<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the
Securities Exchange Act of 1934)
ANDERSEN GROUP, INC.
--------------------------------------
(Name of Issuer)
ANDERSEN GROUP, INC.
--------------------------------------
(Name of Person(s) Filing Statement)
Series A Cumulative Convertible Preferred Stock
-----------------------------------------------
(Title of Class of Securities)
Not Applicable
------------------------------------------
(CUSIP Number of Class of Securities)
Francis E. Baker
President
Andersen Group, Inc.
Ney Industrial Park
Bloomfield, CT 06002
(203) 242-0761
---------------------------------------
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of the
Person Filing Statement)
Copy to:
David A. Garbus, Esq.
Robinson & Cole
One Boston Place
Boston, MA 02108-4404
(617) 557-5900
June 5, 1995
-----------------------------------
(Date Tender Offer First Published,
Sent Or Given to Security Holders)
<PAGE>
Calculation of filing fee
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Transaction Amount of
Valuation* Filing Fee
$5,273,037 $1,054
- --------------------------------------------------------------------------------
</TABLE>
* For purposes of calculation fee only. This amount assumes the
purchase of 430,452 shares of Series A Cumulative Convertible
Preferred Stock (the "Shares"), of Andersen Group, Inc. (the
"Company"), at a purchase price of $12.25 per share. Based upon
representations made to the Company by certain persons, no more than
430,452 shares will be purchased in the transaction described in this
Schedule. The amount of the filing fee, calculated in the accordance
with Regulation 240.0-11 of 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: ______________________________
Form or Registration No.: ______________________________
Filing Party: ______________________________
Date Filed: ______________________________
-2-
<PAGE>
Item 1. Security and Issuer.
-------------------
(a) The name of the issuer of the securities to which this statement
relates is Andersen Group, Inc., a Connecticut corporation (the "Company"). The
address of its principal executive office is Ney Industrial Park, Bloomfield,
Connecticut 06002.
(b) Information with respect to the exact number of shares of the
Company's Series A Cumulative Convertible Preferred Stock (the "Shares") being
sought and the consideration being offered therefor is incorporated herein by
reference to the discussion under the heading "The Offer" in the Offer to
Purchase for Cash dated June 5, 1995 (the "Offer to Purchase"), filed as Exhibit
(a)(1) hereto. As of May 8, 1995, there were 589,036 Shares outstanding and
approximately 125 Preferred Stockholders of record.
Information with respect to whether any Shares are to be purchased from any
officer, director or affiliate of the Company and the details of each such
transaction is incorporated herein by reference to the discussion under the
heading "The Offer -Terms of the Offer" in of the Offer to Purchase.
(c) Information with respect to the principal market for and price range
of the Shares is incorporated by reference to the discussion under the heading
"Price Ranges of the Common Stock and the Preferred Stock" in the Offer to
Purchase.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
(a) Information with respect to source and total amount of funds to be
used for the purchase of Shares is incorporated by reference to the discussion
under the heading "Sources of Funds" in the Offer to Purchase.
(b) Not applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
-------------------------------------------------------------------
Affiliate.
---------
Information with respect to the purpose of the Offer and the possible
results of the Offer is incorporated herein by reference to the discussion under
the headings "Special Factors," "The Dental Divestiture," "Purposes and Effects
of the Offer" and "The Offer" in the Offer to Purchase. Except as set forth in
such sections of the Offer to Purchase, there are no present plans or proposals
which relate to or would result in:
-3-
<PAGE>
(a) The acquisition by any person, other than the Company, of
additional securities of the Company or the disposition of any such
securities by any such person;
(b) Any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
(c) Any sale or transfer of a material amount of assets of the
Company or any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company;
(e) Any material change in the present dividend rate or policy, or
indebtedness or capitalization, of the Company;
(f) Any other material change in the Company's corporate structure or
business;
(g) Any changes in the Company's Amended and Restated Articles of
Incorporation or By-laws or other actions which may impede the acquisition
of control of the Company by any person;
(h) The delisting of any class of equity security of the Company from
any national securities exchange or the cessation of the quotation of any
such security on any inter-dealer quotation system of a registered national
securities association;
(i) Any class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) The suspension of the Company's obligation to file reports
pursuant to Section 15(d) of the Securities Exchange Act of 1934.
Item 4. Interest in Securities of the Issuer.
------------------------------------
Neither the Company nor, to the knowledge of the Company, any of its
executive officers or directors or any associate or subsidiary of any of the
foregoing nor any partner of the Standby Purchaser nor any associate of the
Standby Purchaser has engaged in any transactions involving Shares during the 40
business days prior to June 5, 1995.
-4-
<PAGE>
Item 5. Contracts, Arrangements, Understandings or Relationships With Respect
---------------------------------------------------------------------
to the Issuer's Securities.
--------------------------
Neither the Company nor, to the Company's knowledge, any of its executive
officers or directors nor any partner of the Standby Purchaser is a party to
any material contract, arrangement, understanding or relationship between them
and any other person with respect to the Company's securities relating, directly
or indirectly, to the Offer to Purchase, except as is set forth in the Standby
Purchase Agreement attached hereto as Exhibit c and discussed in under the
headings "Special Factors -Interests of Certain Persons in the Offer" and "The
Standby Agreement" in the Offer to Purchase which is incorporated herein by
reference.
Item 6. Persons Retained, Employed or to be Compensated.
-----------------------------------------------
Information with respect to persons employed, retained or to be compensated
by the Company or by any person on behalf of the Company to make solicitations
or recommendations in connection with the Offer is incorporated herein by
reference to the discussion under the headings "Important" and "The Offer -
Payment of Expenses" in the Offer to Purchase.
Item 7. Financial Information.
---------------------
(a)(1) Incorporated herein by reference to pages 16 through 31 and 49 of
the Company's Annual Report on Form 10-K for the year ended February 28, 1995,
filed as Exhibit g hereto.
(a)(2) Not applicable.
(a)(3)-(b)(3) Incorporated by reference to the discussion under the
headings "Summary Historical Financial Data" and "Pro Forma Data" in the Offer
to Purchase.
Item 8. Additional Information.
----------------------
(a) There is no present or proposed material contract, arrangement,
understanding or relationship between the Company and any of its executive
officers, directors or affiliates other then as disclosed in Item 5 of this
Schedule.
(b) There are no applicable regulatory requirements which must be complied
with or approvals which must be obtained in connection with this Offer.
(c) Not applicable.
(d) There are no material pending legal proceedings relating to the Offer.
-5-
<PAGE>
(e) Not applicable.
Item 9. Material to be Filed as Exhibits.
--------------------------------
(a)(1) Offer to Purchase for Cash, dated June 5, 1995.
(a)(2) Letter of Transmittal.
(a)(3) Letter, dated June 5, 1995, from Andersen Group, Inc. to brokers,
dealers, commercial banks, trust companies and other nominees.
(a)(4) Form of Letter to Clients of brokers, dealers, banks and trust
companies.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Press Release dated June 5, 1995.
(b) Not applicable.
(c) Conformed copy of Standby Agreement between the Company and
Andersen Capital L.P. dated June 1, 1995.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Audited financial statements of the Company for the years ended
February 28, 1995 and 1994 as set forth on pages 16 through 30 and 49 of the
Company's Annual Report on Form 10-K for the year ended February 28, 1995, filed
with the SEC.
(h) Consent of McTeague Investment Bankers, Inc., dated June 2, 1995.
-6-
<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.
ANDERSEN GROUP, INC.
June 5, 1995 By: /s/ Francis E. Baker
------------------------
Francis E. Baker
Its President
<PAGE>
EXHIBIT INDEX
(a)(1) Offer to Purchase for Cash, dated June 5, 1995.
(a)(2) Letter of Transmittal.
(a)(3) Letter, dated June 5, 1995, from Andersen Group, Inc. to brokers,
dealers, commercial banks, trust companies and other nominees.
(a)(4) Form of Letter to Clients of brokers, dealers, banks and trust
companies.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Press Release dated June 5, 1995.
(b) Not applicable.
(c) Conformed copy of Standby Agreement between the Company and
Andersen Capital L.P. dated June 1, 1995.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Audited financial statements of the Company for the years ended
February 28, 1995 and 1994 as set forth on pages 16 through 30 and 49
of the Company's Annual Report on Form 10-K for the year ended
February 28, 1995 filed with the SEC.
(h) Consent of McTeague Investment Bankers, Inc., dated June 2, 1995.
<PAGE>
Exhibit (a)(1)
ANDERSEN GROUP, INC.
NEY INDUSTRIAL PARK
BLOOMFIELD, CONNECTICUT 06002
203-242-0761
June 5, 1995
Dear Preferred Stockholder:
Andersen Group, Inc. is offering to purchase for cash any and all
shares of its Series A Cumulative Convertible Preferred Stock, issued in 1991,
for $12.25 per share.
We believe this offer makes good financial sense for Andersen Group
and is fair to the Preferred Stockholders. In addition, it gives you the
opportunity to sell your shares of Preferred Stock, for which there is no active
market, at a premium over the current estimated market value and without the
usual transaction costs.
Neither Andersen Group nor its Board of Directors makes any
recommendation as to whether you should sell your shares of Preferred Stock.
That is entirely your decision. The offer is explained in more detail in the
enclosed Offer to Purchase for Cash. I encourage you to read this material in
its entirety before making any decision. If you choose to sell, please follow
the instructions in the enclosed materials.
You are cordially invited to an informational meeting concerning this
offer on Friday, June 16, 1995, at 12:15 p.m. at the offices of the Company's
principal subsidiary, The J.M. Ney Company, Ney Industrial Park, Bloomfield,
Connecticut. Complimentary sandwiches and refreshments will be provided.
Please R.S.V.P. by June 12, 1995, to Ms. Jean Barz at 203-242-0761.
If you have any questions regarding this offer, please call Elmer J.
Dahl, Andersen Group Corporate Secretary at 203-242-0761.
Sincerely,
/s/ Francis E. Baker
Francis E. Baker
President
<PAGE>
OFFER TO PURCHASE FOR CASH
By
ANDERSEN GROUP, INC.
ANY AND ALL SHARES OF ITS SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK FOR
$12.25 NET PER SHARE
----------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
TIME, ON FRIDAY JULY 7, 1995, UNLESS EXTENDED
(SUCH TIME AND DATE, THE "EXPIRATION DATE").
----------------------------------------------------------------------------
Andersen Group, Inc., a Connecticut corporation having its principal
executive office at Ney Industrial Park, Bloomfield, Connecticut 06002 (the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Offer to Purchase for Cash (the "Offer to Purchase") and in the
applicable accompanying Letter of Transmittal (which together constitute the
"Offer"), to purchase any and all of its outstanding shares of Series A
Cumulative Convertible Preferred Stock, without par value (the "Preferred
Stock"), of which 589,036 shares were outstanding at May 8, 1995, for a purchase
price of $12.25 per share net to the seller in cash (the "Consideration").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS:
. THERE BEING PROPERLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE A MINIMUM OF 250,000 SHARES OF THE PREFERRED
STOCK (THE "MINIMUM NUMBER OF SHARES"); AND
. CONSUMMATION OF THE DENTAL DIVESTITURE (AS HEREINAFTER DEFINED)
IN ORDER TO PROVIDE THE COMPANY WITH SUFFICIENT CONSOLIDATED NET
INCOME (AS HEREINAFTER DEFINED) FOR PURPOSES OF THE RESTRICTIVE
COVENANTS (AS HEREINAFTER DEFINED) AND FUNDS TO PURCHASE THE
TENDERED SHARES.
The Company is negotiating to sell its Ney Dental Division (the
"Dental Divestiture"). The Company believes that the Offer provides holders of
the Preferred Stock (the "Preferred Stockholders") who tender their shares into
the Offer (who will not include the partners of the Standby Purchaser (as
hereinafter defined) who presently hold in the aggregate approximately 160,000
shares of Preferred Stock) with a fair allocation of the amounts to be realized
from the anticipated Dental Divestiture, since as a result of the Dental
Divestiture the Company will have sufficient Consolidated Net Income to permit
it to redeem or repurchase shares of or to pay dividends on the Preferred Stock
while remaining in compliance with the Restrictive Covenants. Under the
Restrictive Covenants, the Company must have sufficient Consolidated Net Income
determined on a cumulative basis, net of losses, dividends and prior redemptions
or repurchases of stock, in order to redeem or repurchase shares or to pay
dividends on the Preferred Stock. At February 28, 1995, the Company needed to
earn approximately $2,453,000 before it could redeem or repurchase shares of or
pay dividends on the Preferred Stock.
The Company intends to utilize all of the available Consolidated Net
Income generated from the Dental Divestiture to repurchase shares of Preferred
Stock tendered into the Offer. The Offer gives Preferred Stockholders the
opportunity to sell shares of Preferred Stock at a premium above the current
estimated market value and without the usual transaction costs, rather than the
less certain means of liquidating their investment in the Preferred Stock
through possible mandatory redemption or conversion to Common Stock in the
future. Further, in light of recent operating results, once the Company's
available Consolidated Net Income is eliminated by the repurchase of shares of
Preferred Stock pursuant to the Offer, the Company believes that it is doubtful
that it will be able to generate sufficient Consolidated Net Income to permit
the Company to pay
<PAGE>
dividends on or to redeem (on a mandatory or voluntary basis) or repurchase
shares of the Preferred Stock remaining outstanding after the completion of the
Offer unless the Company realizes a significant gain from one or more sales of
all or a portion of its assets. See "Restrictive Covenants" and "Purposes and
Effects of the Offer."
The Company does not intend to proceed with the Dental Divestiture
unless the Minimum Number of Shares - 250,000 - are tendered. The Company may,
however, reduce the Minimum Number of Shares or waive that condition as well as
any other conditions in respect of the Offer. See "The Dental Divestiture" and
"The Offer-Conditions of the Offer."
If for any reason the Company does not purchase all of the shares of
Preferred Stock tendered, the Standby Purchaser, a party affiliated with the
Company, has the right, but not the obligation, to purchase all shares tendered
pursuant to the Offer and not purchased by the Company. See "The Standby
Agreement."
The Company believes that the Consideration of $12.25 per share to be
paid in the Offer is fair to Preferred Stockholders. Approximately $1.50 per
share of the Consideration represents an amount that is approximately equivalent
to the eight quarterly dividends that the Company has not been able to declare
and pay on the Preferred Stock as a result of the Restrictive Covenants. Aside
from payment of the Consideration, Preferred Stockholders who tender their
shares of Preferred Stock will not be entitled to any payment or other
adjustment on account of accrued but unpaid dividends thereon. Preferred
Stockholders who do not participate in the Offer will not receive the scheduled
quarterly dividends for future dividend periods unless and until such dividends
are declared by the Company's Board of Directors. Under agreements relating to
the Company's outstanding indebtedness (collectively, the "Restrictive
Covenants"), the Company believes that it will be prohibited from paying future
quarterly dividends on the Preferred Stock for the foreseeable future and will
likely be prohibited from repurchasing or redeeming the Preferred Stock for the
foreseeable future. See "Restrictive Covenants" and "Purposes and Effects of the
Offer."
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY PREFERRED STOCKHOLDER SHOULD TENDER ANY OR ALL
OF SUCH STOCKHOLDER'S SHARES PURSUANT TO THE OFFER. EACH PREFERRED STOCKHOLDER
MUST MAKE HIS, HER OR ITS OWN DECISION AS TO WHETHER TO TENDER PREFERRED STOCK
AND, IF SO, HOW MANY SHARES TO TENDER.
The Offer does not constitute a notice of redemption of the Preferred
Stock pursuant to the Company's Amended and Restated Certificate of
Incorporation or the Statement Fixing and Determining the Terms of Shares of
Series A Cumulative Convertible Preferred Stock of Andersen Group, Inc. (the
"Terms of the Preferred Stock"), nor does the Company intend to effect such a
redemption by making the Offer. Preferred stockholders can make their own
investment decision as to whether or not to tender the Preferred Stock. In
making such investment decisions, Preferred Stockholders should review carefully
the information under the heading "Special Factors."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
JUNE 5, 1995
<PAGE>
IMPORTANT
Any Preferred Stockholder desiring to tender all or any portion of
such stockholder's shares of Preferred Stock should either (1) complete the
Letter of Transmittal or a facsimile copy thereof in accordance with the
instructions in the Letter of Transmittal, mail or deliver the completed Letter
of Transmittal and any other required documents to Registrar and Transfer
Company (the "Exchange Agent"), and either mail or deliver the certificates for
such shares to the Exchange Agent along with the Letter of Transmittal or follow
the procedure for book-entry transfer set forth under "The Offer;" or (2)
request such Preferred Stockholder's broker, dealer, commercial bank, trust
company or nominee to effect the transaction for such stockholder. Preferred
Stockholders having shares of Preferred Stock registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such person if they desire to tender their shares of Preferred Stock. Preferred
Stockholders who wish to tender their shares and whose certificates for such
shares are not immediately available should tender such shares by following the
procedures for guaranteed delivery set forth under "The Offer."
Questions and requests for assistance or for additional copies of this
Offer to Purchase, a Letter of Transmittal and/or the Notice of Guaranteed
Delivery may be directed to the Company to the attention of Elmer J. Dahl,
Corporate Secretary (telephone 203-242-0761) or to the Exchange Agent at the
addresses and telephone numbers set forth on the last page of this Offer to
Purchase.
The Company will not pay any commission or other remuneration to any
broker, dealer, salesman or other person for soliciting tenders of the Preferred
Stock. Certain of the Directors, officers and regular employees of the Company
may solicit tenders from Preferred Stockholders, without extra compensation.
Such solicitations may be made by correspondence, by telephone or in person.
The Company will pay to banks, brokers, nominees and other fiduciaries their
reasonable charges and expenses incurred in forwarding this Offer to Purchase
and related Offer materials to the beneficial owners of Preferred Stock held by
them. See "The Offer-Payment of Expenses."
________________________
IN MAKING AN INVESTMENT DECISION TO TENDER THEIR PREFERRED STOCK, PREFERRED
STOCKHOLDERS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS AND
CONDITIONS OF THE OFFER, INCLUDING THE MERITS AND SPECIAL FACTORS INVOLVED. THE
OFFER HAS NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED
THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF THE OFFER
The following summary is provided solely for the convenience of
Preferred Stockholders and is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Offer to Purchase. Terms used
in this summary and not otherwise defined herein shall have the meanings given
to them elsewhere in this Offer to Purchase. All references in this Offer to
Purchase to "fiscal year" refer to the year ended on the last day of February of
that calendar year. For example, "fiscal year 1995" refers to the year ended
February 28, 1995.
The Offer.............................. Subject to the terms and conditions set
forth herein and in the applicable
Letter of Transmittal, the Company is
offering to purchase any and all shares
of the Preferred Stock, properly
tendered and accepted, for $12.25 cash
net per share.
Purpose of the Offer................... The Company believes that the Offer
provides tendering Preferred
Stockholders (who will not include the
partners of the Standby Purchaser who
presently hold in the aggregate
approximately 160,000 shares of
Preferred Stock) with a fair allocation
of the amounts to be realized from the
anticipated Dental Divestiture, since
as a result of the Dental Divestiture
the Company will have sufficient
Consolidated Net Income to permit it to
redeem or repurchase shares of or to
pay dividends on the Preferred Stock
while remaining in compliance with the
Restrictive Covenants. Under the
Restrictive Covenants, the Company must
have sufficient Consolidated Net Income
determined on a cumulative basis, net
of losses, dividends and prior
redemptions or repurchases of stock, in
order to redeem or repurchase shares or
to pay dividends on the Preferred
Stock. At February 28, 1995, the
Company needed to earn approximately
$2,453,000 before it could redeem or
repurchase shares of or pay dividends
on the Preferred Stock. The Company
intends to utilize all of the available
Consolidated Net Income generated from
the Dental Divestiture to repurchase
shares of Preferred Stock tendered into
the Offer. The Offer gives Preferred
Stockholders the opportunity to sell
shares of Preferred Stock at a premium
above the current estimated market
value and without the usual transaction
costs, rather than the less certain
means of liquidating their investment
in the Preferred Stock through possible
mandatory redemption or conversion to
Common Stock in the future. Further, in
light of recent operating results, once
the Company's available Consolidated
Net Income is eliminated by the
repurchase of shares of Preferred Stock
pursuant to the Offer, the Company
believes that it is doubtful that it
will be able to generate sufficient
Consolidated Net Income to permit the
Company to pay dividends on or to
redeem (on a mandatory or voluntary
basis) or repurchase shares of the
Preferred Stock remaining outstanding
after the completion of the Offer
unless the
- --------------------------------------------------------------------------------
-1-
<PAGE>
Purpose of the Offer (cont'd).......... Company realizes a significant gain
from one or more sales of all or a
portion of its assets. See "Restrictive
Covenants" and "Purposes and Effects of
the Offer."
Fairness of the Offer.................. The Company believes that the price per
share of $12.25 to be paid in the Offer
is fair to the Preferred Stockholders.
In reaching this conclusion, the Board
of Directors of the Company (the
"Board") has relied, in part, upon an
opinion of McTeague Investment Bankers,
Inc. as financial advisor (the
"Financial Advisor"). See "Fairness of
the Offer."
Dividends.............................. The Consideration to be paid includes
approximately $1.50 per share, which
represents an amount approximately
equivalent to the amount of accrued but
unpaid dividends on the Preferred Stock
since April 15, 1993, the last date on
which the Company was able to declare
and pay dividends on the Preferred
Stock. No separate cash payment will be
made with respect to accrued but unpaid
dividends on shares of the Preferred
Stock tendered and accepted in the
Offer. Under the Restrictive Covenants,
the Company is only per mitted to pay
dividends on the Preferred Stock to the
extent by which cumulative Consolidated
Net Income earned after fiscal year
1995 exceeds approximately $2,453,000,
less payment for shares of Preferred
Stock to be purchased by the Company
pursuant to the Offer (assuming the
Dental Divestiture is consummated). As
a result, the payment of dividends on
the Preferred Stock in the foreseeable
future is highly doubtful. See
"Restrictive Covenants" and
"Dividends."
The Dental Divestiture................. The Company is negotiating to sell its
Ney Dental Division for a purchase
price of approximately $18 million to
$20 million, which could consist of a
combination of cash and securities. The
Company does not intend to proceed with
the Dental Divestiture unless the
Minimum Number (250,000) of shares are
tendered, subject to the right of the
Company to reduce said Minimum Number
or to waive that or any other condition
of the Offer. See "The Dental
Divestiture" and "The Offer-Conditions
of the Offer."
Expiration Date........................ 12:00 Midnight, eastern time, on
Friday, July 7, 1995, unless extended.
See "The Offer--Expiration Date; Exten
sions; Termination; Amendments."
Withdrawal of Tenders.................. Tenders of Preferred Stock may be
withdrawn at any time prior to the
Expiration Date or, unless previously
accepted by the Company or the Standby
Purchaser, after 5:00 P.M., on August
1, 1995. There will be no right of
withdrawal between the Expiration Date
and the "Payment Date" (as defined
below.) See "The Offer--Withdrawal
Rights."
- --------------------------------------------------------------------------------
-2-
<PAGE>
Acceptance of Preferred Stock
and Delivery of Consideration........ Subject to the terms and conditions of
the Offer, the Company will accept,
promptly after the Expiration Date, any
and all shares of the Preferred Stock
properly tendered and not withdrawn
prior to the Expiration Date. The
Company will cause the Exchange Agent
to deliver the Consideration pursuant
to the Offer promptly following the
46th day after the end of the fiscal
quarter of the Company during which the
Dental Divestiture is consummated (the
"Payment Date"). See "The Offer--
Acceptance of Shares of Preferred
Stock; Delivery of Consideration."
Conditions of the Offer................ The Offer is subject to the Minimum
Number of Shares being tendered and is
further subject to certain customary
conditions, any or all of which may be
waived by the Company. See "The Offer-
Conditions of the Offer" and
"Restrictive Covenants."
Procedures for Tendering the Preferred
Stock................................ Each Preferred Stockholder who wishes
to tender his, her or its shares of
Preferred Stock must deliver the
following documents prior to the
Expiration Date to the Exchange Agent
at one of the addresses set forth on
the last page hereof: (i) certificates
representing such Preferred Stock
together with the applicable Letter of
Transmittal which has been properly
completed and duly executed by such
Preferred Stockholder, and all other
documents required by the applicable
Letter of Transmittal, (ii) if such
Preferred Stockholder wishes to deliver
his, her or its Preferred Stock through
book-entry transfer, confirmation of
such transfer together with the
applicable Letter of Transmittal, which
has been properly completed and duly
executed by such holder, and all other
documents required by the applicable
Letter of Transmittal, or (iii) if such
Preferred Stockholder wishes to tender
by guaranteed delivery, a properly
completed and duly executed Notice of
Guaranteed Delivery. Any Preferred
Stockholder whose Preferred Stock is
registered in the name of a broker,
dealer, commercial bank, trust company
or nominee is urged to contact such
registered holder promptly if such
Preferred Stockholder wishes to
participate in the Offer. Letters of
Transmittal, Notices of Guaranteed
Delivery and certificates for Preferred
Stock should be sent to the Exchange
Agent, and not to the Company. See "The
Offer--Procedures for Tendering" and
"-- Guaranteed Delivery Procedure."
- --------------------------------------------------------------------------------
-3-
<PAGE>
Standby Agreement...................... Three affiliates of the Company, Oliver
R. Grace, Jr., Peter N. Bennett and
John S. Grace who are Preferred Stock
holders, and another affiliate of the
Company, James J. Pinto, presently are
the limited partners of the Standby
Purchaser. In addition, Oliver R.
Grace, Jr. is the sole shareholder,
sole director, president and secretary
of the general partner of the Standby
Purchaser. Oliver R. Grace, Jr. is
Chairman of the Company, and he and the
other three named persons are also
Directors of the Company. Additional
persons may become limited partners of
the Standby Purchaser following the
date of this Offer to Purchase. Such
additional limited partners may include
officers of the Company and/or
relatives or affiliates of the present
limited partners. The Standby Purchaser
has entered into the Standby Agreement
(as hereinafter defined) with the
Company whereby the Standby Purchaser
has the right, but not the obligation,
to purchase, on the same terms and
conditions as the Offer, all shares of
Preferred Stock tendered pursuant to
the Offer which the Company does not
purchase. Messrs. Grace, Jr., Bennett
and Grace do not intend to tender any
of their shares (approximately 160,000
shares in the aggregate) of Preferred
Stock into the Offer. Mr. Pinto does
not own any shares of Preferred Stock.
The possible purchase of shares of
Preferred Stock by the Standby
Purchaser results in potential
conflicts of interest. See "Special
Factors-Interests of Certain Persons in
the Offer" and "The Standby Agreement."
The Preferred Stock.................... See "Summary Comparison of Terms of the
Common Stock and the Preferred Stock,"
"Restrictive Covenants" and
"Description of the Company's Capital
Stock--Preferred Stock."
Certain Federal Income Tax
Considerations....................... For a discussion of the federal income
tax considerations related to the
tender of the Preferred Stock for the
Consider ation, see "Federal Income Tax
Considerations."
Exchange Agent......................... Registrar and Transfer Company (the
"Exchange Agent"), 10 Commerce Drive,
Cranford, New Jersey 07016, telephone
(800) 346-6084.
Further Information.................... For further information concerning
procedures for tendering Preferred
Stock, please contact either the
Exchange Agent or the Company. For
further information concerning the
Company or the terms of the Offer,
please contact Elmer J. Dahl, Corporate
Secretary, at (203) 242-0761.
- --------------------------------------------------------------------------------
-4-
<PAGE>
INTRODUCTION
Andersen Group, Inc., a Connecticut corporation (the "Company") hereby
offers to purchase any and all shares of its Series A Cumulative Convertible
Preferred Stock without par value (the "Preferred Stock"), of which 589,036
shares were outstanding at May 8, 1995, for a purchase price of $12.25 per share
net to the seller in cash (the "Consideration"), 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").
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY PREFERRED STOCKHOLDER SHOULD TENDER ANY OR ALL
OF SUCH STOCKHOLDER'S SHARES PURSUANT TO THE OFFER. EACH PREFERRED STOCKHOLDER
MUST MAKE HIS, HER OR ITS OWN DECISION AS TO WHETHER TO TENDER PREFERRED STOCK
AND, IF SO, HOW MANY SHARES TO TENDER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS:
. THERE BEING PROPERLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE A MINIMUM OF 250,000 SHARES OF THE PREFERRED STOCK
(THE "MINIMUM NUMBER OF SHARES"); AND
. CONSUMMATION OF THE DENTAL DIVESTITURE IN ORDER TO PROVIDE THE
COMPANY WITH SUFFICIENT CONSOLIDATED NET INCOME FOR PURPOSES OF THE
RESTRICTIVE COVENANTS AND FUNDS TO PURCHASE THE TENDERED SHARES.
If for any reason the Company does not purchase all of the shares of
Preferred Stock tendered pursuant to the Offer, the Standby Purchaser has the
right, but not the obligation, to purchase all such shares not purchased by the
Company on the same terms and conditions as the Offer. See "The Standby
Agreement."
The Offer does not constitute a notice of redemption of the Preferred
Stock, pursuant to the Company's Amended and Restated Certificate of
Incorporation or the Statement Fixing and Determining the Terms of Shares of
Series A Cumulative Convertible Preferred Stock of Andersen Group, Inc. (the
"Terms of the Preferred Stock"), nor does the Company intend to effect such a
redemption by making the Offer. Under the Company's Amended and Restated
Certificate of Incorporation and the Terms of the Preferred Stock, the Preferred
Stock is subject to both voluntary redemption and mandatory redemption under
certain circumstances, in each case subject to the restrictions set forth in the
Restrictive Covenants. See "Restrictive Covenants" and "Description of the
Company's Capital Stock." Preferred Stockholders should make their own
investment decision as to whether or not to tender any or all of their shares of
Preferred Stock. See "Special Factors" and "Purposes and Effects of the Offer."
Tendering Preferred Stockholders will not be obligated to pay any
commissions, solicitation fees or, subject to the instructions to the Letter of
Transmittal, stock transfer taxes on the Company's purchase of the Preferred
Stock. The Company will pay all charges and expenses of the Exchange Agent and
of other third parties incurred in connection with the Offer. See "The Offer-
Payment of Expenses."
-5-
<PAGE>
SPECIAL FACTORS
Preferred Stockholders should consider the factors set forth below, as
well as the other information set forth in this Offer to Purchase, in
determining whether to participate in the Offer.
BACKGROUND OF THE OFFER
The Dental Division is only one of several highly diverse segments in
which the Company historically has conducted operations. These segments have
included electronics manufacturing and supply businesses, communications
electronics, medical products and services, as well as the manufacture and
distribution of the range of materials, equipment and merchandise distributed by
the Dental Division. The Company wishes to reduce the diversity of segments
within its family of operations in order to focus its management attention and
strengths and to reduce certain indebtedness and other obligations.
The Company acquired the Dental Division through an acquisition of The
J.M. Ney Company ("Ney") in 1991. The Preferred Stock was issued to the
stockholders of Ney as part of the consideration for that acquisition. For
approximately eight fiscal quarters, the Company was able to declare and pay
dividends on the Preferred Stock, as called for by the terms thereof. However,
as a result of losses incurred in fiscal years 1993, 1994 and 1995 and
redemptions or repurchases of the Preferred Stock in fiscal years 1992 and 1993
at prices ranging from $9.25 to $13.00 per share, the Restrictive Covenants have
prevented the Company from paying dividends on its Preferred Stock since
approximately April 15, 1993.
In June 1994, the Board of Directors of the Company (the "Board")
discussed the performance of the Dental Division and a possible divestiture
program, including, among other things, the reasons for considering divestiture,
the Division's "separability" as well as its interdependence with Ney's
Electronics Division, the Company's overall cash flow, potential acquisition
candidates and potential financial advisory arrangements. The Board authorized
the President of the Company to proceed to explore a divestiture program for the
Dental Division. Following discussions between the Company's management and
prospective financial advisory firms, effective as of September 1, 1994, the
Company retained Volpe, Welty & Company ("Volpe, Welty") to provide services to
the Company regarding the possible divestiture of the Dental Division. At
meetings of the Board of Directors in both September and December 1994, the
President of the Company reported on the status of the Dental Division
divestiture program and possible pricing and structure scenarios, as well as
possible interest from a non-commercial purchaser. No definitive action was
taken at these meetings.
The Board's original expectation was to seek to sell the Dental
Division for approximately $22-$25 million in cash. This expectation was
consistent with the Company's original valuation of the Dental Division when it
was acquired in 1991. During 1995, potential purchasers of the Dental Division
were identified, and tentative offers were only in the $18 - $20 million range.
If a sale were consummated below that range, the Company's ability to begin to
redeem the Preferred Stock in accordance with the applicable provisions thereof
would be reduced significantly. Under the Restrictive Covenants, the Company
must have sufficient Consolidated Net Income, determined on a cumulative basis
(net of losses, dividends and prior redemptions or repurchases of stock), before
it may pay dividends on, or redeem or repurchase shares of, its Preferred Stock
or Common Stock. If the Company sells the Dental Division in the $18 - $20
million range, sufficient profits will be recognized to give the Company
approximately $2.5 to $4.0 million of available funds which could be used to
redeem or repurchase its Preferred Stock. SINCE THE EXISTING LIMITED PARTNERS OF
THE STANDBY PURCHASER, WHO WILL NOT BE TENDERING THEIR SHARES OF PREFERRED STOCK
IN THE OFFER, PRESENTLY OWN OR CONTROL, DIRECTLY OR INDIRECTLY, IN THE AGGREGATE
APPROXIMATELY 160,000 SHARES OF THE OUTSTANDING PREFERRED STOCK, THE ENTIRE POOL
OF AVAILABLE FUNDS GENERATED BY THE PROPOSED DENTAL DIVESTITURE WOULD BE
AVAILABLE TO PURCHASE SHARES IN THE OFFER FROM ALL THE OTHER PREFERRED
STOCKHOLDERS. The Board has determined that the Offer provides those Preferred
Stockholders with a fair allocation of the amounts to be realized from the
anticipated Dental Divestiture. There can be no assurances that the Company will
be able to sell the Dental Division at the $18 -
-6-
<PAGE>
$20 million range or at any other price or on terms acceptable to the Company.
In the future, except as a result of the sale of assets by the Company, the
prospect of the Company being able to resume scheduled dividend payments on the
Preferred Stock and complete the first mandatory redemption of a pro rata
portion of the Preferred Stock on March 1, 1996 will remain doubtful. See
"Restrictive Covenants" and "Description of the Company's Capital Stock."
The Company and representatives of certain of the identified
prospective purchasers of the Dental Division have met from time to time. In
March 1995, in the case of one prospective buyer, the parties began to focus on
price and terms. In April 1995, that party began its due diligence review of the
Dental Division at the Company's premises. At the meeting of the Company's Board
of Directors held April 11, 1995, the Company's Board of Directors voted to
engage legal counsel to prepare draft documentation of the Dental Divestiture
and authorized the Company's management to continue negotiations relating to the
Dental Divestiture. During April and May, negotiations with respect to
preliminary forms of the divestiture agreements began and are continuing on the
date of this Offer to Purchase, but no definitive agreement has been reached.
The Company has advised the party with which it is negotiating that
the Company does not intend to sign a definitive agreement as to the Dental
Divestiture unless and until the Company determines that the Minimum Number of
Shares (250,000) of Preferred Stock have been tendered pursuant to the Offer.
The Company has the right to reduce the Minimum Number of Shares and to waive
that or any other condition of the Offer. See "The Offer-Conditions of the
Offer."
On May 16, 1995, the Board of Directors of the Company met, reviewed
draft documentation for the Offer and approved the terms of the Offer, subject
to the preparation of definitive documentation by counsel to the Company and
receipt of a fairness opinion in form and substance satisfactory to the Company
from an independent financial advisor. Shortly after that meeting, after polling
members of the Board of Directors of the Company, the Company engaged McTeague
Investment Bankers, Inc. (the "Financial Advisor") to consider the Company's
then contemplated offer to purchase the Preferred Stock and to advise the
Company and the Board as to the fairness of the Consideration to the Preferred
Stockholders, from a financial point of view.
On May 30, 1995, the Board of Directors of the Company met, reviewed
the Opinion (as hereinafter defined), and approved the terms of the Offer. A
conformed copy of the Opinion is attached hereto as Annex A.
-------
CONTINUED ABSENCE OF TRADING MARKET
Prior to the initiation of the Offer, there has been no established or
active trading market for the Preferred Stock.
Although the Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Preferred
Stock of the Company is not registered under the 1934 Act since there are fewer
than 300 holders of record of the Preferred Stock. As a result, the shares of
Preferred Stock cannot be traded through The NASDAQ Stock Market (the "Nasdaq"),
any securities exchange, or on the National Association of Securities Dealers'
(the "NASD's") "Electronic Bulletin Board." The Company does not intend to list
the Preferred Stock on any securities exchange or any automated inter-dealer
quotation system, and it is unlikely that an active trading market for the
Preferred Stock will develop.
-7-
<PAGE>
CONCENTRATION OF CONTROL OF PREFERRED STOCK
Following the consummation of the Offer (assuming the Minimum Number
of Shares are tendered and accepted), and depending on which Preferred
Stockholders, if any, tender their shares in the Offer, affiliates of the
Company (including the existing general and limited partners of the Standby
Purchaser and any such affiliates who later become limited partners of the
Standby Purchaser) may control more than fifty percent of the remaining
outstanding Preferred Stock. The Preferred Stockholders are entitled to vote on
certain matters, including the election of a director of the Company, the
creation of superior or equal classes of the Company's capital stock and changes
in the rights of the Preferred Stockholders. Persons controlling a majority or
more of the outstanding Preferred Stock would be able to determine the outcome
of any such vote irrespective of the votes of other Preferred Stockholders. See
"Description of the Company's Capital Stock - Preferred Stock."
RECENT LOSSES
For fiscal year 1995, the Company recorded a net loss of approximately
$388,000. The Company's net losses for fiscal years 1994 and 1993 were
approximately $868,000 and $2,685,000, respectively. See "Recent Developments"
and "Summary Historical Financial Data."
RESTRICTIONS ON PREFERRED STOCK DIVIDENDS AND OTHER PAYMENTS
As a result of the losses incurred in fiscal years 1993, 1994 and 1995
and redemptions or repurchases of Preferred Stock in fiscal years 1992 and 1993
at prices ranging from $9.25 to $13.00 per share, the Company has been precluded
from paying dividends on the Preferred Stock since approximately April 15, 1993,
by the Restrictive Covenants. Due to the Restrictive Covenants, the Company will
be unable to pay future quarterly dividends on the Preferred Stock or its Common
Stock, for the foreseeable future and, after the Offer, will likely be
prohibited from repurchasing or redeeming the Preferred Stock for the
foreseeable future. See "Purposes and Effects of the Offer" and "Restrictive
Covenants." Further, in light of recent operating results, once the Company's
available Consolidated Net Income is eliminated by the repurchase of shares of
Preferred Stock pursuant to the Offer, the Company believes that it is doubtful
that it will be able to generate sufficient Consolidated Net Income to permit
the Company to pay dividends on or to redeem (on a mandatory or voluntary basis)
or repurchase shares of the Preferred Stock outstanding after the completion of
the Offer unless the Company realizes a significant gain from one or more sales
of all or a portion of its assets. See "Restrictive Covenants." Moreover, it is
unlikely that a large number of shares of Preferred Stock will be converted to
Common Stock during the Offer since the Consideration exceeds the market value
of the Common Stock which would be received in exchange for any Preferred Stock
so converted.
FAIRNESS OF THE OFFER
The Company believes that the Consideration to be paid in the Offer is
fair to the Preferred Stockhold ers. In reaching this conclusion, the Board of
Directors of the Company has relied in part upon the Opinion of the Financial
Advisor, dated May 30, 1995, that the Consideration of $12.25 per share is fair
from a financial point of view to the Preferred Stockholders tendering shares of
Preferred Stock into the Offer. The full text of the Opinion is attached as
Annex A, and Preferred Stockholders are urged to read the Opinion in its
- -------
entirety.
The Financial Advisor has not been engaged by, nor has it acted on
behalf of, the Company in connection with the Dental Divestiture. See "Fairness
of the Offer."
CERTAIN EFFECTS OF THE OFFER
Following the consummation of the Offer, except for the Dental
Division, the business and operations of the Company will be continued by the
Company substantially as they are currently being conducted. Except as disclosed
in this Offer to Purchase, the Company has no present plan or proposal that
would result in (i) the
-8-
<PAGE>
acquisition by any person of additional securities of the Company, or the
disposition of securities of the Company, (ii) an extraordinary corporate
transaction, such as a merger, reorganization, liquidation or sale, or transfer
of a material amount of assets, involving the Company or any of its
subsidiaries, (iii) any change in the present Board of Directors of the Company,
or management of the Company, including, but not limited to, a plan or proposal
to change the number or term of the directors or to change any material term of
the employment contract of any executive officer, except, in each case, in
connection with the Company's 1995 Annual Meeting of Stockholders to be held
September 20, 1995, (iv) any material change in the present dividend rates or
policies in respect of its capital stock or indebtedness or capitalization of
the Company, (v) any other material change in the Company's corporate structure
or business or (vi) any changes in the Company's Amended and Restated
Certificate of Incorporation, By-Laws or instruments corresponding thereto or
any other action regarding the acquisition or control of the Company by any
person.
INTERESTS OF CERTAIN PERSONS IN THE OFFER
In order to provide additional liquidity for the purchase of shares of
Preferred Stock tendered pursuant to the Offer which the Company does not
purchase, for any reason, the Company has entered into the Standby Agreement
with the Standby Purchaser whose existing general and limited partners are
affiliated with the Company. Three affiliates of the Company, Oliver R. Grace,
Jr., Peter N. Bennett and John S. Grace, who are Preferred Stockholders, and
James J. Pinto, who is also an affiliate of the Company, are the existing
limited partners of the Standby Purchaser. In addition, Oliver R. Grace, Jr. is
the sole shareholder, sole director, president and secretary of the general
partner of the Standby Purchaser. Oliver R. Grace, Jr. is Chairman of the
Company, and he and the other three named persons are also Directors of the
Company. Additional persons may become limited partners of the Standby Purchaser
following the date of this Offer to Purchase. Such additional limited partners
may include officers of the Company and/or relatives or affiliates of the
present limited partners. The Standby Agreement grants the Standby Purchaser the
right, but not the obligation, to purchase, on the same terms and conditions as
the Offer, all shares of Preferred Stock tendered pursuant to the Offer which
the Company does not purchase for any reason. As a result of their positions as
potential buyers of Preferred Stock through the Standby Purchaser, Messrs.
Grace, Jr., Bennett and Grace have informed the Company that they do not intend
to tender any of their shares of Preferred Stock pursuant to the Offer. Mr.
Pinto does not own any shares of Preferred Stock. The possible purchase of
shares of Preferred Stock by the Standby Purchaser results in potential
conflicts of interest. See "The Standby Agreement."
Mr. Edward K. Conklin, who is also a Preferred Stockholder and a
Director of the Company, but not affiliated with the Standby Purchaser, has
informed the Company that he intends to tender all of the approximately 33,000
shares of Preferred Stock that he owns or controls into the Offer.
The Offer is open to all Preferred Stockholders, including certain
officers, Directors and affiliates of the Company. Any purchase or purchases of
Preferred Stock tendered by any such officers, Directors or affiliates will be
on the same terms and conditions offered to all other Preferred Stockholders.
Finally, should the Dental Divestiture be consummated with a
particular buyer, the Company will be obligated to pay Mr. James J. Pinto, a
limited partner of the Standby Purchaser and a Director of the Company, an
amount which is to be negotiated, but which may exceed $60,000, in respect of
his performance of certain services related to the Dental Divestiture.
THE COMPANY
The Company's business consists primarily of Ney's dental and
electronics businesses. Currently, Ney operates in the dental (including the
Dental Division) and electronics industry segments. The Company's principal
executive office is located at Ney Industrial Park, Bloomfield, Connecticut
06002.
-9-
<PAGE>
The Dental Division develops, manufactures and distributes a range of
materials, equipment and merchandise for distribution and sale to the dental
laboratory health care market. The Dental Division's principal product line is
precious metal casting alloys which are sold to dentists and dental laboratories
for use in the fabrication of crowns, bridges and other restorative forms used
in the restoration and reconstruction of teeth. The Dental Division's product
line consists of over 30 different alloys such as Option, Ultima Lite, Bio Ney
and Ney-Oro B-2 that are manufactured by Ney's Electronics Division according to
specific formulas that include precious metals such as gold, platinum, palladium
and silver. The Dental Division maintains an active metallurgical research and
development effort. The Dental Division also develops, manufactures and sells
equipment, including vacuum porcelain and bench-top burnout furnaces, dental
laboratory handpieces and commercial ultrasonic cleaners for use in dental,
scientific and industrial laboratories and the jewelry manufacturing industry.
The Dental Division sells to approximately 3,500 customers throughout
the United States and foreign countries. Sales in the United States of precious
metal alloys are made through a field sales force and telemarketing staff, while
equipment is sold primarily through dealers. Export sales account for
approximately 45% of total sales. Most export sales are made in Europe through
Neyco Dental A.G. ("Neyco"), a majority owned subsidiary of Ney. The Dental
Division operates in a highly competitive marketplace with a number of
substantial domestic and international competitors. Although some of its
competitors have significantly greater resources than the Dental Division, the
Company believes that the Dental Division competes favorably with its
competitors in terms of quality, delivery, service and price.
The Company's electronics industry segment is comprised of Ney's
electronics division (the "Electronics Division") and Ney Ultrasonics Inc., a
manufacturer of industrial ultrasonic cleaning equipment which is a wholly-owned
subsidiary of Ney (collectively, the "Electronics Segment"). The Electronics
Division is a full-service, precious metal and parts supplier to automotive,
medical, industrial electronics, military and semi-conductor manufacturers. The
fully integrated approach of the Electronics Division includes fabrication and
manufacture of its precious metal alloys, design, engineering and metallurgical
support. The metallurgical capabilities include stamping, wire drawing, rolling
from ingot to foil, precision turning, injection and insert molding, and
refining. The Electronics Division specializes in the engineering and
manufacture of precious metal alloy contacts and contact assemblies aimed at low
amperage applications. In developing a finished contact or assembly, the
Electronics Division's technical staff works closely with its customer,
typically on an engineer-to-engineer level, in order to design a product that
meets all of the metallurgical, electronic, thermodynamic and other performance
specifications required by the customer's applications. The Electronics Division
designs and builds the necessary molds and tools as well as designs and
manufactures the end product.
The Electronics Division business has limited direct competition with
regard to the manufacture of low amperage precious metal alloy contacts and
contact assemblies due to the inherent risks which accompany precious metals
(high start-up and inventory costs, theft, etc.). While some smaller facilities
offer similar products, Ney believes these operations lack the vertical
integration to compete across the entire spectrum of products. The Electronics
Division also faces indirect competition from companies with significantly more
resources available, which are involved in higher volume production of standard
precious metal alloys.
The Electronics Segment also manufactures ultrasonic cleaning
equipment through Ney Ultrasonics. Ney Ultrasonics is the exclusive licensee,
pursuant to a license agreement which expires in 2005, of the patented
ultrasonic technology used in its products, EnviroSONIK and SweepSONIK2, which
the Company believes are at a competitive advantage to other ultrasonic
equipment.
The Electronics Segment sells to more than 800 customers, with
approximately 88% of its sales being made to customers in the United States. The
Electronics Segment's sales are made domestically through both field sales and
manufacturer's representatives located in key geographic markets.
Internationally, the Electronics Segment sells through independent distributors
and original equipment manufacturers. The Electronics
-10-
<PAGE>
Segment's ultrasonic business competes with a number of national and regional
companies on the basis of cleaning performance, price and delivery.
THE DENTAL DIVESTITURE
The Company is negotiating to sell the Company's Ney Dental Division
(the "Dental Divestiture"). The Company is seeking an aggregate purchase price
of approximately $18 to $20 million in cash or a combination of cash and
securities. There is no assurance that the Company will be able to consummate
the Dental Divestiture with the party with which it is now negotiating or with
any other party. If the Company does not consummate the Dental Divestiture or
realize sufficient Consolidated Net Income from other sources to satisfy the
applicable Restrictive Covenants, the Company will not be able to accept and pay
for shares of Preferred Stock tendered pursuant to the Offer. However, if for
any reason the Company does not purchase any or all of the shares of Preferred
Stock tendered pursuant to the Offer, the Standby Purchaser has the right, but
not the obligation, to purchase any such shares not purchased by the Company on
the same terms and conditions as the Offer. See "The Standby Agreement."
THE OFFER
TERMS OF THE OFFER
The Company hereby offers, upon the terms and subject to the
conditions set forth herein and in the accompanying applicable Letter of
Transmittal, to purchase for cash any and all of the outstanding shares of the
Preferred Stock for the Consideration of $12.25 per share net to the seller.
Although the amount of accrued but unpaid dividends on the Preferred Stock since
April 15, 1993 (aggregating approximately $1.50 per share), has been taken into
account in determining the Consideration offered in the Offer, no cash payment
will be made with respect to accrued but unpaid dividends on shares of Preferred
Stock tendered and accepted in the Offer. Preferred Stockholders who do not
participate in the Offer will not receive future scheduled quarterly dividends
unless and until such dividends are declared by the Company's Board of
Directors, subject to restrictions on the payment of dividends on the Preferred
Stock contained in agreements relating to the Company's outstanding
indebtedness. Under such agreements, the Company will continue to be prohibited
from paying scheduled dividends on the Preferred Stock for the foreseeable
future and will likely be prohibited from repurchasing or redeeming the
Preferred Stock for the foreseeable future. See "Fairness of the Offer,"
"Dividends," "Purposes and Effects of the Offer" and "Restrictive Covenants."
Upon the terms and subject to the conditions of the Offer, the Company
will accept any and all shares of Preferred Stock properly tendered in the Offer
prior to the Expiration Date. However the consummation of the Offer for the
Preferred Stock is subject to there being properly tendered and not withdrawn
prior to the Expiration Date the Minimum Number of Shares and to certain other
customary terms and conditions set forth herein and in the accompanying Letter
of Transmittal. The Company may reduce the Minimum Number of Shares, and the
Company has the right to waive that or any other condition of the Offer. See
"The Offer -Conditions of the Offer" and "Restrictive Covenants."
The Offer is open to all Preferred Stockholders, including certain
officers, Directors and affiliates of the Company. Any purchase or purchases of
Preferred Stock tendered by any such officers, Directors or affiliates will be
on the same terms and conditions offered to all other Preferred Stockholders.
Edward K. Conklin, a Director of the Company, has informed the Company that he
intends to tender all of the approximately 33,000 shares of Preferred Stock that
he owns or controls into the Offer. Three of the four existing limited partners
of the Standby Purchaser, Messrs. Grace, Jr., Bennett and Grace, each a Director
of the Company and a Preferred Stockholder, have informed the Company that they
do not intend to tender any of
-11-
<PAGE>
their shares of Preferred Stock in the Offer. Mr. Pinto, the fourth existing
limited partner of the Standby Purchaser, does not own any Preferred Stock. See
"Special Factors-Interests of Certain Persons in the Offer" and "The Standby
Agreement."
As of May 8, 1995, 589,036 shares of the Preferred Stock were
outstanding. This Offer to Purchase, together with the applicable Letter of
Transmittal, is first being sent on or about June 5, 1995, to all holders of
record of the Preferred Stock as of May 8, 1995.
Although the Company currently has no plan or intention to do so,
subject to applicable laws and regulations and the Restrictive Covenants, it
reserves the right in its sole discretion to purchase, redeem or make offers for
any shares of the Preferred Stock that remain outstanding subsequent to the
consummation of the Offer, through privately negotiated transactions or another
offer or otherwise, on such terms and at such prices as the Company may
determine from time to time. The terms of all or any of such future transactions
could differ from those of the Offer, except that the Company will not make any
such purchases until the expiration of ten business days after the termination
of the Offer.
Tendering Preferred Stockholders will not be required to pay brokerage
commissions or fees or, subject to the instructions in the applicable Letter of
Transmittal, transfer taxes with respect to the purchase of the Preferred Stock
pursuant to the Offer. The Company will pay all charges and expenses, other than
certain applicable taxes, in connection with the Offer. See "The Offer-Payment
of Expenses."
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Offer will expire at 12:00 Midnight, eastern time, on July 7,
1995, subject to extension by the Company by notice to the Exchange Agent as
herein provided (the "Expiration Date"). The Company reserves the right to
extend the Offer at its discretion, in which event the term "Expiration Date"
with regard to the extended Offer shall mean the time and date on which the
Offer as so extended shall expire. The Company shall notify the Exchange Agent
of any extension by oral or written notice and shall make a public announcement
thereof, prior to 9:00 A.M., eastern time, on the next business day after the
previously scheduled Expiration Date.
The Company reserves the right to (i) delay accepting any shares of
Preferred Stock, to extend or to terminate the Offer and not accept any shares
of Preferred Stock if any of the events set forth below under the caption
"Conditions of the Offer" shall have occurred and shall not have been waived by
the Company, by giving oral or written notice of such delay or termination to
the Exchange Agent, and (ii) amend the terms of the Offer. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by public announcement thereof. If the Offer is amended in any
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the Preferred Stockholders of such amendment, and the Company will extend
the Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to Preferred
Stockholders, if the Offer would otherwise expire during such five to ten
business day period. The rights reserved by the Company in this paragraph are in
addition to the Company's rights set forth below under "Conditions of the
Offer."
PROCEDURES FOR TENDERING
The acceptance by a Preferred Stockholder of the Offer pursuant to one
of the procedures set forth below will constitute an agreement between such
Preferred Stockholder and the Company in accordance with the terms and subject
to the conditions set forth herein and in the applicable Letter of Transmittal.
-12-
<PAGE>
To be tendered effectively, certificates for Preferred Stock, together
with the properly completed applicable Letter of Transmittal (or facsimile
thereof), executed by the Preferred Stockholder of record, and any other
documents required by the applicable Letter of Transmittal, must be received by
the Exchange Agent at the address set forth on the last page hereof prior to the
Expiration Date, except as otherwise provided below under "Guaranteed Delivery
Procedure." LETTERS OF TRANSMITTAL AND CERTIFICATES FOR PREFERRED STOCK SHOULD
BE SENT TO THE EXCHANGE AGENT AND NOT TO THE COMPANY.
---
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the shares of the Preferred Stock
tendered or withdrawn pursuant thereto are tendered (i) by a Preferred
Stockholder of record who has not completed the box entitled "Special Issuance
and Delivery Instructions" on the Letter of Transmittal or (ii) for the account
of a firm that is a member of a registered national securities exchange or a
member of the NASD or by a commercial bank, credit union, savings association or
trust company having an office in the United States (each, an "Eligible
Institution"). If signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by an Eligible Institution.
The method of delivery of certificates of Preferred Stock and other
documents to the Exchange Agent is at the election and risk of the Preferred
Stockholder. If such delivery is by mail, it is suggested that the mailing be
made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to the Expiration Date.
As an alternative to delivery of actual certificates representing
Preferred Stock, Preferred Stockholders can tender their Preferred Stock by
book-entry transfer to accounts to be established by the Exchange Agent at The
Depository Trust Company ("DTC") for the purpose of the Offer promptly after the
date of this Offer to Purchase. Any financial institution that is a participant
in DTC's system may make book-entry transfer of its shares of Preferred Stock by
causing DTC to transfer such shares of Preferred Stock into the Exchange Agent's
account in accordance with DTC's procedure for such transfer. Although delivery
of the Preferred Stock may be effected through book-entry transfer to the
Exchange Agent's account at DTC, the applicable Letter of Transmittal (or
facsimile thereof), with all required signature guarantees and any other
required documents, must in any case be delivered to the Exchange Agent at one
of its addresses set forth on the last page hereof prior to the Expiration Date,
except as provided below under "Guaranteed Delivery Procedure." DELIVERY OF
DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
If the applicable Letter of Transmittal is signed by a person other
than a holder of record of any certificate(s) listed therein, such
certificate(s) must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on the certificate(s).
If the applicable Letter of Transmittal or Notice of Guaranteed
Delivery 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, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered shares of the Preferred Stock
will be resolved by the Company, whose determination will be final and binding.
The Company reserves the absolute right to reject any or all tenders that are
not in proper form or the acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular shares of Preferred
Stock. The Company's interpretation of the terms and conditions of the Offer
(including the instructions in each Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders must be
cured within such time as the Company shall determine. Neither the Company nor
the Exchange Agent shall be
-13-
<PAGE>
under any duty to give notification of defects in such tenders or shall incur
liabilities for failure to give such notification. Tenders of shares of the
Preferred Stock will not be deemed to have been made until such irregularities
have been cured or waived. Any shares of the Preferred Stock received by the
Exchange Agent that are not properly tendered and as to which the irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering Preferred Stockholder, unless otherwise provided in the applicable
Letter of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURE
If a Preferred Stockholder desires to tender his or her shares of
Preferred Stock and the certificate(s) representing such shares of Preferred
Stock are not immediately available, or time will not permit such Preferred
Stockholder's certificate(s) or any other required documents to reach the
Exchange Agent before the applicable Expiration Date, a tender may be effected
if:
(i) the tender is made by or through an Eligible Institution;
and
(ii) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery by telegram, telex, facsimile
transmission, mail or hand delivery setting forth the name and address
of the Preferred Stock holder and the number of shares of Preferred
Stock tendered, stating that the tender is being made thereby and
guaranteeing that, within three over-the-counter market trading days
after the Expiration Date, the certificate(s) representing such shares
of Preferred Stock (or book-entry transfer of such shares), together
with the applicable Letter of Transmittal that has been properly
completed and duly executed, and all other documents required by the
applicable Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(iii) the certificate(s) for all tendered shares of Preferred
Stock, or a confirmation of a book-entry transfer of such shares of
Preferred Stock into the Exchange Agent's account at DTC as described
above, as well as the applicable Letter of Transmittal that has been
properly completed and duly executed, and all other documents required
by the applicable Letter of Transmittal, are received by the Exchange
Agent within three over-the-counter market trading days after the
Expiration Date.
CONDITIONS OF THE OFFER
The Company will not be required to accept any shares of Preferred
Stock tendered, and may terminate or amend the Offer as provided herein before
the acceptance of shares of Preferred Stock, if any of the following conditions
exist:
(i) there shall not have been properly tendered or withdrawn
prior to the Expiration Date a minimum of 250,000 shares of the
Preferred Stock;
(ii) the Company does not consummate the Dental Divestiture or
does not have as of the end of the fiscal quarter during which the
Dental Divestiture is consummated adequate aggregate Consolidated Net
Income to purchase the tendered shares of Preferred Stock in
accordance with the Offer in compliance with the Restrictive Covenants
(see "Restrictive Covenants"); or
(iii) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the
Offer that, in the judgment of the management of the Company may have
a material adverse effect on the contemplated benefits of the Offer to
the Company; or
-14-
<PAGE>
(iv) there shall have occurred (A) any general suspension of, or
limitation on prices for, trading in securities listed on the
over-the-counter market; (B) a declaration of a banking moratorium
by United States, New York or Connecticut authorities; or (C) a
commencement of a war, armed hostilities or other international or
national emergency directly or indirectly involving the United
States.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
such conditions or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. Any determination by the Company
concerning the events described above will be final and binding upon all
parties.
ACCEPTANCE OF SHARES OF PREFERRED STOCK; DELIVERY OF THE CONSIDERATION
Upon the terms and subject to the conditions of the Offer (see "The
Offer-Conditions of the Offer"), the Company will accept any and all shares of
the Preferred Stock properly tendered pursuant to the Offer and not properly
withdrawn. If tendered shares remain to be accepted after the Company has
accepted all of the shares of Preferred Stock tendered into the Offer that the
Company may purchase under the Restrictive Covenants and after the Standby
Purchaser has exercised, or decided not to exercise, its right to purchase
shares of tendered Preferred Stock which have not been purchased by the Company,
the Company and the Standby Purchaser (if applicable) will take up and pay for
the tendered shares as nearly as may be pro rata, disregarding fractions,
according to the number of securities tendered by each Preferred Stockholder
prior to the Expiration Date. However, each of the Company and the Standby
Purchaser may, in its discretion:
(1) Accept all shares of Preferred Stock tendered by persons who own,
beneficially or of record, an aggregate of not more than 99
shares of Preferred Stock and who tender all of their shares
before prorating the securities tendered by other persons; and
(2) Accept by lot Preferred Stock tendered by persons who tender all
Preferred Stock they hold and who, when tendering their Preferred
Stock, elect to have either all or none, or at least a minimum
amount or none, of their shares accepted, if the Company first
accepts all Preferred Stock tendered by Preferred Stockholders
who do not make such an election.
The Company will cause the Exchange Agent to deliver the Consideration
promptly following the 46th day after the end of the fiscal quarter of the
Company during which the Dental Divestiture is consummated (the "Payment Date").
For purposes of the Offer, the Company and the Standby Purchaser (if
applicable) shall be deemed to have accepted the validly tendered shares of the
Preferred Stock when, as and if the Company or the Standby Purchaser (as
applicable) has given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the Company and the Standby Purchaser (as
applicable) and the tendering Preferred Stockholders, respectively, for, among
other things specified in the Letter of Transmittal, the purposes of receiving
the Consideration from the Company on or before the Payment Date and for paying
the Consideration to tendering Preferred Stockholders on the Payment Date.
If any tendered shares of the Preferred Stock are not accepted because
of an invalid tender, less than 250,000 of the outstanding shares of the
Preferred Stock have been tendered as of the Expiration Date or upon the
occurrence of certain other events set forth herein or otherwise, certificates
for any such unaccepted shares of the Preferred Stock will be returned, without
expense, to the tendering holder thereof (or, in the case of shares of Preferred
Stock tendered by book-entry transfer, to an account maintained at DTC), as
promptly as practicable after the expiration or termination of the Offer.
-15-
<PAGE>
WITHDRAWAL RIGHTS
Any Preferred Stockholder of record who has tendered shares of
Preferred Stock may withdraw that tender prior to the Expiration Date, and,
unless previously accepted by the Company, after 5:00 P.M., eastern time, on or
after August 1, 1995, by delivery of written notice of withdrawal to the
Exchange Agent. There will be no right of withdrawal between the Expiration Date
and the Payment Date.
For a withdrawal to be effective, the Exchange Agent must timely
receive a written, telegraphic or facsimile transmission of a notice of
withdrawal at the address set forth on the last page hereof, such notice must
have a guaranteed signature included thereon (unless not required by the terms
set forth above under "Procedures for Tendering"), and such notice must specify
the name of the person having tendered the shares of Preferred Stock to be
withdrawn and the aggregate number of shares of Preferred Stock to be withdrawn.
If certificates have been delivered or otherwise identified to the Exchange
Agent, the name of the registered holder and the serial numbers of the
particular certificate(s) evidencing the shares of Preferred Stock withdrawn
must also be so furnished to the Exchange Agent as aforesaid prior to the
physical release of the certificate(s) evidencing the withdrawn shares of
Preferred Stock. If shares of the Preferred Stock have been tendered pursuant to
the procedures for book-entry transfer as set forth herein, any notice of
withdrawal must also specify the name and number of the account at DTC to be
credited with the withdrawn shares of the Preferred Stock. Withdrawals of
tenders of shares of the Preferred Stock may not be rescinded, and any shares of
the Preferred Stock withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer; provided, however, that withdrawn shares of the Preferred
Stock may be retendered by again following one of the procedures described
herein so long as the retender is made prior to the Expiration Date.
All questions as to the validity (including time of receipt) of
notices of withdrawal will be determined by the Company, whose determination
will be final and binding. Neither the Company, the Exchange Agent nor 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.
EXCHANGE AGENT
Registrar and Transfer Company has been appointed as Exchange Agent
for the Offer.
Requests for information concerning procedures for tendering Preferred
Stock or for additional copies of this Offer to Purchase or the applicable
Letter of Transmittal should be directed to the Company or the Exchange Agent.
For further information concerning the Company or the terms of the Offer, please
contact Elmer J. Dahl, Corporate Secretary, at (203) 242-0761.
FINANCIAL ADVISOR
McTeague Investment Bankers, Inc. has acted as Financial Advisor to
the Company in connection with the Offer and has given its opinion to the
Company as to the fairness, from a financial point of view, of the Consideration
to be paid in the Offer. The Financial Advisor has not been engaged by, nor has
it acted on behalf of, the Company in connection with the Dental Divestiture.
The Company has agreed to pay the Financial Advisor fees totalling approximately
$12,500 for its services rendered in connection with the Offer. The Company also
has agreed to indemnify the Financial Advisor against certain liabilities and
expenses, including liabilities under Federal and state securities laws.
The Company has retained Volpe, Welty & Company ("Volpe"), an
investment banking firm, to advise it with respect to the Dental Divestiture.
Volpe has not been retained to render an opinion as to the fairness of the Offer
or to solicit tenders in connection with the Offer.
-16-
<PAGE>
PAYMENT OF EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of or making recommendations with respect to
the Offer. The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable out-of-
pocket expenses incurred in connection with the provision of such services. The
Company will also reimburse brokerage houses and other custodians, nominees and
fiduciaries for the reasonable out-of-pocket expenses they incur in forwarding
copies of this Offer to Purchase and related documents to the beneficial owners
of Preferred Stock and in handling or forwarding tenders for their customers.
The cash expenses to be incurred in connection with the Offer,
excluding the purchase price for tendered shares of Preferred Stock and
including the fees and expenses of the Company, the Exchange Agent and the
Financial Advisor, and printing, accounting and legal fees, will be paid by the
Company and are estimated at $125,000 in the aggregate.
The Company will pay all transfer taxes, if any, applicable to the
transfer and sale of Preferred Stock to it or its order pursuant to the Offer.
If, however, substitute certificates for shares of the Preferred Stock not
accepted are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Preferred Stock tendered
hereunder, or if tendered certificates are registered in the name of any person
other than the person signing the applicable Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the transfer and sale of any
Preferred Stock to the Company or its order pursuant to the Offer, the amount of
any such transfer taxes (whether imposed on the holder of record or any other
person) will be payable by the tendering Preferred Stockholder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering Preferred Stockholder.
FAIRNESS OF THE OFFER
The Company believes the Consideration of $12.25 per share of
Preferred Stock to be paid in the Offer is fair to the Preferred Stockholders.
In reaching this conclusion, the Company relied in part upon the written opinion
of the Financial Advisor to the Company, dated May 30, 1995, that the
Consideration of $12.25 per share of Preferred Stock is fair from a financial
point of view to the Preferred Stockholders tendering shares of Preferred Stock
in the Offer (the "Opinion"). The full text of the Opinion is attached as Annex
-----
A, and Preferred Stockholders are urged to read the opinion in its entirety.
- -
As part of its investment banking business, the Financial Advisor is
continually engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, tender offers, private
placements and valuations for corporate and other purposes.
The Financial Advisor delivered the Opinion to the Company (and its
Board of Directors). The Financial Advisor did not make or seek to obtain
appraisals of the Company's assets in connection with its analyses of the
Company or the Preferred Stock. The Financial Advisor did not solicit other
parties who might be interested in acquiring the Preferred Stock. No other
limitations were imposed on the Financial Advisor by the Company with respect to
the investigation made or the procedures followed by the Financial Advisor in
rendering the Opinion.
In preparing the Opinion, the Financial Advisor relied upon the
Company with respect to the accuracy and completeness of the financial and other
information provided by the Company. The Financial Advisor did not independently
verify this information, including the financial information.
-17-
<PAGE>
In connection with the rendering of the Opinion, the Financial Advisor
reviewed, among other things, the Company's Annual Reports to Shareholders and
Annual Reports on Form 10-K and related audited financial information for each
of the three fiscal years 1995, 1994 and 1993, the Company's Quarterly Reports
on Form 10-Q and related unaudited financial information for the first three
fiscal quarters of fiscal year 1995, certain information, including financial
forecasts, relating to the Company's businesses, earnings, cash flow, assets and
prospects, furnished to the Financial Advisor by the Company, drafts of this
Offer to Purchase, the historical market prices and trading activity for the
Preferred Stock and Common Stock, the Indenture (as hereinafter defined), and
the other credit agreements referenced herein under the headings "Restrictive
Covenants" and "Description of the Company's Capital Stock-Preferred Stock."
The Financial Advisor performed such financial studies and analyses of the
Company as it deemed necessary. The Financial Advisor also conducted
discussions with members of senior management of the Company with respect to the
Company's business, assets, plans and prospects.
The Company believes that the Financial Advisor's analysis must be
considered as a whole and that selecting portions of its analyses or the factors
considered by it, without considering the analysis taken as a whole and all such
factors, could create a misleading view of the processes underlying the Opinion.
The preparation of a fairness opinion is a complex process not necessarily
susceptible to partial analyses or summary description. In preparing its
analyses, the Financial Advisor made numerous assumptions with respect to
governing instruments pertaining to the Preferred Stock, the Convertible
Debentures (as hereinafter defined) and other securities of the Company as well
as industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Any estimates
contained in such analyses are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth therein.
Estimates of value of companies generally and of the Preferred Stock in
particular do not purport to be appraisals or necessarily reflect the prices at
which companies generally, or the Preferred Stock in particular, may actually be
sold. Because such estimates are inherently subject to uncertainty, neither the
Company, the Financial Advisor nor any other person assumes responsibility for
their accuracy.
The Financial Advisor has previously rendered investment banking and
financial advisory services to the Company and as such has become familiar with
the business and financial affairs of the Company.
RECENT DEVELOPMENTS
See "Summary Historical Financial Data."
As discussed below under "Purposes and Effects of the Offer," as a
result of the losses incurred in fiscal years 1993, 1994 and 1995 and
redemptions or repurchases of the Preferred Stock in fiscal years 1992 and 1993
at prices ranging from $9.25 to $13.00 per share, the Restrictive Covenants have
prevented the Company from paying dividends on the Preferred Stock since April
15, 1993. See "Restrictive Covenants."
SOURCES OF FUNDS
Assuming that the Company purchases a minimum of 250,000 shares of
Preferred Stock pursuant to the Offer, the total amount required by the Company
to purchase such shares and pay related fees and expenses will be approximately
$3.2 million. Assuming that the Company consummates the Dental Divestiture in
the $18 to $20 million range as anticipated and operates according to its fiscal
year 1996 budget, the Company anticipates that it will be able to fund the
purchase of such shares pursuant to the Offer and the payment of related fees
and expenses from the cash to be realized from the Dental Divestiture since,
based on those assumptions, the Company believes the Dental Divestiture will
generate sufficient Consolidated Net Income for the relevant period in
accordance with the limitations under the Restrictive Covenants. Otherwise the
Company will be
-18-
<PAGE>
prohibited from purchasing any of such shares of the Preferred Stock. If the
Dental Divestiture is consummated but the Consolidated Net Income for the
relevant period is not sufficient to purchase all of the shares of Preferred
Stock tendered to and acceptable by the Company in the Offer, the Standby
Purchaser has the right, but not the obligation, to purchase the remaining
shares of tendered Preferred Stock. The Standby Purchaser has informed the
Company that it may fund any purchase of such shares pursuant to the Offer and
the Standby Agreement from a combination of bank and other borrowings and/or
cash capital contributions from its partners and that such capital contributions
may be funded by a combination of bank or other borrowings and/or funds
otherwise available to the partners. The Standby Purchaser has also informed
the Company that neither it nor any of its partners presently has any agreement
with any person or entity to provide the funds required for any such purchase.
The Standby Purchaser has represented to the Company that neither the Standby
Purchaser nor any of its partners presently intends to pledge or otherwise
encumber any shares of Preferred Stock as security for any bank loan or other
financing arrangement that it or he enters into connection with any transaction
contemplated by the Standby Agreement. See "The Standby Agreement."
PURPOSES AND EFFECTS OF THE OFFER
The Company believes that the Offer provides tendering Preferred
Stockholders (who will not include the four existing limited partners of the
Standby Purchaser who presently hold in the aggregate approximately 160,000
shares of Preferred Stock) with a fair allocation of the amounts to be realized
from the anticipated Dental Divestiture since as a result of the Dental
Divestiture the Company will have sufficient Consolidated Net Income to permit
it to redeem or repurchase shares of or to pay dividends on the Preferred Stock
while remaining in compliance with the Restrictive Covenants. Under the
Restrictive Covenants, the Company must have sufficient Consolidated Net Income
determined on a cumulative basis, net of losses, dividends and prior redemptions
or repurchases of stock, in order to redeem or repurchase shares of or to pay
dividends on the Preferred Stock. At February 28, 1995, the Company needed to
earn approximately $2,453,000 before it could redeem or repurchase shares of or
pay dividends on the Preferred Stock. In addition, the Offer gives Preferred
Stockholders the opportunity to sell shares of Preferred Stock at a premium
above the current estimated market value and without the usual transaction
costs, rather than the less certain means of liquidating their investment in the
Preferred Stock through possible mandatory redemption or conversion to Common
Stock in the future.
Pursuant to the Company's Amended and Restated Certificate of
Incorporation and the Terms of the Preferred Stock, holders of shares of the
Preferred Stock are entitled to receive quarterly dividends in an amount
determined based on the operating income of Ney (as defined), but not less than
$.1875 per share. In addition, beginning on the first business day in March
1996, and on the first business day following each anniversary thereafter, the
Preferred Stock is subject to mandatory redemption by the Company. On each such
day the Company must call for redemption 160,000 shares of the Preferred Stock
by paying therefor in cash $18.75 per share plus accrued and unpaid dividends to
the date of payment. See "Description of the Company's Capital Stock--Preferred
Stock."
The Indenture contains covenants restricting payment of dividends on
or repurchases or redemptions of the Company's capital stock (the "Restrictive
Covenants"). As the result of a series of prior redemptions or repurchases in
fiscal years 1992 and 1993 at prices ranging from $9.25 to $13.00 per share and
the losses incurred in fiscal years 1993, 1994 and 1995 (see "Special Factors"
and "Recent Developments"), the Company is prohibited by the Restrictive
Covenants from making such payments, repurchases or redemptions. As a result,
for example, the Company has omitted the scheduled quarterly dividend on the
Preferred Stock for the past eight quarters. In future periods, the Company will
only be permitted to pay dividends on or redeem the Preferred Stock under the
Indenture to the extent by which cumulative Consolidated Net Income (as defined)
earned after fiscal year 1995 exceeds approximately $2,453,000. See "Restrictive
Covenants."
-19-
<PAGE>
In light of recent operating results, the Company believes that it is
unlikely that it will be able to generate sufficient earnings from continuing
operations (after giving effect to the Dental Divestiture) to fund the mandatory
redemption requirements for the Preferred Stock. Aside from the income generated
by the Dental Divestiture, which is an extraordinary, one-time opportunity, the
Company does not believe that it will be able to generate sufficient
Consolidated Net Income to permit the Company to pay dividends on or to redeem
(on a mandatory or voluntary basis) or repurchase shares of Preferred Stock
remaining outstanding after the completion of the Offer unless the Company
realizes a significant gain from one or more sales of all or a portion of its
assets. Moreover, it is unlikely that a large number of shares of Preferred
Stock will be converted to Common Stock during the Offer since the Consideration
exceeds the market value of the Common Stock which would be received in exchange
for any Preferred Stock so converted. The Consideration offered in the Offer is
$12.25 cash per share of the Preferred Stock. As a result, the Offer affords
Preferred Stockholders the opportunity to sell shares of Preferred Stock at a
premium above the current estimated market value and without the usual
transaction costs, rather than awaiting the less certain means of liquidating
their investment in the Preferred Stock through possible mandatory redemption or
conversion to Common Stock in the future. See "Special Factors" and "Price
Ranges of the Common Stock and the Preferred Stock."
Assuming that the minimum of 250,000 of the shares of the Preferred
Stock outstanding as of February 28, 1995, are tendered and accepted pursuant to
the terms of the Offer, the Company's annual Preferred Stock dividend
requirement will decrease by approximately $187,500 per year based upon the
minimum amount payable of $.1875 per quarter). The Company's annual interest
requirements will not be affected. Assuming that 250,000 of the outstanding
shares of the Preferred Stock are tendered and accepted pursuant to the Offer
and the Company realizes $18 million from the Dental Divestiture, the book value
per share of the Company's outstanding Common Stock would increase from $5.13 as
of February 28, 1995, to $8.80 on a pro forma basis. See "Pro Forma Data" for
the anticipated effects of the Offer on the Company's capital structure and for
certain pro forma effects of the Dental Divestiture.
The Company's purchase of the Preferred Stock pursuant to the Offer
will reduce the number of outstanding shares of Preferred Stock and the number
of Preferred Stockholders, which will reduce the liquidity of the Preferred
Stock. See "Special Factors-Continued Absence of Trading Market" and "-
Concentration of Control of Preferred Stock." Additionally, the Standby
Purchaser may acquire any or all of the tendered shares of Preferred Stock
which, for any reason, the Company does not purchase. Any such acquisition by
the Standby Purchaser will further reduce the liquidity of the Preferred Stock
and may give affiliates of the Company the ability to determine the outcome of
any class vote by the Preferred Stockholders following the Offer. See "Special
Factors-Continued Absence of Trading Market" and "-Concentration of Control of
Preferred Stock" and "The Standby Agreement."
The principal benefit of the Offer to Preferred Stockholders is the
opportunity to receive the cash Consideration for shares of Preferred Stock
tendered at a premium above the current estimated market value without paying
brokerage fees or commissions rather than the less certain means of liquidating
their investment in the Preferred Stock through possible mandatory redemption or
conversion to Common Stock in the future. Preferred Stockholders may, however,
incur reinvestment costs and taxable gains upon sale of their Preferred Stock.
See "Federal Income Tax Considerations." Preferred Stockholders also lack
control with respect to timing of the sale and would not receive any future
dividends and would forfeit their mandatory redemption rights.
THE STANDBY AGREEMENT
Andersen Capital L.P., a Delaware limited partnership affiliated with
the Company (the "Standby Purchaser"), has entered into a standby agreement with
the Company (the "Standby Agreement") whereby the Company has granted the
Standby Purchaser the right to purchase any and all shares of Preferred Stock
properly tendered in the Offer and not purchased by the Company, on the same
terms and conditions as are set forth in
-20-
<PAGE>
this Offer to Purchase and in the accompanying applicable Letter of Transmittal.
The Standby Purchaser has no obligation to purchase any of such shares. The
Standby Purchaser will not be paid any compensation or other fees in connection
with its Standby Agreement. However, the Company will reimburse the Standby
Purchaser for the Standby Purchaser's reasonable out-of-pocket expenses,
including attorneys' fees, incurred in connection with the Standby Agreement and
the Offer and will indemnify the Standby Purchaser against certain losses, which
do not include any loss due to a decline in the value of the Preferred Stock
purchased by the Standby Purchaser.
The sole general partner of the Standby Purchaser is ACLP, Inc., a
Delaware corporation, the sole stockholder and director and president and
secretary of which is Oliver R. Grace, Jr., who is Chairman and a Director of
the Company. The existing limited partners of the Standby Purchaser are Oliver
R. Grace, Jr., Peter N. Bennett, John S. Grace and James J. Pinto, who are also
Directors of the Company. Oliver R. Grace, Jr. and John S. Grace are brothers.
Additional persons may become limited partners of the Standby Purchaser
following the date of this Offer to Purchase. Such additional limited partners
may include officers of the Company and/or relatives or affiliates of one or
more of Messrs. Grace, Jr., Grace, Bennett and/or Pinto. Oliver R. Grace, Jr.
expects to fund his equity interest in ACLP, Inc. from available cash and not
from any bank borrowings or other financing arrangements. The Standby Purchaser
has informed the Company that it may fund any purchase of such shares pursuant
to the Offer and the Standby Agreement from a combination of bank and other
borrowings and/or cash capital contributions from its partners and that such
capital contributions may be funded by a combination of bank or other borrowings
and/or funds otherwise available to the partners. The Standby Purchaser has also
informed the Company that neither it nor any of its partners presently has any
agreement with any person or entity to provide the funds required for any such
purchase. The Standby Purchaser has represented to the Company that neither the
Standby Purchaser nor any of its partners presently intends its pledge or
otherwise encumber any shares of Preferred Stock as security for any bank loan
or other financing arrangement that it or he enters into in connection with any
transaction contemplated by the Standby Agreement. Messrs. Grace, Jr., Bennett
and Grace, who currently own beneficially approximately 160,000 shares of
Preferred Stock in the aggregate, have informed the Company that they do not
intend to tender any of their shares of Preferred Stock pursuant to the Offer.
Mr. Pinto does not presently own any shares of Preferred Stock. See "Special
Factors."
-21-
<PAGE>
SUMMARY COMPARISON OF TERMS OF THE
COMMON STOCK AND THE PREFERRED STOCK
The following table summarizes the existing rights and preferences of
the Company's Common Stock and the Preferred Stock. Each capitalized term
utilized in this subsection and not otherwise defined in this Offer to Purchase
shall have the meaning ascribed to it in the Company's Amended and Restated
Certificate of Incorporation or the Terms of the Preferred Stock, as applicable.
See "Description of the Company's Capital Stock."
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------ ---------------
<S> <C> <C>
Shares Outstanding as of
May 8, 1995............. 1,934,205 589,036
Liquidation Preference.... None. $18.75 per share, plus accrued
and unpaid dividends.
Dividend Rate............. The Company paid a dividend of Quarterly dividend payments in
$.05 per share of Common Stock an amount equal to (i) $0.1875
for fiscal years 1992 and 1993. The per share plus (ii) any positive
Company is unable to pay dividends amount per share equal to the
on the Common Stock as a conse quotient obtained by dividing (X)
quence of restrictions in the Inden an amount equal to (1) 50% of
ture. the Ney Operating Income minus
(2) $150,000, by (Y) 800,000;
subject to a maximum total quar
terly rate per share of $0.4375.
The Company has omitted the
last eight scheduled quarterly
dividends. The Company is
unable to pay dividends on the
Preferred Stock as a consequence
of restrictions in the Indenture.
Dividend Payment Dates.... As determined by the Board of Not later than 45 days after the
Directors. end of each fiscal quarter ending
February 28, May 31, August 31
and November 30, respectively.
Optional Redemption....... None. At the option of the Company, in
whole or in part, at a price of
$18.25 per share through Febru
ary 28, 1996, and $18.75 per
share thereafter, in each case
plus accrued and unpaid divi
dends to the date fixed for re
demption.
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------ ---------------
<S> <C> <C>
Mandatory Redemption...... None. Beginning March 1, 1996, and
on each succeeding anniversary
thereof, the Company is required
to redeem 160,000 shares (to the
extent that the Company has
funds legally available therefor
and subject to the restrictions
contained in the Indenture) at a
price of $18.75 per share plus
accrued and unpaid dividends up
to the date of payment.
Voting Rights............. One vote per share on all matters. Limited voting rights.(A)
</TABLE>
- --------------------
(A) If dividends are in arrears in an amount equal to six quarterly dividends,
Preferred Stockholders (voting as a class) are entitled to vote for the
election of one additional director, with each share entitled to one vote,
until all past dividends accumulated shall have been paid in full. See
"Description of the Company's Capital Stock--Preferred Stock" and "--
Preferred Stock-Voting."
-23-
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth, in summary form, certain consolidated
historical financial data for the Company and its subsidiaries. The historical
financial information at and for fiscal years 1995, 1994 and 1993 has been
summarized from the Company's Annual Report on Form 10-K for fiscal year 1995.
The following summary historical financial information should be read in
conjunction with, and is qualified in its entirety by reference to, such audited
consolidated financial statements and the related notes thereto. See "Available
Information."
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28,
------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Consolidated Statements of Operations Data:
Net sales..................................... $63,407 $54,470 $45,503
Investment and other income................... 3,443 1,559 1,588
------ ------ ------
Total revenues............................. 66,850 56,029 47,091
------ ------ ------
Cost of sales................................. 44,518 37,574 31,166
Selling, general and administrative expenses.. 17,991 16,784 13,414
Research and development expenses............. 3,545 3,167 2,590
Restructuring charge.......................... -- -- 950
Gain on post-retirement plan change........... -- -- (529)
Interest expense.............................. 1,447 1,462 1,641
Total costs and expenses................... 67,501 58,987 49,222
------- ------- -------
Loss from continuing operations
before taxes and extraordinary item......... (651) (2,958) (2,131)
Income tax benefit............................ 284 1,975 1,655
------- ------- -------
Loss from continuing operations
before extraordinary item................... (367) (983) (476)
Loss from discontinued operation, net of
income tax benefit of $1,883,007............ -- -- (2,342)
Loss before extraordinary item................ (367) (983) (2,818)
Extraordinary gain (loss) from early
extinguishment of debt, net of income
taxes....................................... (21) 115 133
------- ------- -------
Net loss...................................... (388) (868) (2685)
Preferred dividend requirement................ (587) (600) (670)
------- ------- -------
Loss applicable to common shares..............
$ (975) $ (1,468) $ (3,355)
======== ======== ========
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28,
------------------------
1995 1994 1993
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Consolidated Statements of Operations Data (cont'd):
Earnings (Loss) Per Common Share:(A)
Continuing operations...................... $ (.49) $ (.86) $ (.65)
Discontinued operations.................... -- -- (1.32)
Extraordinary item......................... (.01) .06 .08
------- ------- -------
Income (loss) per common share............. $ (.50) $ (.80) $ (1.89)
Ratio of earnings to fixed charges(B)...... 69% (40%) 9%
</TABLE>
(A) The average number of shares of common stock outstanding during each period
was 1,934,205 in 1995 and 1,928,798 in 1994, respectively.
(B) Earnings for the fiscal years 1995, 1994 and 1993 were inadequate to cover
fixed charges and preferred stock dividends by $2,725,000, $5,070,000 and
$4,502,000, respectively.
-25-
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 28,
------------
1995 1994
---- ----
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Consolidated Balance Sheet Data:
Total assets....................................... $43,679 $48,590
Total current liabilities.......................... 10,947 12,378
Long-term debt..................................... 8,784 11,601
Other long-term obligations........................ 1,160 1,007
Deferred income taxes.............................. 2,281 2,273
Redeemable cumulative convertible preferred stock.. 10,593 10,494
Common stock....................................... 2,103 2,103
Retained earnings.................................. 5,975 6,950
Total common and other stockholders' equity........ 9,913 10,837
Book value per common share........................... $ 5.13 $ 5.62
======= =======
</TABLE>
-26-
<PAGE>
PRO FORMA DATA
The following table sets forth certain financial information of the
Company at February 28, 1995, and as adjusted to give effect to the consummation
of the Offer for the Preferred Stock, assuming 250,000 shares of the Preferred
Stock are tendered and accepted and consummation of the Dental Divestiture,
assuming that the Company realized $18.0 million in cash for the Dental
Divestiture and that both transactions had occurred on February 28, 1995.
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1995
-----------------------
PRO FORMA
---------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets............................. $43,679 $ 1,283 (1) $44,962
Total liabilities........................ 23,172 (1,129) (2) 22,043
Working capital.......................... 15,073 3,646 (3) 18,719
Long-term debt and other obligations..... 9,944 -- 9,944
Redeemable cumulative convertible
preferred stock (authorized 800,000
shares; issued 789,625 shares;
589,036 shares outstanding at
February 28, 1995; and 339,036 pro
---
forma outstanding at February 28,
-----
1995.................................. 10,593 (4,496) (4) 6,097
====== ======= =====
Common stock (authorized 6,000,000
shares; 1,934,205 shares outstanding
at February 28, 1995; and pro forma
outstanding at February 28, 1995...... 2,103 -- 2,103
Additional paid-in capital............... 1,925 1,433 (5) 3,358
Retained earnings........................ 5,975 5,475 (6) 11,450
Treasury Stock (90) (90)
---- ---- ----
Total common and other stockholders'
9,913 6,908 16,821
equity.............................. ===== ===== ======
Book value per common share(B)........... $5.13 $3.67 (7) $8.80
</TABLE>
_________________
-27-
<PAGE>
NOTES TO PRO FORMA DATA
(1) Pro Forma Total Asset Adjustments:
<TABLE>
<S> <C>
Total assets $43,679
Add: Dental divestiture
proceeds 18,000
Less: Dental assets
divested (12,804)
Transaction costs (850)
Preferred stock cash
tender (3,063)
-------
Total Pro Forma Assets $44,962
=======
</TABLE>
(2) Pro Forma Total Liabilities Adjustments:
<TABLE>
<S> <C>
Total liabilities $23,172
Add: Accrued income taxes 1,600
Less: Preferred stock
dividend reduction (375)
Dental liabilities
divested (1,654)
Deferred income taxes (700)
-------
Total Pro Forma Liabilities $22,043
=======
</TABLE>
(3) Pro Forma Working Capital Adjustments:
<TABLE>
<S> <C>
Total working capital $15,073
Add: Dental divestiture proceeds 18,000
Dental current liabilities
divested 1,654
Preferred stock
dividend reduction 375
Less: Dental current assets
divested (10,870)
Accrued income taxes (1,600)
Transaction costs (850)
Preferred stock cash
tender (3,063)
-------
Total Pro Forma Working Capital $18,719
=======
</TABLE>
(4) Pro Forma Redeemable Cumulative Convertible Preferred Stock:
Adjustment to reduce outstanding stock to 339,036 shares after repurchase
by the Company of 250,000 shares.
(5) Pro Forma Additional Paid in Capital:
Adjustment to additional paid in capital to record the difference between
the carrying value of the preferred stock and the cash tender price.
-28-
<PAGE>
(6) Pro Forma Retained Earnings:
<TABLE>
<S> <C>
Total retained earnings $ 5,975
Add: Gain on dental divestiture,
net of taxes and
transaction costs 5,100
Preferred stock dividend
reduction 375
-------
Total pro forma retained earnings $11,450
=======
</TABLE>
(7) Pro Forma Book Value Per Share:
<TABLE>
<S> <C>
Total common and other stockholders' equity $ 9,913
Add: Gain on dental divestiture 5,100
Preferred stock dividend reduction 375
Addition to additional paid in capital
for preferred stock repurchase 1,625
-------
Pro forma common and other stockholders' equity 17,013
Number of shares of common stock outstanding 1,934
-------
Pro forma book value per share $8.80
=====
</TABLE>
If the Offer is consummated, but the Company purchases fewer than
250,000 shares of the Preferred Stock, the increases and decreases indicated
above would be proportionately reduced, reflecting the number of shares of
Preferred Stock that the Company does not purchase in the Offer.
-29-
<PAGE>
PRICE RANGES OF THE COMMON STOCK AND THE PREFERRED STOCK
There is currently no established or active trading market for the
Company's Preferred Stock. The Company's Common Stock trades on The Nasdaq Stock
Market (the "Nasdaq") under the symbol "ANDR." The following table sets forth
the high and low sales prices for the Common Stock, as reported on the Nasdaq
for fiscal years 1993, 1994 and 1995. The stock prices shown represent prices
between dealers and do not include retail markups, markdowns or commissions and
may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK
------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR 1993
First Quarter..................... 10 3/4 4 3/4
Second Quarter.................... 8 1/2 4 3/4
Third Quarter..................... 8 1/4 6
Fourth Quarter.................... 8 1/4 4 3/4
FISCAL YEAR 1994
First Quarter..................... 8 1/4 6 1/4
Second Quarter.................... 7 3/4 5
Third Quarter..................... 5 1/4 4
Fourth Quarter.................... 5 1/2 3/4
FISCAL YEAR 1995
First Quarter..................... 7 1/2 4 1/4
Second Quarter.................... 9 1/2 4
Third Quarter..................... 5 3/4 3 1/2
Fourth Quarter.................... 4 2 3/4
FISCAL YEAR 1996
First Quarter through May 30, 1995
6 1/4 2 3/4
</TABLE>
On May 25, 1995, the last reported sale price for the Common Stock on
the Nasdaq was $4.75 per share.
According to information furnished to the Company, the last reported
sales price for the Preferred Stock in negotiated transactions between buyer and
seller, without regard to any commissions or other expenses, was $8.75 per
share.
During the forty business days prior to the date of this Offer to
Purchase, neither the Company nor any of the Company's subsidiaries, associates
or controlling shareholders nor any executive officer or director of any of such
corporations has been a party to any transaction in the Preferred Stock or any
derivative security relating thereto.
-30-
<PAGE>
On May 8, 1995, there were approximately 800 and 125 holders of record
of the Common Stock and the Preferred Stock, respectively. On May 8, 1995, the
number of outstanding shares of the Common Stock and the Preferred Stock was
1,934,205 and 589,036, respectively.
DIVIDENDS
Dividends on the Preferred Stock are payable as and when declared by
the Board of Directors out of funds legally available therefor. Dividends accrue
quarterly on February 28, May 31, August 31 and November 30 of each year. The
dividend rate on the Preferred Stock is an adjustable rate that is based on the
operating income of Ney as described herein under "Description of the Company's
Capital Stock--The Preferred Stock," but which rate will in no event be less
than $0.1875 per share per quarter and no more than $0.4375 per share per
quarter. As a result of losses incurred in fiscal years 1993, 1994 and 1995 and
redemptions or repurchases of the Preferred Stock in fiscal years 1992 and 1993
at prices ranging from $9.25 to $13.00 per share, the Restrictive Covenants have
prevented the Company from declaring or paying dividends on its Preferred Stock
since approximately April 15, 1993. See "Restrictive Covenants." Nevertheless,
dividends have been accrued during the last two fiscal years at the minimum rate
of $.1875 per share. For additional information concerning the manner in which
the dividend rate on the Preferred Stock is determined, see "Description of the
Company's Capital Stock--Preferred Stock-Dividends."
The Company paid a dividend on its Common Stock of $.05 per annum for
its fiscal years 1992 and 1993. The amount of accrued but unpaid dividends on
the Preferred Stock as at February 28, 1995, was approximately $883,554 in the
aggregate, or approximately $1.50 per share.
If the Offer is consummated, the Company will not pay to tendering
Preferred Stockholders any accrued and unpaid dividends on the Preferred Stock,
but the amounts for such accrued but unpaid dividends were taken into account in
determining the Consideration offered in the Offer. Approximately $1.50 per
share represents the portion of the Consideration that is expected to cover the
eight quarterly dividends which have not been declared or paid. Holders of
Preferred Stock who do not participate in the Offer will not receive future
quarterly dividends unless and until such dividends are declared by the Board of
Directors, subject to the restrictions on the payment of dividends on the
Preferred Stock under the Restrictive Covenants. Under those restrictions, the
Company will be unable to pay future quarterly dividends on the Preferred Stock
or its Common Stock for the foreseeable future. See "Fairness of the Offer,"
"Purposes and Effects of the Offer" and "Restrictive Covenants."
RESTRICTIVE COVENANTS
The Company is subject to certain covenants under existing indentures
and credit agreements which restrict payment of dividends on or repurchases of
the Company's capital stock.
RESTRICTIVE DEBENTURE INDENTURE COVENANTS
Under that certain Indenture (the "Indenture") dated as of October 15,
1982, from the Company to the "Trustee" named therein, relating to the Company's
Convertible Debentures in an aggregate principal amount of $10,000,000, the
relevant covenant provides, in pertinent part, that
So long as any of the [Convertible Debentures] shall be
Outstanding [as defined], the Company will not declare any dividends
(other than dividends payable solely in stock of the Company or in
rights or warrants entitling them to subscribe for or to purchase
stock of the Company) on any stock of the Company or make, or permit
any Subsidiary to make, any
-31-
<PAGE>
payment on account of the purchase, redemption or other retirement of
any shares of such stock or make, or permit any Subsidiary to make,
any distribution in respect thereof, either directly or indirectly,
unless such dividends are declared to be payable not more than 90 days
after the date of declaration and unless, after giving effect to such
proposed dividend or other payment or distribution and to any other
dividend declared but not paid, at the date (herein called the
"Computation Date") of such declaration (in the case of a dividend) or
of such other payment or distribution, (1) there exists no Event of
Default (as defined ...) and (2) the sum of the aggregate amount of
all dividends declared and all such other payments and distributions
made during the period commencing October 15, 1982 to and including
the Computation Date shall not exceed the sum of:
(i) the aggregate Consolidated Net Income [as defined]
computed for the period commencing September 30, 1982, to and
including the end of the last fiscal quarter of the Company next
preceding the date 45 days prior to the Computation Date;
(ii) the aggregate net cash proceeds received by the
Company from sales subsequent to October 21, 1982, of shares of its
stock for cash; and
(iii) the aggregate net cash proceeds received by the
Company from sales subsequent to October 21, 1982, of indebtedness of
the Company convertible into stock of the Company to the extent such
indebtedness has been converted into such stock.
As the result of the losses incurred in fiscal years 1993, 1994 and
1995 and because of redemptions or repurchases of Preferred Stock in fiscal
years 1992 and 1993 at prices ranging from $9.25 to $13.00 per share (see
"Special Factors" and "Recent Developments"), the Company is prohibited by such
covenant from paying any dividends on or repurchasing or redeeming the Preferred
Stock, and the Company has omitted the scheduled quarterly dividend on the
Preferred Stock for the past eight quarters. For a discussion of the effects of
this covenant on the Company's future ability to pay dividends on the Preferred
Stock, see "Purposes and Effects of the Offer." Absent consummation of the
Dental Divestiture, the Company will be unable to consummate the Offer for the
Preferred Stock since the acquisition of the tendered shares would constitute a
"repurchase" or "redemption" of the Preferred Stock. The Offer is conditioned
upon the Company's consummation of the Dental Divestiture so that the Company
can realize sufficient Consolidated Net Income for the relevant period in order
to acquire shares tendered pursuant to the Offer. See "Pro Forma Data." However,
if the Company does not acquire all of the shares of Preferred Stock tendered
pursuant to the Offer, the Standby Purchaser has the right, but not the
obligation, to purchase all shares tendered pursuant to the Offer and not
purchased by the Company. See "The Standby Agreement."
OTHER RESTRICTIVE COVENANTS
A certain indenture of trust dated December 20, 1983, from the Company
to the "Trustee" named therein, as amended (the "IRB Indenture"), also restricts
the Company's ability to pay dividends on the Preferred Stock. However, the IRB
Indenture is less limiting on the Company's ability to pay dividends than the
Indenture.
The Company also is required by one of its credit agreements to
maintain a Tangible Net Worth (shareholders' equity plus the Preferred Stock
less all intangibles) of at least $18 million and a leverage ratio (total
liabilities divided by Tangible Net Worth) of 1.6 to 1.0 or less. The Company
was in compliance with these covenants at February 28, 1995, and will remain in
compliance with such covenants after giving effect to the Dental Divestiture and
the Offer.
-32-
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the anticipated federal
income tax consequences to the Preferred Stockholders who receive the
Consideration for their tendered Preferred Stock. This discussion is based upon
the Internal Revenue Code of 1986, as amended (the "Code"), regulations of the
Treasury Department, administrative rulings and pronouncements of the Internal
Revenue Service (the "IRS") and judicial decisions, all as of the date hereof.
All of the foregoing are subject to change and any such change may be
retroactively applied. This discussion does not purport to address all of the
federal income tax consequences that may be applicable to particular categories
of Preferred Stockholders, some of which may be subject to special rules.
PREFERRED STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO ANY
FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX CONSIDERATIONS RELEVANT TO THEM.
Sales of Preferred Stock by Preferred Stockholders pursuant to the
Offer will be taxable transactions for Federal income tax purposes and may also
be taxable transactions under applicable state, local, foreign and other tax
laws. The Federal income tax consequences to a Preferred Stockholder may vary
depending upon the Preferred Stockholder's particular facts and circumstances.
Under Section 302 of the Code, a sale of Preferred Stock pursuant to
the Offer will, as a general rule, be treated as a sale or exchange if the
receipt of cash upon such sale (a) results in a "complete termination" of the
Preferred Stockholder's interest in the Company or (b) is "not essentially
equivalent to a dividend" with respect to the Preferred Stockholder. If either
of these tests is satisfied, a tendering Preferred Stockholder will recognize
gain or loss equal to the difference between the amount of cash received by the
Preferred Stockholder pursuant to the Offer and the Preferred Stockholder's tax
basis in the Preferred Stock sold pursuant to the Offer. Recognized gain or loss
will be capital gain or loss, assuming the Preferred Stock is held as a capital
asset, which will be long-term capital gain or loss if the Preferred Stock had
been held for more than one year.
In determining whether either of the tests under Section 302 of the
Code is satisfied, Preferred Stockholders must take into account not only the
Preferred Stock they actually own, but also any Common Stock or Preferred Stock
they are deemed to own pursuant to the constructive ownership rules of Section
318 of the Code. Pursuant to those constructive ownership rules, a Preferred
Stockholder is deemed to own the Common Stock or Preferred Stock actually owned,
and in some cases constructively owned, by certain related individuals or
entities, and any Common Stock or Preferred Stock that the Preferred Stockholder
has the right to acquire by exercise of an option or by conversion or exchange
of a security.
The sale of Preferred Stock pursuant to the Offer will result in a
"complete termination" of a Preferred Stockholder's interest in the Company if
at the conclusion of the Offer either (a) the Preferred Stockholder actually and
constructively owns no Common Stock or Preferred Stock or (b) the Preferred
Stockholder actually owns no Common Stock or Preferred Stock and the Preferred
Stockholder is eligible to waive and does effectively waive attribution of all
Common Stock or Preferred Stock constructively owned by the Preferred
Stockholder in accordance with Section 302(c) of the Code.
Even if the sale of Preferred Stock pursuant to the Offer fails to
satisfy the "complete termination" test, such Preferred Stockholder may
nevertheless satisfy the "not essentially equivalent to a dividend" test, if the
Preferred Stockholder's sale of Preferred Stock pursuant to the Offer results in
a "meaningful reduction" in the Preferred Stockholder's proportionate interest
in the Company. Whether the receipt of cash by a Preferred Stockholder results
in a "meaningful reduction" will depend upon the individual Preferred
Stockholder's facts and circumstances. However, if a Preferred Stockholder
actually or constructively owns no Common Stock, it appears that the sale of any
Preferred Stock pursuant to the Offer will result in a "meaningful reduction."
It also appears that the sale of any Preferred Stock in the Offer by a Preferred
Stockholder who also owns a small
-33-
<PAGE>
percentage of Common Stock (substantially less than 1%, based on an Internal
Revenue Service published ruling) and who exercises no control over corporate
affairs will result in a "meaningful reduction." Preferred Stockholders
expecting to rely upon the "not essentially equivalent to a dividend" test
should consult with their tax advisors as to its application in their particular
situations.
It may be possible for a tendering Preferred Stockholder to satisfy
one of the above tests by contemporaneously selling or otherwise disposing of
all or some of the Common Stock or Preferred Stock that are actually or
constructively owned by such Preferred Stockholder but which are not purchased
pursuant to the Offer. Correspondingly, a tendering Preferred Stockholder may
not be able to satisfy one of the above tests because of contemporaneous
acquisitions of Common Stock or Preferred Stock by such Preferred Stockholder or
a related party whose Common Stock or Preferred Stock would be attributed to
such Preferred Stockholder. Preferred Stockholders should consult their tax
advisors regarding the tax consequences of such sales or acquisitions in their
particular circumstances.
If neither of the tests under Section 302 is satisfied and if, as is
anticipated, the Company has sufficient earnings and profits, the tendering
Preferred Stockholder will be treated as having received a dividend includible
in gross income in an amount equal to the entire amount of cash received by the
Preferred Stockholder pursuant to the Offer (without regard to gain or loss, if
any). In such case, the tendering Preferred Stockholder's tax basis in the
Preferred Stock to be purchased pursuant to the Offer will be added to such
Preferred Stockholder's tax basis in the Preferred Stock and the Common Stock
retained by such Preferred Stockholder (or, in the case such Preferred
Stockholder does not retain any Common Stock or Preferred Stock, the tax basis
in the Preferred Stock will be added to the related person's tax basis in the
Preferred Stock and the Common Stock that are constructively owned by such
Preferred Stockholder).
In the case of a corporate Preferred Stockholder, if the cash paid is
treated as a dividend, the dividend income may be eligible for the 70%
dividends-received deduction. The dividends-received deduction is subject to
certain limitations, and may not be available if the corporate Preferred
Stockholder does not satisfy certain holding period requirements with respect to
the Preferred Stock and Common Stock or if the Preferred Stock and Common Stock
are treated as "debt financed portfolio stock." Generally, if a dividends-
received deduction is available, it is expected that the dividend will be
treated as an "extraordinary dividend" under Section 1059(a) of the Code, in
which case such corporate Preferred Stockholder's tax basis in Preferred Stock
and Common Stock retained by such Preferred Stockholder would be reduced, but
not below zero, by the amount of the nontaxed portion of the dividend. Any
amount of the nontaxed portion of the dividend in excess of the Preferred
Stockholder's basis will generally be subject to tax upon sale or disposition of
the Preferred Stock or Common Stock, as the case may be. Corporate Preferred
Stockholders are urged to consult their tax advisors as to the effect of Section
1059 of the Code on their tax basis in Preferred Stock.
In the case of any foreign Preferred Stockholder, the Exchange Agent
will withhold United States federal income tax at a rate of 30% from gross
proceeds paid pursuant to the Offer to the foreign Preferred Stockholder or his
agent, unless the Exchange Agent determines that a reduced rate of withholding
is applicable pursuant to a tax treaty or that an exemption from withholding is
applicable because such gross proceeds are effectively connected to the conduct
of a trade or business by the foreign Preferred Stockholder within the United
States. For this purpose, a foreign Preferred Stockholder is any holder that is
not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States, or (iii) any estate or trust the income of which is subject to
the United States federal income taxation regardless of its source. Without
definite knowledge to the contrary, the Exchange Agent will determine whether a
Preferred Stockholder is a foreign Preferred Stockholder by reference to the
Preferred Stockholder's address. A foreign Preferred Stockholder may be eligible
to file for a refund of such tax or a portion of such tax if such Preferred
Stockholder (i) meets the "complete termination" or "not essentially equivalent
to a dividend" tests described above, (ii) is entitled to a reduced rate of
withholding pursuant to a treaty and the Exchange Agent withheld at a higher
rate, or (iii) is otherwise able to establish that no tax or a reduced portion
of tax was due.
-34-
<PAGE>
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. EACH PREFERRED STOCKHOLDER IS URGED TO CONSULT SUCH
PREFERRED STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH PREFERRED STOCKHOLDER (INCLUDING THE APPLICABILITY AND
EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND STATE, LOCAL AND FOREIGN TAX
LAWS) OF THE SALE OF PREFERRED STOCK PURSUANT TO THE OFFER.
-35-
<PAGE>
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
COMMON STOCK
At February 28, 1995, the Company had 6,000,000 authorized shares of
Common Stock, of which approximately 1,934,205 shares were outstanding. The
following is a brief summary of certain rights and provisions of the Common
Stock.
Each share of the Company's Common Stock is entitled to participate
pro rata in distributions upon liquidation and to one vote on all matters
submitted to a vote of the shareholders. Dividends may be paid to the holders of
the Company's Common Stock when and if declared by the Board of Directors out of
funds legally available therefor. Holders of the Company's Common Stock have no
preemptive or similar rights.
The shares of Common Stock have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors.
Holders of Common Stock do not have any right to subscribe to any
additional securities which may be issued by the Company.
Outstanding shares of Common Stock are validly issued, fully paid and
non-assessable.
The transfer agent and the registrar for the Common Stock is Registrar
and Transfer Company.
PREFERRED STOCK
General. At February 28, 1995, the Company had 800,000 authorized
shares of Preferred Stock, of which 589,036 shares were outstanding. The
following is a brief summary of certain rights and provisions of the Preferred
Stock and is qualified in its entirety by reference to the Terms of the
Preferred Stock.
Dividends. The holders of the Company's Preferred Stock are entitled
to receive, when and as declared by the Company's Board of Directors, cumulative
cash dividends, out of funds legally available therefor, in an amount equal to
(i) $0.1875 per share plus (ii) any positive amount per share (the
"Participating Dividend") equal to the quotient obtained by dividing (a) an
amount equal to (1) 50% of the Ney Operating Income (as defined below) minus (2)
$150,000, by (b) 800,000; provided, however, that such total quarterly rate per
share shall not exceed $0.4375. The dividends are payable not later than 45 days
after the end of each fiscal quarter of the Company. So long as any share of
Preferred Stock remains outstanding, no dividend or other distribution shall be
paid or declared on any shares of the Common Stock, other than dividends payable
in shares of Common Stock, unless all cumulative dividends on the Preferred
Stock have been paid or declared and set apart for payment. If dividends (cash,
stock or otherwise) are paid or declared on the Common Stock, as permitted
above, the Preferred Stock is not entitled to participate in any such dividends
or distributions.
"Ney Operating Income" means, for each quarterly accounting period
ending immediately prior to a dividend payment date, the amount of Income from
Continuing Operations (as defined below) of Ney for such quarterly accounting
period before any allocation of overhead expense incurred by the Company but
after deduction for appropriate and reasonable direct charges for necessary
services rendered or paid for by the Company or any subsidiary to Ney, all as
determined in accordance with generally accepted accounting principles applied
on a consistent basis by the Company in the preparation of the Company's audited
annual financial statements, including the effect of any adjustments to the
carrying value of the assets and liabilities of Ney and its subsidiaries on the
consolidated balance sheet of Ney in accordance with APB No. 16.--"Business
Combinations" and the rules and regulations of the Commission with respect
thereto. "Income from Continuing
-36-
<PAGE>
Operations" means Ney's consolidated revenue from continuing operations
(excluding nonoperating income and results of capital transactions and before
provision for Federal and state income taxes) minus cost of sales, selling,
administrative, research and general expenses, profit sharing, all other
operational expenses, and interest expense and imputed interest expense
calculated at the Company's cost of funds, in each case attributable to Excess
Ney Financings. "Excess Ney Financings" means the amount of any borrowings or
capital leases undertaken to finance (i) working capital needs of Ney or its
subsidiaries in excess of $750,000 or (ii) the acquisition of assets, including
acquisition of assets by way of acquisition of securities or merger or
consolidation, used or included in the continuing operations of Ney or its
subsidiaries, to the extent such amount exceeds Ney's consolidated depreciation
and amortization expense (such amount to be calculated at the end of each
monthly accounting period based on the amount of such financings then
outstanding and the cumulative amount of such depreciation and amortization
expense from February 28, 1991 to such month-end). The Company's independent
public accountants review the Company's calculation of Ney Operating Income
within 120 days after the end of each fiscal year of the Company.
In the event of any merger, consolidation or sale of any substantial
part of the assets of Ney which would have a material adverse effect on Ney
Operating Income, the Participating Dividend rate for the quarter in which such
transaction occurs and for subsequent quarters shall be adjusted to be an amount
equal to the amount determined under clause (ii) above plus the quotient
obtained by dividing (i) the amount equal to one quarter of (a) the net proceeds
received by the Company or any Company subsidiary from any such transaction,
multiplied by (b) the yield to maturity of a seven year U.S. Treasury Note (or
the closest available maturity) (as quoted in the Wall Street Journal on the
date on which such transaction is closed) plus 60 basis points, by (ii) 800,000;
provided, however, that the total Participating Dividend per share per quarter
shall not exceed $0.25.
Payment of the Participating Dividend depends on future operations of
Ney and future transactions involving the Ney divisions. The terms of the
Preferred Stock do not require the Company to consolidate the operations of
businesses acquired with Ney, even if such businesses are related, but the
Company may consolidate such businesses as it determines.
Payment of dividends on, and voluntary and mandatory redemptions and
repurchases of, the capital stock of the Company are subject to certain
restrictions contained in the Indenture. Pursuant to such restrictions, the
Company may not pay any dividends or make any distribution with respect to the
purchase, redemption or other retirement of any of its capital stock (other than
distributions of capital stock or rights or warrants to subscribe to such stock)
if the Company is in default under the Indenture. Additionally, pursuant to such
restrictions, the Company is only permitted to pay any such dividend or make any
such distribution to the extent by which cumulative Consolidated Net Income (as
defined in the Indenture) earned after February 28, 1995, exceeds approximately
$2,453,000. Further, the Company is required by one of its credit agreements to
maintain a Tangible Net Worth (shareholders' equity plus the Preferred Stock
less all intangibles) of at least $18 million and a leverage ratio (total
liabilities divided by Tangible Net Worth) of 1.6 to 1.0 or less. The Company
was in compliance with these covenants at February 28, 1995, and will remain in
compliance with such covenants after giving effect to the Dental Divestiture and
the Offer. See "Purposes and Effects of the Offer."
As the result of the losses incurred in fiscal years 1993, 1994 and
1995 and redemptions or repurchases of the Preferred Stock in fiscal years 1992
and 1993 at prices ranging from $9.25 to $13.00 per share, the Company is
prohibited by the Restrictive Covenants from making such payments on the
Preferred Stock, and the Company has omitted the scheduled quarterly dividend on
the Preferred Stock for the past eight quarters. See "Dividends."
Redemption. The Preferred Stock is redeemable, in whole or in part, at
the option of the Company, by paying therefor in cash a redemption price equal
to $18.25 per share in the case of any such redemption during the period through
February 28, 1996, and $18.75 per share in the case of any such redemption
thereafter, in
-37-
<PAGE>
each case plus accrued and unpaid dividends to the date fixed for redemption.
The holders of record of the Preferred Stock to be redeemed will be given notice
twenty days prior to the date fixed for redemption. If less than all of the
outstanding shares of Preferred Stock are to be redeemed, such shares will be
redeemed on a pro rata basis (rounded to the nearest whole share to avoid
redemption of fractional shares).
Beginning March 1, 1996 and on the first business day following each
anniversary thereafter, the Company is required to call for redemption on such
date 160,000 shares of Preferred Stock, to the extent that the Company has funds
legally available therefor and subject to the Restrictive Covenants, by paying
therefor in cash $18.75 per share plus accrued and unpaid dividends up to the
date of payment. Each holder of Preferred Stock will be given twenty days'
notice prior to the date fixed for redemption. In connection with any mandatory
redemption, the shares of Preferred Stock will be redeemed pro rata from all
record holders in proportion to the number of such shares of Preferred Stock
held by them (rounded to the nearest whole share to avoid redemption of
fractional shares). See "Purposes and Effects of the Offer" for a description of
impediments to redemption of the Preferred Stock.
Voting. Holders of Preferred Stock do not, except as required by law
or as set forth below, have any right or power to vote on any question or in any
proceeding or to be represented at, or to receive notice of, any meeting of the
Company's stockholders. On any matters on which the holders of Preferred Stock
are entitled to vote, they will be entitled to one vote for each share held.
The equivalent of eight quarterly dividends are currently in arrears.
In case at any time the equivalent of six quarterly dividends (whether
consecutive or not) on the Preferred Stock are in arrears, then during the
period (the "Class Voting Period") commencing with such time and ending with the
time when all arrears and the then current quarterly dividend period has been
paid or declared and set apart for payment, at any meeting of the Company held
for the election of Directors during the Class Voting Period, the holders of a
majority of the outstanding shares of Preferred Stock, represented in person or
by proxy at said meeting, will be entitled, as a class, to the exclusion of the
holders of all other classes or series of stock of the Company, to elect one
additional Director to the Company's Board of Directors. At any time during the
Class Voting Period, any holder of Preferred Stock may call a special meeting to
elect such Director by written request to the Secretary of the Company at the
principal office of the Company. The term of the Director elected by the holders
of the Preferred Stock will in all events expire at the end of the Class Voting
Period.
Liquidation, Dissolution and Winding-Up. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, whether
voluntary or involuntary, the holders of the Preferred Stock will be entitled,
before any assets of the Company are distributed among or paid over to the
holders of Common Stock, to be paid $18.75 per share, together with any accrued
but unpaid dividends thereon, and no more. If, upon such liquidation,
dissolution or winding-up, the assets of the Company distributed as aforesaid
among the holders of the Preferred Stock are insufficient to permit payment to
them of said amount, the entire assets of the Company will be distributed
ratably among the holders of the Preferred Stock issued and outstanding and
having such priority.
Preemptive Rights. The holders of Preferred Stock have no preemptive
rights.
Conversion Rights. The holders of the Preferred Stock have the right,
at their option, to convert one or more of such shares into fully paid and
nonassessable shares of Common Stock at any time and from time to time after the
date of issuance, at the rate of 1.875 shares of Common Stock for each share of
Preferred Stock.
The conversion rate is subject to adjustment in the event of certain
issuances of Common Stock and certain changes in the number of issued and
outstanding shares of Common Stock by reason of a stock dividend or
distribution, split-up, merger, reorganization, recapitalization or combination
of the Company. No adjustment will be made, however, upon the consummation of
the Offer.
-38-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934
Act, and in accordance therewith file reports and other information with the
Securities and Exchange Commission (the "Commission"). Information as of
particular dates, concerning directors and Officers, their remuneration, options
granted to them, the principal holders of securities of the Company and any
material interest of such persons in transactions with the Company, is disclosed
in proxy statements distributed to stockholders of the Company and filed with
the Commission. Such reports, proxy statements and other information can be
inspected and copied (at prescribed rates) at the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 75 Park Place, 14th Floor, New York, New York 10007. Copies
of such material can also be obtained by mail from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
No person has been authorized to give any information or to make any
representations in connection with the Offer other than those contained in this
Offer to Purchase. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Offer to Purchase nor any acceptance of shares tendered
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Offer is not being made to (nor will
tenders be accepted from or on behalf of) Preferred Stockholders in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. However, the Company
may, at its discretion, take such action as it may deem necessary to make the
Offer in any such jurisdiction and to extend the Offer to Preferred Stockholders
in such jurisdiction. In any jurisdiction the securities laws or blue sky laws
of which require the Offer to be made by a licensed broker or dealer, the Offer
is being made on behalf of the Company by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
ANDERSEN GROUP, INC.
June 5, 1995
-39-
<PAGE>
ANNEX A:
THE OPINION
McTeague Investment Bankers, Inc.
14 Eugene O'Neill Drive
New London, CT 06320
203-437-7215
May 30, 1995
The Board of Directors
Andersen Group, Inc.
Ney Industrial Park
Bloomfield, CT 06002
Dear Sirs:
You have requested the opinion of McTeague Investment Bankers, Inc.,
("McTeague") as investment bankers, as to the fairness from a financial point of
view, of the $12.25 cash per share to be paid to the holders of Andersen Group,
Inc. (the "Company") Series A Redeemable Cumulative Convertible Preferred Stock
(the "Preferred Stock").
As part of its investment banking business, McTeague is continually engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, private placements as well as valuations
for corporate, estate planning and other purposes.
We have provided investment banking services to the Company from time to time.
During the course of providing those services, we have become familiar with the
businesses and prospects of the Company.
In arriving at our opinion, we have, among other things:
(1) Reviewed the Company's annual reports to shareholders for the
three years ended February 28, 1995;
(2) Reviewed the Company's annual report on Form 10-K for each of the
three years ending February 28, 1995;
(3) Reviewed the Company's quarterly reports on Form 10-Q for the
three fiscal quarters ended November 30, 1994;
(4) Reviewed the Loan Agreement dated February 15, 1994 between the
Company and IBJ Schroder;
(5) Reviewed the November 1, 1979 Guaranty and Indemnification
Agreement, as amended, and the November 1, 1979 Bond Purchase
Agreement between the Company, the Connecticut Development
Authority and American Re-Insurance Company, as amended;
A-1
<PAGE>
(6) Reviewed the Indenture pertaining to the 10.5% Convertible
Subordinated Debentures dated October 15, 1982 between the
Company and the Hartford National Bank and Trust Company.
(7) Reviewed the Joint Proxy Statement For Special Meeting Of
Shareholders dated January 31, 1991;
(8) Reviewed the terms and covenants of the Preferred Stock;
(9) Reviewed the historical purchase prices and volume activity for
the Preferred stock;
(10) Reviewed draft copies of the Offer To Purchase and Letter Of
Transmittal;
(11) Discussed with senior management of the Company the results of
operations and future outlook of the Company, including financial
projections provided to us by management;
(12) Undertaken certain reviews, analyses and inquiries as we deemed
relevant under the circumstances.
We have assumed, without independent verification, the accuracy and completeness
of publicly available information and information provided to us by the Company.
We have not conducted or obtained any independent appraisals of the assets of
the Company. In addition, we have not solicited competitive offers from other
potential purchasers of the securities being evaluated herein nor have we
explored other alternatives which may be available to the Company.
The opinion expressed herein is necessarily based upon factors including general
economic and market conditions as they exist now and can be evaluated on the
date hereof.
Based upon and subject to the foregoing, it is our opinion that the $12.25 cash
per share consideration to be paid to the shareholders tendering shares of the
Preferred Stock in the offer is fair, from a financial point of view.
Very Truly Yours,
/s/ Bertrand L. McTeague
Bertrand L. McTeague
President
MCTEAGUE INVESTMENT BANKERS, INC.
A-2
<PAGE>
THE EXCHANGE AGENT IS:
REGISTRAR AND TRANSFER COMPANY
By Mail: By Facsimile Transmission: By Hand:
10 Commerce Drive (For Eligible c/o Midwest Securities
Cranford, NJ 07016 Institutions Only) 40 Broad Street
908-272-1006 New York, NY
Confirm by Telephone: or
800-346-6084 10 Commerce Drive
Cranford, NJ
By Overnight Delivery:
10 Commerce Drive
Cranford, NJ 07016
For Information Call:
800-346-6084
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Offer...................................................... 1
Introduction.............................................................. 5
Special Factors........................................................... 6
The Company............................................................... 9
The Dental Divestiture....................................................11
The Offer.................................................................11
Fairness of the Offer.....................................................17
Recent Developments.......................................................18
Sources of Funds..........................................................18
Purposes and Effects of the Offer.........................................19
The Standby Agreement.....................................................20
Summary Comparison of Terms of the Common Stock and the Preferred Stock...22
Summary Historical Financial Data.........................................24
Pro Forma Data............................................................27
Price Ranges of the Common Stock and the Preferred Stock..................30
Dividends.................................................................31
Restrictive Covenants.....................................................31
Federal Income Tax Considerations.........................................33
Description of the Company's Capital Stock................................36
Available Information.....................................................39
The Opinion..............................................................A-1
</TABLE>
<PAGE>
Exhibit (a)(2)
ANDERSEN GROUP, INC.
NEY INDUSTRIAL PARK
BLOOMFIELD, CT 06002
LETTER OF TRANSMITTAL
TO ACCOMPANY
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF ANDERSEN GROUP, INC.
- --------------------------------------------------------------------------------
THE OFFER (AS DEFINED BELOW) WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN TIME, ON JULY 7, 1995, UNLESS EXTENDED (SUCH TIME
AND DATE, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
THE EXPIRATION DATE, AND, UNLESS PREVIOUSLY ACCEPTED BY
ANDERSEN GROUP, INC. OR THE STANDBY PURCHASER,
AFTER 5:00 P.M., EASTERN
TIME, ON AUGUST 1, 1995.
- --------------------------------------------------------------------------------
To: Registrar and Transfer Company, Exchange Agent
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
908-272-1006
10 Commerce Drive c/o Midwest
Cranford, NJ 07016 Confirm by Telephone: Securities
800-346-6084 40 Broad Street
New York, NY
or
10 Commerce Drive
Cranford, NJ
By Overnight Delivery: For Information Call:
800-346-6084
10 Commerce Drive
Cranford, NJ 07016
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he, she or it has received and
reviewed the Offer to Purchase for Cash dated June 5, 1995 (the "Offer to
Purchase"), of Andersen Group, Inc., a Connecticut corporation (the "Company"),
and this Letter of Transmittal (this "Letter"), which together constitute the
Company's offer (the "Offer") to purchase for $12.25 cash per share any and all
shares of the Company's Series A Cumulative Convertible Preferred Stock, without
par value (the "Preferred Stock"), and understands the matters described
therein. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action he, she or it desires to take with respect to
the Offer.
No cash payment will be made with respect to accrued dividends on
shares of Preferred Stock tendered and accepted in the Offer.
<PAGE>
The Offer is conditioned upon at least 250,000 of the outstanding
shares of Preferred Stock being validly tendered and upon the closing of the
Acquisition (as defined below). It is also subject to certain customary
conditions, any or all of which may be waived by the Company.
The Company reserves the right to extend the Offer at its discretion,
in which event the term "Expiration Date" shall mean the time and date on which
the Offer as so extended shall expire. The Company shall notify the Exchange
Agent of any extension by oral or written notice and shall make a public
announcement thereof, each prior to 9:00 A.M., eastern time, on the next
business day after the previously scheduled Expiration Date.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Offer.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Offer, the
undersigned hereby tenders to the Company the number of shares of Preferred
Stock indicated below. Subject to, and effective upon, the Company's acceptance
of the Preferred Stock tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such shares of Preferred Stock as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
as the undersigned's true and lawful agent and attorney-in-fact (with full
knowledge that said Exchange Agent also acts as the agent of the Company) with
respect to the tendered Preferred Stock with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to: (a) deliver certificates representing such Preferred Stock or
transfer ownership of such Preferred Stock on the account books maintained by
The Depositary Trust Company ("DTC") and deliver, in any such case, all
accompanying evidences of transfer and authenticity to or upon the order of the
Company upon receipt by the Exchange Agent, as the undersigned's agent, of the
cash consideration to which the undersigned is entitled upon the acceptance by
the Company of such Preferred Stock under the Offer; and (b) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Preferred Stock, 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 PREFERRED
STOCK TENDERED HEREBY AND THAT THE COMPANY WILL ACQUIRE GOOD AND UNENCUMBERED
TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND
ENCUMBRANCES AND NOT SUBJECT TO ANY ADVERSE CLAIM WHEN THE SAME ARE ACCEPTED BY
THE COMPANY. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE EXCHANGE AGENT OR THE COMPANY TO BE NECESSARY
OR DESIRABLE TO COMPLETE THE SALE, ASSIGNMENT AND TRANSFER OF THE PREFERRED
STOCK TENDERED HEREBY. THE UNDERSIGNED HEREBY REPRESENTS THAT THE PREFERRED
STOCK TENDERED HEREBY IS VALID AND THAT THE UNDERSIGNED IS DULY AUTHORIZED TO
TENDER SUCH PREFERRED STOCK.
All authority conferred or agreed to be conferred in this Letter and
every obligation of the undersigned hereunder shall be binding upon the
undersigned's successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the Instructions
contained in this Letter.
The undersigned understands that, upon acceptance by the Company of
the Preferred Stock tendered hereby, the undersigned will be deemed to have
waived all rights with respect to any dividends which have accrued on the
Preferred Stock on or before June 5, 1995, and all dividends which accrue on the
Preferred Stock after June 5, 1995.
<PAGE>
The undersigned recognizes that the Offer is conditioned upon at least
250,000 shares of Preferred Stock being tendered, the closing of the Acquisition
and the satisfaction of the other conditions specified in the Offer to Purchase.
The undersigned further recognizes that the Company may waive any or all of such
conditions.
The undersigned understands that the Company or the Standby Purchaser
may accept the undersigned's tender by delivering written notice of acceptance
to the Exchange Agent.
The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase the Company may not accept any of the Preferred Stock
tendered by the undersigned. Preferred Stock not accepted by the Company or
withdrawn will be returned to the undersigned at the address specified in the
first column of the table below entitled "Description of Preferred Stock" unless
otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated in the box entitled "Special Delivery
Instructions" or the box entitled "Special Issuance and Delivery Instructions"
below, please send the cash consideration for the tendered Preferred Stock (and,
if applicable, substitute Preferred Stock certificates for any shares of
Preferred Stock not accepted) to the undersigned at the address shown below the
signature of the undersigned. The undersigned understands that holders of
Preferred Stock ("Preferred Stockholders") who tender Preferred Stock by book-
entry transfer ("Book-Entry Stockholders") may request that any Preferred Stock
not exchanged be returned by crediting the applicable account maintained by DTC
by making an appropriate entry in the box entitled "Special Issuance and
Delivery Instructions" below. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance and Delivery Instructions" to
transfer any Preferred Stock from the name of the registered holder thereof if
the Company does not accept any of the shares of Preferred Stock so tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
PREFERRED STOCK" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED
THE SHARES OF PREFERRED STOCK AS SET FORTH IN SUCH BOX BELOW.
3
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
----------------
(TO BE COMPLETED BY ALL TENDERING PREFERRED
STOCKHOLDERS)
(See Instructions 1 and 3 and the following paragraph)
................................................................................
................................................................................
SIGNATURE(S) OF OWNER(S) DATE
................................................................................
AREA CODE AND TEL. NO.
Must be signed by the registered holder(s) as their name(s) appear(s) on the
certificate(s) representing shares of Preferred Stock or on a security position
listing or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. SEE INSTRUCTION 3.
Name(s):.......................................................
...............................................................
(PLEASE TYPE OR PRINT)
Capacity:......................................................
Address:.......................................................
...............................................................
(INCLUDE ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
...............................................................
(AUTHORIZED SIGNATURE)
...............................................................
(PLEASE TYPE OR PRINT NAME)
...............................................................
(TITLE)
...............................................................
(NAME OF FIRM)
Dated:.........................................................
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR PREFERRED STOCK OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY OR A TELEGRAM, TELEX OR
FACSIMILE THEREOF MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE.
4
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
This Letter must be used whether certificates for Preferred Stock are
to be forwarded herewith, whether tenders are to be made by book-entry transfer
to the account maintained by the Exchange Agent at DTC, or whether the
guaranteed delivery procedure has been utilized. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Your bank or broker can assist you in completing this form. The
Instructions included with this Letter must be followed. Questions and requests
for assistance or for additional copies of the Offer to Purchase and this Letter
may be directed to the Exchange Agent or the Company.
List below the shares of Preferred Stock to which this Letter relates.
If the space provided below is inadequate, list the certificate numbers and
number of shares on a separate SIGNED schedule and affix such schedule to this
Letter.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF PREFERRED STOCK
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SHARES NUMBER OF
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY SHARES
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S)* TENDERED**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders (see below).
** Unless otherwise indicated in this column, a Book-Entry Stockholder will be
deemed to have tendered all shares of Preferred Stock held by the registered
holder indicated in the first column and a Preferred Stockholder that delivers
Preferred Stock through physical delivery of certificates will be deemed to have
tendered the aggregate number of shares of Preferred Stock specified in the
third column or, if none, by the certificate or certificates specified in the
second column or, if none, the aggregate number of all shares of Preferred Stock
held by the registered holder indicated in the first column. SEE INSTRUCTION 2.
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED SHARES OF PREFERRED STOCK ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED SHARES OF PREFERRED STOCK ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE EXCHANGE AGENT'S ACCOUNT WITH DTC
AND COMPLETE THE FOLLOWING:
[_] Name of Tendering Institution: DTC
Account Number:...........................................................
Transaction Code Number:..................................................
[_] CHECK HERE IF TENDERED SHARES OF PREFERRED STOCK WERE TENDERED AND ARE NOW
BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 1):
Name of Registered Owner(s):................................................
Window Ticket No. (if any):.................................................
Date of Execution of Notice of Guaranteed Delivery:.........................
Name of Eligible Institution which guaranteed delivery:.....................
DTC Account Number and Transaction Number (if delivered by book-entry
transfer):..................................................................
-------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE AND DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for shares of Preferred Stock not
accepted are to be registered in the name of and sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter above or if shares
of Preferred Stock tendered by book-entry transfer that are not accepted are to
be returned by credit to an account maintained by DTC.
Issue and mail:
(check appropriate box(es)):
[_] shares of Preferred Stock to:
[_] Credit unaccepted shares of Preferred Stock tendered by book-entry transfer
to the DTC account set forth below:
Name(s):........................................................................
(PLEASE TYPE OR PRINT)
...........................................................................
(PLEASE TYPE OR PRINT)
Address:........................................................................
................................................................................
(ZIP CODE)
................................................................................
(DTC ACCOUNT NUMBER)
................................................................................
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for shares of Preferred Stock not
accepted and/or cash consid eration for the accepted shares of Preferred Stock
are to be sent to someone other than the person or persons whose signature(s)
appear(s) on this Letter above or to such person or persons at an address other
than that shown in the box entitled "Description of Preferred Stock" on this
Letter above.
Mail or deliver:
(check appropriate box(es)):
[_] Cash consideration to:
[_] shares of Preferred Stock to:
Name(s):........................................................................
(PLEASE TYPE OR PRINT)
...........................................................................
(PLEASE TYPE OR PRINT)
Address:........................................................................
................................................................................
(ZIP CODE)
................................................................................
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NO.)
- --------------------------------------------------------------------------------
6
<PAGE>
TO BE COMPLETED BY ALL TENDERING PREFERRED STOCKHOLDERS
(SEE INSTRUCTION 5)
SUBSTITUTE FORM W-9
PAYOR'S NAME: ANDERSEN GROUP, INC.
- --------------------------------------------------------------------------------
PART I -- TAXPAYER IDENTIFICATION NUMBER ("TIN") ___________
PLEASE PROVIDE YOUR TIN IN THE BOX TO THE RIGHT [___________]
AND CERTIFY BY SIGNING AND DATING BELOW.
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
IF YOU ARE AN EXEMPT RECIPIENT, YOU SHOULD COMPLETE ___________
THIS FORM TO AVOID POSSIBLE ERRONEOUS BACKUP [___________]
WITHHOLDING. ENTER YOUR CORRECT TIN IN PART I, WRITE
"EXEMPT" IN THE BOX TO THE RIGHT, SIGN AND DATE
THE FORM.
________________________________________________________________________________
NAME (IF JOINT NAMES, LIST FIRST AND CIRCLE THE NAME OF THE PERSON OR ENTITY
WHOSE NUMBER YOU ENTER IN PART 1 BELOW)
________________________________________________________________________________
BUSINESS NAME
________________________________________________________________________________
ADDRESS (NUMBER AND STREET)
________________________________________________________________________________
CITY, STATE, AND ZIP CODE
________________________________________________________________________________
SOCIAL SECURITY OR EMPLOYER IDENTIFICATION NUMBER
SUBSTITUTE
FORM W-9
Department of the Treasury Internal Revenue Service
PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
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 either because: (a) I am exemptfrom
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting of interest or dividends on your tax return.
______________________________ ________________________________
Signature Date
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
(1) Delivery of this Letter and Certificates; Guaranteed Delivery
Procedure. This Letter is to be used whether certificates are to be forwarded
herewith, whether tenders are to be made pursuant to the procedures for book-
entry transfer set forth in the Offer to Purchase under the caption "The Offer--
Procedures for Tendering," or whether tenders were made pursuant to the
procedure for guaranteed delivery set forth below and in the Offer to Purchase
under the caption "The Offer--Guaranteed Delivery Procedure." To effect a valid
tender of Preferred Stock, certificates for Preferred Stock, or any book-entry
transfer into the Exchange Agent's account at DTC of Preferred Stock tendered
electronically, as well as a properly completed and duly executed copy of this
Letter or a facsimile hereof, and any other documents required by this Letter,
must be received by the Exchange Agent at one of its addresses set forth herein
or (in the case of tenders by book-entry transfer) confirmed to the Exchange
Agent prior to the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER, THE
PREFERRED STOCK AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE PREFERRED STOCKHOLDER, AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE
AGENT. IF CERTIFICATES FOR PREFERRED STOCK ARE SENT BY MAIL, IT IS SUGGESTED
THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
Preferred Stockholders whose certificates representing the shares of
Preferred Stock that they wish to tender are not immediately available or who
cannot deliver their certificates or any other required documents to the
Exchange Agent prior to the Expiration Date may tender their Preferred Stock
pursuant to the guaranteed delivery procedure set forth in the Offer to
Purchase. Pursuant to that procedure: (i) such tender must be made by or through
an Eligible Institution (as defined in the Offer to Purchase); (ii) by the
Expiration Date, the Exchange Agent must have received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
by telegram, telex, facsimile transmission, mail or hand delivery setting forth
the name and address of the Preferred Stockholder and the number of shares of
Preferred Stock tendered, stating that the tender is being made thereby and
guaranteeing that, within three over-the-counter market trading days after the
Expiration Date, the Preferred Stock certificates (or book-entry transfer of
such shares), together with a properly completed and duly executed Letter (or
facsimile thereof) and all other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificate(s) for all tendered shares of Preferred Stock, or a confirmation of
a book-entry transfer of such shares of Preferred Stock into the Exchange
Agent's account at DTC as described above, and a properly completed and duly
executed copy of this Letter (or facsimile thereof), and all other documents
required by this Letter, must be received by the Exchange Agent within three
over-the-counter market trading days after the Expiration Date, all as provided
in the Offer to Purchase under the caption "The Offer--Guaranteed Delivery
Procedure."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Preferred Stock and all other
documents required by this Letter will be resolved by the Company, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders or subscriptions that are not in proper form
or the acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to any Preferred Stock. The Company's
interpretation of the terms and conditions of the Offer (including the
instructions in this Letter) will be final and binding. Unless waived, any
defect or irregularity in connection with tenders must be cured within such time
as the Company determines. Tenders of Preferred Stock shall not be deemed to
have been made until all defects and irregularities have been waived by the
Company or cured. The Company shall be deemed to have accepted Preferred Stock
tendered to the Company pursuant hereto when, as and if the Company gives
written notice to the Exchange Agent of the Company's acceptance for exchange of
such Preferred Stock. The Standby Purchaser shall be deemed to have accepted
Preferred Stock tendered pursuant hereto and not accepted by the Company when,
as and if the Standby
8
<PAGE>
Purchaser gives written notice to the Exchange Agent of the Standby Purchaser's
acceptance for exchange of such Preferred Stock. All tendering holders of
Preferred Stock, by execution of this Letter (or facsimile hereof, promptly
followed by receipt of a duly executed original), waive any right to receive
notice of the acceptance of their Preferred Stock. Any shares of Preferred Stock
received by the Exchange Agent that are not properly tendered by the holder
thereof will be returned to such holder (or in the case of Preferred Stock
tendered by book-entry transfer into the Exchange Agent's account at DTC, such
Preferred Stock will be credited to an account maintained at DTC) as soon as
practicable following the Expiration Date.
Neither the Company nor the Exchange Agent nor any other person shall be
obligated to give notification of defects or irregularities in any tender or
shall incur any liability for failure to give any such notification.
See "The Offer" section of the Offer to Purchase.
(2) Partial Tenders and Withdrawals. If less than the entire number of
shares of Preferred Stock evidenced by a submitted certificate is to be
tendered, the tendering Preferred Stockholder should fill in the number of
shares to be tendered in the column entitled "Number of Shares Tendered" in the
box above entitled "Description of Preferred Stock." Reissued shares of
Preferred Stock for the number of shares not accepted will be sent to such
Preferred Stockholder, unless otherwise provided in the appropriate box on this
Letter, as soon as practicable after the Expiration Date. The aggregate number
of shares of all Preferred Stock delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Any Preferred Stockholder of record who has tendered shares of Preferred
Stock may withdraw the tender by delivering written notice of withdrawal to the
Exchange Agent prior to the Expiration Date, and, unless such tenders have
previously been accepted by the Company or the Standby Purchaser, after 5:00
P.M., eastern time on August 1, 1995. To be effective, a notice of withdrawal
must indicate the certificate serial number or numbers of the shares of
Preferred Stock to which it relates (or, if the tender was by book-entry
transfer, information sufficient to enable the Exchange Agent to identify the
Preferred Stock so tendered) and the aggregate number of shares represented by
such Preferred Stock certificates and be (a) signed by the holder in the same
manner as the original signature in this Letter or (b) accompanied by evidence
satisfactory to the Company that the holder withdrawing such tender has
succeeded to beneficial ownership of such Preferred Stock, and as further
provided in the Offer to Purchase under the caption "The Offer--Withdrawal
Rights."
(3) Signatures on this Letter, Stock Powers and Endorsements; Guarantee of
Signatures. If this Letter is signed by the registered holder of the Preferred
Stock tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificate representing such Preferred Stock without
any change whatsoever.
If any tendered shares of Preferred Stock are owned of record by two or
more joint owners, all such owners must sign this Letter.
If any tendered shares of Preferred Stock are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
shares of Preferred Stock specified herein and tendered hereby, no endorsements
of certificates or separate stock powers are required. If, however, certificates
for any untendered shares of Preferred Stock are to be reissued to a person
other than the registered holder, then endorsements of any certificates
transmitted hereby or separate stock powers are required, with signatures
guaranteed in either case.
9
<PAGE>
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s).
If this Letter or a Notice of Guaranteed Delivery or any certificates or
stock powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers or corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR PREFERRED STOCK OR SIGNATURES ON STOCK
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION.
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE SHARES OF PREFERRED STOCK ARE TENDERED: (I) BY A
REGISTERED HOLDER OF SUCH PREFERRED STOCK (WHICH TERM, FOR PURPOSES OF THIS
LETTER, SHALL INCLUDE ANY PARTICIPANT IN DTC WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE OWNER OF PREFERRED STOCK) WHO HAS NOT COMPLETED THE BOX
ENTITLED "SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS" ON THIS LETTER; OR (II)
FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
(4) Special Issuance and Delivery Instructions. Tendering Preferred
Stockholders should indicate in the applicable box the name and address to which
cash consideration for accepted Preferred Stock and/or substitute certificates
evidencing Preferred Stock for the number of shares not accepted are to be
issued or sent, if different from the name and address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. If no such instructions are given, such certificates representing
shares of Preferred Stock not accepted will be returned to the name and address
of the person signing this Letter or, at the Company's option, by crediting the
account at DTC designated below the box entitled "Description of Preferred
Stock."
(5) Taxpayer Identification Number. Federal income tax law requires that
a Preferred Stockholder whose tendered Preferred Stock is accepted by the
Company must provide the Company (as payor) with his or her correct Taxpayer
Identification Number ("TIN"), which, in the case of a tendering Preferred
Stockholder who is an individual, is his or her social security number. If the
Company is not provided with the correct TIN or an adequate basis for exemption,
such Preferred Stockholder will be subject to a $50 penalty imposed by the
Internal Revenue Service (the "IRS") unless such failure to provide such TIN is
due to reasonable cause and not to willful neglect. In addition, delivery to
such Preferred Stockholder of the cash consideration for his, her or its
tendered and accepted Preferred Stock may be subject to backup withholding in an
amount equal to 28% of the gross proceeds resulting from the Offer. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt Preferred Stockholders (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering Preferred Stockholder must
provide his, her or its correct TIN by completing the "Substitute Form W-9" set
forth herein, certifying that the TIN provided is correct (or that such
Preferred Stockholder is awaiting a TIN) and that (i) the Preferred Stockholder
is exempt from backup withholding, (ii) the Preferred Stockholder has not been
notified by the IRS that he, she or it is subject to backup withholding as a
result of a failure to report all interest or dividends or (iii) the IRS has
notified the Preferred Stockholder that he, she or it is no longer subject to
backup withholding. In order to satisfy the Exchange Agent and the Company that
a foreign individual qualifies as an exempt recipient, such Preferred
Stockholder must submit a statement signed under penalty of perjury attesting to
such exempt status. Such statements may be
10
<PAGE>
obtained from the Exchange Agent and the Company. If the shares of Preferred
Stock are in more than one name or are not in the name of the actual owner,
consult the W-9 Guidelines for information on which TIN to report. If you do not
have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN,
write "applied for" in lieu of your TIN in Part I of the Substitute Form W-9,
and sign and date the form. If you do not provide your TIN to the Company within
60 days, backup withholding will begin and continue until you furnish your TIN
to the Company.
(6) Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the transfer and sale of Preferred Stock to it or its order
pursuant to the Offer. If, however, certificates for Preferred Stock for the
number of shares of Preferred Stock not accepted are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Preferred Stock tendered hereby, or if a tendered certificate
representing Preferred Stock is registered in the name of any person other than
the person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer and sale of Preferred Stock to the Company or its order
pursuant to the Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
Preferred Stockholder. If satisfactory evidence of payment of such taxes or an
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering Preferred Stockholder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) SPECIFIED IN THIS
LETTER.
(7) Waiver of Conditions. The Company reserves the absolute right to
waive satisfaction of any conditions enumerated in the Offer to Purchase.
(8) No Conditional Offers. No alternative, conditional, irregular or
contingent tenders will be accepted.
(9) Mutilated, Lost, Stolen or Destroyed Preferred Stock Certificates.
Any Preferred Stockholder whose certificates for Preferred Stock have been
mutilated, lost, stolen or destroyed should contact the Exchange Agent at the
address indicated above for further instructions.
(10) Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Offer to Purchase and this Letter, should be directed to the Exchange Agent at
10 Commerce Drive, Cranford, New Jersey 07016, telephone 800-346-6084.
In addition, all questions relating to the Offer may be directed to Elmer
J. Dahl, the Company's Corporate Secretary, at 203-242-0761.
11
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e., 000-
00-0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the number to give
the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ---------------------------------------------------------------
GIVE THE
GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate or Legal Entity (Do not
pension trust furnish the identifying
2. Two or more individuals (joint The actual owner of number of the personal
account) the account or, if representative or
combined funds, any trustee unless the legal
one of the entity itself is not
individuals(1) designated in the
account title.)(5)
3. Husband and wife (joint The actual owner of
account) the account or, if joint
funds, either person(1) 10. Corporate account The corporation
4. Custodian account of a minor The minor(2) 11. Religious, charitable, or The organization
(Uniform Gift to Minors Act) educational organization
account
5. Adult and minor (joint The adult or, if the 12. Partnership account held in The partnership
account) minor is the only the name of the business
contributor, the
minor(1) 13. Association, club or other The organization
tax-exempt organization
6. Account in the name of The ward, minor, or 14. A broker or registered The broker or nominee
guardian or committee for a incompetent person(3) nominee
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-trustee(1) 15. Account with the Department The public entity
trust account (grantor is of Agriculture in the name
also trustee) of a public entity (such as
a State or local government,
b. So-called trust account that The actual owner(1) school district, or prison)
is not legal or valid trust that receives agricultural
under State law program payments
8. Sole proprietorship account The owner(4)
- -------------------------------------------------------------- ---------------------------------------------------------------
</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
The Tax Identification Number ("TIN") provided in the Substitute Form W-9 should
be that of the tendering Holder
For a joint account, only that person whose TIN is furnished should sign the
Substitute Form W-9.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
NOTE: Writing "Applied for" on the form means that you have already applied for
a TIN OR that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date the form and give it to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For purposes of this tender offer, only
payees listed in (1) through (13), and a person registered under the
InvestmentAdvisers Act of 1940 who regularly acts as a broker are exempt.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan (IRA), or a custodial account under 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A State, the District of Columbia, a possession of the United States, or
any or their political subdivisions, or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publications of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, give the payer a completed Form W-8 Certificate of Foreign Status.
(1) 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.
(2) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
<PAGE>
Exhibit (a)(3)
ANDERSEN GROUP, INC.
Offer to Purchase for Cash Any and All Shares of its
Series A Cumulative Convertible Preferred Stock
- --------------------------------------------------------------------------------
THE WITHDRAWAL DEADLINE AND EXPIRATION DATE (UNLESS EXTENDED) ARE ALL 12:00
MIDNIGHT, EASTERN TIME, ON JULY 7, 1995
- --------------------------------------------------------------------------------
TO BROKERS, DEALERS, BANKS AND TRUST COMPANIES:
We, Andersen Group, Inc. (the "Company"), have elected to have Registrar
and Transfer Company act as Exchange Agent in connection with our tender offer
to purchase any and all Shares of our Series A Cumulative Convertible Preferred
Stock (the "Shares") at $12.25 per Share cash to the Seller and upon the terms
and subject to the conditions set forth in our Offer to Purchase for Cash dated
June 5, 1995, and the related Letter of Transmittal enclosed herewith (which
together constitute the "Offer"). The Offer is not conditioned on any
stockholder tendering 100% of his, her or its respective Shares, however, the
Offer is conditioned on at least 250,000 Shares being tendered and not withdrawn
prior to the Expiration Date. If Shares have been validly tendered and not
withdrawn prior to 12:00 Midnight, Eastern Time, on July 7, 1995 (the "Initial
Expiration Date"), such Shares so tendered will, upon the terms and subject to
the conditions of the Offer, be purchased at the time and in the amounts set
forth in the Offer.
No fees or commission will be payable to brokers, dealers or persons for
soliciting tenders of Shares pursuant to the Offer. However, we will reimburse
brokers, dealers, commercial banks, trust companies and other nominees for their
reasonable and necessary costs incurred in forwarding the Offer to Purchase and
related documents to beneficial owners of Shares held by such entities as
nominee or in a fiduciary capacity. No such broker, dealer, bank, trust company
or other nominee has been authorized to act as agent by the Company.
Enclosed are copies of the following documents:
1. Offer to Purchase for Cash dated June 5, 1995;
2. Letter of Transmittal for your use and for the information of your
clients;
3. Form of Letter to Clients which may be sent to clients for whose account
you hold Shares in your name, with space provided for obtaining such
clients' instructions with regard to the Offer;
4. Form of Notice of Guarantee Delivery; and
5. Return envelope addressed to the Exchange Agent.
We urge you to contact your clients as promptly as possible. Please note
that the Withdrawal Deadline and the Expiration Date (unless extended) of the
Offer are all 12:00 Midnight, Eastern Time, on July 7, 1995.
In order to take advantage of this Offer, certificates of Shares,
accompanied by an executed Letter of Transmittal, should be sent to the Exchange
Agent, as indicated in the Offer.
As described in the Offer to Purchase under the heading "The Offer -
Procedures for Tendering," tenders may be made without the concurrent deposit of
stock certificates and any other required documents if such tenders are made by
or through a broker or dealer which is a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank, credit union, savings association or trust
company having an office in the United States. Certificates for Shares so
tendered and any other
1
<PAGE>
required documents must be received within three over-the-counter market trading
days after the Exchange Agent has previously received a completed and duly
executed Notice of Guaranteed Delivery.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the documents listed above may be obtained from the
Company, Andersen Group, Inc., Ney Industrial Park, Bloomfield, Connecticut
06002, (203) 242-0761.
Very truly yours,
ANDERSEN GROUP, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE COMPANY, IN ANY CAPACITY, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF THE COMPANY WITH RESPECT TO
THE OFFER, EXCEPT THE STATEMENTS EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE
LETTER OF TRANSMITTAL.
2
<PAGE>
Exhibit (a)(4)
ANDERSEN GROUP, INC.
Offer to Purchase for Cash Any and All Shares of its
Series A Cumulative Convertible Preferred Stock
- --------------------------------------------------------------------------------
THE WITHDRAWAL DEADLINE AND EXPIRATION DATE (UNLESS EXTENDED) ARE ALL 12:00
MIDNIGHT, EASTERN TIME, ON JULY 7, 1995
- --------------------------------------------------------------------------------
TO OUR CLIENTS:
Enclosed for your consideration is the Offer to Purchase for Cash dated
June 5, 1995, by Andersen Group, Inc. (the "Company") and a related Letter of
Transmittal (which together constitute the "Offer"), pursuant to which the
Company will, upon the terms and subject to the conditions of the Offer,
purchase any and all shares of its Series A Cumulative Convertible Preferred
Stock (the "Shares") at $12.25 per share cash to the Seller. All stockholders
who validly tender Shares will receive the Purchase Price for all Shares
accepted for payment. The Offer to Purchase and the Letter of Transmittal are
being forwarded to you as the beneficial owner of Shares held by us for your
account but not registered in your name. A tender of such shares can be made
only by us as the holder of record and only pursuant to your instructions.
Upon the terms and subject to the conditions of the Offer, if Shares have
been validly tendered and not withdrawn prior to 12:00 Midnight, Eastern Time,
on July 7, 1995 (the "Initial Expiration Date"), such Shares so tendered will,
upon the terms and subject to the conditions of the Offer, be purchased and
Shares tendered after the Initial Expiration Date will not be purchased.
Your attention is called to the following:
1. The Offer is conditioned on a minimum of 250,000 Shares being tendered
in total.
2. Tendering stockholders will not be obligated to pay brokerage commission
or, subject to instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Company pursuant to the Offer.
3. The Withdrawal Deadline and Expiration Date (unless extended) of the
Offer are all 12:00 Midnight Eastern Time, on July 7, 1995. Your
instructions to us should be forwarded in ample time to permit us to
submit a tender on your behalf.
If you wish to have us tender all of your Shares, will you kindly so
instruct us by completing, executing and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. The
enclosed specimen Letter of Transmittal is furnished to you for information only
and may not be used to tender Shares.
The Offer is not being made to, nor will the Company accept tenders from,
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 or if the
making or acceptance of the Offer would violate or contravene any agreement to
which the Company is a party. In any jurisdiction the securities or blue sky
laws of which require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
1
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase for Cash, dated June 5, 1995, relating to the Offer by Andersen
Group, Inc. (the "Company") to purchase any and all of the outstanding shares of
its Series A Cumulative Convertible Preferred Stock (the "Shares") at $12.25 per
Share cash to the Seller.
This will instruct you to tender to the Company ________ of the Shares
which are held by you for the account of the undersigned, upon the terms and
subject to the conditions set forth in the Offer to Purchase for Cash, and in
the related Letter of Transmittal that you have furnished to the undersigned.
Date: _______________, 1995
Sign Here
___________________________________
Signature(s)
___________________________________
(Please print name(s))
___________________________________
(Street Address)
___________________________________
(City, State, Zip)
Aggregate number of Shares to be tendered by us
_________________________
Shares
<PAGE>
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY OF SHARES OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF ANDERSEN GROUP, INC.
A form substantially equivalent to that set forth below must be used to
accept the Offer (as defined below) if certificates for shares of the Series A
Cumulative Convertible Preferred Stock ("Shares") of Andersen Group, Inc. are
not immediately available or time will not permit the Letter of Transmittal and
other required documents to reach the Exchange Agent by the Expiration Date. The
Expiration Date is 12:00 Midnight, Eastern Time, on July 7, 1995 (unless further
extended). Such form may be delivered by hand, mail, telegram or facsimile
transmission to the Exchange Agent. See the information set forth under the
heading "The Offer-Guaranteed Delivery Procedure" in the Offer to Purchase for
Cash.
The Exchange Agent
REGISTRAR AND TRANSFER COMPANY
By Mail or Overnight Delivery By Facsimile:
10 Commerce Drive (908) 272-1006
Cranford, NJ 07016 Confirm by Telephone:
800-346-6084
By Hand:
c/o Midwest Securities 10 Commerce Drive
40 Broad Street or Cranford, NJ
New York, NY
Ladies and Gentlemen:
The undersigned hereby tenders to Andersen Group, Inc., a Connecticut
corporation, upon the terms and subject to the conditions set forth in its Offer
to Purchase for Cash dated June 5, 1995, and the related Letter of Transmittal
(which together constitute the "Offer"), receipt of which is hereby acknowledged
______ Shares at $12.25 per share pursuant to the guaranteed delivery procedures
set forth in the Offer to Purchase for Cash under the heading "The Offer-
Guaranteed Delivery Procedure."
Signature(s):______________________
Names(s):__________________________
Address:___________________________
___________________________________
Area Code and Telephone No.:
( )
_________________________
<PAGE>
GUARANTEE
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank, credit union, savings association or trust company having an
office in the United States guarantees (a) that the above-named person(s)
"own(s)" the Shares tendered hereby within the meaning of Rule 10b-4 under the
Securities Exchange Act of 1934, as amended, (b) that such tender of Shares
complies with Rule 10b-4, and (c) to deliver to Registrar and Transfer Company,
as Exchange Agent, certificates representing the Shares tendered hereby, in
proper form for transfer together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee and any other documents required by the Letter of
Transmittal, within three over-the-counter market trading days after the date of
receipt hereof by the Exchange Agent.
Firm:______________________________
Sign Here:_________________________
(Authorized Signature)
___________________________________
(Title)
Name:______________________________
(Please Type or Print)
Address:___________________________
___________________________________
Area Code and Telephone No.:
___________________________________
Dated:__________________, 1995
Please do not send stock certificates with this form.
Stock certificates must be sent with a Letter of Transmittal.
<PAGE>
Exhibit (a)(6)
FOR IMMEDIATE RELEASE
CONTACT:
JACK E. VOLINSKI
CHIEF FINANCIAL OFFICER
ANDERSEN GROUP, INC.
203/242-0761
ANDERSEN GROUP COMMENCES SELF TENDER OFFER FOR PREFERRED STOCK
AND PLANS TO SELL DENTAL DIVISION
Bloomfield, Connecticut, June 5, 1995 -- Andersen Group, Inc. (NASDAQ:
ANDR) (the "Company") announced the commencement today of a cash tender offer on
its own behalf to purchase any and all shares of its Series A Cumulative
Convertible Preferred Stock (the "Preferred Stock") at $12.25 per share, net.
The Company has approximately 589,000 shares of its Preferred Stock outstanding.
The offer is subject to a number of conditions, including there being
properly tendered and not withdrawn prior to the expiration date a minimum of
250,000 shares of the Preferred Stock. Each preferred stockholder may tender all
or any lesser portion of his or her shares. The offer will expire at 12:00
Midnight, Eastern time, on Friday, July 7, 1995. Any preferred stockholder who
has tendered shares is entitled to withdraw that tender prior to the expiration
date and, unless previously accepted by the Company, after 5:00 p.m., Eastern
time on August l, 1995.
The Company also is planning to sell its Dental Division. This Division
develops, manufactures and distributes a range of materials, equipment and
merchandise for distribution and sale to the dental laboratory healthcare
market. The Dental Division operates facilities in Bloomfield, Connecticut and
Yucaipa,
<PAGE>
California. In the fiscal year ended February 28, 1995, the Company's Dental
Division had net sales and revenues of approximately $38 million.
The Company's offer to purchase the Preferred Stock is conditioned upon
consummation of the sale of the Dental Division in order to generate sufficient
funds to purchase tendered shares and to meet certain existing financing
covenants.
The Company and representatives of prospective buyers of the Dental
Division have met from time to time. In the case of one prospective buyer, the
parties are in the process of exchanging due diligence information and draft
documentation. However, no definitive agreements have been reached. The Company
has advised the party with which it is negotiating that the Company does not
intend to sign a definitive agreement as to the sale of its Dental Division
unless and until the Company determines that a minimum of 250,000 shares of the
Preferred Stock have been tendered.
If the Company consummates both the offer to purchase the minimum of
250,000 shares of Preferred Stock and the sale of the Dental Division at an
assumed purchase price of $18.0 million, the Company's book value per common
share as at February 28, 1995 would have increased by $3.67 per share. Of
course, the Company can give no assurance that the sale of the Dental Division
will be consummated at that assumed purchase price or on any other terms, if at
all, or that the minimum number of shares of Preferred Stock will be tendered
and accepted by the Company.
Prior to the initiation of the offer, there has been no established or
active trading market for the Preferred Stock.
<PAGE>
Exhibit (c)
STANDBY AGREEMENT
-----------------
This Agreement, which is effective as of June 1, 1995, is by and among
Andersen Group, Inc. (the "Company"), a Connecticut corporation, Andersen
Capital L.P., a Delaware limited partnership (the "Standby Purchaser") and, for
the purposes of Section 6 only, Oliver R. Grace, Jr., Peter N. Bennett, John S.
Grace and James J. Pinto (individually a "Principal"; collectively the
"Principals"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Company's Offer to Purchase for Cash dated June 5,
1995 (the "Offer").
For adequate consideration received, the Company and the Standby Purchaser
hereto agree as follows:
(1) Recitals
--------
(a) the Company has determined to offer to purchase for cash any and
all of its outstanding shares of Series A Cumulative Convertible Preferred Stock
(the "Preferred Stock"), for a purchase price of $12.25 per share net to the
Seller in cash (the "Consideration");
(b) the Company has undertaken to make funds available to consummate
the Offer by selling the Company's Ney Dental Division (the "Dental
Divestiture");
(c) Certain of the Company's debt instruments contain restrictions on
the Company's ability to redeem or repurchase shares of or to pay dividends on
the Preferred Stock (the "Restrictive Covenants").
Under the Restrictive Covenants, the Company must have sufficient
Consolidated Net Income determined on a cumulative basis, net of losses,
dividends and prior redemptions or repurchases of stock, in order to redeem or
repurchase shares of or to pay dividends on the Preferred Stock. At February 28,
1995, the Company needed to earn approximately $2,453,000 before it could redeem
or repurchase shares of or pay dividends on the Preferred Stock.
(2) Standby Purchaser Option
------------------------
In order to provide additional liquidity for the purchase of shares of
Preferred Stock tendered pursuant to the Offer which the Company does not
purchase, for any reason, the Company grants the Standby Purchaser the right to
purchase any and all or less than all of the shares of Preferred Stock properly
tendered into the Offer and not purchased by the Company, in such amounts as are
determined in the sole discretion of the Standby Purchaser, on the same terms
and conditions as are set forth in the Offer and the accompanying Letter of
Transmittal (the "Option").
(3) Compensation and Fees
---------------------
The Standby Purchaser will not be paid any compensation or other fees
in connection with this Agreement. However, the Company shall reimburse the
Standby Purchaser for the Standby Purchaser's reasonable out-of-pocket expenses,
including attorneys' fees, incurred in connection with this Agreement and the
Offer.
<PAGE>
(4) Indemnification of Standby Purchaser
------------------------------------
The Company agrees to indemnify the Standby Purchaser for any loss
sustained by the Standby Purchaser as a result of the involvement of the Standby
Purchaser in the transactions contemplated by this Agreement, except for:
(a) a loss sustained by the Standby Purchaser as a result of any
change in the value of the Preferred Stock including, but not limited to, a loss
incurred on a subsequent sale or exchange of the Preferred Stock purchased by
the Standby Purchaser pursuant to the Option;
(b) a loss sustained by the Standby Purchaser as a result of any
representation in this Agreement by the Standby Purchaser or any of the
Principals being false when made;
(c) any loss sustained by the Standby Purchaser which results from a
breach of any provision of this Agreement by the Standby Purchaser or any
Principal; and
(d) any loss sustained by the Standby Purchaser which results from the
negligence or intentional misconduct of the Standby Purchaser or any Principal.
(5) Indemnification of the Company
------------------------------
If the Standby Purchaser exercises the Option, the Standby Purchaser
agrees to indemnify the Company for any loss sustained by the Company as a
result of:
(a) any representation in the Agreement by the Standby Purchaser or
any Principal being false when made;
(b) a breach of any provision of this Agreement by the Standby
Purchaser or any Principal; and
(c) the gross negligence or intentional misconduct of the Standby
Purchaser or any Principal in connection with any transaction contemplated by
this Agreement.
(6) Principals' and Standby Purchaser Representations
-------------------------------------------------
(a) For purposes of this Agreement, each of the Principals severally
represents that:
(i) he owns or controls, directly or indirectly, the number of
shares of Preferred Stock set forth opposite his name and that none of these
shares will be tendered into the Offer:
<TABLE>
<CAPTION>
<S> <C>
Peter N. Bennett 85,150
Oliver R. Grace, Jr. 40,863
John S. Grace 32,571
James J. Pinto None
-------
158,584;
=======
</TABLE>
- 2 -
<PAGE>
(ii) he has reviewed the following sections of the Offer and
represents that they are true and correct in all material respects:
(A) "Special Factors - Interests of Certain Persons in the
Offer," first paragraph only; and
(B) "The Standby Agreement;"
(iii) the Standby Purchaser may fund any purchase of shares of
Preferred Stock pursuant to this Agreement from a combination of bank and other
borrowings and/or cash capital contributions from its partners, and that such
capital contributions may be funded by a combination of bank or other borrowings
and/or funds otherwise available to the partners;
(iv) neither the Standby Purchaser nor any of the Principals
presently has any agreement with any person or entity to provide the funds
required for any such purchase of shares of Preferred Stock;
(v) he will fund his capital contributions to the Standby purchaser
from a combination of bank or other borrowings and/or funds otherwise available
to him; and
(vi) during the forty (40) business days prior to the date of the
Offer to Purchase, he has not been a party to any transaction in any security of
the Company or any derivative security relating thereto.
(b) For purposes of this Agreement, the Standby Purchaser represents
that:
(i) it may fund any purchase of shares of Preferred Stock pursuant
to the Offer and this Agreement from a combination of bank and other borrowings
and/or cash capital contributions from its partners and that such capital
contributions may be funded by a combination of bank or other borrowings and/or
funds otherwise available to the partners;
(ii) neither the Standby Purchaser nor any of its partners presently
has any agreement with any person or entity to provide the funds required for
any such purchase;
(iii) the Standby Purchaser does not presently intend to pledge or
otherwise encumber any shares of Preferred Stock that it purchases pursuant to
this Agreement as security for any bank loan or other financing arrangement that
it enters into connection with any transaction contemplated by this Agreement;
(iv) any person or entity that becomes a partner of the Standby
Purchaser after the date of this Agreement shall be able to make, and shall
make, the representations as set forth in Sections 6(a)(iii), (iv) and (v) above
to the Standby Purchaser prior to such person or entity becoming a partner of
the Standby Purchaser; and
(v) the Standby Purchaser shall not admit any person or entity as a
partner of the Standby Purchaser after the date of this Agreement unless such
person or entity makes the representations set forth in Section 6(b)(iv) in
writing prior to such admission.
(7) Additional Limited Partners
---------------------------
Subject to Section 6(y) and compliance with applicable law, the
general partner of the Standby Purchaser shall be entitled to admit limited
partners other than the Principals after the date of this Agreement.
- 3 -
<PAGE>
(8) Notices; Entire Agreement
-------------------------
(a) Any notice sent pursuant to this Agreement shall be sent to the
parties at the addresses shown below. Notices delivered by facsimile machine
will be deemed to have been delivered in writing for purposes of this Agreement.
Andersen Group, Inc.
--------------------
Francis E. Baker, President
Ney Industrial Park
2 Douglas Street
Bloomfield, CT 06002
Fax: (203) 242-7426
Andersen Capital L.P.
---------------------
Attention: Oliver R. Grace, Jr.
Eden Tree Farm
55 Brookville Road
P.O. Box 163
Glen Head, NY 11545-0163
Fax: (516) 625-1685
(b) This Agreement constitutes the entire agreement between the
parties with respect to the transactions contemplated hereby and supersedes all
prior written or oral understandings and agreements with respect to the subject
matter hereof, all of which prior understandings and agreements are merged into
this Agreement.
THE NEXT PAGE IS THE SIGNATURE PAGE
- 4 -
<PAGE>
(9) Other Provisions
----------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Connecticut. This Agreement may be
executed in one or more counterparts.
ANDERSEN CAPITAL L.P. ANDERSEN GROUP, INC.
by ACLP, Inc., Its General Partner
/s/ Oliver R. Grace, Jr. /s/ Francis E. Baker
- ---------------------------- ------------------------
By: Oliver R. Grace, Jr. By: Francis E. Baker
Its: President Its: President
Oliver R. Grace, Jr. Peter N. Bennett
as to Section 6 only as to Section 6 only
/s/ Oliver R. Grace, Jr. /s/ Peter N. Bennett
- ---------------------------- ------------------------
John S. Grace James J. Pinto
as to Section 6 only as to Section 6 only
/s/ John S. Grace /s/ James J. Pinto
- ---------------------------- ------------------------
<PAGE>
Exhibit (g)
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $63,407,440 $54,469,822 $45,503,282
Investment and other income 3,442,558 1,559,440 1,588,047
- -----------------------------------------------------------------------------------------------
66,849,998 56,029,262 47,091,329
- -----------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 44,517,925 37,573,656 31,166,289
Selling, general and administrative 17,991,117 16,784,178 13,413,724
Research and development 3,544,978 3,166,804 2,590,096
Restructuring charge - - 949,795
Gain on post-retirement plan change - - (538,596)
Interest expense 1,447,315 1,462,525 1,640,805
- -----------------------------------------------------------------------------------------------
67,501,335 58,987,163 49,222,113
- -----------------------------------------------------------------------------------------------
Loss from continuing operations
before income taxes and extraordinary item (651,337) (2,957,901) (2,130,784)
Income tax benefit 283,931 1,974,618 1,654,803
- -----------------------------------------------------------------------------------------------
Loss from continuing operations
before extraordinary item (367,406) (983,283) (475,981)
Loss from discontinued operation,
net of income tax benefit of $1,883,007 - - (2,341,918)
- -----------------------------------------------------------------------------------------------
Loss before extraordinary item (367,406) (983,283) (2,817,899)
Extraordinary gain (loss) from early extinguishment
of debt, net of income taxes (20,546) 114,963 133,218
- -----------------------------------------------------------------------------------------------
Net loss (387,952) (868,320) (2,684,681)
Preferred dividend requirement (586,936) (599,872) (669,821)
- -----------------------------------------------------------------------------------------------
Loss applicable to common shares $(974,888) $(1,468,192) $(3,354,502)
- -----------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $(.49) $(.86) $(.65)
Discontinued operations - - (1.32)
Extraordinary item (.01) .06 .08
- -----------------------------------------------------------------------------------------------
Loss per common share $(.50) $(.80) $(1.89)
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
Years Ended February 28, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,708,926 $2,061,220
Marketable securities 2,180,153 564,072
Accounts and other receivables, less allowance
for doubtful accounts of $359,714 in 1995
and $426,459 in 1994 7,921,364 8,828,232
Inventories 12,690,154 13,550,704
Prepaid expenses and other assets 519,553 692,921
- ------------------------------------------------------------------------------------------
Total current assets 26,020,150 25,697,149
- ------------------------------------------------------------------------------------------
Investments in cellular partnerships - 4,760,966
Property, plant and equipment, net 11,417,762 12,679,835
Prepaid pension expense 3,516,685 3,369,157
Investment in Digital GraphiX 1,801,351 -
Other assets 922,725 2,082,910
- ------------------------------------------------------------------------------------------
$43,678,673 $48,590,017
- ------------------------------------------------------------------------------------------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND COMMON AND OTHER STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $343,285 $1,532,611
Short-term debt 3,200,000 3,237,093
Accounts payable 2,119,216 2,525,301
Accrued liabilities 5,190,547 4,566,411
Deferred income taxes 93,726 516,160
- ------------------------------------------------------------------------------------------
Total current liabilities 10,946,774 12,377,576
- ------------------------------------------------------------------------------------------
Long-term debt, less current maturities 8,784,011 11,601,148
Other long-term obligations 1,160,142 1,007,028
Deferred income taxes 2,281,380 2,273,461
Commitments and contingencies (Notes 14, 18)
Redeemable cumulative convertible preferred
stock, no par value; authorized 800,000
shares; issued 789,628 shares; outstanding shares
of 589,036 in 1995 and 591,920 in 1994; net of
unamortized discount of $450,872 in 1995 and
$604,106 in 1994; liquidation preference $18.75
per share 10,593,440 10,494,281
- ------------------------------------------------------------------------------------------
COMMON AND OTHER STOCKHOLDERS' EQUITY:
Preferred stock, no par value; authorized 200,000 shares
Common stock, no par value; authorized 6,000,000 shares,
issued 1,958,205 shares in 1995 and 1,952,798 in 1994 2,103,204 2,103,150
Additional paid-in capital 1,924,385 1,873,148
Retained earnings 5,975,337 6,950,225
- ------------------------------------------------------------------------------------------
10,002,926 10,926,523
Treasury stock, at cost, 24,000 shares (90,000) (90,000)
- ------------------------------------------------------------------------------------------
Total common and other stockholders' equity 9,912,926 10,836,523
- ------------------------------------------------------------------------------------------
$43,678,673 $48,590,017
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(387,952) $(868,320) $(2,684,681)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation, amortization and accretion 2,329,428 3,367,519 3,287,416
Deferred income taxes (414,515) (2,007,395) (3,331,523)
Gain on sale of cellular investments (3,223,076) - -
Loss (gain) on redemptions of long-term debt 31,129 (174,185) (157,505)
Pension income (147,528) (194,276) (306,416)
Gain on disposal of property, plant and equipment (62,150) - -
Gain on post-retirement plan change - - (538,596)
Net assets of discontinued operation - - 3,698,468
Investment in Digital GraphiX 2,014,184 - -
Changes in operating assets and liabilities,
net of changes from sale of subsidiary in 1993:
Account and notes receivable (644,870) (2,090,181) (345,357)
Inventories (1,095,910) (2,605,979) (255,725)
Prepaid expenses and other assets 667,215 2,009,065 879,164
Accounts payable (144,233) (396,883) 563,138
Accrued expenses and other long-term obligations 397,609 502,303 (1,339,553)
- ------------------------------------------------------------------------------------------------
Net cash used for operating activities (680,669) (2,458,332) (531,170)
- ------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 337,153 - -
Purchase of property, plant and equipment (1,436,372) (1,112,157) (2,305,901)
Sale (purchase) of marketable securities (1,004,380) 4,901,658 3,937,242
Proceeds from sale of cellular partnerships 7,511,068 - -
Investments in cellular partnerships - (40,707) (1,980,065)
Purchase of Microtime assets - (470,000) -
- ------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 5,407,469 3,278,794 (348,724)
- ------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (4,042,001) (1,257,874) (1,377,266)
Redemptions of preferred stock - (119,158) (2,143,887)
Dividends paid - (114,642) (618,100)
Proceeds from issuance of short-term debt, net (37,093) (12,907) 3,250,000
Proceeds from capital lease obligations - - 682,633
Issuance of common stock - 599,999 -
- ------------------------------------------------------------------------------------------------
Net cash used for financing activities (4,079,094) (904,582) (206,620)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 647,706 (84,120) (1,086,514)
Cash and cash equivalents, beginning of year 2,061,220 2,145,340 3,231,854
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $2,708,926 $2,061,220 $2,145,340
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $1,503,148 $1,404,555 $1,542,533
Income taxes, net $165,677 $114,832 $207,499
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
ANDERSEN GROUP, INC.
Consolidated Statements of Common and Other Stockholders' Equity
Years ended February 28, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional
- Common Stock - Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1992 1,791,165 $2,101,533 $151,196 $11,861,277 $(90,000) $14,024,006
Preferred stock dividends
and accretion - - - (669,821) - (669,821)
Common stock dividends - - - (88,358) - (88,358)
Gain on redemption of redeemable
preferred stock - - 817,617 - - 817,617
Conversion of preferred stock 8,915 89 82,679 - - 82,768
Net loss - - - (2,684,681) - (2,684,681)
- -------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1993 1,800,080 2,101,622 1,051,492 8,418,417 (90,000) 11,481,531
Preferred stock dividends
and accretion - - - (599,872) - (599,872)
Gain on redemption of redeemable
preferred stock - - 41,147 - - 41,147
Conversion of preferred stock 19,385 194 181,844 - - 182,038
Common stock issuance 133,333 1,334 598,665 - - 599,999
Net loss - - - (868,320) - (868,320)
- -------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1994 1,952,798 2,103,150 1,873,148 6,950,225 (90,000) 10,836,523
Preferred stock dividends
and accretion - - - (586,936) - (586,936)
Conversion of preferred stock 5,407 54 51,237 - - 51,291
Net loss - - - (387,952) - (387,952)
- -------------------------------------------------------------------------------------------------------------------
Balance, February 28, 1995 1,958,205 $2,103,204 $1,924,385 $5,975,337 $(90,000) $9,912,926
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
ANDERSEN GROUP, INC.
Notes to Consolidated Financial Statements
Years ended February 28, 1995, 1994 and 1993
(1) Nature of Business
------------------
Andersen Group, Inc. (the Company) is a diversified holding company. Its
subsidiaries manufacture dental alloys and equipment, electronic
components, industrial ultrasonic cleaners and digital video effects and
graphics equipment.
(2) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
---------------------------
The Company's financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include funds held in investments with an
original maturity of three months or less.
Marketable Securities
---------------------
The Company accounts for its investment portfolio in accordance with
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115). The effect of
adopting SFAS 115 in 1994 was not material. Investments are categorized as
trading, available-for-sale or held-to-maturity. Unrealized gains and
losses on trading and available-for-sale securities are recorded in the
statement of operations and stockholders' equity, respectively. Held-to-
maturity investments are recorded as amortized costs. The investment
portfolios of February 28, 1995 and 1994 have been categorized as trading
securities. The February 28, 1995 investments consist of approximately
$1.52 million of marketable securities and $.68 million of debt securities.
The February 28, 1994 investments consist primarily of debt securities.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for precious metals and at
standard costs which approximate the first-in, first-out (FIFO) and average
cost methods for the balance of the inventories.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment, including capital leases, are stated at cost
and depreciated using the straight-line method over the estimated useful
life of the respective assets, as follows:
<TABLE>
<S> <C>
Buildings and improvements 10 - 50 years
Machinery and equipment 5 - 10 years
Furniture and fixtures 3 - 10 years
</TABLE>
Unamortized Discounts
---------------------
Unamortized discounts on redeemable convertible cumulative preferred stock
and subordinated notes payable are accreted using the effective interest
method.
20
<PAGE>
Income Taxes
------------
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109). Under the asset and liability method utilized under SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax values. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS
109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
The Company adopted SFAS 109 during fiscal 1993. The effect of adopting
this new standard was not material.
Earnings Per Share
------------------
Earnings per share is computed based on the weighted average number of
common and common equivalent shares outstanding. Fully diluted net loss per
share assumes full conversion of all convertible securities into common
stock at the later of the beginning of the year or date of issuance, unless
anti-dilutive. For 1995, 1994 and 1993, the effect has been anti-dilutive.
Off-Balance Sheet Hedging
-------------------------
The Company has entered into foreign currency and precious metal forward
contracts as a hedge against foreign currency exposures and precious metal
fluctuations for firm price deliveries, respectively. These contracts limit
the Company's exposure to both favorable and unfavorable currency or
precious metals price fluctuations.
Financial Statement Reclassifications
-------------------------------------
Certain reclassifications have been made to the 1994 and 1993 financial
statements in order to conform with the 1995 presentation.
(3) Inventories
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------
<S> <C> <C>
Raw material $949,992 $2,528,861
Work in process 2,732,345 2,840,311
Finished goods 10,374,045 8,961,113
-----------------------------------------------
14,056,382 14,330,285
LIFO Reserve 1,366,228 779,581
-----------------------------------------------
$12,690,154 $13,550,704
-----------------------------------------------
</TABLE>
At February 28, 1995 and 1994, inventories valued at LIFO cost comprised
54% and 47% of total inventories, respectively.
(4) Sale of Cellular Partnership Interests
--------------------------------------
On May 10, 1994 the Company's subsidiary, Clear Cellular Holdings, Inc.
("Clear") sold its interest in a partnership which owned a cellular
communications license to Centennial Cellular Corporation (Centennial). The
partnership interest was sold for a combination of cash and Centennial
stock. The Centennial stock was immediately remarketed in an open market
block transaction. Overall, Clear
21
<PAGE>
received $3,316,075 in net proceeds from the partnership interest sale and
has an additional $170,000 in escrow subject to a post close review.
On August 23, 1994 the Company sold its general partnership interest in
MidSouth Cellular L.P. (MidSouth), a nonwireline cellular telephone
franchise to Centennial. The Company received 281,507 shares of Centennial
stock, of which 222,895 shares were sold for $16.69 per share in an open
market block transaction and 18,500 shares were sold at $16.48 per share.
The Company continues to hold 40,112 shares of Centennial common stock of
which 6,845 shares remain in escrow subject to a post close review.
Excluding the remaining amounts in escrow, the Company has recorded gains
from the sale of these cellular partnership interests totalling $3,223,076,
which is included in investment and other income.
(5) Property, Plant and Equipment
-----------------------------
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------
<S> <C> <C>
Land and improvements $1,667,622 $1,844,814
Buildings and improvements 10,560,166 10,454,410
Machinery and equipment 8,320,096 8,089,876
Furniture and fixtures 1,800,255 1,749,251
------------------------------------------------------------
22,348,139 22,138,351
Less accumulated depreciation
and amortization 10,930,377 9,458,516
------------------------------------------------------------
$11,417,762 $12,679,835
------------------------------------------------------------
</TABLE>
Depreciation and amortization expense was $1,976,751, $3,164,966, and
$3,098,146 in 1995, 1994 and 1993, respectively.
At February 28, 1995 and 1994, property, plant and equipment includes
assets acquired under a capital lease, which will expire in 1998, for
certain machinery and equipment of $567,106 with a related allowance for
depreciation of $325,815 and $212,394, respectively.
(6) Short-term Debt
---------------
The Company's major subsidiary, The J.M. Ney Company ("Ney"), has an $8.5
million demand revolving credit facility with a commercial bank of which
$3,200,000 was outstanding at February 28, 1995. The facility is secured by
certain of Ney's receivables and precious metal inventories. Interest is at
the bank's prime rate, 9% at February 28, 1995 or at LIBOR plus 1.75% if
the borrowing level is fixed for a period of time. The facility contains
covenants which establish certain minimum financial operating ratios for
Ney and a specified equity level for the Company.
(7) Accrued Liabilities
-------------------
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------
<S> <C> <C>
Employee compensation $626,757 $543,247
Accrued dividends 883,554 447,068
Income taxes 1,634,228 1,692,455
Other 2,046,008 1,883,641
----------------------------------------------------
$5,190,547 $4,566,411
----------------------------------------------------
</TABLE>
22
<PAGE>
(8) Redeemable Cumulative Convertible Preferred Stock
-------------------------------------------------
Redeemable cumulative convertible preferred stock is subject to annual
mandatory redemption from legally available funds of 160,000 shares at
$18.75 per share, or $3,000,000, commencing in March 1996. At the Company's
option, shares may be redeemed beginning in March 1993 through February
1996 at escalating prices from $17.75 to $18.75 per share. The Company may
make open market purchases, however, it is currently precluded from doing
so as discussed below and in Note 9.
Quarterly dividend payments, ranging from $.1875 to $.4375 per share, are
paid based upon the operating income of Ney, as defined. As discussed in
Note 9, the Company continues to be restricted from paying dividends since
April 15, 1993 until specified cumulative earnings are reached. At February
28, 1995 and 1994 the Company had accrued approximately $884,000 and
$447,000, respectively, for payment of prior dividends.
The preferred shares increase in carrying value at a rate of $.26 per share
per year and, as such, approximately $150,000, $153,000 and $173,000 of
accretion has been recorded as part of the preferred dividend requirement
in the Consolidated Statements of Operations for 1995, 1994 and 1993,
respectively.
The preferred shares are convertible into the Company's common stock at any
time at a rate of 1.875 shares of common stock for each preferred share. At
February 28, 1995, 1,104,443 shares of common stock have been reserved for
conversion.
(9) Long-term Debt
--------------
<TABLE>
<CAPTION>
Long-term debt consists of the following:
1995 1994
----------------------------------------------------------------------
<S> <C> <C>
Mortgage note payable, due November
1999; interest at 7.75%; annual
principal and interest payments of
$179,937; secured by certain real
and personal property $723,193 $838,171
Mortgage note payable due December
2003; interest at varying rates
from 60-68% of the prime rate, as
defined (5.8% and 4.1% at February 28,
1995 and February 28, 1994, respectively),
payable semi-annually; semi-annual
principal payments in escalating
amounts from $49,705 in 1996 to
$101,061 at maturity; secured by
certain personal property 1,303,790 1,396,882
Convertible subordinated debentures,
due October 2001; interest at 10.5%,
payable semi-annually; annual
principal payments in varying amounts
through maturity; unsecured 6,548,000 7,371,000
Subordinated notes payable, due
February 1998; interest at 11%,
payable quarterly; net of unamortized
discount of $126,431 at February 28,
1994, unsecured - 2,849,737
Other 552,313 677,969
----------------------------------------------------------------------
9,127,296 13,133,759
Less current maturities 343,285 1,532,611
----------------------------------------------------------------------
$8,784,011 $11,601,148
----------------------------------------------------------------------
</TABLE>
23
<PAGE>
On September 26, 1994 the Company redeemed all $2,838,000 of its
outstanding principal amount 11% subordinated notes payable, due February
1998 at their face value.
The Company has a master lease line of credit totaling $1,500,000 of which
$567,106 has been utilized and $273,300 and $455,000 remained outstanding
at February 28, 1995 and 1994, respectively. The line is secured by the
underlying leased equipment. Interest is at rates ranging from 8.2% to
8.5%. Repayments are on a monthly basis with interest through 1998.
The terms of the convertible subordinated debentures call for the annual
liquidation of $834,000 face value of debentures, either through open
market purchases or mandatory sinking fund payments. Such open market
purchases have reduced mandatory sinking fund payments to $19,000 for
fiscal 1996. The Company may make an additional optional sinking fund
payment of $834,000.
The debentures are convertible into common stock of the Company at any time
prior to maturity, unless previously redeemed, at $16.17 per share, subject
to adjustment under certain conditions. At February 28, 1995, 404,948
shares of common stock were reserved for conversion.
Certain of the debt agreements contain restrictive covenants which
establish minimum tangible net worth requirements and limit, among other
things, mergers or consolidations, sales of assets, additional long term
debt, payments of dividends and stock repurchases. Under the terms of one
of the agreements, the Company has been restricted from repurchasing stock
or paying dividends since April 15, 1993 until such time as the Company's
cumulative earnings, as defined, reach specified amounts.
Maturities of long-term debt for each of the five years ending February
28/29 are as follows:
<TABLE>
<S> <C>
1996 $ 343,285
1997 1,160,469
1998 1,187,610
1999 1,157,227
2000 1,153,460
Thereafter 4,125,245
</TABLE>
(10) Income Taxes
------------
Income tax benefit (expense) consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $(20,000) $ 0 $ 346,000
State (100,000) (92,000) (164,000)
Deferred 414,515 2,007,395 3,331,523
--------------------------------------------------------------------------
$294,515 $1,915,395 $3,513,523
--------------------------------------------------------------------------
</TABLE>
The difference between the actual income tax benefit (expense) and the
income tax benefit (expense) computed by applying the statutory Federal
income tax rate of 34% to loss before taxes is attributable to the
following:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax benefit $199,313 $946,463 $2,107,389
State income taxes, net of Federal benefit (66,000) (60,720) (108,240)
Adjustment of accrual for prior years' taxes 161,202 1,029,652 1,479,337
Foreign income - 64,108
Expenses for which no tax benefits recorded - - (29,071)
----------------------------------------------------------------------------------
$294,515 $1,915,395 $3,513,523
----------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
A deferred income tax (expense) benefit results from temporary differences
in the recognition of income and expense for income tax and financial
reporting purposes. The principal components of the net deferred asset
(liability) which give rise to this deferred income tax (expense) benefit
for the years ended February 28, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Fixed asset basis differences $(2,018,085) $(2,126,552)
Inventory (1,111,498) (1,278,198)
Pension (1,301,527) (1,236,452)
Write-off of certain assets (560,049) (928,000)
Cellular partnership's basis differences - (515,910)
--------------------------------------------------------------------------------
Total deferred tax liabilities (4,991,159) (6,085,112)
--------------------------------------------------------------------------------
Deferred tax assets:
Post-retirement benefits other than pensions 337,200 291,600
Capital loss carryforwards - 530,141
Note receivable 200,000 -
Federal operating loss carryforwards 1,241,850 1,462,000
Federal credit carryforwards 537,278 572,000
State operating loss carryforwards 294,537 653,000
Other 488,536 244,750
--------------------------------------------------------------------------------
3,099,401 3,753,491
Valuation allowance for deferred tax assets (483,348) (458,000)
--------------------------------------------------------------------------------
Net deferred tax assets 2,616,053 3,295,491
--------------------------------------------------------------------------------
Net deferred tax liabilities $(2,375,106) $(2,789,621)
--------------------------------------------------------------------------------
</TABLE>
At February 28, 1995 and 1994 the Company's valuation allowance is
primarily attributable to State operating loss carryforwards that expire in
1998 and 1999. These allowances reflect uncertainties as to the realization
of sufficient income and income tax in the future upon which the State
operating loss carryforwards may be utilized. The Company has not
established a valuation reserve for its Federal operating loss and credit
carryforwards, and reasonably expects that the sale of certain assets,
investment securities and certain real property, will generate sufficient
income to fully utilize the Federal operating loss and credit
carryforwards.
At February 28, 1995, the Company had $3,652,500 of Federal operating loss
carryforwards and $537,278 of Federal credit carryforwards which expire in
the years 2009, and 1999 through 2002, respectively. In addition, the
Company has State operating loss carryforwards of $4,909,958, which expire
in the years 1998 and 1999.
(11) Stock Option Plan
-----------------
The Company's incentive stock option plan provides for option grants to
directors and key employees at prices equal to at least 100% of the stock's
fair market value at date of grant. Options are generally exercisable one
year after grant. The Company has reserved 150,000 shares of common stock
for the exercise of stock options. At February 28, 1995, the Company had
72,700 options available for issue under the plan.
25
<PAGE>
Activity under the plan is as follows:
<TABLE>
<CAPTION>
Number Price
of shares per share
Outstanding options ----------------------------
<S> <C> <C>
-------------------------------------------------------------------
Balance at February 29, 1992 128,044 $7.00-10.625
Canceled (35,844) 7.00-10.625
-------------------------------------------------------------------
Balance at February 28, 1993 92,200 7.00-9.50
Granted 7,000 6.50-6.825
Canceled (21,600) 7.00-8.375
-------------------------------------------------------------------
Balance at February 28, 1994 77,600 6.50-9.50
Canceled (300) 7.00
-------------------------------------------------------------------
Balance at February 28, 1995 77,300 $6.50-9.50
-------------------------------------------------------------------
</TABLE>
At February 28, 1995, 77,300 options were exercisable.
(12) Retirement Plans
----------------
The Company maintains both noncontributory defined benefit and defined
contribution plans, which collectively cover substantially all full-time
employees. The defined contribution plans are funded annually through
contributions in amounts that can be deducted for Federal income tax
purposes. Benefits payable under all plans are based upon years of service
and compensation levels.
The plan assets, which are managed by third-party trustees, include equity
securities, government and corporate debt securities and other fixed income
obligations.
The following table sets forth the actuarially determined funded status of
the Company's defined benefit plan and amounts recognized in the Company's
consolidated balance sheets:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------------
<S> <C> <C>
Actual present value of
benefit obligations:
Vested $10,314,808 $9,289,101
Non-vested 275,901 153,253
---------------------------------------------------------------------
Accumulated benefit obligation 10,590,709 9,442,354
Effect of projected compensation
increases 498,089 1,358,577
---------------------------------------------------------------------
Projected benefit obligation 11,088,798 10,800,931
Plan assets at fair value 14,480,654 14,519,638
---------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 3,391,856 3,718,707
Unrecognized prior service cost (222,461) (115,772)
Unrecognized net gain (loss) on plan assets 347,290 (233,778)
---------------------------------------------------------------------
Prepaid pension expense $ 3,516,685 $3,369,157
---------------------------------------------------------------------
</TABLE>
For fiscal years 1995, 1994 and 1993, the projected benefit obligations and
pension income were determined using the following components:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.5%
- --------------------------------------------------------------------------------
Future compensation growth rate 5.5% 5.5% 6.5%
- --------------------------------------------------------------------------------
Long-term rate of return on plan assets 8.5% 8.5% 8.5%
- --------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
Net pension income for the Company's funded defined benefit plan for 1995,
1994 and 1993 includes the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits accrued $ 285,748 $ 313,849 $ 284,588
Interest cost on projected benefit obligations 783,725 756,519 717,883
Return on plan assets (1,195,727) (1,199,647) (776,805)
Unrecognized net gain (21,274) (64,997) (532,082)
----------------------------------------------------------------------------------------
Pension income $ (147,528) $ (194,276) $(306,416)
----------------------------------------------------------------------------------------
</TABLE>
The Company also has a supplemental defined benefit plan which covers a
former senior executive of Ney. There are no assets held by the plan. The
Company's policy is to contribute amounts to the plan as needed to fund
benefit payments to the participant. Benefits are based upon years of
service, compensation levels and benefits earned under the company-wide
defined benefit plan. At February 28, 1995 and 1994, the actuarially
determined status of the plan and the amount recognized in the balance
sheet was a vested accumulated and projected benefit obligation of $307,142
and $331,172, respectively.
For fiscal years 1995, 1994 and 1993, respective discount rates of 7.5%,
7.5% and 8.5% were used for determining the projected benefit obligation.
Pension expense for Ney's supplemental defined benefit plan includes the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits accrued $ - $ - $10,757
Interest cost in projected benefit obligations 24,670 25,452 14,099
---------------------------------------------------------------------------------
Pension expense $24,670 $25,452 $24,856
---------------------------------------------------------------------------------
</TABLE>
Pension expense for all defined contribution plans totaled $157,077,
$121,322, and $233,268 in 1995, 1994 and 1993, respectively.
(13) Post-Retirement Benefit Obligations
-----------------------------------
During 1993, the Company amended its retiree health care plan to include
only those retirees currently in the plan and discontinued the benefit for
current employees. This change resulted in a reduction in the liability and
recognition of a gain of $538,596 in the year ended February 28, 1993.
The Company's cost of its unfunded retiree health care plan for 1995 and
1994 was approximately $56,000 and $59,500, respectively, including
interest. At February 28, 1995 and 1994, the accumulated benefit obligation
for post-retirement benefits was approximately $792,000 and $843,000,
respectively. At February 28, 1995, 32 retirees were receiving benefits
under this plan.
The accumulated estimated benefit obligation was determined using the unit
credit method and an assumed discount rate of 7.5% at February 28, 1995 and
1994. At February 28, 1995 and 1994, the accumulated benefit obligation was
compiled using an assumed health care cost trend rate of 11%, gradually
declining to 6% in the year 2000 and thereafter over the projected payout
period of the benefits.
The estimated effect on the present value of the accumulated benefit
obligation at March 1, 1995 of a 1% increase each year in the health care
cost trend rate used would result in an estimated increase of approximately
$53,000 in the obligation.
27
<PAGE>
(14) Leases
------
The Company leases various manufacturing and office facilities and
equipment under lease agreements expiring through August 1998. The leases
are accounted for as operating leases. In addition, the Company earns
rental income from office space leased to tenants under operating leases
expiring through August 1996.
Future minimum lease payments and rental income under the terms of the
leases for each of the years ending February 28/29, are as follows:
<TABLE>
<CAPTION>
Lease Rental
Expense Income
----------------------------------------------------------
<S> <C> <C>
1996 $263,915 $188,460
1997 137,517 83,599
1998 77,729 --
1999 34,880 --
</TABLE>
Lease expense and rental income are as follows:
<TABLE>
<CAPTION>
Lease Rental
Expense Income
-----------------------------------------------------------
<S> <C> <C>
1995 $349,055 $211,767
1994 317,418 516,805
1993 229,469 698,218
</TABLE>
(15) Restructuring Charge
--------------------
During 1993, the Company restructured the management of the operations of
its subsidiaries, resulting in the payment of severance and related
benefits to former employees. This management restructuring resulted in a
pre-tax charge of $949,795.
(16) Business Segments and Export Sales
----------------------------------
In 1995, the Company operates in three business segments: Dental,
Electronic and Video. Operating income consists of net sales, less cost of
sales and selling, general and administrative expenses directly allocated
to the industry segments. Corporate expenses consist of administrative
costs not directly attributable to a specific industry segment and interest
expense. Corporate revenues consist of investment and other income not
attributable to a specific industry segment. Corporate identifiable assets
include marketable securities and short-term investments, and assets not
directly attributable to a specific industry segment.
28
<PAGE>
Summarized financial information for each business segment is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and revenues:
Dental $37,984,474 $35,014,340 $31,461,611
Electronics 18,424,785 15,125,798 14,019,173
Video 6,998,181 4,399,716 -
Corporate 3,442,558 1,489,408 1,610,545
---------------------------------------------------------------------------------------
$66,849,998 $56,029,262 $47,091,329
---------------------------------------------------------------------------------------
Operating income (loss):
Dental $1,213,980 $ 772,564 $ 449,313
Electronics (174,422) (1,165,675) (650,412)
Video (1,876,231) (18,200) -
Corporate 185,336 (2,546,590) (1,929,685)
---------------------------------------------------------------------------------------
$(651,337) $(2,957,901) $(2,130,784)
---------------------------------------------------------------------------------------
Identifiable assets:
Dental $14,788,626 $15,384,373 $15,591,399
Electronics 15,300,391 11,216,447 11,248,527
Video 7,040,377 4,280,163 -
Corporate 6,549,279 17,709,034 25,496,954
---------------------------------------------------------------------------------------
$43,678,673 $48,590,017 $52,336,880
---------------------------------------------------------------------------------------
Depreciation, amortization and accretion:
Dental $392,268 $1,316,693 $1,298,922
Electronics 1,110,524 1,267,103 1,277,179
Video 349,893 29,552 -
Corporate 627,193 906,974 884,359
---------------------------------------------------------------------------------------
$2,479,878 $3,520,322 $3,460,460
---------------------------------------------------------------------------------------
Capital expenditures:
Dental $ 280,242 $ 402,397 $ 326,474
Electronics 727,242 371,454 1,443,870
Video 506,679 102,087 -
Corporate 168,094 236,219 535,557
---------------------------------------------------------------------------------------
$1,682,257 $1,112,157 $2,305,901
---------------------------------------------------------------------------------------
</TABLE>
Export sales for the years ended February 28, 1995, 1994, and 1993 were
$20,662,000, $19,650,000 and $16,371,000, respectively.
(17) Investment in Digital GraphiX - Subsequent Event
------------------------------------------------
On May 2, 1995, Digital GraphiX, Incorporated (DGI) (formerly New Microtime
Inc.), previously a wholly owned subsidiary of the Company, issued an
additional 64,800 shares of common stock to certain employees and
securityholders of the Company at $5.00 per share. As a result of this
offering, the Company's interest has been reduced to 19%. DGI will utilize
the proceeds from the offering for working capital purposes.
The Company's Consolidated Financial Statements include the operating
results of DGI from the date of inception in April, 1993 through February
28, 1995. As of February 28, 1995 the DGI balance sheet has not been
consolidated. The investment in DGI at February 28, 1995 is comprised of a
7.5% $2.9 million note receivable, discounted to $2.3 million to reflect a
market rate interest, representing the inter-company balance reduced by $.5
million of net liabilities of DGI resulting in a net balance of $1.8
million. Interest is payable monthly with the principal due October, 1997.
The Company has not
29
<PAGE>
recorded any gain related to the May 2, 1995 sale of stock by the
subsidiary, which will be considered along with the discount in the
Company's future valuation of the note receivable and equity interest.
DGI was formed in April 1993 as a wholly owned subsidiary. Andersen Group
had previously been in the video graphics marketplace for nearly twenty
years with its majority-owned subsidiary, Microtime, Inc., which sold video
signal processing equipment, including time base correctors, frame
synchronizers and, later, digital video effects equipment. The Microtime,
Inc. assets were sold to Digital F/X, Inc. (DF/X) in October 1992 for a
combination of subordinated notes and preferred stock. The assets which
DF/X bought from AGI were put into the DF/X Broadcast Division. When this
Division did not perform financially as well as expected, AGI reached an
agreement with DF/X to manage its Broadcast Division through AGI's wholly-
owned subsidiary, New Microtime. The management arrangement included an
option by New Microtime to purchase the DF/X Broadcast Division assets
under certain conditions. This option was exercised in September, 1993
prior to DF/X's bankruptcy filing.
This Agreement, which was approved by the U.S. Bankruptcy Court in December
1993, confirmed the transfer of title of the DF/X Broadcast assets free and
clear of all liens, claims and encumbrances arising out of DF/X's operation
of the division, including claims of DF/X trade and other creditors, for
forgiveness of debt and an additional payment of $470,000 to the debtor's
estate. The net assets acquired were valued at approximately $2.4 million
and consisted primarily of inventory, equipment, licenses, patents and
trademarks.
On October 19, 1994 New Microtime acquired certain assets of the Graphics
Systems Division (GSD) of The Grass Valley Group, Inc. (Grass Valley) in
exchange for three year 7.5% promissory notes totalling $2,035,000 and a
minimum royalty of $600,000 payable over three years. The acquired product
lines were integrated with the other products sold by New Microtime. The
combined entity began operating under the name Digital GraphiX in January,
1995. Grass Valley is continuing to sell its former GSD products as DGI's
worldwide non-exclusive master distributor.
(18) Contingencies
-------------
Althin CD Medical, Inc. (Althin) has filed a complaint against the
Company's subsidiary Seratronics, Inc. of Nevada in the U.S. District Court
for the Southern District of Florida, asserting various claims including
breach of contract for failure to pay royalties arising out of a License
Agreement with Althin's predecessor, CD Medical, and claims arising out of
the management of Seratronics' business by Fresenius U.S.A., Inc. Althin
has claimed money damages of at least $300,000. Seratronics has denied all
claims or owing any additional liability for royalties and has filed
counterclaims against Althin alleging misuse by Althin of know-how and
technology licensed exclusively to Seratronics and breach of Althin
covenants of good faith and fair dealings with Seratronics. The case is
presently in the discovery phase. Seratronics intends to strongly defend
these claims and to vigorously assert its counterclaims. The ultimate
outcome of the litigation discussed above or the necessity for any
provision for liability which may result cannot presently be determined.
30
<PAGE>
ANDERSEN GROUP, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
--------Additions---------
Balance Charged to Charged Balance
Beginning costs and to other End
Description of Year expenses account Deductions of year
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 28, 1995
- -------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $426,459 47,390 (31,000) (83,135) (a) $359,714
Discontinued operation $0 41,000 31,000 (9,393) (a) $62,607
Deferred income tax
valuation allowance $458,000 25,348 $483,348
- -------------------------------------------------------------------------------------------------
February 28, 1994
- -------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $306,038 102,421 98,048 (80,048) (a) $426,459
Discontinued operation $924,132 (98,048) (826,084) (a) $0
Deferred income tax
valuation allowance $1,526,567 (1,068,567) $458,000
- -------------------------------------------------------------------------------------------------
February 28, 1993
- -------------------------------------------------------------------------------------------------
Allowance for doubtful
accounts $324,142 (42,685) 24,581 (a) $306,038
Discontinued operation $351,811 815,853 (243,532) (b) $924,132
Deferred income tax
valuation allowance $921,881 604,686 $1,526,567
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Write offs net of recoveries.
(b) Offset of discontinued operation losses.
49
<PAGE>
Exhibit (h)
McTeague Investment Bankers, Inc.
14 Eugene O'Neill Drive
New London, CT 06320
203-437-7215
June 2, 1995
Andersen Group, Inc.
Ney Industrial Park
Bloomfield, CT 06002
Ladies and Gentlemen:
We previously have delivered to the Board of Directors of Andersen
Group, Inc. (the "Company") our opinion dated May 30, 1995, as to the fairness
from a financial point of view, of the $12.25 cash per share to be paid to the
holders of the Company's Series A Cumulative Convertible Preferred Stock (the
"Opinion").
We hereby consent to:
(a) The inclusion of a conformed copy of the Opinion in the
Company's Offer to Purchase for Cash dated June 5, 1995, as it may be amended
from time to time (the "Offer"), as Annex A thereto; and
(b) The discussions in the Offer relating to our firm; and
(c) The inclusion of the Offer (including the conformed copy of the
Opinion as Annex A thereto) and this letter as exhibits to the Company's
Schedule 13E-4, as amended from time to time, to be filed with the Securities
and Exchange Commission and the Nasdaq Stock Market; and
(d) The distribution of the Offer (including the conformed copy of
the Opinion as Annex A thereto) to the holders of the Company's Series A
Cumulative Convertible Preferred Stock.
Very truly yours,
MCTEAGUE INVESTMENT BANKERS, INC.
By: /s/ Bertrand L. McTeague
------------------------------
Bertrand L. McTeague
Its President
