OFFER TO PURCHASE FOR CASH UP TO
900,000 SHARES OF COMMON STOCK
OF
AQUA CARE SYSTEMS, INC.
AT
$2.25 NET PER SHARE
BY
AV, INC.
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, MARCH 22, 2001, UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14 UNDER THE
CAPTION "THE TENDER OFFER." THE OFFER IS NOT CONDITIONED UPON THE
RECEIPT OF FINANCING.
------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such
shareholder's Shares should either:
1. Complete and sign the Letter of Transmittal (or a facsimile thereof)
tendered in accordance with the instructions in the Letter of Transmittal, have
such shareholder's signature thereon guaranteed if required by Instruction 1 to
the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such
facsimile), or, in the case of a book-entry transfer effected pursuant to the
procedure set forth in Section 2 under the caption "Tender Offer" on page 5, an
Agent's Message (as defined herein) and any other required documents to the
Depositary and either deliver the certificates for such Shares to the Depositary
along with the Letter of Transmittal (or facsimile) or deliver such Shares
pursuant to the procedure for book-entry transfer set forth in Section 2 under
the caption "Tender Offer" on page 5 or
2. Request such shareholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such shareholder.
A shareholder having Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
shareholder desires to tender such Shares.
If a shareholder desires to tender Shares and such
shareholder's certificates for Shares are not immediately available or the
procedure for book-entry transfer cannot be completed on a timely basis, or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such shareholder's tender may be effected by following the
procedure for guaranteed delivery set forth in Section 2 under the caption "The
Tender Offer" on page 5 and in the Notice of Guaranteed Delivery provided
herewith.
Questions and requests for assistance may be directed to
Innisfree M&A Incorporated, the Information Agent, at its address and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be obtained from the Information Agent
or from brokers, dealers, commercial banks and trust companies.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
February 22, 2001
ii
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET..........................................................i
INTRODUCTION................................................................1
THE TENDER OFFER............................................................3
1. TERMS OF THIS OFFER.......................................3
2. PROCEDURES FOR TENDERING SHARES...........................5
3. WITHDRAWAL RIGHTS.........................................9
4. ACCEPTANCE FOR PAYMENT AND PAYMENT; PRORATION.............9
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................11
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES...........12
7. EFFECT OF THIS OFFER ON THE MARKET FOR THE SHARES;
NASDAQ LISTING EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS......................................13
8. CERTAIN INFORMATION CONCERNING THE COMPANY...............14
9. CERTAIN INFORMATION CONCERNING THE PURCHASER.............16
10. SOURCE AND AMOUNT OF FUNDS...............................17
11. BACKGROUND OF THIS OFFER; PAST CONTACTS,
TRANSACTIONS OR NEGOTIATIONS WITH THE COMPANY............17
12. PURPOSE OF THIS OFFER....................................18
13. DIVIDENDS AND DISTRIBUTIONS..............................18
14. CERTAIN CONDITIONS OF THIS OFFER.........................19
15. CERTAIN LEGAL MATTERS....................................23
16. FEES AND EXPENSES........................................24
17. MISCELLANEOUS............................................25
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER...........S-1
SCHEDULE II TRANSACTIONS IN SHARES..................................S-2
SUMMARY TERM SHEET
AV, INC. AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND AREF CHEVAL, THE SOLE STOCKHOLDERS OF AV, INC.
ARE OFFERING TO ACQUIRE UP TO 900,000 SHARES OF THE COMMON STOCK OF AQUA CARE
SYSTEMS, INC. FOR $2.25 PER SHARE, NET TO THE SELLER IN CASH, WITHOUT INTEREST.
THE FOLLOWING ARE SOME OF THE QUESTIONS YOU, AS A SHAREHOLDER OF AQUA CARE, MAY
HAVE AND ANSWERS TO THOSE QUESTIONS. THIS SUMMARY TERM SHEET IS NOT MEANT TO BE
A SUBSTITUTE FOR THE INFORMATION CONTAINED IN THE REMAINDER OF THIS OFFER TO
PURCHASE AND THE RELATED LETTER OF TRANSMITTAL, AND THE INFORMATION CONTAINED IN
THIS SUMMARY TERM SHEET IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
DESCRIPTIONS AND EXPLANATIONS CONTAINED IN THIS OFFER TO PURCHASE AND THE
RELATED LETTER OF TRANSMITTAL. WE URGE YOU TO CAREFULLY READ THE ENTIRE OFFER TO
PURCHASE AND RELATED LETTER OF TRANSMITTAL PRIOR TO MAKING ANY DECISION
REGARDING WHETHER TO TENDER YOUR SHARES.
WHO IS OFFERING TO PURCHASE MY SHARES OF COMMON STOCK OF AQUA CARE?
o AV, Inc., a Delaware corporation formed in March 2000 for the
purpose of making an investment in Aqua Care, is offering to
purchase your Aqua Care shares. AV, Inc. is owned by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇. See the "Introduction" on page 1 and
Section 9 on page 16 under the caption "The Tender Offer."
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, together with AV, Inc., are
deemed to be bidders in this offer, but any purchases in this
offer will be made solely through AV, Inc.
HOW MANY SHARES IS AV, INC. SEEKING TO PURCHASE, AT WHAT PRICE, AND DO
I HAVE TO PAY ANY BROKERAGE OR SIMILAR FEES TO TENDER?
o AV, Inc. is offering to purchase up to 900,000 shares of Aqua
Care common stock at a price of $2.25 per share, net to the
seller in cash, without interest. To the extent more than
900,000 shares are tendered in the offer, AV, Inc. will
purchase only up to 900,000 shares on a pro rata basis based
on the number of shares properly tendered by each stockholder
prior to or on the expiration of the offer and not withdrawn.
No fractional shares will be purchased. See Section 4 under
the caption "The Tender Offer" on page 9.
o As of February 20, 2001, the last practicable trading day
prior to the announcement of this offer, the closing price of
an Aqua Care share on the Nasdaq SmallCap Market was $1.44.
o If you are the record owner of your shares and you tender
shares in this offer, you will not have to pay any brokerage
or similar fees. However, if you own your shares
i
through a broker or other nominee, and your broker tenders
your shares on your behalf, your broker or nominee may charge
you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply. See the
"Introduction" on page 1 and Section 9 on page 16 under the
caption "The Tender Offer".
WHY IS AV, INC. MAKING THIS OFFER?
o AV, Inc. is making this offer to acquire the shares to make an
investment in Aqua Care. AV, Inc. believes that the recent
market price of the shares does not accurately reflect the
value or potential of Aqua Care. AV, Inc. believes that the
potential value of the Company could be fully realized under
new management. Accordingly, AV, Inc. intends, as soon as
practicable after consummation of this offer, to explore all
alternatives to elect a new board of directors and replace
senior management of Aqua Care. See Section 12 under the
caption "The Tender Offer" on page 18.
WHAT ARE THE CONDITIONS TO THIS OFFER?
o This offer is conditional on at least 500,000 shares being
tendered. This offer may be terminated by AV, Inc. if less
than 500,000 shares are tendered before this offer expires.
This offer is not conditional on the receipt of financing. A
more detailed discussion of the conditions to consummation of
this offer may be found in the "Introduction" on page 1,
Section 11 on page 17 and Section 14 on page 19 under the
caption "The Tender Offer."
DOES AV, INC. HAVE THE FINANCIAL RESOURCES TO PAY FOR THE SHARES?
o AV, Inc. has sufficient cash available to pay for the shares.
See Section 10 under the caption "Tender Offer" on page 17.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER INTO THIS OFFER?
o You have until the expiration date of this offer to tender.
This offer currently is scheduled to expire at 12:00 midnight,
New York City time, on Thursday, March 22, 2001. AV, Inc.
currently expects that this offer will be extended until
500,000 shares of Aqua Care common stock are validly tendered
and not withdrawn. If this offer is extended, AV, Inc. will
issue a press release announcing the extension on or before
9:00 a.m. New York City time on the first business day
following the date this offer was scheduled to expire. See
Section 1 under the caption "The Tender Offer" on page 3.
ii
o AV, Inc. may elect to provide a "subsequent offering period"
for this offer. A subsequent offering period, if one is
included, will be an additional period of time beginning after
AV, Inc. has purchased shares tendered during this offer,
during which shareholders may tender, but not withdraw, their
shares and receive this offer consideration. AV, Inc. does not
currently intend to include a subsequent offering period,
although AV, Inc. reserves the right to do so.
HOW DO I ACCEPT THIS OFFER AND TENDER MY SHARES?
o To tender your shares, you must completely fill out the
enclosed Letter of Transmittal and deliver it, along with your
share certificates and any other documents required by the
Letter of Transmittal, to the depositary, prior to the
expiration of this offer. If your shares are held through a
broker, dealer or other nominee, they can be tendered by your
nominee through The Depository Trust Company. If you cannot
deliver all necessary documents to the depositary in time, you
may be able to complete and deliver to the depositary, in lieu
of the missing documents, the enclosed Notice of Guaranteed
Delivery, provided you are able to comply fully with its
terms. See Section 2 under the caption "The Tender Offer" on
page 5.
IF I ACCEPT THIS OFFER, WHEN WILL I GET PAID?
o If the conditions to this offer are satisfied and AV, Inc.
consummates this offer and accepts your shares for payment,
you will receive payment for the shares you tendered as
promptly as practicable following the expiration of this
offer. See Section 4 under the caption "The Tender Offer" on
page 9.
CAN I WITHDRAW MY PREVIOUSLY TENDERED SHARES?
o You may withdraw a portion of or all your tendered shares by
delivering written, manually executed or facsimile notice to
the depositary prior to the expiration of this offer. Further,
if AV, Inc. has not agreed to accept your shares for payment
within 60 days of the commencement of this offer, you can
withdraw them at any time after that 60-day period until AV,
Inc. does accept your shares for payment. Once shares are
accepted for payment, they cannot be withdrawn. The right to
withdraw tendered shares will not apply to any subsequent
offering period, if one is included. See Section 3 under the
caption "The Tender Offer" on page 9.
HAS THE BOARD OF DIRECTORS OF AQUA CARE APPROVED THIS OFFER?
o Aqua Care's board of directors has not approved this offer or
otherwise commented on it as of the date of this offer. Within
10 business days after the date of this offer, Aqua Care is
required by law to publish, send or give to you (and file with
the SEC) a statement as to whether it recommends acceptance or
rejection of this offer, that it
iii
has no opinion with respect to this offer or that it is unable
to take a position with respect to this offer.
IF I DO NOT TENDER BUT THIS OFFER IS SUCCESSFUL, WHAT WILL HAPPEN TO MY SHARES?
o If this offer is successful, the number of shareholders and
the number of shares of Aqua Care that are still in the hands
of the public may be so small that there may no longer be an
active public trading market (or, possibly, any public trading
market) for the shares. Also, the shares may no longer be
eligible to be traded on the Nasdaq SmallCap Market or any
other securities exchange, and Aqua Care may cease making
filings with the SEC or otherwise cease being required to
comply with the SEC's rules relating to publicly held
companies.
ARE DISSENTERS' RIGHTS AVAILABLE IN THIS OFFER?
o Dissenters' rights are not available in this offer.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED
TRANSACTIONS?
o The receipt of cash in this offer in exchange for Aqua Care
shares will be a taxable transaction for U.S. federal income
tax purposes and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws.
You should consult your tax advisor about the particular
effect the proposed transactions will have on your shares. See
Section 5 under the caption "The Tender Offer" on page 11.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
o On February 20, 2001, the last practicable trading day before
the commencement of this offer, the shares of Aqua Care common
stock closed on the Nasdaq SmallCap Market at $1.44 per share.
You should obtain a recent quotation for your shares prior to
deciding whether or not to tender. See Section 6 under the
caption "The Tender Offer" on page 12.
WHO SHOULD I CALL WITH QUESTIONS?
o You should call Innisfree M&A Incorporated at (▇▇▇) ▇▇▇-▇▇▇▇
(toll-free) with any questions you may have. Innisfree M&A
Incorporated is acting as the information agent for this
offer. See the back cover of this offer.
iv
INTRODUCTION
AV, Inc., a Delaware corporation (the "Purchaser"), hereby
offers to purchase up to 900,000 shares of common stock, par value $.001 per
share ("Shares"), of Aqua Care Systems, Inc., a Delaware corporation (the
"Company"), at a price of $2.25 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer").
The Purchaser believes that the Shares are registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), based upon its review of available filings made by the Company with the
Securities and Exchange Commission (the "Commission"). The information
concerning the Company contained in this Offer to Purchase has been taken from
or based upon publicly available documents on file with the Commission and other
publicly available information. Although the Purchaser does not have any
knowledge that any such information is untrue, the Purchaser takes no
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
Brokers, dealers, commercial banks and trust companies and
other nominees will, upon request, be reimbursed by the Purchaser for customary
clerical and mailing expenses incurred by them in forwarding offering materials
to their clients. Tendering shareholders will not be obligated to pay brokerage
fees or commissions. Except as set forth in Instruction 6 of the Letter of
Transmittal, tendering shareholders will not be obligated to pay stock transfer
taxes on the purchase of Shares pursuant to this Offer. The Purchaser will pay
all charges and expenses of Wilmington Trust Company, as Depositary (the
"Depositary"), and Innisfree M&A Incorporated, as Information Agent (the
"Information Agent"), incurred in connection with this Offer. See Section 16
under the caption "The Tender Offer" on page 24.
The purpose of this Offer is to make, through the purchase of
Shares, an investment in the Company. By tendering Shares pursuant to this
Offer, shareholders will relinquish any rights, as shareholders, to participate
in any increase in the value of the Company. Except as disclosed in this Offer
to Purchase, the Purchaser has no current plans or proposals that would result
in an extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company, sale or transfer of any material amount of
assets of the Company, any change in the Board of Directors or management of the
Company, any material change in the capitalization or dividend policy of the
Company, any other material change in the Company's corporate structure or
business. However, to the extent information is available, the Purchaser intends
to continuously evaluate the Company and its prospects, and the Purchaser
reserves the right to change its plans and intentions. See Section 9 under the
caption "Tender Offer" on page 16.
Certain federal income tax consequences of the sale of Shares
pursuant to this Offer are described in Section 5 under the caption "The Tender
Offer" on page 11.
1
THIS OFFER IS CONDITIONED UPON AT LEAST 500,000 SHARES BEING TENDERED
AND AV, INC. MAY TERMINATE THIS OFFER IF LESS THAN 500,000 SHARES ARE
TENDERED BEFORE THIS OFFERING EXPIRES. THIS OFFER IS NOT CONDITIONED ON
THE RECEIPT OF FINANCING.
Certain conditions to this Offer are described in Section 14
under the caption "Tender Offer" on page 19. The Purchaser expressly reserve the
right, in their sole discretion, to waive any one or more of the conditions to
this Offer. See Section 1 on page 3, Section 14 on page 19 and Section 15 on
page 23 under the caption "The Tender Offer".
YOU SHOULD READ THIS OFFER TO PURCHASE AND THE LETTER OF
TRANSMITTAL CAREFULLY BEFORE YOU MAKE ANY DECISION WITH RESPECT TO THIS OFFER.
2
THE TENDER OFFER
1. TERMS OF THIS OFFER
Upon the terms and subject to the conditions of this Offer
(including, if this Offer is extended or amended, the terms and conditions of
any extension or amendment), the Purchaser will accept for payment and pay for
up to 900,000 Shares validly tendered and not withdrawn prior to the Expiration
Date. The term "Expiration Date" means 12:00 midnight, New York City time, on
Thursday, March 22, 2001, unless and until the Purchaser, in its sole
discretion, shall have extended the period of time during which this Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which this Offer, as so extended by the Purchaser, will expire. To the
extent more than 900,000 Shares are tendered in this Offer, AV, Inc. will
purchase up to 900,000 Shares in this Offer on a pro rata basis (with
appropriate adjustments to avoid purchase of fractional Shares) based on the
number of Shares properly tendered by each stockholder prior to or on the
Expiration Date (as defined below) and not withdrawn. See Section 4 under this
caption on page 9.
Subject to the applicable rules and regulations of the
Commission, the Purchaser expressly reserves the right, in its sole discretion,
at any time or from time to time, regardless of whether or not any of the events
set forth in Section 14 under this caption on page 19 shall have occurred or
shall have been determined by the Purchaser to have occurred, (i) to extend the
period of time during which this Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) to waive any condition to this
Offering or to amend this Offer in any respect by giving oral or written notice
of such amendment to the Depositary. During any such extension of this Offering,
all Shares previously tendered and not properly withdrawn shall remain subject
to this Offer, subject to a tendering shareholder's right to withdraw such
shareholder's Shares. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS
RIGHT TO EXTEND THIS OFFER.
If by the Expiration Date any or all of the conditions to this
Offer have not been satisfied or waived, the Purchaser reserves the right (but
shall not be obligated), subject to the applicable rules and regulations of the
Commission, to (a) terminate this Offer and not accept for payment or pay for
any Shares and return all tendered Shares to tendering shareholders, (b) waive
all the unsatisfied conditions and accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn, (c)
extend this Offer and, subject to the right of shareholders to withdraw Shares
until the Expiration Date, retain the Shares that have been tendered during the
period or periods for which this Offer is extended or (d) amend this Offer.
The rights reserved by the Purchaser in the foregoing two
paragraphs are in addition to the Purchaser's rights to terminate this Offer
pursuant to Section 14 under this caption on page 19. There can be no assurance
that the Purchaser will exercise its right to extend this Offer. Any extension,
amendment or termination will be followed as promptly as practicable by public
3
announcement. In the case of an extension, Rule 14e-1(d) under the Exchange Act
requires that the announcement be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rule 14d-4(c) under the
Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14e-1(d)
under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with this
Offer be promptly disseminated to shareholders in a manner reasonably designed
to inform shareholders of such change), and without limiting the manner in which
the Purchaser may choose to make any public announcement, the Purchaser will not
have any obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow ▇▇▇▇▇ News
Service. As used in this Offer to Purchase, "business day" has the meaning set
forth in Rule 14d-1 under the Exchange Act.
If the Purchaser extends this Offer, or if the Purchaser
(whether before or after its acceptance for payment of Shares) is delayed in its
acceptance for payment of or payment for Shares or is unable to pay for Shares
pursuant to this Offer for any reason, then, without prejudice to the
Purchaser's rights under this Offer, the Depositary may retain tendered shares
on behalf of the Purchaser, and such Shares may not be withdrawn except to the
extent tendering shareholders are entitled to withdrawal rights as described in
Section 3 under this caption on page 9. However, the ability of the Purchaser to
delay the payment for Shares which the Purchaser has accepted for payment is
limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder
pay the consideration offered or return the securities deposited by or on behalf
of holders of securities promptly after the termination or withdrawal of this
Offer.
If the Purchaser makes a material change in the terms of this
Offer or the information concerning this Offer or waives a material condition of
this Offer, the Purchaser will disseminate additional tender offer materials and
extend this Offer to the extent required by Rules 14d-4(c), 14d- 6(c) and
14e-1(d) under the Exchange Act. The minimum period during which this Offer must
remain open following material changes in the terms of this Offer or information
concerning this Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the terms or information. With respect to
a change in price or a change in percentage of securities sought, a minimum 10
business day period is generally required to allow for adequate dissemination to
shareholders and investor response. If, prior to the Expiration Date, the
Purchaser should decide to increase the price per Share being offered in this
Offer, such increase will be applicable to all shareholders whose Shares are
accepted for payment pursuant to this Offer.
A request is being made to the Company pursuant to Rule 14d-5
of the Exchange Act for the use of the Company's stockholder lists and security
position listings for the purpose of disseminating this Offer to holders of
Shares. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares, and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
lists, or, if applicable, who are listed as
4
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares, by the Purchaser following receipt
of such lists or listings from the Company, or by the Company if it so elects.
2. PROCEDURES FOR TENDERING SHARES
Valid Tender. For a shareholder to validly tender Shares
pursuant to this Offer, either (a) a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) relating to the Common Shares tendered,
together with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message (as defined below), and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either certificates for tendered Shares ("Share Certificates") must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case prior to the Expiration Date, or (b) the tendering shareholder must comply
with the guaranteed delivery procedures set forth below.
Book-Entry Transfer. The Depositary will establish accounts
with respect to the Shares at The Depository Trust Company (the "Book-Entry
Transfer Facility") for purposes of this Offer within two business days after
the date of this Offer to Purchase. Any financial institution that is a
participant in the Book-Entry Transfer Facility's system may make book-entry
delivery of Shares by causing the Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below), and any other required documents, must,
in any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering shareholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
The term "Agent's Message" means a message transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against such participant.
5
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING
SHAREHOLDER. SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on a
Letter of Transmittal if either (a) the Letter of Transmittal is signed by the
registered holder (which term, for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) such Shares are tendered for
the account of a financial institution (including most commercial banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on a Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If Share Certificates are registered in the
name of a person other than the signer of a Letter of Transmittal, or if payment
is to be made or Share Certificates for Shares not tendered or not accepted for
payment are to be returned to a person other than the registered holder of the
Share Certificates surrendered, the tendered Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holders appear on the Share Certificates, with
the signatures on the Share Certificates or stock powers guaranteed as described
above. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares
pursuant to this Offer and such shareholder's Share Certificates are not
immediately available or the procedure for book- entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such shareholder's tender may
be effected if all the following conditions are met:
o the tender is made by or through an Eligible
Institution;
o a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form
provided by the Purchaser, is received by the
Depositary, as provided below, prior to the
Expiration Date; and
6
o the Share Certificates representing all tendered
Shares, in proper form for transfer (or a Book-Entry
Confirmation with respect to all such Shares),
together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any
other required documents are received by the
Depositary within three trading days after the date
of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock
Exchange is open for business.
A Notice of Guaranteed Delivery may be delivered by hand to
the Depositary or transmitted by facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares
accepted for payment pursuant to this Offer will in all cases be made only after
timely receipt by the Depositary of (a) Share Certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or facsimile thereof) relating to the Shares tendered, properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering shareholders may
be paid at different times depending upon when Share Certificates or Book-Entry
Confirmations with respect to Shares are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THIS OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
The Purchaser's acceptance for payment of Shares validly
tendered pursuant to this Offer will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of this Offer.
Appointment as Proxy. By executing a Letter of Transmittal as
set forth above, a tendering shareholder irrevocably appoints designees of the
Purchaser as such shareholder's attorneys-in-fact and proxies in the manner set
forth in the Letter of Transmittal, each with full power of substitution, to the
full extent of such shareholder's rights with respect to the Shares tendered by
such shareholder and accepted for payment by the Purchaser (and any and all
other Shares or other securities issued or issuable in respect of such Shares).
All such proxies will be irrevocable and considered coupled with an interest in
the tendered Shares. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Shares for payment pursuant to this
Offer. Upon such acceptance for payment, all prior powers of attorney, proxies
and consents given by such shareholder with respect to such Shares or other
securities will, without further action, be revoked and no subsequent powers of
attorney, proxies, consents or revocations may be given (and, if given, will not
be deemed effective). The designees of the Purchaser will thereby be empowered
to exercise all voting and other rights with respect to such Shares and other
securities in respect of any annual, special, adjourned or postponed meeting of
the Company's shareholders, actions by
7
written consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting, consent and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of shareholders.
Determination of Validity. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by them not
to be in proper form or the acceptance for payment of or payment for which may,
in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also
reserves the absolute right to waive any defect or irregularity in the tender of
any Shares of any particular shareholder whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of the Purchaser, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of this Offer (including the Letter
of Transmittal and the instructions thereto) will be final and binding on all
parties.
Backup Withholding. In order to avoid "backup withholding" of
federal income tax on payments of cash pursuant to this Offer, a shareholder
surrendering Shares in this Offer must, unless an exemption applies, provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such shareholder is not subject to backup
withholding. If a shareholder does not provide such shareholder's correct TIN or
fails to provide the certifications described above, the Internal Revenue
Service (the "IRS") may impose a penalty on such shareholder and the payment of
cash to such shareholder pursuant to this Offer may be subject to backup
withholding of 31% of the amount of such payment. All shareholders surrendering
Shares pursuant to this Offer should complete and sign the main signature form
and the Substitute Form W-9 included as part of the Letter of Transmittal to
provide the information and certification necessary to avoid backup withholding
(unless an applicable exemption exists and is proved in a manner satisfactory to
the Purchaser and the Depositary). Noncorporate foreign shareholders should
complete and sign the main signature form and a Form W-8, Certificate of Foreign
Status, a copy of which may be obtained from the Depositary, in order to avoid
backup withholding. See Instruction 10 to the Letter of Transmittal.
Lost Certificates. If the Share Certificates that a registered
holder wants to surrender have been lost or destroyed, that fact should be
indicated in the appropriate space on the Letter of Transmittal. Certain
representations and agreements contained in the Letter of Transmittal are
required to be made by tendering stockholders who have lost their Share
Certificates. In addition, the Information Agent or Depositary may forward to
such registered holders additional
8
documentation necessary to be completed in order to effectively surrender such
lost or destroyed certificates. See Instruction 11 to the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of receipt)
and acceptance for payment of any tender of Shares will be determined by the
Purchaser, in its sole discretion, whose determination will be final and binding
on all parties.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of
Shares pursuant to this Offer are irrevocable. Shares tendered pursuant to this
Offer may be withdrawn pursuant to the procedures set forth below at any time
prior to the Expiration Date and, unless theretofore accepted for payment and
paid for by the Purchaser pursuant to this Offer, may also be withdrawn at any
time after, April 23, 2001 (or such later date as may apply in case this Offer
is extended).
For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If Share Certificates have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and, unless such Shares have been tendered
by an Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedure for book-entry transfer as set forth in Section 2 under this
caption on page 5, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with the Book-Entry Transfer
Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of this Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 under this caption on
page 5 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Purchaser, in its
sole discretion, whose determination will be final and binding on all parties.
None of the Purchaser, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT; PRORATION
Upon the terms and subject to the conditions of this Offer
(including, if this Offer is extended or amended, the terms and conditions of
any such extension or amendment), the Purchaser
9
will accept for payment and will pay for up to 900,000 Shares validly tendered
and not properly withdrawn in accordance with Section 3 promptly after the
Expiration Date. To the extent more than 900,000 Shares are tendered in this
Offer, the Purchaser will purchase only up to 900,000 Shares in this Offer on a
pro rata basis (with appropriate adjustments to avoid purchase of fractional
Shares) based on the number of Shares properly tendered by each stockholder
prior to or on the Expiration Date and not withdrawn. See Section 3 under this
caption on page 9. All questions as to the satisfaction of such terms and
conditions will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding on all parties. See Section 1 on page 3
and Section 14 on page 19 under this caption. The Purchaser expressly reserves
the right, in its sole discretion, to delay acceptance for payment of or payment
for Shares in anticipation of obtaining all necessary governmental approvals.
See Section 14 under this caption on page 19. Any such delays will be effected
in compliance with Rule 14e-1(c) under the Exchange Act (relating to a bidder's
obligation to pay for or return tendered securities promptly after the
termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant
to this Offer will be made only after timely receipt by the Depositary of (a)
Share Certificates for (or a timely Book-Entry Confirmation with respect to)
such Shares, (b) the Letter of Transmittal (or facsimile thereof) relating to
the Shares tendered, properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal. The
per Share consideration paid to any shareholder pursuant to this Offer will be
the highest per Share consideration paid to any other shareholder pursuant to
this Offer.
For purposes of this Offer, the Purchaser will be deemed to
have accepted for payment, and thereby purchased, Shares validly tendered to the
Purchaser and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Shares. Payment for Shares accepted for payment pursuant to this Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for validly tendering shareholders for the purpose of receiving
payment from the Purchaser and transmitting payment to tendering shareholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES
TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THIS OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for
the purpose of making payments to tendering shareholders, the Purchaser's
obligation to make such payment shall be satisfied and tendering shareholders
must thereafter look solely to the Depositary for payment of amounts owed to
them by reason of the acceptance for payment of Shares pursuant to this Offer.
The Purchaser will pay any stock transfer taxes with respect to the transfer and
sale to them or their order pursuant to this Offer, except as otherwise provided
in Instruction 6 of the Letter of Transmittal, as well as any charges and
expenses of the Depositary and the Information Agent.
If the Purchaser is delayed in their acceptance for payment of
or payment for Shares or are unable to accept for payment or pay for Shares
pursuant to this Offer for any reason, then,
10
without prejudice to the Purchaser's rights under this Offer (but subject to
compliance with Rule 14e- l(c) under the Exchange Act), the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to exercise, and duly exercise, withdrawal rights as described in
Section 3 under this caption on page 9.
If any tendered Shares are not purchased pursuant to this
Offer for any reason, including proration, Share Certificates for any such
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares delivered by book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedure set forth in Section 2 under this caption on page 5,
such Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration, termination or
withdrawal of this Offer.
Because of the difficulty of determining precisely the number
of Shares validly tendered and not withdrawn, if proration is required, the
Purchaser would not expect to be able to announce the final results of proration
or pay for Shares until at least five trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Holders of Shares may obtain such
preliminary information from the Information Agent and may also be able to
obtain such preliminary information from their brokers.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to this Offer will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for
federal income tax purposes, a tendering shareholder will recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
pursuant to this Offer and the aggregate tax basis in the Shares tendered by the
shareholder and purchased pursuant to this Offer. If Shares are held by a
shareholder as capital assets (i.e., generally assets held for investment), gain
or loss recognized by the shareholder with respect to such Shares will be
capital gain or loss.
Capital gains recognized by an individual shareholder will
generally be taxed at a maximum federal marginal tax rate of 20% if the
shareholder's holding period for the shares exceeds 18 months and 28% if the
shareholder's holding period for the shares exceeds 12 months but does not
exceed 18 months. Capital gains recognized by a corporate shareholder will be
taxed at a maximum federal marginal tax rate of 35%.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION
ONLY AND MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT
TO HOLDERS OF SHARES WHO
11
ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS,
LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS,
AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES.
YOU ARE URGED TO CONSULT YOUR TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO YOU (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN INCOME AND OTHER TAX LAWS) OF THIS OFFER.
6. PRICE RANGE OF SHARES; DIVIDENDS ON THE SHARES
Based on the Company's Quarterly Report on Form 10-QSB for the
fiscal quarter ended September 30, 2000 (the "September 2000 Quarterly Report"),
as of September 30, 2000, there were 2,948,420 Shares outstanding. Based on the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1999 (the "1999 Annual Report"), at February 29, 2000, the Shares outstanding
were held by approximately 63 shareholders of record.
Based on the 1999 Annual Report, the Shares are quoted on the
NASDAQ SmallCap Market. The following table sets forth for each of the periods
indicated, the high and low trading prices per Share as reported by Bloomberg
Financial Markets:
CALENDAR YEAR HIGH ($) LOW($)
1999
First Quarter 13/8 3/4
Second Quarter 11/2 7/8
Third Quarter 1 13/16 11/4
Fourth Quarter 1 15/16 1 3/16
2000
First Quarter 2 7/16 2 1/16
Second Quarter 2 1/16 1 9/16
Third Quarter 1 9/16 1 1/4
Fourth Quarter 1 1/2 1 1/8
Based on the 1999 Annual Report, since its inception the
Company has not paid any cash dividends to holders of its Shares and has stated
that it intends to retain future earnings, if any, generated from the Company's
operations.
12
7. EFFECT OF THIS OFFER ON THE MARKET FOR THE SHARES; NASDAQ
LISTING EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS
Market for the Shares. Based upon the September 2000 Quarterly
Report, there were 2,948,420 Shares outstanding as of September 30, 2000. Based
on the 1999 Annual Report, there were 63 holders of record of Shares at February
29, 2000. The purchase of Shares pursuant to this Offer will reduce the number
of holders of Shares and the number of Shares that might otherwise trade
publicly and could adversely affect the liquidity and market value of the
remaining Shares held by the public.
Nasdaq SmallCap Listing. Based on the 1999 Annual Report, the
Shares are currently listed for quotation on the Nasdaq SmallCap Market. In
order to for the Shares to continue to be listed on Nasdaq, among other things,
at least 500,000 Shares must be held by persons other than officers or directors
of the Company or beneficial owners of 10% or more of the outstanding Shares and
at least 300 persons must hold 100 Shares or more. As a result of the purchase
of Shares pursuant to this Offer, the Company may no longer satisfy these
continued listing requirements and the Shares may be delisted from Nasdaq. In
the event that the Shares are delisted from Nasdaq, it is possible that the
Shares would continue to trade in the over-the-counter market and that the price
or other quotations may still be available from other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon such factors as the number of holders and/or the aggregate
market value of such Shares remaining at such time, the interest in maintaining
a market in such Shares on the part of securities firms, the possible
termination of registration of such Shares under the Exchange Act, as described
below, and other factors. The Purchaser cannot predict whether a reduction in
the number of Shares that might otherwise trade publicly would have an adverse
or beneficial effect on the market price for or marketability of the Shares or
whether it would cause future market prices to be greater or less than the price
paid in this Offer.
Exchange Act Registration. The Shares are currently registered
under the Exchange Act. The Shares may be eligible for deregistration either
prior to or after this Offer depending upon certain circumstances, including the
number of recordholders of the Shares at such time. Registration of the Shares
under the Exchange Act may be terminated upon application of the Company to the
Commission if the Shares are neither listed on a national securities exchange
nor held by 500 or more holders of record, where total assets of the Company
have not exceeded $10 million on the last day of the Company's three most recent
fiscal years. In order to be eligible to effect such termination, however, the
Company must be current on its periodic reporting requirements under the
Exchange Act. The Purchaser currently has no intention of recommending the
deregistration of the Shares.
Termination of registration of the Shares under the Exchange
Act would, assuming the Company were in compliance with its reporting
obligations, substantially reduce the information required to be furnished by
the Company to its shareholders and to the Commission. Termination would also
make certain provisions of the Exchange Act no longer applicable to the Company,
such as the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act, the requirement
13
of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in
connection with shareholders' meetings and the related requirement of furnishing
an annual report to shareholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities in compliance with Rule
144 or 144A promulgated under the Securities Act of 1933, as amended, would be
eliminated, although Rule 144 and Rule 144A would appear to be currently
unavailable to affiliates because of the absence of currently available
information concerning the Company.
Margin Securities. The Shares are currently "margin
securities" under the rules of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), which has the effect, among other things,
of allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities. Following the purchase of
Shares pursuant to this Offer or any subsequent open market or privately
negotiated purchases, depending upon factors such as the number of record
holders of the Shares and the number and market value of publicly held Shares,
the Shares might no longer constitute "margin securities" for purposes of the
Federal Reserve Board's margin regulations and therefore no longer be used as
collateral for purposes of loans made by brokers. In addition, if registration
of the Shares under the Exchange Act is terminated, or if the Shares are
delisted from Nasdaq the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
According to the 1999 Annual Report, the Company is a Delaware
corporation, and the principal executive offices of the Company are located at
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and its telephone number is (954)
796-3338. According to the 1999 Annual Report, the Company is engaged in the
design, engineering, manufacturing, assembly, sales, marketing, distribution and
service of filtration systems and products, water filtration and purification
products, car wash equipment sales and service.
Set forth below is certain selected consolidated financial
information with respect to the Company excerpted from information contained in
the 1999 Annual Report, the September 2000 Quarterly Report and the Company's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999 (the
"September 1999 Quarterly Report"). More comprehensive financial information is
included in the 1999 Annual Report, the September 2000 Quarterly Report, the
September 1999 Quarterly Report and other documents filed by the Company with
the Commission, and the following summary is qualified in its entirety by
reference and such other documents and all the financial information (including
any related notes) contained therein. The 1999 Annual Report, the September 2000
Quarterly Report, the September 1999 Quarterly Report and such other documents
should be available for inspection and copies thereof should be obtainable in
the manner set forth below under "Available Information."
14
SELECTED FINANCIAL INFORMATION OF AQUA CARE SYSTEMS, INC.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------- -------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
OPERATING DATA:
Revenues.................................. $23,901,102 $26,449,286 $23,356,260 $14,908,332 $12,223,095
Income (loss) from continuing operations $(797,979) $(1,989,689) $(1,252,610) $(909,571) $(286,254)
before taxes..............................
Net income (loss)......................... $(366,800) $(2,697,033) $(561,440) $(473,605) $(697,776)
Net income (loss) per share............... $(.14) $(.98) $(.20) $(.17) $(.24)
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------- -------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Working capital........................... $(1,871,005) $(628.255) $23,356,260 $14,908,332 $12,223,095
Total assets.............................. $12,088,609 $14,567,448 $(1,252,610) $(909,571) $(286,254)
Total liabilities......................... $9,264,002 $9,299,091 $(561,440) $(473,605) $(697,776)
Stockholders' equity (deficit)............$(17,088,609) $5,268,357) $(.20) $(.17) $(.24)
Available Information. The Company is subject to the
informational requirements of the Exchange Act and, in accordance therewith, is
required to file reports relating to its business, financial condition and other
matters. Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's shareholders and filed with the Commission. Such
reports, proxy statements and other information, may be available for inspection
at the public reference facilities of the Commission at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, NY 10048 and Citicorp Center,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇▇ ▇▇▇▇), ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Such reports, proxy
statements and other information may also be obtained at the Web site that the
Commission maintains at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇. Copies of such information should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
Company Information. The information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents on file with the Commission and other publicly available
information. Although the Purchaser has no knowledge that any such information
is untrue, the Purchaser takes no responsibility for the accuracy or
completeness of such information or for any failure by the Company to disclose
events that may have occurred and may affect the significance or accuracy of any
such information.
15
9. CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser was formed in March 2000 under the laws of the
State of Delaware for the purpose of making an investment in the Company. See
Section 11 under this caption on page 17. The principal executive office of the
Purchaser is located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and its
telephone number is (▇▇▇) ▇▇▇-▇▇▇▇. Until February 2001, the Purchaser had no
assets, liabilities, or business. The cash and Shares described below in the
unaudited balance sheet of the Purchaser as of February 22, 2001 were
contributed into the Purchaser in February 2001. The Purchaser has not engaged,
and is not expected to engage, in any business other than in connection with
acquiring Shares. As of the date of this Offer to Purchase, the Purchaser is the
beneficial owner of 134,900 Shares, which constitute approximately 4.6% of the
Shares outstanding as of the date of this Offer to Purchase.
Set forth below is the unaudited balance sheet of the Purchaser as of
February 22, 2001.
AV, INC.
BALANCE SHEET AT FEBRUARY 22, 2001
(unaudited)
▇▇▇▇ and U.S. Treasury Money Market............... $2,166,286
Investment Securities at Cost..................... 220,317
Other............................................. 77,554
--------------
Total Assets...................................... $2,464,157
==============
Total Liabilities................................. $0
--------------
Total Stockholders' Equity........................ 2,464,157
--------------
Total Liabilities and Stockholders' Equity........ $2,464,157
==============
As the sole stockholders of the Purchaser, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇, together with the Purchaser, are deemed to be bidders in this
Offer, but any purchases in this Offer will be made solely by the Purchaser.
Certain information concerning Messrs. ▇▇▇▇▇▇▇▇ and Cheval is set forth in
Schedule I hereto.
Except as set forth in this Offer to Purchase (including the
Schedules hereto), none of the Purchaser nor any of the persons listed in
Schedule I hereto has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
without limitation, any contract, arrangement, understanding or relationship
concerning the transfer of the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase (including the Schedules hereto), none of the
Purchaser nor any of the persons listed in Schedule I hereto has had any
transactions with the
16
Company, or any of its executive officers, directors or affiliates that would
require reporting under the rules of the Commission. See Section 11 under this
caption on page 17.
Except as set forth in this Offer to Purchase (including the
Schedules hereto), there have been no contacts, negotiations or transactions
between the Purchaser or any of the persons listed in Schedule I hereto, on the
one hand, and the Company or its executive officers, directors or affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, election of directors, or a sale or other
transfer of a material amount of assets that would require reporting under the
rules of the Commission. See Section 11 under this caption on page 17.
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to
purchase 900,000 Shares pursuant to this Offer and to pay related fees and
expenses incurred in connection with this Offer, is estimated at $2,285,000. The
Purchaser has sufficient cash available to pay for the Shares. Because the
Purchaser has sufficient resources to fund this Offer, the Purchaser has no
alternative financing arrangements.
11. BACKGROUND OF THIS OFFER; PAST CONTACTS, TRANSACTIONS OR
NEGOTIATIONS WITH THE COMPANY
In March 2000, the Purchaser and Messrs. ▇▇▇▇▇▇▇▇ and Cheval
(the "Group") initiated contact with the Company for the purpose of negotiating
an investment by the Purchaser in the Company. The Group and its affiliates were
interested in investments in the water business. As a result of the Company
already being public, the Group believed that the Company represented a unique
opportunity to invest in a such business. On June 1, 2000, the Company and the
Purchaser entered into a non-binding letter of intent (the "Letter of Intent"),
pursuant to which the Company and the Purchaser agreed to negotiate the sale
(the "Sale") by the Company to the Purchaser of 575,000 Shares at the price of
$2.25 per share and of warrants to purchase an additional 575,000 Shares at an
exercise price of $3.35 per share. The Letter of Intent provided that the
commitment represented thereby would expire on the earlier to occur of the
execution and delivery of definitive agreements with respect to the Sale or July
31, 2000. The Company and the Group were unable to negotiate definitive
agreements with respect to the Sale by July 31, 2000. Negotiations between the
Company and the Group regarding an investment by the Purchaser in the Company
continued until October 23, 2000. On that date, the Purchaser was informed by
letter from counsel to the Company that the Company's board of directors had
determined that it was not in the best interest of the Company and its
shareholders to pursue a transaction with the Group at that time and that the
Company had decided to engage an investment banker to, among other things, work
with management to develop a strategic plan to enhance shareholder value.
Notwithstanding the determination of the board, the Group and the Company have
subsequently, from time to time, continued to discuss the possibility of an
investment by the Purchaser in the Company although no
17
agreement with respect to such an investment has been reached. The Group now
believes that the Company never seriously considered entering into a transaction
with the Group.
12. PURPOSE OF THIS OFFER
The purpose of this Offer is to make an investment in the
Company through the purchase of Shares. The Purchaser believes that the recent
market price of the Shares does not accurately reflect the value or potential of
the Company. The Purchaser believes that the potential value of the Company's
assets could be fully realized under new management. Accordingly, the Purchaser
intends, as soon as practicable after consummation of this Offer, to explore all
alternatives to elect a new board of directors and replace senior management of
the Company.
Except as set forth in this Offer to Purchase, the Purchaser
has no current plans or proposals that would result in: an extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company or any of its subsidiaries; a purchase, sale or transfer of any
material amount of assets of the Company or any of its subsidiaries, any
material change in the present dividend rate or policy of the Company or
indebtedness or capitalization of the Company; or any other material change in
the Company's corporate structure or business. However, to the extent
information is available, the Purchaser intends to continuously evaluate the
Company and its prospects, and the Purchaser reserves the right to change its
plans and intentions. See Section 7 under this caption on page 13 for certain
Exchange Act consequences of this Offer.
13. DIVIDENDS AND DISTRIBUTIONS
If, after February 22, 2001, the Company should (a) split,
combine or otherwise change the Shares or its capitalization from that disclosed
in the September 2000 Quarterly Report, (b) acquire or otherwise cause a
reduction in the number of outstanding Shares or other securities or (c) issue
or sell additional Shares (other than the issuance of Shares under option as
disclosed in the September 2000 Quarterly Report, in accordance with the terms
of such options as such terms have been publicly disclosed in the September 2000
Quarterly Report, shares of any other class of capital stock, other voting
securities or any securities convertible into, or rights, warrants or options,
conditional or otherwise, to acquire any of the foregoing), then, subject to the
provisions of Section 14 under this caption on page 19, the Purchaser, in its
sole discretion, may make such adjustments as it deems appropriate in the Offer
Price and other terms of this Offer, including without limitation, the number or
type of securities offered to be purchased.
If, after February 22, 2001, the Company should declare or pay
any cash dividend on the Shares or other distribution on the Shares, or issue
with respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, payable or distributable to shareholders of record on a date prior to
the transfer of the Shares purchased pursuant to this Offer to Purchase, or
their nominees or transferees on the Company's stock transfer records, then,
subject to the provisions of Section 14 under this caption on page 19, (a) the
Offer
18
Price may, in the sole discretion of the Purchaser, be reduced by the amount of
any such cash dividend or cash distribution and (b) the whole of any such
noncash dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for the
account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at
the direction of the Purchaser, be exercised for the benefit of the Purchaser,
in which case the proceeds of such exercise will promptly be remitted to the
Purchaser. Pending such remittance and subject to applicable law, the Purchaser
will be entitled to all rights and privileges as owner of any such noncash
dividend, distribution, issuance or proceeds and may withhold the entire Offer
Price or deduct from the Offer Price the amount or value thereof, as determined
by the Purchaser in its sole discretion.
14. CERTAIN CONDITIONS OF THIS OFFER
THIS OFFER IS CONDITIONED UPON AT LEAST 500,000 SHARES BEING
TENDERED AND AV, INC. MAY TERMINATE THIS OFFER IF LESS THAN 500,000
SHARES ARE TENDERED BEFORE THIS OFFER EXPIRES. THIS OFFER IS NOT
CONDITIONED ON THE RECEIPT OF FINANCING.
Notwithstanding any other provisions of this Offer, and in
addition to (and not in limitation of) the Purchaser's right to extend and amend
this Offer at any time in its sole discretion, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after termination or withdrawal of such bidder's offer), pay for, and
may delay the acceptance for payment of or, subject to the restriction referred
to above, the payment for, any tendered Shares, may terminate or amend this
Offer as to any Shares not then paid for, if any of the following events shall
occur or be deemed by the Purchaser to have occurred on or prior to the
Expiration Date:
o There shall be threatened, instituted or pending any action,
proceeding, application or counterclaim by any government or
governmental, regulatory or administrative authority or
agency, domestic, foreign or supranational (each, a
"Governmental Entity"), or by any other person, domestic or
foreign, before any court or Governmental Entity, (i) (A)
challenging or seeking to, or which is reasonably likely to,
make illegal, delay or otherwise directly or indirectly
restrain or prohibit, or seeking to, or which is reasonably
likely to, impose voting, procedural, price or other
requirements, in addition to those required by Federal
securities laws (each as in effect on the date of this Offer
to Purchase), in connection with the making of this Offer, the
acceptance for payment of, or payment for, some of or all the
Shares by the Purchaser or any other affiliate of the
Purchaser, (B) seeking to obtain material damages or (C)
otherwise directly or indirectly relating to this Offer, (ii)
seeking to prohibit the ownership or operation by the
Purchaser or any other affiliate of the Purchaser of all or
any portion of the Shares or of the business or assets of the
19
Purchaser or any other affiliate of the Purchaser or to compel
the Purchaser, or any other affiliate of the Purchaser, to
dispose of or hold separate the Shares or all or any portion
of the business or assets of the Purchaser or any other
affiliate of the Purchaser or seeking to impose any limitation
on the ability of the Purchaser or any other affiliate of the
Purchaser to conduct such business or own such assets, (iii)
seeking to impose or confirm limitations on the ability of the
Purchaser or any other affiliate of the Purchaser effectively
to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or
owned by the Purchaser or any other affiliate of the Purchaser
on all matters properly presented to the Company's
stockholders, (iv) seeking to require divestiture by the
Purchaser or any other affiliate of the Purchaser of any
Shares, (v) seeking any material diminution in the benefits
expected to be derived by the Purchaser or any other affiliate
of the Purchaser as a result of this Offer, or (vi) otherwise
directly or indirectly relating to this Offer or which
otherwise, in the sole judgment of the Purchaser, might
materially adversely affect the Company or the Purchaser or
any other affiliate of the Purchaser or the value of the
Shares;
o There shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or
injunction proposed, enacted, enforced, promulgated, amended,
issued or deemed applicable to (i) the Purchaser or any other
affiliate of the Purchaser or the Company or (ii) this Offer
by any government, legislative body or court, or Governmental
Entity, that, in the sole judgment of the Purchaser, might,
directly or indirectly, result in any of the consequences
referred to in clauses (i) through (vi) of the immediately
preceding bullet paragraph;
o The Purchaser shall have learned of any change that has, since
the filing of the September 2000 Quarterly Report, occurred or
been threatened (or any condition, event or development shall
have occurred or been threatened involving a prospective
change) in the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or
otherwise), operations, licenses or franchises, results of
operations or prospects of the Company that, in the sole
judgment of the Purchaser, is or may be materially adverse to
the Company, or the Purchaser shall have become aware of any
facts that, in the sole judgment of the Purchaser, have or may
have material adverse significance with respect to either the
value of the Company or the value of the Shares to the
Purchaser;
o There shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States, (ii) any
extraordinary or material adverse change in the financial
markets or major stock exchange indices in the United States,
(iii) any material change in United States currency exchange
rates or any other currency exchange rates or a suspension of,
or limitation on, the markets therefor, (iv) a declaration of
a banking moratorium or any suspension of payments
20
in respect of banks in the United States, (v) any limitation
(whether or not mandatory) by any government, domestic,
foreign or supranational, or Governmental Entity on, or other
event that, in the sole judgment of the Purchaser, might
affect the extension of credit by banks or other lending
institutions, (vi) a commencement of a war or armed
hostilities or other national or international calamity
directly or indirectly involving the United States or (vii) in
the case of any of the foregoing existing at the time of the
commencement of this Offer, a material acceleration or
worsening thereof;
o The Company shall have (i) split, combined or otherwise
changed, or authorized or proposed a split, combination or
other change of the Shares or its capitalization, (ii)
acquired or otherwise caused a reduction in the number of, or
authorized or proposed the acquisition or other reduction in
the number of, outstanding Shares or other securities, (iii)
issued or sold, or authorized or proposed the issuance,
distribution or sale of, additional Shares (other than the
issuance of Shares under option prior to the filing of the
September 2000 Quarterly Report, in accordance with the terms
of such options as such terms have been publicly disclosed in
the September 2000 Quarterly Report, shares of any other class
of capital stock, any other class of preferred stock, other
voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing), (iv) declared or paid, or
proposed to declare or pay, any dividend or other
distribution, whether payable in cash, securities or other
property, on or with respect to any shares of capital stock of
the Company, (v) altered or proposed to alter any material
term of any outstanding security, (vi) authorized,
recommended, proposed or entered into an agreement, agreement
in principle or arrangement or understanding with respect to
any release or relinquishment of any material contractual or
other right of the Company, or (vii) amended or authorized or
proposed any amendment to, the Company's Certificate of
Incorporation or By-laws, or the Purchaser shall become aware
that the Company shall have proposed or adopted any such
amendment that was not disclosed in publicly available filings
prior to the date hereof;
o A tender or exchange offer for any Shares shall have been made
or publicly proposed to be made by any other person (including
the Company or any of its subsidiaries or affiliates), or it
shall have been publicly disclosed or the Purchaser shall have
otherwise learned that (i) any person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) shall have
acquired or proposed to acquire beneficial ownership of more
than 5% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted
any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares),
other than acquisitions for bona fide arbitrage purposes only
and other than as disclosed in a Schedule 13D or 13G
21
on file with the Commission prior to February 22, 2001, (ii)
any such person, entity or group that prior to February 22,
2001, had filed such a schedule with the Commission has
acquired or proposes to acquire, through the acquisition of
stock, the formation of a group or otherwise, beneficial
ownership of 1% or more of any class or series of capital
stock of the Company (including the Shares), or shall have
been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of 1% or more of
any class or series of capital stock of the Company (including
the Shares), (iii) any person or group shall have entered into
a definitive agreement or an agreement in principle or made a
proposal with respect to a tender offer or exchange offer or a
merger, consolidation or other business combination with or
involving the Company or (iv) any person, other than the
Purchaser, if not filed prior to the date hereof, shall have
filed a Notification and Report Form under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as
amended (the "HSR Act") (or amended a prior filing to increase
the applicable filing threshold set forth therein) or made a
public announcement reflecting an intent to acquire the
Company or any assets or subsidiaries of the Company;
o Any approval, permit, authorization or consent of any
Governmental Entity (including those described or referred to
in Section 15 under this caption on page 23) shall not have
been obtained on terms satisfactory to the Purchaser in its
sole discretion; or
o The Purchaser shall have reached an agreement or understanding
with the Company providing for termination of this Offer;
which, in the sole judgment of the Purchaser in any such case, and regardless of
the circumstances (including any action or inaction by the Purchaser or any
other affiliate of the Purchaser) giving rise to any such condition, makes it
inadvisable for the Purchaser to proceed with this Offer and/or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by the Purchaser in whole or
in part at any time and from time to time prior to the expiration of the Offer
in their sole discretion. The failure by the Purchaser at any time to exercise
any of the foregoing rights will not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances will
not be deemed a waiver with respect to any other facts and circumstances and
each such right will be deemed an ongoing right that may be asserted at any time
and from time to time prior to the expiration of the Offer. Any determination by
the Purchaser concerning the events described in this Section 14 will be final
and binding upon all parties.
Each reference in this Section 14 to the "sole judgment" or
"sole discretion" of the Purchaser with respect to the satisfaction of the
conditions set forth in this Section 14 shall be
22
deemed to mean the "sole reasonable judgment" and "sole reasonable discretion",
respectively, of the Purchaser.
15. CERTAIN LEGAL MATTERS
General. Except as otherwise disclosed in this Section 15,
based on a review of publicly available information filed by the Company with
the Commission, the Purchaser is not aware of (i) any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to this Offer or (ii) any
approval or other action, by any governmental, administrative or regulatory
agency or authority, domestic, foreign or supranational, that would be required
for the acquisition or ownership of Shares by the Purchaser as contemplated
herein. Should any such approval or other action be required or desirable, the
Purchaser currently contemplates that such approval or action would be sought,
except as described below under "State Takeover Laws." While the Purchaser does
not currently intend to delay the acceptance for payment of Shares tendered
pursuant to this Offer pending the outcome of any such matter, there can be no
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company or the Purchaser or that certain
parts of the businesses of the Company or the Purchaser might not have to be
disposed of in the event that such approvals were not obtained or any other
actions were not taken. The Purchaser's obligation under this Offer to accept
for payment and pay for Shares is subject to certain conditions. See Section 14
under this caption on page 19.
A change of control of the Company may require filings with
the Commission and the Nasdaq SmallCap Market. The Purchaser does not currently
and does not expect to acquire or exercise control of the Company as a result of
this Offer. However, if it does control the Company it will determine whether to
make any required filings.
State Takeover Laws. A number of states throughout the United
States have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, stockholders, executive offices or places of
business in such states. In ▇▇▇▇▇ ▇. MITE Corp., the Supreme Court of the United
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions.
Subsequently, a number of federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
23
The Purchaser has not attempted to comply with any state
takeover statutes in connection with this Offer. This Offer is not conditioned
upon approval of the Board of Directors of the Company under Section 203 of the
Delaware General Corporation Law ("Section 203"). If the Purchaser becomes an
"interested stockholder" of the Company within the meaning of Section 203 as a
result of the consummation of this Offer, the Purchaser does not intend to enter
into a "prohibited transaction" with the Company within the meaning of Section
203 for three years following such consummation. The Purchaser reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to this Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to this Offer, the Purchaser
might be unable to accept for payment or pay for the Shares tendered pursuant to
this Offer or be delayed in continuing or consummating this Offer. In such case,
the Purchaser may not be obligated to accept for payment or pay for any Shares
tendered. See Section 14 under this caption on page 19.
Antitrust. The Purchaser believes that the HSR Act is
inapplicable to this Offer in light of the size of the Company. If the
provisions of the HSR Act were applicable to this Offer, the acquisition of
Shares under this Offer could be consummated only following the expiration of a
15- calendar day waiting period following the filing by the Purchaser of a
Notification and Report Form with respect to this Offer, unless the Purchaser
received a request for additional information or documentary material from the
Antitrust Division or the FTC or early termination of the waiting period is
granted. If, within the initial 15-day waiting period, either the Antitrust
Division or the FTC requested additional information or material from the
Purchaser concerning this Offer, the waiting period would be extended and would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by the Purchaser with such request. Only one
extension of the waiting period pursuant to a request for additional information
is authorized by the HSR Act. Thereafter, such waiting period may be extended
only by court order or with the consent of the Purchaser. In practice, complying
with a request for additional information or material can take a significant
amount of time. In addition, if the Antitrust Division or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the
legality under the antitrust laws of transactions. At any time before or after
Purchaser's acquisition of the Shares pursuant to this Offer, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of the Shares pursuant to this Offer or seeking the divestiture of the
Shares acquired by the Purchaser. Private parties may also bring legal action
under the antitrust laws under certain circumstances. There can be no assurance
that a challenge to this Offer on antitrust grounds will not be made or, if such
a challenge is made, of the result thereof.
24
16. FEES AND EXPENSES
Innisfree M&A Incorporated has been retained by the Purchaser
as Information Agent in connection with this Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile and personal interview
and may request brokers, dealers and other nominee shareholders to forward
material relating to this Offer to beneficial owners of Shares. The Purchaser
will pay the Information Agent reasonable and customary compensation for all
such services in addition to reimbursing the Information Agent for reasonable
out-of-pocket expenses in connection therewith. The Purchaser has agreed to
indemnify the Information Agent against certain liabilities and expenses in
connection with this Offer, including, without limitation, certain liabilities
under the federal securities laws.
Wilmington Trust Company has been retained as the Depositary.
The Purchaser will pay the Depositary reasonable and customary compensation for
its services in connection with this Offer, will reimburse the Depositary for
its reasonable out-of-pocket expenses in connection therewith and will indemnify
the Depositary against certain liabilities and expenses in connection therewith,
including, without limitation, certain liabilities under the federal securities
laws.
Brokers, dealers, commercial banks and trust companies and
other nominees will, upon request, be reimbursed by the Purchaser for customary
clerical and mailing expenses incurred by them in forwarding offering materials
to their clients. No soliciting dealers fees shall be paid to any person or
entity with respect to tendered Shares beneficially owned by such person or
entity.
17. MISCELLANEOUS
This Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of this Offer or the acceptance thereof would not be in compliance with the
securities, blue-sky or other laws of such jurisdiction. The Purchaser is not
aware of any jurisdiction in which the making of this Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. If the
Purchaser becomes aware of any jurisdiction where the making of this Offer or
the tender of Shares is not in compliance with any applicable law, the Purchaser
will make a good faith effort to comply with such law. If, after such good faith
effort, the Purchaser cannot comply with such law, this Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares
residing in such jurisdiction. To the extent the Purchaser becomes aware of any
state law that would limit the class of offerees in this Offer, the Purchaser
will amend this Offer and, depending on the timing of such amendment, if any,
will extend this Offer to provide adequate dissemination of such information to
such holders of Shares prior to the expiration of this Offer. In any
jurisdiction the securities, blue sky or other laws of which require this Offer
to be made by a licensed broker or dealer, this Offer shall be deemed to be made
on behalf of the Purchaser by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
25
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THE PURCHASER HAS FILED WITH THE COMMISSION A TENDER OFFER
STATEMENT ON SCHEDULE TO (THE "SCHEDULE TO") PURSUANT TO RULE 14D-3 UNDER THE
EXCHANGE ACT, TOGETHER WITH EXHIBITS, FURNISHING CERTAIN ADDITIONAL INFORMATION
WITH RESPECT TO THIS OFFER, AND MAY FILE AMENDMENTS THERETO. SUCH SCHEDULE TO
AND ANY AMENDMENTS THERETO, INCLUDING EXHIBITS, MAY BE INSPECTED AND COPIES MAY
BE OBTAINED IN THE MANNER SET FORTH IN SECTION 8 UNDER THIS CAPTION ON PAGE 14
WITH RESPECT TO THE COMPANY (EXCEPT THAT SUCH MATERIAL WILL NOT BE AVAILABLE AT
THE REGIONAL OFFICES OF THE COMMISSION).
AV, INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
AREF CHEVAL
February 22, 2001
26
SCHEDULE I
INFORMATION CONCERNING ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND AREF CHEVAL
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, who
constitute each director and executive officer of the Purchaser. Except as
otherwise noted, the business address of each such person is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and, except as otherwise noted, each such person is a
United States citizen.
PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME 5-YEAR EMPLOYMENT HISTORY
---- -----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Director and President of AV, Inc. since March 8,
2000. From 1996 to 1998, ▇▇. ▇▇▇▇▇▇▇▇ was
President of Ordnance Products, Inc., a military
ordnance manufacturer. From 1998 to 2000, he was
Chairman of the Board and Chief Executive Officer
of Aero-Electric Connectors, Inc., a manufacturer of
military inter-connect devices. Since 2000, ▇▇.
▇▇▇▇▇▇▇▇ has been Chief Executive Officer of
Conesys, Inc., a manufacturer of military inter-
connect devices.
▇▇▇▇ ▇▇▇▇▇▇ Director and Secretary of AV, Inc. since March 8,
2000. From 1989 to 1997, Mr. ▇▇▇▇▇▇ was Chief
Executive Officer of Water Engineering
Technologies, in Karachi, Pakistan. From 1997 to
1999, he was Vice-President of International Sales
for Hydromatix, Inc., a manufacturer of liquid
purification systems. Since 2000, he has been Chief
Financial Officer and Vice-President of Business
Development of Hydromatix. Mr. ▇▇▇▇▇▇ is a
citizen of Pakistan.
SCHEDULE II
TRANSACTIONS IN THE SHARES
Set forth below is a description of each transaction in the Shares that
was effected during the sixty days prior to the date of this Offer to Purchase
by any of the Purchaser, ▇▇. ▇▇▇▇▇▇▇▇ or Mr. ▇▇▇▇▇▇:
All of the below trades were made through accounts jointly held by ▇▇. ▇▇▇▇▇▇▇▇
and Mr. ▇▇▇▇▇▇, and the Shares in such accounts were transferred in February
2001 to accounts held by AV, Inc. Such Shares were transferred as a capital
contribution to the Purchaser.
TRANSACTION QUANTITY AMOUNT ($) SHARE PRICE ACTIVITY DATE
Purchase 4,000 5,473.50 1 5/18 12/19/00
Purchase 2,500 3,087.50 1 3/16 12/22/00
Purchase 5,000 7,202.50 1 7/16 01/04/01
Purchase 5,000 7,202.50 1 7/16 01/10/01
Purchase 1,500 2,265.00 11/2 01/18/01
Purchase 3,400 5,327.50 1 9/16 02/05/01
Purchase 1,600 2,515.00 1 9/16 02/07/01
Purchase 500 765.00 11/2 02/08/01
Manually signed facsimile copies of the Letter of Transmittal
will be accepted. The Letter of Transmittal, certificates for Shares and any
other required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for this Offer is:
WILMINGTON TRUST COMPANY
By Mail: By Hand/Overnight Delivery:
Corporate Trust Reorg. Svcs. Wilmington Trust Company
Wilmington Trust Company ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ Floor
P.O. Box 8861 Wilmington, DE 19801
Wilmington, DE 19899-8861 Attn: Corporate Trust Reorg. Svcs.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Questions and requests for assistance should be directed to
the Information Agent at its respective address or telephone numbers set forth
below. Additional copies of this Offer to Purchase, the Letter of Transmittal
and all other tender offer materials may be obtained from the Information Agent
as set forth below, and will be furnished promptly at the Purchaser's expense.
You may also contact your broker, dealer, commercial bank, trust company or
other nominee for assistance concerning this Offer.
The Information Agent for this Offer is:
Innisfree M&A Incorporated
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(Toll Free)
(▇▇▇) ▇▇▇-▇▇▇▇
(Call Collect)