-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UqS/feghypT0PjeOMGHSx90gLLsSDejkrYJzaaVKGjwIz0WNGLY8UFXTIAwfEy2H K+/vqM2JoV12D0DqDIFMOw== 0000950123-97-005703.txt : 19970710 0000950123-97-005703.hdr.sgml : 19970710 ACCESSION NUMBER: 0000950123-97-005703 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970709 SROS: NONE GROUP MEMBERS: EBV ELECTRONICS INC GROUP MEMBERS: RAAB KARCHER AG GROUP MEMBERS: VEBA AG SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WYLE ELECTRONICS CENTRAL INDEX KEY: 0000108683 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 951779998 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-33406 FILM NUMBER: 97638060 BUSINESS ADDRESS: STREET 1: 15370 BARRANCA PKWY CITY: IRVINE STATE: CA ZIP: 92718-2215 BUSINESS PHONE: 7147539953 MAIL ADDRESS: STREET 1: 15370 BARRANCA PARKWAY CITY: IRVINE STATE: CA ZIP: 92718-2215 FORMER COMPANY: FORMER CONFORMED NAME: WYLE LABORATORIES DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WAINER STANLEY A DATE OF NAME CHANGE: 19671101 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EBV ELECTRONICS INC CENTRAL INDEX KEY: 0001041987 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: RUDOLF V BENNIGSEN FOERDER CITY: 45131 ESSEN GERMANY STATE: I8 ZIP: 00000 MAIL ADDRESS: STREET 1: RUDOLF V BENNIGSEN FOERDER CITY: 45131 ESSEN GERMANY STATE: I8 ZIP: 00000 SC 14D1 1 SCHEDULE 14D1 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ WYLE ELECTRONICS (Name of Subject Company) EBV ELECTRONICS INC., RAAB KARCHER AG AND VEBA AG (Bidder) COMMON STOCK, WITHOUT PAR VALUE (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) (Title of Class of Securities) 983051103 (CUSIP Number of Class of Securities) DR. FERDINAND POHL EBV ELECTRONICS INC. RUDOLF-V.-BENNIGSEN-FOERDER-PLATZ 1 45131 ESSEN, GERMANY 011-201-459-1501 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) Copy to: JOHN J. MADDEN, ESQ. SHEARMAN & STERLING 599 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 (212) 848-4000 JULY 9, 1997 CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE -------------------------------------------------------- $632,910,729.40* $126,582.15 --------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: ---------------------------------------------------------------------- Form or Registration No.: --------------------------------------------------------------------- Filing Party: ---------------------------------------------------------------------------- Date Filed: ---------------------------------------------------------------------------- *Note: The Transaction Valuation is calculated by multiplying $50.00, the per share tender offer price, by 13,123,085, the sum of the 12,229,100 shares of Common Stock outstanding and the 893,985 shares of Common Stock subject to options outstanding, less the exercise price of the options. ================================================================================ 2 This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent"), to purchase all outstanding shares of Common Stock, without par value, and the associated preferred stock purchase rights (collectively, the "Shares"), of Wyle Electronics, a California corporation, at a price of $50.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated July 9, 1997 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. Parent is a wholly owned subsidiary of VEBA AG, a corporation organized under the laws of the Federal Republic of Germany ("VEBA"). ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Wyle Electronics, a California corporation (the "Company"), which has its principal executive offices at 15370 Barranca Parkway, Irvine, California 92618. (b) The class of equity securities being sought is all the outstanding Shares. The information set forth in the Introduction and Section 1 ("Terms of the Offer; Proration in Certain Circumstances; Expiration Date") of the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase are incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by Purchaser, Parent and VEBA. The information concerning the name, state or other place of organization, principal business and address of the principal office of each of Purchaser, Parent and VEBA, and the information concerning the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employments during the last five years and citizenship of each of the executive officers and directors of Purchaser and VEBA are set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA") and Schedule I of the Offer to Purchase and are incorporated herein by reference. (e) and (f) During the last five years, none of Purchaser, Parent or VEBA and, to the best knowledge of Purchaser, Parent and VEBA, none of the persons listed in Schedule I of the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in Section 7 ("Certain Information Concerning the Company"), Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA"), Section 10 ("Background of the Offer; Contacts with the Company; the Merger Agreement, the Stock Option Agreement and the Rights Agreement") of the Offer to Purchase is incorporated herein by reference. 1 3 (b) The information set forth in the Introduction, Section 7 ("Certain Information Concerning the Company"), Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA"), Section 10 ("Background of the Offer; Contacts with the Company; the Merger Agreement, the Stock Option Agreement and the Merger Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The information set forth in Section 9 ("Financing of the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company; the Merger Agreement, the Stock Option Agreement and the Rights Agreement"), Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") and Section 12 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") and Section 13 ("Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA") of the Offer to Purchase and Schedule I of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA"), Section 10 ("Background of the Offer; Contacts with the Company; the Merger Agreement, the Stock Option Agreement and the Rights Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 8 ("Certain Information Concerning Purchaser, Parent and VEBA") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. (b)-(c) and (e) The information set forth in Section 15 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. 2 4 (d) The information set forth in Section 13 ("Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase, Letter of Transmittal and the Agreement and Plan of Merger, dated as of July 3, 1997, among Parent, Purchaser and the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2) and (c)(1), is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase dated July 9, 1997. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients. (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in The Wall Street Journal on July 9, 1997. (a)(8) Joint Press Release issued by Parent and the Company on July 3, 1997. (b) None. (c)(1) Agreement and Plan of Merger, dated as of July 3, 1997, among Parent, Purchaser and the Company. (c)(2) Stock Option Agreement, dated as of July 3, 1997, among Parent, Purchaser and the Company. (d) None. (e) Not applicable. (f) None.
3 5 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. July 9, 1997 EBV ELECTRONICS INC. By: /s/ MICHAEL ROHLEDER ------------------------------------ Name: Michael Rohleder Title: President and CEO 4 6 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. July 9, 1997 RAAB KARCHER AG By: /s/ GUNTHER BEUTH /s/ CURT VON BERGHES ---------------------- ------------------------- Name: Gunther Beuth Name: Curt Von Berghes Title: Member of the Board Title: General Counsel 5 7 After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. July 9, 1997 VEBA AKTIENGESELLSCHAFT /s/ DR. HANS MICHAEL GAUL /s/ DR. KLAUS GRUNDLER ---------------------------- ------------------------- Dr. Hans Michael Gaul Dr. Klaus Grundler Member of the Board Senior Vice President 6 8 EXHIBIT INDEX
PAGE IN SEQUENTIAL EXHIBIT NUMBERING NO. SYSTEM - ------- ---------- (a)(1) Form of Offer to Purchase dated July 9, 1997........................... (a)(2) Form of Letter of Transmittal.......................................... (a)(3) Form of Notice of Guaranteed Delivery.................................. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees..................................................... (a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to Clients.......................................... (a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9................................................. (a)(7) Summary Advertisement as published in The Wall Street Journal on July 9, 1997................................................................ (a)(8) Joint Press Release issued by Parent and the Company on July 3, 1997... (c)(1) Agreement and Plan of Merger, dated as of July 3, 1997, among Parent, Purchaser and the Company.............................................. (c)(2) Stock Option Agreement, dated as of July 3, 1997, among Parent, Purchaser and the Company..............................................
7 EX-99.A.1 2 FORM OF OFFER TO PURCHASE DATED JULY 9, 1997 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF WYLE ELECTRONICS AT $50.00 NET PER SHARE BY EBV ELECTRONICS INC. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF RAAB KARCHER AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES (AS DEFINED BELOW) WHICH WOULD CONSTITUTE NOT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER SHALL HAVE EXPIRED OR BEEN TERMINATED. SEE SECTION 14. IN THE EVENT THAT MORE THAN 50% OF THE SHARES THEN OUTSTANDING ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN BUT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS ARE ACQUIRED BY PURCHASER PURSUANT TO THE OFFER AND THE STOCK OPTION DESCRIBED BELOW, PURCHASER WILL WAIVE THE MINIMUM CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT TO THE OFFER TO 6,102,321 SHARES OR SUCH GREATER OR LESSER NUMBER OF SHARES AS EQUALS 49.9% OF THE SHARES THEN OUTSTANDING (THE "REVISED MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED INTO THE OFFER AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED MINIMUM NUMBER OF SHARES (IT BEING UNDERSTOOD THAT PURCHASER SHALL NOT IN ANY EVENT BE REQUIRED TO ACCEPT FOR PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM NUMBER OF SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER). ------------------------ THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------------ IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's shares of Common Stock, without par value (the "Common Stock"), of Wyle Electronics and the associated preferred stock purchase rights (together with the Common Stock, the "Shares") should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to the Depositary or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. A shareholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in Section 3. Questions or requests for assistance may be directed to the Information Agent or to the Dealer Managers at their respective addresses 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 and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. ------------------------ The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. July 9, 1997 2 TABLE OF CONTENTS
PAGE ---- INTRODUCTION......................................................................... 1 1. Terms of the Offer; Proration in Certain Circumstances; Expiration Date...... 3 2. Acceptance for Payment and Payment for Shares................................ 5 3. Procedures for Accepting the Offer and Tendering Shares...................... 6 4. Withdrawal Rights............................................................ 8 5. Certain Federal Income Tax Consequences...................................... 9 6. Price Range of Shares; Dividends............................................. 10 7. Certain Information Concerning the Company................................... 10 8. Certain Information Concerning Purchaser, Parent and VEBA.................... 13 9. Financing of the Offer and the Merger........................................ 17 10. Background of the Offer; Contacts with the Company; the Merger Agreement, the Stock Option Agreement and the Rights Agreement.............................. 17 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger... 30 12. Dividends and Distributions.................................................. 32 13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration.................................................... 33 14. Certain Conditions of the Offer.............................................. 34 15. Certain Legal Matters and Regulatory Approvals............................... 35 16. Fees and Expenses............................................................ 38 17. Miscellaneous................................................................ 38 Schedule I. Directors and Executive Officers of VEBA and Purchaser................... I-1
3 To the Holders of Common Stock of Wyle Electronics: INTRODUCTION EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent"), hereby offers to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), at a price of $50.00 per Share (such amount or any greater amount per Share paid pursuant to the Offer (as defined below), being hereinafter referred to as the "Per Share Amount"), net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). Parent is a wholly owned subsidiary of VEBA AG, a corporation organized under the laws of the Federal Republic of Germany ("VEBA"). Until the Distribution Date (as defined in the Rights Agreement (as defined below)), the Rights will be evidenced by and trade with the certificates evidencing shares of the Common Stock. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of Goldman, Sachs & Co. ("Goldman Sachs"), who are acting as Dealer Managers for the Offer (in such capacity, the "Dealer Managers"), ChaseMellon Shareholder Services, L.L.C. (the "Depositary") and Georgeson & Company Inc. (the "Information Agent") incurred in connection with the Offer. See Section 17. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY APPROVED THE OFFER AND DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES WHICH WOULD CONSTITUTE NOT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER SHALL HAVE EXPIRED OR BEEN TERMINATED. IN THE EVENT THAT MORE THAN 50% OF THE SHARES THEN OUTSTANDING ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN, BUT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS ARE ACQUIRED BY PURCHASER PURSUANT TO THE OFFER AND THE STOCK OPTION DESCRIBED BELOW, PURCHASER WILL WAIVE THE MINIMUM CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT TO THE OFFER TO 6,102,321 SHARES OR SUCH GREATER OR LESSER NUMBER OF SHARES AS EQUALS 49.9% OF THE SHARES THEN OUTSTANDING (THE "REVISED MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED INTO THE OFFER AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED MINIMUM NUMBER OF SHARES (IT BEING UNDERSTOOD THAT PURCHASER SHALL NOT IN ANY EVENT BE REQUIRED TO ACCEPT FOR PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM NUMBER OF SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER). 4 The Offer is being made pursuant to an Agreement and Plan of Merger dated as of July 3, 1997 (the "Merger Agreement") among Parent, Purchaser and the Company. The Merger Agreement provides that, among other things, upon the terms and subject to the conditions set forth in the Merger Agreement, and in accordance with the California Corporations Code ("California Law") and the General Corporation Law of the State of Delaware ("Delaware Law"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the surviving corporation (the "Surviving Corporation") and will become an indirect wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by the Company or by any subsidiary of the Company and each Share that is owned by Parent, Purchaser or any other subsidiary of Parent, and other than Shares held by shareholders who have demanded and perfected, and have not withdrawn or otherwise lost, appraisal rights, if any, under California Law) will be cancelled and converted automatically into the right to receive $50.00 in cash, or any higher price that may be paid per Share in the Offer, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 10. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including the approval of the Merger Agreement by the requisite vote, if any, of the shareholders of the Company. See Section 11. Under California Law, if Purchaser acquires, pursuant to the Offer, the Stock Option or otherwise, at least 90% of the Shares then outstanding, Purchaser will be able to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, without a vote of the Company's shareholders. In such event, Parent, Purchaser and the Company have agreed to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders. If, however, Purchaser does not acquire at least 90% of the then outstanding Shares on a fully diluted basis pursuant to the Offer, the Stock Option or otherwise and Purchaser instead waives the Minimum Condition and amends the Offer to reduce the number of Shares subject to the Offer to 49.9% of the Shares then outstanding, Purchaser would own upon consummation of the Offer 49.9% of the Shares then outstanding and would thereafter solicit the approval of the Merger Agreement by a vote of the shareholders of the Company. Under such circumstances, a significantly longer period of time will be required to effect the Merger. See Section 11. Under California Law, the Merger may not be accomplished for cash paid to the Company's shareholders if Purchaser or Parent owns directly or indirectly more than 50% but less than 90% of the then outstanding shares unless either all the shareholders consent or the Commissioner of Corporations of the State of California approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. Accordingly, simultaneously with entering into the Merger Agreement, and as an inducement to Parent and Purchaser to enter into the Merger Agreement, the Company entered into a Stock Option Agreement with Parent and Purchaser, dated as of July 3, 1997 (the "Stock Option Agreement"). Pursuant to the Stock Option Agreement, the Company granted to Purchaser an irrevocable option (the "Stock Option") to purchase up to the number of Shares (the "Option Shares") that, when added to the number of Shares owned by Purchaser and its affiliates following the consummation of the Offer, would constitute 90% of the Shares then outstanding on a fully diluted basis (assuming the issuance of the Option Shares) at a cash purchase price per Option Share equal to $50.00 (the "Purchase Price"), subject to the terms and conditions set forth in the Stock Option Agreement, including, without limitation, (i) that Purchaser shall have accepted for payment Shares constituting more than 50% of the Shares then outstanding and (ii) that the number of Shares to be issued thereunder shall not exceed the number of authorized shares available for issuance. If the Stock Option is exercised by Purchaser (resulting in Purchaser acquiring 90% or more of the outstanding Shares), Parent will be able to effect a short-form merger under California Law, 2 5 subject to the terms and conditions of the Merger Agreement. Purchaser currently intends to effect a short-form merger if it is able to do so. The Merger Agreement provides that, promptly following the purchase of and payment for Shares by Purchaser pursuant to the Offer, Purchaser shall be entitled to designate up to such number of directors, rounded down to the nearest whole number, on the Board as will give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to any increase in the number of directors pursuant to the Merger Agreement) and the percentage that the aggregate number of Shares beneficially owned by Purchaser bears to the total number of Shares then outstanding (on a fully diluted basis); provided, however, that Purchaser will be entitled to designate a number of directors equal to or greater than 50% of the total number of directors only if Purchaser purchases 90% or more of the outstanding Shares pursuant to the Offer. In the Merger Agreement, the Company has agreed to take all actions necessary to cause Purchaser's designees to be so appointed or elected to the Board, with Purchaser's designees being allocated as evenly as possible among the classes of directors. In addition, the Company agreed that, until the Effective Time, the Board shall have at least three directors who are directors on the date of the Merger Agreement and who are not officers of the Company. The Company has advised Purchaser that as of June 30, 1997, 12,229,100 Shares were issued and outstanding and 893,985 Shares were reserved for issuance pursuant to outstanding stock options granted by the Company to employees and directors ("Existing Stock Options"). As provided in the Merger Agreement, Existing Stock Options will be cancelled in exchange for a cash payment immediately prior to the consummation of the Offer. See Section 11. As a result, as of June 30, 1997, the Minimum Condition would be satisfied if Purchaser acquired 11,810,777 Shares (11,006,190 Shares assuming all Existing Stock Options are cancelled prior to the consummation of the Offer). 6,114,550 Shares would constitute 50% of the Shares issued and outstanding (assuming no Existing Stock Options are exercised on or prior to such date). THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER; PRORATION IN CERTAIN CIRCUMSTANCES; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date (as defined below) and not withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday, August 5, 1997, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. In the event Purchaser amends the Offer as described above such that Purchaser offers to purchase the Revised Minimum Number of Shares, such decrease in the number of Shares being sought will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Shares being sought is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. Upon the terms and subject to the conditions of such amended Offer, if more than the Revised Minimum Number of Shares shall be validly tendered and not withdrawn prior to the Expiration Date, the Shares so tendered shall be purchased as provided in Section 2 on a pro rata basis (adjusted to avoid the purchase of fractional shares). Because of the difficulty of determining the precise number of Shares properly tendered, Purchaser does not expect to be able to announce the final proration factor until approximately five New York Stock Exchange, Inc. 3 6 ("NYSE") trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Shareholders can obtain such information from their brokers. Purchaser will not pay for any Shares accepted for payment pursuant to the Offer until the final proration factor is known. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the conditions specified in Section 14, by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw his Shares. See Section 4. Subject to the applicable regulations of the Securities and Exchange Commission (the "Commission"), Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares pending receipt of any regulatory approval specified in Section 15, (ii) to terminate the Offer and not accept for payment any Shares upon the occurrence of any of the conditions specified in Section 14 prior to the Expiration Date and (iii) to delay, terminate or waive any condition or otherwise amend the Offer in any respect, by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the consent of the Company, Purchaser will not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Per Share Amount, (iii) modify or add conditions to the Offer in addition to those set forth in Section 14, (iv) except as provided in the Merger Agreement, extend the term of the Offer, (v) change the form of consideration payable in the Offer or (vi) make any other modifications that are otherwise materially adverse to holders of Shares. Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Shares upon the occurrence of any of the conditions specified in Section 14 without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. Subject to the terms of the Merger Agreement, if, prior to the Expiration Date, Purchaser should decide to decrease the number of Shares being sought or to increase or decrease the consideration being offered in the Offer, such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered will be applicable to all shareholders whose Shares are accepted for payment pursuant to the Offer and, if at the time notice of any such decrease in the number of Shares being sought or such increase or decrease in the consideration being offered is first published, sent or given to holders of such Shares, the Offer is scheduled to expire at any time 4 7 earlier than the period ending on the tenth business day from and including the date that such notice is first so published, sent or given, the Offer will be extended at least until the expiration of such ten business day period. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn promptly after the latest to occur of (i) the Expiration Date, (ii) the expiration or termination of any applicable waiting periods under the HSR Act or any applicable foreign competition and antitrust statutes and regulations and (iii) the satisfaction or waiver of the conditions to the Offer set forth in Section 14. Notwithstanding the immediately preceding sentence and subject to applicable rules of the Commission and the terms of the Merger Agreement, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares pending receipt of any regulatory approvals specified in Section 15 or in order to comply in whole or in part with any other applicable law. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees and (iii) any other documents required under the Letter of Transmittal. VEBA intends to file with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") a Premerger Notification and Report Form under the HSR Act with respect to the Offer on or about July 17, 1997. Assuming such filing is made on such date, it is anticipated that the waiting period under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York City time, on August 1, 1997. If Purchaser acquires 50% or more of the Shares then outstanding in the Offer, no separate waiting period will apply to the subsequent purchase of Shares pursuant to the Stock Option Agreement. Prior to the expiration or termination of any such waiting period, the FTC or the Antitrust Division may extend any such waiting period by requesting additional information from VEBA or the Company with respect to the Offer or the Stock Option Agreement. If such a request is made with respect to the purchase of Shares in the Offer, the waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after substantial compliance by VEBA or the Company with such a request. Thereafter, the FTC or Antitrust Division must obtain a court order to prevent Purchaser from consummating the acquisition of Shares pursuant to the Offer. The waiting period under the HSR Act may be terminated prior to its expiration by the FTC and the Antitrust Division. VEBA intends to request early termination of the waiting period, although there can be no assurance that this request will be granted. See Section 15 for additional information regarding the HSR Act. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser 5 8 gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered or accepted for purchase as provided in this Section 2, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a holder of Shares validly to tender Shares pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 6 9 Signature Guarantees. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-5 promulgated under the Exchange Act (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates evidencing such Shares are not immediately available or such shareholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such shareholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal are received by the Depositary within three NYSE trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity in the tender of any Shares of any particular 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 and irregularities have been cured or waived. None of Purchaser, Parent, VEBA, the Dealer Managers, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. 7 10 Other Requirements. By executing the Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after July 3, 1997). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such shareholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares. The acceptance for payment by Purchaser of Shares pursuant to any of the procedures described above will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 10 OF THE LETTER OF TRANSMITTAL. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after September 6, 1997. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. 8 11 All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, Parent, VEBA, the Dealer Managers, 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. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or in the Merger will be a taxable transaction for federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. In general, a shareholder will recognize gain or loss for federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. For federal income tax purposes, such gain or loss will be a capital gain or loss if the Shares are a capital asset in the hands of the shareholder, and a long-term capital gain or loss if the shareholder's holding period is more than one year as of the date the Purchaser accepts such Shares for payment pursuant to the Offer or the Effective Time, as the case may be. Legislative proposals have been under consideration that would reduce the rate of federal income taxation of certain capital gains. Such legislation, if enacted, might apply only to gain realized on sales occurring after a date specified in the legislation. It cannot be predicted whether any such legislation ultimately will be enacted and, if enacted, what its effective date will be. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF SHAREHOLDERS, INCLUDING FINANCIAL INSTITUTIONS, BROKER-DEALERS, SHAREHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND STATE, LOCAL AND FOREIGN TAX LAWS. 9 12 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the NYSE. The following table sets forth, for the quarters indicated, the high and low sales prices per Share on the NYSE as reported by the Dow Jones News Service:
HIGH LOW ------- ------- 1995: First Quarter................................................ $ 24.50 $ 19.38 Second Quarter............................................... 29.25 23.00 Third Quarter................................................ 45.38 27.38 Fourth Quarter............................................... 46.50 33.50 1996: First Quarter................................................ $ 35.88 $ 27.38 Second Quarter............................................... 44.75 32.88 Third Quarter................................................ 34.25 28.00 Fourth Quarter............................................... 39.50 29.38 1997: First Quarter................................................ $ 42.13 $ 32.25 Second Quarter............................................... 38.50 $ 32.25 Third Quarter (through July 8, 1997)......................... 49.88 $ 37.00
On July 2, 1997, the last full trading day prior to the announcement of the execution of the Merger Agreement and of Purchaser's intention to commence the Offer, the closing price per Share as reported on the NYSE was $42.81. On July 8, 1997, the last full trading day prior to the commencement of the Offer, the closing price per Share as reported on the NYSE was $49.56. The Company has declared and paid dividends of $0.08 per Share for each quarter since the first quarter of 1996. Prior to the first quarter of 1996, and for each other quarter referenced above, the Company declared and paid dividends of $0.07 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of Purchaser, Parent nor VEBA assumes any responsibility for the accuracy or completeness of the information concerning the Company furnished by the Company or contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Purchaser, Parent or VEBA. General. The Company is a California corporation with its principal executive offices located at 15370 Barranca Parkway, Irvine, California 92618. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "Form 10-K"), the Company is an international electronics distributor marketing semiconductors and computer products, as well as providing value-added services. According to the Form 10-K, these services include complex materials management systems and engineering design for application-specific integrated circuits, including field programmable logic devices. Historical Financial Information. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Form 10-K and the unaudited financial statements contained in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 10 13 (the "Form 10-Q"). More comprehensive financial information is included in the Form 10-K, the Form 10-Q and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such reports and other documents, including the financial statements and related notes contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. WYLE ELECTRONICS SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENTS OF INCOME:
THREE MONTHS ENDED --------------------- YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31, ---------------------------------- 1997 1996 1996 1995 1994 --------- --------- ---------- ---------- -------- (UNAUDITED) Net sales..................................... $ 322,140 $ 326,506 $1,244,504 $1,077,467 $792,309 -------- -------- ---------- ---------- -------- Costs and expenses Cost of sales............................... 270,129 268,620 1,020,796 890,693 663,741 Selling and administrative expenses......... 37,890 37,589 150,287 124,603 103,253 Special charge.............................. -- -- -- -- 1,900 Interest expense, net....................... 1,901 1,934 7,623 3,315 1,289 Miscellaneous, net.......................... (499) (101) (673) (1,193) (604) -------- -------- ---------- ---------- -------- 309,421 308,042 1,178,033 1,017,418 769,579 -------- -------- ---------- ---------- -------- Income from continuing operations before income taxes................................ 12,719 18,464 66,471 60,049 22,730 Income taxes................................ 4,922 7,461 26,256 23,839 8,750 -------- -------- ---------- ---------- -------- Income from continuing operations............. 7,797 11,003 40,215 36,210 13,980 Discontinued operations Income from operations, net of taxes........ -- -- -- -- 1,418 Loss on sale, net of taxes.................. -- -- -- -- (15,779) -------- -------- ---------- ---------- -------- Net income (loss)............................. $ 7,797 $ 11,003 $ 40,215 $ 36,210 $ (381) ======== ======== ========== ========== ======== Income (loss) per share Income from continuing operations........... $ .61 $ .86 $ 3.12 $ 2.86 $ 1.13 ======== ======== ========== ========== ======== Discontinued operations Income from operations, net of taxes...... $ -- $ -- $ -- $ -- $ .11 ======== ======== ========== ========== ======== Loss on sale, net of taxes................ $ -- $ -- $ -- $ -- $ (1.27) ======== ======== ========== ========== ======== Net income (loss)............................. $ .61 $ .86 $ 3.12 $ 2.86 $ (.03) ======== ======== ========== ========== ======== Average common and common equivalent shares... 12,853 12,841 12,893 12,664 12,425 ======== ======== ========== ========== ========
11 14 BALANCE SHEET DATA:
AT DECEMBER 31, --------------------- 1996 1995 AT MARCH 31, -------- -------- 1997 ------------ (UNAUDITED) Current assets Cash and cash equivalents..................................... $ 12,036 $ 13,857 $ 15,694 Receivables (less allowances of $8,650, $8,487 and $6,423, respectively)............................................... 196,124 174,530 159,829 Inventories................................................... 256,478 216,544 203,413 Prepaid expenses and deferred tax assets...................... 9,325 8,563 7,295 ------------ -------- -------- Total current assets.......................................... 473,963 413,494 386,231 ------------ -------- -------- Property, plant & equipment Land.......................................................... -- 862 862 Buildings and improvements.................................... -- 24,480 22,394 Machinery and equipment....................................... -- 39,821 29,581 ------------ -------- -------- 69,130 65,163 52,837 Less accumulated depreciation and amortization................ 29,480 27,324 18,508 ------------ -------- -------- 39,650 37,839 34,329 ------------ -------- -------- Goodwill, net of amortization................................... 28,049 28,236 241 ------------ -------- -------- Other assets and deferred tax assets............................ 27,600 26,683 18,543 ------------ -------- -------- Total assets........................................... $569,262 $506,252 $439,344 ========== ======== ======== Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt.......................... $ 208 $ 575 $ 3,000 Accounts payable.............................................. 140,752 93,111 97,697 Accrued expenses.............................................. 46,232 39,465 30,032 ------------ -------- -------- Total current liabilities..................................... 187,192 133,151 130,729 ------------ -------- -------- Long-term debt, less current maturities......................... 130,144 111,845 87,600 ------------ -------- -------- Other liabilities............................................... 24,986 25,111 25,345 ------------ -------- -------- Commitments and contingencies Shareholders' equity Common stock, 25,000,000 shares authorized (shares outstanding: March 31, 1997 -- 12,186,270, December 31, 1996 -- 12,588,609 and December 31, 1995 -- 12,447,946)..... 95,052 97,091 90,482 Retained earnings............................................. 132,034 139,006 105,188 Foreign currency translation adjustment....................... (146) 48 -- ------------ -------- -------- 226,940 236,145 195,670 ------------ -------- -------- Total liabilities and shareholders' equity............. $569,262 $506,252 $439,344 ========== ======== ========
12 15 Projected Financial Information. In connection with Parent's review of the Company and in the course of the negotiations between the Company and Parent described in Section 10, the Company provided Parent with certain business and financial information which VEBA, Parent and Purchaser believe is not publicly available, including the following:
FISCAL YEAR ENDING DECEMBER 31, -------------------------------------------- ACTUAL 1996 1997 1998 1999 ----------- ------ ------ ------ (DOLLARS IN MILLIONS) Net Sales......................................... $ 1,245 $1,404 $1,685 $2,022 % Growth........................................ 15.5% 12.8% 20.0% 20.0% Gross Profit...................................... $ 224 $ 231 $ 269 $ 318 % Margin........................................ 18.0% 16.4% 15.9% 15.7% Operating Income.................................. $ 73 $ 68 $ 86 $ 106 % Margin........................................ 5.9% 4.8% 5.1% 5.2% Net Income........................................ $ 40 $ 37 $ 45 $ 56 % Margin........................................ 3.2% 2.6% 2.7% 2.8%
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS WILL BE REALIZED OR THAT ACTUAL RESULTS WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN ADDITION, THESE PROJECTIONS DO NOT GIVE EFFECT TO THE OFFER OR THE MERGER, WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO PARENT BY THE COMPANY. NONE OF VEBA, PARENT, PURCHASER, THE COMPANY OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS. Available Information. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Commission also maintains an Internet site on the World Wide Web at http://www.sec.gov that contains reports, proxy statements and other information. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The information should also be available for inspection at the NYSE, 20 Broad Street, New York, New York 10005. 8. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND VEBA. Purchaser is a newly incorporated Delaware corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. The principal offices of Purchaser are located at Rudolf-v.-Bennigsen-Foerder-Platz 1, 45131 Essen, Germany. Purchaser is an indirect wholly owned subsidiary of Parent. Until immediately prior to the time that Purchaser will purchase Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by 13 16 the Offer and the Merger. Because Purchaser is newly formed and has minimal assets and capitalization, no meaningful financial information regarding Purchaser is available. Parent is a corporation organized under the laws of the Federal Republic of Germany. Its principal offices are located at Rudolf-v.-Bennigsen-Foerder-Platz 1, 45131 Essen, Germany. Parent is engaged in wholesale distribution of construction supplies and electronic systems and components, and provides building-related and gasoline station engineering services. Its building materials and tile wholesale businesses and its security and gasoline station engineering services businesses have the largest market share in Germany, as well as leading shares in other European countries, and it is one of the leading European distributors of active electronic components. Parent is a wholly owned subsidiary of VEBA. VEBA is the fourth largest industrial group in Germany on the basis of market capitalization at year-end 1996. VEBA is organized into five separate business divisions: electricity, chemicals, oil, trading/transportation/services and telecommunications. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of Purchaser and VEBA and certain other information are set forth in Schedule I hereto. VEBA is not subject to the informational reporting requirements of the Exchange Act, and, accordingly, does not file reports or other information with the Commission relating to its business, financial condition and other matters. Set forth below is certain selected consolidated financial information relating to VEBA and its subsidiaries for VEBA's last two fiscal years. The selected consolidated financial information has been prepared in Deutsche Mark in accordance with generally accepted accounting principles in the Federal Republic of Germany ("German GAAP"). German GAAP differs in certain significant respects from generally accepted accounting principles in the United States ("U.S. GAAP"). A summary of the significant differences between U.S. GAAP and German GAAP is set forth below. Parent, however, believes that the differences are not material to a decision by a holder of Shares whether to sell, tender or hold any Shares because any such differences would not affect the ability of Purchaser to obtain sufficient funds to pay for Shares to be acquired pursuant to the Offer. The amounts in the table set forth below are in Deutsche Mark unless otherwise indicated. 14 17 VEBA AG SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN DEUTSCHE MARK ("DM"), EXCEPT WHERE OTHERWISE INDICATED IN UNITED STATES DOLLARS ("$"))
YEAR ENDED DECEMBER 31, -------------------------------- 1996(1) 1996 1995 ------- --------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Amounts in accordance with German GAAP: Sales..................................................... $48,444 DM74,541 DM72,372 Net income(2)............................................. 1,712 2,634 2,107 Net income available for distribution..................... 610 938 830 Amounts in accordance with U.S. GAAP: Net income(3)............................................. 1,603 2,467 2,027 Net income per share...................................... 3.23 4.97 4.12 BALANCE SHEET DATA: Amounts in accordance with German GAAP: Liquid funds.............................................. 3,230 4,969 4,162 Currents assets........................................... 14,464 22,255 22,109 Total assets.............................................. 46,739 71,917 67,751 Long-term financial liabilities........................... 2,034 3,129 3,017 Shareholders' equity...................................... 14,974 23,041 20,953 Amounts in accordance with U.S. GAAP: Total assets.............................................. 48,685 74,911 69,864 Shareholders' equity(3)................................... 14,170 21,803 19,452
- --------------- (1) Amounts in this column are unaudited and have been translated solely for the convenience of the reader at an exchange rate of DM 1.5387 = $1.00, the Noon Buying Rate on December 31, 1996. No representation is made that Deutsche Mark have been, could have been or could be, converted into U.S. dollars at that or any other rate. (2) Before minority interests of DM 176 million and DM 192 million for 1996 and 1995, respectively. (3) After minority interests. The following represents, in the opinion of management of VEBA, the significant differences between U.S. GAAP and German GAAP that would affect the determination of consolidated net income and shareholders' equity of VEBA for the periods for which the selected consolidated financial information has been presented herein. Capitalized Interest. German GAAP permits, but does not require, the capitalization of interest as a part of the historical cost of acquisition of assets that are constructed or otherwise produced for an enterprise's own use. The capitalization of such interest costs is required by U.S. GAAP. Due to the historical cost principle a retroactive capitalization of interest cost for financial years up to 1995 is not allowed under German GAAP. For purposes of the reconciliation to U.S. GAAP, interest on debt apportionable to the construction period has been capitalized as cost of the acquisition of qualifying assets. The capitalized interest costs relate to property, plant and equipment up to and including 1994 as part of production cost. The additional acquisition cost has been depreciated over the expected useful life of the related asset. 15 18 Valuation of Securities and Other Investments. Under German GAAP, securities and other investments are valued at the lower of acquisition costs or market value at the balance sheet date. Under U.S. GAAP, securities and other share investments are classified into one of three categories: held-to-maturity securities, available-for-sale securities or trading securities. VEBA securities and other investments are considered to be available-for-sale and therefore are required to be valued at market value at the balance sheet date. Unrealized gains and losses are excluded from earnings and reported as an adjustment to net equity. Shares in Associated Companies. For purposes of the reconciliation to U.S. GAAP, earnings of associated companies accounted for using the equity method have been determined using valuation principles prescribed by U.S. GAAP. Deferred Taxes. Under German GAAP, deferred taxes are calculated based on the liability method but are recognized only to the extent that consolidated deferred tax liabilities exceed consolidated deferred tax assets. Additionally, deferred tax assets may not be established for net operating loss carryforwards. Under U.S. GAAP, deferred taxes are provided for all temporary differences between the tax and commercial balance sheets. Not all these differences that qualify for deferred tax calculation are permissible under German accounting principles. Under U.S. GAAP, deferred taxes are also calculated for tax loss carryforwards and certain other adjustments using the liability method and based on enacted tax rates. A valuation allowance is established when it is more likely than not that deferred tax assets will not be realized. Minority Interests. Contrary to U.S. GAAP, under German GAAP participation of minority shareholders at subsidiaries as well of those of VEBA is shown as part of shareholders' equity and net income. For reconciliation purposes, minority interests resulting from U.S. GAAP adjustments are reflected separately. Other. Other differences in accounting principles include adjustments for the treatment of costs for initial public offerings and unrealized gains from foreign currency translation and outstanding forward contracts. Except as described in this Offer to Purchase, (i) none of Purchaser, Parent, VEBA nor, to the knowledge of Purchaser, Parent and VEBA, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Purchaser, Parent, VEBA or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (ii) none of Purchaser, Parent, VEBA nor, to the knowledge of Purchaser, Parent and VEBA, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement and the Stock Option Agreement and as otherwise described in this Offer to Purchase, none of Purchaser, Parent, VEBA nor, to the knowledge of Purchaser, Parent and VEBA, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since January 1, 1994, none of Purchaser, Parent nor VEBA nor, to the best knowledge of Purchaser, Parent and VEBA, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, since January 1, 1994, there have been no contacts, negotiations or transactions between any of Purchaser, Parent, VEBA, nor any of their respective subsidiaries or, to the best knowledge of Purchaser, Parent and VEBA, any of the persons listed in Schedule I to this Offer to Purchase, on 16 19 the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required by Purchaser to consummate the Offer and the Merger and to pay related fees and expenses is estimated to be approximately $820,000,000. Purchaser will obtain all of such funds from Parent. Parent will obtain all of such funds from VEBA. VEBA will supply such funds from working capital and other cash on hand. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENT AND THE RIGHTS AGREEMENT. In June 1996, Dr. Ferdinand Pohl, a Member of the Board of Management of Parent, met with Ralph L. Ozorkiewicz, President and Chief Executive Officer of the Company, in Irvine, California. Dr. Pohl was visiting the United States on other matters, and the two executives met to introduce themselves and to discuss the opportunities and challenges each faced within the industry. Possible collaborative efforts, not including a business combination, were discussed in general terms. On October 3, 1996, Dr. Pohl, Mr. Ozorkiewicz and Charles M. Clough, Chairman of the Board of the Company, met in Irvine, California, to exchange information regarding the respective businesses of Parent and the Company. Again, no business combination between Parent and the Company was discussed although possible collaborative efforts were raised. In February 1997, following their attendance at an industry conference, Mr. Ozorkiewicz, Dr. Pohl and Peter Gurtler, President of EBV Elektronik GmbH (a subsidiary of Parent), met in Phoenix, Arizona. At the meeting, Dr. Pohl expressed an interest by Parent in exploring the possibility of entering into a business combination with the Company. In March 1997, Dr. Pohl invited Mr. Ozorkiewicz and Mr. Clough to meet with Parent in Germany in April. On April 9, 1997, Dr. Pohl met with Mr. Clough and Mr. Ozorkiewicz in Munich, Germany to have further discussions regarding a possible business combination between Parent and the Company. At the meeting, Messrs. Clough and Ozorkiewicz asked that Dr. Pohl formally indicate Parent's interest in the Company by submitting a written proposal for a possible business combination within the ensuing four weeks. Also at that meeting, Dr. Pohl and Mr. Ozorkiewicz each executed a preliminary confidentiality letter agreement on behalf of his company. On May 7, 1997, Mr. Ozorkiewicz contacted Dr. Pohl to discuss the status of Parent's written proposal. Dr. Pohl noted that Parent had retained Goldman Sachs to act as its financial adviser and was intending shortly to submit a proposal valuing the Company in the low-to-mid $40 range per Share. Mr. Ozorkiewicz expressed his view that a proposal in the low $40 range per Share would be unlikely to receive serious consideration from the Company's Board of Directors. On May 12, 1997, Dr. Pohl sent a letter to Mr. Ozorkiewicz expressing Parent's continued interest in pursuing a possible business combination and indicating a preliminary valuation, based on publicly available information, in the mid-$40 range per Share. On May 13, 1997, at the annual organizational meeting of the Company's Board of Directors, the Board reviewed Parent's proposal. The Board authorized the Company to permit Parent to conduct its diligence investigation of the Company and to negotiate with Parent. On May 27, 1997, Dr. Pohl, Gunther Beuth, a Member of Parent's Management Board and Chief Financial Officer, and representatives of Goldman Sachs and Parent's legal counsel, Shearman & Sterling, met in California with Mr. Ozorkiewicz, R. Van Ness Holland, Jr., the Company's Executive Vice President -- Finance, Treasurer and Chief Financial Officer, and representatives of Credit Suisse First Boston Corporation ("CSFB") and the Company's outside legal counsel, O'Melveny & 17 20 Myers LLP, to discuss various organizational matters, including the timing and procedures for the conduct of due diligence. On June 2, 1997, Parent and the Company entered into a second Confidentiality Letter, effective as of April 9, 1997. From June 2 through June 6, 1997, the Company provided Parent and its representatives access to requested information at the offices of the Company's outside legal counsel in Newport Beach, California. Parent and its representatives continued their due diligence review of the Company through June 17, 1997. On June 16, 1997, Parent's legal counsel delivered drafts of the Merger Agreement and the Stock Option Agreement to the Company and its legal counsel and other representatives. On June 17, 1997, representatives of Parent's and the Company's respective legal counsel discussed various issues concerning the draft Merger Agreement and Stock Option Agreement. On June 18, 1997, Georg Kulenkampff, Chairman of Parent's Management Board, Dr. Pohl and representatives of Goldman Sachs and Shearman & Sterling met with Mr. Ozorkiewicz, Mr. Holland, Stephen D. Natcher, Senior Vice President -- Administration, General Counsel and Secretary of the Company and representatives of CSFB and the Company's outside legal counsel in California. At the meeting, the parties discussed a number of outstanding issues that would need to be addressed in order to reach agreement on a business combination. Parent's representatives proposed that, subject to the resolution of those issues, they would be in a position to submit a proposed price for the acquisition of the Company by the end of the following week. During the week of June 23, 1997, Parent's and the Company's respective legal counsel continued to discuss the draft Merger Agreement and Stock Option Agreement. On June 24, 1997, Dr. Pohl telephoned Mr. Ozorkiewicz to inform Mr. Ozorkiewicz that Parent was considering making an offer to acquire the Company at between $47 and $48 per Share. On June 24 and 25 representatives of CSFB and Goldman Sachs exchanged views regarding Parent's valuation of the Company. On June 25, 1997, Mr. Kulenkampff and Dr. Pohl telephoned Mr. Ozorkiewicz and communicated to Mr. Ozorkiewicz Parent's view that an appropriate value for the Company would be $50 per Share, subject to satisfactory completion of the negotiation of the Merger Agreement and the Stock Option Agreement and confirmation of certain due diligence matters. From June 26 through July 2, 1997, Parent's and the Company's respective legal counsel continued negotiations on the terms of the Merger Agreement and the Stock Option Agreement and addressed the remaining due diligence matters. All remaining issues under discussion were resolved by telephone conferences on July 2, 1997. On July 2, 1997, the Board met and approved the Merger Agreement and the Stock Option Agreement. Following approval of the Merger Agreement and the Stock Option Agreement by Parent's Supervisory Board on the morning of July 3, 1997, the parties executed and delivered the Merger Agreement and the Stock Option Agreement. THE MERGER AGREEMENT The following summary of the Merger Agreement is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as an Exhibit to the Schedule 14D-1 and is incorporated by reference in this Offer to Purchase. The Offer. The Merger Agreement provides for the commencement of the Offer as promptly as practicable, but in no event later than five business days, after the date of the public announcement of the Merger Agreement. The obligation of Purchaser to, and of Parent to cause Purchaser to, 18 21 commence the Offer and accept for payment, and pay for, the Shares tendered pursuant to the Offer is subject to the satisfaction of (i) the Minimum Condition prior to the expiration of the Offer and (ii) certain other conditions described in Section 14. Subject to the terms and conditions of the Merger Agreement, Purchaser, in its sole discretion, may waive any condition to the Offer. In addition, Purchaser may modify the terms and conditions of the Offer, except that, without the prior written consent of the Company, or as expressly permitted by the Merger Agreement, Purchaser will not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Per Share Amount, (iii) modify or add to the conditions described in Section 14, (iv) except as otherwise provided in the Merger Agreement, extend the term of the Offer, (v) change the form of consideration payable in the Offer or (vi) make any other modifications that are otherwise materially adverse to holders of Shares. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (A) extend the term of the Offer beyond any scheduled expiration date of the Offer if, at any such scheduled expiration date, any of the conditions to Purchaser's obligation to accept for payment, and pay for, Shares tendered pursuant to the Offer shall not have been satisfied or waived; provided, however, that Purchaser may extend the Offer under this clause (A) on not more than one occasion and for not more than ten business days on such occasion) and (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer or any other applicable law. Notwithstanding any other provision contained in the Merger Agreement, in the event the Minimum Condition is not satisfied on any scheduled expiration date of the Offer, the Purchaser will amend the Offer to provide that, in the event (i) the Minimum Condition is not satisfied at the next scheduled expiration date of the Offer (after giving effect to the issuance of any Shares theretofore issued under the Stock Option Agreement) and (ii) the number of Shares tendered pursuant to the Offer and not withdrawn as of such next scheduled expiration date is not less than 50% of the then outstanding Shares, Purchaser will waive the Minimum Condition, reduce the number of Shares subject to the Offer to the Revised Minimum Number of Shares and, if a greater number of Shares is tendered in the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the expiration of the Offer). The Merger. The Merger Agreement provides that, upon the terms and subject to the conditions thereof and in accordance with Delaware Law and California Law, Purchaser will be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation. Upon consummation of the Merger, each issued and outstanding Share (other than Shares owned by the Company or by any subsidiary of the Company and each Share that is owned by Parent, Purchaser or any other subsidiary of Parent, and other than Shares held by shareholders who have demanded and perfected, and have not withdrawn or otherwise lost, appraisal rights, if any, under California Law) will automatically be cancelled and converted into the right to receive the Merger Consideration. Pursuant to the Merger Agreement, as of the Effective Time, each issued and outstanding share of common stock of Purchaser will be converted into and become one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. Charter Documents; Initial Directors and Officers. The Merger Agreement provides that, at the Effective Time, the Restated Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, will be the Articles of Incorporation of the Surviving Corporation. The Merger Agreement also provides that the Bylaws of the Company, as in effect immediately prior to the Effective Time, will be the Bylaws of the Surviving Corporation. Pursuant to the Merger Agreement, at the Effective Time, the directors of the Company immediately prior to the Effective Time will be deemed to have resigned and the directors of Purchaser immediately prior to the Effective Time 19 22 shall become the directors of the Surviving Corporation. At the Effective Time, the officers of the Company immediately prior to the Effective Time will be the officers of the Surviving Corporation. Shareholders Meeting. The Merger Agreement provides that, if approval of the Merger Agreement by the shareholders of the Company is required by applicable law, the Company will, at Parent's request, as soon as practicable following the consummation of the Offer, duly call, give notice of, convene and hold a meeting of its shareholders (the "Company Shareholders Meeting") for the purpose of approving the Merger. Subject to the provisions of the Merger Agreement, the Company will, through its Board, recommend to its shareholders approval of the Merger Agreement. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the approval of the Merger without the affirmative vote of any other shareholder. Under California Law, if Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be able to approve the Merger without a vote of the Company's shareholders. In the event Purchaser or any other subsidiary of Parent shall own at least 90% of the outstanding Shares, and provided that the other conditions set forth in the Merger Agreement shall have been satisfied or waived, the Company, Purchaser and Parent will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after acceptance of the Shares for payment pursuant to the Offer without the approval of the shareholders of the Company in accordance with California Law. Filings. The Merger Agreement provides that, if approval of the Merger Agreement by the shareholders of the Company is required by applicable law, the Company will, at Parent's request, as soon as practicable prepare and file the Proxy Statement (as defined in the Merger Agreement) with the Commission and the Company and Parent will cooperate in responding to any comments of the Commission or its staff and the Company will cause a Proxy Statement to be mailed to the Company's shareholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. Conduct of Business. Pursuant to the Merger Agreement, the Company has covenanted and agreed that, between the date of the Merger Agreement and the Effective Time, and until such time as Parent's designees shall constitute a majority of the members of the Board (except as expressly contemplated or permitted by the Merger Agreement, the Stock Option Agreement or to the extent that Parent shall otherwise consent in writing) as follows: Ordinary Course. The Company will, and will cause its subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as theretofore conducted and will use all reasonable efforts to preserve intact their present business organizations, keep available the services of their present officers and employees and preserve their relationships with customers, suppliers and others having business dealings with the Company and its subsidiaries. Dividends; Changes in Stock. The Company will not, and will not permit any of its subsidiaries to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except for regular quarterly dividends on the Shares not in excess of $0.08 per share or dividends by a direct or indirect wholly owned subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any shares of capital stock of the Company or its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities. Issuance of Securities. The Company will not, and will not permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any shares of its capital stock of any class or any securities convertible into, or any rights, warrants, calls, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than: (i) the issuance of Shares upon the exercise of Stock Options (as defined below) granted under the Stock 20 23 Incentive Plans (as defined below) and outstanding on the date of the Merger Agreement and in accordance with the present terms of such Stock Options and (ii) the issuance of Preferred Shares (as defined below) and Common Stock upon conversion thereof, if any, pursuant to the Rights Agreement. Governing Documents. The Company will not, and will not permit any of its subsidiaries to, amend or propose to amend its Articles of Incorporation or Bylaws (or comparable organizational documents). No Acquisitions. The Company will not, and will not permit any of its subsidiaries to, acquire or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial equity interest in all or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, limited liability company, association or other business organization or division thereof or (ii) any assets that are material, individually or in the aggregate, to the Company and its subsidiaries taken as a whole, except purchases of inventory and supplies in the ordinary course of business consistent with past practice. No Dispositions. Other than sales of its products to customers or other dispositions, in any case in the ordinary course of business consistent with past practice, the Company will not, and will not permit any of its subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise dispose of, any of its assets. Capital Expenditures. The Company will not, nor will the Company permit any of its subsidiaries to, make or agree to make any capital expenditures other than expenditures consistent with the Company's current capital expenditure forecast of $12,000,000 for 1997. Indebtedness. The Company will not, and will not permit any of its subsidiaries to, incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any of its subsidiaries or guarantee any debt securities of others, except in the ordinary course of business consistent with past practice. Tax Matters. The Company will not make any tax election that would have a material effect on the tax liability of the Company or settle or compromise any income tax liability of the Company of any of its subsidiaries that would materially affect the aggregate tax liability of the Company or any of its subsidiaries. The Company will, before filing or causing to be filed any material tax return of the Company or any of its subsidiaries, consult with Parent and its advisors as to the positions and elections that may be taken or made with respect to such return. Discharge of Liabilities. The Company will not, and will not permit any of its subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business, or as otherwise disclosed to Parent, consistent with past practice or in accordance with their terms, of liabilities recognized or disclosed in the most recent consolidated financial statements (or the notes thereto) of the Company included in the documents filed by the Company with the Commission in accordance with the Exchange Act or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any of its subsidiaries is a party. Material Contracts. Except in the ordinary course of business, the Company will not, and will not permit any of its subsidiaries to, enter into, modify, amend or terminate any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license which is material to the Company and its subsidiaries or waive, release or assign any material rights or claims. 21 24 Employee Benefits. The Company will not, and will not permit any of its subsidiaries to, (i) grant any increase in the compensation of any of its directors, officers or employees, except for increases for officers other than executive officers and employees in the ordinary course of business consistent with past practice, (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing Benefit Plans (as defined below) as in effect on the date of the Merger Agreement to any director, officer or employee, (iii) enter into any new employment, severance or termination agreement with any such director, officer or employee or (iv) except as may be required to comply with applicable law, become obligated under any Benefit Plan which was not in existence on the date of the Merger Agreement or amend any such plan in existence on the date hereof. Accounting Matters. The Company will not, and will not permit any of its subsidiaries to, take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable). No Solicitation. The Company has agreed that it will, and will cause its subsidiaries and their respective officers, directors, employees, consultants, investment bankers, accountants, attorneys and other advisors, representatives and agents ("Company Representatives") to immediately cease any discussions or negotiations with any parties that may be ongoing with respect to any Acquisition Proposal (as defined below). The Company will not, nor will it permit any of its subsidiaries to, nor will it authorize or permit any Company Representative to, directly or indirectly, (i) solicit or initiate, or knowingly encourage the submission of, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to any proposal that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal; provided, however, that if, prior to the acceptance for payment of Shares pursuant to the Offer, the Board determines in good faith, based upon advice of independent counsel, which may be the Company's regularly engaged outside counsel ("Independent Counsel"), that not to do so would be inconsistent with its fiduciary duties to the Company's shareholders under applicable law, the Company may, in response to an unsolicited Acquisition Proposal, and subject to compliance with the notice requirements described below, (x) furnish information with respect to the Company pursuant to a customary confidentiality agreement and (y) participate in discussions or negotiations regarding such Acquisition Proposal. For purposes of the Merger Agreement, "Acquisition Proposal" means any proposal or offer from any person relating to any direct or indirect acquisition or purchase of all or a substantial part of the assets of the Company or any of its subsidiaries or of over 15% of any class of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of the Company or any of its subsidiaries, any merger, consolidation, business combination, sale of all or substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement. The Merger Agreement also provides that neither the Board nor any committee thereof may (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by the Board or any such committee of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, in the event that, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Board determines in good faith, based upon advice of Independent Counsel, that it is necessary to do so in order to comply with its fiduciary duties to the Company's shareholders under applicable law, the Board may (x) withdraw or modify (or propose to withdraw or modify) its approval or recommendation of the Offer, the Merger and the Merger Agreement or 22 25 (y) approve or recommend (or propose to approve or recommend) a Superior Proposal (as defined below) or terminate (or propose to terminate) the Merger Agreement (and concurrently with or after such termination, if it so chooses, cause the Company to enter into any agreement with respect to any Superior Proposal), but in each of the cases set forth in this clause (y), only at a time that is at least three business days after Parent's receipt of written notice advising Parent that the Board has received a Superior Proposal. The Notice of Superior Proposal must specify the amount and type of consideration to be paid and such other terms and conditions of the Superior Proposal as the Company determines in good faith to be material and identify the person making such Superior Proposal. For purposes of the Merger Agreement, a "Superior Proposal" means any bona fide proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the Shares then outstanding or all or substantially all the assets of the Company and otherwise on terms which the Board determines in its good faith judgment (based on the advice of a financial advisor of nationally recognized reputation) to be more favorable to the Company's shareholders than the Offer and the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of the Company (based on the advice of a financial advisor of nationally recognized reputation), is reasonably capable of being financed by such third party. The Merger Agreement provides that the Company will promptly advise Parent orally and in writing of the Company's receipt of any bona fide acquisition proposal and any request for information that may reasonably be expected to lead to or is otherwise related to any such Acquisition Proposal and the identity of the person making such request or Acquisition Proposal. The Merger Agreement also provides that the Company will keep Parent informed on a reasonable basis of the status and details (including amendments) of any such request or Acquisition Proposal, unless the Board determines in good faith, based upon advice of Independent Counsel, that to do so would be inconsistent with its fiduciary duties to the Company's shareholders under applicable law. Directors of the Company. The Merger Agreement provides that promptly following the purchase of and payment for Shares by Purchaser pursuant to the Offer, Purchaser will be entitled to designate such number of directors, rounded down to the nearest whole number, on the Board as will give Purchaser representation on the Board equal to the product of the total number of directors on the Board (giving effect to any increase in the number of directors pursuant to the Merger Agreement) and the percentage that the aggregate number of Shares beneficially owned by Purchaser bears to the total number of Shares then outstanding (on a fully diluted basis); provided, however, that Purchaser will be entitled to designate a number of directors equal to or greater than 50% of the total number of directors only if Purchaser purchases 90% or more of the outstanding Shares pursuant to the Offer. The Company and its Board will, at such time, take such action as may be necessary to cause Purchaser's designees to be so appointed or elected to the Board, with Purchaser's designees being allocated as evenly as possible among the classes of directors. Notwithstanding the foregoing, in the event that Purchaser's designees are to be appointed or elected to the Board, until the Effective Time, such Board will have at least three directors who are directors on the date of the Merger Agreement and who are not officers of the Company (the "Independent Directors"), provided, that, in such event, if the number of Independent Directors is reduced below three for any reason whatsoever, any remaining Independent Directors (or Independent Director, if there is only one remaining) will be entitled to designate persons to fill such vacancies who will be deemed to be Independent Directors for purposes of the Merger Agreement. Pursuant to the Merger Agreement, an affirmative vote of a majority of the Independent Directors will be obtained prior to the Company entering into any material transaction with Parent, Purchaser or any affiliate thereof. The Merger Agreement further provides that, in the event the Company's obligation to appoint or elect designees to the Board is subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, Parent will give the Company reasonable notice of its intention to exercise its rights under the Merger Agreement and, after receipt of such notice, the Company will promptly 23 26 take such action as may be required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations regarding directors under the Merger Agreement and will include in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 or a separate Rule 14f-1 Statement to shareholders such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its obligations regarding directors under the Merger Agreement. Indemnification and Insurance. In the Merger Agreement, Parent and Purchaser have agreed that all rights to indemnification for acts or omissions occurring prior to the Effective Time now existing in favor of the current or former directors, officers, employees and agents (the "Indemnified Parties") of the Company and its subsidiaries as provided in their respective certificates of incorporation or bylaws (or similar organizational documents) will survive the Merger and will continue in full force and effect in accordance with their terms for a period of not less than six years. From and after the Effective Time and for a period of not less than six years thereafter, Parent will, and will cause the Surviving Corporation to, indemnify and hold harmless any and all Indemnified Parties to the full extent such persons may be indemnified by the Company or such subsidiaries, as the case may be, pursuant to applicable law, their respective certificates of incorporation or bylaws (or similar organizational documents) or pursuant to indemnification agreements as in effect on the date of the Merger Agreement for acts or omissions occurring at or prior to the Effective Time, and Parent will, or will cause the Surviving Corporation to, advance litigation expenses incurred by such persons in connection with defending any action arising out of such acts or omissions to the extent provided by the respective terms and provisions of such certificates of incorporation, bylaws, similar documents or indemnification agreements as in effect on the date of the Merger Agreement. The Merger Agreement further provides that, for not less than six years from the Effective Time, Parent will maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy; provided, however, that in no event will Parent be required to pay a premium in any one year in an amount in excess of 175% of the annual premium paid by the Company (which annual premium the Company represented to be approximately $475,000); and provided further that if the annual premium of such insurance coverage exceeds such amount, Parent will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. Existing Stock Options. The Merger Agreement provides that as soon as practicable following the date of the Merger Agreement, the Board (or, if appropriate, any committee administering the Stock Incentive Plans) will adopt such resolutions or take such other actions as are required to provide that each Existing Stock Option theretofore granted under any stock option or stock purchase plan, program or arrangement or other option agreement or contingent stock grant plan of the Company or any of its subsidiaries (collectively, the "Stock Incentive Plans") will be accelerated so as to be fully exercisable prior to the consummation of the Offer, and the Company will assure that any such Existing Stock Options outstanding immediately prior to the consummation of the Offer will be surrendered immediately prior to the consummation of the Offer in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (x) the number of Shares subject to such Existing Stock Option immediately prior to the consummation of the Offer and (y) the excess of the Per Share Amount over the per share exercise price of such Existing Stock Option. Any Existing Stock Option not cancelled in accordance with the Merger Agreement immediately prior to the consummation of the Offer will be cancelled at the Effective Time in exchange for an amount in cash, payable at the Effective Time, equal to the amount which would have been paid had such Existing Stock Option been surrendered immediately prior to the consummation of the Offer. The Merger Agreement also provides that all Stock Incentive Plans will terminate as of the Effective Time and the provisions in any other Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company will be terminated as of the Effective Time, and the Company will use its best efforts to 24 27 ensure that following the Effective Time no holder of an Existing Stock Option or any participant in any Stock Incentive Plan will have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, except as provided above. Benefit Plans. The Merger Agreement provides that, for a period of at least through December 31, 1998, Parent will cause the Surviving Corporation to continue to maintain the Company's existing compensation, severance, welfare and pension benefit plans, programs and arrangements (other than any stock based plans, programs and arrangements) for the benefit of current and former employees of the Company and its subsidiaries (subject to such modification as may be required by applicable law or to maintain the tax exempt status of any such plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended); provided, however, that (i) nothing therein prohibits Parent from replacing any such existing plan, program or arrangement with a plan, program or arrangement which provides such employees with benefits which are not less favorable in the aggregate than the benefits that would have been provided under such existing plan, program or arrangement to the extent such replacement is permitted under the terms of the applicable plan, program or arrangement and (ii) nothing therein obligates Parent to provide such employees with any stock based compensation (including, without limitation, stock options or stock appreciation rights) after the Effective Time. In the Merger Agreement, Parent also agreed to institute during the one-year period following the Effective Time a new performance-based incentive compensation plan for the benefit of employees of the Surviving Corporation and its subsidiaries. The Merger Agreement also provides that all service credited to each employee by the Company through the Effective Time will be recognized by Parent for all purposes, including for purposes of eligibility, vesting and benefit accruals under any employee benefit plan provided by the Surviving Corporation or Parent for the benefit of the employees; provided, however, that, to the extent necessary to avoid duplication of benefits, amounts payable under employee benefit plans provided by the Surviving Corporation or Parent may be reduced by amounts payable under similar Company plans with respect to the same periods of service. Parent also agreed to cause the Surviving Corporation to honor (without modification) and assume, and thereby guaranteed the Surviving Corporation's performance of, certain employment agreements, executive termination agreements and individual benefit arrangements set forth in the Merger Agreement or disclosed to Parent. Certain Litigation. In the Merger Agreement, the Company agreed that it will not settle any litigation commenced after the date of the Merger Agreement against the Company or any of its directors by any shareholder of the Company relating to the Offer, the Merger, the Merger Agreement or the Stock Option Agreement without the prior written consent of Parent. In addition, subject to its rights under the Merger Agreement, the Company will not voluntarily cooperate with any third party that may thereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and will cooperate with Parent and Purchaser to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto including representations by the Company as to the Company's corporate organization and qualification, the Company's subsidiaries, capitalization, authority, filings with the Commission and other governmental authorities, financial statements, the absence of certain changes or events concerning the Company's corporate organization and qualification, the absence of undisclosed liabilities, the truth of information supplied by the Company, litigation, labor matters, employee benefit matters and ERISA, taxes, compliance with applicable laws, environmental matters, real property, intellectual property, insurance, amendments to the Rights Agreement, state takeover statutes, the opinion of the Company's financial advisor with respect to the Offer and the Merger and brokers involved in the Offer and the Merger. 25 28 Conditions to Consummation of the Merger. The Merger Agreement provides that the respective obligations of each party to effect the Merger are subject to the following conditions: (i) if required by applicable law, the Merger Agreement will have been approved by the affirmative vote of the holders of a majority of the outstanding Shares; (ii) no statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any governmental entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that, in the case of a temporary restraining order, injunction or other order, each of the parties has used all reasonable efforts to prevent the entry of any such temporary restraining order, injunction or other order and to appeal as promptly as possible any temporary restraining order, injunction or other order that may be entered; (iii) Purchaser will have previously accepted for payment and paid for the Shares pursuant to the Offer; and (iv) any waiting periods (and any extensions thereof) applicable to the consummation of the Merger under the HSR Act will have expired or been terminated. Termination. The Merger Agreement may be terminated at any time prior to the Effective Time: (i) by mutual written consent of Parent and the Company; (ii) by either Parent or the Company if (A) as a result of the failure of any of the conditions described in Section 14 the Offer has terminated or expired in accordance with its terms without Purchaser having accepted for payment any Shares pursuant to the Offer or (B) Purchaser has not accepted for payment any Shares pursuant to the Offer within 90 days following the date of the Merger Agreement; provided, however, that the right to terminate the Merger Agreement pursuant to this clause (ii) will not be available to any party whose failure to perform any of its obligations under the Merger Agreement results in the failure, occurrence or existence of any such condition; (iii) by either Parent or the Company if any governmental entity has enacted or issued any statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action has become final and nonappealable; (iv) by Parent or Purchaser prior to the purchase of Shares pursuant to the Offer in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement which (A) would give rise to the failure of certain of the conditions described in Section 14 and (B) cannot be or has not been cured within 10 days after the giving of written notice to the Company; (v) by Parent or Purchaser if either Parent or Purchaser is entitled to terminate the Offer as a result of the occurrence of certain events described in paragraph (d) of Section 14; (vi) by the Company in connection with entering into a definitive agreement regarding a Superior Proposal (as described above), provided it has complied with all applicable provisions of the Merger Agreement relating to Superior Proposals, including the notice provisions therein, and that it pays the Termination Fee (as defined below) immediately prior to such termination pursuant to the applicable provisions of the Merger Agreement; or (vii) by the Company, if Purchaser or Parent has breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which failure to perform is incapable of being cured or has not been cured within 10 days after the giving of written notice to Parent or Purchaser, as applicable. Fees and Expenses. The Merger Agreement provides that, except as provided in the following paragraphs, all fees and expenses incurred in connection with the Offer, the Merger, the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such fees and expenses, whether or not the Offer or the Merger is consummated. Pursuant to the Merger Agreement, the Company will pay, or cause to be paid, in immediately available funds to Parent the sum of $20,000,000 (the "Termination Fee") under the circumstances and at the times set forth as follows: (i) if Parent or Purchaser terminates the Merger Agreement pursuant to clause (v) of the second preceding paragraph, the Company will pay the Termination Fee upon demand; (ii) immediately prior to any termination of the Merger Agreement pursuant to clause (vi) of the second preceding paragraph, the Company shall pay the Termination Fee; (iii) if, 26 29 at the time of any termination of the Merger Agreement pursuant to clause (ii) of the second preceding paragraph (as a result of less than 50% of the outstanding Shares being tendered), an Acquisition Proposal shall have been made and shall be pending and the Board shall not have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, and, within 12 months of such termination, (x) the Company shall enter into an agreement providing for any Acquisition Proposal or an Acquisition Proposal shall be consummated at a price per Share equal to or in excess of the Per Share Amount, the Company shall pay the Termination Fee concurrently with the earlier of the entering into of such agreement or the consummation of such Acquisition Proposal or (y) the Company shall enter into an agreement providing for an Acquisition Proposal or an Acquisition Proposal shall be consummated at a price less than the Per Share Amount, the Company shall pay the Expenses (as defined below) concurrently with the earlier of the entering into of such agreement or the consummation of such Acquisition Proposal; and (iv) if, at the time of any termination of the Merger Agreement pursuant to clause (iv) of the second preceding paragraph resulting from a wilful and material breach of any covenant or agreement contained in the Merger Agreement, an Acquisition Proposal has been made and is pending and, within 12 months of such termination, the Company enters into an agreement providing for an Acquisition Proposal or an Acquisition Proposal is consummated, the Company will pay the Termination Fee concurrently with the earlier of the entering into of such agreement or the consummation of such Acquisition Proposal. For the purposes of the Merger Agreement, "Expenses" means documented out-of-pocket fees and expenses incurred or paid by or on behalf of Parent or Purchaser in connection with the Offer or the Merger, the preparation and negotiation of the Merger Agreement and the Stock Option Agreement and the consummation of any of the transactions contemplated by the Merger Agreement or the Stock Option Agreement, including, without limitation, all fees and expenses of law firms, commercial banks, investment banking firms, accountants, printing firms, information agents, proxy solicitors, experts and consultants to Parent; provided, however, that in no event will such fees and expenses exceed $5,000,000. The Merger Agreement also provides that, in the event the Company fails to pay the Termination Fee or Expenses when due, the amount of any such Termination Fee or Expenses will be increased to include the costs and expenses actually incurred or accrued by Parent (including, without limitation, fees and expenses of counsel) in connection with the collection of such unpaid Termination Fee or Expenses, together with interest on such unpaid Termination Fee or Expenses, commencing on the date that such Termination Fee or Expenses became due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in The City of New York as such bank's base rate plus 3.00%. THE STOCK OPTION AGREEMENT The following summary of the Stock Option Agreement is qualified in its entirety by reference to the Stock Option Agreement, a copy of which is filed as an Exhibit to the Schedule 14D-1 and is incorporated by reference in this Offer to Purchase. Grant of Stock Option. Pursuant to the Stock Option Agreement, the Company granted to Purchaser the Stock Option to purchase the Option Shares at the Purchase Price, subject to the terms and conditions set forth in the Stock Option Agreement; provided, however, that the Stock Option will not be exercisable if the number of Shares subject thereto exceeds the number of authorized Shares available for issuance. Exercise of Stock Option. The Stock Option Agreement provides that, subject to the conditions set forth in the Stock Option Agreement and to any additional requirements of law, the Stock Option may be exercised by Purchaser, in whole but not in part, at any time or from time to time after the occurrence of an Exercise Event (as defined below) and prior to the Termination Date (as defined below). For the purpose of the Stock Option Agreement, an "Exercise Event" would occur upon 27 30 Purchaser's acceptance for payment pursuant to the Offer of Shares constituting more than 50% of the Shares then outstanding but less than 90% of the Shares then outstanding on a fully diluted basis, and the "Termination Date" would occur upon the first to occur of any of the following: (i) the Effective Time; (ii) the date which is 10 business days after the occurrence of an Exercise Event (unless prior thereto the Stock Option has been exercised); or (iii) the termination of the Merger Agreement. Conditions to Closing. The Stock Option Agreement provides that the obligation of the Company to deliver Option Shares upon any exercise of the Stock Option is subject to the following conditions: (a) such delivery would not in any material respect violate, or otherwise cause the material violation of, Section 312.03(c) of the NYSE Listed Company Manual or any material law, including, without limitation, the HSR Act, applicable thereto; (b) no preliminary or permanent injunction or other final, non-appealable judgment by a court of competent jurisdiction preventing or prohibiting such exercise of such Stock Option or the delivery of the Option Shares; and (c) the Company has available from its authorized Shares such number of Shares as is sufficient to issue the Option Shares; provided, however, that the Company will have fully complied with the terms of the Stock Option Agreement. Representations and Warranties. The Stock Option Agreement contains various representations and warranties of the parties thereto, including representations by the Company as to the Company's corporate organization and authority relative to the Stock Option Agreement, the Company's authority to issue the Option Shares and the absence of any conflicts and the obtaining of all applicable filings and consents. Termination. The Stock Option Agreement, other than certain obligations of the parties specified in the Stock Option Agreement, will terminate on the Termination Date. THE RIGHTS AGREEMENT In 1989, the Company implemented a Rights Agreement between the Company and ChaseMellon Shareholder Services, L.L.C. (as successor to Chemical Bank), as successor Rights Agent (the "Rights Agreement") and declared a dividend to shareholders of one Right for each outstanding share of the Company's common stock. One Right was issued for each share of the Company's common stock outstanding on October 16, 1989, and as long as the Rights have not expired, been redeemed or become exercisable, for each share of common stock issued thereafter. Upon becoming exercisable, each Right will entitle the holder to purchase from the Company, at any time after the Distribution Date (as defined below) and prior to the Expiration Date or the redemption of the Rights by the Board, 1/100(th) of a share of Series A Junior Participating Cumulative Preferred Stock, without par value (a "Preferred Share"), at a purchase price of $85.00 per Right (subject to adjustment, the final price being the "Rights Purchase Price"). For purposes of the Rights Agreement, the "Distribution Date" refers to the earlier of (i) the 10th business day following the date of, the commencement of or the first public announcement of the intent of any person (other than the Company) to commence a tender offer or exchange offer, the consummation of which would cause any person to become an owner of 15% or more of the shares of the Company's outstanding common stock (a "15% Shareholder"), (ii) a public announcement (including the filing of a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or a 15% Shareholder containing the facts detailing how such person became a 15% Shareholder or (iii) any date after a person becomes a 15% Shareholder and the Company either (y) merges with another company or (z) sells assets equalling at least 50% of the earning power of the Company. The Rights will expire on February 23, 2005 (the "Rights Expiration Date") or any earlier date if redeemed or exchanged by the Board as described below. 28 31 In the event that a person becomes a 15% Shareholder, each holder of a Right has a right to receive, upon payment of the Rights Purchase Price, such number of shares of common stock of the Company as shall equal the result obtained by multiplying the then current Rights Purchase Price by the then number of 1/100(ths) of a Preferred Share for which the right was exercisable immediately prior to a person becoming a 15% Shareholder and dividing that product by 50% of the current market price of the Company's common stock on the date that such person becomes a 15% Shareholder. In the event that, at any time after a person becomes a 15% Shareholder (and such ownership is publicly announced), and prior to the earlier of the Redemption Date or the Rights Expiration Date, the Company (i) merges or combines with or into any other entity and the Company is not the surviving or continuing entity, (ii) any entity merges or combines with or into the Company and the Company is the surviving or continuing entity and, in connection with such transaction, all or part of the Company's common stock is exchanged for stock or other securities of the other entity or (iii) the Company sells or transfers assets or earning power aggregating more than 50% of the assets or earning power of the Company to another entity (all such entities identified in (i), (ii) and (iii) above being a "Surviving Entity" and any transaction being a "Business Combination"), then each holder of a Right has the right to receive, upon payment of the Rights Purchase Price, such number of shares of common stock of the Surviving Entity as shall be equal to a fraction, the numerator of which is the product of the then current Rights Purchase Price multiplied by the number of 1/100(ths) of a Preferred Share purchasable upon the exercise of one Right immediately prior to the event whereby the person becomes a 15% Shareholder, and the denominator of which is 50% of the current market price of the Surviving Entity's common stock on the date of such Business Combination. After completion of any Business Combination, the Surviving Entity will thereafter be liable for and shall assume all the obligation and duties of the Company pursuant to the Rights Agreement. Until the earliest of (i) a public announcement of a person becoming a 15% Shareholder, (ii) a merger of the Company or any sale of more than 50% of the Company's assets after a person becomes a 15% Shareholder or (iii) the Rights Expiration Date, a majority, but not less than three, of the Independent Directors (as defined below) may, at their option, redeem all, but not less than all, of the then outstanding Rights at a price of $.01 per Right (the date of such redemption being the "Redemption Date"). For purposes of the Rights Agreement, an "Independent Director" is any director of the Company who (i) became a director of the Company prior to any person becoming a 15% Shareholder or (ii) became a director after a person has become a 15% Shareholder, was recommended to become a director of the Company by a majority of the Independent Directors then in office and is not (A) a 15% Shareholder (or any affiliate or associate thereof), (B) an officer, director or employee of such 15% Shareholder or (C) a relative or nominee of any of the foregoing. The Board may, at its option, at any time after a person becomes a 15% Shareholder, exchange all or part of the then outstanding and exercisable Rights for common stock at a ratio of one share of the Company's common stock per Right. Until the earliest of (i) a public announcement of a person becoming a 15% Shareholder, (ii) a merger of the Company or any sale of more than 50% of the Company's assets after a person becomes a 15% Shareholder, (iii) the Redemption Date or (iv) the Rights Expiration Date, a majority, but not less than three, of the Independent Directors may, without the approval of any Rights holders, amend any provision of the Rights Agreement in any manner, even if such amendment is adverse to Rights holders. Prior to the earlier of the Redemption Date or the Rights Expiration Date, a majority, but not less than three, of the Independent Directors may, without the approval of any Rights holders, amend any provision of the Rights Agreement in any manner, provided that such amendment does not materially and adversely affect the holders of Rights. The Rights Agreement was amended and restated on February 23, 1995. 29 32 In connection with and prior to the Company entering into the Merger Agreement, on July 2, 1997, the Company amended its Rights Agreement to the extent necessary to permit Parent and Purchaser to perform their obligations under the Merger Agreement and consummate the transactions contemplated by the Merger Agreement without being deemed to be a 15% Shareholder or otherwise triggering a Distribution Date by reason of the execution of, or consummation of the transactions contemplated in, the Merger Agreement. If the Rights Agreement had not been so amended and if the Offer, the Merger Agreement or any of the respective transactions contemplated thereby had resulted in Parent being deemed the beneficial owner of 15% or more of the shares of Common Stock outstanding, it may have resulted in a distribution to the Company's shareholders (other than Parent and Purchaser) of Rights certificates separate from the Common Stock. 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER. Purpose of the Offer. The purpose of the Offer and the Merger is for Parent to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer. Upon consummation of the Merger, the Company will become an indirect wholly owned subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement. Plans for Merger Consummation. Under California Law, the approval of the Board and the affirmative vote of the holders of a majority of the outstanding Shares is required to approve the Merger Agreement. The Board has unanimously approved the Merger Agreement, and, unless the Merger is consummated pursuant to the short-form merger provisions under California Law described below, the only remaining required corporate action of the Company is the approval of the Merger Agreement by the affirmative vote of the holders of a majority of the Shares. Accordingly, if the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the approval of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other shareholder. In the Merger Agreement, the Company has agreed to take all action necessary to convene a meeting of its shareholders as soon as practicable after the consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby, if such action is required by California Law. Parent and Purchaser have agreed that all Shares owned by them and their subsidiaries will be voted in favor of the Merger Agreement and the transactions contemplated thereby. If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement provides that Purchaser will be entitled to designate representatives to serve on the Board in proportion to Purchaser's ownership of Shares following such purchase; provided, however, that Purchaser will be entitled to designate a number of directors equal to or greater than 50% of the total number of directors only if Purchaser purchases 90% or more of the outstanding Shares. See Section 10. Purchaser expects that such representation would permit Purchaser to exert substantial influence over the Company's conduct of its business and operations. Under California Law, if Purchaser acquires, pursuant to the Offer, the Stock Option or otherwise, at least 90% of the outstanding Shares, Purchaser will be able to effect the Merger without a vote of the Company's shareholders. In such event, Parent, Purchaser and the Company have agreed in the Merger Agreement to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders. In the event that more than 50% of the Shares then outstanding are tendered pursuant to the Offer and not withdrawn, but less than 90% of the Shares then outstanding on a fully diluted basis are acquired by Purchaser pursuant to the Offer and the Stock Option, Purchaser will waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to the Revised Minimum Number of Shares and, if a greater number of Shares is tendered into the Offer 30 33 and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the expiration of the Offer). The Company's Articles of Incorporation provide that the affirmative vote of the holders of not less than 80% of the total voting power of the Company's outstanding voting securities is required to approve (i) any merger (other than a short-form merger effected in accordance with applicable California Law), consolidation, combination or reorganization of the Company or any of its subsidiaries with any other corporation if such other corporation is a Substantial Shareholder (as defined below) or an associate of a Substantial Shareholder or (ii) the issuance or delivery of any stock or other securities of the Company or any of its subsidiaries in exchange for payment for any (A) cash or other properties or assets of such Substantial Shareholder or associate thereof or (B) securities of such Substantial Shareholder or associate thereof. This supermajority voting requirement is not applicable, however, to any such merger, consolidation, combination or reorganization or issuance or delivery of stock or other securities which is approved by resolution duly adopted by a majority of the Continuing Directors (as defined below). For the purpose of the Company's Restated Articles of Incorporation, "Substantial Shareholder" means any person or group of two or more persons who have agreed to act together for the purpose of acquiring, holding, voting or disposing of securities representing 10% or more of the voting power of all shares of voting securities of the Company. For the purpose of the Company's Restated Articles of Incorporation, "Continuing Director" means, with reference to any Substantial Shareholder, any member of the Board who (A) is not an affiliate of and is not the Substantial Shareholder and (B) was a member of the Board prior to July 1, 1986 or thereafter become a member of the Board prior to the time the Substantial Shareholder become a Substantial Shareholder, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. Parent believes that the described supermajority voting requirement is not applicable to this Offer or the Merger. Dissenters' Rights. Holders of Shares do not have dissenters' rights as a result of the Offer. However, in connection with the Merger, holders of Shares, by complying with the provisions of Chapter 13 of California Law, may have certain rights to dissent and to require the Company to purchase their Shares for cash at fair market value. In general, holders of Shares will be entitled to exercise "dissenters' rights" under California Law only if the holders of five percent or more of the outstanding Shares properly file demands for payment or if the Shares held by such holders are subject to any restriction on transfer imposed by the Company or any law or regulation ("Restricted Shares"). Accordingly, any holder of Restricted Shares and, if the holders of five percent or more of the Shares properly file demands for payment, all other such holders who fully comply with all other applicable provisions of Chapter 13 of California Law will be entitled to require the Company to purchase their Shares for cash at their fair market value if the Merger is consummated. In addition, if immediately prior to the Effective Time, the Shares are not listed on a national securities exchange or on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), holders of Shares may likewise exercise their dissenters' rights as to any or all of their Shares entitled to such rights. If the statutory procedures under California Law relating to dissenters' rights were complied with, such rights could lead to a judicial determination of the fair market value of the Shares. The "fair market value" would be determined as of the day before the first announcement of the terms of the proposed Merger, excluding any appreciation or depreciation in consequence of the Merger. The value so determined could be more or less than the Merger Consideration. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining Shares not held by it. 31 34 Purchaser believes, however, that Rule 13e-3 will not be applicable to the Merger. Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such transaction be filed with the Commission and disclosed to shareholders prior to consummation of the transaction. Plans for the Company. It is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued by the Company substantially as they are currently being conducted. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger, and will take such actions as it deems appropriate under the circumstances then existing. Parent intends to seek additional information about the Company during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to optimizing exploitation of the Company's potential in conjunction with Parent's businesses. It is expected that the business and operations of the Company would form an important part of Parent's future business plans. Except as indicated in this Offer to Purchase, Parent does not have any present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or any material change in the Company's capitalization or dividend policy or any other material changes in the Company's corporate structure or business, or the composition of the Board or the Company's management. 12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the Company will not, and will not permit any of its subsidiaries to, between the date of the Merger Agreement and the Effective Time, without the prior written consent of Parent, issue, deliver, sell, pledge or encumber, or authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any shares of its capital stock of any class or any securities convertible into, or any rights, warrants, call, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than the issuance of Shares upon the exercise of the Existing Stock Options granted under the Stock Incentive Plans and outstanding on the date of the Merger Agreement and in accordance with the terms of such Existing Stock Options as of the date of the Merger Agreement. See Section 11. In addition, the Company will not, and will not permit any of its subsidiaries to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except for regular quarterly dividends on Shares not in excess of $0.08 per Share or dividends by a direct or indirect wholly owned subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any shares of capital stock of the Company or its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities. If, on or after July 3, 1997, the Company should declare or pay any dividend on the Shares or make any other distribution (including the issuance of additional shares of capital stock pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares purchased pursuant to the Offer other than regular quarterly dividends on the Shares declared and paid at times consistent with past practice and in an amount not in excess of $0.08 per Share, then, without prejudice to Purchaser's rights under Section 14, (i) the purchase price per Share payable by Purchaser pursuant to the Offer will be reduced (subject to the Merger Agreement) to the extent any such dividend or distribution is 32 35 payable in cash and (ii) any non-cash dividend, distribution or right shall be received and held by the tendering shareholder for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, Purchaser will be entitled to all the rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. 13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer and the Stock Option, the Shares may no longer meet the requirements of the NYSE for continued listing and may be delisted from the NYSE. Parent intends to seek the delisting of the Shares by the NYSE following consummation of the Offer. According to the NYSE's published guidelines, the NYSE would consider delisting the Shares if, among other things, the number of record holders of at least 100 Shares (or of a unit of trading if less than 100 Shares) should fall below 1,200, the number of publicly-held Shares (exclusive of holdings of officers, directors and their families and other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000 or the aggregate market value of publicly-held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000. The Company has advised Purchaser that, as of June 30, 1997, there were 12,229,100 Shares outstanding, held by approximately 1,918 holders of record. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NYSE for continued listing and the listing of the Shares is discontinued, the market for the Shares could be adversely affected. If the NYSE were to delist the Shares, it is possible that the Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other sources. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Merger Consideration. The Shares are currently "margin securities", as such term is defined under the rules of the Federal Reserve Board, which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going 33 36 private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NASDAQ reporting. Purchaser currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer or the Merger Agreement, Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) the Minimum Condition has been satisfied, (ii) any waiting period under the HSR Act applicable to the purchase of the shares pursuant to the Offer or the Stock Option Agreement shall have expired or been terminated and (iii) the satisfaction of any applicable foreign competition and antitrust statutes and regulations, including the approval of the German Federal Cartel Office pursuant to the German Act Against Restraint of Competition. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, Purchaser will not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of the Merger Agreement and before the acceptance of such Shares for payment or, subject to applicable rules and regulations of the Commission, the payment therefor, any of the following events occur (other than as a result of any action or inaction of Parent or any of its subsidiaries which constitutes a breach of the Merger Agreement): (a) any order, preliminary or permanent injunction, decree, judgment or ruling in any suit, action or proceeding is entered that (i) makes illegal or otherwise directly or indirectly restrains or prohibits the acquisition by Parent or Purchaser of any Shares under the Offer or the making or consummation of the Offer or the Merger, the performance by the Company of any of its obligations under the Merger Agreement or the consummation of any purchase of Shares contemplated by the Merger Agreement, (ii) prohibits or limits the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or compels the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as a result of the Offer or the Merger, (iii) imposes material limitations on the ability of Parent or Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares accepted for payment pursuant to the Offer, including, without limitation, the right to vote such Shares on all matters properly presented to the shareholders of the Company or (iv) prohibits Parent or any of its subsidiaries from effectively controlling in any material respect the business or operations of the Company and its subsidiaries, taken as a whole; or (b) any Law is enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action is taken by any governmental entity, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that results, directly or indirectly, in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; or (c) any Material Adverse Change (as defined in the Merger Agreement) has occurred; or (d) (i) the Board or any committee thereof withdraws or modifies in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger or the Merger 34 37 Agreement, or approves or recommends any Acquisition Proposal or (ii) the Company enters into any agreement to consummate any Acquisition Proposal; or (e) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality are not true and correct or any such representations and warranties that are not so qualified are not true and correct in any respect that is reasonably likely to have a Material Adverse Effect (as defined in the Merger Agreement), in each case at the date of the Merger Agreement and at the scheduled expiration of the Offer; or (f) the Company fails to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; or (g) (i) any general suspension of trading in, or limitation on prices for, securities on the NYSE (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or the Federal Republic of Germany, (iii) commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or the Federal Republic of Germany which in any case is reasonably expected to have a Material Adverse Effect or to materially adversely affect Parent's or Purchaser's ability to complete the Offer or the Merger or materially delay the consummation of the Offer, the Merger or both or (iv) in case of any of the foregoing existing on the date of the Merger Agreement, material acceleration or worsening thereof, occurs and continues to exist for at least three business days; or (h) the Merger Agreement is invalidated or terminated. The foregoing conditions are for the sole benefit of Purchaser and Parent and may, subject to the terms of the Merger Agreement, be waived by Purchaser and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or 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. 15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Based upon its examination of publicly available information with respect to the Company and the review of certain information furnished by the Company to Parent and discussions of representatives of Parent with representatives of the Company during Parent's investigation of the Company (see Section 10), neither Purchaser nor Parent is aware of any license or other regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, which might be adversely affected by the acquisition of Shares by Purchaser pursuant to the Offer or, except as set forth below, of any approval or other action by any domestic (federal or state) or foreign governmental, administrative or regulatory authority or agency which would be required prior to the acquisition of Shares by Purchaser pursuant to the Offer. Should any such approval or other action be required, it is Purchaser's present intention to seek such approval or action. Purchaser does not currently intend, however, to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such action or the receipt of any such approval (subject to Purchaser's right to decline to purchase Shares if any of the conditions in Section 14 shall have occurred). There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, Purchaser or Parent or that certain parts of the businesses of the Company, Purchaser or Parent might not have to be disposed of or held separate or other substantial conditions complied with in order to obtain such approval or other action or in the event that such approval was not obtained or such other action was not taken. Purchaser's obligation 35 38 under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this Section 15. See Section 14. State Takeover Laws. The Company's principal executive offices are located in, and the Company is incorporated under the laws of, the State of California, which currently has no takeover statute that would apply to the Offer or to the Merger. However, there can be no assurances that California will not, prior to the completion of the Offer, adopt such a statute. Under California Law, the Merger may not be accomplished for cash paid to the Company's shareholders if Purchaser or Parent owns directly or indirectly more than 50% but less than 90% of the then outstanding Shares unless either all the shareholders consent or the Commissioner of Corporations of the State of California approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. The purpose of the Offer is to obtain 90% or more of the Shares (on a fully diluted basis) and to enable Parent and Purchaser to acquire control of the Company. In the event that more than 50% of the Shares then outstanding are tendered pursuant to the Offer and not withdrawn, but less than 90% of the Shares then outstanding on a fully diluted basis are acquired by Purchaser pursuant to the Offer and the Stock Option Agreement, Purchaser will waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to the Revised Minimum Number of Shares and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the expiration of the Offer). In the event that Purchaser acquires the Revised Minimum Number of Shares, it may have, as a practical matter the ability to ensure approval of the Merger by the Company's shareholders. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws are applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer, and the Merger. In such case, Purchaser may not be obligated to accept for payment any Shares tendered. See Section 14. Antitrust. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been 36 39 furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares by Purchaser pursuant to the Offer and the Stock Option Agreement are subject to such requirements. See Section 2. Pursuant to the HSR Act, VEBA intends to file a Premerger Notification and Report Form in connection with the purchase of Shares pursuant to the Offer and the Stock Option Agreement with the Antitrust Division and the FTC on or about July 17, 1997. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of a 15-calendar day waiting period following the filing by Parent. Assuming such filing is made on such date, the waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York City time, on August 1, 1997, unless such waiting period is earlier terminated by the FTC and the Antitrust Division or extended by a request from the FTC or the Antitrust Division for additional information or documentary material prior to the expiration of the waiting period. If Purchaser acquires 50% or more of the Shares in the Offer, then no separate waiting period would apply to the subsequent purchase of Shares pursuant to the Stock Option. Pursuant to the HSR Act, VEBA intends to request early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the 15-day HSR Act waiting period will be terminated early. If either the FTC or the Antitrust Division were to request additional information or documentary material from VEBA or the Company with respect to the Offer or the Stock Option Agreement, the waiting period with respect to the Offer would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by VEBA or the Company with such request. Thereafter, the FTC or the Antitrust Division must obtain a court order to prevent Purchaser from consummating the acquisition of Shares pursuant to the Offer. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended and, in any event, the purchase of and payment for Shares will be deferred until 10 days after the request is substantially complied with, unless the extended period expires on or before the date when the initial 15-day period would otherwise have expired, or unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Only one extension of such waiting period pursuant to a request for additional information is authorized by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. It is a condition to the Offer that the waiting period applicable under the HSR Act to the Offer expire or be terminated. See Section 2 and Section 14. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by Purchaser pursuant to the Offer or the Stock Option Agreement. At any time before or after the purchase of Shares pursuant to the Offer or the Stock Option Agreement by Purchaser, the FTC or the Antitrust Division 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 Shares pursuant to the Offer or the Stock Option Agreement or seeking the divestiture of Shares purchased by Purchaser or the divestiture of substantial assets of VEBA, Parent, the Company or their respective subsidiaries. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of information available to VEBA and Parent relating to the businesses in which VEBA, Parent, the Company and their respective subsidiaries are engaged, VEBA, Parent and Purchaser believe that neither the Offer nor the Stock Option Agreement will violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or the Stock Option Agreement on antitrust grounds will not be made or, if such a challenge is made, what the result would be. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation. Foreign Laws. According to publicly available information, the Company also owns property and conducts business in a number of other countries and jurisdictions, including Germany, the United Kingdom, France, Sweden, Finland and Denmark. In connection with the acquisition of the Shares pursuant to the Offer, the laws of certain foreign countries and jurisdictions may require the 37 40 filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. In addition, the waiting period prior to consummation of the Offer associated with such filings or approvals may extend beyond the scheduled Expiration Date. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Merger. There can be no assurance that the Purchaser will be able to cause the Company or its subsidiaries to satisfy or comply with such laws or that compliance or noncompliance will not have adverse consequences for the Company or any subsidiary after purchase of the Shares pursuant to the Offer or the Merger. 16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Goldman Sachs are acting as Dealer Managers in connection with the Offer and have provided certain financial advisory services in connection with the acquisition of the Company. Parent has agreed to pay Goldman Sachs a fee of $5,000,000 in the event that Parent acquires at least 50% of the Shares or assets of the Company or, in certain circumstances, determines to proceed with the acquisition with a view to achieving a business combination with the Company. If the Merger Agreement is terminated under circumstances requiring the Company to pay a Termination Fee to Parent, Parent has agreed to pay to Goldman Sachs an amount equal to 25% of such Termination Fee. Parent has also agreed to reimburse Goldman Sachs for all reasonable out-of-pocket expenses incurred by Goldman Sachs, including the reasonable fees and expenses of legal counsel, and to indemnify Goldman Sachs against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Purchaser and Parent have retained Georgeson & Company Inc., as the Information Agent, and ChaseMellon Shareholder Services, L.L.C., as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners. As compensation for acting as Information Agent in connection with the Offer, Georgeson & Company Inc. will be paid a fee of $15,000 and will also be reimbursed for certain out-of-pocket expenses and may be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including under federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by Purchaser for customary handling and mailing expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Managers or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER 38 41 TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, VEBA, Parent and Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 7 (except that they will not be available at the regional offices of the Commission). EBV ELECTRONICS INC. July 9, 1997 39 42 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF VEBA AND PURCHASER 1. Directors and Executive Officers of VEBA. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of VEBA. Unless otherwise indicated, the current business address of each person is VEBA, Bennigsenplatz 1, D-40474, Dusseldorf, Germany. Unless otherwise indicated, each such person is a citizen of the Federal Republic of Germany and has held his or her present position as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with VEBA.
NAME AND CURRENT BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------- --------------------------------------------------------- SUPERVISORY BOARD Hermann Josef Strenger.......... Chairman of the Supervisory Board, Bayer AG Chairman of the Supervisory Board (since 1993) Bayer AG, Kaiser-Wilhelm- Allee, Gebaude Q 26, 51368 Leverkusen, Germany Hans Berger(1).................. 1st Chairman, Industriegewerkschaft Bergbau and Energie Industriegewerkschaft Berbau und Deputy Chairman of the Supervisory Board (since 1996) Energie, Alte Hattinger Strasse 19, 44789 Bochum, Germany Dr. Marcus Bierich.............. Chairman of the Supervisory Board, Robert Bosch GmbH, Robert- Robert Bosch GmbH (since 1994); Managing Director Bosch-Platz 1, 70839 Gerlingen- Robert Bosch GmbH (through 1993) Schillerhohe, Stuttgart, Germany Ralf Blauth(1).................. Industrial Clerk, HULS AG HULS AG, Paul-Baumann- Str. 1, 45764 Marl, Germany Dr. Rolf-E. Breuer.............. Spokesman of the Board of Management, Deutsche Bank AG, Deutsche Bank AG Taunusanlage 12, 60325 Frankfurt, Germany Dr. Gerhard Cromme.............. Chairman of the Board of Management, Fried. Fried. Krupp AG Hoesch-Krupp, Krupp AG Hoesch-Krupp Altendorfer Strasse 103, 45143 Essen, Germany Rainer Ducker(1)................ Power plant worker, PREUSSENELEKTRA AG PREUSSENELEKTRA AG, Betriebsstelle Lubeck, Bargerbruck 4, 23617 Stockelsdorf, Germany and Tresckowstrasse 5, 30457 Hannover, Germany Hartmut Kaminski(1)............. Lathe operator, VEBA Kraftwerke Ruhr AG VEBA Kraftwerke Ruhr AG, Bergmannsgluckstrasse 41-43, 45896 Gelsenkirchen-Buer, Germany
43
NAME AND CURRENT BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------- --------------------------------------------------------- Dr. Horst Klose................. Vice President, Deutsche Schutzvereinigung Deutsche Schutzvereinigung fur fur Wertpapierbesitz e.V. Wertpapierbesitz e.V., MERO- Firmengruppe, Leitengraben 2, 97084 Wurzburg, Germany Dr. h.c. Andre Leysen........... Chairman of the Administrative Board, Geveart N.V., Septestraat 27, Geveart N.V. B-2640 Mortsel, Belgium (a citizen of Belgium) Dr. Klaus Liesen................ Chairman of the Supervisory Board, Ruhrgas AG, Huttropstrasse 60, Ruhrgas AG 45138 Essen, Germany Chairman of the Board of Management, Ruhrgas AG (through 1996) Helga Lissek-Roza(1)............ Archivist, Parent Raab Karcher AG, Rudolf-v.- Bennigsen-Foerder-Platz 1, 45131 Essen, Germany Herbert Mai(1).................. Chairman, Gewerkschaft Offentliche Dienste, Gewerkschaft Offentliche Transport and Verkehr (since 1995); District Dienste, Transport und Verkehr, Chairman, Gewerkschaft Offentliche Dienste, Theodor-Heuss-Strasse 2, 70174 Transport and Verkehr Hessen (through 1995) Stuttgart, Germany Dagobert Millinghaus(1)......... Accounting and administration manager, BRENNTAG AG, Humboldtring 15, BRENNTAG AG 45472 Mulheim/Ruhr, Germany Hubertus Schmoldt(1)............ Chairman, Industriegewerkschaft Industriegewerkschaft Chemie- Chemie-Papier-Keramik (since 1995) Papier Keramik, Konigsworther Member of Management Board, Platz 6, 30167 Industriegewerkschaft Chemie-Papier-Keramik Hannover, Germany (through 1995) Dr. Henning Schulte-Noelle...... Chairman of the Board of Management, Allianz AG, Koniginstrasse 28, Allianz AG 80802 Munchen, Germany Kurt F. Viermetz................ Vice Chairman, J.P. Morgan & Co. Inc. J.P. Morgan & Co Inc., 60 Wall Street, 20th Floor, New York, New York 10260 (a citizen of the United States of America) Dr. Bernd Voss.................. Member of the Board of Management, Dresdner Bank AG Dresdner Bank AG Jurgen-Ponto-Platz 1, 60329 Frankfurt/Main, Germany Dr. Peter Weber(1).............. Director of the Legal Department, HULS AG HULS AG, Paul-Baumann-Strasse 1, 45764 Marl, Germany Kurt Weslowski(1)............... Chemical Worker, VEBA OEL AG VEBA OEL AG, Pawiker Strasse 30, 45896 Gelsenkirchen, Germany - --------------- (1) Elected by the employees.
I-2 44
NAME AND CURRENT BUSINESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------- --------------------------------------------------------- MANAGEMENT BOARD Ulrich Hartmann................. Chairman of the Board of Management (since 4/1993); Member of the Board of Management Wilhelm Bonse-Geuking........... Member of the Board of Management (since 1995); Chairman of the Board of Management of VEBA OEL AG (since 1995); Member of the Board of Management of VEBA OEL AG, Gelsenkirchen (through 1994) Dr. Hans Michael Gaul........... Member of the Board of Management; Vice Chairman of the Board of Management of PREUSSENELEKTRA AG, Hannover (since 1993); Member of the Board of Management of PREUSSENELEKTRA AG, Hannover (through 1993) Dr. Hans-Dieter Harig........... Member of the Board of Management; Chairman of the Board of Management of PREUSSENELEKTRA AG, Hannover (since 1993); Chairman of the Board of Management of VEBA KRAFTWERKE RUHR AG, Gelsenkirchen (through 1993) Dr. Hermann Kramer.............. Member of the Board of Management; Chairman of the Board of Management of PREUSSENELEKTRA AG, Hannover (through 1993) Dr. Manfred Kruper.............. Member of the Board of Management (since 7/96); Member of the Board of Management of VEBA OEL AG, Gelsenkirchen (through 6/96) Georg Kulenkampff............... Member of the Board of Management (since 7/96); Chairman of the Board of Management of Raab Karcher AG, Essen (since 7/96); Member of the Board of Management of Raab Karcher AG, Essen (through 6/1996) Helmut Mamsch................... Member of the Board of Management (since 1993); Chairman of the Board of Management of STINNES AG, Mulheim (since 7/96); Chairman of the Board of Management of Raab Karcher AG, Essen (through 6/96) Dr. Erhard Meyer-Galow.......... Member of the Board of Management (since 1993); Chairman of the Board of Management of HULS AG, Marl (since 1993); Member of the Board of Management of STINNES AG, Mulheim (through 1993)
2. Directors and Executive Officers of Purchaser. The following table sets forth the name, current business address, citizenship and present principal occupation or employment and employment history for the past five years for each of the directors and executive officers of Purchaser. Unless otherwise indicated, the current business address of each person is c/o Purchaser, Rudolf- v.-Bennigsen-Foerder-Platz 1, 45131 Essen, Germany. Unless otherwise indicated, each such person has held his or her present position as set forth below for the past five years, and each such person does not beneficially own Shares. Each such person is a citizen of the I-3 45 Federal Republic of Germany except Michael J. Rohleder, who is a citizen of the United States of America and Colin Stevens, who is a citizen of the United Kingdom.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND CURRENT BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - -------------------------------------------- -------------------------------------------- Dr. Ferdinand Pohl.......................... Member of Management Board of Parent Michael J. Rohleder,........................ President and Chief Executive Officer of Raab Karcher North America, Raab Karcher North America (since 1996) 9980 Huennekens, San Diego, CA 92121 President of Insight Electronics, Inc. (through 1996) Colin Stevens,.............................. Finance Director of Memec Plc Memec Plc, 17 Thame Park Road, Thame, OX93D, United Kingdom Gunther Beuth............................... Member of Management Board and Deputy Chairman Member of Management Board and Chief Financial Officer of Parent.
I-4 46 Facsimiles of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates evidencing Shares and any other required documents should be sent or delivered by each shareholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Hand: By Overnight Courier: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road -- Mail South Hackensack, New York, Drop-Reorg New Jersey 07606 New York 10271 Ridgefield Park, Attn: Reorganization Attn: Reorganization New Jersey 07660 Department Department Attn: Reorganization Department By Facsimile: (201) 329-8936 Confirm by Telephone: (201) 296-4860
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: (LOGO) Toll Free: (800) 223-2064 Wall Street Plaza New York, New York 10005 Bankers and Brokers call collect: (212) 440-9800 All others call toll free: (800) 223-2064 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (800) 323-5678 EX-99.A.2 3 FORM OF LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF WYLE ELECTRONICS PURSUANT TO THE OFFER TO PURCHASE DATED JULY 9, 1997 OF EBV ELECTRONICS INC. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF RAAB KARCHER AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Hand: By Overnight Courier: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road -- Mail South Hackensack, New York, Drop-Reorg New Jersey 07606 New York 10271 Ridgefield Park, Attn: Reorganization Attn: Reorganization New Jersey 07660 Department Department Attn: Reorganization Department By Facsimile: (201) 329-8936 Confirm by Telephone: (201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2 This Letter of Transmittal is to be completed by shareholders either if certificates evidencing Shares (as defined below) are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates or deliver confirmation of the book-entry transfer of the Shares into the Depositary's account at a Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in "Section 1. Terms of the Offer; Proration in Certain Circumstances; Expiration Date" of the Offer to Purchase) and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. See Instruction 2. [ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution - -------------------------------------------------------------------------------- Check Box of Applicable Book-Entry Transfer Facility: (check one) [ ] DTC [ ] MSTC [ ] PDTC Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- [ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) - -------------------------------------------------------------------------------- Window Ticket No. (if any) - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ------------------------------------------------------------- Name of Institution which Guaranteed Delivery ------------------------------------------------------------------- If delivery is by book-entry transfer, check box of applicable Book-Entry Transfer Facility: (check one) [ ] DTC [ ] MSTC [ ] PDTC Account Number - ------------------------------------------------------------------------------- Transaction Code Number - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------ SHARE TOTAL NUMBER OF NUMBER OF CERTIFICATE SHARES EVIDENCED BY SHARES NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total Shares ------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. - -------------------------------------------------------------------------------- 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent"), the above-described shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"), pursuant to Purchaser's offer to purchase all Shares, at a price of $50.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 9, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith, in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect of such Shares on or after July 3, 1997 (collectively, "Distributions") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints Michael Rohleder and Dr. Ferdinand Pohl, and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of shareholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with other terms of the Offer. Such acceptance for payment shall revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Shares, including, without limitation, voting at any meeting of the Company's shareholders then scheduled. 4 The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby, or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered". In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any of the Shares tendered hereby. 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Issue: [ ] Check [ ] Share Certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address ------------------------------------------------- ------------------------------------------------------------ (ZIP CODE) ------------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) [ ] Credit Shares delivered by book-entry transfer and not purchased to the account set forth below: Check appropriate box: [ ] DTC [ ] MSTC [ ] PDTC ------------------------------------------------------------ (ACCOUNT NUMBER) ============================================================ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased or Share Certificates evidencing Shares not tendered or not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered". Mail: [ ] Check [ ] Share Certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address ------------------------------------------------- ------------------------------------------------------------ (ZIP CODE) ------------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) ------------------------------------------------------------ 6 IMPORTANT SHAREHOLDERS: SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) Dated: - --------------------------- , 199 - --- (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney- in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s):------------------------------------------------------------------------ PLEASE PRINT Capacity (full title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- INCLUDE ZIP CODE Area Code and Telephone No.: ------------------------------------------------------ Taxpayer Identification or Social Security No.: ------------------------------------------- (SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW. 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. All signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Share Certificates. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, a Book-Entry Confirmation (as defined in "Section 2. Acceptance for Payment and Payment for Shares" of the Offer to Purchase)), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery, all as described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. The method of delivery of this Letter of Transmittal, Share Certificates and all other required documents, including delivery through any Book-Entry Transfer Facility, is at the option and risk of the tendering shareholder, and the delivery will be deemed made only when actually received by the Depositary. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering shareholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 8 4. Partial Tenders (not applicable to shareholders who tender by book-entry transfer). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered". In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 9 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. Shareholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such shareholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. Questions and Requests for Assistance or Additional Copies. Questions and requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 9. Substitute Form W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalty of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. In addition, if a shareholder makes a false statement that results in no imposition of backup withholding, and there was no reasonable basis for such statement, a $500 penalty may also be imposed by the Internal Revenue Service. 10 Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to such individual's exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. A shareholder should consult his or her tax advisor as to such shareholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such shareholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such shareholder until a TIN is provided to the Depositary. 11 PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. - -------------------------------------------------------------------------------------------------------- SUBSTITUTE PART I -- Taxpayer Identification ------------------------------- FORM W-9 Number -- For all accounts, enter Social Security Number your taxpayer identification number OR in the box at right. (For most ---------------------------- individuals, this is your social Taxpayer Identification security number. If you do not have Number a number, see Obtaining a Number in (If awaiting Tin write the enclosed Guidelines.) Certify by "Applied For") signing and dating below. Note: If the account is in more than one name, see the chart in the enclosed Guidelines to determine which number to give the payer. ---------------------------------------------------------------------- Payer's Request for Taxpayer PART II -- For Payees Exempt From Backup Withholding, see the Identification Number (TIN) enclosed Guidelines and complete as instructed therein. - -------------------------------------------------------------------------------------------------------- CERTIFICATION -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) - -------------------------------------------------------------------------------------------------------- SIGNATURE DATE , 199 - --------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 12 Facsimiles of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittals certificates evidencing Shares and any other required documents should be sent or delivered by each shareholder 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 the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Hand: By Overnight Courier: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road -- South Hackensack, New York, New York 10271 Mail Drop-Reorg New Jersey 07606 Attn: Reorganization Department Ridgefield Park, Attn: Reorganization Department New Jersey 07660 Attn: Reorganization Department By Facsimile: (201) 329-8936 Confirm by Telephone: (201) 296-4860
Questions or requests for assistance may be directed to the Information Agent or the Dealer Managers at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: (LOGO) Toll Free: 1-800-223-2064 Wall Street Plaza New York, New York 10005 Banks and Brokers call collect: (212) 440-9800 All others call toll free: (800) 223-2064 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (800) 323-5678 EX-99.A.3 4 FORM OF NOTICE OF GUARANTEED DELVIERY 1 NOTICE OF GUARANTEED DELIVERY FOR Tender of Shares of Common Stock (Including the Associated Preferred Stock Purchase Rights) OF WYLE ELECTRONICS (Not to be Used for Signature Guarantees) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"), are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), prior to the Expiration Date (as defined in "Section 1. Terms of the Offer; Proration in Certain Circumstances; Expiration Date" of the Offer to Purchase) or (iii) if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary. See "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. By Mail: By Hand: By Overnight Courier: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. PO Box 3301 120 Broadway, 13th Floor 85 Challenger Road -- South Hackensack, New Jersey 07606 New York, New York 10271 Mail Drop -- Reorg Attn: Reorganization Department New Jersey 07660 Ridgefield Park, Attn: Reorganization Department New Jersey 07660 Attn: Reorganization Department By Facsimile: (201) 329-8936 Confirm by Telephone: (201) 296-4860
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to EBV Electronics Inc., a Delaware corporation and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 9, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. Number of Shares: - ------------------------------- --------------------------------------------- --------------------------------------------- SIGNATURE(S) OF HOLDER(S) Certificate Nos. (If Available): Dated: - --------------------------------------------- --------------------------------------, 199 Name(s) of Holders: --------------------------------------------- --------------------------------------------- PLEASE TYPE OR PRINT Check one box if Shares will be delivered by book-entry transfer: --------------------------------------------- ADDRESS [ ] The Depository Trust Company --------------------------------------------- ZIP CODE [ ] Midwest Securities Trust Company --------------------------------------------- AREA CODE AND TELEPHONE NO. [ ] Philadelphia Depository Trust Company Account No. ---------------------------------------
3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of the Medallion Signature Guarantee Program, guarantees to deliver to the Depositary, at one of its addresses set forth above, either Share Certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed with any required signature guarantees or a Book-Entry Confirmation (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three New York Stock Exchange, Inc. trading days of the date hereof. - -------------------------------------------- -------------------------------------------- NAME OF FIRM AUTHORIZED SIGNATURE - -------------------------------------------- -------------------------------------------- ADDRESS TITLE - -------------------------------------------- Name: -------------------------------------------- ZIP CODE PLEASE TYPE OR PRINT - -------------------------------------------- Dated: --------------------------------------, 199 AREA CODE AND TELEPHONE NO.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A.4 5 FORM OF LETTER TO BROKERS, DEALERS, ETC. 1 GOLDMAN, SACHS & CO. 85 BROAD STREET NEW YORK, NEW YORK 10004 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF WYLE ELECTRONICS AT $50.00 NET PER SHARE BY EBV ELECTRONICS INC. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF RAAB KARCHER AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. July 9, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent"), to act as Dealer Managers in connection with Purchaser's offer to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"), at a price of $50.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated July 9, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer") enclosed herewith. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES WHICH WOULD CONSTITUTE NOT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER SHALL HAVE EXPIRED OR BEEN TERMINATED. IN THE EVENT THAT MORE THAN 50% OF THE SHARES THEN OUTSTANDING ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN, BUT LESS THAN 90% OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS ARE ACQUIRED BY PURCHASER PURSUANT TO THE OFFER AND THE STOCK OPTION DESCRIBED IN THE OFFER TO PURCHASE, PURCHASER WILL WAIVE THE MINIMUM CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT TO THE OFFER TO 6,102,321 SHARES OR SUCH GREATER OR LESSER NUMBER OF SHARES AS EQUALS 49.9% OF THE SHARES THEN OUTSTANDING (THE "REVISED MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED INTO THE OFFER AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED MINIMUM NUMBER OF SHARES (IT BEING UNDERSTOOD THAT PURCHASER SHALL NOT IN ANY EVENT BE REQUIRED TO ACCEPT FOR PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM NUMBER OF SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE EXPIRATION OF THE OFFER). 2 Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated July 9, 1997; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents are not immediately available or cannot be delivered to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A letter to shareholders of the Company from Ralph L. Ozorkiewicz, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates evidencing such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or facsimile thereof) properly completed and duly executed and any other required documents. If holders of Shares wish to tender, but cannot deliver their certificates or other required documents or cannot comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Managers, the Depositary and the Information Agent, as described in the Offer) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Goldman, Sachs & Co. or Georgeson & Company Inc. (the "Information Agent") at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent, at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, GOLDMAN, SACHS & CO. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.A.5 6 FORM OF LETTER FROM BROKERS, ETC. TO CLIENTS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF WYLE ELECTRONICS AT $50.00 NET PER SHARE BY EBV ELECTRONICS INC. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF RAAB KARCHER AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. July 9, 1997 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated July 9, 1997 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany, to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"), at a price of $50.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). We are the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $50.00 per Share, net to the seller in cash. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company has unanimously approved the Offer and determined that each of the Offer and the Merger (as defined in the Offer to Purchase) is fair to, and in the best interests of, the shareholders of the Company, and recommends that shareholders accept the Offer and tender their Shares pursuant to the Offer. 4. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997 UNLESS THE OFFER IS EXTENDED. 5. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares which would constitute not less than 90% of the Shares then outstanding on a fully diluted basis (the "Minimum Condition") and (ii) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the purchase of the Shares pursuant to the Offer shall have expired or been terminated. 2 6. In the event that more than 50% of the Shares then outstanding are tendered pursuant to the Offer and not withdrawn, but less than 90% of the Shares then outstanding on a fully diluted basis are acquired by Purchaser pursuant to the Offer and the Stock Option described in the Offer to Purchase, Purchaser will waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to 6,102,321 Shares or such greater or lesser number of Shares as equals 49.9% of the Shares then outstanding (the "Revised Minimum Number") and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the expiration of the Offer). 7. Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF WYLE ELECTRONICS BY EBV ELECTRONICS INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated July 9, 1997, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by EBV Electronics Inc., a Delaware corporation and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany, to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation, and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"). This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: , 199 Number of Shares to be Tendered: - ------------------ Shares* SIGN HERE - ------------------------------------------------------ - ------------------------------------------------------ SIGNATURE(S) - ------------------------------------------------------ - ------------------------------------------------------ PLEASE TYPE OR PRINT NAME(S) - ------------------------------------------------------ - ------------------------------------------------------ PLEASE TYPE OR PRINT ADDRESS - ------------------------------------------------------ AREA CODE AND TELEPHONE NUMBER - ------------------------------------------------------ TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.6 7 FORM OF GUIDELINES - CERTIFICATION OF TAXPAYER ID 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF -- - ------------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of the account) account or, if combined funds, any one of the individuals (1) 3. Custodian and wife (joint account) The actual owner of the account or, if joint funds, either person (1) 4. Custodian account of a minor The minor (2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor (1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent person (3) minor, or incompetent person 7. a The usual revocable savings trust The grantor-trustee (1) account (grantor is also trustee) b So-called trust account that is The actual owner (1) not a legal or valid trust under State law - ------------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF -- - ------------------------------------------------------------------ 8. Sole proprietorship account The Owner (4) 9. A valid trust, estate, or pension Legal entity (Do not trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (5) 10. Corporate account The Corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- ------------------------------------------------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - - A corporation. - - A financial institution. - - An organization exempt from tax under section 501(a), or an individual retirement plan. - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or agency or instrumentality thereof. - - An international organization or any agency, or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt interest dividends under section 852). - - Payments described in section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A (a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends or patronage dividends in gross income and such failure is due to negligence, a penalty of 20% is imposed on any portion of any underpayment attributable to the failure. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.A.7 8 FORM OF SUMMARY ADVERTISEMENT 1 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated July 9, 1997 and the related Letter of Transmittal, and is being made to all holders of Shares. Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Goldman, Sachs & Co. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF WYLE ELECTRONICS AT $50.00 NET PER SHARE BY EBV ELECTRONICS INC. AN INDIRECT WHOLLY OWNED SUBSIDIARY OF RAAB KARCHER AG EBV Electronics Inc., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Raab Karcher AG, a corporation organized under the laws of the Federal Republic of Germany ("Parent"), is offering to purchase all outstanding shares of common stock, without par value (the "Common Stock"), of Wyle Electronics, a California corporation (the "Company"), and the associated preferred stock purchase rights (together with the Common Stock, the "Shares"), at a price of $50.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated July 9, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). Following the Offer, Purchaser intends to effect the Merger described below. Parent is a wholly owned subsidiary of VEBA AG, a corporation organized under the laws of the Federal Republic of Germany. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 5, 1997, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares which would constitute not less than 90% of the Shares then outstanding on a fully diluted basis (the "Minimum Condition") and (ii) any waiting period under the Hart-Scott-Rodino 2 Antitrust Improvements Act of 1976 applicable to the purchase of the Shares pursuant to the Offer shall have expired or been terminated. In the event that more than 50% of the Shares then outstanding are tendered pursuant to the Offer and not withdrawn, but less than 90% of the Shares then outstanding on a fully diluted basis are acquired by Purchaser pursuant to the Offer and the Stock Option described below, Purchaser will waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to 6,102,321 Shares or such greater or lesser number of Shares as equals 49.9% of the Shares then outstanding (the "Revised Minimum Number") and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the expiration of the Offer). The Offer is being made pursuant to an Agreement and Plan of Merger dated as of July 3, 1997 (the "Merger Agreement") among Parent, Purchaser and the Company. The Merger Agreement provides that, among other things, upon the terms and subject to the conditions set forth in the Merger Agreement, and in accordance with the General Corporation Law of the State of Delaware and the California Corporations Code ("California Law"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the surviving corporation and will become an indirect wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by the Company or by any subsidiary of the Company and each Share that is owned by Parent, Purchaser or any other subsidiary of Parent, and other than Shares held by shareholders who have demanded and perfected, and have not withdrawn or otherwise lost, appraisal rights, if any, under California Law) will be cancelled and converted automatically into the right to receive $50.00 in cash, or any higher price that may be paid per Share in the Offer, without interest. The Board of Directors of the Company has unanimously approved the Offer and determined that each of the Offer and the Merger is fair to, and in the best interests of, the shareholders of the Company, and recommends that shareholders accept the Offer and tender their Shares pursuant to the Offer. Simultaneously with entering into the Merger Agreement, and as an inducement to Parent and Purchaser to enter into the Merger Agreement, the Company entered into a Stock Option Agreement with Parent and Purchaser, dated as of July 3, 1997 (the "Stock Option Agreement"). Pursuant to the Stock Option Agreement, the Company granted to Purchaser an irrevocable option (the "Stock Option") to purchase up to the number of Shares (the "Option Shares") that, when added to the number of Shares owned by Purchaser and its affiliates following the consummation of the Offer, would constitute 90% of the Shares then outstanding on a fully diluted basis (assuming the 3 issuance of the Option Shares), at a cash purchase price per Option Share equal to $50.00, subject to the terms and conditions set forth in the Stock Option Agreement, including, without limitation, (i) that Purchaser shall have accepted for payment Shares constituting more than 50% of the Shares then outstanding and (ii) that the number of Shares to be issued thereunder shall not exceed the number of authorized Shares available for issuance. If the Stock Option is exercised by Purchaser (resulting in Purchaser acquiring 90% or more of the outstanding Shares) or the Purchaser otherwise acquires 90% of the outstanding Shares, Parent will be able to effect a short-form merger without a vote of the Company's shareholders under California Law, subject to the terms and conditions of the Merger Agreement. Purchaser currently intends to effect a short-form merger if it is able to do so. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of Parent's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid, regardless of any extension of the Offer or delay in making such payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in "Section 2. Acceptance for Payment and Payment for Shares" of the Offer to Purchase) pursuant to the procedure set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as described in the Offer to Purchase) and (iii) any other documents required under the Letter of Transmittal. Purchaser expressly reserves the right, in its sole discretion (subject to the terms and conditions of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any condition specified in "Section 14. Certain Conditions of the Offer" of the Offer to Purchase, by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as practicable by public announcement thereof, such announcement to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date (as defined below) of the Offer. During any such extension, all Shares previously 4 tendered and not withdrawn will remain subject to the Offer, subject to the rights of tendering shareholders to withdraw their Shares. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, August 5, 1997, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, will expire. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after Saturday, September 6, 1997. For the withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including the time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information which should be read before any decision is made with respect to the 5 Offer. Questions and requests for assistance or for additional copies of the Offer to Purchase and the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent or the Dealer Manager as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent and the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [GEORGESON & COMPANY INC. LOGO] Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 Call Toll-Free: 1-800-223-2064 The Dealer Managers for the Offer are: GOLDMAN, SACHS & CO. 85 Broad Street New York, New York 10004 (800) 323-5678 July 9, 1997 EX-99.A.8 9 JOINT PRESS RELEASE 1 -- JOINT PRESS RELEASE -- RAAB KARCHER TO ACQUIRE LEADING US ELECTRONICS DISTRIBUTOR WYLE RAAB KARCHER TO COMMENCE TENDER OFFER AT $50 PER SHARE IN CASH WYLE TO PARTNER WITH EBV EUROPE AS PART OF A GLOBAL STRATEGY; WILL KEEP NAME, OPERATE AUTONOMOUSLY, NO LAYOFFS ESSEN, GERMANY AND IRVINE, CALIFORNIA, JULY 3, 1997 -- Raab Karcher AG, a wholly-owned subsidiary of VEBA AG, and Wyle Electronics (NYSE:WYL.N), one of North America's leading electronics distributors, today jointly announced that they have entered into a definitive agreement for Raab Karcher to acquire all of the outstanding shares of Wyle for $50 per share in cash, for a transaction valued at approximately $810 million, including Wyle's debt. The purchase price represents a premium of approximately 40% over the average trading price for Wyle shares over the last 90 days. Under the agreement, EBV Electronics Inc., a wholly-owned subsidiary of Raab Karcher, will commence a tender offer for all outstanding shares of common stock of Wyle on or prior to July 10, 1997. The transaction has been unanimously approved by the Boards of Directors of both companies and is not subject to financing. The combination of the two businesses creates a leading global company in electronic component and computer system distribution with combined sales of approximately $3.0 billion. Raab Karcher is a market leading, European-based distribution and services group, with worldwide activities. In 1996, Raab Karcher generated revenue of $7.0 billion with a total of approximately 29,000 employees. In distribution of electronic components and computer systems, Raab Karcher serves as the holding company for its subsidiaries EBV, Memec, Insight and Raab Karcher Electronic Systems, which in 1996 reported aggregate sales of $1.7 billion. Raab Karcher is a wholly owned subsidiary of VEBA AG, the fourth largest company in Germany. With 1996 consolidated sales of approximately $50 billion and a current market capitalization of approximately $28 billion, the VEBA Group counts as one of the largest industrial groups in Europe. 2 Wyle is a leading US-based distributor of electronic components and computer systems with 1996 sales of $1.2 billion and earnings before interest and taxes of $74 million. Wyle, which has a total of approximately 1,700 employees, operates 35 sales locations throughout the US and serves customers in 7 European countries through wholly owned subsidiaries. Wyle ranks 6th among the electronic component and computer system distributors on a world-wide basis and holds a particularly strong position in the value-added service segment of the electronics distribution field, including programming of ASIC components, kitting and just-in-time delivery services. With the acquisition of Wyle, Raab Karcher will significantly enhance its global scale and presence. Mr. Georg Kulenkampff, CEO of Raab Karcher, said, "This is the largest acquisition in the near-150 year history of Raab Karcher. The transaction will clearly position the combined business as a strong global player in the world-wide markets for distribution of electronic components and computer systems and will provide an excellent platform for further growth. In addition, the acquisition is another significant step in Raab Karcher's strategy to internationalise and build global size operations in its core business." Dr. Ferdinand Pohl, President of Raab Karcher's electronics operations added, "Wyle is an excellent company, widely recognized as a leader in the value-added segment of the electronics distribution industry. We see this acquisition as a unique opportunity to capitalize on the complementary strengths of our two organisations and we fully intend to build on Wyle's existing strengths, maintaining the Wyle name, its headquarters and its excellent workforce." Mr. Ralph L. Ozorkiewicz, President and CEO of Wyle, stated, "This is an outstanding opportunity to build a substantial multi-national alliance of a number of important electronic component distribution companies and will create a new force in the market, which we believe will offer substantial benefits to customers as well as suppliers. Our Board of Directors unanimously concluded that this transaction is in the best interest of our shareholders, who will receive a significant all-cash premium for their shares. In addition, our employees will all keep their jobs and have the potential for enhanced career opportunities and suppliers and customers will benefit from our increased global reach. There is no better partner for Wyle in our consolidating industry." Raab Karcher's obligation to purchase shares in the tender offer will be subject to at least 90% of the shares outstanding (on a fully diluted basis) being tendered into the offer. In order to comply with California law regarding mergers of companies, in the event that fewer than 90% of the outstanding shares (on a fully diluted basis) are tendered into the offer, Raab Karcher will 3 have the right to exercise an option granted by Wyle to acquire additional shares of Wyle's common stock under certain circumstances to enable Raab Karcher to acquire 90% of the outstanding shares (on a fully diluted basis). In the event the option would not permit Raab Karcher to acquire sufficient shares, and more than 50% of the outstanding shares but fewer than 90% of the outstanding shares (on a fully diluted basis) are tendered into the offer, Raab Karcher will reduce the number of shares subject to the offer to 49.9% of the shares outstanding and subsequently pursue a merger with Wyle. Raab Karcher's obligation to purchase shares in the offer will be further subject to the satisfaction or waiver of certain customary conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Contacts: Mr. Van Holland Chief Financial Officer Wyle Electronics Tel: +1-714-453 4310 Internet home page: http://www.wyle.com Dr. Andreas Dahms Director Public Relations Raab Karcher Tel: +49-201-459 1311 E-mail: info@rkag.de Internet home page: http://www.raab-karcher.de Mr. Paul Verbinnen Mr. David Reno Mr. Drew Brown Sard Verbinnen & Co Tel: +1-212-687 8080 EX-99.C.1 10 AGREEMENT AND PLAN OF MERGER 1 AGREEMENT AND PLAN OF MERGER Among RAAB KARCHER AG, EBV ELECTRONICS INC. and WYLE ELECTRONICS Dated as of July 3, 1997 2 TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I THE OFFER 1.01. The Offer ........................................................ 2 1.02. Company Actions .................................................. 4 ARTICLE II THE MERGER 2.01. The Merger ....................................................... 5 2.02. Effective Time; Closing........................................... 5 2.03. Effects of the Merger............................................. 6 2.04. Articles of Incorporation and By-Laws............................. 6 2.05. Directors......................................................... 6 2.06. Officers ......................................................... 6 ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 3.01. Effect on Capital Stock........................................... 7 3.02. Exchange of Certificates.......................................... 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4.01. Organization...................................................... 10 4.02. Subsidiaries...................................................... 10 4.03. Capitalization.................................................... 10 4.04. Authority......................................................... 11 4.05. Noncontravention; Filings and Consents............................ 12 4.06. SEC Documents; Financial Statements............................... 13 4.07. Absence of Certain Changes or Events.............................. 14 4.08. No Undisclosed Liabilities........................................ 14 4.09. Information Supplied.............................................. 15 4.10. Litigation........................................................ 15 4.11. Labor Matters..................................................... 16 4.12. Employee Benefits; ERISA.......................................... 16 3 ii Section Page - ------- ---- 4.13. Taxes.......................................................... 19 4.14. Compliance with Applicable Laws................................ 19 4.15. Environmental Matters.......................................... 20 4.16. Real Property.................................................. 20 4.17. Intellectual Property.......................................... 21 4.18. Insurance...................................................... 21 4.19. Amendment of Rights Agreement.................................. 22 4.20. State Takeover Statutes........................................ 22 4.21. Opinion of Financial Advisor................................... 22 4.22. Brokers........................................................ 22 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 5.01. Organization................................................... 22 5.02. Authority ..................................................... 23 5.03. Noncontravention; Filings and Consents......................... 23 5.04. Information Supplied........................................... 24 5.05. Financing...................................................... 24 5.06. Interim Operations of Purchaser................................ 24 5.07. Litigation..................................................... 24 5.08. Brokers ....................................................... 25 ARTICLE VI COVENANTS OF THE COMPANY 6.01. Conduct of Business ........................................... 25 6.02. Other Actions ................................................. 28 6.03. No Solicitation ............................................... 28 ARTICLE VII ADDITIONAL AGREEMENTS 7.01. Shareholders Meeting; Preparation of the Proxy Statement....... 30 7.02. Access to Information; Confidentiality......................... 31 7.03. Reasonable Efforts ............................................ 32 7.04. Stock Options.................................................. 32 7.05. Benefit Plans.................................................. 33 7.06. Indemnification and Insurance.................................. 34 7.07. Directors of the Company....................................... 35 7.08. Fees and Expenses ............................................. 36 7.09. Public Announcements........................................... 37 4 iii Section Page - ------- ---- 7.10. Notification..................................................... 37 7.11. Certain Litigation ............................................. 37 7.12. Other Actions ................................................... 38 ARTICLE VIII CONDITIONS PRECEDENT 8.01. Conditions to Each Party's Obligation to Effect the Merger....... 38 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.01. Termination ..................................................... 39 9.02. Effect of Termination............................................ 40 9.03. Amendment ....................................................... 40 9.04. Extension; Waiver................................................ 40 9.05. Procedure for Termination, Amendment, Extension or Waiver........ 40 ARTICLE X GENERAL PROVISIONS 10.01. Nonsurvival of Representations.................................. 41 10.02. Notices ........................................................ 41 10.03. Definitions .................................................... 42 10.04. Interpretation ................................................. 43 10.05. Counterparts ................................................... 43 10.06. Entire Agreement; Third Party Beneficiaries..................... 43 10.07. Assignment...................................................... 43 10.08. Governing Law .................................................. 44 10.09. Enforcement .................................................... 44 10.10. Severability ................................................... 44 Exhibit A Conditions of the Offer Exhibit B Form of Agreement of Merger 5 INDEX OF DEFINED TERMS Defined Term Section AARC Section 4.05(b) acquisition proposal Section 6.03(a) affiliate Section 10.03(a) Agreement Preamble Benefit Plans Section 4.12(a) Certificates Section 3.02(b) CCC Recitals Code Section 4.12(a) Commonly Controlled Entity Section 4.12(a) Company Preamble Company Common Stock Recitals Company Filed SEC Documents Section 4.07 Company Permits Section 4.14 Company Preferred Stock Section 4.03 Company Representatives Section 6.03(a) Company SEC Documents Section 4.06 Company Shareholder Vote Section 4.04 Company Shareholders Meeting Section 7.01(a) Confidentiality Agreement Section 7.02 control Section 10.03(b) controlled by Section 10.03(b) DGCL Recitals Disclosure Schedule Article IV Dissenting Shares Section 3.01(d) Effective Time Section 2.02 Environmental Laws Section 4.15 ERISA Section 4.12(a) Exchange Act Section 1.01(d) Expenses Section 7.08(b) FCO Section 4.05(b) Governmental Entity Section 4.05(b) Hazardous Substance Section 4.15 HSR Act Section 4.05(b) Indemnified Parties Section 7.06(a) Independent Counsel Section 1.02(a) Independent Directors Section 7.07(a) Information Statement Section 4.09 Intellectual Property Rights Section 4.17 IRS Section 4.12(a) 6 Defined Term Section - ------------ ------- Law Section 4.05(a) Leased Real Property Section 4.16(b) Lien Section 10.03(c) Material Adverse Change Section 10.03(d) Material Adverse Effect Section 10.03(d) Merger Recitals Merger Consideration Section 3.01(c) Merger Documents Section 2.02 Minimum Condition Exhibit A Notice of Superior Proposal Section 6.03(b) Offer Recitals Offer Documents Section 1.01(d) Owned Real Property Section 4.16(a) Parent Preamble Paying Agent Section 3.02(a) PBGC Section 4.12(d) Pension Plans Section 4.12(a) Per Share Amount Recitals person Section 10.03(e) Preferred Stock Section 4.03 Proxy Statement Section 4.05(b) Purchaser Preamble Real Property Section 4.16(b) Revised Minimum Number Section 1.01(b) Rights Agreement Section 4.03 Schedule 14D-9 Section 1.02(b) SEC Section 1.01(a) Securities Act Section 4.06 Significant Subsidiary Section 4.01 Specified Court Section 10.09 Stock Incentive Plans Section 7.04(a) Stock Option Section 7.04(a) Stock Option Agreement Recitals subsidiary Section 10.03(f) Superior Proposal Section 6.03(b) Surviving Corporation Section 2.01 taxes Section 4.13 Termination Fee Section 7.08(b) under common control with Section 10.03(b) WARN Section 4.12(g) Welfare Plans Section 4.12(a) 7 AGREEMENT AND PLAN OF MERGER, dated as of July 3, 1997 (this "Agreement"), among RAAB KARCHER AG, a corporation organized under the laws of Germany ("Parent"), EBV ELECTRONICS INC., a Delaware corporation and an indirect wholly owned subsidiary of Parent ("Purchaser"), and WYLE ELECTRONICS, a California corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, Purchaser and the Company have each determined that it is in the best interests of their respective shareholders for Parent to acquire the Company upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance of such acquisition, Parent proposes to cause Purchaser to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to purchase all the outstanding shares of common stock, no par value, of the Company (the "Company Common Stock"), at a purchase price of US$50.00 per share (such amount, or any greater amount to be paid per share of Company Common Stock in the Offer, being referred to as the "Per Share Amount"), net to the seller in cash, upon the terms and subject to the conditions set forth in this Agreement and in the Offer; and the Board of Directors of the Company has unanimously approved the Offer and is recommending that the Company's shareholders accept the Offer and tender their shares of Company Common Stock pursuant to the Offer; WHEREAS, also in furtherance of such acquisition, the respective Boards of Directors of Parent, Purchaser and the Company have approved the merger of Purchaser with and into the Company (the "Merger") upon the terms and subject to the conditions set forth in this Agreement and in accordance with the provisions of the Delaware General Corporation Law (the "DGCL") and the California Corporations Code (the "CCC"), whereby each share of Company Common Stock, other than shares owned directly or indirectly by Parent or by the Company and other than Dissenting Shares (as defined in Section 3.01(d)), will be converted into the right to receive the Per Share Amount; WHEREAS, as an inducement to Parent to enter into this Agreement, Parent, Purchaser and the Company have entered into a Stock Option Agreement (the "Stock Option Agreement") pursuant to which the Company has granted to Parent an option to purchase newly issued shares of Company Common Stock under certain circumstances; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows: 8 ARTICLE I THE OFFER SECTION 1.01. The Offer. (a) Subject to the provisions of this Agreement, as promptly as practicable but in no event later than five business days after the date of the public announcement of this Agreement, Purchaser shall, and Parent shall cause Purchaser to, commence the Offer. The obligation of Purchaser to, and of Parent to cause Purchaser to, commence the Offer and accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer shall be subject to the conditions set forth in Exhibit A (any of which may be waived in whole or in part by Purchaser in its sole discretion), and to the terms and conditions of this Agreement. Purchaser expressly reserves the right to modify the terms and conditions of the Offer, except that, without the prior written consent of the Company or as expressly permitted by this Agreement, Purchaser shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the Per Share Amount, (iii) modify or add to the conditions set forth in Exhibit A, (iv) except as provided in the following sentence or in Section 1.01(b), extend the term of the Offer, (v) change the form of consideration payable in the Offer or (vi) make any other modifications that are otherwise materially adverse to holders of Company Common Stock. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (A) extend the term of the Offer beyond any scheduled expiration date of the Offer if, at any such scheduled expiration date, any of the conditions to Purchaser's obligation to accept for payment, and pay for, shares of Company Common Stock tendered pursuant to the Offer shall not have been satisfied or waived (provided, however, that Purchaser may extend the Offer under this clause (A) on not more than one occasion and for not more than ten business days on such occasion) and (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer or any other applicable Law. (b) Notwithstanding any other provision contained herein, including, without limitation, Section 1.01(a), in the event the Minimum Condition (as defined in Exhibit A) is not satisfied on any scheduled expiration date of the Offer, the Purchaser may either (x) extend the Offer pursuant to clause (A) of the last sentence of Section 1.01(a) or (y) amend the Offer to provide that, in the event (i) the Minimum Condition is not satisfied at the next scheduled expiration date of the Offer (after giving effect to the issuance of any shares of Company Common Stock theretofore issued under the Stock Option Agreement) and (ii) the number of shares of Company Common Stock tendered pursuant to the Offer and not withdrawn as of such next scheduled expiration date is more than 50% of the then outstanding shares of Company Common Stock, Purchaser must waive the Minimum Condition and amend the Offer to reduce the number of shares of Company Common Stock subject to the Offer to 49.9% of the shares of Company Common Stock then outstanding (the "Revised Minimum Number") and, if a greater number of shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of shares (it being understood that Purchaser shall not in any event be required to accept for payment, 9 3 or pay for, any shares of Company Common Stock if less than the Revised Minimum Number of shares are tendered pursuant to the Offer and not withdrawn at the expiration date). (c) The Per Share Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. Subject to the terms and conditions of the Offer and this Agreement, Purchaser shall, and Parent shall cause Purchaser to, pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer promptly after the expiration of the Offer. Parent shall provide or cause to be provided to Purchaser on a timely basis the funds necessary to pay for any shares of Company Common Stock that Purchaser becomes obligated to accept for payment, and pay for, pursuant to the Offer. (d) On the date of commencement of the Offer, Parent and Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). Parent and Purchaser agree that the Offer Documents shall comply as to form in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder and, on the date filed with the SEC and when first published, sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied by the Company for inclusion in the Offer Documents or incorporated therein by reference to any statement, report or other document filed by or on behalf of the Company with the SEC. Each of Parent, Purchaser and the Company agrees to correct promptly any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Parent and Purchaser further agrees to take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and to be disseminated to the Company's shareholders, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents and all amendments and supplements thereto prior to their filing with the SEC or dissemination to shareholders of the Company. Parent and Purchaser agree to provide the Company and its counsel any comments Parent, Purchaser or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments and shall provide the Company and its counsel an opportunity to participate in the response of Parent and/or Purchaser to such comments. 10 4 SECTION 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that the Board of Directors of the Company, at a meeting duly called and held, has unanimously adopted resolutions (i) approving this Agreement, the Offer, the Merger and the Stock Option Agreement, (ii) determining that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's shareholders, and (iii) recommending that the Company's shareholders accept the Offer, tender their shares pursuant to the Offer and approve this Agreement. Subject to the fiduciary duties of the Board under applicable law as advised by independent counsel (which may be the Company's regularly engaged outside counsel) ("Independent Counsel"), the Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence. The Company has been advised by each of its directors and executive officers that they intend to tender all shares of Company Common Stock beneficially owned by them to Purchaser pursuant to the Offer. (b) On the date the Offer Documents are filed with the SEC, or as soon thereafter as is practicable, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") containing, subject to the fiduciary duties of the Board under applicable law as advised by Independent Counsel, the recommendation described in Section 1.02(a) and shall mail the Schedule 14D-9 to the shareholders of the Company. The Company agrees that the Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and when first published, sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Purchaser for inclusion in the Schedule 14D-9. Each of the Company, Parent and Purchaser agrees to correct promptly any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's shareholders, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 and all amendments and supplements thereto prior to their filing with the SEC or dissemination to shareholders of the Company. The Company agrees to provide Parent and its counsel with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments and shall provide Parent and its counsel an opportunity to participate in the response of the Company to such comments. 11 5 (c) In connection with the Offer, the Company shall cause its transfer agent to furnish Purchaser promptly with mailing labels containing the names and addresses of the record holders of Company Common Stock as of the most recent practicable date and of those persons becoming record holders subsequent to such date, together with copies of all lists of shareholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Company Common Stock, and shall furnish to Purchaser such information and assistance (including updated lists of shareholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company's shareholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Purchaser shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, deliver to the Company all copies of such information then in their possession or control. ARTICLE II THE MERGER SECTION 2.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL and the CCC, Purchaser shall be merged with and into the Company at the Effective Time (as defined in Section 2.03). Following the Effective Time, the separate corporate existence of Purchaser shall cease and the Company shall continue its corporate existence under the laws of the State of California as the surviving corporation (the "Surviving Corporation"). SECTION 2.02. Effective Time; Closing. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the parties will cause the Merger to be consummated by delivering to the Secretary of State of the State of Delaware a certificate of merger or a certificate of ownership and merger and by filing with the Secretary of State of the State of California a duly executed agreement of merger, in substantially the form attached hereto as Exhibit B and, if applicable, a certificate of satisfaction by the California Franchise Tax Board with respect to the Company, together with the requisite officer's certificates or a certificate of ownership, each in such form or forms as may be required by, and executed and acknowledged in accordance with, the relevant provisions of the DGCL and the CCC (such documents being referred to collectively as the "Merger Documents"), and shall make all other filings and recordings required by the DGCL and the CCC in connection with the Merger. The Merger shall become effective at the time of filing of the appropriate Merger Documents with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, or at such later time, 12 6 which shall be as soon as reasonably practicable, specified as the effective time in the Merger Documents (the "Effective Time"). Prior to such filing, a closing shall be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, unless another date, time or place is agreed to in writing by the parties hereto, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article VIII. SECTION 2.03. Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL and Section 1107 of the CCC. SECTION 2.04. Articles of Incorporation and By-Laws. (a) The Restated Articles of Incorporation of the Company as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided therein and as permitted by law and this Agreement. (b) The Bylaws of the Company as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation upon completion of the Merger and remain the Bylaws of the Surviving Corporation until thereafter amended as provided therein and as permitted by law and this Agreement. SECTION 2.05. Directors. At the Effective Time, the directors of the Company immediately prior to the Effective Time shall be deemed to have resigned. At the Effective Time, the directors of Purchaser immediately prior to the Effective Time shall become the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 2.06. Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be, or as otherwise provided in the Bylaws of the Company. 13 7 ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Purchaser: (a) Capital Stock of Purchaser. Each issued and outstanding share of capital stock of Purchaser shall be converted into and become one fully paid and nonassessable share of Common Stock, no par value, of the Surviving Corporation. (b) Cancellation of Parent Owned Stock. Each share of Company Common Stock that is owned by the Company or by any subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Purchaser or any other subsidiary of Parent shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to Section 3.01(d), each share of Company Common Stock issued and outstanding (other than shares to be cancelled in accordance with Section 3.01(b)) shall be converted into the right to receive the Per Share Amount in cash, without interest (the "Merger Consideration"). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) If, pursuant to the CCC, an affirmative vote of the Company's shareholders is required to approve the Merger, then notwithstanding Section 3.01(c), shares of Company Common Stock held by a holder who, subject to and in accordance with Section 1300 et seq. of the CCC, has demanded and perfected such holder's right to an appraisal of such holder's shares of Company Common Stock and has not effectively withdrawn or lost the right to such appraisal ("Dissenting Shares"), shall not be converted into a right to receive the Merger Consideration, unless such holder withdraws or otherwise loses the right to appraisal for such holder's shares of Company Common Stock. If after the Effective Time of the Merger such holder withdraws or loses the right to appraisal for such holder's shares of Company Common Stock, such shares of Company Common Stock shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger 14 8 Consideration payable in respect of such shares of Company Common Stock pursuant to Section 3.01(c). (e) If Parent is not required under the CCC to obtain the approval of the other shareholders of the Company in order to effect the Merger and effects the Merger without holding a meeting of the shareholders, then, prior to consummating the Merger, Parent will provide notice, as required by the CCC, that the Merger will become effective on or after a specified date and that shareholders are entitled to exercise their dissenters' rights. SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as paying agent in the Merger (the "Paying Agent"), and, from time to time, prior to or after the Effective Time, Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent cash in amounts and at the times necessary for the payment of the Merger Consideration upon surrender of certificates representing Company Common Stock as part of the Merger pursuant to Section 3.01. The Paying Agent shall invest portions of the Merger Consideration as Parent directs (it being understood that any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be the property of, and shall be turned over to, Parent), provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of US$100 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). The Merger Consideration shall not be used for any other purpose, except as provided in this Agreement. (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "Certificates") whose shares were converted into the right to receive the Merger Consideration pursuant to Section 3.01, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent may specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of 15 9 transmittal, duly executed, and such other documents as may reasonably be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash into which the shares of Company Common Stock theretofore represented by such Certificate shall have been converted pursuant to Section 3.01, and the Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Company Common Stock theretofore represented by such Certificate shall have been converted pursuant to Section 3.01. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Certificates, and, from and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be cancelled and exchanged as provided in this Article III. (d) No Liability. At any time following the twelfth month after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and not disbursed to holders of shares of Company Common Stock (including, without limitation, all interest and other income received by the Paying Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a share of Company Common Stock for any Merger Consideration properly delivered in respect of such Share to a public official as required pursuant to any abandoned property, escheat or other similar law. 16 10 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Purchaser as follows (with such exceptions thereto as are set forth in the disclosure schedule delivered by the Company to Parent on the date hereof (the "Disclosure Schedule") with reference to particular Sections of this Agreement): SECTION 4.01. Organization. The Company and each of its Significant Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority and governmental approvals to own, lease or operate its properties and to carry on its business as now being conducted, except when the failure to be so organized, existing or in good standing, or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as defined in Section 10.03). The Company and each of its Significant Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so qualified, licensed and in good standing would not have a Material Adverse Effect. For purposes of this Agreement, a "Significant Subsidiary" means any subsidiary of the Company that constitutes a significant subsidiary within the meaning of Rule 1-02 of Regulation S-X of the SEC. The Company has delivered to Parent complete and correct copies of its Articles of Incorporation and By-Laws and the articles of incorporation and by-laws (or other comparable organizational documents) of its Significant Subsidiaries, in each case as amended to the date of this Agreement. SECTION 4.02. Subsidiaries. Section 4.02 of the Disclosure Schedule lists each subsidiary of the Company. All the outstanding shares of capital stock or other ownership interest of each such subsidiary are owned by the Company (or by another wholly owned subsidiary of the Company) free and clear of all Liens (as defined in Section 10.03), and are duly authorized, validly issued, fully paid and nonassessable. Except for the capital stock of its subsidiaries or as set forth in Section 4.02 of the Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, limited liability company, joint venture or other entity. SECTION 4.03. Capitalization. The authorized capital stock of the Company consists of 25,000,000 shares of Company Common Stock and 500,000 shares of Preference Stock, no par value, of the Company ("Company Preferred Stock"). As of June 30, 1997, 12,229,100 shares of Company Common Stock and no shares of Company Preferred Stock were issued and outstanding. Pursuant to a Rights Agreement, dated as of February 23, 17 11 1995, as amended, between the Company and ChaseMellon Shareholder Service LLC (as successor to Chemical Bank) as Rights Agent (the "Rights Agreement") the Company has issued to the shareholders certain rights to purchase shares of Junior Participating Cumulative Preferred Stock of the Company (the "Preferred Stock") which Preferred Stock is, under certain circumstances, convertible into Company Common Stock. As of June 30, 1997, 902,985 shares of Company Common Stock were reserved for issuance upon exercise of outstanding Stock Options (as defined in Section 7.04). Except as set forth in Section 4.03 of the Disclosure Schedule and as set forth above, as of the date of this Agreement, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are, and all shares which may be issued will, when issued, be duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote. Except as set forth in Section 4.03 of the Disclosure Schedule and as set forth above, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its subsidiaries is a party or by which any of them is bound obligating the Company or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or of any of its subsidiaries or obligating the Company or any of its subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except as set forth above and as set forth in Section 4.03 of the Disclosure Schedule, there are not as of the date hereof and there will not be at the Effective Time any shareholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting, registration or disposition of any shares of the capital stock of the Company (including any such agreements or understandings that may limit in any way the solicitation of proxies by or on behalf of the Company from, or the casting of votes by, the shareholders of the Company with respect to the Merger) or granting to any person or group of persons the right to elect, or to designate or nominate for election, a director to the Board of Directors of the Company. Except as set forth above and as set forth in Section 4.03 of the Disclosure Schedule, there are not any outstanding contractual obligations of the Company or any of its subsidiaries (i) to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries or (ii) to vote or to dispose of any shares of the capital stock of any of the Company's subsidiaries. SECTION 4.04. Authority. The Company has all requisite corporate power and authority to execute and deliver this Agreement and the Stock Option Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, subject to, in the case of the Merger, the approval of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of 18 12 Company Common Stock (the "Company Shareholder Vote") to the extent required by the CCC. The execution and delivery of this Agreement and the Stock Option Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Company, subject to, with respect to the Merger, the Company Shareholder Vote (to the extent required by the CCC). This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by Parent and Purchaser, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. SECTION 4.05. Noncontravention; Filings and Consents. (a) Except as set forth in Section 4.05 of the Disclosure Schedule, the execution and delivery of this Agreement and the Stock Option Agreement by the Company do not, and the performance by the Company of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of the Company or any of its Significant Subsidiaries, (ii) assuming that all consents, approvals, orders and authorizations described in Section 4.05(b) have been obtained and all registrations, declarations, filings and notifications described in Section 4.05(b) have been made, conflict with or violate any United States federal, state or local or any foreign statute, law, rule, regulation, ordinance, code, order, or any other requirement or rule of law (a "Law"), applicable to the Company or any subsidiary or by which any property or asset of the Company or any subsidiary is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Company or any subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, rights or Liens that individually or in the aggregate would not (x) have a Material Adverse Effect or (y) prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by the Company of any of its material obligations hereunder or thereunder. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any United States federal, state or local or any foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity"), is required by the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement or the Stock Option Agreement by the Company, the performance by the Company of its obligations hereunder and thereunder or the consummation by the Company of the transactions contemplated hereby and thereby, except for (i) the filing of a 19 13 premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or termination of the waiting period thereunder, (ii) the filing with the SEC of (x) the Schedule 14D-9 and any Information Statement, (y) a proxy statement relating to any required approval by the Company's shareholders of this Agreement (as amended or supplemented from time to time, the "Proxy Statement") and (z) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement and the Stock Option Agreement and the transactions contemplated hereby and thereby, (iii) shareholder approval of the Merger, if required by the CCC, and the filing of the applicable Merger Documents with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (iv) as may be required by any applicable state securities or "blue sky" laws, (v) the filing of reports with the U.S. Department of Commerce regarding foreign direct investment in the United States, (vi) notification under the German Law Against Restraints of Competition (the "AARC") and the approval of the German Federal Cartel Office (the "FCO") thereunder and any filings or notifications under other similar laws throughout the world and (vii) such other consents, approvals, orders, authorizations, registrations, declarations, filings and notices, the failure of which to be obtained or made would not, individually or in the aggregate, (x) have a Material Adverse Effect or (y) prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by the Company of any of its material obligations hereunder or thereunder. SECTION 4.06. SEC Documents; Financial Statements. The Company and each of its subsidiaries has filed with the SEC, and has heretofore made available to Parent true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1993 under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act") (such forms, reports, schedules, statements and other documents, including any financial statements or schedules included therein, are referred to as the "Company SEC Documents"). Each of the Company SEC Documents, at the time it was filed, (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Except to the extent that information contained in any Company SEC Document has been revised or superseded by a subsequently filed Company Filed SEC Document (as defined in Section 4.07) (a copy of which has been made available to Parent prior to the date hereof), none of the Company SEC Documents contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company 20 14 SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, recurring audit adjustments) the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. SECTION 4.07. Absence of Certain Changes or Events. Except for the transactions contemplated by this Agreement and except as disclosed in Section 4.07 of the Disclosure Schedule or in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "Company Filed SEC Documents"), since December 31, 1996, the Company and its subsidiaries have conducted their respective businesses only in the ordinary course in a manner consistent with past practice, and there has not been (i) any Material Adverse Change, (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company's capital stock or any redemption, purchase or other acquisition of any of its capital stock, other than regular quarterly dividends on Company Common Stock not in excess of US$0.08 per share, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, (iv) (x) any granting by the Company or any of its subsidiaries to any director, officer, employee or consultant of the Company or any of its subsidiaries of any increase in compensation or benefits, except in the ordinary course of business consistent with past practice, (y) any granting by the Company or any of its subsidiaries to any such director, officer, employee or consultant of any increase in severance or termination pay, except as part of a standard employment package to any person promoted or hired, or (z) except employment agreements in the ordinary course of business consistent with past practice with employees other than any executive officer of the Company, any entry by the Company or any of its subsidiaries into any employment, consulting, severance, termination or indemnification agreement with any such employee or executive officer, (v) any damage, destruction or loss, whether or not covered by insurance, that has or reasonably could be expected to have a Material Adverse Effect, (vi) any change in accounting methods, principles or practices by the Company or (vii) any entry by the Company or any of its subsidiaries into any commitment or transaction material to the Company and its subsidiaries taken as a whole. SECTION 4.08. No Undisclosed Liabilities. Except as and to the extent set forth in Section 4.08 of the Disclosure Schedule or in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1996 (including the financial statements included therein), as of December 31, 1996, neither the Company nor any of its subsidiaries 21 15 had any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by generally accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its subsidiaries (including the notes thereto). Since December 31, 1996, except as and to the extent set forth in Section 4.08 of the Disclosure Schedule or in the Company Filed SEC Documents, neither the Company nor any of its subsidiaries has incurred any liabilities of any nature, whether or not accrued, contingent or otherwise, other than liabilities incurred in the ordinary course of business which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. SECTION 4.09. Information Supplied. None of the information supplied or to be supplied by the Company for inclusion in (i) the Offer Documents, (ii) the information to be filed by the Company pursuant to Rule 14f-1 promulgated under the Exchange Act and Section 7.07 hereof (the "Information Statement") or (iii) the Proxy Statement, will, in the case of the Offer Documents and the Information Statement, at the respective times the Offer Documents and the Information Statement are filed with the SEC or first published, sent or given to the Company's shareholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's shareholders or at the time of the Company Shareholders Meeting (as defined in Section 7.01), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made therein based on information supplied by Parent or Purchaser for inclusion therein. The information set forth in Section 4.09 of the Disclosure Schedule is true and correct in all material respects. SECTION 4.10. Litigation. Except as disclosed in the Company Filed SEC Documents or as set forth in Section 4.10 of the Disclosure Schedule, there is no suit, claim, action, proceeding or investigation (whether judicial, administrative, regulatory, arbitral or otherwise) pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries that could reasonably be expected to (x) have a Material Adverse Effect or (y) prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by the Company of any of its material obligations hereunder or thereunder. Except as disclosed in the Company Filed SEC Documents, as of the date of this Agreement, neither the Company nor any of its subsidiaries is subject to any outstanding judgment, order, writ, injunction or decree that could reasonably be expected to (x) have a Material Adverse Effect or (y) prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by the Company of any of its material obligations hereunder or thereunder. 22 16 SECTION 4.11. Labor Matters. Except as set forth in Section 4.11 of the Disclosure Schedule, (i) there are no material controversies pending or, to the knowledge of the Company, threatened between the Company or any subsidiary and any of their respective employees, (ii) neither the Company nor any subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any subsidiary, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees, (iii) there are no unfair labor practice complaints pending against the Company or any subsidiary before the National Labor Relations Board or any current union representation questions involving employees of the Company or any subsidiary and (iv) there is no strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company, any threat thereof, by or with respect to any employees of the Company or any subsidiary. The Company and each subsidiary is in material compliance with all applicable Laws relating to the employment of labor, including, without limitation, those relating to wages, hours, collective bargaining and the payment and withholding of taxes and other sums as required by appropriate Governmental Entities and has withheld and paid to the appropriate Governmental Entities all amounts required to be withheld from employees of the Company and its subsidiaries and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing, except where such failure would not have a Material Adverse Effect. SECTION 4.12. Employee Benefits; ERISA. (a) Section 4.12(a) of the Disclosure Schedule contains a list of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) (sometimes referred to herein as "Welfare Plans"), and each other material plan, material arrangement or material policy (written or oral) providing for bonuses, pensions, profit sharing, stock options, stock purchases, compensation, deferred compensation, incentive compensation, severance, disability, retiree medical or life insurance, supplemental retirement, death benefits, hospitalization, medical or dental benefits, fringe benefits or other employee benefits, in each case maintained, or contributed to, by the Company or any of its subsidiaries or any other person or entity that, together with the Company is treated as a single employer (each, together with the Company, a "Commonly Controlled Entity") under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of any current or former employees, officers, consultants, agents or directors of the Company or any of its subsidiaries (all of the foregoing being herein called "Benefit Plans"). The Company has delivered to Parent true and complete copies of (i) each Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual report on Form 5500 (and related schedules and financial statements or opinions required in connection therewith) filed with the Internal Revenue Service (the "IRS") with respect to each Benefit Plan (if any such report was required), (iii) the most recent actuarial report and financial statement with respect to each Benefit Plan, as applicable, (iv) the most recent summary plan 23 17 description (or similar document) for each Benefit Plan for which a summary plan description is required or was otherwise provided to plan participants or beneficiaries, (v) the most recent IRS determination letter, if any, for each Benefit Plan and (vi) each trust agreement and group annuity contract relating to any Benefit Plan. (b) All Pension Plans and related trusts that are intended to be tax-qualified plans have been the subject of determination letters from the IRS to the effect that such Pension Plans and related trusts are qualified and exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the knowledge of the Company, has revocation been threatened; no event has occurred and no circumstances exist that would adversely affect or would reasonably be likely to adversely affect the tax qualification of such Pension Plan nor has any such Pension Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect or would reasonably be likely to adversely affect its qualification or materially increase its costs or require security under Section 302 of ERISA. (c) Each Benefit Plan has been administered in all material respects in accordance with its terms. The Benefit Plans are, and have been operated, in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable Laws. All material contributions or payments required to be made to or in respect of the Benefit Plans has been timely made or provided for. No Benefit Plan has incurred an "accumulated funding deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived. All contributions, premiums or payments required to be made with respect to any Benefit Plan are fully deductible for income tax purposes and no such deduction previously claimed has been challenged by any Governmental Entity; provided, however, that no benefits under any nonqualified pension or deferred compensation plan are deductible until actually paid. There are no investigations by any Governmental Entity, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Benefit Plans), suits or proceedings against or involving any Benefit Plan or asserting any rights to or claims for benefits under any Benefit Plan that could give rise to any material liability, and there are not any facts or circumstances that would reasonably be expected to give rise to any material liability in the event of any such investigation, claim, suit or proceeding. (d) No Commonly Controlled Entity is required to contribute to any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or has withdrawn or expects to withdraw from any such multiemployer plan where such withdrawal has resulted or would result in any material "withdrawal liability" (within the meaning of Section 4201 of ERISA) that has not been fully paid. None of the Company, any of its subsidiaries, any officer of the Company or any of its subsidiaries or any of the Benefit Plans which are subject to ERISA, including the Pension Plans, any trusts created thereunder or any trustee or 24 18 administrator thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that could subject the Company, any of its subsidiaries or any officer of the Company or any of its subsidiaries to any material tax or penalty on prohibited transactions imposed by such Section 4975 of ERISA or to any material liability under Section 502(i) or (l) of ERISA. Neither any of such Benefit Plans nor any of such trusts has been terminated, nor has there been, nor is there expected to be, any "reportable event" (as that term is defined in Section 4043 of ERISA) as to which notice would be required with the Pension Benefit Guaranty Corporation (the "PBGC") with respect thereto, during the last five years, except that the Company's acquisition of Sylvan Ginsbury was reported to the PBGC under Section 4043(c)(10) of ERISA. (e) Neither the Company nor any subsidiary has or reasonably expects to incur liability under Title IV of ERISA (other than for the payment of premiums, none of which are overdue). Each Benefit Plan subject to Title IV of ERISA is fully funded in accordance with the actuarial assumptions used by the PBGC to determine the level of funding required in the event of the termination of such plan. No Commonly Controlled Entity has completely or partially terminated a plan subject to Title IV of ERISA within the last five years. None of the assets of the Company or any subsidiary is the subject of any lien arising under Section 302 of ERISA or Section 412(n) of the Code; neither the Company nor any subsidiary has been required to post any security under Section 307 of ERISA or Section 401(a)(29) of the Code; and no fact or event exists which could give rise to any such lien or requirement to post any such security. (f) Except as set forth in Section 4.12(f) of the Disclosure Schedule, no employee of the Company or any of its subsidiaries will be entitled to any additional benefits or any acceleration of the time of payment or vesting of any benefits under any Benefit Plan as a result of the transactions contemplated by this Agreement. (g) The Company and its subsidiaries have not incurred any liability under, and have complied in all respects with, the Worker Adjustment Retraining Notification Act and the rules and regulations promulgated thereunder ("WARN") and do not reasonably expect to incur any such liability as a result of actions taken or not taken prior to the Effective Time. The Company will advise Parent and Purchaser in writing of any material terminations, layoffs and reductions in hours from the date hereof through the Effective Time and will provide Parent and Purchaser with any related information that they may reasonably request. (h) Except as disclosed in Section 4.12(h) of the Disclosure Schedule, since December 31, 1996 there has not been any adoption or amendment in any material respect by the Company or any of its subsidiaries of any Benefit Plan. 25 19 (i) Except as disclosed in Section 4.12(i) of the Disclosure Schedule, there exist no employment, consulting, severance, termination or indemnification agreements, arrangements or understandings between the Company or any of its subsidiaries and any current or former employee, officer, director or consultant of the Company or any of its subsidiaries, and there is no oral or written understanding or arrangement to enter into any such agreement with any such individual. (j) The Commonly Controlled Entities have complied in all material respects with the requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section 4980B. SECTION 4.13. Taxes. The Company and each of its subsidiaries has filed all federal, state, local and foreign tax returns and reports required to be filed by it. All such returns and reports are complete and correct in all material respects. The Company and each of its subsidiaries has paid (or the Company has paid on its subsidiaries' behalf) all taxes required to be paid by it, and the most recent financial statements contained in the Company Filed SEC Documents reflect reserves sufficient to cover all taxes payable by the Company and its subsidiaries for all taxable periods and portions thereof through the date of such financial statements except where such failure to pay or to reflect such reserves would not have a Material Adverse Effect. No material deficiencies for any taxes have been proposed, asserted or assessed against the Company or any of its subsidiaries, and no requests for waivers of the time to assess any such taxes are pending. The federal income tax returns of the Company and each of its subsidiaries consolidated in such returns have been examined by and settled with the IRS for all years through January 31, 1992. As used in this Agreement, "taxes" shall include all federal, state, local and foreign income, property, sales, excise and other taxes, tariffs or governmental charges of any nature whatsoever. SECTION 4.14. Compliance with Applicable Laws. The Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except where the failure to hold such permits, licenses, variances, exemptions, orders and approvals would not have a Material Adverse Effect. The Company and its subsidiaries are in compliance in all material respects with the terms of the Company Permits. Except as disclosed in the Company Filed SEC Documents, to the knowledge of the Company, the businesses of the Company and its subsidiaries are not being conducted in violation of any Law. Except as set forth in the Company Filed SEC Documents, as of the date of this Agreement, no investigation or review by any Governmental Entity with respect to the Company or any of its subsidiaries is pending or, to the knowledge of the Company, threatened, other than, in each case, those the outcome of which would not be reasonably expected to (x) have a Material Adverse Effect or (y) prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option 26 20 Agreement or the performance by the Company of any of its material obligations hereunder or thereunder. SECTION 4.15. Environmental Matters. Except as set forth in Section 4.15 of the Disclosure Schedule, neither the Company nor any of its subsidiaries has (i) placed, held, located, released, transported or disposed of any Hazardous Substances (as defined below) on, under, from or at any of the Company's or any of its subsidiaries' properties or any other properties, other than in a manner that could not, in all such cases taken individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (ii) any knowledge or reason to know of the presence of any Hazardous Substances on, under or at any of the Company's or any of its subsidiaries' properties or any other property but arising from the Company's or any of its subsidiaries' current or former properties or operations, other than in a manner that could not reasonably be expected to result in a Material Adverse Effect, or (iii) received any written notice (A) of any violation of or liability under any Law relating to any matter of pollution, protection of the environment or natural resources, environmental regulation or control or regarding Hazardous Substances (collectively, "Environmental Laws") on, under or emanating from any of the Company's or any of its subsidiaries' current or former properties or operations or any other properties, (B) of the institution or pendency of any suit, action, claim, proceeding or investigation by any Governmental Entity or any third party in connection with any such violation or liability, (C) requiring the response to or remediation of Hazardous Substances at or arising from any of the Company's or any of its subsidiaries' current or former properties or operations or any other properties, (D) alleging noncompliance by the Company or any of its subsidiaries with the terms of any permit required under any Environmental Law in any manner reasonably likely to require material expenditures or to result in material liability or (E) demanding payment for response to or remediation of Hazardous Substances at or arising from any of the Company's or any of its subsidiaries' current or former properties or operations, as to clauses (A) through (E) of this Section 4.15(iii), other than for matters that could not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the term "Hazardous Substance" shall mean any toxic or hazardous materials or substances, including asbestos, buried contaminants, chemicals, flammable explosives, radioactive materials, petroleum and petroleum products and any substances defined or regulated as a pollutant or contaminant under any Environmental Law. SECTION 4.16. Real Property. (a) Section 4.16(a) of the Disclosure Schedule sets forth a true and complete list of all the real property owned by the Company and its subsidiaries (the "Owned Real Property"). (b) Section 4.16(b) of the Disclosure Schedule sets forth a true and complete list of the real property leased by the Company and the Subsidiaries (the "Leased Real Property" and, together with the Owned Real Property, the "Real Property"). 27 21 (c) The Company and its subsidiaries have sufficient title to all their properties and assets to conduct their respective businesses as currently conducted or as contemplated to be conducted, with only such exceptions as individually or in the aggregate would not have a Material Adverse Effect. (d) Each parcel of Real Property (i) is owned or leased free and clear of all Liens, other than Liens and other imperfections of title which would not, individually or in the aggregate, have a Material Adverse Effect and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (e) All leases of real property leased for the use or benefit of the Company or any subsidiary to which the Company or any subsidiary is a party requiring rental payments in excess of US$400,000 during the period of the lease, and all amendments and modifications thereto, are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company or any subsidiary, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Company or any subsidiary, except as, individually or in the aggregate, would not have a Material Adverse Effect. SECTION 4.17. Intellectual Property. The Company and its subsidiaries own, or are validly licensed or otherwise have the legal right to use, all patents, patent rights, trademarks, trade names, service marks, copyrights, know-how and other proprietary intellectual property rights and computer programs (collectively, "Intellectual Property Rights") that are material to the conduct of the business of the Company and its subsidiaries. Section 4.17 of the Disclosure Schedule sets forth a description of all Intellectual Property Rights that are material to the conduct of the business of the Company and its subsidiaries taken as a whole. No claims that would have a Material Adverse Effect are pending or, to the knowledge of the Company, threatened that the Company or any of its subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right, and the Company is not aware of any basis for any such claims. To the knowledge of the Company, no person is infringing the rights of the Company or any of its subsidiaries with respect to any material Intellectual Property Right, except where such infringement would not have a Material Adverse Effect. SECTION 4.18. Insurance. The Company and its subsidiaries have obtained and maintained in full force and effect public liability insurance, insurance against claims for personal injury or death or property damage occurring in connection with the activities of the Company or its subsidiaries or any properties owned, occupied or controlled by the Company 28 22 or its subsidiaries and other insurance, in each case, with responsible and reputable insurance companies or associations in such amounts, on such terms and covering such risks as reasonably deemed necessary by the Company and its subsidiaries. SECTION 4.19. Amendment of Rights Agreement. The Rights Agreement has been duly and validly amended to the extent necessary to permit Parent and Purchaser to perform their obligations under this Agreement and consummate the transactions contemplated hereby. SECTION 4.20. State Takeover Statutes. Except for Section 1101 of the CCC, to the knowledge of the Company, no state takeover statute or similar statute applies or purports to apply to the Offer, the Merger, this Agreement or the Stock Option Agreement or any of the transactions contemplated by this Agreement or the Stock Option Agreement. SECTION 4.21. Opinion of Financial Advisor. The Company has received an opinion from Credit Suisse First Boston Corporation, to the effect that, as of the date of this Agreement, the consideration to be received in the Offer and the Merger by the Company's shareholders is fair to the Company's shareholders from a financial point of view, and a true and correct signed copy of such opinion has been, or promptly upon receipt thereof will be, delivered to Parent. SECTION 4.22. Brokers. No broker, investment banker, financial advisor or other person, other than Credit Suisse First Boston Corporation, the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has provided Parent a true and correct copy of the agreement between the Company and Credit Suisse First Boston Corporation. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company as follows: SECTION 5.01. Organization. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. 29 23 SECTION 5.02. Authority. Each of Parent and Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and the Stock Option Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Stock Option Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of Parent and Purchaser. This Agreement and the Stock Option Agreement have been duly and validly executed and delivered by Parent and Purchaser and, assuming the due authorization, execution and delivery thereof by the Company, constitute the legal, valid and binding obligations of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with their respective terms. SECTION 5.03. Noncontravention; Filings and Consents. (a) The execution and delivery of this Agreement and the Stock Option Agreement by Parent and Purchaser do not, and the performance by Parent and Purchaser of their respective obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof will not, (i) conflict with or violate the Certificate of Incorporation or by-laws or equivalent organizational documents of Parent or Purchaser, (ii) assuming that all consents, approvals, orders and authorizations described in Section 5.03(b) have been obtained and all registrations, declarations, filings and notifications described in Section 5.03(b) have been made, conflict with or violate any Law applicable to Parent or Purchaser or by which any property or asset of Parent or Purchaser is bound or affected or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, rights or Liens that would not prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by Parent or Purchaser of any of their respective material obligations hereunder or thereunder. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by Parent or Purchaser in connection with the execution and delivery of this Agreement or the Stock Option Agreement by Parent and Purchaser, the performance by Parent and Purchaser of their respective obligations hereunder and thereunder or the consummation by Parent or Purchaser of any of the transactions contemplated hereby and thereby, except for (i) the filing of a premerger notification and report form under the HSR Act, and the expiration or termination of the waiting period thereunder, (ii) the filing with the SEC of (x) the Offer 30 24 Documents and (y) such reports under the Exchange Act as may be required in connection with this Agreement or the Stock Option Agreement and the transactions contemplated hereby and thereby, (iii) shareholder approval of the Merger, if required by the CCC, and the filing of the applicable Merger Documents with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and the filing of appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (iv) as may be required by any applicable state securities or "blue sky" laws, (v) the filing of reports with the U.S. Department of Commerce regarding foreign direct investment in the United States, (vi) notification under the AARC and the approval of the FCO thereunder and any filings or notifications under other similar laws throughout the world and (vii) such other consents, approvals, orders, authorizations, registrations, declaration, filings and notices the failure of which to be obtained or made would not prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by Parent or Purchaser of any of their respective material obligations hereunder or thereunder. SECTION 5.04. Information Supplied. None of the information supplied or to be supplied by Parent or Purchaser for inclusion in (i) the Schedule 14D-9, (ii) the Information Statement or (iii) the Proxy Statement will, in the case of the Schedule 14D-9 and the Information Statement, at the respective times the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's shareholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's shareholders or at the time of the Company Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. SECTION 5.05. Financing. Parent and Purchaser have funds available sufficient to consummate the Offer and the Merger on the terms contemplated by this Agreement, and at the expiration of the Offer and the Effective Time, Parent and Purchaser will have available all of the funds necessary (i) for the acquisition of all shares of Company Common Stock pursuant to the Offer and the Merger, as the case may be and (ii) to repay all the outstanding debt that may become due and payable as a result of the Offer or the Merger, as set forth in Section 5.05 of the Disclosure Schedule. SECTION 5.06. Interim Operations of Purchaser. Purchaser was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby. SECTION 5.07. Litigation. There is no suit, claim, action, proceeding or investigation (whether judicial, administrative, regulatory, arbitral or otherwise) pending or, 31 25 to the knowledge of Parent, threatened against Parent or Purchaser that could reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by Parent and Purchaser of their respective obligations hereunder and thereunder. Neither Parent nor Purchaser is subject to any outstanding judgment, order, writ, injunction or decree that could reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement or the Stock Option Agreement or the performance by Parent and Purchaser of their respective obligations hereunder and thereunder. SECTION 5.08. Brokers. No broker, investment banker, financial advisor or other person, other than Goldman, Sachs & Co., the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Purchaser. ARTICLE VI COVENANTS OF THE COMPANY SECTION 6.01. Conduct of Business. Until such time as Parent's designees shall constitute a majority of the members of the Board of Directors of the Company, the Company agrees (except as expressly contemplated or permitted by this Agreement, the Stock Option Agreement or to the extent that Parent shall otherwise consent in writing) as follows: (a) Ordinary Course. The Company shall and shall cause its subsidiaries to carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and shall use all reasonable efforts to preserve intact their present business organizations, keep available the services of their present officers and employees and preserve their relationships with customers, suppliers and others having business dealings with the Company and its subsidiaries. (b) Dividends; Changes in Stock. The Company shall not, and shall not permit any of its subsidiaries to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except for regular quarterly dividends on Company Common Stock not in excess of US$0.08 per share or dividends by a direct or indirect wholly owned subsidiary of the Company to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any 32 26 shares of capital stock of the Company or its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities. (c) Issuance of Securities. The Company shall not, and shall not permit any of its subsidiaries to, issue, deliver, sell, pledge or encumber, or authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any shares of its capital stock of any class or any securities convertible into, or any rights, warrants, calls, subscriptions or options to acquire, any such shares or convertible securities, or any other ownership interest other than: (i) the issuance of shares of Company Common Stock upon the exercise of Stock Options granted under the Stock Incentive Plans and outstanding on the date of this Agreement and in accordance with the present terms of such Stock Options and (ii) the issuance of Preferred Stock and Company Common Stock upon conversion thereof, if any, pursuant to the Rights Agreement. (d) Governing Documents. The Company shall not, and shall not permit any of its subsidiaries to, amend or propose to amend its Articles of Incorporation or By-Laws (or comparable organizational documents). (e) No Acquisitions. The Company shall not, and shall not permit any of its subsidiaries to, acquire or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial equity interest in all or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, limited liability company, association or other business organization or division thereof or (ii) any assets that are material, individually or in the aggregate, to the Company and its subsidiaries taken as a whole, except purchases of inventory and supplies in the ordinary course of business consistent with past practice. (f) No Dispositions. Other than sales of its products to customers or other dispositions, in any case in the ordinary course of business consistent with past practice, the Company shall not, and shall not permit any of its subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise dispose of, any of its assets. (g) Capital Expenditures. The Company shall not, nor shall the Company permit any of its subsidiaries to, make or agree to make any capital expenditures other than expenditures consistent with the Company's current capital expenditure forecast of US$12,000,000 for 1997. (h) Indebtedness. The Company shall not, and shall not permit any of its subsidiaries to, incur any indebtedness for borrowed money or guarantee any such 33 27 indebtedness or issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any of its subsidiaries or guarantee any debt securities of others, except in the ordinary course of business consistent with past practice. (i) Tax Matters. The Company shall not make any tax election that would have a material effect on the tax liability of the Company or settle or compromise any income tax liability of the Company of any of its subsidiaries that would materially affect the aggregate tax liability of the Company or any of its subsidiaries. The Company shall, before filing or causing to be filed any material tax return of the Company or any of its subsidiaries, consult with Parent and its advisors as to the positions and elections that may be taken or made with respect to such return. (j) Discharge of Liabilities. The Company shall not, and shall not permit any of its subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business or as otherwise set forth in the Disclosure Schedule, consistent with past practice or in accordance with their terms, of liabilities recognized or disclosed in the most recent consolidated financial statements (or the notes thereto) of the Company included in the Company Filed SEC Documents or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any of its subsidiaries is a party. (k) Material Contracts. Except in the ordinary course of business, the Company shall not, and shall not permit any of its subsidiaries to, enter into, modify, amend or terminate any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license which is material to the Company and its subsidiaries or waive, release or assign any material rights or claims. (l) Employee Benefits. The Company shall not, and shall not permit any of its subsidiaries to, (i) grant any increase in the compensation of any of its directors, officers or employees, except for increases for officers other than executive officers and employees in the ordinary course of business consistent with past practice, (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing Benefit Plans as in effect on the date hereof to any director, officer or employee, (iii) enter into any new employment, severance or termination agreement with any such director, officer or employee or (iv) except as may be required to comply with applicable Law, become 34 28 obligated under any Benefit Plan which was not in existence on the date hereof or amend any such plan in existence on the date hereof. (m) Accounting Matters. The Company shall not, and shall not permit any of its subsidiaries to, take any action, other than reasonable and usual actions in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivable). SECTION 6.02. Other Actions. (a) The Company shall not, and shall not permit any of its subsidiaries to, take any action that would, or that would reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect, (iii) except as otherwise permitted by Section 6.03, any of the conditions to the Offer set forth in Exhibit A, or any of the conditions to the Merger set forth in Article VIII, not being satisfied or (iv) a Material Adverse Effect. (b) The Company shall promptly advise Parent of any change or event having, or which, insofar as can reasonably be foreseen, could have, a Material Adverse Effect. SECTION 6.03. No Solicitation. (a) The Company shall, and shall cause its subsidiaries and their respective officers, directors, employees, consultants, investment bankers, accountants, attorneys and other advisors, representatives and agents ("Company Representatives") to immediately cease any discussions or negotiations with any parties that may be ongoing with respect to any "acquisition proposal" (as defined below in this Section 6.03(a)). The Company shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any Company Representative to, directly or indirectly, (i) solicit or initiate, or knowingly encourage the submission of, any acquisition proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to any proposal that constitutes, or may reasonably be expected to lead to, an acquisition proposal; provided, however, that if, prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer, the Board of Directors determines in good faith, based upon advice of Independent Counsel, that not to do so would be inconsistent with its fiduciary duties to the Company's shareholders under applicable Law, the Company may, in response to an unsolicited acquisition proposal, and subject to compliance with Section 6.03(c), (x) furnish information with respect to the Company pursuant to a customary confidentiality agreement and (y) participate in discussions or negotiations regarding such acquisition proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any subsidiary of the Company or any Company Representative, whether or not such person is 35 29 purporting to act on behalf of the Company or any of its subsidiaries or otherwise, shall be deemed to be a breach of this Section 6.03(a) by the Company. For purposes of this Agreement, "acquisition proposal" means any proposal or offer from any person relating to any direct or indirect acquisition or purchase of all or a substantial part of the assets of the Company or any of its subsidiaries or of over 15% of any class of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any person beneficially owning 15% or more of any class of equity securities of the Company or any of its subsidiaries, any merger, consolidation, business combination, sale of all or substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by this Agreement. (b) Except as set forth in this Section 6.03, neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by the Board of Directors or any such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any acquisition proposal or (iii) enter into any agreement with respect to any acquisition proposal. Notwithstanding the foregoing, in the event that, prior to the time of acceptance for payment of shares of Company Common Stock pursuant to the Offer, the Board of Directors of the Company determines in good faith, based upon advice of Independent Counsel, that it is necessary to do so in order to comply with its fiduciary duties to the Company's shareholders under applicable Law, the Board of Directors of the Company may (subject to this and the following sentences) (x) withdraw or modify (or propose to withdraw or modify) its approval or recommendation of the Offer, the Merger and this Agreement or (y) approve or recommend (or propose to approve or recommend) a Superior Proposal (as defined below) or terminate (or propose to terminate) this Agreement (and concurrently with or after such termination, if it so chooses, cause the Company to enter into any agreement with respect to any Superior Proposal), but in each of the cases set forth in this clause (y), only at a time that is at least three business days after Parent's receipt of written notice (a "Notice of Superior Proposal") advising Parent that the Board of Directors of the Company has received a Superior Proposal. The Notice of Superior Proposal shall specify the amount and type of consideration to be paid and such other terms and conditions of the Superior Proposal as the Company determines in good faith to be material and identifying the person making such Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means any bona fide proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of Company Common Stock then outstanding or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines in its good faith judgment (based on the advice of a financial advisor of nationally recognized reputation) to be more favorable to the Company's shareholders than the Offer and the Merger and for which financing, to the extent required, is then committed or which, 36 30 in the good faith judgment of the Board of Directors of the Company (based on the advice of a financial advisor of nationally recognized reputation), is reasonably capable of being financed by such third party. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 6.03, the Company shall promptly advise Parent orally and in writing of the Company's receipt of any bona fide acquisition proposal and any request for information that may reasonably be expected to lead to or is otherwise related to any such acquisition proposal and the identity of the person making such request or acquisition proposal. The Company will keep Parent informed on a reasonable basis of the status and details (including amendments) of any such request or acquisition proposal, unless the Board of Directors determines in good faith, based upon advice of Independent Counsel, that to do so would be inconsistent with its fiduciary duties to the Company's shareholders under applicable Law. (d) Nothing contained in this Section 6.03 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act, issuing a communication meeting the requirements of Rule 14d-9(e) promulgated under the Exchange Act or from making any disclosure to the Company's shareholders if, in the good faith judgment of the Board of Directors of the Company, based upon written advice of Independent Counsel, failure so to disclose would be inconsistent with its fiduciary duties to the Company's shareholders under applicable Law; provided, however, neither the Company nor its Board of Directors nor any committee thereof shall, except as permitted by Section 6.03(b), withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Offer, this Agreement or the Merger or to approve or recommend, or propose to approve or recommend, an acquisition proposal. ARTICLE VII ADDITIONAL AGREEMENTS SECTION 7.01. Shareholders Meeting; Preparation of the Proxy Statement. (a) If approval of this Agreement by the shareholders of the Company is required by applicable Law, the Company shall, at Parent's request, as soon as practicable following the consummation of the Offer, duly call, give notice of, convene and hold a meeting of its shareholders (the "Company Shareholders Meeting") for the purpose of approving this Agreement. Subject to the provisions of Section 6.03(b), the Company shall, through its Board of Directors, recommend to its shareholders approval of this Agreement. Notwithstanding the foregoing, if Purchaser or any other subsidiary of Parent shall own at least 90% of the outstanding shares of Company Common Stock, and provided that the 37 31 conditions set forth in Section 8.01 shall have been satisfied or waived, the parties shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after acceptance of shares of Company Common Stock for payment pursuant to the Offer without the approval of the shareholders of the Company in accordance with the CCC. (b) If approval of this Agreement by the shareholders of the Company is required by applicable Law, the Company shall, at Parent's request, as soon as practicable prepare and file a preliminary Proxy Statement with the SEC and the Company and Parent will cooperate in responding to any comments of the SEC or its staff and the Company shall cause the Proxy Statement to be mailed to the Company's shareholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. The Company shall notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of the Company Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Company Shareholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare (and if relating to Parent, Parent will also promptly cooperate with the Company in preparing) and mail to its shareholders such an amendment or supplement. The Company will not file or mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects. (c) If approval of this Agreement by the shareholders of the Company is required by applicable Law, Parent shall cause all of the shares of Company Common Stock then actually or beneficially owned by Parent, Purchaser or any of their subsidiaries, or as to which Parent, Purchaser or any of their subsidiaries has voting rights by proxy or otherwise, to be voted in favor of the approval of this Agreement. SECTION 7.02. Access to Information; Confidentiality. The Company shall afford to Parent, and to Parent's officers, directors, employees, consultants, investment bankers, accountants, counsel and other advisors, representatives and agents, reasonable access during normal business hours during the period prior to the Effective Time to all the properties, books, contracts, commitments and records of the Company and its subsidiaries and, during such period, the Company shall furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed by it or its subsidiaries during such period pursuant to the requirements of federal or state securities laws and (b) all other information concerning its or its subsidiaries' business, properties and personnel as Parent or any of its officers, directors, employees, consultants, investment bankers, accountants, counsel or other advisors, representatives or agents may reasonably request. Except as otherwise agreed to by the Company, unless and until Parent or Purchaser shall 38 32 have purchased a majority of the outstanding shares of Company Common Stock, and notwithstanding any termination of this Agreement, the terms of the confidentiality agreement dated April 9, 1997 (the "Confidentiality Agreement") between Parent and the Company shall apply to all information concerning the Company made available to Parent or Purchaser under this Agreement. No investigation pursuant to this Section 7.02 shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto; provided, however, that Parent and Purchaser shall promptly provide to the Company any information that Parent or Purchaser obtains that conflicts with any representation or warranty of the Company under this Agreement or the Stock Option Agreement. SECTION 7.03. Reasonable Efforts. Except as otherwise contemplated in this Agreement, each of the Company, Parent and Purchaser agree to use all commercially reasonable efforts to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements that may be imposed with respect to the Offer and the Merger (which actions shall include furnishing all information required under the HSR Act and in connection with approvals of or filings with any other Governmental Entity) and shall promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their subsidiaries in connection with the Offer and the Merger. Except as otherwise contemplated in this Agreement, each of the Company, Parent and Purchaser shall, and shall cause its subsidiaries to, use all commercially reasonable efforts to take all reasonable actions necessary to obtain (and shall cooperate with each other in obtaining) any consent, approval, order or authorization of, or any exemption by or waiver from, any Governmental Entity or other public or private third party required to be obtained or made by Parent, Purchaser, the Company or any of their respective subsidiaries in connection with the Offer and the Merger or the taking of any action contemplated thereby or by this Agreement or the Stock Option Agreement, except that no party need waive any substantial rights or agree to any substantial limitation on its operations or to dispose of any assets having more than a de minimus value. SECTION 7.04. Stock Options. (a) As soon as practicable following the date of this Agreement, the Board of Directors of the Company (or, if appropriate, any committee administering the Stock Incentive Plans (as defined below) shall adopt such resolutions or take such other actions as are required to provide that each outstanding stock option to purchase shares of Company Common Stock (a "Stock Option") heretofore granted under any stock option or stock purchase plan, program or arrangement or other option agreement or contingent stock grant plan of the Company or any of its subsidiaries (collectively, the "Stock Incentive Plans") shall be accelerated so as to be fully exercisable prior to the consummation of the Offer, and the Company shall assure that any such Stock Options outstanding immediately prior to the consummation of the Offer shall be surrendered immediately prior to the consummation of the Offer in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (x) the number of shares of 39 33 Company Common Stock subject to such Stock Option immediately prior to the consummation of the Offer and (y) the excess of the Per Share Amount over the per share exercise price of such Stock Option. Any Stock Option not cancelled in accordance with this paragraph (a) immediately prior to the consummation of the Offer shall be cancelled at the Effective Time in exchange for an amount in cash, payable at the Effective Time, equal to the amount which would have been paid had such Stock Option been surrendered immediately prior to the consummation of the Offer. A listing of all outstanding Stock Options as of June 30, 1997, showing the portions of such Stock Options that are exercisable as of such date, the dates upon which such Stock Options expire and the exercise price of such Stock Options, is set forth in Section 7.04 of the Disclosure Schedule. (b) All Stock Incentive Plans shall terminate as of the Effective Time and the provisions in any other Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be terminated as of the Effective Time, and the Company shall use its best efforts to ensure that following the Effective Time no holder of a Stock Option or any participant in any Stock Incentive Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, except as provided in Section 7.04(a). SECTION 7.05. Benefit Plans. (a) For a period of at least through December 31, 1998, Parent shall cause the Surviving Corporation to continue to maintain the Company's existing compensation, severance, welfare and pension benefit plans, programs and arrangements (other than any stock based plans, programs and arrangements) for the benefit of current and former employees of the Company and its subsidiaries (subject to such modification as may be required by applicable law or to maintain the tax exempt status of any such plan which is intended to be qualified under Section 401(a) of the Code); provided, however, that (i) nothing herein shall prohibit Parent from replacing any such existing plan, program or arrangement with a plan, program or arrangement which provide such employees with benefits which are not less favorable in the aggregate than the benefits that would have been provided under such existing plan, program or arrangement to the extent such replacement is permitted under the terms of the applicable plan, program or arrangement and (ii) nothing herein shall obligate Parent to provide such employees with any stock based compensation (including, without limitation, stock options or stock appreciation rights) after the Effective Time. (b) In light of Parent's desire that the Surviving Corporation provide appropriate employee incentives in the future, Parent agrees to institute during the one-year period following the Effective Time a new performance-based incentive compensation plan for the benefit of employees of the Surviving Corporation and its subsidiaries. (c) All service credited to each employee by the Company through the Effective Time shall be recognized by Parent for all purposes, including for purposes of 40 34 eligibility, vesting and benefit accruals under any employee benefit plan provided by the Surviving Corporation or Parent for the benefit of the employees; provided, however, that, to the extent necessary to avoid duplication of benefits, amounts payable under employee benefit plans provided by the Surviving Corporation or Parent may be reduced by amounts payable under similar Company plans with respect to the same periods of service. (d) Parent hereby agrees to cause the Surviving Corporation to honor (without modification) and assume, and hereby guarantees the Surviving Corporation's performance of, the employment agreements, executive termination agreements and individual benefit arrangements listed in Section 4.12(h) of the Disclosure Schedule, all as in effect on the date hereof or as amended after the date hereof with Parent's consent pursuant to Section 6.01. SECTION 7.06. Indemnification and Insurance. (a) Parent and Purchaser agree that all rights to indemnification for acts or omissions occurring prior to the Effective Time now existing in favor of the current or former directors, officers, employees and agents (the "Indemnified Parties") of the Company and its subsidiaries as provided in their respective articles of incorporation or by-laws (or similar organizational documents) shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of not less than six years. From and after the Effective Time and for a period of not less than six years thereafter, Parent shall, and shall cause the Surviving Corporation to, indemnify and hold harmless any and all Indemnified Parties to the full extent such persons may be indemnified by the Company or such subsidiaries, as the case may be, pursuant to applicable law, their respective certificates of incorporation or by-laws (or similar organizational documents) or pursuant to indemnification agreements as in effect on the date of this Agreement for acts or omissions occurring at or prior to the Effective Time, and Parent shall, or shall cause the Surviving Corporation to, advance litigation expenses incurred by such persons in connection with defending any action arising out of such acts or omissions to the extent provided by the respective terms and provisions of such certificates of incorporation, by-laws, similar documents or indemnification agreements as in effect on the date hereof. (b) For not less than six years from the Effective Time, Parent shall maintain in effect the Company's current directors' and officers' liability insurance covering those persons who are currently covered by the Company's directors' and officers' liability insurance policy (a copy of which has been heretofore delivered to Parent); provided, however, that in no event shall Parent be required to pay a premium in any one year in an amount in excess of 175% of the annual premium paid by the Company (which annual premium the Company represents and warrants to be approximately US$475,000); and provided further that if the annual premiums of such insurance coverage exceed such amount, Parent shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. 41 35 (c) This Section 7.06 shall survive the consummation of the Merger, is intended to benefit the Company, Parent, the Surviving Corporation and the Indemnified Parties, and shall be binding on all successors and assigns of Parent and the Surviving Corporation. SECTION 7.07. Directors of the Company. (a) Promptly following the purchase of and payment for shares of Company Common Stock by Purchaser pursuant to the Offer, Purchaser shall be entitled to designate such number of directors, rounded down to the nearest whole number, on the Board of Directors of the Company as will give Purchaser representation on the Board of Directors equal to the product of the total number of directors on the Board (giving effect to any increase in the number of directors pursuant to this Section 7.07(a)) and the percentage that the aggregate number of shares of Company Common Stock beneficially owned by Purchaser bears to the total number of shares of Company Common Stock then outstanding (on a fully diluted basis); provided, however, that Purchaser shall be entitled to designate a number of directors equal to or greater than 50% of the total number of directors only if Purchaser purchases 90% or more of the outstanding shares of Company Common Stock pursuant to the Offer. The Company and its Board of Directors shall, at such time, take such action as may be necessary to cause Purchaser's designees to be so appointed or elected to the Company's Board of Directors, with Purchaser's designees being allocated as evenly as possible among the classes of directors. Notwithstanding the foregoing, in the event that Purchaser's designees are to be appointed or elected to the Board of Directors, until the Effective Time, such Board of Directors shall have at least three directors who are directors on the date of this Agreement and who are not officers of the Company (the "Independent Directors"), provided that, in such event, if the number of Independent Directors shall be reduced below three for any reason whatsoever, any remaining Independent Directors (or Independent Director, if there shall be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Independent Directors for purposes of this Agreement. An affirmative vote of a majority of the Independent Directors shall be obtained prior to the Company entering into any material transaction with Parent, Purchaser or any affiliate thereof. (b) In the event the Company's obligation to appoint or elect designees to the Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, Parent shall give the Company reasonable notice of its intention to exercise its rights under Section 7.07(a) and, after receipt of such notice, the Company shall promptly take such action as may be required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 7.07 and shall include in the Schedule 14D-9 or a separate Rule 14f-1 Statement to shareholders such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 7.07. Parent shall provide to the Company and be solely responsible for all information relating to Parent and Purchaser and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. 42 36 SECTION 7.08. Fees and Expenses. (a) Except as provided below in this Section 7.08, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated. (b) The Company shall pay, or cause to be paid, in immediately available funds to Parent, the sum of US$20,000,000 (the "Termination Fee") under the circumstances and at the times set forth as follows: (i) if Parent or Purchaser terminates this Agreement pursuant to Section 9.01(e), the Company shall pay the Termination Fee upon demand; (ii) immediately prior to any termination of this Agreement pursuant to Section 9.01(f), the Company shall pay the Termination Fee; (iii) if, at the time of any termination of this Agreement pursuant to Section 9.01(b) (as a result of less than 50% of the outstanding shares of Company Common Stock being tendered), an acquisition proposal shall have been made and shall be pending and the Board of Directors of the Company shall not have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, and, within 12 months of such termination, (x) the Company shall enter into an agreement providing for an acquisition proposal or an acquisition proposal shall be consummated at a price per share equal to or in excess of the Per Share Amount, the Company shall pay the Termination Fee concurrently with the earlier of the entering into of such agreement or the consummation of such acquisition proposal or (y) the Company shall enter into an agreement providing for an acquisition proposal or an acquisition proposal shall be consummated at a price less than the Per Share Amount, the Company shall pay the Expenses concurrently with the earlier of the entering into of such agreement or the consummation of such acquisition proposal; and (iv) if, at the time of any termination of this Agreement pursuant to Section 9.01(d) resulting from a wilful and material breach of any covenant or agreement contained in this Agreement, an acquisition proposal shall have been made and shall be pending and, within 12 months of such termination, the Company shall enter into an agreement providing for an acquisition proposal or an acquisition proposal shall be consummated, the Company shall pay the Termination Fee concurrently with the earlier of the entering into of such agreement or the consummation of such acquisition proposal. "Expenses" shall mean documented out-of-pocket fees and expenses incurred or paid by or on behalf of Parent or Purchaser in connection with the Offer or the Merger, the preparation 43 37 and negotiation of this Agreement and the Stock Option Agreement and the consummation of any of the transactions contemplated hereby or thereby, including without limitation all fees and expenses of law firms, commercial banks, investment banking firms, accountants, printing firms, information agents, proxy solicitors, experts and consultants to Parent; provided, however, that in no event shall such fees and expenses exceed US$5,000,000. (c) In the event that the Company shall fail to pay the Termination Fee or the Expenses when due, the amount of any such Termination Fee or the Expenses shall be increased to include the costs and expenses actually incurred or accrued by Parent (including, without limitation, fees and expenses of counsel) in connection with the collection under and enforcement of this Section 7.08, together with interest on such unpaid Termination Fee or the Expenses, commencing on the date that such Termination Fee or the Expenses became due, at a rate equal to the rate of interest publicly announced by Citibank, N.A., from time to time, in The City of New York as such bank's base rate plus 3.00%. SECTION 7.09. Public Announcements. The initial press release concerning the Merger shall be a joint press release and, thereafter, Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Merger and shall not issue any such press release or make any such public statement without the prior written approval of the other, except to the extent required by applicable Law or the requirements of the New York Stock Exchange, in which case the issuing party shall use its reasonable efforts to consult with the other party before issuing any such release or making any such public statement. SECTION 7.10. Notification. The Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. SECTION 7.11. Certain Litigation. The Company agrees that it shall not settle any litigation commenced after the date hereof against the Company or any of its directors by any shareholder of the Company relating to the Offer, the Merger, this Agreement or the Stock Option Agreement without the prior written consent of Parent. In addition, subject to its rights under Section 6.03, the Company shall not voluntarily cooperate with any third party that may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and shall cooperate with Parent and Purchaser to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger. 44 38 SECTION 7.12. Other Actions. (a) Parent and Purchaser shall not, and shall not permit any of its subsidiaries to, take any action that would, or that would reasonably be expected to, result in (i) any of the representations and warranties of Parent and Purchaser set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions to the Offer set forth in Exhibit A, or any of the conditions to the Merger set forth in Article VIII, not being satisfied. ARTICLE VIII CONDITIONS PRECEDENT SECTION 8.01. Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Company Shareholder Approval. If required by applicable law, this Agreement shall have been approved by the Company Shareholder Vote. (b) No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that, in the case of a temporary restraining order, injunction or other order, each of the parties shall have used all reasonable efforts to prevent the entry of any such temporary restraining order, injunction or other order and to appeal as promptly as possible any temporary restraining order, injunction or other order that may be entered. (c) Purchase of Shares. Purchaser shall have previously accepted for payment and paid for shares of Company Common Stock pursuant to the Offer. (d) HSR Act. Any waiting period (and any extensions thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. 45 39 ARTICLE IX TERMINATION, AMENDMENT AND WAIVER SECTION 9.01. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of this Agreement by the shareholders of the Company: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company if (i) as a result of the failure of any of the conditions set forth in Exhibit A to this Agreement the Offer shall have terminated or expired in accordance with its terms without Purchaser having accepted for payment any shares of Company Common Stock pursuant to the Offer or (ii) Purchaser shall not have accepted for payment any shares of Company Common Stock pursuant to the Offer within 90 days following the date of this Agreement; provided, however, that the right to terminate this Agreement pursuant to this Section 9.01(b) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure, occurrence or existence of any such condition; (c) by either Parent or the Company if any Governmental Entity shall have enacted or issued any statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, shares of Company Common Stock pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (d) by Parent or Purchaser prior to the purchase of shares of Company Common Stock pursuant to the Offer in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in this Agreement which (A) would give rise to the failure of a condition set forth in paragraph (e) or (f) of Exhibit A and (B) cannot be or has not been cured within 10 days after the giving of written notice to the Company; (e) by Parent or Purchaser if either Parent or Purchaser is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (d) of Exhibit A to this Agreement; (f) by the Company in connection with entering into a definitive agreement in accordance with Section 6.03(b), provided it has complied with all provisions 46 40 thereof, including the notice provisions therein, and that it makes immediately prior to such termination payment of the Termination Fee pursuant to Section 7.08(b); or (g) by the Company, if Purchaser or Parent shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which failure to perform is incapable of being cured or has not been cured within 10 days after the giving of written notice to Parent or Purchaser, as applicable. SECTION 9.02. Effect of Termination. In the event of termination of this Agreement by either the Company or Parent as provided in Section 9.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of Parent, Purchaser or the Company, other than the provisions of Section 4.22 [Brokers], Section 5.08 [Brokers], the last sentence of Section 7.02 [Confidentiality], Section 7.08 [Fees], this Section 9.02 and Article X and except to the extent that such termination results from the wilful and material breach by a party of any of its covenants or agreements set forth in this Agreement. SECTION 9.03. Amendment. This Agreement may be amended by the parties at any time before or after any required approval of this Agreement by the shareholders of the Company; provided, however, that after any such approval, there shall not be made any amendment that by law requires further approval by such shareholders without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. SECTION 9.04. Extension; Waiver. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 9.03, waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in any instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver. In the event Purchaser's designees are appointed or elected to the Board of Directors of the Company as provided in Section 7.07, the affirmative vote of a majority of the Independent Directors shall be required by the Company to (i) amend or terminate this Agreement, (ii) exercise or waive any of the Company's rights or remedies under this Agreement or (iii) extend the time for performance of Parent's and Purchaser's obligations under this Agreement. 47 41 ARTICLE X GENERAL PROVISIONS SECTION 10.01. Nonsurvival of Representations. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, in the case of the Company, shall survive the acceptance for payment of, and payment for, shares of Company Common Stock by Purchaser pursuant to the Offer. This Section 10.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. SECTION 10.02. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by telecopy or by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such address for a party as shall be specified by like notice): (a) if to Parent or Purchaser, to: Raab Karcher AG Rudolf-von-Bennigsen Foerder-Platz 1 45131 Essen Germany Attn: Curt von Berghes Telecopier: 011-49-201-459-1508 with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Attn: John J. Madden, Esq. Telecopier: (212) 848-7179 48 42 (b) if to the Company, to: Wyle Electronics 15370 Barranca Pkwy P.O. Box 19675 Irvine, California 92713-9675 Attn: General Counsel Telecopier: (714) 753-9908 with a copy to: O'Melveny & Myers 610 Newport Center Drive Suite 1700 Newport Beach, California 92660 Attn: Gary J. Singer, Esq. Telecopier: (714) 669-6994 SECTION 10.03. Definitions. For purposes of this Agreement: (a) an "affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person; (b) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise; (c) "Lien" means any encumbrance, hypothecation, lien, mortgage, pledge, security interest or other encumbrance; provided, however, that the term "lien" does not include (i) liens for water and sewer charges and current taxes not yet due and payable or being contested in good faith, (ii) mechanics', carriers', workers', repairers', materialmen's, warehousemen's and other similar liens arising or incurred in the ordinary course of business or (iii) vendor liens granted pursuant to the distributor agreements between the Company and its vendors in existence on the date hereof and previously made available to Parent; (d) "Material Adverse Change" or "Material Adverse Effect" means any change or effect (other than a change or effect that impacts the Company's industry generally or is specifically identified in Sections 4.07 and 4.08 of the Disclosure Schedules) that is or is reasonably likely to be materially adverse to the business, 49 43 operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) or long-term prospects of the Company and its subsidiaries taken as a whole; provided that a change or effect that impacts the prospects of the Company's industry generally shall not be considered impacting the long-term prospects of the Company; (e) "person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity; and (f) a "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person, including, without limitation, Accord Contract Services LLC. SECTION 10.04. Interpretation. When a reference is made in this Agreement to a Section or Exhibit, such reference shall be to a Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or"including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". SECTION 10.05. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 10.06. Entire Agreement; Third Party Beneficiaries. This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement (provided, however, that the provisions of the Confidentiality Agreement shall remain valid and in effect to the extent such provisions do not conflict with the provisions of this Agreement) and, except for the provisions of Article III and Sections 7.04, 7.05 and 7.06 [Benefits; Indemnity], is not intended to confer upon any person other than the parties any rights or remedies hereunder. SECTION 10.07. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by 50 44 operation of law or otherwise by any of the parties without the prior written consent of the other parties, except that Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations under this Agreement to Parent or to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Purchaser of any of its obligations under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns. SECTION 10.08. Governing Law. Except to the extent the laws of the State of California is mandatorily applicable hereto, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. SECTION 10.09. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York, Delaware or California or in New York, Delaware or California state court (a "Specified Court"), this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Specified Court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Specified Court and (iv) agrees to waive any defense based upon venue or forum non conveniens grounds. SECTION 10.10. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. 51 45 IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. RAAB KARCHER AG By /s/ Gunther Beuth /s/ Curt Von Berghes ----------------------------------------------- Name: Gunther Beuth Curt Von Berghes Title: Member of the Board General Counsel EBV ELECTRONICS INC. By Michael Rohleder ------------------------ Name: Michael Rohleder Title: President and CEO WYLE ELECTRONICS By Ralph L. Ozorkiewicz -------------------------- Name: Ralph L. Ozorkiewicz Title: President and Chief Executive Officer 52 EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer or this Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered shares of Company Common Stock after the termination or withdrawal of the Offer), to pay for any shares of Company Common Stock tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of shares of Company Common Stock which would constitute not less than 90% (determined on a fully diluted basis) of the outstanding shares of Company Common Stock (the "Minimum Condition"), (ii) any waiting period under the HSR Act applicable to the purchase of shares of Company Common Stock pursuant to the Offer shall have expired or been terminated and (iii) the satisfaction of any applicable foreign competition and antitrust statutes and regulations, including the approval of the FCO pursuant to the AARC. Furthermore, notwithstanding any other term of the Offer or this Agreement, Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any shares of Company Common Stock not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of this Agreement and before the acceptance of such shares for payment or the payment therefor, any of the following events shall occur (other than as a result of any action or inaction of Parent or any of its subsidiaries which constitutes a breach of this Agreement): (a) there shall have been entered any order, preliminary or permanent injunction, decree, judgment or ruling in any suit, action or proceeding that (i) makes illegal or otherwise directly or indirectly restrains or prohibits the acquisition by Parent or Purchaser of any shares of Company Common Stock under the Offer or the making or consummation of the Offer or the Merger, the performance by the Company of any of its obligations under this Agreement or the consummation of any purchase of Company Common Stock contemplated hereby, (ii) prohibits or limits the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or compels the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as a result of the Offer or the Merger, (iii) imposes material limitations on the ability of Parent or Purchaser to acquire or hold, or exercise full rights of ownership of, any shares of Company Common Stock accepted for payment pursuant to the Offer including, without limitation, the right to vote such Company Common Stock on all matters properly presented to the shareholders of the Company or (iv) prohibits Parent or any of its subsidiaries from effectively 53 2 controlling in any material respect the business or operations of the Company and its subsidiaries, taken as a whole; or (b) there shall be any Law enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that results, directly or indirectly, in any of the consequences referred to in clauses (i) through (iv) of paragraph (a) above; or (c) there shall have occurred any Material Adverse Change; or (d) (i) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger or this Agreement, or approved or recommended any other acquisition proposal or (ii) the Company shall have entered into any agreement to consummate any acquisition proposal; or (e) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any respect that is reasonably likely to have a Material Adverse Effect, in each case at the date of this Agreement and at the scheduled expiration of the Offer; or (f) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under this Agreement; or (g) there shall have occurred and be continuing to exist for at least three business days (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or the Federal Republic of Germany, (iii) commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States or the Federal Republic of Germany which in any case is reasonably expected to have a Material Adverse Effect or to materially adversely affect Parent's or Purchaser's ability to complete the Offer or the Merger or materially delay the consummation of the Offer, the Merger or both or (iv) in case of 54 3 any of the foregoing existing on the date of this Agreement, material acceleration or worsening thereof; or (h) this Agreement shall have been invalidated or terminated. The foregoing conditions are for the sole benefit of Purchaser and Parent and may, subject to the terms of this Agreement, be waived by Purchaser and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Terms used but not defined herein shall have the meanings assigned to such terms in the Agreement to which this Exhibit A is a part. 55 EXHIBIT B AGREEMENT OF MERGER THIS AGREEMENT OF MERGER (this "AGREEMENT") is executed as of _______________, 1997 by and between EBV ELECTRONICS INC. a Delaware corporation (the "PURCHASER"), and WYLE ELECTRONICS, a California corporation (the "COMPANY"), which corporations are hereinafter sometimes referred to jointly as the "CONSTITUENT CORPORATIONS." BACKGROUND A. The Purchaser is a corporation duly organized and existing under the laws of the State of Delaware. The Company is a corporation duly organized and existing under the laws of the State of California. B. The Purchaser has authorized capital stock consisting of 1.000 shares of common stock, $.01 par value, of which 100 shares are now validly issued, are fully paid and nonassessable and are owned by EBV ELECTRONICS HOLDINGS INC., a Delaware corporation ("HOLDING"). Holding is a wholly owned subsidiary of RAAB KARCHER AG, a corporation organized under the laws of Germany ("PARENT"). C. The Company has authorized capital stock consisting of 25,000,000 shares of common stock and 500,000 shares of preference stock, no par value, of which 12,229,100 shares were validly issued, fully paid and nonassessable. D. The Purchaser and the Company desire to effect a merger (the "MERGER") of the Purchaser with and into the Company in the manner herein set forth, and the Board of Directors of the Constituent Corporations have duly adopted resolutions approving this Agreement. E. The Purchaser, the Company and Parent have entered into that certain Agreement and Plan of Merger, dated as of July 3, 1997 (the "MERGER AGREEMENT"), pursuant to which the parties agreed to the Merger of the Purchaser with and into the Company and the conversion in the Merger of each issued and outstanding share of common stock, without par value, of the Company (the "COMPANY COMMON STOCK") into the right to receive $50.00 per share in cash (the "PER SHARE AMOUNT") in cash, without interest. This Agreement is being filed pursuant to Section 2.02 of the Merger Agreement and Section 1103 of the California Corporations Code ("CCC"). In consideration of the foregoing premises, and the mutual covenants and agreements herein contained, it is hereby agreed as follows: 1 56 ARTICLE I PARTIES TO THE MERGER SECTION 1 THE PURCHASER. The name of the corporation proposing to merge into the Company is EBV ELECTRONICS INC. SECTION 2 THE SURVIVING CORPORATION. The name of the corporation into which the Purchaser proposes to merge is WYLE ELECTRONICS and WYLE ELECTRONICS will be the corporation surviving the Merger (the "SURVIVING CORPORATION"). SECTION 3 PARENT. Cash will be issued in the Merger to the holders of the Company Common Stock. ARTICLE II TERMS AND CONDITIONS OF THE MERGER SECTION 1 GENERAL. Upon the date on which this Agreement is filed with the Secretary of State of the State of California and the Certificate of Ownership and Merger (or Certificate of Merger) is filed with the Secretary of State of the State of Delaware, together with any required officers' certificates (collectively, the "Merger Documents") of each Constituent Corporation: (a) the Purchaser shall merge with and into the Company, which shall survive the Merger and continue to be a California corporation; (b) the shares of Company Common Stock outstanding at the Effective Time of the Merger shall be converted into the right to receive the Per Share Amount; (c) the separate existence of the Purchaser shall cease, as provided by the CCC; and (d) the name of the Surviving Corporation shall remain WYLE ELECTRONICS. SECTION 2 EFFECTIVE TIME. The "EFFECTIVE TIME" with respect to the Merger contemplated by this Agreement shall be at the time of filing of the appropriate Merger Documents with the Secretary of State of the State of California. SECTION 3 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its rights, title or interest in, to or under any of the rights, properties or assets of either Constituent Corporation or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized, so long as such action is consistent with this Agreement, to execute and deliver, in the name and on behalf of each Constituent Corporation, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each Constituent Corporation, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title 2 57 and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. ARTICLE III CONVERSION OF CAPITAL STOCK At the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of the Purchaser's capital stock or the holders of any shares of the Company Common Stock: (a) Capital Stock of Purchaser. Each issued and outstanding share of capital stock of Purchaser shall be converted into and become one fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. (b) Cancellation of Company Common Stock Owned by Parent. Each share of Company Common Stock that is owned by the Company or by any subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Purchaser or any other subsidiary of Parent shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to paragraph (d) of this Article III, each share of Company Common Stock issued and outstanding (other than shares to be cancelled in accordance with paragraph (b) of this Article III) shall be converted into the right to receive the Per Share Amount in cash, without interest (the "MERGER CONSIDERATION"). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (d) Company Dissenting Shares. Notwithstanding paragraph (c) of this Article III, shares of Company Common Stock held by a holder who, subject to and in accordance with Section 1300 et seq. of the CCC, has demanded and perfected such holder's right to an appraisal of such holder's shares of Company Common Stock and has not effectively withdrawn or lost the right to such appraisal ("DISSENTING SHARES"), shall not be converted into a right to receive the Merger Consideration, unless such holder withdraws or otherwise loses the right to appraisal for such holder's shares of Company Common Stock. If after the Effective Time of the Merger such holder withdraws or loses the right to appraisal for such holder's shares of Company Common Stock, such shares of Company Common Stock shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration payable in respect of such shares of Company Common Stock pursuant to paragraph (c) of this Article III. 3 58 ARTICLE IV ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS Upon the Effective Time, the Restated Articles of Incorporation and the Bylaws of the Company shall be the Articles of Incorporation and the Bylaws of the Surviving Corporation until thereafter amended as provided therein and as permitted by law and by the Merger Agreement. At the Effective Time, the directors of the Company immediately prior to the Effective Time shall be deemed to have resigned, and the directors of Purchaser immediately prior to the Effective Time shall become the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their successors are duly elected and qualified, as the case may be. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be, or as otherwise provided in the Bylaws of the Company. ARTICLE V CORPORATE APPROVALS SECTION 1 CORPORATE APPROVALS. Pursuant to Section 1201 of the CCC and Section 251 of the DGCL, this Agreement and related matters have been approved in accordance with such provisions. ARTICLE VI GENERAL PROVISIONS SECTION 1 AMENDMENT. This Agreement may be amended by the parties hereto any time before or after approval hereof by the shareholders of the Surviving Corporation, if necessary, but, after such approval, no amendment shall be made which by law requires the further approval of such shareholders without obtaining such approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. SECTION 2 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one agreement. 4 59 IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above. WYLE ELECTRONICS a California corporation By:________________________ Name: Title: By:________________________ Name: Title: EBV ELECTRONICS INC. a Delaware corporation By:________________________ Name: Title: By:________________________ Name: Title: 5 60 CERTIFICATE ________________ and _______________ certify that: 1. They are the _______________ and the __________________, respectively, of WYLE ELECTRONICS, a corporation organized under the laws of the State of California (the "CORPORATION"). 2. The Corporation has authorized two classes of stock, designated "Common Stock" and "Preference Stock." 3. The number of outstanding shares of Common Stock of the Corporation entitled to vote on the Record Date, ______________, for the Special Meeting of the Shareholders of the Corporation was _______________ shares. There are no outstanding shares of Preferred Stock. 4. The principal terms of the agreement relating to the merger of EBV ELECTRONICS INC., a Delaware corporation, with and into the Corporation (the "MERGER") in the form attached were approved by the Corporation's Board of Directors and by the vote of a number of shares of Common Stock which equaled or exceeded the vote required. 5. The percentage vote required of the holders of Common Stock entitled to vote in connection with the Merger is more than 50%. _____________________________________ Name: Title: _____________________________________ Name: Title: 6 61 __________________ declares under penalty of perjury under the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. ____________, 1997 ___________________________ Name: ___________________ declares under penalty of perjury under the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. _____________, 1997 ___________________________ Name: 62 CERTIFICATE _____________________ and ___________________ certify that: 1. They are the _______________ and the _________________, respectively, of EBV ELECTRONICS, INC. a corporation organized under the laws of the State of Delaware (the "CORPORATION"). 2. The number of outstanding shares of common stock of the Corporation is 1,000 shares. 3. The principal terms of the agreement relating to the merger of the Corporation with and into WYLE ELECTRONICS, a California corporation, (the "MERGER") in the form attached were approved by the Corporation's Board of Directors and by the vote of a number of shares of each class which equaled or exceeded the vote required. ___________________________ Name: Title: ___________________________ Name: Title: 63 _____________________ declares under penalty of perjury under the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. _____________, 1997 ___________________________ Name: ___________________ declares under penalty of perjury under the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. ______________, 1997 ___________________________ Name: EX-99.C.2 11 STOCK OPTION AGREEMENT 1 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of July 3, 1997 (this "Agreement"), among RAAB KARCHER AG, a company organized under the laws of Germany ("Parent"), EBV ELECTRONICS INC., a Delaware corporation and an indirect wholly owned subsidiary of Parent ("Purchaser"), and WYLE ELECTRONICS, a California corporation (the "Company"). W I T N E S S E T H: WHEREAS, Parent, Purchaser and the Company propose to enter into, simultaneously herewith, an Agreement and Plan of Merger (the "Merger Agreement"; capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Merger Agreement), which provides, upon the terms and subject to the conditions thereof, for (i) the commencement by Purchaser of a tender offer (the "Offer") to purchase all of the issued and outstanding shares of the common stock, no par value, of the Company ("Common Stock"), at a purchase price of $50.00 per share, net to the seller in cash, and (ii) the subsequent merger of Purchaser with and into the Company (the "Merger"), whereby each share of Common Stock, other than shares owned directly or indirectly by Parent or by the Company and other than Dissenting Shares, will be converted into the right to receive $50.00 (or such greater amount to be paid per share in the Offer); and WHEREAS, as a condition to the willingness of Parent and Purchaser to enter into the Merger Agreement, Parent and Purchaser have required that the Company agree, and in order to induce Parent and Purchaser to enter into the Merger Agreement, the Company has agreed, to grant Purchaser an option to purchase shares of Common Stock, upon the terms and subject to the conditions of this Agreement; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and in the Merger Agreement, the parties hereto agree as follows: ARTICLE I THE STOCK OPTION SECTION 1.01. Grant of Top-Up Stock Option. The Company hereby grants to Purchaser an irrevocable option (the "Top-Up Stock Option") to purchase that number of shares of Common Stock (the "Top-Up Option Shares") equal to the number of shares of Common Stock that, when added to the number of shares of Common Stock owned by 2 2 Purchaser and its affiliates immediately following consummation of the Offer, shall constitute 90% of the shares of Common Stock then outstanding on a fully diluted basis (assuming the issuance of the Top-Up Option Shares), at a cash purchase price per Top-Up Option Share equal to $50.00 (the "Purchase Price"), subject to the terms and conditions set forth herein; provided, however, that the Top-Up Stock Option shall not be exercisable if the number of shares of Common Stock subject thereto exceeds the number of authorized shares of Common Stock available for issuance. SECTION 1.02. Exercise of Top-Up Stock Option. (a) Subject to the conditions set forth in Section 1.05 and to any additional requirements of Law, the Top-Up Stock Option may be exercised by Purchaser, in whole but not in part, at any time or from time to time after the occurrence of a Top-Up Exercise Event (as defined below) and prior to the Top-Up Termination Date (as defined below). (b) A "Top-Up Exercise Event" shall occur for purposes of this Agreement upon Purchaser's acceptance for payment pursuant to the Offer of shares of Common Stock constituting more than 50% but less than 90% of the shares of Common Stock then outstanding on a fully diluted basis. (c) The "Top-Up Termination Date" shall occur for purposes of this Agreement upon the first to occur of any of the following: (i) the Effective Time; (ii) the date which is 10 business days after the occurrence of a Top-Up Exercise Event (unless prior thereto the Top-Up Stock Option shall have been exercised); or (iii) the termination of the Merger Agreement. (d) In the event Purchaser wishes to exercise the Top-Up Stock Option, Purchaser shall send a written notice (a "Top-Up Exercise Notice") to the Company specifying the denominations of the certificate or certificates evidencing the Top-Up Option Shares which Purchaser wishes to receive, a date (subject to the earlier satisfaction or waiver of the conditions set forth in Section 1.03) (the "Closing Date"), which shall be a business day which is not later than 10 business days and not earlier than the fifth business day after delivery of such notice, and place for the closing of such purchase (the "Closing"). The Company shall, within two business days after receipt of a Top-Up Exercise Notice, deliver written notice to Purchaser specifying the number of Top-Up Option Shares and the aggregate Purchase Price therefor. 3 3 SECTION 1.03. Conditions to Closing. The obligation of the Company to deliver Top-Up Option Shares upon any exercise of the Top-Up Stock Option is subject to the following conditions: (a) Such delivery would not in any material respect violate, or otherwise cause the material violation of, Section 312.03(c) of the NYSE Listed Company Manual ("Section 312") or any material Law, including, without limitation, the HSR Act, applicable thereto; (b) There shall be no preliminary or permanent injunction or other final, non-appealable judgment by a court of competent jurisdiction preventing or prohibiting such exercise of the Top-Up Stock Option or the delivery of the Top-Up Option Shares in respect of such exercise; and (c) The Company shall have available from its authorized shares of Common Stock such number of shares as is sufficient to issue the Top-Up Option Shares; provided, however, that the Company shall have fully complied with its obligations under Section 3.01(b). SECTION 1.04. Closing. (a) At the Closing, (i) the Company shall deliver to Purchaser a certificate or certificates evidencing the applicable number of Top-Up Option Shares (in the denominations specified therein), and (ii) Purchaser shall purchase each Top-Up Option Share from the Company at the Purchase Price. Payment by Purchaser of the Purchase Price for the Top-Up Option Shares shall be made in cash. (b) All cash payments made pursuant to this Agreement shall be made by wire transfer of immediately available funds. Certificates evidencing Top-Up Option Shares delivered hereunder may, at the Company's election, contain the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 OR AN EXEMPTION THEREFROM. 4 4 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Purchaser as follows: SECTION 2.01. Organization; Authority Relative to this Agreement. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company. SECTION 2.02. Authority to Issue Shares. The Company has taken all necessary corporate action to authorize and reserve and permit it to issue, and at all times from the date hereof through the Top-Up Termination Date shall have reserved, all the Top-Up Option Shares issuable pursuant to this Agreement, and the Company shall take all necessary corporate action to authorize and reserve and permit it to issue all additional shares of the Company Common Stock or other securities which may be issued pursuant to Section 1.03, all of which, upon their issuance and delivery in accordance with the terms of this Agreement, shall be duly authorized, validly issued, fully paid and nonassessable, shall be delivered free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on Purchaser's voting rights, charges, adverse rights and other encumbrances of any nature whatsoever (other than this Agreement) and shall not be subject to any preemptive rights. SECTION 2.03. No Conflict; Required Filings and Consents. (a) Except as set forth in Section 4.05 of the Disclosure Schedule, the execution and delivery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate the Articles of Incorporation or Bylaws or equivalent organizational documents of the Company or any of its subsidiaries, (ii) assuming that all consents, approvals, orders and authorizations described in Section 2.03(b) have been obtained and all registrations, declarations, filings and notifications described in Section 2.03(b) have been made, conflict with or violate any Law applicable to the Company or any subsidiary or by which any property or asset of the Company or any subsidiary is bound or affected or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, 5 5 amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Company or any subsidiary pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults or other occurrences that individually or in the aggregate would not prevent or materially delay the consummation of the transactions contemplated hereby or the performance by the Company of any of its obligations hereunder. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement except for (i) the filing of a pre-merger notification and report form by the Company under the HSR Act and the expiration or termination of the waiting period thereunder and (ii) such other consents, approvals, orders, authorizations, registrations, declarations, filings and notices the failure of which to be obtained or made would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby or the performance by the Company of any of its obligations hereunder. ARTICLE III COVENANTS OF THE COMPANY SECTION 3.01. Further Action. (a) The Company shall use its best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated hereunder, including, without limitation, using all reasonable efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities. (b) The Company shall not take any action in order to cause intentionally the exercise of the Top-Up Stock Option to violate Section 312. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby jointly and severally represent and warrant to the Company as follows: 6 6 SECTION 4.01. Organization; Authority Relative to this Agreement. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each of Parent and Purchaser has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Purchaser and the consummation by Parent and Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent and Purchaser. This Agreement has been duly executed and delivered by Parent and Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of Parent and Purchaser, enforceable against each of Parent and Purchaser in accordance with its terms. SECTION 4.02. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by Parent and Purchaser do not, and the performance by Parent and Purchaser of their obligations hereunder and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate the Certificate of Incorporation or Bylaws or equivalent organizational documents of Parent or Purchaser, (ii) assuming that all consents, approvals, orders and authorizations described in Section 4.02(b) have been obtained and all registrations, declarations, filings and notifications described in Section 4.02(b) have been made, conflict with or violate any Law applicable to Parent or Purchaser or by which any property or asset of Parent or Purchaser is bound or affected or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults or other occurrences that individually or in the aggregate would not prevent or materially delay the consummation of the transactions contemplated hereby or the performance by Parent or Purchaser of any of their respective obligations hereunder. (b) No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by Parent or Purchaser in connection with the execution and delivery of this Agreement, the performance by Parent or Purchaser of any of its obligations hereunder or the consummation by Parent or Purchaser of the transactions contemplated hereby, except for (i) the filing of a pre-merger notification and report form under the HSR Act and the expiration or termination of the waiting period thereunder and (ii) such other consents, approvals, orders, authorizations, registrations, declarations, filings and notices the failure of which to be obtained or made would not, individually or in the aggregate, prevent or materially delay the consummation of 7 7 the transactions contemplated hereby or the performance by Parent or Purchaser of any of their respective obligations hereunder. ARTICLE V COVENANTS OF PARENT AND PURCHASER SECTION 5.01. Distribution. Purchaser shall acquire the Top-Up Option Shares for investment purposes only and only for the purpose of effecting a short-form merger with the Company and not with a view to any distribution thereof in violation of the Securities Act, and shall not sell any Top-Up Option Shares purchased pursuant to this Agreement except in compliance with the Securities Act and applicable state securities and "blue sky" laws. SECTION 5.02. Parent Guaranty. Parent hereby agrees to cause Purchaser to perform all of Purchaser's obligations under this Agreement. ARTICLE VI TERMINATION OF AGREEMENT SECTION 6.01. Termination. This Agreement, other than the rights and obligations of the Company and Purchaser under Sections 3.01, 5.01 and 5.02 and Article VII, shall terminate on the Top-Up Termination Date. ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 7.02. Waiver. Any party hereto may (a) extend the time for or waive compliance with the performance of any obligation or other act of any other party hereto or (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. 8 8 SECTION 7.03. Fees and Expenses. Except as otherwise provided herein or in Section 7.08 of the Merger Agreement, all Expenses incurred in connection with this Agreement shall be paid by the party incurring such Expenses. SECTION 7.04. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by telecopy or by overnight courier (providing proof of delivery) to the respective parties at their addresses as specified in Section 10.02 of the Merger Agreement. SECTION 7.05. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner to the fullest extent permitted by applicable Law in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible. SECTION 7.06. Assignment; Binding Effect; Benefit. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties hereto without the prior written consent of the other parties, except that Purchaser may assign, in its discretion, any or all of its rights, interests and obligations hereunder to Parent or any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Purchaser of any of its obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 7.07. Governing Law. Except to the extent the law of the State of California is mandatorily applicable hereto, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. SECTION 7.08. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any 9 9 court of the United States located in the State of New York, Delaware or California or in New York, Delaware or California state court (a "Specified Court"), this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Specified Court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Specified Court and (iv) agrees to waive any defense based upon venue or forum non conveniens grounds. SECTION 7.09. Headings. The descriptive headings contained in this Agreement are included for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 7.10. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 7.11. Entire Agreement. This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first written above. RAAB KARCHER AG By /s/ Gunther Beuth /s/ Curt Von Berghes ----------------------------------------------- Name: Gunther Beuth Curt Von Berghes Title: Member of the Board General Counsel EBV ELECTRONICS INC. By Michael Rohleder ------------------------ Name: Michael Rohleder Title: President and CEO WYLE ELECTRONICS By Ralph L. Ozorkiewicz -------------------------- Name: Ralph L. Ozorkiewicz Title: President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----