remedy available to
Ferrotec and Merger Sub. Except for nonpayment of the Liquidated Amount,
Ferrotec, Merger Sub and the Company hereby agree that, upon any termination of
this Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii) hereof, in no event
shall Ferrotec or Merger Sub be entitled to seek or to obtain any recovery or
judgment against the Company or any of the Company Subsidiaries or any of their
respective assets, or against any of their respective directors, officers,
employees, partners, managers, members or shareholders, and in no event shall
Ferrotec or Merger Sub be entitled to seek or obtain any other damages of any
kind, including, without limitation, consequential, indirect or punitive
damages.
(c) The obligations of the Company, Ferrotec, and Merger
Sub under this Section 8.2 shall survive any termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the Shareholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this
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Agreement by the Shareholders of the Company, no such amendment, modification or
supplement shall reduce or change the Cash Consideration or adversely affect the
rights of the Company's Shareholders hereunder without the approval of such
shareholders.
Section 9.2 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time or the termination of this Agreement. This Section 9.2 shall not
limit any covenant or agreement contained in this Agreement which by its terms
contemplates performance after the Effective Time, including, without
limitation, those made in Sections 6.3, 6.6, 8.2, the last sentence of Section
6.2 and this Article IX.
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or one business day after being sent by an
overnight courier service, such as Federal Express, for next day delivery, 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 Ferrotec, to:
Ferrotec Corporation
5-24-8, Higashi-Ueno
Taito-ku
Tokyo, Japan 110-0015
Telephone No.: 011-81-33-845-1032
Telecopy No.: 011-81-33-845-1019
Attention: Mr. Akira Yamamura, President
and Chief Executive Officer
with a copy to:
Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue
28th Floor
Miami, Florida 33131-1714
Telephone No.: (305) 374-5600
Telecopy No.: (305) 374-5095
Attention: Alan H. Aronson, Esquire
(b) if to Merger Sub, to:
c/o Ferrotec Corporation
5-24-8, Higashi-Ueno
Taito-ku
Tokyo, Japan 110-0015
Telephone No.: 011-81-33-845-1032
Telecopy No.: 011-81-33-845-1019
Attention: Mr. Akira Yamamura, President
and Chief Executive Officer
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<PAGE>
with a copy to:
Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue
28th Floor
Miami, Florida 33131-1714
Telephone No.: (305) 374-5600
Telecopy No.: (305) 374-5095
Attention: Alan H. Aronson, Esquire
and
(c) if to the Company, to:
Ferrofluidics Corporation
40 Simon Street
Nashua, New Hampshire 03061
Telephone No.: (603) 883-9800
Telecopy No.: (603) 883-1213
Attention: Paul F. Avery, Jr., Chief Executive Officer
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
Attention: Stuart M. Cable, P.C.
James A. Matarese, Esq.
Section 9.4 Interpretation. The words "hereof", "herein" and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified. The word "or" shall be construed to refer to
"and/or." Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". The word describing the singular number shall include the plural
and vice versa, and words denoting any gender shall include all genders and
words denoting natural persons shall include corporations and partnerships and
vice versa. The phrase "to the knowledge of" or "to the best knowledge of" or
any similar phrase shall mean such facts and
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<PAGE>
other information which as of the date of this Agreement are actually known by
any officer of the referenced party who currently files Forms 4 pursuant to
Section 16(b) of the Exchange Act. The phrase "made available" in this Agreement
shall mean that the information referred to has been made available to the other
party. The phrases "the date of this Agreement", "the date hereof" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to October 20, 1999. As used in this Agreement, the term "affiliate(s)"shall
have the meaning set forth in Rule 12b-2 of the Exchange Act. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
Section 9.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.6 Entire Agreement: Third Party Beneficiaries. This
Agreement, the Annex and Exhibits hereto (including the Company Disclosure
Letter and the Merger Sub Disclosure Letter), and the Confidentiality Agreement
(including the documents and the instruments referred to herein and therein)
constitute the entire agreement and supersede all prior agreements and
understandings, including, without limitation, all representations and
warranties made by the parties in connection herewith, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended or shall confer upon
any other person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement, except that Sections 6.3 and 6.6 hereof are
intended to be for the benefit of those persons described therein and the
covenants and agreements contained therein may be enforced by such persons.
Section 9.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 9.8 Governing Law.
(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof or of any other jurisdiction.
(b) Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of
Delaware or the Commonwealth of Massachusetts or any Delaware or Massachusetts
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court
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and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal or
state court sitting in the Commonwealth of Massachusetts or State of Delaware.
Section 9.9 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(a) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in a court of competent jurisdiction.
Section 9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law, or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and assigns.
Section 9.11 Expenses. Except as set forth in Section 8.2, all costs
and expenses incurred in connection with this Agreement and the consummation of
the transactions contemplated hereby shall be paid by the party incurring such
costs and expenses, whether or not any of the transactions contemplated hereby
is consummated.
Section 9.12 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 9.13 Waivers. Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party or parties entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 9.14 No Agreement Until Executed. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until (i) the Company Board
has approved, for purposes of Chapter 110F of the MBCL and any applicable
provision of the Articles of Organization, the terms of this Agreement, (ii) the
Board of Directors of Ferrotec has approved the terms of this Agreement, and
(iii) this Agreement is executed by the parties thereto.
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IN WITNESS WHEREOF, Ferrotec, the Merger Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
FERROFLUIDICS CORPORATION
By: /s/ Paul F. Avery, Jr.
--------------------------------------
Name: Paul F. Avery, Jr.
--------------------------------
Title: President and CEO
--------------------------------
By: /s/ William B. Ford
--------------------------------------
Name: William B. Ford
--------------------------------
Title: Treasurer
--------------------------------
FERROTEC ACQUISITION, INC.
By: /s/ Richard R. Cesati II
--------------------------------------
Name: Richard R. Cesati II
--------------------------------
Title: President
--------------------------------
By: /s/ Akira Yamamura
--------------------------------------
Name: Akira Yamamura
--------------------------------
Title: Treasurer
--------------------------------
FERROTEC CORPORATION
By: /s/ Nozomu Yamamoto
--------------------------------------
Name: Nozomu Yamamoto
--------------------------------
Title: Executive Director
--------------------------------
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ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer and subject to Rule
14e-1(c) of the Exchange Act and Section 1.1 of the Agreement, the Merger Sub
shall not be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may (A) postpone the acceptance for payment of and
payment for Shares tendered, if (i) the Minimum Condition shall not have been
satisfied as of the Expiration Date or Final Expiration Date, or (ii) any
applicable waiting period under HSR shall not have expired or been terminated
prior to the Expiration Date or Final Expiration Date, or (B) terminate or amend
the Offer or postpone the acceptance for payment of and payment for Shares
tendered if at any time on or after the date of this Agreement, and prior to the
Expiration Date or Final Expiration Date, any of the following conditions shall
exist which, in the sole judgment of the Merger Sub in any such case, and
regardless of the circumstances (including any action or inaction by Merger Sub
or any of its affiliates) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment:
(a) there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to make
illegal, materially delaying or otherwise directly or indirectly restraining or
prohibiting the making of the Offer, the acceptance for payment of, or payment
for, any Shares by Ferrotec, the Merger Sub or any other affiliate of Ferrotec
or the Merger Sub or the consummation of any other transaction contemplated
hereby or thereby, or seeking to obtain material damages in connection with any
transaction contemplated hereby or thereby; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Ferrotec, Merger Sub or
any of their subsidiaries of all or any material portion of the business or
assets of the Company, Ferrotec, Merger Sub or any of their subsidiaries, or to
compel the Company, Merger Sub or any of their subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company, Ferrotec, Merger Sub or any of their subsidiaries, as a result of the
transactions contemplated hereby; (iii) seeking to impose or confirm limitations
on the ability of Ferrotec, the Merger Sub or any other affiliate of Merger Sub
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by the Merger Sub
pursuant to the Offer or otherwise on all matters properly presented to the
Company's Shareholders, including, without limitation, the approval and adoption
of this Agreement and the transactions contemplated hereby; (iv) seeking to
require divestiture by the Ferrotec, Merger Sub or any other affiliate of Merger
Sub of any Shares; or (v) with respect to any such action or proceeding relating
to this Agreement, the Merger, the transactions contemplated by this Agreement
or the announcement thereof, which otherwise has a Company Material Adverse
Effect or Ferrotec Material Adverse Effect; or
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Ferrotec, Merger Sub, the Company or any subsidiary or affiliate of the Merger
Sub or the Company or (ii) any transaction contemplated hereby, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of HSR to
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the Offer or the Merger, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) there shall have occurred after the date of the Agreement any
change, condition, event or development that has had a Company Material Adverse
Effect, provided, however, that (i) no event, change or effect that primarily
results from this Agreement, the Merger, the Offer and the transactions
contemplated thereby or the announcement thereof, (ii) no event, change or
effect generally affecting the industries in which the Company operates, or
(iii) no event, change or effect related to a general drop in stock prices in
the United States resulting from political or economic turmoil, shall be deemed
to cause either individually or in the aggregate a Company Material Adverse
Effect; or
(d) there shall have occurred after the date of the Agreement (i) any
general suspension of, trading in securities on NASDAQ for the Company for a
period in excess of 24 hours (excluding suspensions or limitations resulting
solely from physical damage or interference with such exchange not related to
market conditions), (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, Japan, or Canada, (iii)
any limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on, or
other event that, in the reasonable judgment of the Merger Sub, is reasonably
likely to materially adversely affect the extension of credit by banks or other
lending institutions, (iv) a declaration of war or armed hostilities by either
the United States or Japan or (v) in the case of any of the foregoing existing
on the date hereof, a material acceleration or worsening thereof; or
(e) the Company (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained in
the Agreement or (y) breaches its representations and warranties and such breach
would have a Company Material Adverse Effect; or
(f) the Company Board shall have withdrawn, modified or changed in any
manner adverse to Ferrotec or Merger Sub its approval or recommendation of this
Agreement or the Merger or shall have recommended an Acquisition Proposal
involving the Company or shall have executed an agreement in principle or
definitive agreement relating to an Acquisition Proposal involving the Company
or similar business combination with a person or entity other than Ferrotec,
Merger Sub or its affiliates (or the Company Board resolves to do any of the
foregoing); or
(g) this Agreement shall have been terminated in accordance with its
terms; or
(h) Ferrotec, the Merger Sub and the Company shall have agreed in
writing that the Merger Sub shall terminate the Offer or postpone the acceptance
for payment of or payment for Shares thereunder.
Except as provided below, the foregoing conditions are for the sole
benefit of the Ferrotec and Merger Sub and may be asserted by Ferrotec and the
Merger Sub regardless of the circumstances giving rise to any such condition or
may be waived by Ferrotec and the Merger Sub in whole or in part at any time and
from time to time in its sole discretion. The failure by Ferrotec or Merger Sub
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right;
41
<PAGE>
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 that may be
asserted at any time and from time to time. Notwithstanding anything to the
contrary provided in the Agreement or this Annex A, neither Ferrotec nor Merger
Sub shall be permitted to waive the Minimum Condition without the written
consent of the Company.
42
EXHIBIT 99(c)(2)
[Ferrofluidics Corporation Letterhead]
August 10, 1999
Ferrotec Corporation
5-24-8
Higashi-Ueno
Taito-ku
Tokyo, Japan 110-0015
Attn: Akira Yamamura
Ladies and Gentlemen:
In connection with our mutual consideration of a potential transaction
involving a business combination or a strategic alliance (the "Proposed
Transaction") between Ferrofluidics Corporation, a Massachusetts corporation
("FFC"), on the one hand, and Ferrotec Corporation, a corporation formed under
the laws of Japan ("Ferrotec"), on the other hand, Ferrotec has requested
certain information concerning FFC, and FFC, in turn, has requested certain
information concerning Ferrotec. This information is confidential and
proprietary to the respective parties and not otherwise available. Each party
agrees that, in consideration of, and as a condition to, furnishing such
information, it will abide by the following:
1. Confidentiality Agreement. Each of FFC and Ferrotec, as applicable
(each, a "Receiving Party"), hereby agrees to treat all information, whether
written or oral, concerning Ferrotec or FFC, as applicable (each a "Disclosing
Party"), or any of their respective affiliates, subsidiaries or divisions, which
the Disclosing Party or any directors, officers, employees, partners, agents or
representatives (collectively, the "Representatives") of the Disclosing Party
furnishes, whether before or after the date of this agreement, to the Receiving
Party or its Representatives, together with all originals or copies of all
reports, analyses, compilations, data, studies and other materials which contain
or otherwise reflect or are generated from such information (collectively, the
"Evaluation Material"), confidential and in accordance with the provisions of
this agreement. Notwithstanding the foregoing, the term "Evaluation Material"
shall not for the purposes of this agreement include any information which (a)
at the time of disclosure or thereafter is generally available to and known by
the public other than as a result of a disclosure by the Receiving Party or its
Representatives, (b) was or becomes available to the Receiving Party on a
nonconfidential basis from a source other than the Disclosing Party or any of
its Representatives, provided that such source is not bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation to, the
Disclosing Party, or (c) has been independently acquired by the Receiving Party
without violating any of the obligations of the Receiving Party or its
Representatives under this agreement or any other confidentiality agreement, or
under any other contractual, legal or fiduciary obligations of the Receiving
Party or its Representatives. The fact that information included in the
Evaluation Material is or becomes otherwise available to the Receiving Party or
its Representatives under clauses (a), (b) or (c) above shall not relieve the
Receiving Party or its Representatives of the prohibitions or other
confidentiality provisions of this agreement.
2. Use of Evaluation Material and Confidentiality.
(a) Subject to paragraph (b) below, the Evaluation Material
will be kept confidential by the Receiving Party and its Representatives and
will not, without the prior written consent of the Disclosing Party, be
<PAGE>
disclosed, in whole or in part, to any third party by the Receiving Party or any
of its Representatives in any manner whatsoever, and will not be used by the
Receiving Party or any of its Representatives, directly or indirectly, for any
purpose other than in connection with the Receiving Party's evaluation of the
Proposed Transaction or in any way directly or indirectly detrimental to the
Disclosing Party or any of its subsidiaries. In addition, the Receiving Party
hereby agrees to disclose that the Receiving Party is evaluating the Proposed
Transaction and to transmit Evaluation Material to only those of its
Representatives who need to know the information for the purpose of evaluating
the Proposed Transaction and are informed by the Receiving Party of the
confidential nature of the information. The Receiving Party agrees not to make
any such disclosure or transmission unless the Receiving Party is satisfied that
its Representatives will act in accordance herewith. The Receiving Party agrees
that it will be responsible for any breach of any of the provisions of this
agreement by any of its Representatives and the Receiving Party agrees to take,
at its sole expense, all necessary measures to restrain its Representatives from
prohibited or unauthorized disclosure or use of the Evaluation Material
(including, without limitation, the initiation of court proceedings).
(b) In the event that the Receiving Party or any of its Representatives
are requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose (a) any Evaluation Material, (b) any information relating
to the opinion, judgment or recommendation of any such person concerning the
Disclosing Party, its affiliates or subsidiaries, or (c) any other information
supplied to the Receiving Party in the course of the Receiving Party's, or its
Representatives', dealings with the Disclosing Party, the Receiving Party will
promptly notify the Disclosing Party of such request or requirement so that the
Disclosing Party may seek an appropriate protective order or waive compliance
with the provisions of this agreement, and/or take any other mutually agreed
action. If, in the absence of a protective order or the receipt of a waiver
hereunder, the Receiving Party or any of its Representatives are, in the
reasonable written opinion of such person's counsel, compelled to disclose
information or else stand liable for contempt or suffer other censure or
significant penalty, the Receiving Party or such Representative may disclose
that portion of the requested information which such person's counsel advises
such person in writing that such person is compelled to disclose. In any event,
the Receiving Party and its Representatives will furnish only that portion of
the information which is legally required and will exercise its best efforts to
obtain reliable assurance that confidential treatment will be accorded the
information. In addition, neither the Receiving Party nor any of its
Representatives will oppose action by the Disclosing Party to obtain an
appropriate protective order or other reliable assurance that such confidential
treatment will be so accorded and the Receiving Party and its Representatives
shall cooperate with the Disclosing Party to obtain such order or other
assurance.
3. Nondisclosure of Negotiations. Except as otherwise expressly
permitted hereby, without the prior written consent of the Disclosing Party, the
Receiving Party will not, and will direct its Representatives not to, disclose
to any person the fact that any discussions (or any other discussions between or
involving the Receiving Party and the Disclosing Party) with respect to the
matters contemplated hereby are taking, have taken or are proposed to take place
or other facts with respect to such discussions, including the status thereof,
or the fact (if such becomes the case) that any Evaluation Material has been
made available to the Receiving Party, nor otherwise make any public disclosure,
whether written or oral, with respect to this agreement or the actions or
transactions contemplated hereby; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may be required by law or the applicable rules of any stock
exchange or Nasdaq if it has used its reasonable best efforts to consult with
the other party prior to issuing such release or making such public statement
and to obtain such party's prior consent, but has been unable to do so in a
timely manner. Subject to the second to last paragraph of Section 6, no request
or proposal to amend, modify or waive any provision of this agreement shall be
made or solicited except in a non-public and confidential manner. The term
"person" as used in this agreement shall be broadly interpreted to include,
without limitation, any corporation, company, partnership or individual.
2
<PAGE>
4. Access to Employees; No Solicitation. For two years from the date of
this agreement, the Receiving Party agrees not to initiate or maintain contact
(except for those contacts made in the ordinary course of business) with any
officer, director or employee of the Disclosing Party regarding the business,
operations, prospects or finances of the Disclosing Party, except with the
express permission of the Disclosing Party, or as contemplated in this
agreement. Unless otherwise agreed to by FFC in writing, all (a) communications
regarding any possible transaction, (b) requests for additional information, (c)
requests for facility tours or management meetings and (d) discussions or
questions regarding procedures, timing and terms, will be submitted or directed
to Paul F. Avery, Jr. Unless otherwise agreed to by Ferrotec in writing, all (a)
communications regarding any possible transaction, (b) requests for additional
information, (c) requests for facility tours or management meetings and (d)
discussions or questions regarding procedures, timing and terms, will be
submitted or directed to Akira Yamamura of Ferrotec or Hide Takahashi of Knox &
Co. The Receiving Party agrees that, for a period of one year from the date
hereof, it will not solicit for employment any individual currently serving as a
director, officer, employee or agent of the Disclosing Party without obtaining
the prior written consent of the Disclosing Party.
5. Federal Securities Laws. The Receiving Party hereby acknowledges
that it and its Representatives (a) are aware that the United States securities
laws and the Japanese securities laws prohibit any person who has material,
non-public information concerning a company from purchasing or selling
securities of such company or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, (b) are familiar with the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Exchange Act"), and that it and its
Representatives will neither use, nor cause any third party to use, any
Evaluation Material in contravention of such Exchange Act, including, without
limitation, Rule 10b-5 thereunder, and (c) will neither use, nor cause any third
party to use, any Evaluation Material in contravention of such Japanese
securities laws, including, without limitation, any applicable rules and
regulations promulgated thereunder.
6. Standstill. The Receiving Party hereby acknowledges that the
Evaluation Material is being furnished to it in consideration of its agreement
that neither it nor any person or entity directly or indirectly, through one or
more intermediaries, controlling it or controlled by it or under common control
with it, acting alone or as part of any group, will, for a period of two years
from the date of this agreement, directly or indirectly, unless specifically
requested to do so in writing in advance by the Disclosing Party:
(a) acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-1 under the Exchange Act)
of any of the assets or businesses of the Disclosing Party or any of
its subsidiaries or of any securities of the Disclosing Party or any of
its subsidiaries, or any rights or options to acquire any such
ownership (including from a third party), or
(b) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are used in the Exchange Act) to vote or seek
to advise or influence in any manner whatsoever any person or entity
with respect to the voting of any securities of the Disclosing Party or
any of its subsidiaries, or
(c) form, join, or in any way participate in a "group" (within
the meaning of Section 13d(3) of the Exchange Act) with respect to any
voting securities of the Disclosing Party or any of its subsidiaries,
or
3
<PAGE>
(d) arrange, or in any way participate in, any financing for
the purchase of any voting securities or securities convertible or
exchangeable into or exercisable for any voting securities or assets of
the Disclosing Party or any of its subsidiaries, or
(e) otherwise act, whether alone or in concert with others, to
seek to propose to the Disclosing Party or any of its stockholders any
merger, business combination, restructuring, recapitalization or
similar transaction to or with the Disclosing Party or any of its
subsidiaries or otherwise act, whether alone or in concert with others,
to seek to control, change or influence the management, Board of
Directors or policies of the Disclosing Party, or nominate any person
as a Director of the Disclosing Party who is not nominated by the then
incumbent Directors, or propose any matter to be voted upon by the
stockholders of the Disclosing Party, or
(f) solicit, negotiate with, or provide any information to,
any person with respect to a merger, exchange offer or liquidation of
the Disclosing Party or any of its subsidiaries or any other
acquisition of the Disclosing Party or any of its subsidiaries, any
acquisition or voting securities of or all or any portion of the assets
of the Disclosing Party or any of its subsidiaries, or any other
similar transaction, or
(g) announce an intention to, or enter into any discussion,
negotiations, arrangements or understandings with any third party with
respect to, any of the foregoing, or
(h) disclose any intention, plan or arrangement inconsistent
with the foregoing, or
(i) advise, assist or encourage any other person in connection
with any of the foregoing.
In addition, the Receiving Party also agrees during such two-year
period not to (i) request the Disclosing Party (or any of its Representatives),
directly or indirectly, to amend or waive any provision of this Paragraph 6
(including this sentence) or (ii) take any action that might require the
Disclosing Party to make a public announcement regarding a possible transaction.
If at any time during such two-year period the Receiving Party is
approached by any third party concerning its or their participation in a
transaction involving the assets or businesses of the Disclosing Party or any of
its subsidiaries or securities issued by the Disclosing Party or any of its
subsidiaries, the Receiving Party will promptly inform the Disclosing Party of
the nature of such transaction and the parties thereto.
7. Return of Evaluation Material. The Receiving Party and its
Representatives will keep a written record of the location of the Evaluation
Material and will, promptly upon the request of the Disclosing Party and, in any
event, if the Receiving Party and the Disclosing Party do not enter into an
agreement with respect to the Proposed Transaction within 90 days of the date
hereof (or such longer time period as may be mutually agreed to by the parties
hereto), will return to the Disclosing Party all copies of the Evaluation
Material furnished to the Receiving Party and in its possession or in the
possession of its Representatives, without retaining a copy thereof. The
Receiving Party and its Representatives will destroy any analyses, compilations,
studies or other documents prepared by or for the Receiving Party's, or its
Representatives', internal use which include, utilize or reflect the Evaluation
Material. Such destruction will be confirmed by the Receiving Party upon
request, in writing. Notwithstanding the return or destruction of the Evaluation
Material, the Receiving Party and its Representatives will continue to be bound
by its obligations of confidentiality hereunder.
4
<PAGE>
8. No Definitive Agreement/Freedom to Change Process. The Receiving
Party agrees that unless and until a definite agreement between the Disclosing
Party and the Receiving Party with respect to the Proposed Transaction has been
executed and delivered, neither the Disclosing Party nor the Receiving Party
will be under any legal obligation of any kind whatsoever with respect to any
such transaction by virtue of this or any written or oral expression with
respect to such a transaction by any of the Receiving Party's or the Disclosing
Party's respective Representatives except, in the case of this agreement, for
the matters specifically agreed to herein. Ferrotec further acknowledges and
agrees that FFC reserves the right, in its sole discretion, to reject any and
all proposals made by Ferrotec or any of its Representatives with regard to the
Proposed Transaction, and to terminate discussions and negotiations with
Ferrotec at any time. Ferrotec further understands that (a) FFC and its
Representatives shall be free to conduct any process for any transaction
involving FFC, if and as if in its sole discretion shall determine (including,
without limitation, negotiating with any other interested parties and entering
into a definitive agreement without prior notice to Ferrotec or any other
person), (b) FFC may change any procedures relating to such process or
transaction at any time without notice to Ferrotec or any other person, and (c)
as a consequence of any actions taken by FFC pursuant to the foregoing clauses
(a) and (b), Ferrotec shall have no claims whatsoever against FFC, its
Representatives or any of their respective directors, officers, stockholders,
owners, affiliates or agents arising out of or relating to any such transaction
involving FFC.
9. Accuracy of Evaluation Material. The Receiving Party hereby
acknowledges that although the Disclosing Party has endeavored to include in the
Evaluation Material information known to the Disclosing Party and that it
believes to be relevant to the Receiving Party's evaluation, the Receiving Party
understands that neither the Disclosing Party nor any of its Representatives
makes any representation or warranty as to the accuracy or completeness of the
Evaluation Material. The Receiving Party agrees that it shall assume full
responsibility for all conclusions it derives from the Evaluation Material and
that neither the Disclosing Party nor any of its Representatives shall have any
liability with respect to the Evaluation Material or any use thereof. The
Receiving Party further acknowledges that it is not entitled to rely on the
accuracy or completeness of the Evaluation Material.
10. Remedies. The Receiving Party agrees that money damages would not
be a sufficient remedy for any breach of this agreement by the Receiving Party
or any of its Representatives, and that in addition to all other remedies, the
Disclosing Party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach, and the Receiving Party
further agrees waive and to use its best efforts to cause its Representatives to
waive, any requirement for the securing or posting of any bond in connection
with any such remedy. In the event of litigation relating to this agreement, if
a court of competent jurisdiction determines that the Receiving Party or any of
its Representatives has breached this agreement, it shall be liable for and pay
to the Disclosing Party on demand the legal fees and expenses incurred by the
Disclosing Party in connection with such litigation, including any appeal
therefrom.
11. Waiver and Amendment. The Receiving Party understands and agrees
that no failure or delay by the Disclosing Party or any of its Representatives
in exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. The agreements set forth herein may only be waived or modified by an
agreement in writing signed on behalf of the parties hereto.
12. Successors and Assigns. This agreement shall inure to the benefit
of and by enforceable by the Disclosing Party and its successors.
5
<PAGE>
13. Severability. In case provisions of this agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of the agreement shall not in any way be affected or
impaired thereby.
14. Governing Law; Venue. The validity, interpretation, performance and
enforcement of this agreement shall be governed by the laws the Commonwealth of
Massachusetts. The parties hereto hereby irrevocably and unconditionally consent
to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts
and the United States District Court for the District of Massachusetts for any
action, suit or proceeding arising out of or relating to this agreement or the
Proposed Transaction, and agree not to commence any action, suit or proceeding
related thereto except in such courts. The parties hereto further hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of or relating to this agreement in
the courts of the Commonwealth of Massachusetts or the United States District
Court for the District Massachusetts, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum. Each of the parties hereto further agrees that service of
any process, summons, notice or document by U.S. registered mail to its address
set forth above shall be effective service of process for any action, suit or
proceeding brought against it in any such court.
15. Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same agreement.
[signature page to follow]
6
<PAGE>
Please acknowledge your agreement to the foregoing by countersigning
this agreement in the place provided below and returning it to the undersigned.
Very truly yours,
FERROFLUIDICS CORPORATION
By: /s/ Paul F. Avery, Jr.
---------------------------------------
Name: Paul F. Avery, Jr.
Title: President and CEO
Accepted and Agreed to,
this 16th day of August, 1999
FERROTEC CORPORATION
By: /s/ Akira Yamamura
- -------------------------------
Name: Akira Yamamura
Title: President
7
EXHIBIT 99(c)(3)
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made as of October 20,
1999, by and among Ferrofluidics Corporation (the "Company"), a Massachusetts
corporation with its principal place of business at 40 Simon Street, Nashua, New
Hampshire, Ferrotec Corporation ("Ferrotec"), a corporation organized under the
laws of Japan and having its principal place of business at Sumitomo Bldg. #6,
5-24-8 Higashi Ueno, Taito-Ku, Tokyo 110-0015, Japan, Ferrotec Acquisition,
Inc., a Massachusetts corporation and a wholly-owned subsidiary of Ferrotec
("Merger Sub" and, together with Ferrotec, the "Acquiror"), and Paul F. Avery,
Jr. ("Consultant") of 178 Drinkwater Road, Kensington, New Hampshire.
WHEREAS, Consultant has been employed by the Company as its Chairman of
the Board of Directors, Chief Executive Officer and President pursuant to that
certain Employment Agreement dated as of June 3, 1998, as amended and
supplemented by those certain agreements dated as of June 3, 1999 and September
9, 1999 by and between the Company and Consultant (the "Employment Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger (the "Merger Agreement") with Ferrotec and Merger Sub, pursuant to which
Merger Sub will be merged (the "Merger") with and into the Company upon the
terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, in connection with the Merger, Merger Sub will make a cash
tender offer (the "Offer") to acquire all of the issued and outstanding common
stock, par value $.004 per share, of the Company (the "Common Stock") in
accordance with the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS, the parties desire to terminate the Employment Agreement and
the Consultant's employment with the Company effective as of the Acceptance Date
(as hereinafter defined);
WHEREAS, the Company desires to retain Consultant to render consulting
and advisory services to the Company on an independent contractor basis and on
the terms and conditions set forth herein;
WHEREAS, Consultant desires to furnish such consulting and advisory
services to the Company on an independent contractor basis and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth in this Agreement,
the parties hereby agree:
1. Termination of Employment; Engagement of Consultant. The parties
acknowledge and agree that Consultant's employment with the Company pursuant to
the Employment Agreement and any other agreement or understanding pursuant to
which Consultant is providing services to or on behalf of the Company and/or its
subsidiaries (other than the letter agreement referred to in Section 11 hereof)
shall be terminated effective as of the Acceptance Date (as such term is defined
in the Merger Agreement); and that the Employment Agreement and any of such
other agreements or understandings pursuant to which Consultant is providing
services to or on behalf of the Company and/or its subsidiaries (other than the
letter agreement referred to in Section 11 hereof) shall be deemed to have been
terminated as of the Acceptance Date and shall be of no further force or effect
thereafter. Subject to the terms and conditions set forth in this Agreement, the
Company hereby retains Consultant for the term set forth in Section 2 as a
consultant and advisor to the Company.
<PAGE>
2. Term. This Agreement shall commence as of the Acceptance Date and
shall continue for a period of three (3) years thereafter (such period being
referred to as the "Consultation Period"), unless sooner terminated in
accordance with the provisions of Section 5. The parties hereto may extend the
Consultation Period upon mutual written agreement.
3. Services. Consultant agrees to perform such consulting, advisory and
related services for the Company as may be reasonably requested from time to
time by the Company (the "Services"). During the Consultation Period, Consultant
shall perform the Services under the direction and restriction of the Company.
4. Compensation.
a. Consulting and Advisory Fees. During the Consultation Period, the
Company shall pay to Consultant consulting fees at a rate of $10,000 per month,
payable in arrears on the last day of each month; payment for any partial month
shall be prorated.
b. Auto Lease. The Company shall promptly pay all monthly lease
payments of Consultant or promptly reimburse Consultant for such lease payments
in connection with Consultant's current automobile lease for the remaining term
of such lease which expires on May 25, 2001.
c. Certain Severance Benefits. The parties agree and acknowledge
that Consultant will receive from the Company an amount equal to $250,000 as of
the Acceptance Date. At Consultant's option, payment of such amount may be made
over the thirty-six (36) month term of the Consultation Period at a rate of
$6,944.44 per month, payable in arrears on the last day of each month.
Consultant hereby agrees to release the Company, Ferrotec and Merger Sub and
their respective officers, directors, shareholders and affiliates from any and
all claims and/or liabilities arising under the Employment Agreement or arising
from Consultant's employment or retention by the Company and/or its subsidiaries
prior to the Acceptance Date; provided, however, that nothing herein shall in
any way limit Consultant's indemnification rights under Section 6.6 of the
Merger Agreement or under the Articles of Organization or Bylaws of the Company.
d. Life Insurance. The Company agrees that it shall pay all premiums
that become due or payable for the two years following the Acceptance Date
relating to that certain term life insurance policy (Policy # 41019258) on the
life of Consultant in the amount of $1,000,000 (the "Life Insurance Policy")
such that the Life Insurance Policy remains in full force and effect through the
second anniversary of the Acceptance Date (the "Second Anniversary Date"),
subject to Consultant's continued eligibility to be so covered by such policy.
The parties agree that after the Second Anniversary Date the Company shall have
no obligation to maintain such policy; provided, however, that Consultant shall
be entitled to assume the Company's obligations under the Life Insurance Policy
and continue to maintain such policy in accordance with its terms following the
Second Anniversary Date. Each of the Company and Consultant shall use its or his
best efforts to arrange for the assumption by Consultant on the Second
Anniversary Date of the Company's obligations under the Life Insurance Policy,
subject to any restrictions under the policy on assignment and subject to
Consultant's continued eligibility to be so covered by such policy.
e. Retirement Plans. In connection with the termination of
Consultant's employment with the Company at the Acceptance Date, Consultant
shall be entitled to participate in and enjoy the benefit of the Company's
retirement, supplementary retirement, deferred compensation or similar plans,
programs or arrangements as available to the Company's management as of the
Acceptance Date, subject to Consultant's eligibility to so
2
<PAGE>
participate based on his consultant and/or independent contractor status.
f. Health, Medical and Welfare Plans. The Company shall continue
Consultant's group health insurance and shall pay all of the premiums to
properly maintain such insurance for a period of ninety (90) days following the
Acceptance Date. Thereafter, Consultant may, at his sole expense, elect to
continue his group health insurance pursuant to COBRA.
g. 401(k) Plan. The Company shall use its best efforts to assist
Consultant in the roll over or withdrawal of his interest in the Company's Tax
Savings and Deposit and Investment Plan (the "401(k) Plan"), all in accordance
with and subject to applicable law and the terms of the 401(k) Plan.
h. Reimbursement of Expenses. The Company shall reimburse Consultant
for all reasonable and necessary expenses incurred or paid by Consultant in
connection with, or related to, the performance of the Services under this
Agreement; provided, however, that the Company shall provide all airline tickets
to Consultant on a prepaid basis in connection with all travel by Consultant for
purposes of performance of the Services hereunder. Consultant shall submit to
the Company itemized monthly statements, in a form reasonably satisfactory to
the Company, of such expenses incurred in the previous month. The Company shall
pay to Consultant amounts shown on each such statement within thirty (30) days
after receipt thereof.
i. Accrued Vacation. The Company shall, on the Acceptance Date, pay
Consultant for all accrued vacation time as of the Acceptance Date in accordance
with Company policy.
5. Termination of Consultancy and Termination Compensation.
a. General Termination Compensation. If Consultant's consultancy is
terminated pursuant to Sections 5b or 5d, the Company shall continue to make all
payments to Consultant (or, if applicable, to Consultant's beneficiary) provided
for in Section 4 for the balance of the Consultation Period.
b. Death or Disability. In the event Consultant dies or becomes
disabled during the Consultation Period, his consultancy hereunder shall
automatically terminate. For the purpose of this Agreement, "disability" shall
refer to a situation in which Consultant is totally disabled from performing
Services for the Company during a period of thirteen (13) consecutive weeks.
If any question shall arise as to whether during any period Consultant
has suffered a disability, Consultant may, and at the request of the Company
will, submit to the Company a certification in reasonable detail by a physician
selected by Consultant or his guardian to whom the Company has no reasonable
objection as to whether Consultant was so disabled and such certification shall
for the purposes of this Agreement be conclusive of the issue. If such question
shall arise and Consultant shall fail to submit such certification, the
Company's determination of such issue shall be binding on Consultant.
c. By the Company for Cause. The Company may terminate Consultant's
consultancy hereunder for cause at any time upon notice to Consultant setting
forth in reasonable detail the nature of such cause. The following, as
determined by the Board of Directors of the Company in its good faith and
reasonable judgment, shall constitute "cause" for termination:
3
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(1) Consultant's embezzlement of funds of or theft from the
Company or other material dishonesty with respect to the Company,
Acquiror or any of their respective affiliates; or
(2) Conviction of, or plea of nolo contendere to, a felony or
other crime involving moral turpitude (it being understood that
violation of a motor vehicle code does not constitute such a crime); or
(3) Conduct engaged in or action taken or omitted to be taken
by Consultant which is in material breach of this Agreement, in which
case where such breach is incapable of being cured and remains uncured
after written notice by the Company to Consultant; or
(4) Gross or willful misconduct of Consultant with respect to
the Company, Acquiror or any subsidiary or affiliate thereof.
Upon the giving of notice of termination of Consultant's consultancy
hereunder for cause, the Company shall have no further obligation or liability
to Consultant, other than the payment of consulting fees earned and unpaid at
the date of termination and the remaining payments under Section 4c hereof.
d. By the Company Other Than for Cause. The Company may terminate
Consultant's consultancy hereunder other than for cause at any time upon sixty
(60) days' written notice to Consultant.
e. By Consultant. Consultant may terminate his consultancy hereunder
at any time upon sixty (60) days' written notice to the Company.
6. Independent Contractor Status. Consultant shall perform all services
under this Agreement as an "independent contractor" and not as an employee or
agent of the Company. Consultant is not authorized to assume or create any
obligation or responsibility, express or implied, on behalf of, or in the name
of, the Company or to bind the Company in any manner.
7. Covenant of Non-Disclosure and Non-Competition.
(a) The Consultant acknowledges that the success of the business of
the Company depends upon both the absence of competition from Consultant and the
continued preservation of the confidentiality of certain information possessed
by Consultant, that an absence of such competition and the preservation of the
confidentiality of such information is an essential term of this Agreement, and
that the Company would be unwilling to enter into this Agreement in the absence
of this Section. Accordingly, Consultant hereby agrees with the Company as
follows:
(a) Consultant will not, at any time, directly or indirectly,
without the prior written consent of the Company, disclose or use, in any way
harmful to the business, operations, assets, prospects or condition, financial
or otherwise, of the Company, or otherwise contrary to the interests of the
Company, any proprietary or Confidential Information (as defined below)
involving or relating to the Company past, present or future, actual or
prospective; provided, however, that such information shall not include any
information known generally to the public (other than as a result of disclosure
in violation hereof by the Consultant); and provided, further, that the
provisions of this Section shall not prohibit any disclosure required by law in
connection with any
4
<PAGE>
judicial or administrative proceeding or inquiry. "Confidential Information"
includes, but is not limited to, information relating to the Company which is
not generally known to those outside of the Company relating to (i) the
business, conduct or operations of the Company, (ii) any materials, apparatus,
processes, methods, ways of business, programs, formulae, technology, research,
development, or intellectual property, (iii) any customer lists, or customer
requirements and preferences, (iv) any supplier lists or supplier requirements
and preferences, (v) financial information or business plans, or (vi) any other
information about or generated by the Company which could, if disclosed, be
useful to any competitors of the Company.
(b) During the term hereof and for a period of two (2) years
thereafter (or, if Consultant's consultancy hereunder is terminated, two (2)
years from the date of such termination), irrespective of the reasons for any
such termination (the "Non-Competition Term"), the Consultant shall not,
directly or indirectly, (i) acquire, own, manage, operate, control or
participate directly or indirectly in any manner in the acquisition, ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director, principal, consultant, agent or otherwise with, or have any
financial interest in (other than solely as an owner for investment purposes of
not more than 5% of the outstanding capital stock of any company engaged in the
same business as that of the Company), or aid or assist anyone else in the
conduct of, any business, venture or activity whose activities, products or
services are competitive with the current activities, products or services of
the Company or Ferrotec or the contemplated activities, products or services set
forth in the Company's Annual Operating Plan for Fiscal 2000, (ii) recruit or
otherwise seek to induce any employee or consultant of the Company to terminate
his or her employment or consulting relationship with the Company, (iii) solicit
or encourage any person who is a customer or supplier of the Company to
terminate its relationship with the Company, or (iv) encourage any of the
Company employees or consultants to become engaged or retained by or on behalf
of any person whose activities, products or services are competitive with the
current activities, products or services of the Company or Ferrotec or the
contemplated activities, products or services set forth in the Company's Annual
Operating Plan for Fiscal 2000.
(c) The Consultant acknowledges and agrees that, because the legal
remedies of the Company may be inadequate in the event of a breach of, or other
failure to perform, any of the covenants and obligations set forth in this
Section, the Company may, in addition to obtaining any other remedy or relief
available to it (including without limitation, consequential and other damages
at law), enforce this Section by injunction and other equitable remedies.
(d) The parties agree that the provisions set forth in this Section,
including without limitation as to duration and geographic scope, are reasonable
to protect the legitimate interests of the Company. The provisions of this
Section are severable, and in the event that any provision hereof should, for
any reason, be held invalid or unenforceable in any respect, it shall not
invalidate, render unenforceable or otherwise affect any other provision hereof,
and such invalid or unenforceable provision shall be construed by limiting it so
as to be valid and enforceable to the maximum extent compatible with, and
possible under, applicable law.
8. Assignment. Neither the Company nor Consultant may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party; provided,
however, that (i) the Company may assign its rights and obligations under this
Agreement without the consent of Consultant in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
person or entity or transfer all of its properties or assets to any other person
or entity, and (ii) Consultant may assign its rights and obligations under this
Agreement without the consent of the Company to P.F. Avery Corporation.
5
<PAGE>
This Agreement shall inure to the benefit of and be binding upon the Company and
Consultant, their respective successors, executors, administrators, heirs and
permitted assigns.
9. Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
11. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed given when delivered by hand, telex or facsimile, or if mailed, five days
after mailing (two business days in the case of courier service), to the parties
as follows:
If to Consultant: Paul F. Avery, Jr.
178 Drinkwater Road
Kensington, NH 03833
If to the Company: Ferrofluidics Corporation
40 Simon Street
Nashua, NH 03061
Attn: William B. Ford
If to Acquiror: Ferrotec Corporation
Sumitomo Bldg. #6
5-24-8 Higashi Ueno
Taito-Ku, Tokyo 110-0015, Japan
Attn: Akira Yamamura
12. Entire Agreement. This Agreement and the letter agreement of even
date herewith by and among the Company, Ferrotec, Merger Sub and Consultant
constitute the entire agreement between the parties and supersede all prior
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of Consultant's consultancy and prior employment with
the Company.
13. Amendment. This Agreement may be amended or modified only by a
written instrument signed by Consultant and by an expressly authorized
representative of the Company.
14. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope of or content of any
provision of this Agreement.
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<PAGE>
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
16. Governing Law. This is a Massachusetts contract and shall be
construed and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
17. Effectiveness. This Agreement is conditioned upon and shall become
effective only upon the occurrence of the Acceptance Date, and shall not become
effective in the event that the Offer is terminated or abandoned or the Merger
Agreement is terminated in accordance with its terms.
[END OF TEXT]
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, Ferrotec and Merger Sub, by their respective duly
authorized representatives, and by Consultant, as of the date first above
written.
CONSULTANT FERROFLUIDICS CORPORATION
By:
- ----------------------- ----------------------------------
Paul F. Avery, Jr. Name: William B. Ford
Title: Chief Financial Officer
FERROTEC CORPORATION
By:
----------------------------------
Name:
Title:
FERROTEC ACQUISITION, INC.
By:
----------------------------------
Name:
Title:
<PAGE>
Ferrofluidics Corporation
40 Simon Street
Nashua, NH 03061
October 20, 1999
Ferrotec Corporation
5-24-8
Higashi-Ueno
Taito-ku
Tokyo, Japan 110-0015
Attn: Akira Yamamura
Ladies and Gentlemen:
In connection with and as a condition to entering into the transactions
contemplated by the Agreement and Plan of Merger (the "Merger Agreement") by and
between Ferrofluidics Corporation (the "Company"), a Massachusetts corporation,
Ferrotec Corporation ("Ferrotec"), a corporation organized under the laws of
Japan, and Ferrotec Acquisition, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of Ferrotec ("Merger Sub"), the Company, Ferrotec,
Merger Sub and the undersigned individual, Paul F. Avery, Jr. ("Avery"), hereby
agree that, notwithstanding any other arrangement between any of the foregoing
parties, from and after the Acceptance Date (as defined in the Merger
Agreement), Avery shall perform such advisory and related services for the
Company as may be reasonably requested from time to time by the Company (the
"Services"). Avery shall perform the Services under the direction and
restriction of the Company. The Company shall pay to Avery an advisory fee of
$50,000 per annum payable monthly in arrears commencing on the first day of the
next month after the date first set forth above. The parties further agree that
the Company or Avery may terminate Avery's engagement as an advisor hereunder at
any time upon thirty (30) days' written notice to the other parties hereto,
whereupon upon such termination all payments due hereunder shall cease.
[signature page to follow]
<PAGE>
Please acknowledge your agreement to the foregoing by countersigning
this agreement in the place provided below and returning it to the undersigned.
Very truly yours,
---------------------------
Paul F. Avery, Jr.
Accepted and Agreed to,
this 20th day of October, 1999
FERROTEC CORPORATION
By:
-----------------------------
Name:
Title:
FERROTEC ACQUISITION, INC.
By:
-----------------------------
Name:
Title:
FERROFLUIDICS CORPORATION
By:
-----------------------------
Name: William B. Ford
Title: Chief Financial Officer
2
EXHIBIT 99(c)(4)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of October 20, 1999,
by and between FERROFLUIDICS CORPORATION, a Massachusetts corporation (the
"Company"), whose principal place of business is 40 Simon Street, Nashua, New
Hampshire, 03061, FERROTEC CORPORATION, a corporation organized under the laws
of Japan ("Ferrotec"), whose principal place of business is Sumitomo Bldg. #6,
5-24-8 Higashi Ueno, Taito-Ku, Tokyo 110-0015, Japan, and WILLIAM B. FORD, an
individual (the "Executive"), whose address is 22 Preserve Drive, Nashua, New
Hampshire, 03064.
W I T N E S S E T H:
WHEREAS, the Company, Ferrotec Corporation, a Japanese corporation, and
Ferrotec Acquisition, Inc., a Massachusetts corporation, are parties to that
certain Agreement and Plan of Merger, dated as of the same date herewith (the
"Merger Agreement);
WHEREAS, in connection with the Merger Agreement, an offer (the
"Offer") will be made to acquire all of the issued and outstanding common stock,
par value $.004 per share, of the Company (the "Common Stock"), in accordance
with the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, pursuant to the terms of the Merger Agreement, Executive is to
be employed by the Company subsequent to the consummation of the transactions
contemplated pursuant to and in accordance with that certain Merger Agreement;
WHEREAS, the Company desires to employ the Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement; and
WHEREAS, the parties intend for this Agreement to supersede and replace
all prior agreements between Executive and the Company, including, but not
limited to, the Employment Agreement dated September 23, 1996 (the "Employment
Agreement").
NOW, THEREFORE, in consideration of the mutual premises set forth
herein, and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive in the capacity
described in Section 3 of this Agreement, and the Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
<PAGE>
2. TERM. The Term of employment hereunder will commence on the
Acceptance Date, as hereinafter defined, and will end on March 31, 2000
("Term"), unless otherwise sooner terminated hereunder, provided that the
Executive and the Company may upon the expiration of the then current Term
hereof, renew this Agreement for an additional term as mutually acceptable to
the parties hereto ("Renewal Term"). For purposes of this Agreement, "Acceptance
Date" has the same meaning as set forth in the Merger Agreement. The parties
acknowledge and agree that Employee's employment with the Company pursuant to
the Employment Agreement and any other agreement or understanding pursuant to
which the Employee is providing services to or on behalf of the Company and/or
its subsidiaries shall be terminated effective as of the Acceptance Date; and
that the Employment Agreement and any of such other agreements or understandings
pursuant to which the Employee is providing services to or on behalf of the
Company and/or its subsidiaries shall be deemed to have been terminated as of
the Acceptance Date and shall be of no further force or effect thereafter,
except to the extent expressly provided hereunder.
3. DUTIES DURING EMPLOYMENT PERIOD.
a. During the Term (including any Renewal Term), the Executive shall
devote substantially all of the Executive's business time to the business and
affairs of the Company. The Executive shall have such duties and powers that are
commensurate and consistent with those of an executive officer, subject to the
authority and direction of the Company's Board of Directors.
b. Executive shall devote substantially all of his business time,
his best efforts, business judgment, skill and knowledge to the advancement of
the business and interests of the Company and its affiliates, and to the
discharge of his duties and responsibilities hereunder. In accordance with the
foregoing, Executive shall not engage in any other business activity, except as
may be approved by the Board of Directors; provided, however, that nothing
herein shall be construed as preventing Executive from investing his assets in a
manner not otherwise prohibited by this Agreement, and in such form or manner as
shall not require any material services on his part in the operations or affairs
of the companies or other entities in which such investments are made.
c. Except for required travel on the Company's business, Executive
shall not be required to work on a regular basis at any location outside of
Hillsborough County in the State of New Hampshire.
4. COMPENSATION AND BENEFITS.
a. Salary. The Executive shall be paid a base salary (the "Base
Salary"), payable not less than twice per month, at an annual rate of no less
than One Hundred Forty Five Thousand Dollars ($145,000).
b. Benefit Plans. During the Term hereof, Executive shall be
entitled to participate in and enjoy the benefit of the retirement,
supplementary retirement, deferred compensation, health, medical, dental,
cafeteria, reimbursement, death (including life insurance), accident, travel
insurance, long-term disability, short-term disability, sick leave, other leaves
of
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absence, holidays and other similar welfare, fringe-benefit or
employment-related plans, programs, arrangements, policies or perquisites
available to the Company's management from time to time. Participation in the
foregoing shall be subject to the terms of the applicable plan documents and the
discretion of the Board of Directors or any administrative or other committee
provided for in or contemplated by such plan. The Company may alter, modify, add
to or delete its employee benefit plans as they apply to the Company's
management at such times and in such manner as the Company determines to be
appropriate, without recourse by Executive.
c. Vacation. During the Term of employment hereunder, the Executive
will be entitled to four (4) weeks of vacation time to be utilized or paid for
each year to be taken at such times and intervals as shall be determined by
Executive; provided, however, that the Executive will evidence reasonable
judgment with regard to appropriate vacation scheduling subject to the
reasonable business needs of the Company. The number of vacation days during the
Term (or any Renewal Term) will accrue on a daily basis at the rate of four
weeks per year of employment. Accrued but unused vacation time at the end of the
Term of this Agreement will be paid to Executive upon the expiration of such
Term. Executive shall be given credit under all of the Company's employee
benefit plans and policies, including without limitation, for accrued vacation
time, for all services prior to the Acceptance Date; and provided further that
the Company shall upon the termination of Executive's employment hereunder pay
Executive for all accrued vacation time as of the termination date in accordance
with Company policy.
d. Business Expense Reimbursement. The Executive shall be entitled
to be paid for, or receive proper reimbursement for, all reasonable,
out-of-pocket expenses incurred directly by the Executive (in accordance with
the policies and procedures established by the Company for its senior executive
officers), including business class accommodations for international air travel,
and first class rates for any other form of travel, in performing services
hereunder, provided the Executive properly accounts therefor. Employee shall
submit to the Company itemized monthly statements, in a form reasonably
satisfactory to the Company, of such expenses incurred in the previous month.
e. Severance Payments. Executive shall be entitled to receive One
Hundred Forty Nine Thousand Dollars ($149,000). This amount will be payable in
the following installments:
(1) Forty Five Thousand Dollars ($45,000) on the first payroll
date following January 1, 2000; and
(2) One Hundred Four Thousand Dollars ($104,000), inclusive of
earned interest therein, at a rate of 4% on the first payroll date
following January 1, 2001.
f. Options. Executive shall be entitled to receive for each option
to acquire Common Stock of the Company that is outstanding immediately prior to
the Acceptance Date, whether or not then vested or exercisable, an amount equal
to the product of (1) the number of shares of common stock subject to such
options and (2) the excess, if any, of the Cash Consideration over
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<PAGE>
the exercise price per share of such option (the "Option Payment"). For purposes
of this Agreement, "Cash Consideration" shall have the same meaning as set forth
in the Merger Agreement. This amount will be payable in the following
installments, notwithstanding anything in the Merger Agreement to the contrary
with respect to the timing of any such payments:
(1) Fifty Thousand Dollars ($50,000) on January 2,
2000; and
(2) On January 2, 2001, an amount equal to Forty Eight Thousand
Seven Hundred Fifty Dollars ($48,750) inclusive of earned interest at
the rate of 4% (the "Second Installment").
5. CONSEQUENCES OF TERMINATION OF EMPLOYMENT.
a. Death or Disability. In the event Executive dies or becomes
disabled during the Term this Agreement, his employment hereunder shall
automatically terminate. In such case, the Company shall pay to Executive or his
beneficiary, as the case may be, any earned but unpaid salary as of the date of
his death or disability. For the purpose of this Agreement, "disability" shall
refer to a situation in which Executive is totally disabled from performing his
duties for the Company during a period of thirteen (13) consecutive weeks. If
any question shall arise as to whether during any period Executive has suffered
disability, Executive may, and at the request of the Company will, submit to the
Company a certification in reasonable detail by a physician selected by
Executive or his guardian to whom the Company has no reasonable objection as to
whether Executive was so disabled and such certification shall for the purposes
of this Agreement be conclusive of the issue. If such question shall arise and
Executive shall fail to submit such certification, the Company's determination
of such issue shall be binding on Executive.
b. By the Company for Cause. The Company may terminate Executive's
employment hereunder for cause at any time upon notice to Executive setting
forth in reasonable detail the nature of such cause. The following, as
determined by the Board of Directors in its reasonable judgment, shall
constitute "cause" for termination:
(1) Executive's falsification of the accounts of the Company,
embezzlement of funds of the Company or other material dishonesty with
respect to the Company or any of its affiliates; or
(2) Conviction of, or plea of nolo contendere to, a felony or
other crime involving moral turpitude (it being understood that
violation of a motor vehicle code does not constitute such a crime); or
(3) Conduct engaged in or action taken or omitted to be taken by
Executive which is in material breach of this Agreement; or
(4) Material failure to perform Executive's duties and
responsibilities hereunder, which failure continues for more than
thirty (30) days after written notice given
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<PAGE>
to Executive pursuant to a vote of the Board of Directors, such vote to
set forth in reasonable detail the nature of such failure; or
(5) Gross or willful misconduct of Executive with
respect to the Company or any subsidiary or affiliate thereof.
Upon the giving of notice of termination of Executive's employment under this
Section 5, the Company shall have no further obligation or liability to
Executive, other than (i) payments of amounts set forth in Sections 4c, 4d, 4e
and 4f; (ii) the payment of salary earned and unpaid at the date of termination;
and (iii) the contribution by the Company to the cost of Executive's
participation (subject to any required employee contribution by Executive under
the terms of the applicable plans) in the Company's group medical and dental
insurance plans as the same are in effect from time to time for so long as
Executive is entitled to continue such participation under applicable law and
plan terms. Executive hereby agrees to release the Company, Ferrotec and Merger
Sub and their respective officers, directors, shareholders and affiliates from
any and all claims and/or liabilities arising under the Employment Agreement or
arising from the Executive's employment or retention by the Company and/or its
subsidiaries prior to the Acceptance Date; provided, however, that nothing
herein shall in any way limit Executive's indemnification rights under Section
6.6 of the Merger Agreement or under the Articles of Organization or Bylaws of
the Company.
6. COVENANT OF NON DISCLOSURE AND NON-COMPETITION.
a. The Executive acknowledges that the success of the business of
the Company depends upon both the absence of competition from the Executive and
the continued preservation of the confidentiality of certain information
possessed by the Executive, that an absence of such competition and the
preservation of the confidentiality of such information is an essential term of
this Agreement, and that the Company would be unwilling to enter into this
Agreement in the absence of this Section. Accordingly, the Executive hereby
agrees with the Company as follows:
(1) The Executive will not, at any time, directly or indirectly,
without the prior written consent of the Company, disclose or use, in
any way harmful to the business, operations, assets, prospects or
condition, financial or otherwise, of the Company, or otherwise
contrary to the interests of the Company, any proprietary or
Confidential Information (as defined below) involving or relating to
the Company past, present or future, actual or prospective; provided,
however, that such information shall not include any information known
generally to the public (other than as a result of disclosure in
violation hereof by the Executive); and provided, further, that the
provisions of this Section shall not prohibit any disclosure required
by law in connection with any judicial or administrative proceeding or
inquiry. "Confidential Information" includes, but is not limited to,
information relating to the Company which is not generally known to
those outside of the Company relating to (i) the business, conduct or
operations of the Company, (ii) any materials, apparatus, processes,
methods, ways of business, programs, formulae, technology, research,
development, or intellectual property, (iii) any customer lists, or
customer requirements and preferences, (iv) any supplier lists or
supplier requirements and preferences, (v) financial
5
<PAGE>
information or business plans, or (vi) any other information about or
generated by the Company which could, if disclosed, be useful to any
competitors of the Company.
(2) During the term hereof and for a period of two
(2) years thereafter (or, if Executive's employment hereunder is
terminated, two (2) years from the date of such termination),
irrespective of the reasons for any such termination (the
"Non-Competition Term"), the Executive shall not, directly or
indirectly, (i) acquire, own, manage, operate, control or participate
directly or indirectly in any manner in the acquisition, ownership,
management, operation or control of, or be connected as an officer,
employee, partner, director, principal, consultant, agent or otherwise
with, or have any financial interest in (other than solely as an owner
for investment purposes of not more than 5% of the outstanding capital
stock of any company engaged in the same business as that of the
Company), or aid or assist anyone else in the conduct of, any business,
venture or activity whose activities, products or services are
competitive with the current activities, products or services of the
Company or Ferrotec or the contemplated activities, products or
services of the Company as set forth in the Company's Annual Operating
Plan for Fiscal 2000, (ii) recruit or otherwise seek to induce any
employee or consultant of the Company to terminate his or her
employment or consulting relationship with the Company, (iii) solicit
or encourage any person who is a customer or supplier of the Company to
terminate its relationship with the Company, or (iv) encourage any of
the Company employees or consultants to become engaged or retained by
or on behalf of any person whose activities, products or services are
competitive with the current or contemplated, as set forth in the
Company's current business plan, activities, products or services of
the Company or Ferrotec or the contemplated activities, products or
services of the Company as set forth in the Company's Annual Operating
Plan for Fiscal 2000.
(3) The Executive acknowledges and agrees that,
because the legal remedies of the Company may be inadequate in the
event of a breach of, or other failure to perform, any of the covenants
and obligations set forth in this Section, the Company may, in addition
to obtaining any other remedy or relief available to it (including
without limitation, consequential and other damages at law), enforce
this Section by injunction and other equitable remedies.
(4) The parties agree that the provisions set forth
in this Section, including without limitation as to duration and
geographic scope, are reasonable to protect the legitimate interests of
the Company. The provisions of this Section are severable, and in the
event that any provision hereof should, for any reason, be held invalid
or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof, and such
invalid or unenforceable provision shall be construed by limiting it so
as to be valid and enforceable to the maximum extent compatible with,
and possible under, applicable law.
7. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
6
<PAGE>
8. EFFECT ON PRIOR AGREEMENTS. This Agreement supersedes any and all
prior or written agreements in their entirety between the parties, which shall
be void and of no further force and effect after the Effective Time of this
Agreement.
9. NOTICES. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested, by overnight
delivery, by courier, or by confirmed telecopy, in the case of the Executive to
the Executive's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the introductory paragraph, or such other place as it may designate.
10. WAIVER. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11. COMPLETE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the contents hereof and supersedes
all prior agreements and understandings between the parties with respect to such
matters, whether written or oral. Neither this Agreement nor any term or
provision hereof may be changed, waived, discharged or amended in any manner
other than by an instrument in writing, signed by the party against which the
enforcement of the change, waiver, discharge or amendment is sought.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement.
13. BINDING-EFFECT/ASSIGNMENT. Neither the Company nor Executive may
make any assignment of this Agreement or any interest herein, by operation of
law or otherwise, without the prior written consent of the other; provided,
however, that the Company may assign its rights and obligations under this
Agreement without the consent of Executive in the event that the Company shall
hereafter affect a reorganization, consolidate with, or merge into, any other
person or entity or transfer all of its properties or assets to any other person
or entity. This Agreement shall inure to the benefit of and be binding upon the
Company and Executive, their respective successors, executors, administrators,
heirs and permitted assigns.
14. GOVERNING LAW. This is a Massachusetts contract and shall be
construed and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof and the parties shall submit to the exclusive jurisdiction of the courts
of the Commonwealth of Massachusetts for all matters relating to the subject
matter of this Agreement and hereby waive any claim of non-convenient forum or
lack of personal jurisdiction or improper venue.
7
<PAGE>
15. HEADINGS. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
16. SURVIVAL. Any termination of this Agreement shall not affect the
ongoing provisions of this Agreement which shall survive such termination in
accordance with their terms.
17. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. If any court
determines that any provision of Sections 6 or 7 hereof is unenforceable because
of the duration or scope of such provision, such court shall have the power to
reduce the scope or duration of such provision, as the case may be, and, in its
reduced form, such provision shall then be enforceable.
18. CONSTRUCTION. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
19. EFFECTIVENESS. This Agreement is conditioned upon and shall become
effective only upon the occurrence of the Acceptance Date, and shall not become
effective in the event that the Offer is terminated or abandoned or the Merger
Agreement is terminated in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written in ____________, Massachusetts.
FERROFLUIDICS CORPORATION
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
FERROTEC CORPORATION
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
8
<PAGE>
EXECUTIVE
--------------------------------
William B. Ford
9
<PAGE>
Ferrofluidics Corporation
40 Simon Street
Nashua, NH 03061
October 20, 1999
Ferrotec Corporation
5-24-8
Higashi-Ueno
Taito-ku
Tokyo, Japan 110-0015
Attn: Akira Yamamura
Ladies and Gentlemen:
In connection with and as a condition to entering into the transactions
contemplated by the Agreement and Plan of Merger (the "Merger Agreement") by and
between Ferrofluidics Corporation (the "Company"), a Massachusetts corporation,
Ferrotec Corporation ("Ferrotec"), a corporation organized under the laws of
Japan, and Ferrotec Acquisition, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of Ferrotec ("Merger Sub"), the Company, Ferrotec,
Merger Sub and the undersigned individual, Paul F. Avery, Jr. ("Avery"), hereby
agree that, notwithstanding any other arrangement between any of the foregoing
parties, from and after the Acceptance Date (as defined in the Merger
Agreement), Avery shall perform such advisory and related services for the
Company as may be reasonably requested from time to time by the Company (the
"Services"). Avery shall perform the Services under the direction and
restriction of the Company. The Company shall pay to Avery an advisory fee of
$50,000 per annum payable monthly in arrears commencing on the first day of the
next month after the date first set forth above. The parties further agree that
the Company or Avery may terminate Avery's engagement as an advisor hereunder at
any time upon thirty (30) days' written notice to the other parties hereto,
whereupon upon such termination all payments due hereunder shall cease.
[signature page to follow]
<PAGE>
Please acknowledge your agreement to the foregoing by countersigning
this agreement in the place provided below and returning it to the undersigned.
Very truly yours,
---------------------------
Paul F. Avery, Jr.
Accepted and Agreed to,
this 20th day of October, 1999
FERROTEC CORPORATION
By:
-----------------------------
Name:
Title:
FERROTEC ACQUISITION, INC.
By:
-----------------------------
Name:
Title:
FERROFLUIDICS CORPORATION
By:
-----------------------------
Name: William B. Ford
Title: Chief Financial Officer
2
