SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
|_| Definitive Proxy Statement Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
ANDERSEN GROUP, INC.
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number or the
Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ANDERSEN GROUP, INC.
405 Park Avenue
Suite 1202
New York, New York 10022
(212) 826-8942
This Proxy Statement relates to the combined Special Meeting and Annual
Meeting (the "Combined Meeting") of stockholders of Andersen Group, Inc. (the
"Company") to be held on [______], 2002 at [_____] a.m., New York City time, at
[_______________], or at such other time and place to which the Combined Meeting
may be adjourned or postponed. The date of this Proxy Statement is [_____],
2002. The proxy materials relating to the Combined Meeting are being mailed to
our stockholders entitled to vote at the Combined Meeting on or about [_____],
2002. THE ENCLOSED PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS OF THE COMPANY.
At the Combined Meeting you will be asked to act on the following matters
(collectively, the "Proposals"):
1. Approval of the issuance of Common Stock in the CCTV Share Acquisition.
On April 30, 2002, we entered into a Stock Subscription Agreement (the
"Stock Subscription Agreement") with Asinio Commercial Limited, a limited
liability company organized under the laws of Cyprus ("ACL"). Pursuant to
the Stock Subscription Agreement, as amended in September 2002, we agreed
to acquire from ACL a 50% equity interest in ZAO ComCor TV, a closed joint
stock company organized under the laws of the Russian Federation ("CCTV")
(the "CCTV Share Acquisition"). In exchange for receipt of the equity
interest in CCTV, we will deliver at the closing 4,000,000 shares of our
common stock, par value $.01 per share ("Common Stock").
Pursuant to applicable rules of the National Association of Securities
Dealers, Inc. ("NASD"), you will be asked to approve the issuance of
Common Stock to be paid as consideration in the CCTV Share Acquisition. We
cannot complete the CCTV Share Acquisition unless you approve this
Proposal and Proposals 2, 3 and 4.
2. Approval of the issuance of Common Stock in the MBC Share Acquisition.
We intend to enter into an Exchange Agreement (the "Exchange Agreement")
with certain MBC shareholders and rights holders (collectively, the "MBC
Transferors") of ABC Moscow Broadband Communication Limited, a limited
liability company organized under the laws of Cyprus ("MBC"). Pursuant to
the Exchange Agreement, we will exchange 150 shares of our Common Stock
for each MBC share, or right to receive an MBC share, tendered by the MBC
Transferors. If the MBC Transferors tender all of their shares for
exchange, we will issue up to 3,250,050 shares of our Common Stock. If we
were to issue in excess of approximately 2,900,000 shares, prior to such
issuance, we would need to receive a waiver from ACL of a covenant set
forth in the Stock Subscription Agreement that currently prohibits any
issuance of shares that would cause the total number of shares of Common
Stock to be issued and outstanding immediately following the closing of
the CCTV and MBC Share Acquisitions, excluding the shares to be issued
pursuant to the Stock Subscription Agreement, to exceed 5,000,000.
Following the acquisition of all of the MBC Transferors' MBC shares (the
"MBC Share Acquisition"), MBC will be wholly-owned by the Company.
Pursuant to applicable NASD rules, you will be asked to approve the
issuance of Common Stock to be paid as consideration in the MBC Share
Acquisition.
In addition to the foregoing vote, we are also seeking the approval of the
MBC Share Acquisition by the holders of a majority of the outstanding
shares of our Common Stock not controlled by our directors or executive
officers, as provided by Section 144 of the Delaware General Corporation
Law ("Delaware 144"), since these individuals have a direct economic
interest in the MBC Share Acquisition through their ownership of MBC
shares.
We cannot complete the MBC Share Acquisition unless you approve this
Proposal and Proposals 1, 3 and 4.
3. Approval of the Share Increase Amendment. You will be asked to approve
an amendment to our Certificate of Incorporation (the "Certificate of
Incorporation") that will increase the number of authorized shares of our
Common Stock from 6,000,000 to 12,000,000 shares.
4. Approval of the Classified Board Amendment. You will be asked to
approve an amendment to our Certificate of Incorporation to establish a
classified Board of Directors so that only one-third of our directors will
be elected annually.
5. Approval of the Name Change Amendment. You will be asked to approve an
amendment to our Certificate of Incorporation to change our name from
"Andersen Group, Inc." to "Moscow Broadband Group, Inc.".
6. Election of Directors. The stockholders will be asked to elect a Board
of Directors for the ensuing year.
7. Other Business. If other business is properly raised at the meeting or
if we need to adjourn or postpone the meeting, you will vote on these
matters too.
Your vote is important. Only stockholders of record as of the close of
business on [______], 2002 are entitled to notice of, and to vote at, the
Combined Meeting or any postponement or adjournment thereof. On September 24,
2002, we had 2,099,908 shares of Common Stock issued and outstanding. Each share
is entitled to one vote.
Shares may not be voted at the Combined Meeting unless the holder thereof
is present or represented by proxy. Any stockholder executing the accompanying
form of proxy has the power to revoke it at any time prior to its exercise by:
(i) attending the Combined Meeting and voting in person, (ii) duly executing and
delivering a proxy bearing a later date or (iii) sending written notice of
revocation to Francis E. Baker, the Secretary of the Company, at our executive
offices, which are located at 405 Park Avenue, Suite 1202, New York, New York
10022.
____________________
Oliver R. Grace, Jr.
President and Chief Executive Officer
Dated: [_____], 2002
New York, New York
ii
ANDERSEN GROUP, INC.
405 Park Avenue
Suite 1202
New York, New York 10022
NOTICE OF COMBINED SPECIAL MEETING AND ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON [_____], 2002
To Our Stockholders:
A combined Special Meeting and Annual Meeting (the "Combined Meeting") of
stockholders of Andersen Group, Inc., a Delaware corporation (the "Company"),
will be held at [__________], on [_____], 2002, beginning at [_____] a.m., New
York City time, or at such other time and place to which the Combined Meeting
may be adjourned or postponed.
At the Combined Meeting we will ask you to act on the following matters:
1. Approval of the issuance of Common Stock in the CCTV Share Acquisition.
On April 30, 2002, we entered into a Stock Subscription Agreement (the
"Stock Subscription Agreement") with Asinio Commercial Limited, a limited
liability company organized under the laws of Cyprus ("ACL"). Pursuant to
the Stock Subscription Agreement, as amended in September 2002, we agreed
to acquire from ACL a 50% equity interest in ZAO ComCor TV, a closed joint
stock company organized under the laws of the Russian Federation ("CCTV")
(the "CCTV Share Acquisition"). In exchange for receipt of the equity
interest in CCTV, we will deliver at the closing 4,000,000 shares of our
common stock, par value $.01 per share ("Common Stock").
Pursuant to applicable rules of the National Association of Securities
Dealers, Inc. ("NASD"), you will be asked to approve the issuance of
Common Stock to be paid as consideration in the CCTV Share Acquisition. We
cannot complete the CCTV Share Acquisition unless you approve this
Proposal and Proposals 2, 3 and 4.
2. Approval of the issuance of Common Stock in the MBC Share Acquisition.
We intend to enter into an Exchange Agreement (the "Exchange Agreement")
with certain MBC shareholders and rights holders (collectively, the "MBC
Transferors") of ABC Moscow Broadband Communication Limited, a limited
liability company organized under the laws of Cyprus ("MBC"). Pursuant to
the Exchange Agreement, we will exchange 150 shares of our Common Stock
for each MBC share, or right to receive an MBC share, tendered by the MBC
Transferors. If the MBC Transferors tender all of their shares for
exchange, we will issue up to 3,250,050 shares of our Common Stock. If we
were to issue in excess of approximately 2,900,000 shares, prior to such
issuance, we would need to receive a waiver from ACL of a covenant set
forth in the Stock Subscription Agreement that currently prohibits any
issuance of shares that would cause the total number of shares of Common
Stock to be issued and outstanding immediately following the closing of
the CCTV and MBC Share Acquisitions, excluding the shares to be issued
pursuant to the Stock Subscription Agreement, to exceed 5,000,000.
Following the acquisition of all of the MBC Transferors' MBC shares (the
"MBC Share Acquisition"), MBC will be wholly-owned by the Company.
Pursuant to applicable NASD rules, you will be asked to approve the
issuance of Common Stock to be paid as consideration in the MBC Share
Acquisition.
In addition to the foregoing vote, we are also seeking the approval of the
MBC Share Acquisition by the holders of a majority of the outstanding
shares of our Common Stock not controlled by our directors or executive
officers, as provided by Section 144 of the Delaware General Corporation
Law ("Delaware 144"), since these individuals have a direct economic
interest in the MBC Share Acquisition through their ownership of MBC
shares.
We cannot complete the MBC Share Acquisition unless you approve this
Proposal and Proposals 1, 3 and 4.
3. Approval of the Share Increase Amendment. You will be asked to approve
an amendment to our Certificate of Incorporation (the "Certificate of
Incorporation") that will increase the number of authorized shares of our
Common Stock from 6,000,000 to 12,000,000 shares (the "Share Increase
Amendment").
4. Approval of the Classified Board Amendment. You will be asked to
approve an amendment to our Certificate of Incorporation to establish a
classified Board of Directors so that only one-third of our directors will
be elected annually (the "Classified Board Amendment").
5. Approval of the Name Change Amendment. You will be asked to approve an
amendment to our Certificate of Incorporation to change our name from
"Andersen Group, Inc." to "Moscow Broadband Group, Inc." (the "Name Change
Amendment").
6. Election of Directors. The stockholders will be asked to elect a Board
of Directors for the ensuing year (the "Election of Directors").
7. Other Business. If other business is properly raised at the meeting or
if we need to adjourn or postpone the meeting, you will vote on these
matters too.
OUR BOARD OF DIRECTORS HAS APPROVED EACH OF PROPOSALS 1-6 AND RECOMMENDS
THAT YOU VOTE FOR PROPOSALS 1-6. IN RECOMMENDING PROPOSAL 1, THE BOARD OF
DIRECTORS HAS ASSUMED THAT PRIOR TO THE CLOSING OF THE CCTV SHARE ACQUISITION
THE COMPANY OR MBC SHALL RECEIVE COMMITMENTS OF $4,000,000 OR MORE OF NEW
CAPITAL, AND SUCH NEW CAPITAL SHALL BE COMMITTED TO BE PAID NO LATER THAN THIRTY
DAYS AFTER THE CLOSING OF THE CCTV SHARE ACQUISITION.
Stockholders of record at the close of business on [______], 2002 are
entitled to notice of and to vote at the Combined Meeting or any postponement or
adjournment thereof. The affirmative vote thresholds required to approve
Proposals 1-6 are dependent upon the specific proposal. Therefore we encourage
you to read this entire Proxy Statement carefully in order to be fully informed
of the specific voting requirements.
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE
COMBINED MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN THE CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
ANY STOCKHOLDER EXECUTING THE ACCOMPANYING FORM OF PROXY HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE BY: (I) ATTENDING THE COMBINED
MEETING AND VOTING IN PERSON, (II) DULY EXECUTING AND DELIVERING A PROXY BEARING
A LATER DATE OR (III) SENDING WRITTEN NOTICE OF REVOCATION TO FRANCIS E. BAKER,
THE SECRETARY OF THE COMPANY, AT OUR EXECUTIVE OFFICES, WHICH ARE LOCATED AT 405
PARK AVENUE, SUITE 1202, NEW YORK, NEW YORK 10022.
BY ORDER OF THE BOARD OF DIRECTORS
________________
Francis E. Baker
Secretary
Dated: [_____], 2002
New York, New York
ii
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE COMBINED MEETING .......................... 1
SUMMARY OF THE PROPOSALS TO BE VOTED ON AT THE COMBINED MEETING ........... 8
The CCTV Share Acquisition ............................................. 8
The MBC Share Acquisition .............................................. 10
The Share Increase Amendment ........................................... 12
The Classified Board Amendment ......................................... 13
Name Change Amendment .................................................. 13
Election of Directors .................................................. 14
APPROVAL OF THE ISSUANCE OF COMMON STOCK IN THE CCTV SHARE ACQUISITION .... 15
General ................................................................ 15
NASDAQ Stockholder Approval Requirements ............................... 15
Parties to the CCTV Share Acquisition .................................. 15
Business of CCTV ....................................................... 16
Reasons for the CCTV Share Acquisition ................................. 16
Determination of the Purchase Price .................................... 18
The Stock Subscription Agreement ....................................... 19
Other Agreements in Connection with the CCTV Share Acquisition ......... 20
Certain Related Parties and Related Party Transactions ................. 21
Appraisal Rights ....................................................... 21
Regulatory Approvals ................................................... 21
Accounting Treatment ................................................... 21
Material U.S. Federal Income Tax Consequences .......................... 21
APPROVAL OF THE ISSUANCE OF COMMON STOCK IN THE MBC SHARE ACQUISITION ..... 22
General ................................................................ 22
Stockholder Approval Requirements ...................................... 22
Parties to the MBC Share Acquisition ................................... 23
Reasons for the MBC Share Acquisition .................................. 23
Determination of the Exchange Ratio .................................... 24
The Exchange Agreement ................................................. 25
The Registration Rights Agreement ...................................... 26
Participation of Certain Related Parties in the MBC Share Acquisition .. 26
J'son & Partners Opinion ............................................... 27
Appraisal Rights ....................................................... 31
Regulatory Approvals ................................................... 31
Accounting Treatment ................................................... 31
Material U.S. Federal Income Tax Consequences .......................... 32
THE SHARE INCREASE AMENDMENT .............................................. 33
Description of the Share Increase Amendment ............................ 33
Reasons for the Share Increase Amendment ............................... 33
Possible Effects of the Share Increase Amendment ....................... 33
THE CLASSIFIED BOARD AMENDMENT ............................................ 35
Summary of the Classified Board Amendment .............................. 35
Reasons for, and Effects of, the Classified Board Amendment ............ 35
Delaware Law ........................................................... 36
NAME CHANGE AMENDMENT ..................................................... 38
Summary of the Name Change Amendment ................................... 38
ELECTION OF DIRECTORS ..................................................... 39
CORPORATE GOVERNANCE ...................................................... 40
REPORT OF THE AUDIT COMMITTEE ............................................. 44
EXECUTIVE COMPENSATION .................................................... 45
OPTION/SAR INFORMATION .................................................... 46
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION ............. 46
PERFORMANCE GRAPH ......................................................... 48
PENSION BENEFITS .......................................................... 49
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE ................... 50
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
OF THE COMPANY ......................................................... 51
INDEPENDENT PUBLIC ACCOUNTANTS ............................................ 54
STOCKHOLDER PROPOSALS ..................................................... 54
FORWARD-LOOKING INFORMATION ............................................... 55
OTHER MATTERS ............................................................. 55
AVAILABLE INFORMATION ..................................................... 55
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA .......................... 57
Annex A ... J'son & Partners Opinion
Annex B ... Subscription Agreement between our company and ACL
Annex C ... Amendment to the Subscription Agreement between our company and ACL
Annex D ... Form of Registration Rights Agreement between our company and ACL
Annex E ... Form of Exchange Agreement between our company and the MBC
Transferors
Annex F ... Form of Registration Rights Agreement between our company and the
MBC Transferors
Annex G ... Form of Amended and Restated Certificate of Incorporation of our
company
ii
QUESTIONS AND ANSWERS ABOUT
THE COMBINED MEETING
The Combined Meeting and the Proposals
Q. When and where will the combined meeting be held?
A. The Combined Meeting will be held on [_____], 2002, beginning at [_____]
a.m., New York City time, at [_______________], or at such other time and place
to which the Combined Meeting may be adjourned or postponed.
Q. What is the purpose of the Combined Meeting?
A. At the Combined Meeting, you will be asked to consider and vote on the
following:
o the issuance of Common Stock in the CCTV Share Acquisition;
o the issuance of Common Stock in the MBC Share Acquisition;
o the Share Increase Amendment;
o the Classified Board Amendment;
o the Name Change Amendment;
o the Election of Directors; and
o such other business as may properly come before the Combined Meeting or
any adjournment or postponement thereof.
Q. What are the Board of Directors' recommendations for each of the Proposals?
A. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE:
o FOR the issuance of Common Stock in the CCTV Share Acquisition, assuming
that prior to the closing of the CCTV Share Acquisition the Company or MBC
shall receive commitments of $4,000,000 or more of new capital, and such
new capital shall be committed to be paid no later than thirty days after
the closing of the CCTV Share Acquisition;
o FOR the issuance of Common Stock in the MBC Share Acquisition;
o FOR the Share Increase Amendment;
o FOR the Classified Board Amendment;
o FOR the Name Change Amendment; and
o FOR each of the Directors nominated for election.
With respect to any other matter(s) that properly comes before the meeting, the
proxy holders will vote as recommended by our Board of Directors or, if no
recommendation is given, in their own discretion.
The CCTV and MBC Share Acquisitions
Q. What are the CCTV and MBC Share Acquisitions?
A. The CCTV and MBC Share Acquisitions are part of our strategy to gain
exclusive control over CCTV, a Russian based broadband services company that
provides "last mile" connectivity of certain broadband services to approximately
1.5 million subscribers in Moscow. In the CCTV Share Acquisition we will be
acquiring a 50% equity interest in CCTV from ACL. In the MBC Share Acquisition
we will be acquiring the remaining equity interest in MBC that we do not own.
MBC currently owns the remaining 50% equity interest in CCTV not owned by ACL.
Q. What are you offering to the respective holders of CCTV and MBC shares in
exchange for their equity interests?
A. We will deliver shares of our Common Stock in exchange for the equity
interests acquired in the CCTV and MBC Share Acquisitions. In connection with
the CCTV Share Acquisition we have agreed to deliver 4,000,000 shares of our
Common Stock. In connection with the MBC Share Acquisition, we have agreed to
issue up to 3,250,050 shares of our Common Stock in exchange for the MBC shares
acquired by us. If we were to issue in excess of approximately 2,900,000 shares,
prior to such issuance, we would need to receive a waiver from ACL of a covenant
set forth in the Stock Subscription Agreement that currently prohibits any
issuance of shares that would cause the total number of shares of our Common
Stock to be issued and outstanding immediately following the closing of the CCTV
and MBC Share Acquisitions, excluding the shares to be issued pursuant to the
Stock Subscription Agreement, to exceed 5,000,000.
Q. What is the MBC Rights Offering? What impact does this transaction have upon
the MBC Share Acquisition?
A. In July 2002, the Board of Directors of MBC determined that it was advisable
and in the best interest of MBC to conduct a private offering of its securities
(the "MBC Rights Offering") with the intent of raising up to US$5,000,000 in
cash proceeds. The Board of Directors of MBC has conditioned the closing of the
MBC Rights Offering upon the closing of the CCTV Share Acquisition, and we have
agreed that any shares acquired in the MBC Rights Offering will be eligible to
participate in the MBC Share Acquisition.
MBC is initially offering each of its shareholders the right to acquire their
pro rata share of the offered shares. In the event that the existing MBC
shareholders do not acquire all of the shares offered in the MBC Rights
Offering, MBC will attempt to privately place the remaining shares with one or
more third parties on a best efforts basis.
MBC has determined that the shares offered in the MBC Rights Offering will have
a purchase price per share of US$750. Therefore, when applying the exchange rate
of 150 shares of our Common Stock for each MBC share, or right to receive an MBC
share, tendered in the MBC Share Acquisition, the participants in the MBC Rights
Offering will receive shares of our Common Stock at $5.00 per share, which may
represent a significant discount to their trading price of the time of closing
the MBC Share Acquisition.
In order to accommodate the additional shares to be issued in the MBC Rights
Offering, we have increased the number of shares permitted to be issued under
the terms of the Exchange Agreement from 2,250,000 to 3,250,050, assuming the
MBC Rights Offering is fully subscribed. If the MBC Rights Offering were
subscribed such that we would issue in excess of approximately 2,900,000 shares,
prior to such issuance, we would need to receive a waiver from ACL of a covenant
set forth in the Stock Subscription Agreement that currently prohibits any
issuance of shares that would cause the total number of shares of Common Stock
to be issued and outstanding immediately following the closing of the CCTV and
MBC Share Acquisitions, excluding the shares to be issued pursuant to the Stock
Subscription Agreement, to exceed 5,000,000.
2
Q. What percentage of our Common Stock will be held by ACL and the MBC
Transferors after the completion of the CCTV and MBC Share Acquisitions?
A. The percentage of our Common Stock held by ACL and the MBC Transferors will
depend upon the subscription rate of the MBC Rights Offering. After the
completion of the CCTV and MBC Share Acquisitions, ACL will hold between
approximately 43% and 48% of the outstanding shares of our Common Stock. As of
September 24, 2002, our officers, directors and certain of our affiliates, taken
as a whole, presently have a beneficial interest in, or voting control of,
approximately 46.9% of MBC's issued and outstanding stock, excluding our 25%
equity interest in MBC as well as the MBC shares that may be issued to officers,
directors and certain of our affiliates in the MBC Rights Offering. After the
completion of the CCTV and MBC Share Acquisitions, these "insiders" will hold
between approximately 22% and 26% of the outstanding shares of our Common Stock
when aggregated with their present beneficial holdings, and the MBC Transferors,
together, will hold between approximately 26% and 35% of the outstanding shares
of our Common Stock.
Q. Will my rights as a stockholder of the Company change following the CCTV and
MBC Share Acquisitions?
A. No. When issued, the shares of Common Stock that ACL and the MBC Transferors
will receive will have the same rights and privileges as the shares of Common
Stock currently authorized and outstanding. Holders of our Common Stock have no
preemptive rights, and therefore you do not have any preferential right to
purchase any additional shares of our Common Stock when such shares are issued.
However, the issuances of common stock in these transactions will significantly
dilute your equity interest in our company.
Q. Has someone determined that the CCTV and MBC Share Acquisitions are in my
best interests?
A. Our Board of Directors believes that the CCTV and MBC Share Acquisitions are
advisable to, and in the best interests of, our company and our stockholders.
However our Board of Directors has determined that in order to fund our and
CCTV's future capital requirements, our company will need to raise $4,000,000 or
more in new capital either directly or indirectly, therefore, our Board of
Directors recommends that our stockholders vote for approval and adoption of
each of the Proposals relating to the issuance of stock in connection with the
CCTV Share Acquisition, subject to our receipt prior to the closing of the CCTV
Share Acquisition of commitments of $4,000,000 or more of new capital, which new
capital shall be committed to be paid no later than thirty days after the
closing of the CCTV Share Acquisition.
In addition, since members of our board of directors are shareholders of MBC, we
hired J'son & Partners, a multinational consulting firm specializing in
converging telecommunications, information technology and consumer electronics
markets particularly in Russia and the Commonwealth of Independent States, to
provide us with an opinion as to the fairness of the MBC Share Acquisition from
a financial point of view to our stockholders. A copy of the entire J'son &
Partners opinion is attached to this Proxy Statement as Annex A and a
description of their opinion and the analysis that supports their opinion is
included under the heading "Proposal 2: Approval of the Issuance of Common Stock
in the MBC Share Acquisition--J'son & Partners Opinion."
Q. What will happen if our company does not receive the requisite commitments of
$4,000,000 or more?
A. Our Board of Directors has determined that the consummation of the CCTV Share
Acquisition without commitments for such additional financing is neither
advisable for, nor in the best interests of, our stockholders. Accordingly, if
we are unable to raise, directly or indirectly, commitments of $4,000,000 or
more of new capital prior to the closing of the CCTV Share Acquisition, which
new capital shall be committed to be paid no later than thirty days after the
closing of the CCTV Share Acquisition, our Board of Directors will not recommend
the closing of the CCTV Share Acquisition.
3
Q. Do I have any rights if I do not approve the CCTV and/or MBC Share
Acquisitions?
A. If you choose to vote against the Proposals to issue shares of Common Stock
in the CCTV and/or MBC Share Acquisition, Delaware law does not afford you any
appraisal rights, as defined under such law, because your shares are ineligible
for such treatment.
Q. What are the tax consequences of the CCTV and MBC Share Acquisitions?
A. There will be no U.S. Federal income tax consequences to our stockholders or
to the Company as a result of the CCTV and MBC Share Acquisitions. The U.S.
Federal tax consequences, if any, to ACL or its stockholders, or to the MBC
stockholders have not been evaluated by the Company.
Q. When do you expect the CCTV and MBC Share Acquisitions to be completed?
A. We plan to complete the CCTV and MBC Share Acquisitions as soon as possible
after the stockholder meeting, subject to the satisfaction or waiver of the
other conditions to the transactions (including our receipt of commitments for
$4,000,000 or more in new capital). Although we cannot predict when these
conditions will be satisfied, we hope to complete the transactions during the
fourth calendar quarter of 2002.
Voting Your Shares
Q. Who is entitled to vote on each of the Proposals?
A. Only stockholders of record at the close of business on the record date,
[_____], 2002, are entitled to receive notice of the Combined Meeting and to
vote the shares that they held on that date at the Combined Meeting, or any
postponement or adjournment of such meeting. At the close of business on
September 24, 2002, there were 2,099,908 shares of Common Stock issued and
outstanding.
Q. What vote is required to approve each of the Proposals?
A. The Proposals will need to be approved in the following manner:
o The CCTV Share Acquisition. Pursuant to certain rules of the NASD
applicable to entities whose securities are quoted on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") National
Market System, a majority of the shares of our Common Stock represented
and voting at the Combined Meeting must approve the issuance of Common
Stock to be paid as consideration in the CCTV Share Acquisition.
o MBC Share Acquisition. We will need to meet two different standards of
stockholder approval in order to consummate the MBC Share Acquisition.
o As with the CCTV Share Acquisition, under the applicable NASD
rules a majority of the shares of our Common Stock represented and
voting at the Combined Meeting must approve the issuance of Common
Stock to be paid as consideration.
o In addition, since (i) our executive officers and directors have
equity interests in MBC and (ii) certain of our executive officers
and directors owe a fiduciary duty to both companies, we are also
seeking the approval of the MBC Share Acquisition by the holders of
a majority of the outstanding shares of our Common Stock not
controlled by our directors or executive officers, as provided by
Delaware 144. As of the date of this Proxy Statement, our directors
and executive officers held approximately 16.7% of our issued and
outstanding Common Stock (this calculation does not include any
unexercised
4
convertible securities held by such persons that are convertible
into shares of Common Stock).
o The Amendments. Pursuant to Delaware law, holders of at least a majority
of the outstanding Common Stock at the record date must approve the
amendment of our Certificate of Incorporation to affect each of the Share
Increase, the Classified Board and the Name Change Amendments
(collectively, the "Amendments").
o Election of the Directors. Pursuant to Delaware law, the election of
each director requires the affirmative vote of a plurality of the votes
cast by the shares entitled to vote at the Combined Meeting.
Q. Who may attend the Combined Meeting?
A. All holders of our Common Stock on the record date, or their duly appointed
proxies, may attend the Combined Meeting.
Q. What constitutes a quorum for the Combined Meeting?
A. The presence at the Combined Meeting, in person or by proxy, of the holders
of a majority of the issued and outstanding Common Stock on the record date will
constitute a quorum, permitting us to conduct our business at the Combined
Meeting. Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered to be present at
the meeting.
Q. How do I vote my shares?
A. You may vote on matters to come before the Combined Meeting in two ways:
o You may attend the Combined Meeting and cast your vote in person; or
o You may vote by completing, dating and signing the enclosed proxy card
and returning it to Register & Transfer Company, our transfer agent, in
the enclosed postage-paid envelope. If you deliver a valid proxy, you will
authorize the individuals named on the proxy card, referred to as the
proxy holders, to vote your shares according to your instructions.
Q. How many votes do I have for each share that I own?
A. Each share of Common Stock that you own entitles you to one vote on each
Proposal. The proxy card indicates the number of shares that you own.
Q. What happens if I do not make choices on my signed proxy card?
A. If you sign the proxy card, but do not make specific choices, proxy holders
will vote your shares as recommended by our Board of Directors as follows:
o FOR the issuance of Common Stock in the CCTV Share Acquisition, assuming
that prior to the closing of the CCTV Share Acquisition the Company or MBC
shall receive commitments of $4,000,000 or more of new capital, and such
new capital shall be committed to be paid no later than thirty days after
the closing of the CCTV Share Acquisition;
o FOR the issuance of Common Stock in the MBC Share Acquisition;
5
o FOR the Share Increase Amendment;
o FOR the Classified Board Amendment;
o FOR the Name Change Amendment;
o FOR the Election of Directors; and
as recommended by our Board of Directors or, if no recommendation is given, in
the discretion of the proxy holder as to any other matter(s) that properly comes
before the Combined Meeting.
Q. What if I vote and then change my mind?
A. You may revoke your proxy at any time before it is exercised by:
o Filing a notice of revocation with our Secretary at our executive
offices;
o Sending in another duly executed proxy bearing a later date; or
o Attending the Combined Meeting and casting your vote in person.
Your last vote will be the vote that is counted.
Q. What are the effects of abstentions and broker non-votes on the approval of
the Proposals?
A. Abstentions occur when a person with voting power checks the abstention box
on a proxy card for a particular Proposal or otherwise indicates that he, she or
it abstains from voting on a Proposal. A broker non-vote occurs when a nominee
holding shares for a beneficial owner (i.e., your broker) returns an executed
proxy but does not vote on a particular proposal because the nominee does not
have the discretion to vote with respect to that particular Proposal and has not
received instructions from the beneficial owner.
o Issuance of Common Stock in the CCTV and MBC Share Acquisitions. If you
abstain from voting in connection with the issuance of Common Stock in the
CCTV Share Acquisition and/or the MBC Share Acquisition, it has the same
effect as if you voted "against" such Proposal(s). In addition, if you do
not give instructions to your broker on how to vote on one or both of the
Proposals, your broker will not be able to vote for you. This will have no
effect on such Proposal or Proposals, however, because those shares for
which brokers are not able to vote will not be considered voting (i) at
the Combined Meeting and (ii) for purposes of approving the issuance of
Common Stock in connection with the CCTV and/or MBC Share Acquisitions, as
the case may be.
o The Amendments. If you abstain from voting in connection with the Share
Increase, the Classified Board and/or the Name Change Amendments or do not
give instructions to your broker on how to vote with respect to such
proposals, it has the same effect as if you voted "against" such
proposals.
o Election of Directors. If you abstain from voting in connection with the
Election of Directors, such abstention shall have no legal effect on the
Election of Directors. If you do not give instructions to your broker on
how to vote in connection with the Election of Directors, such non-vote
will be counted as a vote for the Election of Directors.
6
Q. Who will bear the cost of soliciting proxies?
A. We will pay the cost associated with this proxy solicitation. Our officers
and other employees also may solicit proxies by personal interview, by
electronic means or by telephone or facsimile equipment, in addition to the use
of the mails. None of these individuals will receive special compensation for
such services, which will be performed in addition to their regular duties, and
some of them may not necessarily solicit proxies. We also have made arrangements
with brokerage firms, banks, nominees and other fiduciaries to forward proxy
solicitation materials for shares held of record by them to the beneficial
owners of such shares. Upon request, we will reimburse these record holders for
their reasonable out-of-pocket expenses.
Other Matters
Q. Will there be any other matters considered at the Combined Meeting?
A. We are unaware of any matters to be presented at the Combined Meeting other
than the Proposals discussed in this Proxy Statement. If other matters are
properly presented at the Combined Meeting, then the persons named in the proxy
will have authority to vote all properly executed proxies in accordance with
their judgment on any such matter, including any proposal to adjourn or postpone
the meeting. If you vote against any of the Proposals (other than the Election
of Directors), your proxy will not vote in favor of any proposal to adjourn or
postpone the Combined Meeting if such postponement or adjournment is for the
purpose of soliciting additional proxies to approve the proposal that you voted
against.
Q. What do I need to do now?
A. You should carefully read and consider the information contained in this
Proxy Statement, including its appendices. This Proxy Statement contains
important information about the Proposals and about what our Board of Directors
considered in evaluating the CCTV and MBC Share Acquisitions and the remaining
Proposals. You should then complete and sign your proxy card and return it in
the enclosed postage-paid return envelope as soon as possible, so that your
shares will be represented at the stockholder meeting.
Q. Where can I get more information about our company and the Proposals?
A. You may obtain more information about our company and the Proposals from
various sources, as listed under "Available Information" on page 55 of this
Proxy Statement.
Q. Whom should I call with questions about the Proposals?
A. You should contact: Andrew M. O'Shea, Chief Financial Officer of our company,
at (860) 298-0444, or at aoshea@andersengrp.com.
7
SUMMARY OF THE PROPOSALS TO BE VOTED
ON AT THE COMBINED MEETING
The CCTV Share Acquisition (see page 15)
General
Pursuant to the Stock Subscription Agreement, as amended in September
2002, we have agreed, subject to the conditions set forth below, to acquire 50%
of the issued and outstanding capital stock of CCTV from ACL in exchange for
4,000,000 shares of our Common Stock. We cannot complete the CCTV Share
Acquisition unless you approve this Proposal and Proposals 2, 3 and 4.
NASDAQ Stockholder Approval Requirements (see page 15)
Pursuant to applicable rules of the NASD, you will be asked to approve the
issuance of the Common Stock to be paid as consideration in the CCTV Share
Acquisition. NASD rules require us to receive the approval of the holders of a
majority of the shares of our Common Stock represented and voting at the
Combined Meeting in order to approve the issuance of our Common Stock as
consideration in the CCTV Share Acquisition.
Reasons for the CCTV Share Acquisition (see page 16)
Assuming that we raise commitments for $4,000,000 or more in new capital
as described in the immediately following paragraph, our Board of Directors
believes that it is in the best interest of our company and our stockholders to
acquire the 50% equity interest in CCTV to be held by ACL. The CCTV Share
Acquisition is part of our larger goal to obtain full ownership of CCTV which
will allow us to improve our control over the management of CCTV and the
execution of CCTV's business plan. Moreover, the acquisition of CCTV in its
entirety will improve our ability to negotiate appropriate debt financing for
CCTV and to attract future financing for us and CCTV by increasing our market
capitalization and liquidity for our stockholders as well as increase our
potential return on our investment in CCTV.
However, our Board of Directors has determined that we must receive, prior
to the closing of the CCTV Share Acquisition, directly or indirectly,
commitments for $4,000,000 or more in new capital, which new capital shall be
committed to be paid no later than thirty days after the closing of the CCTV
Share Acquisition, in order to provide us with additional financing sources
thereby enabling our company to make scheduled capital contributions to CCTV and
to continue to be able to meet our operating expenses and debt service
requirements. However, there can be no assurance that, if commitments for an
additional $4,000,000 or more of new capital are raised, we will have adequate
liquidity to meet our future financial needs.
Material U.S. Federal Income Tax Consequences (see page 21)
The consummation of the CCTV Share Acquisition will not have any material
U.S. Federal income tax consequences on the Company or its stockholders. The
U.S. Federal tax consequences, if any, to ACL or its stockholders have not been
evaluated by the Company.
Conditions to the closing of the CCTV Share Acquisition (see page 19)
As provided in the Stock Subscription Agreement, the closing of the CCTV
Share Acquisition is subject to the satisfaction or waiver of certain customary
closing conditions in addition to the following conditions:
8
o Each Party shall have received all authorizations, consents and
approvals of governmental and regulatory authorities referred to in the
Stock Subscription Agreement;
o The MBC Share Acquisition shall have been consummated or shall be
consummated simultaneously with the CCTV Closing, and we shall hold, or
shall have rights to acquire simultaneously with the CCTV Closing,
substantially all of the capital stock of MBC;
o We shall have obtained your approval as required by the NASD and with
respect to the adoption of the Classified Board Amendment; and
o COMCOR shall have contributed to CCTV defined assets, including 55,675
shares, or 22.6%, of IAS, having an aggregate agreed upon value of
$17,488,873. This agreed upon value does not purport to represent either
the market value or the liquidation value of the assets to be contributed.
The agreed upon amount was partially derived from historical costs,
including allocated overhead costs, paid by COMCOR for the assets to be
contributed, using foreign currency exchange rates in effect at the times
the assets were acquired.
Post-Closing Covenants (see page 19)
In the Stock Subscription Agreement, we agreed to several post-closing
covenants including our obligation to make certain capital contributions to CCTV
and to maintain control over CCTV so long as ACL maintains a specified ownership
interest in the Company.
Termination of the Stock Subscription Agreement (see page 20)
Either ACL or our company may terminate the Stock Subscription Agreement
prior to the closing of the CCTV Share Acquisition (i) by mutual written consent
or (ii) in the event that the other party has breached any material
representation, warranty or covenant contained in the Stock Subscription
Agreement in any material respect.
Other Agreements (see page 20)
In connection with the Stock Subscription Agreement we have entered into,
or will enter into, a number of agreements with ACL and certain other parties,
including an Undertaking Agreement, Registration Rights Agreement and Voting
Agreement.
Related Parties and Related Party Transactions (see page 21)
Yuri Pripachkin, our former director, is the Chairman of the Board of
Directors of CCTV and COMCOR. Mr. Pripachkin also owns a controlling interest in
COMCOR. COMCOR is a party to several agreements with CCTV that will be
maintained following the closing of the CCTV Share Acquisition. Accordingly, Mr.
Pripachkin may indirectly benefit economically from the CCTV Share Acquisition.
Appraisal Rights
If you choose to vote against Proposal 1, Delaware law does not afford you
any appraisal rights, as defined under such law, because your shares are
ineligible for such treatment.
Regulatory Approvals (see page 21)
ACL's acquisition of the CCTV shares from COMCOR and our acquisition of
the CCTV shares from ACL will each require the prior approval of the Russian
Federation Ministry of Anti-monopoly Policy.
9
Accounting Treatment (see page 21)
We expect that the CCTV Share Acquisition will be accounted for using the
purchase method of accounting.
WITH RESPECT TO PROPOSAL 1, OUR BOARD RECOMMENDS THIS PROPOSAL, ASSUMING
THAT PRIOR TO THE CLOSING OF THE CCTV SHARE ACQUISITION THE COMPANY OR MBC SHALL
RECEIVE COMMITMENTS OF $4,000,000 OR MORE OF NEW CAPITAL, AND SUCH NEW CAPITAL
SHALL BE COMMITTED TO BE PAID NO LATER THAN THIRTY DAYS AFTER THE CLOSING OF THE
CCTV SHARE ACQUISITION.
The MBC Share Acquisition (see page 22)
General
We intend to enter into an Exchange Agreement with the MBC Transferors
pursuant to which we have agreed to exchange 150 shares of our Common Stock for
each MBC share, or right to receive an MBC share, tendered by the MBC
Transferors. If the MBC Transferors tender all of their shares for exchange, we
have agreed, subject to the conditions set forth below, to issue up to 3,250,050
shares of our Common Stock. If we were to issue in excess of approximately
2,900,000 shares, prior to such issuance, we would need to receive a waiver from
ACL of a covenant set forth in the Stock Subscription Agreement that currently
prohibits any issuance of shares that would cause the total number of shares of
Common Stock to be issued and outstanding immediately following the closing of
the CCTV and MBC Share Acquisitions, excluding the shares to be issued pursuant
to the Stock Subscription Agreement, to exceed 5,000,000. Following the
acquisition of all of the MBC Transferors' shares, MBC will be wholly-owned by
the Company. We cannot complete the CCTV Share Acquisition unless you approve
this Proposal and Proposals 1, 3 and 4.
Stockholder Approval Requirements (see page 22)
We will need to meet two different standards of stockholder approval in
connection with the MBC Share Acquisition:
o Pursuant to applicable rules of the NASD, you will be asked to approve
the issuance of the Common Stock to be paid as consideration in the MBC
Share Acquisition. NASD rules require us to receive the approval of the
holders of a majority of the shares of our Common Stock represented and
voting at the Combined Meeting in order to effect the MBC Share
Acquisition (the "Nasdaq Vote").
o Since (i) our executive officers and directors have equity interests in
MBC and (ii) certain of our executive officers and directors owe a
fiduciary duty to both companies, we are also seeking the approval of the
MBC Share Acquisition by the holders of a majority of the outstanding
shares of our Common Stock not controlled by our directors or executive
officers, as provided by Delaware 144. As of the date of this Proxy
Statement, our directors and executive officers held approximately 16.7%
of our issued and outstanding Common Stock (this calculation does not
include any unexercised convertible securities held by such persons that
are convertible into shares of Common Stock).
Reasons for the MBC Share Acquisition (see page 23)
The MBC Share Acquisition is part of our larger goal to obtain full
ownership of CCTV. We cannot achieve this goal, and the CCTV Share Acquisition
cannot be completed, unless we complete the MBC Share Acquisition. The reasons
for the MBC Share Acquisition are in large part identical to those for the CCTV
Share Acquisition. The MBC Share Acquisition will allow us to improve our
control over
10
the management of CCTV and the execution of CCTV's business plan. Moreover, the
acquisition of CCTV in its entirety will improve our ability to negotiate
appropriate debt financing for CCTV and to attract future financing for us and
CCTV by increasing our market capitalization and liquidity for our stockholders
as well as increase our potential return on our investment in CCTV. In addition,
the MBC Share acquisition will give us access to additional capital that can be
used to satisfy our CCTV funding obligations as well as our debt service and
operational commitments.
Conditions to the closing of the MBC Share Acquisition (see page 25)
As provided in the Exchange Agreement, the closing of the MBC Share
Acquisition is subject to the satisfaction or waiver of certain customary
closing conditions in addition to the following conditions:
o Each Party shall have received all authorizations, consents and
approvals of governmental and regulatory authorities referred to in the
Exchange Agreement;
o The CCTV Share Acquisition shall have been consummated or shall be
consummated simultaneously with the MBC Closing, and we shall hold or
shall have rights to acquire simultaneously with the MBC Closing
substantially all of the capital stock of CCTV; and
o We shall have obtained your approval as required by the NASD, Delaware
law and with respect to the adoption of the Classified Board Amendment.
Post-Closing Covenants (see page 26)
We agreed to several post-closing covenants in the Exchange Agreement
including our obligation to make certain capital contributions to CCTV.
Termination of the Exchange Agreement (see page 26)
The Exchange Agreement may be terminated by either party if the per share
value of our Common Stock is less than Eight Dollars ($8.00) per share or
greater than Twelve Dollars ($12.00) per share on the date on which all of the
conditions to closing have been satisfied and/or waived by the parties. In
addition, the Exchange Agreement may be terminated prior to the closing of the
MBC Share Acquisition (i) by mutual written consent of our company and the
shareholder representative of the MBC Transferors (the "Shareholder
Representative"), (ii) by our company in the event that any MBC Transferor has
breached any material representation, warranty or covenant contained in the
Exchange Agreement or (iii) by the Shareholder Representative in the event that
we have breached any material representation, warranty or covenant contained in
the Exchange Agreement.
Registration Rights Agreement (see page 26)
We will enter into a Registration Rights Agreement with the MBC
Transferors that will provide them with the ability to participate in future
registrations of our Common Stock with the Securities and Exchange Commission.
Participation of Certain Related Parties in the MBC Share Acquisition (see page
26)
Our officers, directors and their affiliates, taken as a whole, presently
have a beneficial interest in, or voting control of, approximately 46.9% of
MBC's issued and outstanding stock. This figure excludes the 25% equity interest
in MBC that we own as well as the MBC shares that may be issued to those
officers, directors and their affiliates who may participate in the MBC Rights
Offering.
11
J'son & Partners Opinion (see page 27)
In deciding whether to approve the MBC Share Acquisition, our Board of
Directors considered the opinion delivered to it by J'son & Partners that, as of
the date of the opinion, and based upon and subject to the assumptions,
limitations and qualification set forth in the opinion, the MBC Share
Acquisition was fair from a financial view to our stockholders. We have attached
as Annex A hereto the written opinion of J'son & Partners dated September 13,
2002. You should read this opinion carefully in order to understand the
assumptions made, matters considered and the limitations of the review
undertaken by J'son & Partners in providing their opinion.
Material U.S. Federal Income Tax Consequences (see page 32)
The consummation of the MBC Share Acquisition will not have any material
U.S. Federal income tax consequences on the Company or its stockholders. The
U.S. Federal tax consequences, if any, to the MBC stockholders have not been
evaluated by the Company.
Appraisal Rights
If you choose to vote against Proposal 2, Delaware law does not afford you
any appraisal rights, as defined under such law, because your shares are
ineligible for such treatment.
Regulatory Approvals (see page 31)
We are not required to obtain any regulatory approvals in connection with
the consummation of the MBC Share Acquisition.
Accounting Treatment (see page 31)
We expect that the MBC Share Acquisition will be accounted for using the
purchase method of accounting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
ISSUANCE OF COMMON STOCK PURSUANT TO THE MBC SHARE ACQUISITION.
The Share Increase Amendment (see page 33)
Currently, we do not have enough authorized and unissued shares of Common
Stock to effect both of the CCTV and MBC Share Acquisitions. As of the date of
this Proxy Statement, 3,285,672 shares of Common Stock are authorized and remain
available for issuance after giving effect to the issuance of shares of Common
Stock upon the exercise or conversion of our currently outstanding stock
options, convertible preferred stock and debt instruments. If both of the CCTV
and MBC Share Acquisitions are completed as proposed, assuming full subscription
of the MBC Rights Offering, we may be required to issue up to 7,250,050 shares
of our Common Stock. Accordingly, we would like to amend our certificate of
incorporation so as to increase the number of authorized shares of our Common
Stock from 6,000,000 to 12,000,000.
Pursuant to Delaware law, holders of at least a majority of the
outstanding Common Stock at the record date must approve the amendment of our
Certificate of Incorporation to effect the Share Increase Amendment.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES.
12
The Classified Board Amendment (see page 35)
We would like to amend our Certificate of Incorporation to establish a
classified Board of Directors. This amendment to our Certificate of
Incorporation is one of the conditions to the closing of the CCTV and MBC Share
Acquisitions. Under the proposed Classified Board Amendment approximately
one-third of our Board of Directors would be elected each year. Initially,
however, members of all three classes would be elected at the 2003 Annual
Meeting. If the proposed Classified Board Amendment is adopted, the slate of
directors nominated for election at the 2003 Annual Meeting would be proposed
for election in three separate classes as follows:
o three directors, constituting the "Class I Directors," would be elected
for a one-year term expiring at the 2004 Annual Meeting;
o two directors, constituting the "Class II Directors," would be elected
for a two-year term expiring at the 2005 Annual Meeting; and
o two directors, constituting the "Class III Directors," would be elected
for a three-year term expiring at the 2006 Annual Meeting.
Pursuant to Delaware law, holders of at least a majority of the
outstanding Common Stock at the record date must approve the amendment of our
Certificate of Incorporation to effect the Classified Board Amendment.
If you approve the Classified Board Amendment, pursuant to the Stock
Subscription Agreement and the Voting Agreement, ACL would initially be entitled
to one nominee in each of the classes to be elected to the Classified Board at
the first annual meeting following the closing of the CCTV Share Acquisition.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION ADOPTING A CLASSIFIED BOARD OF
DIRECTORS.
Name Change Amendment (see page 38)
Our historical activities have been principally in the areas of
manufacturing and investments, which has been represented by our investment in
The J.M. Ney Company ("JM Ney"). However, we recently sold substantially all of
the operating assets and certain liabilities of JM Ney. Currently, our primary
investment is a 25% equity interest in MBC which holds a 50% equity interest in
CCTV. As described in Proposals 1 and 2 of this Proxy Statement, we are seeking
to acquire control over the remaining equity interest in CCTV that we do not
currently have indirect control. We have determined that the name of our company
no longer reflects the business in which we are presently engaged.
Alternatively, the name "Moscow Broadband Group, Inc." more clearly identifies
our company as a participant in the cable industry in Russia and improves our
marketing and capital fundraising efforts. If you approve the Name Change
Amendment, we will cause the trading symbol for the Common Stock to be changed
from "ANDR" to a symbol more readily associated with our new name.
Pursuant to Delaware law, holders of at least a majority of the
outstanding Common Stock at the record date must approve the amendment of our
Certificate of Incorporation to effect the Name Change Amendment.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION ADOPTING A CHANGE IN THE NAME OF
THE COMPANY.
13
Election of Directors (see page 39)
At the Combined Meeting, you will be asked to elect seven directors. Each
director nominee will be elected for a term of one year or until such nominee's
successor is elected and qualified.
Pursuant to Delaware law, the election of each director requires the
affirmative vote of a plurality of the votes cast by the shares entitled to vote
at the Combined Meeting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES FOR DIRECTOR.
14
DISCUSSION OF PROPOSALS
PROPOSAL 1:
APPROVAL OF THE ISSUANCE OF COMMON STOCK
IN THE CCTV SHARE ACQUISITION
General
Our Board of Directors has approved a Stock Subscription Agreement which
provides for our acquisition of 50% of the issued and outstanding capital stock
of CCTV, currently owned by Moscow Telecommunications Company ("COMCOR"), from
ACL. Prior to the closing of the CCTV Share Acquisition, ACL will acquire the
shares of CCTV from COMCOR. The terms and conditions of the sale from COMCOR to
ACL have not yet been established, but it is currently contemplated that ACL
will acquire the CCTV shares from COMCOR for a yet to be determined amount of
consideration to be paid six months following ACL's acquisition of such shares.
As of the date of this Proxy Statement MBC owns the remaining 50% of the capital
stock of CCTV, which we are seeking to acquire through the acquisition of all of
the capital stock of MBC that we do not currently own.
We have agreed to deliver 4,000,000 shares of our Common Stock as
consideration for the acquisition of the CCTV shares. Pursuant to applicable
NASD rules, described in more detail below, we seek your approval to issue the
shares of Common Stock as consideration in the CCTV Share Acquisition.
NASDAQ Stockholder Approval Requirements
Our Common Stock is quoted on the NASDAQ National Stock Market. NASD Rule
4350(i)(1)(C) requires stockholder approval of the issuance of Common Stock in
connection with the CCTV Share Acquisition because:
o the aggregate amount of Common Stock being issued to ACL as
consideration will upon issuance represent more than 20% of the voting
power of the Common Stock outstanding prior to the issuance; and
o the number of shares of Common Stock to be issued to ACL will be in
excess of 20% of the number of shares or Common Stock outstanding prior to
the issuance.
In addition, NASD Rule 4350(i)(1)(B) requires stockholder approval of any
issuance of securities that will result in a change of control of the issuer.
Although the term "change of control" is not defined in the NASD rules, the CCTV
Share Acquisition, together with the MBC Share Acquisition, may be deemed
related transactions that constitute a "change of control" of the Company.
Parties to the CCTV Share Acquisition
The Company
Our executive offices are located at 405 Park Avenue, Suite 1202, New
York, New York 10022, and our telephone number is (212) 826-8942. Our historical
activities have been principally in the areas of manufacturing and investments.
Since February 1991, our primary activities have been represented by our
investment in JM Ney. Effective March 22, 2002, we sold substantially all of the
operating assets and certain liabilities of JM Ney to Deringer Mfg. Company of
Mundelein, Illinois ("Deringer"). Our current primary investment is a 25% equity
interest in MBC (excluding any MBC shares issued in the MBC Rights Offering)
which holds a 50% equity interest in CCTV. As described in this Proposal and
Proposal 2 of this Proxy Statement, we are seeking to acquire the remaining
equity interest in CCTV that we do not currently own.
15
ACL
ACL is a private company incorporated in the Republic of Cyprus,
registered in Nicosia on February 28, 1998. ACL's executive offices are located
at 165, Spyrou Araouzou St., Lordos Waterfront Court, 2 Floor, Office 201,
Limassol, Cyprus POB 56568. As of the date of this Proxy Statement, ACL has not
engaged in any commercial activities. Prior to the closing of the CCTV Share
Acquisition, ACL will acquire the shares of CCTV currently owned by Moscow
Telecommunications Company ("COMCOR"). The terms and conditions of the sale from
COMCOR to ACL have not yet been established, but it is currently contemplated
that ACL will acquire the CCTV shares from COMCOR for a yet to be determined
amount of consideration to be paid six months following ACL's acquisition of
such shares. After acquiring the shares of CCTV, ACL will become a party to the
general shareholders agreement, dated January 1, 2000, which was originally
among COMCOR, MBC and CCTV. ACL and COMCOR will also enter into a Subordination
Agreement pursuant to which the parties agree that ACL's obligations to COMCOR
will be subordinated to its obligations to our company.
Business of CCTV
CCTV provides a "last mile solution," based on hybrid fibre-coaxial
technology, for cable TV, high speed Internet access, data transmission and
voice services to residential and business customers. CCTV is licensed to
provide these services to up to 1.5 million subscribers in Moscow (44% of total
estimated households). Under a 20-year Services Agreement with COMCOR, an open
joint stock company organized under the laws of the Russian Federation, CCTV has
exclusive rights to utilize the Moscow Fibre Optic Network ("MFON") backbone for
the provision of its services in a defined area, with an additional right of
first refusal to utilize the MFON to access the remaining approximately 1.8
million homes outside this area. Currently, CCTV is marketing cable TV and
Internet services to nearly 90,000 homes passed in the districts of Chertanovo
and Khamovniki.
Reasons for the CCTV Share Acquisition
Assuming we raise commitments for $4,000,000 or more in new capital as
identified below, our Board of Directors believes that it is in the best
interest of our company and our stockholders to acquire the 50% equity interest
in CCTV to be held by ACL. The CCTV Share Acquisition is part of our larger goal
to obtain full ownership of CCTV. We cannot achieve this goal, and the MBC Share
Acquisition discussed in Proposal 2 cannot be completed, unless we complete the
CCTV Share Acquisition.
However, our Board of Directors has determined that we must receive, prior
to the closing of the CCTV Share Acquisition, directly or indirectly,
commitments for $4,000,000 or more in new capital, which new capital shall be
committed to be paid no later than thirty days after the closing of the CCTV
Share Acquisition, in order to provide additional liquidity to allow our company
to contribute the agreed upon capital to CCTV and to continue to be able to meet
our operating expenses and debt service requirements. The requisite commitments
for $4,000,000 or more in new capital may be raised through the MBC Rights
Offering. However, if the MBC Rights Offering were fully subscribed, our company
would be required to receive a waiver from ACL of a covenant in the Stock
Subscription Agreement that currently prohibits an issuance of securities in the
quantity necessary to satisfy a fully subscribed MBC Rights Offering. If we are
unable to raise commitments for $4,000,000 or more in connection with the MBC
Rights Offering, all or a portion of such amount may be raised through other
means, including but not limited to private placements of debt or equity
securities of our company or our subsidiaries. The closing of a debt or equity
private placement would also require a waiver from ACL as such financing
activities are also prohibited under the terms of the Stock Subscription
Agreement. Notwithstanding the foregoing, there can be no assurance that the
additional $4,000,000 or more of new capital will provide our company with
sufficient liquidity to meet our future financial needs.
Assuming our receipt, directly or indirectly, of commitments for
$4,000,000 or more in new capital prior to the closing, which new capital
committed to be paid no later than thirty days after the
16
closing of the CCTV Share Acquisition of the CCTV Share Acquisition, our Board
of Directors has approved the CCTV Share Acquisition and the terms of the Stock
Subscription Agreement. Our Board of Directors' decision to approve the CCTV
Share Acquisition is based on a number of factors including, but not limited to,
the following:
o Improves management control. Since CCTV represents our most important
investment at this time, our Board of Directors believes that it is
important to increase our influence over the management of CCTV. The
improved control which would be achieved through the CCTV Share
Acquisition would enable us to ensure that management decisions with
respect to CCTV's operations and finances are made with the best interests
of CCTV and the achievement of CCTV's objectives and long-term plans in
mind.
o Improves our company's ability to position CCTV and/or our company for
future equity or debt financing. The capital contributions that CCTV will
receive in connection with the consummation of the CCTV Share Acquisition
may not be adequate to fully meet CCTV's prospective capital requirements.
Our Board of Directors believes that the consolidation of the ownership
interests of CCTV into our company will improve our ability to negotiate
appropriate debt financing for CCTV and to attract future financing for us
and CCTV by increasing our market capitalization and the future liquidity
of our Common Stock.
o Potentially increases the return on our investment in CCTV. Our Board of
Directors believes that the potential return on our investment in CCTV is
commensurate with the risks being undertaken. Acquiring complete ownership
of CCTV will provide us with the opportunity to fully realize the benefits
of this investment if the projected growth in CCTV's subscribers and
subscriber revenue from cable television, Internet access and telephony
services is realized. Although our current stockholders will experience
significant dilution of their ownership of our company, there will be an
increase in the effective ownership of CCTV by our current stockholders.
In addition to the factors set forth above, in the course of its
deliberations concerning the CCTV Share Acquisition, our Board of Directors
consulted with our management team. Our Board of Directors also considered a
number of other factors relevant to the CCTV Share Acquisition including:
o Oral reports from management regarding CCTV's financial condition and
the specific terms of the Stock Subscription Agreement, the ACL
Registration Rights Agreement, the Voting Agreement and the Undertaking
Agreement (together, the "ACL Transaction Documents"); and
o Financial analyses prepared by our Chief Financial Officer.
Our Board of Directors also considered a number of potentially negative
factors in its deliberations concerning the CCTV Share Acquisition, including:
o Potential inability to meet CCTV's capital requirements. The Stock
Subscription Agreement calls for the Company and MBC to make cash capital
contributions of approximately $11,658,000 to provide CCTV with the amount
of capital which it believes is necessary to allow it to build-out the
Central Administrative Region of Moscow and to meet its operating
requirements until it becomes cash flow positive, which CCTV projects will
be in the third calendar quarter of 2003. However, there can be no
assurance that these capital contributions will be sufficient to meet
these defined objectives, or the future needs of CCTV if additional system
build-out plans are developed. When our company becomes the sole parent
company of CCTV, we will have the responsibility to provide or attract the
appropriate level of debt or equity financing for CCTV. Such additional
financing may have a dilutive
17
effect on our stockholders, or if such financing cannot be obtained, then
our company's investment in CCTV could be significantly impaired or
totally lost.
o Significant dilution to our existing stockholders' ownership of our
company. The CCTV Share Acquisition will result in the issuance of
4,000,000 shares of our Common Stock. Following the CCTV Share
Acquisition, the shares issued pursuant to the Stock Subscription
Agreement will represent 43% of our issued and outstanding Common Stock on
a fully diluted basis assuming the consummation of the MBC Share
Acquisition and the full subscription of the MBC Rights Offering. As a
result of the consummation of the CCTV and MBC Share Acquisitions,
existing stockholders' ownership of the Company will be diluted.
o Concentrates our company's risk into one investment. We historically
have had diverse investments, and for the past eleven years, among our
primary holdings we held a 100% interest in JM Ney, whose operations date
back approximately 190 years. The CCTV Share Acquisition in conjunction
with the MBC Share Acquisition would concentrate substantially all of our
available assets in CCTV, thus increasing our exposure to Russian
political and economic risks. Our investment in CCTV may be particularly
volatile because CCTV is a start-up company whose results of operations to
date have failed to meet the financial goals established in its original
business plan. Our ability to recover our investment in CCTV would be
greatly impaired if CCTV's business plans should fail.
o Decreases liquidity which may harm our company's ability to meet cash
flow requirements. We historically have had other assets and the earnings
of JM Ney to meet our cash flow requirements for administrative expenses,
debt service and the payment of dividends on our Class A Preferred Stock.
The increased investment in CCTV would place our assets into foreign
operations from which there is no expectation of dividends or
distributions in the near future. In addition, the capital contribution
obligations required under the Stock Subscription Agreement have
significantly reduced our liquidity and although we believe the $4,000,000
or more in new capital required by our Board of Directors to consummate
the transaction will be sufficient to meet our capital requirements, any
additional capital commitments we undertake on behalf of CCTV may further
compromise our ability to meet our financial obligations in the future.
Determination of the Purchase Price
The CCTV Share Acquisition was originally to be transacted between the
Company and COMCOR. The determination of the purchase price to be paid in the
CCTV Share Acquisition was based upon extensive negotiations conducted by
Messrs. Baker and Oliver Grace with representatives of COMCOR. COMCOR
subsequently withdrew from the transaction and ACL thereafter adopted the terms
negotiated by the Company and COMCOR. In negotiating the pricing terms of the
CCTV Share Acquisition, we considered many factors including, but not limited
to:
o The amount of assets contributed, and to be contributed, to CCTV by
COMCOR;
o CCTV's recent operating results; and
o An assessment of CCTV's prospects for near-term progress in (i) building
out the network, (ii) attracting subscribers for its services and (iii)
achieving profitability.
In view of the wide variety of factors considered, our Board of Directors
did not find it practicable to quantify or otherwise assign relative weight to
the specific factors considered. Our Board of Directors believes that the risks
associated with the CCTV Share Acquisition are outweighed by the potential
benefits of the transaction. As a result our Board of Directors agrees that the
CCTV Share Acquisition and the consummation of the CCTV Share Acquisition are
fair to, and in the best interests of,
18
our company and our stockholders, assuming our receipt, directly or indirectly,
of commitments for $4,000,000 or more in new capital prior to the closing of the
CCTV Share Acquisition, which new capital shall be committed to be paid no later
than thirty days after the closing of the CCTV Share Acquisition.
The Stock Subscription Agreement
Although we have summarized the material terms of the Stock Subscription
Agreement, the summary does not purport to be complete and is subject in all
respects to the specific provisions of the Stock Subscription Agreement. We
encourage you to carefully read the entire Stock Subscription Agreement and
amendment thereto, which we have included as Annexes B and C to this Proxy
Statement and are incorporated herein by reference.
Purchase and Sale of CCTV Shares
Pursuant to the terms of the Stock Subscription Agreement, as amended in
September 2002, we agreed, subject to the conditions set forth therein, to
acquire the 50% equity interest in CCTV to be held by ACL. In exchange for the
equity interest in CCTV, we will deliver at the closing of the CCTV Share
Acquisition (the "CCTV Closing") 4,000,000 shares of our Common Stock. Based
upon the average price of the Common Stock as of the date of this Proxy
Statement, approximately $4.00 per share, the total consideration we are paying
for the CCTV shares pursuant to the CCTV Share Acquisition will equal
approximately $16,000,000.
Conditions to the CCTV Closing
As provided in the Stock Subscription Agreement, the obligation of the
Company and ACL to consummate the CCTV Share Acquisition is subject to the
satisfaction or waiver of certain customary closing conditions in addition to
the following conditions:
o Each party shall have received all authorizations, consents and
approvals of governmental and regulatory authorities referred to in the
Stock Subscription Agreement;
o The MBC Share Acquisition shall have been consummated or shall be
consummated simultaneously with the CCTV Closing, and we shall hold or
shall have rights to acquire simultaneously with the CCTV Closing
substantially all of the capital stock of MBC;
o We shall have obtained your approval as required by the NASD and with
respect to the adoption of the Classified Board Amendment; and
o COMCOR shall have contributed to CCTV defined assets, including 55,675
shares, or 22.6%, of IAS, having an aggregate agreed upon value of
$17,488,873. This agreed upon value does not purport to represent either
the market value or the liquidation value of the assets to be contributed.
The agreed upon amount was partially derived from historical costs,
including allocated overhead costs, paid by COMCOR for the assets to be
contributed, using foreign currency exchange rates in effect at the times
the assets were acquired.
Post-Closing Covenants
We and ACL agreed to several post-closing covenants, including the
following;
o We shall make or cause MBC to make a cash capital contribution to IAS of
$9,455,080, which is to be followed within 30 days of an additional cash
contribution to CCTV of $2,202,787 and the contribution of shares of IAS
with an agreed upon value of $286,086.
19
o So long as ACL owns not less than 12.5% of our issued and outstanding
Common Stock, we shall not permit CCTV to cease to be our affiliate
without the prior written consent of ACL.
Indemnification
Pursuant to the Stock Subscription Agreement, ACL agreed to indemnify us
against certain losses due to breaches of the representations, warranties,
covenants or other agreements made by ACL in the ACL Transaction Documents, as
well as certain losses arising out of our securities filings where such losses
are based on information provided to us by ACL for inclusion in our filings.
Termination of the Stock Subscription Agreement
Either ACL or our company may terminate the Stock Subscription Agreement
prior to the closing of the CCTV Share Acquisition (i) by mutual written consent
or (ii) in the event that the other party has breached any material
representation, warranty or covenant contained in the Stock Subscription
Agreement in any material respect.
Other Agreements in Connection with the CCTV Share Acquisition
In addition to the Stock Subscription Agreement, we entered into or will
also enter into the following agreements in connection with the CCTV Share
Acquisition, including:
o Undertaking Agreement. On April 30, 2002, the Company, MBC and COMCOR
entered into an Undertaking Agreement pursuant to which COMCOR undertakes
to contribute to CCTV certain equipment and telecommunications networks of
the MFON and other assets of COMCOR. In addition COMCOR agreed to transfer
its CCTV shares to ACL.
o ACL Registration Rights Agreement. In connection with the CCTV Closing,
we will enter into a Registration Rights Agreement with ACL, the form of
which is attached to this Proxy Statement as Annex D. Pursuant to the
terms of the Registration Rights Agreement, we will grant ACL the right:
o to require us, subject to certain limitations, to register our
shares of Common Stock for resale with the Securities and Exchange
Commission; and
o to participate, subject to customary exclusions, in future Company
initiated registrations of our Common Stock with the Securities and
Exchange Commission.
o Voting Agreement. In connection with the CCTV Closing, we will also
enter into a Voting Agreement with ACL and certain of our stockholders
(the "Stockholders") pursuant to which, among other things, the
Stockholders and ACL agree that ACL will be entitled to representation on
our board of directors proportionate to ACL's relative percentage
ownership of our Common Stock.
20
Certain Related Parties and Related Party Transactions
Yuri Pripachkin is Chairman of the Board of Directors of CCTV and COMCOR
and is a former director of our company. Mr. Pripachkin owns directly and
indirectly a controlling interest in COMCOR. COMCOR currently owns 50% of the
equity interest of CCTV, which will be transferred to ACL pursuant to
Undertaking Agreement. As of the date of this Proxy Statement COMCOR is a party
to the following agreements with CCTV:
o CCTV receives signal delivery services and data network services from
COMCOR based on CCTV's exclusive access to the MFON for such services.
During the year ended December 31, 2001, CCTV paid or accrued $546,000 for
such charges. We expect this amount to grow as the number of subscribers
and related subscriber services increases.
o COMCOR presently grants CCTV the right to access approximately 190
co-location equipment stations in the Chertanovo and Khamovniki regions,
and it anticipates granting CCTV access to approximately 190 additional
co-location equipment stations in the Central Administrative Region of
Moscow. COMCOR will charge CCTV a monthly lease fee of $350 per node for
the use of such nodes.
We anticipate continuing each of the foregoing agreements following the
consummation of the CCTV Share Acquisition.
Accordingly, Mr. Pripachkin may indirectly benefit economically from the
proposed CCTV Share Acquisition.
Appraisal Rights
If you choose to vote against Proposal 1, Delaware law does not afford you
any appraisal rights since your shares are ineligible for such treatment
pursuant to Section 262 of the Delaware General Corporation Law.
Regulatory Approvals
ACL's acquisition of the CCTV shares from COMCOR and our acquisition of
the CCTV shares from ACL will each require the prior approval of the Russian
Federation Ministry of Anti-monopoly Policy. The Ministry's approval process
generally takes thirty days to complete.
Accounting Treatment
In accordance with generally accepted accounting principles, we expect
that the CCTV Share Acquisition will be accounted for using the purchase method
of accounting. Accordingly, the purchase price will be allocated based upon the
estimated fair values of CCTV's net assets at the date of the acquisition. Any
excess of the purchase price over the fair value of the net assets acquired will
be recorded as goodwill.
Material U.S. Federal Income Tax Consequences
The consummation of the CCTV Share Acquisition will not have any material
U.S. Federal income tax consequences on our company or our stockholders. The
U.S. Federal tax consequences, if any, to ACL or its stockholders have not been
evaluated by the Company.
WITH RESPECT TO PROPOSAL 1, OUR BOARD RECOMMENDS THIS PROPOSAL, ASSUMING THAT
PRIOR TO THE CLOSING OF THE CCTV SHARE ACQUISITION THE COMPANY OR MBC SHALL
RECEIVE COMMITMENTS OF $4,000,000 OR MORE OF NEW CAPITAL, AND SUCH NEW CAPITAL
SHALL BE COMMITTED TO BE PAID NO LATER THAN THIRTY DAYS AFTER THE CLOSING OF THE
CCTV SHARE ACQUISITION.
21
PROPOSAL 2:
APPROVAL OF THE ISSUANCE OF COMMON STOCK
IN THE MBC SHARE ACQUISITION
General
We intend to enter into an Exchange Agreement with the MBC Transferors
which provides for our acquisition of the remaining outstanding capital stock of
MBC that we currently do not own as well as the MBC shares subscribed for in the
MBC Rights Offering.
Pursuant to the terms of the Exchange Agreement, we have agreed to issue
up to 3,250,050 shares of Common Stock, which includes the maximum number of
additional shares of Common Stock issuable to the participants in the MBC Rights
Offering, assuming full subscription of the MBC Rights Offering. If the MBC
Rights Offering is subscribed such that we would issue in excess of
approximately 2,900,000 shares, prior to such issuance, we would need to receive
a waiver from ACL of a covenant set forth in the Stock Subscription Agreement
that currently prohibits any issuance of shares that would cause the total
number of shares of Common Stock to be issued and outstanding immediately
following the closing of the CCTV and MBC Share Acquisitions, excluding the
shares to be issued pursuant to the Stock Subscription Agreement, to exceed
5,000,000. The issuance of our Common Stock to the MBC Transferors as
consideration for the purchase of the MBC shares shall be based upon the
exchange ratio described below. Pursuant to applicable NASD rules and in
connection with applicable Delaware law, described in more detail below, we seek
specific approvals relating to the MBC Share Acquisition.
Stockholder Approval Requirements
NASDAQ Vote
Our Common Stock is quoted on the NASDAQ National Stock Market. NASD Rule
4350(i)(1)(C) requires stockholder approval of the issuance of Common Stock in
connection with the MBC Share Acquisition because:
o certain of our directors, officers and significant stockholders have
greater than a 5% equity interest in MBC and the stock consideration to be
received by them in connection with the MBC Share Acquisition, as well as
the issuance of shares of Common Stock to MBC, would result in a greater
than 5% increase in our outstanding Common Stock and voting power;
o the aggregate amount of Common Stock being issued to MBC as
consideration will upon issuance represent more than 20% of the voting
power of the Common Stock outstanding prior to the issuance; and
o the number of shares of Common Stock to be issued to MBC will be in
excess of 20% of the number of shares or Common Stock outstanding prior to
the issuance.
In addition, NASD Rule 4350(i)(1)(B) requires stockholder approval of any
issuance of securities that will result in a change of control of the issuer.
Although the term "change of control" is not defined in the NASD rules, the MBC
Share Acquisition, together with the CCTV Share Acquisition, may be deemed
related transactions that constitute a "change of control" of the Company.
Delaware Law Vote
Since (i) our executive officers and directors have equity interests in
MBC and (ii) certain of our executive officers and directors owe a fiduciary
duty to both companies, we are also seeking the approval of the MBC Share
Acquisition by the holders of a majority of the outstanding shares of our Common
22
Stock not controlled by our directors or executive officers, as provided by
Delaware 144. As of the date of this Proxy Statement, our directors and
executive officers held approximately 16.7% of our issued and outstanding Common
Stock (this calculation does not include any unexercised convertible securities
held by such persons that are convertible into shares of Common Stock).
Parties to the MBC Share Acquisition
The Company
A description of our business can be found under the heading "Approval of
the Issuance of Common Stock in the CCTV Share Acquisition - The Company" in
Proposal 1 of this Proxy Statement (see page 15).
The MBC Transferors
The MBC Transferors are comprised of shareholders of MBC, other than the
Company, who will tender their shares in the MBC Share Acquisition, including
those parties subscribing for shares in the MBC Rights Offering. Our officers,
directors and their affiliates taken as a whole presently have a beneficial
interest in, or voting control of approximately 46.9% of MBC's issued and
outstanding stock. This figure excludes the 25% equity interest in MBC that we
own as well as the MBC shares that may be issued to those officers, directors
and their affiliates who may participate in the MBC Rights Offering. The
overlapping interests of certain of our stockholders and the MBC Transferors are
described in greater detail under the heading, "-- Participation of Certain
Related Parties in the MBC Share Acquisition" (see page 26).
MBC
MBC is a Cyprus limited liability company formed in 1995 to act as a
holding company for investments in Russian companies. While MBC's registered
office is located in Cyprus its executive offices are located at 405 Park
Avenue, Suite 1202, New York, New York. At present, MBC's primary investment is
its 50% shareholding in CCTV. MBC also has a 1.8% ownership interest in IAS, a
Russian telecommunications company. MBC was capitalized with approximately US$20
million, of which US$18 million was raised in 2000, and the remaining portion
was contributed prior to 2000. MBC's shareholders include the Company, parties
affiliated with the Company and a small number of investment funds and private
investors.
Reasons for the MBC Share Acquisition
Our Board of Directors believes that it is in the best interest of our
company and our stockholders to acquire the remaining equity interest in MBC
that we do not currently own as well as the MBC shares subscribed for in the MBC
Rights Offering. The MBC Share Acquisition is part of our larger goal to obtain
full ownership of CCTV. We cannot achieve this goal, and the CCTV Share
Acquisition discussed in Proposal 1 cannot be completed, unless we complete the
MBC Share Acquisition.
Our Board of Directors has approved the MBC Share Acquisition and the
terms of the Exchange Agreement. The reasons for the MBC Share Acquisition are
substantially identical to those for the CCTV Share Acquisition. The MBC Share
Acquisition will allow us to improve our control over the management of CCTV and
the execution of CCTV's business plan. Moreover, the acquisition of CCTV in its
entirety will improve our ability to negotiate appropriate debt financing for
CCTV and to attract future financing for us and CCTV by increasing our market
capitalization and liquidity for our stockholders as well as increase our
potential return on our investment in CCTV.
23
Our Board of Directors also considered a number of additional factors
unique to the MBC Share Acquisition including, but not limited to, the
following:
o Required to Complete CCTV Acquisition. Completion of the CCTV Share
Acquisition, the advantages of which are discussed above in Proposal 1, is
conditioned upon the consummation of the MBC Share Acquisition. Therefore,
we will be unable to achieve its business strategy and objectives unless
the MBC Share Acquisition is completed.
o Provides Source to Continue Funding CCTV's Business Plans. The CCTV
Share Acquisition requires that we contribute MBC's remaining shares of
IAS to CCTV and to invest approximately $11,658,000 in cash into CCTV. A
capital contribution of $5 million was made by MBC in May 2002. The
completion of the MBC Share Acquisition will allow us to contribute the
IAS shares; moreover it provides us with additional cash, currently held
by MBC, to be used for CCTV's capital needs and our own working capital
and debt service requirements.
In addition to the factors set forth above, in the course of its
deliberations concerning the MBC Share Acquisition, our Board of Directors
consulted with our management team. Our Board of Directors also considered a
number of other factors relevant to the MBC Share Acquisition including:
o The opinion provided by J'son & Partners dated September 13, 2002
stating that the MBC Share Acquisition is fair from a financial point of
view to our stockholders. We encourage you to read carefully the entire
opinion of J'son & Partners, which we have included as Annex A to this
Proxy Statement and is incorporated herein by reference. We also encourage
you to read carefully the description of the methodology used by J'son &
Partners in the preparation of its opinion found under the heading "-J'son
& Partners Opinion." (see page 27)
o Oral reports from management regarding MBC's financial condition and the
specific terms of the Exchange Agreement and the MBC Registration Rights
Agreement (together, the "MBC Transaction Documents"); and
o Financial analyses prepared by our Chief Financial Officer.
Our Board of Directors also considered a number of potentially negative
factors in its deliberations concerning the MBC Share Acquisition, including our
potential inability to meet CCTV's capital requirements, the concentration of
our risk in one investment and the decrease in our liquidity as discussed in
connection with Proposal 1. The most notable potentially negative factor in
connection with the MBC Share Acquisition is the dilutive effect that the MBC
Share Acquisition will have on our existing stockholders. Following the MBC
Share Acquisition, assuming the full subscription for the MBC Rights Offering
and the consummation of the CCTV Share Acquisition, the shares issued pursuant
to the Exchange Agreement will represent approximately 35% of our issued and
outstanding Common Stock on a fully diluted basis. In addition our Board of
Directors considered the fact that as a result of the MBC Share Acquisition our
directors and officers will receive up to approximately 63% of the consideration
provided in the MBC Share Acquisition.
Determination of the Exchange Ratio
The determination of the exchange ratio used in the MBC Share Acquisition
was based upon:
o Negotiations conducted by Messrs. Baker and Oliver Grace with certain
MBC shareholders, including Mr. James Reeves and representatives of the
Firebird Funds (these MBC shareholders are not our affiliates);
o The value of MBC's ownership interest in CCTV;
24
o The value of MBC's assets unrelated to CCTV, including cash, notes and
interest receivable from CCTV; and
o The value of MBC's investment in IAS in relation to the provisions of
the CCTV Share Acquisition.
In view of the wide variety of factors considered by our Board of
Directors, our Board of Directors did not find it practicable to quantify or
otherwise assign relative weight to the specific factors considered. Our Board
of Directors believes that the risks associated with the MBC Share Acquisition
are outweighed by the potential benefits of the transaction. As a result our
Board of Directors agrees that the MBC Share Acquisition and the consummation of
the MBC Share Acquisition are fair to and in the best interests of our company
and our stockholders.
The Exchange Agreement
Although we have summarized the material terms of the Exchange Agreement,
the summary does not purport to be complete and is subject in all respects to
the specific provisions of the Exchange Agreement. We encourage you to carefully
read the entire Exchange Agreement, which we have included as Annex E to this
Proxy Statement and is incorporated herein by reference.
Exchange of MBC Shares for our Common Stock
Pursuant to the terms of the Exchange Agreement, we agreed, subject to the
conditions set forth therein, to exchange 150 shares of our Common Stock for
each MBC share, or right to receive an MBC share, tendered by the MBC
Transferors. If the MBC Transferors tender all of their shares, or rights to
receive shares, in the MBC Share Acquisition and the other conditions set forth
in the Exchange Agreement are satisfied or waived, assuming the full
subscription of the MBC Rights Offering, we will issue an aggregate of 3,250,050
shares of our Common Stock. If the MBC Rights Offering is subscribed such that
we would issue in excess of approximately 2,900,000 shares, prior to such
issuance, we would need to receive a waiver from ACL of a covenant set forth in
the Stock Subscription Agreement that currently prohibits any issuance of shares
that would cause the total number of shares of Common Stock to be issued and
outstanding immediately following the closing of the CCTV and MBC Share
Acquisitions, excluding the shares to be issued pursuant to the Stock
Subscription Agreement, to exceed 5,000,000. Following the acquisition of all of
the MBC Transferor's shares, MBC will be wholly-owned by the Company. Based upon
the average price of the Common Stock as of the date of this Proxy Statement,
approximately $4.00 per share, the total consideration we are paying for the MBC
shares pursuant to the MBC Share Acquisition will equal approximately
$13,000,000.
Conditions to the MBC Closing
As provided in the Exchange Agreement, our obligation and the MBC
Transferors' obligation to consummate the MBC Share Acquisition is subject to
the satisfaction or waiver of certain customary closing conditions in addition
to the following:
o Each Party shall have received all authorizations, consents and
approvals of governmental and regulatory authorities referred to in the
Exchange Agreement;
o The CCTV Share Acquisition shall have been consummated or shall be
consummated simultaneously with the closing of the MBC Share Acquisition
(the "MBC Closing"), and we shall hold or shall have rights to acquire
simultaneously with the MBC Closing substantially all of the capital stock
of CCTV; and
o We shall have obtained your approval as required by the NASD and with
respect to the adoption of the Classified Board Amendment.
25
Post-Closing Covenants
We and the MBC Transferors agreed to a number of post-closing covenants
including our covenant to make or cause MBC to make a cash capital contribution
to CCTV of $9,455,080. This capital contribution is to be followed within 30
days by our additional cash contribution to CCTV of $2,202,787 and the
contribution of shares of IAS having an agreed upon value of $286,086.
Indemnification
Pursuant to the Exchange Agreement, the MBC Transferors severally agree to
indemnify us against certain losses due to breaches of the representations,
warranties, covenants or other agreements made by the MBC Transferors in the MBC
Transaction Documents, as well as certain losses arising out of our securities
filings where such losses are based on information provided to us by the MBC
Transferors for inclusion in our filings.
Termination of the Exchange Agreement
The Exchange Agreement may be terminated by either party if the per share
value of our Common Stock is less than Eight Dollars ($8.00) per share or
greater than Twelve Dollars ($12.00) per share on the date on which all of the
conditions to closing have been satisfied and/or waived by the parties. In
addition, the Exchange Agreement may be terminated prior to the closing of the
MBC Share Acquisition (i) by mutual written consent of our company and the
Shareholder Representative; (ii) by our company in the event that any MBC
Transferor has breached any material representation, warranty or covenant
contained in the Exchange Agreement; or (iii) by the Shareholder Representative
in the event that we have breached any material representation, warranty or
covenant contained in the Exchange Agreement.
The Registration Rights Agreement
In connection with the MBC Closing, we will enter into a Registration
Rights Agreement with the MBC Transferors, the form of which is attached to this
Proxy Statement as Annex F. Pursuant to the terms of the Registration Rights
Agreement, we will grant the MBC Transferors right to participate, subject to
customary exclusions, in future Company initiated registrations of our Common
Stock with the Securities and Exchange Commission initiated by our company.
Participation of Certain Related Parties in the MBC Share Acquisition
Our officers, directors and their affiliates, taken as a whole, presently
have a beneficial interest in, or voting control of, approximately 46.9% of
MBC's issued and outstanding stock. This figure excludes the 25% equity interest
in MBC that we own as well as the MBC shares that may be issued to those
officers, directors and their affiliates who may participate in the MBC Rights
Offering.
Under the terms of the MBC Share Acquisition, these officers, directors
and significant stockholders and their affiliates would benefit economically
from the MBC Share Acquisition by increasing their respective ownership of
shares of our Common Stock and receiving the enhanced liquidity associated with
our Common Stock, as opposed to the MBC shares, for which there is currently no
public market.
As of September 24, 2002, the following officers and directors of the
Company and their affiliates owned shares in MBC:
o Oliver R. Grace, Jr. is a Director and President and Chief Executive
Officer of our company. Mr. Grace is also Chairman of the Board of
Directors of MBC and serves on the
26
Board of Directors of CCTV. Mr. Oliver Grace is the brother of John S.
Grace, also a Director. Mr. Oliver Grace may directly and indirectly be
deemed to share beneficial ownership of 16.3% of MBC's outstanding shares
held by certain affiliated entities. In addition, Mr. Oliver Grace may be
deemed to share beneficial ownership of an additional 0.6% of the
outstanding shares of MBC held by trusts and other vehicles for the
benefit of relatives and other investors.
o Francis E. Baker is Chairman and Secretary of our company. Mr. Baker is
also a Director and President of MBC and a Director of CCTV. Mr. Baker
holds approximately 2.5% of the outstanding shares of MBC.
o Peter N. Bennett is a Director of our company. Mr. Bennett holds
approximately 1.0% of the outstanding shares of MBC.
o John S. Grace is a Director and employee of our company. Mr. John Grace
is the brother of Oliver R. Grace, Jr. Mr. John Grace may be deemed to
share beneficial ownership of 15.5% of the outstanding shares of MBC held
by certain affiliated entities. In addition, Mr. John Grace may be deemed
to share beneficial ownership of an additional 6.1% of the outstanding
shares of MBC held by trusts and other vehicles for the benefit of certain
relatives and other investors.
o Louis A. Lubrano is a Director of our company. Mr. Lubrano's daughter,
Anne Marie Lubrano, holds approximately 0.5% of the outstanding shares of
MBC.
o Thomas McPartland is a Director of our company. Mr. McPartland holds
approximately 2.5% of the outstanding shares of MBC.
o James J. Pinto is a Director of our company. Mr. Pinto holds
approximately 1.8% of the outstanding shares of MBC.
o Andrew M. O'Shea is Chief Financial Officer of our company and Chief
Financial Officer of MBC. Mr. O'Shea holds less than 0.1% of the
outstanding shares of MBC.
In addition to the foregoing, we are informed that relatives of Oliver R.
Grace, Jr. and John S. Grace may be deemed to have beneficial ownership of
approximately 1.4% of the outstanding shares of MBC.
As a result of the potential economic benefits to be derived from the
increased beneficial ownership of shares of our Common Stock, the foregoing
persons may have conflicts of interests with respect to their fiduciary duties
to our company as they negotiate and carry out the terms of the proposed MBC
Share Acquisition. Moreover, certain of our executive officers and directors who
are also officers and directors of MBC may be deemed to have a conflict of
interest with respect to their fiduciary duties to each entity that they serve
as a result of the necessity of simultaneously acting in our interests and on
our behalf, on the one hand, and MBC, on the other hand. In recognition of these
potential conflicts, in order to consummate the MBC Share Acquisition, our Board
of Directors has recommended that, in addition to the Nasdaq Vote, our company
also receive the vote of a majority of the shares not controlled by our
executive officers and directors prior to consummating the MBC Share
Acquisition.
J'son & Partners Opinion
We ("the Company") retained J'son & Partners, a multinational consultancy,
specializing in converging telecommunications, information technology markets,
and consumer electronics to render its opinion as to the fairness of the
exchange of up to 2,250,000 shares of our Common Stock for 15,000
27
shares of MBC. J'Son & Partners has not evaluated (a) the fairness of the MBC
Rights Offering, (b) the fairness of the consideration to be paid to the
participants of the MBC Rights Offering, or (c) the fairness of the Company's
extension of its Exchange Offer to any MBC shares that may be issued pursuant to
the MBC Rights Offering.
At the meeting of our Board of Directors on June 28, 2002, J'son &
Partners delivered its oral opinion, which was subsequently confirmed in writing
on September 13, 2002, that as of those respective dates, the MBC Share
Acquisition was fair from a financial point of view to the Company and its
stockholders.
The J'son & Partners opinion does not constitute a recommendation to the
Company's stockholders to vote in favor of Proposal 2, and our stockholders
should not rely on J'son & Partners' opinion as a recommendation.
1. Scope of Assignment
Since the transaction in question is a part of a group of transactions,
that involves the issuance of 4,000,000 shares of the Company's Common Stock to
ACL for 50% of CCTV, J'son & Partners has been specifically asked to provide an
opinion that takes into consideration all of the transactions that should take
place in order for the exchange of our shares for MBC shares to be effective.
J'son & Partners' analysis included the following main elements of the
overall transactions:
(i.) MBC's contribution of US$ 5,000,000 to CCTV during May 2002;
(ii.) COMCOR's (the owner of the CCTV shares prior to ACL) contribution of
approximately US $17,489,000 worth of assets to CCTV prior to the
CCTV Share Acquisition;
(iv.) COMCOR's sale of its stake in CCTV to ACL immediately prior to the
CCTV Share Acquisition;
(v.) The Company's issuance of 2,250,000 shares of its Common Stock in
exchange for 15,000 shares of MBC, which represents all the issued
and outstanding shares of MBC not owned by the Company prior to any
shares of MBC common stock that may be issued pursuant to the MBC
Rights Offering;
(vi.) The Company's issuance of 4,000,000 shares of its Common Stock to
ACL for 50% of CCTV that ACL possesses.
(vii.) Upon closing of the CCTV and MBC Share Acquisitions, the Company
will invest approximately US $11,658,000 of cash and MBC's shares of
IAS into CCTV.
In addition to the arrangements described herein, the Company may issue
additional shares of its common stock to raise capital to support both CCTV's
and the Company's operations. This issuance may be accomplished in whole or in
part through the exchange into the Company's Common Stock of newly issued MBC
shares pursuant to the MBC Rights Offering to MBC stockholders and other
accredited investors who may subscribe to unused MBC rights. However, the cost
of the new capital and the resultant dilution to the existing stockholders of
the Company, and the impact that such dilution may have on the market price of
the Company's common stock are outside the scope of J'son & Partners' opinion.
In order to arrive at the conclusion as to the fairness of the MBC Share
Acquisition, J'son & Partners also looked into the net assets of the Company,
MBC and CCTV. Furthermore, since CCTV appears to be a key asset of both the
Company and MBC, the focus in J'son & Partners' research was on establishing a
fair value of CCTV, based on the following methods:
o Discounted projected future cash flow of CCTV; and.
o Valuation of CCTV based on multiples of reasonably comparable companies.
Although J'son & Partners undertook certain field research activities in
order to obtain relevant
28
information on the tariffs and performance of the main pay-TV operators in
Moscow, in conducting its research J'son & Partners relied, without independent
investigation and verification, upon all information that was available from
public sources as well as other information supplied to J'son & Partners on
behalf of the Company by our management.
The full text of J'son & Partners' opinion, which describes, among other
things, the assumptions made, general procedures followed, matters considered
and the limitations of the review undertaken by J'son & Partners in rendering
its opinion is included in this Proxy Statement as Annex A.
2. Process Review
The complexity of the CCTV and MBC Share Acquisitions called for a
balanced approach to assessing the fairness of the MBC Share Acquisition.
Instead of looking into each individual transaction, J'son & Partners evaluated
the ultimate result for the parties involved in terms of value of the assets
gained through the exchange of equity and cash contributions, as well as
obligations derived from the transactions in question.
J'son & Partners used two methodologies to assess the fairness of the MBC
Share Acquisition:
o The evaluation of the assets owned by the existing stockholders of the
Company before the CCTV and MBC Share Acquisitions and after such planned
transactions are completed;
o A comparison of assets to be obtained by the Company from MBC and CCTV
through the MBC and CCTV Share Acquisitions, and the purchase price to be
paid by the Company to acquire such assets.
The consideration should be deemed to be fair if the Company will have an
incremental increase in enterprise value as a result of the MBC Share
Acquisition, under the first methodology, or if fair value of acquired assets
exceeds fair value of assets paid for the acquisition, under the second
methodology .
Although the two methodologies are slightly different in the way of
calculating "fairness" of the MBC Share Acquisition, they are based on the same
quantitative assumptions, namely the fair value of CCTV (which is a core asset
for both the Company and MBC) and the net book value of other assets in the
Company and MBC.
2.1 Comparison of the Company's stockholders' assets before and after the
transaction
In order for the consideration to be fair, the fair value of the assets
owned by the Company's stockholders after all the transactions in question are
completed should be equal or greater than the value of its assets before the
transactions are executed.
As a result of the proposed MBC and CCTV Share Acquisitions, the Company's
stockholders will increase their interest in CCTV from 12.5% to 100%, but their
shareholdings will be diluted through the issuance of additional 2,250,000
shares to MBC and the issuance of 4,000,000 shares to ACL. Assuming that CCTV's
value is estimated at approximately US $72,000,000 (see Sections 3.1 and 3.2
below for discussion of the determination of this value), and the net assets of
Andersen Group, Inc. and MBC are evaluated at approximately US $10,279,000 and
US $1,858,000, respectively excluding the effects of their indirect or direct
investments in CCTV, the proposed MBC Share Acquisition should be deemed to be
fair from a financial point of view to the Company's stockholders if the number
of shares issued by the Company to ACL does not exceed 4,000,000.
2.2 Comparison of assets contributed and obtained by the Company's
stockholders
J'son & Partners applied an alternative method that compares the assets to
be obtained by our stockholders as a result of the proposed transactions against
the cost in terms of the dilution through the
29
issuance of additional shares of our Common Stock.
If the fair value of CCTV is US$ 72,000,000, the fair value of the Company
prior to the transaction is US$ 19,740,000. The existing stockholders of the
Company will see their shareholdings diluted as a result of issuing 2,250,000
shares to MBC and 4,000,000 shares to ACL. Through this dilution they will
directly and indirectly give up about 84% of the existing fair value of the
Company, or US$ 14,690,000.
At the same time, they will obtain the following assets: 75% of MBC's net
assets (excluding stake in CCTV), 75% of 50% of CCTV (as a result of MBC related
transaction) and additional 50% of CCTV (through the transaction with ACL). Fair
value of the acquired assets to the existing shareholders of the Company will be
US$ 16,480,000 (adjusted for dilution). This fair value of acquired assets will
exceed the fair value of the Company's stock to be exchanged. While the
Company's stockholders contribute approximately US $ 14,690,000 worth of assets
(through dilution of their ownership in net assets of the Company and MBC), they
should obtain approximately US $ 16,480,000 worth of assets, without taking into
consideration any liquidity discount. If the liquidity discount for the assets
obtained does not exceed 12%, the value of acquired assets is higher than the
value of contributed assets, and the transaction is fair to the stockholders.
2.3 Estimating Net Assets
One of the key issues in assessing the fairness of the transactions in
question is the valuation of CCTV as well as the net assets of the Company and
MBC, exclusive of their respective direct or indirect investments in CCTV. J'son
& Partners estimated the net assets of MBC at approximately US $1,834,000 based
on the data as of May 31, 2002 submitted by MBC's management. The Company's net
assets have been evaluated at US $ 10,279,000 based on the data as of May 31,
2002 supplied by the management of the Company.
3. CCTV Valuation
3.1 Discounted Cash Flow
Discounted cash flow (DCF) has been used as a primary method to arrive to
a fair valuation of CCTV. DCF valuation supplied by J'son & Partners are as of
July 1, 2002.
3.1 DCF Analysis
Weighted average cost of capital used in the valuation was assumed to
gradually decline from 15.1% in 2003 to 14.8% in 2006 to account for
expectations of decline in risk-free interest and risk premium required for
Russian assets. The Weighted Average Cost of Capital was calculated based on the
understanding that CCTV would be funded largely through equity financing rather
than debt financing. For the purpose of assessing fairness to the Company's
stockholders of the proposed equity exchange it was conservatively assumed that
there would be no debt financing available to CCTV through to year 2005.
Successful fulfillment of the CCTV business plan would be conditional upon
raising additional US $69,000,000 in equity financing in the next three years.
According to projections, if the business develops according to the plan, the
company would not need further external financing to fulfill its subscriber
targets under the existing license.
It was also assumed that there would be no significant increase in CCTV's
cash flow beyond the point in time where CCTV passes 1,500,000 homes, currently
a limitation under CCTV's license. One of the key assumptions was that CCTV
should be able to reach a 40% penetration level for its cable TV services in
homes passed within six months following the launching of the network in such
homes. Moreover, approximately 86% of new subscribers should represent
subscribers willing to pay a monthly subscription fee of approximately US$1.10,
which is close to the average fee collected from every household by the Moscow
municipal authorities for free television broadcast from every household. The
30
remaining 14% should be willing to pay a monthly subscription fee ranging from
US $ 6 to 11 to receive additional channels and services. CCTV estimates that
the total number of pay-TV subscribers will reach 9% of the total number of its
subscribers in 2002. The Company management believes that 14% of pay-TV
subscribers will be achieved in subsequent years.
As a result of the DCF analysis, the value of CCTV was evaluated at
approximately US $72,000,000.
3.2 Comparable Multiples Approach
J'Son & Partners determined that ratios EV/S (Enterprise Value to Sales),
EV/EBITDA (Enterprise Value to Earnings Before Interest, Tax, Depreciation and
Amortization) and EV/E (Enterprise Value to Earnings) could not be applied to
value CCTV. CCTV is an early stage growth company with a predominantly fixed
cost base. As a consequence, until breakeven, these ratios would be meaningless.
The ratios could be used for valuation only when CCTV enters a relatively mature
stage of its development. On the other hand, EV/Subs (Enterprise Value per
Subscriber) and EV/HP (Enterprise Value per Home Passed) are more suitable for
comparison since they are based on the future revenue stream that would be
generated by each subscriber or home passed.
Comparative analysis shows that CCTV's EV/Subs and EV/HP ratios are close
to those of its emerging markets peers and below those of European and American
markets. Based on the multiples for comparable cable TV networks in emerging
markets, CCTV could be evaluated at approximately US $ 77,000,000. The
comparable multiples approach demonstrates an even a higher valuation of CCTV
than the DCF approach.
4. Conclusion
The summary presented above is not a complete description of analyses
underlying J'son & Partners opinion or its presentation to the Company's Board
of Directors. J'son & Partners strongly believes that the summary presented
above must be considered as a whole and that selected portions of its analyses
and the factors considered, without considering all such analyses and factors,
could create incomplete view of the process behind assessing the fairness of the
consideration to the Company's stockholders.
Appraisal Rights
If you choose to vote against Proposal 2, Delaware law does not afford you
any appraisal rights since your shares are ineligible for such treatment
pursuant to Section 262 of the Delaware General Corporation Law.
Regulatory Approvals
We are not required to obtain any regulatory approvals in connection with
the consummation of the MBC Share Acquisition.
Accounting Treatment
In accordance with generally accepted accounting principles, we expect
that the CCTV Share Acquisition will be accounted for using the purchase method
of accounting. Accordingly, the purchase price will be allocated based upon the
estimated fair values of CCTV's net assets at the date of the acquisition. Any
excess of the purchase price over the fair value of the net assets acquired will
be recorded as goodwill.
31
Material U.S. Federal Income Tax Consequences
The consummation of the MBC Share Acquisition will not have any material
U.S. Federal income tax consequences on our company or our stockholders. The
U.S. Federal tax consequences, if any, to the MBC stockholders have not been
evaluated by the Company.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL
2.
32
PROPOSAL 3:
THE SHARE INCREASE AMENDMENT
Description of the Share Increase Amendment
On July 16, 2002, our Board of Directors approved and declared it to be
advisable that you approve the Share Increase Amendment, and has directed that
the Share Increase Amendment be submitted to you at the Combined Meeting for
your approval. The Share Increase Amendment must be approved by you before the
CCTV and MBC Share Acquisitions can be completed. We encourage you to carefully
read the proposed Share Increase Amendment, which is one of the amendments
reflected in our Amended and Restated Certificate of Incorporation attached as
Annex G to this Proxy Statement and incorporated herein by reference.
Reasons for the Share Increase Amendment
We do not have enough unissued authorized shares of Common Stock to effect
both of the CCTV and MBC Share Acquisitions. As of September 24, 2002, there
were 2,099,908 shares of Common Stock and 188,006 shares of our preferred stock,
par value $.01 per share ("Preferred Stock"), issued and outstanding. After
giving effect to the issuance of shares of Common Stock upon the exercise or
conversion of our currently existing stock options, Preferred Stock and 10 1/2%
Convertible Subordinated Debentures due 2007 ("Debentures"), 3,285,672 shares of
Common Stock are authorized and remain available for issuance. If both of the
CCTV and MBC Share Acquisitions are completed as proposed, depending on how
fully subscribed the MBC Rights Offering is, we will need to issue between
approximately 6,250,000 and 7,250,050 shares of our Common Stock.
Our Board of Directors believes that it is in the best interest of the
Company and in your best interests as a stockholder to increase the number of
authorized shares of Common Stock. The proposed Share Increase Amendment will
provide us with a sufficient number of authorized shares to complete the CCTV
and MBC Share Acquisitions as well as giving us flexibility in the future by
assuring us that there will be a sufficient number of authorized but unissued
shares of Common Stock available for financing requirements, possible
acquisitions and other corporate purposes. We currently have no plans to issue
additional shares of Common Stock, other than as described in this Proxy
Statement and except in connection with the exercise of outstanding options and
warrants and conversion of our Preferred Stock and Debentures.
If you approve the Share Increase Amendment, we will have 12,000,000
authorized shares of Common Stock. If both of the CCTV and MBC Share
Acquisitions are completed as proposed, immediately following the closings,
depending on the subscription rate of the MBC Rights Offering, between
approximately 2,035,622 and 3,035,672 shares of Common Stock would remain
available for future issuance.
Possible Effects of the Share Increase Amendment
Until issued, the increase in the number of authorized shares of Common
Stock will not have any immediate effect on your rights as an existing
stockholder. However, following the issuance of shares pursuant to the CCTV and
MBC Share Acquisitions, your percentage equity ownership in the Company will
decrease significantly. Depending on how fully subscribed the MBC Rights
Offering is, we anticipate issuing between approximately 6,250,000 and 7,250,050
shares of Common Stock in these transactions. This issuance will increase the
number of issued and outstanding Common Stock from 2,099,908 to between
approximately 8,349,908 and 9,349,958; therefore your proportional ownership in
the Company will be reduced significantly.
When issued, the additional shares authorized by this proposed amendment
will have the same rights and privileges as the shares of Common Stock currently
authorized, issued and outstanding. Our
33
Board of Directors may authorize the issuance of such shares of Common Stock
without further vote or action by you, except as contemplated hereby and as may
be required by applicable laws or the rules of any national securities exchange
or market on which shares of Common Stock are then listed. Holders of Common
Stock do not have any preemptive rights, and therefore no stockholders have any
preferential right to purchase any of the additional shares of Common Stock when
such shares are issued.
The additional authorized shares of Common Stock could also create
impediments to a takeover or change in control of the Company. Shares of
authorized and unissued Common Stock could be issued in one or more transactions
that would make a change in control of the Company more difficult, and therefore
less likely. Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of outstanding shares
of Common Stock, and such additional shares could be used to dilute the stock
ownership or voting rights of persons seeking to obtain control of the Company.
Accordingly, the increase in the number of authorized shares of Common Stock may
deter a future takeover attempt which holders of Common Stock may deem to be in
their best interest or in which holders of Common Stock may be offered a premium
for their shares over the then current market price. The Share Increase
Amendment was not approved by our Board of Directors in response to any
threatened or perceived takeover threat, and we have no knowledge of such a
threat as of the date of this Proxy Statement. Our Board of Directors has no
current plans or intention to issue shares of Common Stock, except in connection
with the exercise of outstanding options and warrants, conversion of our
Preferred Stock and Debentures and the CCTV and MBC Share Acquisitions.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL
3.
34
PROPOSAL 4:
THE CLASSIFIED BOARD AMENDMENT
On July 16, 2002, our Board of Directors approved and declared it to be
advisable that you approve the Classified Board Amendment, and has directed that
the Classified Board Amendment be submitted to you at the Combined Meeting for
your approval. The Classified Board Amendment would provide for a Board of
Directors divided into three classes of directors serving staggered three-year
terms. The Classified Board Amendment must be approved by you before the CCTV
and MBC Share Acquisitions can be completed. We encourage you to read carefully
the proposed Classified Board Amendment which is one of the amendments reflected
in our Amended and Restated Certificate of Incorporation attached as Annex G to
this Proxy Statement and incorporated herein by reference.
Summary of the Classified Board Amendment
Under the proposed Classified Board Amendment, approximately one-third of
our Board of Directors would be elected each year. Initially, however, members
of all three classes would be elected at the 2003 Annual Meeting. If the
proposed Classified Board Amendment is adopted, the slate of directors nominated
for election at the 2003 Annual Meeting would be proposed for election in three
separate classes as follows:
o three directors, constituting the "Class I Directors," would be elected
for a one-year term expiring at the 2004 Annual Meeting
o two directors, constituting the "Class II Directors," would be elected
for a two-year term expiring at the 2005 Annual Meeting; and
o two directors, constituting the "Class III Directors," would be elected
for a three-year term expiring at the 2006 Annual Meeting;
At each annual meeting after the 2003 Annual Meeting, directors would be elected
to succeed those whose terms expire, with each newly elected director to serve
for a three-year term. Pursuant to the Stock Subscription Agreement and the
Voting Agreement, ACL would initially be entitled to one nominee in each of the
classes to be elected to the Classified Board.
Increases in the size of our Board of Directors would be distributed among
the classes so as to render the classes as nearly equal in size as possible. No
decrease in the number of directors constituting our Board of Directors would
shorten the term of any incumbent director. Under Delaware law, any director or
the entire board of directors generally may be removed with or without cause by
the holders of a majority of the shares entitled to vote at an election of
directors, unless the corporation has a classified Board of Directors, in which
case the directors may only be removed for cause. Any vacancies which occur
during the year may be filled by the majority vote of our Board of Directors to
serve the remainder of the full term.
Reasons for, and Effects of, the Classified Board Amendment
The Classified Board Amendment must be approved by you before the CCTV and
MBC Share Acquisitions can be completed. In addition, our Board of Directors
believes that dividing our Board of Directors into three classes to serve
staggered three-year terms is advantageous to us and to you as our stockholders.
The likelihood of continuity and stability in the policies formulated by our
Board of Directors will be enhanced by having directors who serve three-year
rather than one-year terms. Our Board of Directors also believes that
establishing three-year terms will increase our ability to attract and retain
desirable directors. Our Board of Directors further believes that the Classified
Board Amendment will permit it to represent more effectively your interests.
35
The proposed Classified Board Amendment may discourage individuals or
entities from purchasing shares of Common Stock with the intention of acquiring
a significant minority position in order to obtain actual control of our company
by electing their own slate of directors, or to achieve some other goal, such as
the repurchase of their shares at a premium or a restructuring of our company by
threatening to obtain such control, because the provisions of the Classified
Board Amendment may delay the purchaser's ability to obtain control of our Board
of Directors in a relatively short period of time. The delay may arise because
under the proposed Classified Board Amendment it will generally take a purchaser
(or any other individual or entity) two annual meetings (as contrasted with a
single meeting under our current Certificate of Incorporation) to elect a
majority of our Board of Directors, unless directors have been removed from
office during their terms, regardless of whether such purchaser acquires a
majority of the Common Stock.
For the same reasons, the adoption of the proposed Classified Board
Amendment may also deter certain mergers, tender offers, proxy contests or other
future takeover attempts which holders of some or a majority of the Common Stock
may deem to be in their best interests. The proposed Classified Board Amendment
applies to every election of directors, whether or not a change in control of
our company shall have occurred. It would delay stockholders who are not in
agreement with the policies of our Board of Directors or who desire that we
effect a merger or other business combination, including a merger with a
substantial stockholder, from electing or removing a majority of our Board of
Directors for two years. The proposed Classified Board Amendment could increase
the likelihood that incumbent directors will retain their positions and make it
more difficult for you to change the composition of our Board of Directors,
whether or not a change would be beneficial to us and to you as our
stockholders. Increasing the terms of directors to three years may render more
difficult the removal for up to three years of any individual director that
management, a majority of our Board of Directors and a majority of our
stockholders believe should be removed, whether or not a change of control shall
have occurred.
Our Board of Directors has no knowledge of any present effort to change
the composition of our Board of Directors, gain control of our company or
organize a proxy contest. Moreover, there has been no problem in the past or at
the present time with Board of Directors continuity or stability. However, our
Board of Directors believes it is prudent and in your interests generally to
provide the advantage of greater assurance of continuity of Board of Directors
composition and policies and believes that the Classified Board Amendment will
increase its ability to attract and retain desirable directors. Our Board of
Directors believes such advantages outweigh any disadvantages of the proposed
Classified Board Amendment, including that of discouraging potential acquirers
from making an effort to obtain control of our company.
Other than the possible anti-takeover affects of Proposal 3 of this Proxy
Statement, our Board of Directors does not presently contemplate adopting, or
recommending to you for your adoption, any further amendments to our Certificate
of Incorporation which would affect the ability of third parties to take over or
change control of our company.
Delaware Law
We are subject to a Delaware statute which may deter a change in control
of our company. It provides that a public Delaware corporation is prohibited
from engaging in any business combination transaction with any interested
stockholder (i.e., the owner of 15% or more of the corporation's outstanding
stock) for a period of 3 years following the time that such stockholder became
an interested stockholder, unless:
o the board of directors either approved the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder before such stockholder became an interested stockholder, or
36
o upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the corporation's outstanding voting stock, subject to
certain exceptions, or
o the business combination is approved by the board of directors and the
affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder.
Adoption of the Classified Board Amendment decreases the likelihood that a
stockholder could successfully wage a single proxy contest, prior to becoming a
15% or greater stockholder, that results in the change of a majority of the
board of directors and the establishment by a new board of directors of a
committee of disinterested directors to approve a merger or other business
combination with the stockholder and avoid the three-year statutory moratorium
on business combinations.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL
4.
37
PROPOSAL 5:
NAME CHANGE AMENDMENT
On July 16, 2002, our Board of Directors approved and declared it to be
advisable that you approve the Name Change Amendment, and has directed that the
Name Change Amendment be submitted to you at the Combined Meeting for your
approval. The Name Change Amendment which is one of the amendments reflected in
our Amended and Restated Certificate of Incorporation attached as Annex G to
this Proxy Statement and incorporated herein by reference.
Summary of the Name Change Amendment
Our historical activities have principally been in the areas of
manufacturing and investments. Since February 1991, our primary activities have
been represented by our investment in JM Ney. Effective March 22, 2002, we sold
substantially all of the operating assets and certain liabilities of JM Ney to
Deringer. Our current primary investment is a 25% equity interest in MBC which
holds a 50% equity interest in CCTV. As described in Proposals 1 and 2 of this
Proxy Statement, we are seeking to acquire control over the remaining equity
interests in CCTV over which we do not currently have direct or indirect
control.
Our Board of Directors has determined that the name of our corporation no
longer reflects the business in which we are presently engaged and that the name
"Moscow Broadband Group, Inc." will more clearly identify us as a participant in
the cable industry and improve our marketing and capital fundraising efforts.
If you approve the Name Change Amendment, we will cause the trading symbol
for the Common Stock to be changed from "ANDR" to a symbol more readily
associated with our new name. The currently outstanding stock certificates
evidencing shares of Common Stock bearing the name "Andersen Group, Inc." will
continue to be valid and represent shares of the Common Stock following the name
change. In the future, new certificates will be issued bearing our new name, but
this will in no way effect the validity of your current stock certificates.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL
5.
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PROPOSAL 6:
ELECTION OF DIRECTORS
Seven directors are to be elected at the Combined Meeting for a term of
one year and until their successors shall be elected and qualified. Unless
authority is withheld, it is intended that votes will be cast pursuant to the
enclosed proxy for the election of the seven nominees set forth below. Each of
the nominees is presently a member of the Board and has agreed to serve as a
director if so elected. In the event that any of the nominees should become
unable or unwilling to serve as a director, a contingency which management has
no reason to expect, it is intended, except when authority has been withheld,
that the proxy will be voted FOR the election of such person, if any, as shall
be designated by the Board. The names of, and certain information with respect
to, the persons nominated for election as directors are as follows:
OLIVER R. GRACE, JR., age 48, has been a Director of our company since
1986, President and Chief Executive Officer since 1997, and was Chairman from
1990 to 1997. He has also been President and a Director of AG Investors, Inc.,
one of our subsidiaries, since 1992 and a Director of former subsidiary, JM Ney,
since February 1997. Mr. Grace, Jr. is the Chairman of MBC, and he also serves
on the Board of Directors of CCTV. Mr. Grace, Jr. is a General Partner of The
Anglo American Security Fund L.P. and Republic Automotive Parts, Inc. Mr. Grace,
Jr. is the brother of Director John S. Grace.
FRANCIS E. BAKER, age 72, has been Chairman and Secretary of our company
since 1997, a Director since 1959, and President and Chief Executive Officer of
our company from 1959 to 1997. Mr. Baker also serves as a Director of our
wholly-owned subsidiary, JM Ney. Mr. Baker is also the President of MBC. He also
serves on the Board of Directors of CCTV.
PETER N. BENNETT, age 65, has been a Director of our company since 1992.
He is a private investor and financial consultant.
JOHN S. GRACE, age 44, has been a Director of our company since 1990. He
is the Chairman of Sterling Grace Corporation, a General Partner of The Anglo
American Security Fund L.P. Mr. Grace has been an employee of our company since
1992. John S. Grace is the brother of Oliver R. Grace, Jr.
LOUIS A. LUBRANO, age 69, has been a Director of our company since 1983.
Mr. Lubrano is currently a Senior Vice President with Gilford Securities,
Incorporated, a New York City based brokerage firm. Mr. Lubrano was formerly
with Herzog, Heine, Geduld, Inc. from 1996 to 2001.
THOMAS MCPARTLAND, age 43, has been a Director of our company since April
2000. He is founder and majority stockholder of Convergence Media, Ltd., a
consulting and investment company and former President and CEO of TCI Music, now
known as Liberty Digital. Mr. McPartland is the Executive Chairman and member of
the Board of Directors of Redwood Partners International, a pan-European
executive search, strategic and financial consulting company focusing on the
technology, media and telecommunications sector. Mr. McPartland is also a Board
of Directors member of PlantAmerica, Inc., a company that specializes in
providing information resources and related technology solutions for the green
industry.
JAMES J. PINTO, age 51, has been a Director of our company since 1988. He
is President of the Private Finance Group Corp., a merchant and venture capital
firm, a position he has held since 1990.
39
CORPORATE GOVERNANCE
Meetings of our Board of Directors
During the fiscal year ended February 28, 2002, our Board of Directors
held five meetings. All of the directors attended at least seventy-five percent
(75%) of the aggregate of the meetings of our Board of Directors and of the
meetings of the committees of our Board of Directors on which each served.
Executive Committee
Our Board of Directors has an Executive Committee comprised of Oliver R.
Grace, Jr. (Chairman), Francis E. Baker and John S. Grace. The responsibilities
of the Executive Committee include selection of potential nominees for director
and the recommendation of nominees to the full Board of Directors, monitoring
our management resources, structure, succession planning, development and
performance of key executives and review and recommendation of new business
opportunities to the entire Board of Directors. There were no meetings of the
Executive Committee during the fiscal year ended February 28, 2002.
Nominating Committee
Our Board of Directors does not have a Nominating Committee. The Executive
Committee considers the qualifications of persons to be recommended to our Board
of Directors and to you for election as directors of the Company. Such
recommendations must be accompanied by appropriate background information and
documentation.
Audit Committee
During the fiscal year ended February 28, 2002, our Board of Directors'
Audit Committee was comprised of Louis A. Lubrano (Chairman), James J. Pinto and
Thomas McPartland. The Audit Committee is primarily concerned with the
effectiveness of our audits by our independent certified public accountants.
Among other things, its duties include: recommending the selection of
independent certified public accountants; reviewing the scope of the audit to be
conducted by them, as well as the results of their audit; reviewing the
organization and scope of our internal system of financial controls; evaluating
our financial reporting activities (including its Proxy Statement and Annual
Report on Form 10-K) and the accounting standards and principles that we follow;
and examining other reviews covering compliance by employees with important
Company policies. The Directors who serve on the Audit Committee are all
"independent" for the purposes of NASDAQ listing standards. Our Board of
Directors has determined that none of the Audit Committee members have a
relationship to the Company that may interfere with their independence from the
Company and its management. Our Board of Directors has adopted a written charter
describing the functions of the Audit Committee. There were four meetings of the
Audit Committee during the fiscal year ended February 28, 2002.
Compensation Committee
Our Board of Directors has a Compensation Committee comprised of James J.
Pinto (Chairman) and Louis A. Lubrano, each of whom is an independent,
non-employee director. The Compensation Committee reviews and recommends
executive compensation, including changes therein, and administers our stock
option plans. There were no meetings of the Compensation Committee during the
fiscal year ended February 28, 2002.
40
Pension Committee
Our Board of Directors also has a Pension Committee. This Committee is
presently comprised of Frank A. Baker (Chairman) and Oliver R. Grace, Jr. The
Pension Committee monitors the administration of our and our subsidiary's
qualified retirement plans to ensure investment management is consistent with
the Committee's objectives. There were no meetings of the Pension Committee
during the fiscal year ended February 28, 2002.
Independent Committee
Our Board of Directors also has an Independent Committee comprised of
Frank A. Baker (Chairman), Louis A. Lubrano and James J. Pinto. This Committee
considers and reviews any and all transactions with our affiliates. There were
no meetings of the Independent Committee during the fiscal year ended February
28, 2002.
The Independent Committee will not be in a position to act as an
"independent committee" with respect to the proposed MBC Share Acquisition due
to the members' conflicts of interest. At this time, we do not contemplate
assembling a committee of independent directors or stockholders to consider the
proposed MBC Share Acquisition on our behalf. Rather, our Board of Directors has
disclosed each member's interests in the proposed MBC Share Acquisition in this
Proxy Statement in connection with the Combined Meeting and at any meetings of
our Board of Directors convened to discuss or vote upon the proposed MBC Share
Acquisition. To further mitigate any conflict, the MBC Share Acquisition will
not be approved unless we receive, as provided by Delaware 144, the affirmative
vote of a majority of the outstanding shares of our Common Stock not controlled
by our executive officers and directors.
Director Compensation
During fiscal year 2002, each non-employee director received a fee of
$12,000 per year, and $500 plus a reimbursement of expenses for each Board of
Directors meeting attended. All non-employee directors that serve as a chairman
of a committee of our Board of Directors received additional compensation of
$2,000 per year. In addition, Mr. John S. Grace, our employee, received a salary
of $15,000; plus $6,000 for Board of Directors fees and $500 for each Board of
Directors meeting attended.
Employment Agreements
Ronald N. Cerny had an employment agreement that is contained in a March
7, 1993 letter, as amended on February 23, 1995, and as further amended on March
20, 1995, which among other things, provided for severance pay in the event of
involuntary termination for other than cause. In such case, we, at our option,
would provide Mr. Cerny with twelve months of notice or salary and fringe
benefits, or any combination thereof. The agreement also specified that, in the
event of a change of control situation, if Mr. Cerny were to be hired on a full
time basis for a period of at least one year by the new owner of the business
and his employment was not renewed to Mr. Cerny's satisfaction at the end of the
one year period, then Mr. Cerny would be entitled to one year of severance.
Under terms of the sale of JM Ney's net assets, in December 2001, Deringer
formally notified us that it was not going to hire Mr. Cerny after the closing
of the transaction. Accordingly, upon the closing of the Ney-Deringer
transaction, we advised Mr. Cerny that his employment with us would terminate on
March 25, 2003. In July 2002, we reached an agreement with Mr. Cerny to settle
the amount owed pursuant to this agreement. Under the settlement, Mr. Cerny was
paid $299,678 in addition to which payment we agreed to pay Mr. Cerny's
insurance premiums and provide Mr. Cerny with a vehicle for a period of one
year.
We have established deferred compensation trusts for the benefit of
Francis E. Baker and Oliver R. Grace, Jr. The investments within the accounts
continue to be our assets, subject to the claims of our general creditors until
disbursements are made from the accounts for the benefit of either Mr. Baker or
Mr. Grace. We will receive income tax deductions upon such disbursements. At
February 28, 2002, the
41
trusts held $550,059 and $88,827 for the benefit of Mr. Baker and Mr. Grace,
respectively.
Certain Relationships and Related Transactions
MBC
At February 28, 1999, we owned 50% of Treglos Investments Limited
("Treglos") which owned an investment in IAS. At that date, Oliver R. Grace,
Jr., our President and Chief Executive Officer, and his brother John S. Grace, a
Director of the Company, each owned directly and indirectly approximately 22% of
Treglos. Treglos has since changed its name to MBC.
During the period from March 1, 1999 through December 31, 1999, we
invested an additional $300,000, including $39,000 of allocated salaries, in MBC
which was matched equally on a pro rata basis by the other MBC shareholders.
These funds were used primarily to pay expenses relating to developing an
agreement with COMCOR to own and operate CCTV.
During January 2000 through March 2000, MBC conducted a private placement
of its common stock in which it raised $18,000,000 in gross cash proceeds. We
invested $4,500,000 in this private placement, including the conversion of
$500,000 of accounts receivable from MBC into MBC stock. In addition, entities
formed for the benefit of Oliver R. Grace, Jr. and John S. Grace, or their
families, invested $6,090,000, including the conversion of $475,000 of
receivables due from MBC to these Grace-related entities into MBC stock. Francis
E. Baker, our Chairman, invested $500,000, Thomas McPartland, a Director,
invested $500,000, James J. Pinto, a Director, directly and indirectly invested
$600,000, Peter N. Bennett, a Director, invested $200,000 and Andrew M. O'Shea,
our Chief Financial Officer, invested $10,000. Also, the daughter of Louis A.
Lubrano, a Director, invested $100,000.
The accounts receivable due to the Company and the Grace-controlled
interests, as well as to one other investor, represented a portion of amounts
paid into MBC from 1995 through 1999.
During fiscal 2002, we allocated $125,000 of expenses to MBC for
administrative services provided by us to MBC.
See Proposal 2 for a description of the MBC Share Acquisition, which, if
consummated, will also be deemed a related party transaction.
Other Related Transactions
During fiscal 2000, Oliver R. Grace, Jr., our President and Chief
Executive Officer, extended the Company a $1,000,000 loan for the purpose of
increasing our investment in MBC. This loan, which bore interest at the annual
rate of 8.5%, and was secured by a first lien on real estate owned by our
wholly-owned subsidiary was paid in full in December 2001 in connection with the
sale of our real estate property. In connection with the loan, Mr. Grace, Jr.
also received a warrant to purchase 18,706 shares of our Common Stock at an
exercise price of $16.04 per share, which expires in February 2003.
During April 2000, we borrowed an additional $200,000 from Mr. Grace, Jr.
in exchange for a 8.5% secured note and a warrant to purchase 5,393 shares of
Common Stock at $11.13 per share, which expires in April 2003. This note was
repaid in April 2001.
During fiscal 2002, we paid Mr. Grace, Jr. interest totaling approximately
$99,000 pursuant to these loans.
During fiscal 2001 our Chairman and Secretary, Francis E. Baker, was
granted a bonus in the form of the forgiveness of $111,743 of a $223,487
unsecured non-interest-bearing note payable from Mr. Baker to us. In May 2001,
Mr. Baker repaid us the remaining $111,744 balance of this note.
42
Through May 31, 2002, we leased office space from a company owned by
Oliver R. Grace, Jr., President and Chief Executive Officer, for which we paid
$40,476 during the fiscal year ended February 28, 2002.
43
REPORT OF THE AUDIT COMMITTEE
In the performance of our oversight responsibilities, the Audit Committee
has reviewed and discussed with management the Company's audited consolidated
financial statements for the year ended February 28, 2002.
The Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees) and has discussed with
the independent auditors the independent auditors' independence.
Based on the reviews and discussions referred to above, in reliance on
management and the independent auditors, and subject to the limitations of our
role, the Audit Committee recommended to the Board of Directors that the
financial statements referred to above be included in the Company's Annual
Report on Form 10-K.
The foregoing report has been
Approved by all of the members
of the Audit Committee
Louis A. Lubrano
James J. Pinto
Thomas McPartland
44
EXECUTIVE COMPENSATION
The following information is provided regarding the annual and long-term
compensation paid or to be paid to our Chief Executive Officer and our three
other most highly compensated executive officers with respect to the fiscal
years 2002, 2001 and 2000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Securities
Underlying All Other
Name and Fiscal Salary(1) Bonus Options/SARs Compensation(3)
Principal Position Year ($) ($) (#) ($)
------------------ ---- --- --- --- ---
Oliver R. Grace, Jr 2002 103,846 -- -- 3,154
President and 2001 95,077 -- -- 2,971
Chief Executive Officer 2000 60,446 -- -- 2,017
Francis E. Baker 2002 250,000(2) -- -- --
Chairman and Secretary 2001 187,428(2) -- -- 111,743
2000 98,000 -- -- --
Ronald N. Cerny 2002 193,777 -- -- 5,250
President, JM Ney 2001 186,024 -- -- 5,319
2000 171,473 -- -- 5,030
Andrew M. O'Shea 2002 155,231 -- -- 4,868
Chief Financial Officer, and Chief 2001 132,501 25,000 -- 4,044
Financial Officer of JM Ney 2000 120,513 10,000 -- 3,959
(1) Includes amounts of compensation deferred by the employee pursuant to our
401(k) plan.
(2) Since July 2001, Mr. Baker has been compensated by MBC as a non-employee
officer, prior to which he was a non-employee officer of the Company.
During fiscal year 2002, all indicated compensation to Mr. Baker was paid
by MBC. For fiscal 2001, the amount presented includes $45,000 paid by the
Company and $142,428 paid by MBC.
(3) For Messrs. Grace, Jr., Cerny and O'Shea this amount consists of
contributions made by the Company in respect of its 401(k) plan. For Mr.
Baker, this amount represents the portion of a note payable to the Company
which was written off as a bonus.
45
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
Neither we nor JM Ney issued any stock options to any of the named
executives during the fiscal year ended February 28, 2002.
The following table sets forth certain information with respect to
options/SARs exercised during fiscal year 2002 by the individuals named in the
Summary Compensation Table and unexercised options to purchase Common Stock
granted under the 1990 Incentive Stock Option Plan to the individuals named in
the Summary Compensation Table.
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs at
Options/SARs at Fiscal Fiscal Year End($)
Shares Acquired On Value Realized Year End(#) Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
-------------------- ------------------ -------------- ------------------------ -------------------------
Oliver R. Grace, Jr. -- -- 7,500/0 $31,706/$0
Francis E. Baker -- -- 20,000/0 $35,800/$0
Ronald N. Cerny -- -- 5,000/0 $8,950/$0
Andrew M. O'Shea -- -- 0/0 $0/$0
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for reviewing the
Company's executive compensation program and policies each year and determining
the compensation of the Company's senior executive officers. The Compensation
Committee's determination on compensation of the Company's Chief Executive
Officer and other executive officers is reviewed with and approved by the entire
Board.
For the fiscal year 2002, the Compensation Committee of the Board was
comprised of Messrs. James J. Pinto and Louis A. Lubrano, independent directors.
The fiscal year 2002 base pay of each of the Company's executive officers
was determined on the basis of the individual's responsibilities and performance
and a comparison with salaries paid by competitors of the Company. The bonus
component of executive compensation is directly related to corporate and
business unit performance. The Compensation Committee's overall policy regarding
compensation of the Company's executive officers is to provide competitive
salary levels and compensation incentives that attract and retain individuals of
outstanding ability in key positions that recognize individual performance and
the Company's performance relative to the performance of other companies of
comparable size, complexity and quality, and that support both the short-term
and long-term goals of the Company. The executive compensation program includes
elements which, taken together, constitute a flexible and balanced method of
establishing total compensation for senior management.
Compensation paid to the Company's executive officers for fiscal year 2002
consisted primarily of salary, bonus and contributions made by the Company in
respect of its 401(k) Plan.
For fiscal 2002, the Compensation Committee established the compensation
of Oliver R. Grace, Jr., the President and Chief Executive Officer of the
Company, using the same criteria used to determine compensation for other
executive officers.
For fiscal 2002, the Compensation Committee established the compensation
of Francis E. Baker, the Company's non-employee Chairman and Secretary, using
the same criteria used to determine compensation for other executive officers.
Since July 2000, Mr. Baker has been compensated directly by
46
MBC in monthly payments at the annual rate of $250,000. The Company expects to
assume the payment of Mr. Baker's compensation upon the consummation of the MBC
Share Acquisition.
It is the opinion of the Compensation Committee that the aforementioned
compensation structures provide features which properly align the Company's
executive compensation with corporate performance and interests of its
stockholders and which offer competitive opportunities in the marketplace.
Under Section 162(m) of the Internal Revenue Code and the regulations
promulgated thereunder, deductions for employee remuneration in excess of $1
million which is not performance based are disallowed for publicly traded
companies. The Compensation Committee has determined that it is unnecessary at
this time to seek to qualify the components of its compensation program within
the meaning of Section 162(m) of the Internal Revenue Code.
The foregoing report has been
approved by all members of the
Compensation Committee
James J. Pinto, Chairman
Louis A. Lubrano
47
Performance Graph
The following graph compares the performance of the Common Stock for the
periods indicated with the performance of the NASDAQ Composite Stock Index (the
"NASDAQ Composite") and the performance of the NASDAQ Industrial Composite Stock
Index (the "Peer Group"). The comparative five-year total returns assume a $100
investment made on February 28, 1997 with dividends reinvested. The stockholder
return shown for the Company ("AGI") on the following is not necessarily
indicative of future stock performance.
Comparative Five-Year Total Returns
Andersen Group, Inc., NASDAQ Composite and Peer Group
(Performance results through February 28, 2002)
--------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
1997 1998 1999 2000 2001 2002
AGI $100.00 $106.91 $ 72.73 $311.36 $144.33 $146.18
Nasdaq Composite $100.00 $135.26 $174.79 $358.80 $164.39 $132.28
Peer Group $100.00 $119.53 $118.90 $239.26 $124.76 $117.49
--------------------------------------------------------------------------------
48
Pension Benefits
The following table sets forth the estimated aggregate annual benefit
payable upon retirement or at normal retirement age for each level of
remuneration specified at the listed years of service in accordance with our
defined benefit plan. The pension benefits are based on calendar year earnings
and are payable in the form of a life annuity. For calendar 2001, the maximum
annual compensation limit for determining pension benefits is $170,000; for
calendar year 2002, the limit is $200,000.
Pension Plan Table
Years of Service
---------------------------------------------------------
Remuneration 5 10 15 20 25 30
------------ ------- ------- ------- ------- ------- -------
$100,000 $ 4,300 $ 8,600 $12,900 $17,200 $21,500 $25,800
125,000 5,863 11,725 17,588 23,450 29,313 33,175
150,000 7,425 14,850 22,275 29,700 37,125 44,550
200,000 10,550 21,100 31,650 42,200 52,750 63,300
An individual's pension benefits are equal to the greater of the following
two calculations: (A) .75% of final average earnings (average annual earnings
for the five consecutive years of highest earnings in the employee's last 10
years of employment), plus .50% of final average earnings in excess of covered
compensation (covered compensation equals the average of the Social Security
wage base for the individual based upon his/her age) multiplied by the
employee's years of service as a qualified employee (up to a maximum of 40
years), or (B) the sum of the individual's accrued pension benefit at December
31, 1993 calculated pursuant to (A) plus the individual's average compensation
for the years since December 31, 1993 (average compensation equals the highest
average annual earnings for the five consecutive years since December 31, 1993,
up to a maximum, which for calendar year 2001 was $170,000) multiplied by the
percentages in (A), multiplied by the number of years of service since December
31, 1993. Pension benefits payable upon retirement are increased by a late
retirement factor due to the delay in receipt of benefits if the employee
continues to work after attaining the age of 65.
Pension benefits are not reduced on account of social security benefits
received by the employee. Average earnings is the sum of the amounts shown in
the columns labeled "Salary" and "Bonus" in the Summary Compensation Table. For
purposes of the Pension Plan Table, the amount used for covered compensation is
for an individual born in 1957, which is roughly representative for the
individuals named in the Summary Compensation Table. The executive officers
named in the Summary Compensation Table have the following years of credited
service for pension plan purposes under the Table: Mr. Grace, Jr. 10 years; Mr.
Cerny 9 years; and Mr. O'Shea 6 years. Mr. Baker's pension benefits were
computed in accordance with (B) of the above formula and were enhanced by the
late retirement factor pursuant to the Plan. The estimated aggregate annual
benefit being paid to Mr. Baker from our defined benefit pension plan is
$29,913.
49
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and related rules of the Securities and Exchange Commission
(the "SEC") require our directors and executive officers and persons who own
more than 10% of a registered class of our equity securities to file with the
SEC initial reports of ownership and reports of changes in ownership of our
Common Stock and other equity securities. Related rules of the SEC also require
such persons to furnish us with copies of all reports filed pursuant to Section
16(a) of the Exchange Act. Ronald N. Cerny, President of JM Ney made a late
filing with the SEC on May 9, 2002 of a Form 4 filed in connection with exercise
of incentive stock options on March 26, 2002. Based solely on our review of the
copies of the reports received or written representations from certain reporting
persons, we believe that all other Section 16(a) filing requirements applicable
to its directors, officers and stockholders owning more than 10% of the Common
Stock were complied with during the fiscal year ended February 28, 2002.
50
PRINCIPAL STOCKHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information regarding the beneficial
ownership of Common Stock, as of September 24, 2002 by each director, by each of
our named executive officers described in "Executive Compensation", by persons
who beneficially own 5% or more of the outstanding shares of Common Stock, and
by all our directors and executive officers as a group. The beneficial ownership
information described and set forth below is based on information furnished by
the specified persons and is determined in accordance with Rule 13d-3 under the
Exchange Act. It does not constitute an admission of beneficial ownership for
any other purpose.
Beneficial Ownership of Common Stock
------------------------------------
Conversion
of Preferred
Exercise of Stock and Percent
Name and Address Common Options/ 10 1/2% of Preferred Percent
of Beneficial Owner Stock Warrants Debentures Total Class Stock of Class
Francis E. Baker(1)
8356 Sego Lane,
Vero Beach, FL 103,301 20,000 2,906 126,207 6.0 -- --
Estate of Oliver R. Grace, Sr.(2)
c/o Lorraine G. Grace,
Executrix 49 Cove Neck Road,
Oyster Bay, NY 156,360 -- -- 156,360 7.5 -- --
Lorraine G. Grace(3)
49 Cove Neck Road,
Oyster Bay, NY 230,280 -- 8,596 238,876 11.3 -- --
Oliver R. Grace, Jr. (4)
55 Brookville Road,
Glen Head, NY 329,174 31,599 88,393 449,166 20.5 12,863 6.8
John S. Grace(5)
55 Brookville Road,
Glen Head, NY 92,423 6,000 105,965 204,388 9.3 32,571 17.3
Peter N. Bennett(6)
6 Batersea High St
London SW11 3RA, England -- 3,000 85,409 88,409 4.1 43,935 23.4
The Bank of Butterfield(7)
Rose Bank Centre
14 Bermudiana Road
Hamilton, Bermuda 294,544 -- 32,782 327,325 15.4 16,683 9.0
Miles P. Jennings, Jr.(8)
4 Oakland Street, Bristol, CT 153,300 -- -- 153,300 7.3 -- --
Rachel Belash(9)
46 Comina Costadino
Santa Fe, NM 133,220 -- -- 133,220 6.3 -- --
First United Securities Limited(10)
Exchange House
P.O. Box 16, 54-58 Athol Street
Douglas, Isle of Man 126,710 -- 6,926 133,636 6.3 -- --
Grace & White, Inc.(11)
515 Madison Avenue, Ste 1700,
New York, NY 478,896 -- -- 478,896 22.8 -- --
Louis A. Lubrano(12) -- 6,000 -- 6,000 * -- --
James J. Pinto(13) 53,515 6,000 247 59,762 2.9 -- --
Thomas McPartland(14) -- 20,000 -- 20,000 * -- --
Ronald N. Cerny(15) 8,884 -- -- 8,884 * -- --
Andrew M. O'Shea(16) 8,552 -- -- 8,552 * -- --
All directors and executive officers as
a group (3 (Preferred) and 9
(Common) persons including certain
of the above-named individuals) 595,849 92,599 246,742 935,190 38.3 89,369 47.5
51
----------
* Represents less than one percent (1%) of the Common Stock.
(1) Francis E. Baker has beneficial ownership of an aggregate of 126,207
shares of Common Stock and no shares of Preferred Stock. Within Common
Stock held amount are 44,401 shares which are owned by Mr. Baker directly
and 58,900 shares with respect to which Mr. Baker has shared voting power
as co-trustee under the Oliver R. Grace Grandchildren Trust U/R dated
December 27, 1976. The 2,906 conversion shares represent shares owned by
virtue of the trust's ability to convert $47,000 principal amount of our
Debentures to Common Stock within a 60-day period. Mr. Baker also holds
options to acquire 20,000 shares of Common Stock within a 60-day period.
Mr. Baker disclaims beneficial ownership of such shares held in trust.
(2) The Estate of Oliver R. Grace, Sr., c/o Lorraine G. Grace, Executrix, has
direct beneficial ownership of an aggregate of 156,360 shares of Common
Stock and no shares of Preferred Stock.
(3) Lorraine G. Grace has beneficial ownership of 238,876 shares of Common
Stock and no shares of Preferred Stock. Of the Common Stock amount, 13,638
shares are held by Mrs. Grace directly; 2,475 shares are held by Mrs.
Grace, as trustee of a trust for the benefit of her children; 57,807
shares are held by a trust of which Mrs. Grace is the beneficiary, and
156,360 shares are held by virtue of Mrs. Grace's appointment as Executrix
of the Estate of Oliver R. Grace, Sr. Mrs. Grace also has beneficial
ownership of 8,596 by virtue of her ability to convert $139,000 principal
amount of the Debentures to Common Stock within a 60-day period. Lorraine
G. Grace is the mother of Directors Oliver R. Grace, Jr. and John S.
Grace.
(4) Oliver R. Grace, Jr. has beneficial ownership of an aggregate of 449,166
shares of Common Stock and 12,863 shares of Preferred Stock. Within the
Common Stock held amount, 28,700 shares are held directly; 37,000 shares
are held by a corporation owned by members of Mr. Grace's family; 94,556
shares are held in an individual retirement account for the benefit of Mr.
Grace; 168,438 shares are held by trusts for which Mr. Grace is a possible
beneficiary, and 480 shares are held by Mr. Grace's spouse. Mr. Grace also
has beneficial ownership of 88,393 shares of Common Stock based upon the
assumed conversion of 12,863 shares of Preferred Stock into 25,005 shares
of Common Stock, and the conversion of $1,025,000 principal amount of
Debentures into 63,388 shares of Common Stock. Of the 12,863 shares of
Preferred Stock, 6,000 shares are held in accounts for the benefit of Mr.
Grace's children, of which he is the custodian; and 6,863 shares are held
by trusts of which Mr. Grace is a possible beneficiary. Of the $1,025,000
principal amount of Debentures, $376,000 are held directly by Mr. Grace;
$68,000 are held by Mr. Grace's spouse and $581,000 are held by The Anglo
American Security Funds L.P., of which Mr. Grace is a general partner. Mr.
Grace also holds stock options to acquire an additional 7,500 shares of
Common Stock which may be issued to him within a 60-day period. Mr. Grace,
Jr. also holds stock warrants to acquire an additional 18,706 shares and
5,393 shares expiring March 2003 and April 2003, respectively. Mr. Grace,
Jr. disclaims beneficial ownership of all shares owned by his spouse, by
him as trustee for the benefit of family members, by his children, and by
The Anglo American Security Fund, L.P. described herein.
(5) John S. Grace has beneficial ownership of 204,388 shares of Common Stock
and 32,571 shares of Preferred Stock. Within the Common Stock held amount,
15,850 shares are owned by Mr. Grace directly; 9,055 shares are held in an
individual retirement account for Mr. Grace's benefit; 3,237 shares are
held in trust for Mr. Grace's benefit and 64,281 shares are held by trusts
for which Mr. Grace is a possible beneficiary. Mr. Grace also has
beneficial ownership of 105,965 shares of Common Stock based upon the
assumed conversion of 32,571 shares of Preferred Stock into 63,318 shares
of Common Stock, and the conversion of $689,634 principal amount of
Debentures into 42,647 shares of Common Stock. Of the 32,571 shares of
Preferred Stock, 22,571 shares are held by Sterling Grace Capital
Management, LP, for which Mr. Grace is the Chairman of the general
partnership, and 10,000 shares are held by trusts for which Mr. Grace is a
possible beneficiary. Of the $689,634 principal amount of Debentures,
$17,000 are held by Mr. Grace directly; $18,000 are held by a corporation
of which Mr. Grace's spouse is the sole stockholder; $581,000 is held by
The Anglo-American Security Fund, L.P., of which Mr. Grace is a general
partner, $55,000 is held in a trust for Mr. Grace's benefit and $18,634
are held by trusts for Mr. Grace's possible benefit. Mr. Grace
52
also holds stock options to acquire an additional 6,000 shares of Common
Stock. Mr. Grace disclaims beneficial ownership of all shares held by
trustees for the benefit of members of his family and The Anglo American
Security Fund L.P.
(6) Peter N. Bennett has beneficial ownership of 88,409 shares of Common Stock
and 43,935 shares of Preferred Stock. The figure set forth in the table
includes shares held by virtue of the ability of Mr. Bennett to convert
43,935 shares of the Preferred Stock to 85,409 shares of Common Stock
within a 60-day period. Also included in the figure set forth in the table
are 3,000 shares of Common Stock which may be issued to Mr. Bennett within
60 days hereof upon the exercise of his existing exercisable stock
options.
(7) The Bank of Butterfield (the "Bank") has beneficial ownership of an
aggregate 327,326 shares of Common Stock and 16,863 shares of Preferred
Stock as trustee of various trusts. Of the Common Stock amount, 294,544
shares are held directly and 32,781 shares are held by virtue of the
Bank's ability, as trustee, to convert 16,863 shares of the Preferred
Stock to Common Stock within a 60-day period.
(8) Miles P. Jennings reported his holdings in a Schedule 13G filed on
February 13, 2002.
(9) Rachel Belash reported her holdings as of October 12, 2001 in a Schedule
13G filed on April 9, 2002.
(10) First United Securities Limited ("FUSL") has beneficial ownership of an
aggregate of 133,636 shares of Common Stock, as trustee of various trusts,
and no shares of Preferred Stock. Of the Common Stock amount 126,710
shares are held directly and 6,926 shares by virtue of the ability of FUSL
to convert $112,000 principal amount of the Debentures to Common Stock
within a 60-day period.
(11) Grace & White reported its holdings as of December 31, 2001 in its
Schedule 13G/A which was filed on January 22, 2002. Within its holdings,
13,638 shares are held for the benefit of Lorraine Grace; 57,807 shares
are held in a trust for the benefit of Lorraine Grace; 156,360 shares are
held in trust for the Estate of Oliver R. Grace, Sr., of which Lorraine
Grace is the Executrix; 188,535 shares are held in various trusts at the
Bank of Butterfield and FUSL; 58,900 shares are held in a trust for which
Francis E. Baker has voting power as co-trustee; and 3,656 shares are held
for persons unaffiliated with the Company.
(12) Louis A. Lubrano has beneficial ownership of 6,000 shares of Common Stock
and no shares of Preferred Stock. Mr. Lubrano's ownership is represented
by stock options to acquire 6,000 shares of Common Stock within a 60-day
period.
(13) James J. Pinto has beneficial ownership of 59,762 shares of Common Stock
and no shares of Preferred Stock. Of the Common Stock amount, 53,515
shares are held directly and 247 shares are beneficially owned by virtue
of Mr. Pinto's ability to convert $4,000 principal amount of the
Debentures to Common Stock. Also included in the figure set forth in the
table are stock options to acquire 6,000 shares of Common Stock within a
60-day period.
(14) Thomas McPartland holds non-qualified stock options to acquire 20,000
shares of Common Stock within a 60-day period.
(15) Ronald N. Cerny has beneficial ownership of 8,884 shares of Common Stock
and no shares of Preferred Stock. Of the Common Stock amount, 8,000 shares
are held directly and an estimated 884 shares are held in our 401(k) Plan.
(16) Andrew M. O'Shea has beneficial ownership of 8,552 shares of Common Stock
and no shares of Preferred Stock. Of the Common Stock amount, 7,700 shares
are held directly, and an estimated 852 shares are held in our 401(k) Plan
by virtue of Mr. O'Shea's holdings of units of a Company stock fund within
the Plan.
53
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP is our independent accounting firm, and has
been since January 2001.
In January 2001, our former auditors, Deloitte & Touche LLP were dismissed
by the Company for the fiscal year ended February 28, 2001. Deloitte & Touche
LLP rendered an unqualified opinion with respect to our consolidated financial
statements for all the years covered by their reports up until the time of their
dismissal. The dismissal of Deloitte & Touche LLP was approved by the Audit
Committee of our Board of Directors, and later ratified by the entire Board of
Directors.
During the fiscal years ended February 28, 1999 and February 29, 2000, and
the interim period from February 29, 2000 through January 11, 2001, there were
no disagreements with Deloitte & Touche LLP on any matter of accounting
principles or procedures, financial statement disclosures or auditing scope or
procedures.
Effective January 11, 2001, upon recommendation of the Audit Committee of
our Board of Directors, the firm of PricewaterhouseCoopers LLP, 100 Pearl
Street, Hartford, Connecticut 06103 was retained to perform an examination on
and render an opinion with respect to our consolidated financial statements as
of and for the year ended February 28, 2001. During the prior two fiscal years,
we did not consult with PricewaterhouseCoopers LLP regarding the application of
accounting principles, or the type of audit opinion that might be rendered on
our financial statements. Furthermore, no written report or oral advice was
provided by PricewaterhouseCoopers LLP that was an important factor in reaching
a decision as to an accountant, auditor or financial report issue.
PricewaterhouseCoopers LLP was not consulted on any matter which would be viewed
as being the subject of a disagreement or reportable event.
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting.
Audit Fees
The aggregate fees paid to PricewaterhouseCoopers LLP for professional
services rendered for their reviews of our unaudited statements included in our
quarterly filings on Form 10-Q and the audit of our consolidated financial
statements for the year ended February 28, 2002 were $119,650. This amount
excludes fees paid by MBC or CCTV for service provided by PricewaterhouseCoopers
LLP for the audit of the financial statements of those entities for the year
ended December 31, 2001. The aggregate fees paid to Deloitte & Touche LLP for
their review of our Annual Report on Form 10-K for the purpose of their granting
us their consent to include their opinions with respect to previous year audits
were $17,500.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for certain information technology services of
the type described in Rule 2-01(C)(4)(ii)(B) of Regulation S-X rendered by
either PricewaterhouseCoopers LLP or Deloitte & Touche LLP during the year ended
February 28, 2002 were $0.
All Other Fees
The total fees billed for all other services rendered by
PricewaterhouseCoopers LLP during the fiscal year ended February 28, 2002 were
$138,750. The Audit Committee of our Board of Directors believes that
PricewaterhouseCoopers LLP's provision of the services covered in this paragraph
is compatible with maintaining their independence.
STOCKHOLDER PROPOSALS
We received no stockholder proposals during Fiscal 2002.
54
In order to be considered for inclusion in the Proxy Statement relating to
the 2003 Annual Meeting of Stockholders, we must receive any proposal by a
record holder of Common Stock, or a record holder of the Preferred Stock
pursuant to the Preferred Stock Terms, at our principal offices on or before
[__________]. A proponent of such a proposal must comply with the proxy rules
under the Exchange Act.
FORWARD-LOOKING INFORMATION
This Proxy Statement includes statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the Private Securities Litigation
Reform Act of 1995, including statements regarding our ability to consummate the
MBC Share Acquisition and the CCTV Share Acquisition. Forward-looking statements
also include statements that are predictive in nature, which depend upon or
refer to future events or conditions, which include words such as "believes,"
"plans," "anticipates," "estimates," "expects" or similar expressions. In
addition, any statements concerning future financial performance, ongoing
business strategies or prospects, and possible future actions, which may be
provided by our management, are also forward-looking statements. Forward-looking
statements are based on current expectations and projections about future events
and are subject to risks, uncertainties, and assumptions about our company,
economic and market factors and the industry in which we do business, among
other things. These statements are not guarantees of future performance and we
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. Certain
factors that could cause actual results to differ materially from those
discussed in any forward-looking statements include the risks described in our
Annual Report on Form 10-K for the year ended February 28, 2002 and other public
filings made by us with the Securities and Exchange Commission, which
descriptions are incorporated herein by reference.
OTHER MATTERS
As of the date of this Proxy Statement, our Board of Directors and
Management do not intend to present and have not been informed that any other
person intends to present any matter for action at the Combined Meeting other
than as discussed in this Proxy Statement. If any other matters properly come
before the meeting, it is intended that the holders of the proxy will act in
accordance with their best judgment.
The following sections, as applicable, of our Annual Report on Form 10-K
for the fiscal year ended February 28, 2002 and Form 10-Q for the fiscal quarter
ended May 31, 2002 are incorporated by reference into this Proxy Statement: Risk
Factors; Supplementary Financial Information; Management's Discussion and
Analysis of Financial Condition and Results of Operations and Quantitative and
Qualitative Disclosures about Market Risk. One copy of each report accompanies
this proxy statement.
AVAILABLE INFORMATION
The Appendices are part of this Proxy Statement and are incorporated
herein. Included with the mailing of this Proxy Statement are our Annual Report
for the fiscal year ended February 28, 2002, which includes our Annual Report on
Form 10-K for the fiscal year ended February 28, 2002, and our Quarterly Report
on Form 10-Q for the fiscal quarter ended May 31, 2002, all of which form a part
of this Proxy Statement.
We are subject to the informational requirements of the Exchange Act and
the rules and regulations promulgated thereunder and in accordance therewith we
file reports, proxy statements and other information with the SEC. Reports,
proxy statements and other information that we file may be inspected and copied
at the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
55
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a
web site at www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically.
ANDERSEN GROUP, INC
---------------------
Francis E. Baker
Secretary
[_____], 2002
56
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
We are providing the following information to aid you in your analysis of
the financial aspects of the MBC Share Acquisition and the CCTV Share
Acquisition. The following tables show financial results actually reported by
each of the Company, MBC and CCTV (the "historical" amounts). The tables also
show results as if the companies had been combined for the periods presented
(the "pro forma combined" amounts). Pro forma combined amounts are arithmetical
combinations of separate financial results of the Company, MBC and CCTV with
certain elimination and pro forma adjustments. You should not assume that the
Company, MBC and CCTV would have achieved the pro forma combined results if they
actually had been combined during the periods presented.
Our annual historical amounts are derived from financial statements
audited by PricewaterhouseCoopers LLP, our independent auditors. The annual
historical information presented below should be read together with our
consolidated audited financial statements and related notes, accompanying this
document. MBC's annual historical amounts for fiscal year ended December 31,
2001 are derived from financial statements audited by PricewaterhouseCoopers
LLP, independent auditors of MBC and for the other fiscal periods referenced
from financial statements prepared by MBC's management. CCTV's annual historical
amounts for fiscal year ended December 31, 2001 are derived from financial
statements audited by PricewaterhouseCoopers, independent auditors of CCTV and
for the other fiscal periods referenced from financial statements prepared by
CCTV's management. The annual historical information presented below should be
read with the consolidated audited and unaudited financial statements and
related notes of MBC or CCTV which are included within our annual report on Form
10-K for the year ended February 28, 2002.
We expect to incur acquisition-related expenses as a result of the MBC
Share Acquisition. We also anticipate that the merger may provide the resulting
company with financial benefits such as the opportunity to earn additional
revenues and earnings. However, none of these anticipated expenses or benefits
has been factored into the pro forma combined income statement information. For
that reason, the pro forma combined information, while helpful in illustrating
the financial attributes of the resulting company under one set of assumptions,
does not attempt to predict or suggest future results.
Our unaudited pro forma consolidated condensed financial information ("Pro
Forma Information") on pages F-3 through F-7 gives effect to the CCTV Share
Acquisition and the MBC Share Acquisition. Such transactions will be effected
substantially in accordance with the terms and conditions outlined in the Stock
Subscription Agreement and the Exchange Agreement, respectively, which are
described elsewhere in this Proxy Statement. Terms of the transactions which
directly effect the Pro Forma Information presented herein are also disclosed in
the notes thereto.
The Pro Forma Information for the three months ended May 31, 2002 and for
the years ended February 28, 2002 and 2001, give effect to the CCTV Share
Acquisition and the MBC Share Acquisition as if they had occurred as of March 1,
2000. The Pro forma Condensed Balance Sheet gives pro forma effect to the CCTV
Share Acquisition, the MBC Share Acquisition and the MBC Rights Offering as if
they had occurred as of May 31, 2002.
The Pro Forma Information does not purport to be indicative of our results
of operations or our financial position that would have actually been obtained
had such transactions been completed as of the assumed dates and for the periods
presented, or which may be obtained in the future. The Pro Forma Information do
not reflect any changes in operating costs which may occur, or the effects of
the investment of cash into the operations of CCTV. The pro forma adjustments
are described in the accompanying notes and are based on available information
and certain assumptions that we believe are reasonable.
57
The accompanying Pro Forma Information may not necessarily reflect the
actual results that may occur upon the closings which result in the acquisition
of CCTV. Among the factors that could cause actual results to differ from this
Pro Forma Information are a) the market price for our Common Stock could differ
from the underlying assumptions which could result in different valuations for
the acquisition of the CCTV shares and the MBC shares, b) the number of shares
issued pursuant to the MBC Exchange could change based upon changes in the
number of shares issued by MBC pursuant to its Rights Offering, c) our operating
results from May 31, 2002 through the closings, or for MBC and CCTV from March
31, 2002 to the closings may affect the balance sheets of those companies and
their abilities to operate as planned, and d) we may not be able to acquire all
of the outstanding shares of MBC which will result in a minority interest in
CCTV.
58
INDEX TO FINANCIAL STATEMENTS
ANDERSEN GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
As of May 31, 2002 and
For the Three Month Period Ended May 31 2002 and
For the Year Ended February 28, 2002
Unaudited Pro Forma Consolidated Condensed Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet as of May 31, 2002 ..... F-3
Unaudited Pro Forma Statements of Operations for the Three Month
Period Ended May 31, 2002 ............................................. F-4
Unaudited Pro Forma Statements of Operations for the Year Ended
February 28, 2002 ..................................................... F-5
Unaudited Notes to Consolidated Condensed Financial Statements ........ F-6
ANDERSEN GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the Years ended February 28, 2002,
February 28, 2001 and February 29, 2000
Consolidated Financial Statements:
Consolidated Balance Sheets ........................................... F-9
Consolidated Statements of Operations ................................. F-10
Consolidated Statements of Changes in Stockholders' Equity ............ F-11
Consolidated Statements of Cash Flows ................................. F-12
Notes to Consolidated Financial Statements ............................ F-13
ANDERSEN GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
As of May 31, 2002 and
For the Three Month Period Ended May 31, 2002 and
For the Year Ended February 28, 2002
F-2
ANDERSEN GROUP, INC.
Pro Forma Consolidated Balance Sheet
As of May 31, 2002
(In thousands, except per share data)
(Unaudited)
Andersen Moscow
Group Broadband ComCor-TV
-------- --------- --------
Cash and cash
equivalents ............. $ 9,632 $ 4,212 $ 445
Marketable securities ...... 738 -- --
Accounts and other
receivables ............. 302 -- 29
Inventories ................ -- -- 717
Prepaid expenses and
other current assets .... 111 52 867
Deferred income taxes ...... 151 -- --
------- -------- --------
Total current assets ....... 10,934 4,264 2,058
Property, plant and
equipment, net .......... 3,578 -- 656
Construction in process
and advances ............ -- -- 2,598
Prepaid pension expense .... 4,356 -- --
Intangible assets, net ..... -- -- 8,661
Goodwill ................... -- -- --
Investment in Moscow
Broadband ............... 2,515 -- --
Loans and advances to
ComCor-TV ............... -- 2,527 --
Investment in ComCor-
TV ...................... -- 4,908 --
Investment in IAS .......... -- 48 2,883
Other assets ............... 1,131 -- --
------- -------- --------
Total assets ............... $22,514 $ 11,747 $ 16,856
======= ======== ========
Current maturities of
long-term debt .......... $ 377 -- --
Accounts payable ........... 209 54 706
Accrued liabilities ........ 1,978 108 3,168
------- -------- --------
Total current liabilities .. 2,564 162 3,874
Long-term debt, less
current maturities ...... 2,158 -- --
Other liabilities .......... 980 -- 35
Deferred income taxes ...... 1,883 -- 2,035
------- -------- --------
7,585 162 5,944
------- -------- --------
Stockholders' equity
Cumulative convertible
preferred stock ......... 3,497 -- --
Common stock ............... 21 19,002 --
Additional paid-in
capital ................. 6,653 1,409 19,977
Retained earnings .......... 4,758 (8,826) (9,065)
------- -------- --------
Total stockholders'
equity .................. 14,929 11,585 10,912
------- -------- --------
$22,514 $ 11,747 16,856
======= ======== ========
Pro Forma Adjustments
==============================================================================
COMCOR Pro Forma
Investment MBC Rights Investment Investment Elimination Consolidating Consolidated
in CCTV Offering in MBC in CCTV Entries Entries Totals
---------- ---------- --------- ---------- ----------- ------------- ------------
(Note B) (Note C) (Note D) (Note E) (Note F) (Note G)
-------- -------- -------- -------- -------- --------
Cash and cash
equivalents ............. -- $ 5,000 -- -- -- -- $19,289
Marketable securities ...... -- -- -- -- -- -- 738
Accounts and other
receivables ............. -- -- -- -- -- -- 331
Inventories ................ -- -- -- -- -- -- 717
Prepaid expenses and
other current assets .... -- -- -- -- -- -- 1,030
Deferred income taxes ...... -- -- -- -- -- -- 151
------- ------- ------- -------- -------- -------- -------
Total current assets ....... -- 5,000 -- -- -- -- 22,256
Property, plant and
equipment, net .......... 13,871 -- -- -- -- (8,563) 9,542
Construction in process
and advances ............ -- -- -- -- -- -- 2,598
Prepaid pension expense .... -- -- -- -- -- 4,356
Intangible assets, net ..... -- -- -- -- -- -- 8,661
Goodwill ................... -- -- -- -- -- -- --
Investment in Moscow
Broadband ............... -- -- 13,000 -- -- (15,515) --
Loans and advances to
ComCor-TV ............... -- -- -- -- (2,527) -- --
Investment in ComCor-
TV ...................... -- -- -- 16,000 -- (20,908) --
Investment in IAS .......... 3,618 -- -- -- -- 11 6,560
Other assets ............... -- -- -- -- -- -- 1,131
------- ------- ------- -------- -------- -------- -------
Total assets ............... $17,489 $ 5,000 $13,000 $ 16,000 $ (2,527) $(44,975) $55,104
======= ======= ======= ======== ======== ======== =======
Current maturities of
long-term debt .......... -- -- -- -- -- -- $ 377
Accounts payable ........... -- -- -- -- -- -- 969
Accrued liabilities ........ -- -- -- -- (2,527) -- 2,727
------- ------- ------- -------- -------- -------- -------
Total current liabilities .. -- -- -- -- (2,527) -- 4,073
Long-term debt, less
current maturities ...... -- -- -- -- -- -- 2,158
Other liabilities .......... -- -- -- -- -- -- 1,015
Deferred income taxes ...... -- -- -- -- -- -- 3,918
------- ------- ------- -------- -------- -------- -------
-- -- -- -- (2,527) -- 11,164
------- ------- ------- -------- -------- -------- -------
Stockholders' equity
Cumulative convertible
preferred stock ......... -- -- -- -- -- -- 3,497
Common stock ............... -- -- 33 40 -- (19,002) 94
Additional paid-in
capital ................. 17,489 5,000 12,967 15,960 -- (43,875) 35,580
Retained earnings .......... -- -- -- -- -- 17,902 4,769
------- ------- ------- -------- -------- -------- -------
Total stockholders'
equity .................. 17,489 5,000 13,000 16,000 -- (44,975) 43,940
------- ------- ------- -------- -------- -------- -------
$17,489 $ 5,000 $13,000 $ 16,000 $ (2,527) $(44,975) $55,104
======= ======= ======= ======== ======== ======== =======
F-3
ANDERSEN GROUP, INC.
Unaudited Pro Forma Statements of Operations
For the Three Months Ended May 31, 2002
(In thousands, except per share data)
(Unaudited)
Andersen Moscow Pro Forma Pro Forma
Group Broadband ComCor-TV Eliminations Adjustments Totals
-------- --------- --------- ------------ ----------- ---------
(Note F) (Notes G, H, I)
Sales and revenue:
Net sales ............................ $ -- $ -- $ 436 $ -- -- $ 436
Investment and other income .......... 196 39 -- (17) -- 218
------ ------ ------- ---- --- -------
196 39 436 (17) -- 654
------ ------ ------- ---- --- -------
Cost and expenses:
Cost of sales ........................ -- -- 863 -- -- 863
General and administrative ........... 546 154 725 -- -- 1,425
Interest expense ..................... 69 -- 25 (17) -- 77
------ ------ ------- ---- --- -------
615 154 1,613 (17) -- 2,365
------ ------ ------- ---- --- -------
Loss before equity in losses of
unconsolidated subsidiary and
income taxes ......................... (419) (115) (1,177) -- -- (1,711)
Equity in losses of Moscow Broadband .... (168) -- -- 168 -- --
Equity in losses of ComCor-TV ........... -- (557) -- 557 -- --
Equity in income of IAS ................. -- -- -- -- 11 11
------ ------ ------- ---- --- -------
Loss before income taxes ................ (587) (672) (1,177) 725 11 (1,700)
Income tax (benefit) .................... (153) -- (64) -- -- (217)
------ ------ ------- ---- --- -------
Net loss from continuing operations ..... (434) (672) (1,113) 725 11 (1,483)
Preferred dividends ..................... (71) -- -- -- -- (71)
------ ------ ------- ---- --- -------
(Loss) from continuing operations
applicable to common shareholders .... $ (505) $ (672) $(1,113) $725 $11 $(1,554)
====== ====== ======= ==== === =======
Loss per Common Share - Basic and
Diluted:
Net loss from continuing operations .. $(0.24) -- -- -- -- $ (0.18)
====== ====== ======= ==== === =======
Weighted average shares outstanding -
basic and diluted .................... 2,097 3,250 3,500 -- -- 8,847
====== ====== ======= ==== === =======
F-4
ANDERSEN GROUP, INC.
Unaudited Pro Forma Statements of Operations
For the Year Ended February 28, 2002
(In thousands, except per share data)
(Unaudited)
Andersen Moscow Pro Forma Pro Forma
Group Broadband ComCor-TV Eliminations Adjustments Totals
-------- --------- --------- ------------ ----------- ---------
(Note F) (Notes G, H, I)
Sales and revenue:
Net Sales ............................ $ -- $ -- $ 1,200 -- -- $ 1,200
Investment and other income .......... 590 311 23 -- -- 924
------- ------- ------- ------ --- -------
590 311 1,223 -- -- 2,124
------- ------- ------- ------ --- -------
Cost and expenses:
Cost of sales ........................ -- -- 3,099 -- -- 3,099
General and administrative ........... 1,956 1,144 3,195 -- -- 6,295
Loss on sale of real estate .......... 197 -- -- 197
Interest expense ..................... 374 -- -- -- -- 374
------- ------- ------- ------ --- -------
2,527 1,144 6,294 -- -- 9,965
------- ------- ------- ------ --- -------
Income from continuing operations
before equity in losses of
unconsolidated subsidiary and
income taxes ......................... (1,937) (833) (5,071) -- -- (7,841)
Equity in losses of Moscow Broadband .... (671) -- -- 671 -- --
Equity in losses of ComCor-TV ........... -- (1,852) -- 1,852 -- --
Equity in loss of IAS ................... -- -- -- -- (2) (2)
------- ------- ------- ------ --- -------
Loss from continuing operations
before income taxes .................. (2,608) (2,685) (5,071) 2,523 (2) (7,843)
Income tax (benefit) .................... (955) -- (1,367) -- -- (2,322)
------- ------- ------- ------ --- -------
Net loss from continuing operations ..... (1,653) (2,685) (3,704) 2,523 -- 5,521
Preferred dividends ..................... (286) -- -- -- -- (286)
------- ------- ------- ------ --- -------
Net (loss) from continuing operations
applicable to common shareholders .... $(1,939) $(2,685) $(3,704) $2,523 $(2) $(5,807)
======= ======= ======= ====== === =======
Loss per Common Share - Basic and
Diluted:
Net loss from continuing operations .. $ (0.93) -- -- -- -- $ (0.66)
======= ======= ======= ====== === =======
Weighted average shares outstanding -
basic and diluted .................... 2,082 3,250 3,500 -- -- 8,832
======= ======= ======= ====== === =======
F-5
ANDERSEN GROUP, INC.
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
(In thousands, except per share data)
A) The accompanying historical financial information is as of May 31, 2002
for Andersen Group, Inc. and as of March 31, 2002 for each of Moscow
Broadband and CCTV.
B) Pursuant to the agreements signed, COMCOR is to contribute assets with an
agreed upon value of approximately $17,489, of which approximately $13,871
is represented by equipment and supplies and approximately $3,618 is
represented by COMCOR's investment in IAS. The agreements call for the
Company to contribute approximately $16,658 of cash into CCTV. The
contribution of such funds does not have any effect on the pro forma
financial balance sheet except to the extent that the Company may have
insufficient funds to meet this payment and will be required to raise
funds through the issuance of equity securities, debt, or from the sale of
assets such as short term investments or the Company's real estate
property. The accompanying pro forma balance sheet reflects the raising of
additional capital through the MBC Rights Offering as discussed in Note C.
However, some or all of the estimated $4 million or more of new capital
which the Company's Board has deemed is necessary to be raised may be
raised through other means, including but not limited to private
placements of Company debt or equity securities. As discussed in Note C,
the accompanying pro forma financial statements assumes that $5 million is
raised through the MBC Rights Offering.
C) MBC is currently conducting a Rights Offering pursuant to which it hopes
to raise $5 million of cash in exchange for a total of 6,667 of its common
shares. The accompanying pro forma adjustment, including the number of
shares of the Company's Common Stock that may be issued pursuant to the
exchange of any newly issued MBC shares of its common stock, is based on a
full subscription amount, however the actual amount raised could be less
than indicated. Some or all of the additional capital which the Company
hopes to raise may be raised through means other than the MBC Rights
Offering.
D) The Company will issue 150 shares of its Common Stock for each of the
15,000 shares of MBC presently outstanding and not owned by the Company
and for the assumed 6,667 shares that would be issued if the MBC Rights
Offering is fully subscribed. Such stock has been valued at $4.00 per
share (the approximate current market value of the Company's common stock)
for total pro forma consideration of $13,000,000. As further described in
Note G, the difference between the purchase price for this additional
ownership in Moscow Broadband and the reported value of the Company's
current ownership in Moscow Broadband over Moscow Broadband's net assets
has been allocated to MBC's investment in CCTV and further allocated to
CCTV's assets and liabilities. Any difference between the Company's pro
forma combined investment in CCTV, including the ownership to be acquired
as described in Note E, has been presented as downward adjustment in the
value of CCTV's Property, Plant and Equipment in the accompanying balance
sheet. When the transactions are completed, the Company will determine the
fair value of the net assets acquired, including but not limited to the
underlying value of CCTV's intangible assets, property, plant and
equipment and its investment in IAS. The allocation of the difference
between the purchase price for CCTV and its recorded net assets may be
revised from the accompanying presentation at that time.
E) The Company's issuance of 4 million shares of its common stock to acquire
the 50% of CCTV from ACL has been valued at $4.00 per share (the
approximate current market value of the Company's common stock) for total
pro forma consideration of $16,000,000 The difference between the combined
purchase of CCTV in the forma of the purchase from ACL of its 50% interest
in CCTV and indirect purchase of Moscow Broadband's 50% interest in CCTV
and the recorded book value of CCTV's net assets has been presented as a
downward adjustment in the value of CCTV's Property, Plant and Equipment
in the accompanying balance sheet. When the transactions are completed,
the Company will determine the fair value of the net assets acquired,
including but not limited to the underlying value of CCTV's intangible
assets, property, plant and equipment and its investment in IAS. The
allocation of the difference between the purchase price for CCTV and its
recorded net assets may be revised from the accompanying presentation at
that time.
The Company's issuance of 4 million shares of its common stock to acquire
the 50% of CCTV from ACL has been
F-6
valued at $4.00 per share (the approximate current market value of the
Company's common stock) for total pro forma consideration of $16,000,000
The difference between the combined purchase of CCTV in the forma of the
purchase from ACL of its 50% interest in CCTV and indirect purchase of
Moscow Broadband's 50% interest in CCTV and the recorded book value of
CCTV's net assets has been presented as a downward adjustment in the value
of CCTV's Property, Plant and Equipment in the accompanying balance sheet.
When the transactions are completed, the Company will determine the fair
value of the net assets acquired, including but not limited to the
underlying value of CCTV's intangible assets, property, plant and
equipment and its investment in IAS. The allocation of the difference
between the purchase price for CCTV and its recorded net assets may be
revised from the accompanying presentation at that time.
F) Intercompany loans between Moscow Broadband and CCTV and the associated
interest income and expense, have been eliminated in consolidation. The
Company's 25% equity interest in the losses of Moscow Broadband as well as
Moscow Broadband's 50% equity interest in the losses of CCTV have been
eliminated in consolidation.
G) No provision for the amortization of any as-yet unidentified adjustment in
the values of the net assets of Moscow Broadband and CCTV have been
reflected in the accompanying pro forma condensed consolidated statements
of operations.
Pro forma adjustments include the elimination of the investment in the
companies being consolidated and their shareholders' equity accounts.
Other adjustments are as follows:
Property, plant and equipment: ($8,563) This represents the difference
between the book value of the net assets being acquired through the
purchase of MBC and CCTV stock and the value of the Company's common stock
to be issued to acquire such shares of MBC and CCTV.
Investment in IAS: $11 - This represents the pro forma equity in the
earnings of IAS for the three months ended May 31, 2002 based upon the
Company owning approximately 43.5% of IAS's outstanding stock. This
adjustment is also included as an addition to retained earnings within the
amounts being eliminated in consolidation.
H) The income from JM Ney and the gain from the sale of its net operating
assets has been eliminated as these items will not be present in the
Company's future results of operations.
I) As a result of COMCOR's and MBC's contributions of their ownership
interests in IAS, CCTV will own approximately 43.5% of the outstanding
stock of IAS. Accordingly, an adjustment which reflects CCTV's pro forma
equity interest in IAS's results of operations has been reflected in the
accompanying pro forma income statement and balance sheet.
F-7
ANDERSEN GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the Years ended February 28, 2002,
February 28, 2001 and February 29, 2000
F-8
ANDERSEN GROUP, INC.
Consolidated Balance Sheets
February 28, 2002 and February 28, 2001
(in thousands, except share data)
2002 2001
------- --------
Assets
Current assets:
Cash and cash equivalents ......................................... $ 1,152 $ 1,217
Marketable securities ............................................. 455 96
Accounts and other receivables, less allowance for doubtful
accounts of $96 in 2002 and $77 in 2001 ........................ 3,820 5,475
Inventories ....................................................... 23 37
Prepaid expenses and other current assets ......................... 648 620
Net assets held for sale .......................................... 6,974 10,181
------- --------
Total current assets .............................................. 13,072 17,625
Property, plant and equipment, net ................................ 3,632 5,934
Prepaid pension expense ........................................... 4,775 4,809
Investment in Moscow Broadband Communication Ltd. ................. 2,683 3,354
Other assets ...................................................... 913 1,169
------- --------
$25,075 $ 32,892
======= ========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt .............................. $ 435 $ 734
Short-term borrowings ............................................. 2,366 1,500
Accounts payable .................................................. 1,041 833
Accrued liabilities ............................................... 1,712 1,677
Deferred income taxes ............................................. 156 877
------- --------
Total current liabilities ......................................... 5,710 5,621
Long-term debt, less current maturities ........................... 2,158 2,654
Note payable to officer, net of unamortized discount .............. -- 971
Subordinated note payable, net of unamortized discount ............ -- 7,388
Other long-term obligations ....................................... 1,842 1,895
Deferred income taxes ............................................. 1,614 915
------- --------
Total liabilities ................................................. 11,324 19,444
------- --------
Commitments and contingencies (See Notes 20 and 24)
Stockholders' equity:
Cumulative convertible preferred stock, no par value;
authorized 800,000 shares; 188,006 and 201,201 shares issued
and outstanding in 2002 and 2001, respectively; liquidation
preference $18.75 per share .................................... 3,497 3,742
Common stock, $.01 par value; authorized 6,000,000 shares;
issued and outstanding 2,094,158 and 2,065,811
shares in 2002 and 2001, respectively .......................... 21 21
Additional paid-in capital ........................................ 6,574 6,315
Accumulated other comprehensive loss .............................. -- (47)
Retained earnings ................................................. 3,659 3,417
------- --------
Total stockholders' equity ........................................ 13,751 13,448
------- --------
$25,075 $ 32,892
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 2002, February 28, 2001 and February 29, 2000
(in thousands, except per share data)
2002 2001 2000
------- ------- -------
Revenues:
Investment income and other income ................... $ 590 $ 698 $ 1,262
------- ------- -------
Costs and expenses:
General and administrative ........................... 1,956 1,805 2,455
Loss on sale of real estate .......................... 197 -- --
Interest expense ..................................... 374 450 425
------- ------- -------
2,527 2,255 2,880
------- ------- -------
Loss from continuing operations before equity in
losses of unconsolidated subsidiary and income
taxes ............................................. (1,937) (1,557) (1,618)
Equity in losses of Moscow Broadband
Communication Ltd. ................................ (671) (730) --
------- ------- -------
Loss from continuing operations before income taxes .. (2,608) (2,287) (1,618)
Income tax benefit ................................... (955) (427) (628)
------- ------- -------
Net loss from continuing operations .................. (1,653) (1,860) (990)
Income from discontinued operations, net of income
taxes of $1,366, $146 and $2, respectively ........ 2,181 237 3
------- ------- -------
Net income (loss) .................................... 528 (1,623) (987)
Preferred dividends .................................. (286) (304) (362)
------- ------- -------
Income (loss) applicable to common shareholders ...... $ 242 $(1,927) $(1,349)
======= ======= =======
Income (loss) per common share:
BASIC AND DILUTED:
Net loss from continuing operations .................. $ (0.93) $ (1.06) $ (0.70)
Discontinued operations .............................. 1.05 0.12 --
------- ------- -------
$ 0.12 $ (0.94) $ (0.70)
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
ANDERSEN GROUP, INC.
Consolidated Statements of Changes in Stockholders' Equity
Years ended February 28, 2001, February 29, 2000 and February 28, 1999
(in thousands, except share data)
2002 2001 2000
---------------------- ---------------------- ----------------------
Outstanding Outstanding Outstanding
Shares Amount Shares Amount Shares Amount
----------- ------- ----------- ------- ----------- -------
Preferred Stock
Beginning balance ................................ 201,201 $ 3,742 216,864 $ 4,033 256,416 $ 4,769
Shares tendered for conversion to common stock ... (13,195) (245) (15,663) (291) (39,552) (736)
========= ======= ========= ======= ========= =======
188,006 $ 3,497 201,201 $ 3,742 216,864 $ 4,033
========= ======= ========= ======= ========= =======
Common Stock
Beginning balance ................................ 2,065,811 $ 21 2,035,364 $ 20 1,958,478 $ 20
Conversion of preferred stock .................... 25,650 -- 30,447 1 76,886 --
Conversion of 10 1/2% notes ...................... 247 -- -- -- -- --
Exercise of stock options ........................ 2,450 -- -- -- -- --
--------- ------- --------- ------- --------- -------
2,094,158 $ 21 2,065,811 $ 21 2,035,364 $ 20
========= ======= ========= ======= ========= =======
Additional Paid-in Capital
Beginning balance ................................ -- $ 6,315 -- $ 6,141 -- $ 5,339
Conversion of preferred stock .................... -- 245 -- 290 -- 736
Conversion of 10 1/2% notes ...................... -- 4 -- -- -- 12
Exercise of stock options ........................ -- 10 -- -- -- --
Value of warrants issued ......................... -- -- -- 18 -- 67
Net loss on sales of treasury shares and
subsidiary transactions ....................... -- -- -- (134) -- (13)
--------- ------- --------- ------- --------- -------
-- $ 6,574 -- $ 6,315 -- $ 6,141
========= ======= ========= ======= ========= =======
Retained Earnings
Beginning balance ................................ -- $ 3,417 -- $ 5,344 -- $ 6,693
Net income (loss) ................................ -- 528 -- (1,623) -- (987)
Preferred stock dividends ........................ -- (286) -- (304) -- (362)
--------- ------- --------- ------- --------- -------
-- $ 3,659 -- $ 3,417 -- $ 5,344
========= ======= ========= ======= ========= =======
Receivable from Officer
Beginning balance ................................ -- $ -- -- $ -- -- $ (250)
Repayment in cash ................................ -- -- -- -- -- 50
Repayment in common stock ........................ -- -- -- -- -- 200
--------- ------- --------- ------- --------- -------
-- $ -- -- $ -- -- $ --
========= ======= ========= ======= ========= =======
Accumulated Other Comprehensive
Income (Loss)
Beginning balance ................................ -- $ (47) -- $ -- -- --
Change in unrealized losses on precious metals
hedging, net of income tax benefit of $27 ..... -- 47 -- (47) -- --
--------- ------- --------- ------- --------- -------
$ -- -- $ (47) -- --
========= ======= ========= ======= ========= =======
Treasury Stock
Beginning balance ................................ -- $ -- 28,002 $ (276) 30,549 $ (142)
Shares sold ...................................... -- -- (28,002) 276 (12,393) 62
Shares issued from conversion of notes ........... -- -- -- -- (988) 4
Shares tendered to repay loan .................... -- -- -- -- 10,834 (200)
--------- ------- --------- ------- --------- -------
-- $ -- -- $ -- 28,002 $ (276)
========= ======= ========= ======= ========= =======
Total stockholders' equity ....................... -- $13,751 -- $13,448 -- $15,262
========= ======= ========= ======= ========= =======
Other Comprehensive Loss
Income (loss) applicable to common shareholders .. -- $ 242 -- $(1,927) -- $(1,349)
Other comprehensive gain (loss) .................. -- 47 -- (47) -- --
--------- ------- --------- ------- --------- -------
Total comprehensive income (loss) ................ -- $ 289 -- $(1,974) -- $(1,349)
========= ======= ========= ======= ========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 2002, February 28, 2001 and February 29, 2000
(in thousands)
2002 2001 2000
Cash flows from operating activities:
Net income (loss) .................................................... $ 528 $(1,623) $ (987)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Equity in losses of Moscow Broadband Communication Ltd. .............. 671 730 --
Depreciation, amortization and interest accretion .................... 1,581 1,589 1,466
Deferred income taxes ................................................ (22) (346) (633)
Gains from securities and investments ................................ (100) (172) (270)
Purchases of securities .............................................. (278) -- (196)
Proceeds from sales of marketable securities ......................... 19 1,002 5,359
Pension expense ...................................................... 34 108 116
Loss on disposal of property, plant and equipment .................... 197 31 --
Changes in operating assets and liabilities:
Accounts and other receivables ....................................... 1,655 (818) (559)
Inventories .......................................................... 2,447 1,405 (198)
Prepaid expenses and other assets .................................... 50 (67) (456)
Accounts payable ..................................................... 208 (182) 356
Accrued liabilities and other long-term obligations .................. 117 106 169
------- ------- -------
Net cash provided by operating activities ............................ 7,107 1,763 4,167
------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment ............................ (216) (358) (2,138)
Investment in Moscow Broadband Communication Ltd. .................... -- -- (4,000)
Proceeds from sale of real estate, net ............................... 1,692 -- --
Proceeds from sale of investments .................................... -- -- 317
------- ------- -------
Net cash provided by (used in) investing activities .................. 1,476 (358) (5,821)
------- ------- -------
Cash flows from financing activities:
Principal payments on long-term debt ................................. (8,034) (523) (445)
(Repayments of) proceeds from issuance of collateralized
note to officer ................................................... (1,200) 200 1,000
Proceeds from (payment of) short-term borrowings, net ................ 866 (1,554) 698
Stock options exercised .............................................. 10 50 10
Treasury shares sold, net ............................................ -- 92 39
Repayment of loan to officer ......................................... -- -- 50
Preferred dividends paid ............................................. (290) (307) (385)
------- ------- -------
Net cash (used in) provided by financing activities .................. (8,648) (2,042) 967
------- ------- -------
Net decrease in cash and cash equivalents ............................ (65) (637) (687)
Cash and cash equivalents, beginning of year ......................... 1,217 1,854 2,541
------- ------- -------
Cash and cash equivalents, end of year ............................... $ 1,152 $ 1,217 $ 1,854
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
Andersen Group, Inc.
Notes to Consolidated Financial Statements
Years ended February 28, 2002, February 28, 2001 and February 29, 2000
(1) Nature of Business
Andersen Group, Inc. ("the Company") is a diversified holding company which
invests in both marketable and other securities of domestic and foreign-based
companies. Until March 22, 2002, it also owned a consolidated subsidiary, The
J.M. Ney Company ("JM Ney"), which manufactured electronic connectors,
components and precious metal materials for sale to the automotive,
telecommunications, defense, semiconductor, and medical and dental markets.
(2) Sale of JM Ney
During March 2002, the Company received shareholder approval for the sale of
substantially all of the operating assets and certain liabilities of JM Ney to
Deringer Mfg. Company ("Deringer"). On March 26, 2002, the Company completed
this transaction and received cash consideration of $10,961,000, of which
$600,000 was placed in an escrow account to settle potential claims of the buyer
relating to identified components of the inventory sold and the Company's
representations and warranties. The sales resulted in an estimated pre-tax gain
of approximately $2,158,000. This gain is based on estimates of the value of
certain asset balances sold and of expenses of the transactions. Any differences
between these estimates and their actual settlement will change the gain
accordingly. The Company and Deringer also entered into an eight-year lease of
JM Ney's Bloomfield, Connecticut manufacturing facility. Concurrent with the
transaction, the outstanding cash and precious metals borrowings under JM Ney's
revolving line of credit with its primary bank were repaid and the Company
purchased warrants for JM Ney's common stock (see Note 8) from the bank for
consideration of $160,000.
Due to the sale of JM Ney, certain reclassification of the consolidated balance
sheet s of February 28, 2002 and 2001 and the consolidated statement of
operations for the years ended February 28, 2002, 2001, and 2000 have been made
to reflect JM Ney as a discontinued operation under Statement of Financial
Accounting Standards No. 144. The Company reclassified the assets of JM Ney that
were sold into one line item, "Net assets held for sale," and the footnotes to
the financial statements also reflect this reclassification.
The following assets have been reclassified in the accompanying balance sheets
as of February 28, 2002 and 2001 in thousands:
2002 2001
-------- --------
Inventory ........................................ $ 4,144 $ 6,577
Prepaid expenses and other current assets ........ 182 147
Property, plant and equipment, net ............... 2,732 3,411
Other assets ..................................... 110 230
Other liabilities ................................ (194) (184)
-------- --------
$ 6,974 $ 10,181
======== ========
Prior to the sale of JM Ney, the Company operated in two segments, Electronics
and Corporate. As a result of the sale of JM Ney, the Company effectively sold
the Electronics segment and, accordingly no disclosure of operating segments has
been made in the accompanying notes to the financial statements.
(3) Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
F-13
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The Company's financial statements include the accounts of the Company and its
wholly-owned subsidiaries. The net assets of JM Ney that were held for sale have
been separately classified and its results of operations have been presented as
discontinued operations. All significant intercompany transactions and balances
have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include funds held in investments with an original
maturity of three months or less.
Marketable Securities
The Company's common stock investments are carried as trading securities at
market value in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115). Any changes in the valuation of the portfolio are reflected in the
accompanying Consolidated Statements of Operations as investment income or
losses.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the last-in, first-out (LIFO) method for precious metals, and at standard costs
which approximate the first-in, first-out (FIFO) method for the balance of the
inventories.
Property, Plant and Equipment
Property, plant and equipment, including those obtained under capital leases,
are stated at cost and depreciated using the straight-line method over the
estimated useful life of the respective assets, as follows:
Buildings and improvements 10-30 years
Machinery and equipment 5-10 years
Furniture and fixtures 3-10 years
When fixed assets are sold or retired the cost and accumulated depreciation are
eliminated and the resulting gains or losses are reflected in income.
Investment in Moscow Broadband Communication Limited
The Company has a 25% ownership interest in ABC Moscow Broadband Communication
Limited (Moscow Broadband), a Cyprus based limited liability company which in
turn has a 50% equity interest in a Moscow Russia-based cable television and
Internet operator. This investment bears currency, economic and political risks
relating to Russia in addition to other business risks associated with a venture
capital investment. This investment is recorded using the equity method of
accounting. Moscow Broadband has a December 31 year end, and as a result, the
Company's equity in Moscow Broadband's results is reported on a two-month lag.
Tooling Costs
The Company capitalizes costs related to certain tooling items in accordance
with EITF 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply
Arrangements." The tooling, which amounted to approximately $197,000 and
$268,000 as of February 28, 2002 and 2001, respectively, is amortized based on
the units-of-production method.
Debt Discounts
Unamortized discounts on subordinated notes payable and notes payable to officer
are being amortized over the term of the notes using the effective interest
method.
Deferred Compensation
The Company has established irrevocable trusts to fund the deferred compensation
of certain executives. The assets of the trusts are owned by the Company and
subject to the claims of its general creditors, and are reported on the
Company's consolidated balance sheet in accordance with the consensus in EITF
97-14. Income and changes in the value of the
F-14
trusts' assets are reported within Investment and Other Income with
corresponding adjustments to the deferred compensation obligation and
compensation expense.
Revenue
Sales are recognized when title passes to the customer, which is when the
products are shipped, the price is fixed and determinable, and collectibility is
reasonably assured. Returns and warranty costs are estimated at the time of sale
based on historical experience. Investment income and other income is recognized
when earned and is based on changes in the fair value of marketable securities
and realized gains and losses.
Income Taxes
Income taxes are determined using the asset and liability approach. This method
gives consideration to the future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities at
currently enacted tax rates.
Earnings Per Share
In accordance with Statement of Financial Accounting Standards No. 128 "Earnings
Per Share" (SFAS 128), basic earnings per share is computed based upon the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed based upon the weighted average number of common
shares plus the assumed issuance of common shares for all potentially dilutive
securities. See Note 12 for additional information and a reconciliation of the
basic and diluted earnings per share computations.
Accounting for Derivatives and Hedging Activities
The Company uses derivative financial instruments primarily to hedge portions of
precious metal fluctuations relating to fixed price sales contracts. The Company
does not qualify for hedge accounting under Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). All derivatives are recognized on the balance sheet at
their fair value and changes in fair value of derivatives are recorded in
current period earnings.
The Company adopted FAS 133 on March 1, 2001. In accordance with the transition
provisions of FAS 133, the Company recorded a net-of-tax cumulative-effect loss
adjustment of $47,000 within the net income from discontinued operations in its
Consolidated Statement of Operations to recognize the fair value of all
derivatives in current period earnings.
As of February 28, 2002, the Company held contracts to purchase 1,252 ounces of
palladium over the following three months at an average price of $387 per ounce.
At February 28, 2002, the Company recorded a $13,000 loss related to these open
contracts.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and No.
142, "Goodwill and Other Intangible Assets". Under the new rules, all business
combinations are required to be accounted for using the purchase method.
Goodwill and indefinite lived intangible assets are no longer amortized, but
will be reviewed annually for impairment. SFAS 141 is effective for all business
combinations initiated after June 30, 2001. SFAS 142 is effective for fiscal
years beginning after December 15, 2001. The Company intends to account for the
ComCor-TV transaction described in Note 23 in accordance with these standards.
In July 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires recognition of the fair value of liabilities
associated with the retirement of long-lived assets when a legal obligation to
incur such costs arises as a result of the acquisition, construction,
development and/or the normal operation of a long-lived asset. SFAS 143 is
effective for fiscal years beginning after June 15, 2002. The Company does not
expect that this new accounting pronouncement will have a material impact on its
consolidated financial statements.
In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS 144 requires that long-lived assets to be disposed of by sale, including
discontinued operations, be measured
F-15
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. SFAS 144 also
broadens the reporting requirements of discontinued operations to include all
components of an entity that have operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest
of the entity. Accordingly, JM Ney has been classified as held for sale in the
accompanying financial statements. The provisions of SFAS 144 are effective for
fiscal years beginning after December 15, 2001.
Reclassification
Certain reclassifications have been made to the prior years' financial
statements in order to conform with the current year presentation.
(4) Inventories
Inventories consist of the following (in thousands):
February 28, 2002 February 28, 2001
----------------- -----------------
Raw materials .................... $ 485 $ 3,127
Work in process .................. 1,547 5,349
Finished goods ................... 4,134 6,414
Metals held on consignment ....... (932) (1,512)
-------- --------
5,234 13,378
LIFO reserve ..................... (1,067) (6,764)
-------- --------
Total inventory .................. 4,167 6,614
Less: Inventory held for sale .... (4,144) (6,577)
-------- --------
$ 23 $ 37
-------- --------
The Company's precious metal inventory records are maintained on a first-in,
first-out (FIFO) basis, which values the inventory equivalent to market or
replacement cost. The Company records a LIFO reserve, which represents the
excess of replacement cost over the historical LIFO value of the precious metal
content of inventories.
At February 28, 2002 and February 28, 2001, inventories valued at LIFO cost
comprised 44% and 57% of total inventories, respectively. At February 28, 2002,
the precious metal components of inventories before the LIFO reserve consisted
of 2,708 troy ounces of gold recorded at $298 per ounce; 3,975 troy ounces of
silver recorded at $4.50 per ounce; 1,380 troy ounces of platinum recorded at
$475 per ounce, and 3,759 troy ounces of palladium recorded at $380 per troy
ounce. At February 28, 2001, inventories consisted of 6,054 troy ounces of gold
recorded at $265 per ounce; 7,150 ounces of silver recorded at $4.75 per ounce;
2,110 troy ounces of platinum recorded at $610 per ounce, and 8,674 troy ounces
of palladium recorded at $875 per ounce. Such quantities of precious metals
exclude precious metals held by JM Ney on consignment subject to leasing
arrangements with JM Ney's primary bank or for the benefit of its customers.
During FY02, FY01 and FY00, JM Ney recognized LIFO gains (losses) of
approximately $2,402,000, ($75,000) and $1,400,000, respectively, from decreases
in certain precious metal LIFO layers.
F-16
(5) Property, Plant and Equipment
Property, plant and equipment consist of the following (in thousands):
February 28, 2002 February 28, 2001
----------------- -----------------
Land and improvements ........................... $ 401 $ 550
Buildings and improvements ...................... 5,993 10,348
Machinery and equipment ......................... 12,393 12,125
Furniture and fixtures .......................... 749 771
-------- --------
19,536 23,794
Less accumulated depreciation and amortization .. (13,172) (14,449)
-------- --------
Total property, plant and equipment ............. 6,364 9,345
Less: Net fixed assets held for sale ............ (2,732) (3,411)
-------- --------
$ 3,632 $ 5,934
-------- --------
Depreciation and amortization expense was $1,334,000, $1,439,000 and $1,380,000,
in FY02, FY01, and FY00, respectively.
At February 28, 2002 and 2001, property, plant and equipment includes $89,000
and $539,000, respectively, of machinery and equipment acquired under capital
leases, which expire through FY03, with related accumulated amortization of
$57,000 and $334,000, respectively.
In December 2001, Andersen Realty, Inc., a wholly-owned subsidiary of the
Company, sold a 108,000 square foot office building located in Bloomfield,
Connecticut to a private buyer for proceeds of $1,692,000, net of transaction
costs of $209,000. The buyer also assumed a sewer lien on the property of
approximately $56,000. The Company recorded a loss on the sale of $197,000 for
the year ended February 28, 2002. The Company recorded rental income related to
the building of $272,000, $445,000, and $376,000 for FY02, FY01, and FY00,
respectively.
(6) Investment in Moscow Broadband Communication Limited
During FY00, the Company invested $4,000,000 in a private placement of the
common stock of Moscow Broadband, that, in total, raised approximately
$18,000,000. Prior to this investment, the Company had an investment in Moscow
Broadband with a reported value of $84,000. At each of February 28, 2002 and
2001, the Company had a 25% ownership interest in Moscow Broadband which was
accounted for using the equity method of accounting.
On January 31, 2000, Moscow Broadband entered into an agreement ("Joint Venture
Agreement") with Moscow Telecommunications Corporation ("COMCOR") under which
COMCOR and Moscow Broadband would fund the operations of ZAO ComCor-TV
("ComCor-TV") and maintain joint and equal control over ComCor-TV. ComCor-TV is
developing a network to deliver cable television, high speed data transmission
and Internet access, and IP telephony to up to 1,500,000 homes and businesses
throughout the Moscow region. On April 24, 2000, pursuant to the Joint Venture
Agreement, Moscow Broadband contributed $8,500,000 in cash, 10,722 shares of the
Institute for Automated Systems (IAS), a Moscow-based telecommunications
company, and agreed to contribute an additional $500,000 in cash during the year
ending December 31, 2000. In return, Moscow Broadband received a 50% ownership
in ComCor-TV. Moscow Broadband accounts for its investment in ComCor-TV using
the equity method of accounting.
F-17
The following presents summarized financial information for Moscow Broadband as
of, and for the years ended December 31, 2001 and 2000 (in thousands):
December 31,
2001 2000
-------- --------
Balance Sheet Data
Current assets $ 4,353 $ 7,837
Noncurrent assets 8,040 7,373
-------- --------
Total assets $ 12,393 $ 15,210
======== ========
Accounts payable and accrued liabilities $ 137 $ 269
Capital stock subscribed -- 550
Shareholders' equity 12,256 14,391
-------- --------
$ 12,393 $ 15,210
======== ========
Statement of Operations Data
Net loss before equity in losses of ComCor-TV $ (833) $ (1,104)
Equity in losses of ComCor-TV (1,852) (1,814)
-------- --------
Net loss $ (2,685) $ (2,918)
======== ========
The following presents summarized financial information for ComCor-TV as of, and
for the years ended December 31, 2001 and 2000 (in thousands):
December 31,
2001 2000
-------- --------
Balance Sheet Data
Current Assets $ 2,930 $ 4,972
Non-Current Assets 14,850 14,921
-------- --------
Total assets $ 17,780 $ 19,893
-------- --------
Current liabilities $ 3,631 $ 666
Non-current liabilities and minority interest 2,124 3,498
Stockholder's equity 12,025 15,729
-------- --------
$ 17,780 $ 19,893
-------- --------
Statement of Operations Data
Revenues $ 1,200 $ 359
Cost of revenues, including amortization of
intangibles (3,099) (1,611)
Loss from operations (5,094) (3,574)
Net loss (3,704) (3,599)
Moscow Broadband has a December 31 year end and, as a result, the Company's
equity in Moscow Broadband's results is reported on a two-month lag. For the
two-month periods ended February 28, 2002 and 2001, Moscow Broadband's net loss
was $386,000 (unaudited) and $516,000 (unaudited), respectively.
At February 28, 2002, the reported value of the Company's investment in Moscow
Broadband was $2,683,000 and the Company's 25% equity in the net assets of
Moscow Broadband as of December 31, 2001 was approximately $3,060,000. The
$381,000 difference is attributed to a non-depreciable asset that was
transferred to ComCor-TV and will not result in the Company accreting the
difference into its consolidated results of operations.
F-18
(7) Short-term Borrowings
As of February 28, 2002 and 2001, JM Ney had an $8.0 million revolving credit
and deferred payment sales agreement with a commercial bank which is
collateralized by substantially all of JM Ney's assets. At February 28, 2002,
short-term borrowings under this line were comprised of $575,000 cash advances
and $1,791,000 of precious metals borrowings. At February 28, 2001, short-term
borrowings of $1,500,000 were comprised of cash advances. At February 28, 2002
and 2001, JM Ney had unused availability under this line of $5,291,000 and
$6,114,000, respectively. At JM Ney's election, interest is charged at the
bank's prime rate, which was 4.75% and 8.5% at February 28, 2002 and 2001,
respectively, at LIBOR plus 1.75% if the borrowing is fixed for a period of
time, or at 1.75% over the bank's precious metals leasing rate if the borrowing
is represented by deferred payment purchases of precious metals. A fee of 0.25%
is charged on the unused balance of the facility. In connection with the sale of
JM Ney's assets in March 2002, as described in Note 23, this line of credit was
reduced to limit usage by JM Ney to a $343,000 outstanding letter of credit.
(8) Accrued Liabilities and Other Long-Term Obligations
Accrued liabilities and other long term obligations consist of the following (in
thousands):
February 28, 2002 February 28, 2001
----------------- -----------------
Accrued liabilities:
Employee compensation ....................... $ 531 $ 678
Accrued preferred dividends ................. 71 75
Income taxes ................................ 650 211
Accrued interest ............................ 102 260
Restructuring costs ......................... -- 122
Other ....................................... 552 515
------- -------
1,906 1,861
Less: Liabilities held for sale ............. (194) (184)
------- -------
Net accrued liabilities ..................... $ 1,712 $ 1,677
------- -------
Other long-term obligations liabilities:
Post retirement health benefit obligations .. $ 674 $ 697
Deferred compensation ....................... 633 670
Other ....................................... 535 528
------- -------
$ 1,842 $ 1,895
------- -------
(9) Long-term Debt and Subordinated Notes Payable
Long-term debt and subordinated notes payable consist of the following (in
thousands):
February 28, 2002 February 28, 2001
----------------- -----------------
Convertible subordinated debentures, due October 2007;
interest at 10.5% payable semi-annually; annual principal
payments through maturity, unsecured .............................. $ 2,584 $ 3,018
Subordinated note payable of JM Ney due December 2004;
collateralized by a lien on JM Ney's assets; interest at
10.26% payable quarterly .......................................... -- 7,500
Notes payable to officer, collateralized by a lien on real estate .... -- 1,200
Other ................................................................ 9 170
-------- --------
2,593 11,888
Less unamortized discounts on notes payable .......................... -- (141)
-------- --------
2,593 11,747
Less current maturities .............................................. (435) (734)
-------- --------
$ 2,158 $ 11,013
======== ========
F-19
The terms of the 2007 convertible subordinated debentures call for the annual
redemption of approximately $431,000 of principal. The debentures are
convertible into common stock of the Company at any time prior to maturity at
$16.17 per share, subject to adjustment under certain conditions. At February
28, 2002, 159,802 shares of common stock were reserved for conversion.
In connection with the issuance of the subordinated note payable in FY98, JM Ney
issued warrants to the lender to acquire 34,000 shares of its common stock at an
exercise price of $1.00 per share, and warrants to acquire 6,000 shares at an
exercise price of $10.00 per share. These warrants were exercisable at any time
until December 2007, or six months after an initial public offering. Upon
issuance of the note, the estimated fair value of these warrants of $205,000 was
recorded as a liability and a discount to the face amount of the note. The
discount was being amortized over the life of the note but was written off in
its entirety during FY02 as a result of the prepayment of the underlying note.
The lender had an option to put these warrants back to JM Ney at the earlier of
December 2002, or the date of an initial public offering of JM Ney's common
stock on terms as defined in the agreement. At February 28, 2002, the liability
of $205,000 for the warrants remained within other long-term obligations. In
connection with the sale of JM Ney's assets in March 2002 as discussed in Note
23, JM Ney settled these warrants for $160,000.
During FY00, the President and Chief Executive Officer loaned the Company
$1,000,000 for the purpose of increasing the Company's investment in Moscow
Broadband. This loan was paid by the Company in December 2001. The loan bore
interest at the annual rate of 8.5%, and was collateralized by a lien on the
Company's real estate which was sold in December 2001. In connection with the
loan, the Company issued the officer warrants to acquire 18,706 shares of the
Company's common stock at an exercise price of $16.04 per share. Such warrants
are exercisable through February 2003. The estimated fair value of these
warrants of $68,000 was recorded as a discount to the face amount of the loan,
and was amortized over the original life of the loan. During FY01, the President
and Chief Executive Officer loaned the Company an additional $200,000. The
Company repaid this note in April 2001. The loan bore interest at the annual
rate of 8.5%, and was collateralized by a lien on the Company's real estate. In
connection with the loan, the Company issued the officer warrants to acquire
5,393 shares of the Company's common stock at an exercise price of $11.13 per
share. Such warrants are exercisable through April 2003. The estimated fair
value of these warrants of $18,000 was recorded as a discount to the face amount
of the loan, and was being amortized over the life of the loan. During FY02 and
FY01, the Company paid the officer approximately $99,000 and $101,000,
respectively, of interest pursuant to these notes.
Non-cash interest expense from the amortization of discounts and deferred
financing costs totaled $247,000, $150,000 and $86,000 during FY02, FY01 and
FY00, respectively.
Maturities of long-term debt for each of the next five fiscal years and
thereafter as of February 28, 2002 are as follows (in thousands):
2003 $ 435
2004 431
2005 431
2006 431
2007 431
Thereafter 434
-------
$ 2,593
-------
(10) Income Taxes
For FY02, FY01 and FY00, income tax expense (benefit) consists of the following
(in thousands):
2002 2001 2000
----- ----- -----
Current Federal ................ $ 373 $ 5 $(141)
Current State .................. 60 60 148
Deferred Federal ............... 55 (237) (563)
Deferred State ................. (77) (109) (70)
----- ----- -----
$ 411 $(281) $(626)
----- ----- -----
F-20
The difference between the actual income tax expense (benefit) and the income
tax expense (benefit) computed by applying the statutory Federal income tax rate
of 34% to income (loss) before income taxes is attributable to the following (in
thousands):
2002 2001 2000
----- ----- -----
Income tax expense (benefit), at statutory rates $ 334 $(647) $(549)
State income taxes, net of Federal impact (17) (32) 51
Tax credits -- -- (355)
Valuation allowance 96 402 267
Other (2) (4) (40)
----- ----- -----
Income tax expense (benefit) $ 411 $(281) $(626)
----- ----- -----
The principal components of the net deferred tax asset (liability) as of
February 28, 2002 and 2001 are as follows (in thousands):
February 28, February 28,
2002 2001
------------ ------------
Deferred tax liabilities:
Fixed asset basis differences .................... $ (337) $ (769)
Inventory ........................................ (351) (1,092)
Pension .......................................... (1,658) (1,757)
Unrealized gains on marketable securities, net ... (62) --
------- -------
Total deferred tax liabilities ................... (2,408) (3,618)
------- -------
Deferred tax assets:
Post-retirement benefits other than pensions ..... 249 269
Unrealized losses on marketable securities, net .. -- 275
Equity in losses of Moscow Broadband ............. 909 537
Allowance for uncollectible receivables .......... 35 57
Accrued vacation ................................. 6 96
Federal and State credit carry-forwards .......... 184 443
Federal and State net operating loss carry-
forwards ....................................... -- 801
Capital loss carry forwards ...................... 193 85
Valuation allowance .............................. (1,021) (925)
Other ............................................ 83 188
------- -------
Total deferred tax assets ........................ 638 1,826
------- -------
Net deferred tax liabilities ..................... $(1,770) $(1,792)
------- -------
At February 28, 2002, the Company had $184,000 of Federal alternative minimum
tax credit carry-forwards that have no expiration date. A valuation allowance of
$1,021,000 has been established at February 28, 2002 against the capital losses,
equity in losses of Moscow Broadband, and unrealized losses on marketable
securities to the extent it is more likely than not that these items will not be
realized. The Company has $521,000 of Federal capital loss carryforwards which
expire in the fiscal years ending February 2021 and February 2022.
(11) Series A Cumulative Convertible Preferred Stock
The Company's Series A Cumulative Convertible Preferred Stock (Preferred Stock)
has an annual dividend rate of $1.50 per share, that is paid quarterly. The
Preferred Stock is convertible into the Company's common stock at any time at a
rate of 1.944 shares of common stock for each share of Preferred Stock, subject
to certain adjustments. At February 28, 2002, 365,483 shares of common stock
have been reserved for conversion.
F-21
During FY02, FY01 and FY00, 13,195, 15,663 and 39,552 shares of the Preferred
Stock were converted into 25,650, 30,447 and 76,886 shares, respectively, of the
Company's common stock.
Holders of the convertible preferred stock have no voting rights, except as
required by applicable law and except when among other things, accrued and
unpaid dividends on the convertible preferred stock are equal to or exceed the
equivalent of six quarterly dividends payable on the convertible preferred stock
such holders will be entitled to elect one director to the Company's board of
directors until the dividend arrearage has been paid or amounts have been set
apart for such payment. The convertible preferred stock is senior to the common
stock with respect to dividends and liquidation events.
(12) Income (loss) Per Share
The computation of basic and diluted income (loss) per share is as follows (in
thousands, except per share amounts):
2002 2001 2000
------ ------- -------
Numerator for basic and diluted earnings per share:
Income (loss) applicable to common shareholders ....... $ 242 $(1,927) $(1,349)
------ ------- -------
Denominator for basic earnings per share:
Weighted average shares ............................... 2,082 2,048 1,932
Effect of dilutive securities ......................... -- -- --
------ ------- -------
Denominator for diluted earnings per share ............ 2,082 2,048 1,932
------ ------- -------
Basic and diluted income (loss) per share ............ $ 0.12 $ (0.94) $ (0.70)
------ ------- -------
For FY02, FY01 and FY00, the net addition of 22,050, 28,078, and 16,777 common
share equivalents, respectively, from the assumed exercise of stock options
using the treasury method have been excluded, because of their antidilutive
effects.
For each of FY02, FY01 and FY00, the effects of the conversion of the Preferred
Stock and the 10 1/2% Convertible Subordinated Debentures have been excluded
because the impacts of such conversions would have been antidilutive.
(13) Stock Option Plans
The Company's and JM Ney's incentive stock option plans provide for option
grants to directors and key employees at prices equal to at least 100% of the
stock's fair market value at date of grant. Options generally vest over three
years and have a maximum term of ten years. No stock options were granted during
FY02 or FY00. All options granted during FY01 had an exercise price equal to the
fair market value as of the date of grant. The per share weighted average fair
value of stock options granted during FY01 under the Company plan was $8.18
using the Black Scholes option pricing model with the following weighted average
assumptions: expected dividend yield of 0%, risk-free interest rate of 6%,
expected life of five years, and expected volatility of 80%.
Grants of options in FY01 under the JM Ney plan had a fair value of $7.61 per
share, based upon an expected dividend yield of 0%, risk-free interest rate of
6%, expected life of five years, and expected volatility of 33%.
F-22
The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". Accordingly, no compensation expense has been
recognized for the stock option plans. Had compensation cost for the Company's
stock option plans, including the JM Ney plan, been determined based on the fair
value on the grant date for awards during FY02, FY01 and FY00 consistent with
the provisions of SFAS No. 123, the Company's net income (loss) applicable to
common shareholders, and the income (loss) per share would have adjusted to the
pro forma amounts indicated below (amounts in thousands, except per share data):
2002 2001 2000
----- ------- -------
Income (loss) applicable to common shareholders:
As reported ..................................... $ 242 $(1,927) $(1,349)
Pro forma ....................................... $ 173 $(1,966) $(1,521)
Income (loss) per share - basic and diluted:
As reported ..................................... $0.12 $ (0.94) $ (0.70)
Pro forma ....................................... $0.08 $ (0.96) $ (0.79)
The Company has reserved 94,250 shares of common stock for the exercise of stock
options. The Company's plan expired during FY01, and accordingly, no future
options can be granted under the Plan. JM Ney had reserved 106,050 shares of its
common stock for the exercise of stock options, of which no shares were
available for issuance at February 28, 2002 due to restrictions in the agreement
governing the sale of its operating assets to Deringer (Note 23).
Activity under the Company's plan, which excludes JM Ney's plan, was as follows:
Number Weighted Average Range of
Outstanding Options Of Shares Exercise Price Exercise Prices
--------- -------------- ---------------
Balance at February 28, 1999 ...... 94,000 $ 5.31 $3.81 - $8.38
Exercised ......................... (2,600) $ 3.81 $3.81
Canceled .......................... (10,700) $ 6.27 $3.81 - $6.44
------- ------ --------------
Balance as of February 29, 2000 ... 80,700 $ 5.23 $3.81 - $8.38
Granted ........................... 40,000 $12.00 $10.50- $13.50
Exercised ......................... (18,000) $ 4.08 $3.81 - $6.25
------- ------ --------------
Balance as of February 28, 2001 ... 102,700 $ 8.06 $3.81 - $13.50
Canceled .......................... (6,000) $ 8.38 $8.38
Exercised ......................... (2,450) $ 3.81 $3.81
------- ------ --------------
Balance as of February 28, 2002 ... 94,250 $ 8.16 $3.81 - $13.50
------- ------ --------------
At February 28, 2002, the range of exercise prices and the weighted average
remaining contractual life of the options was as follows:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Weighted
Weighted Average Average
Range of Number Average Remaining Number Exercise
Exercise Prices Outstanding Exercise Price Contractual Life Exercisable Price
--------------- ----------- -------------- ---------------- ----------- --------
$10.50-$13.50 40,000 $12.00 8.3 years 40,000 $12.00
$6.13 - $6.44 34,000 $ 6.22 5.0 years 34,000 $ 6.22
$3.81 20,250 $ 3.81 4.1 years 20,250 $ 3.81
------------- ------ ------ --------- ------ ------
94,250 $ 8.16 6.2 years 94,250 $ 8.16
------ ------ --------- ------ ------
During FY01, options to purchase 2,000 shares of JM Ney, at an average exercise
price of $11.17 per share were issued. During FY02, FY01 and FY00, options to
acquire 750, 500 and 6,500 shares, respectively, of JM Ney were forfeited.
During FY02, FY01 and FY00, options to acquire 250, 21,000 and 9,750 shares,
respectively, were exercised, and the resultant shares were simultaneously
repurchased by JM Ney for net consideration of $100,
F-23
$24,000 and $16,000, respectively. At February 28, 2002, all of the 106,050
total outstanding JM Ney options were exercisable. At February 28, 2002, the
Company owned all 850,000 outstanding shares of JM Ney. There presently is no
public market for JM Ney's common stock. Subsequent to the sale of JM Ney's
assets, as discussed in Note 23, the Company purchased all of the outstanding JM
Ney options from the holders thereof for total consideration of $304,000.
(14) Retirement Plans
The Company maintains a noncontributory defined benefit plan and a defined
contribution plan, which collectively cover substantially all full-time
employees. The defined contribution plan is funded through employee
contributions and employer matching contributions. Pension expense for the
Company's defined contribution plan totaled $213,000, $223,000 and $208,000, in
FY02, FY01 and FY00, respectively. The defined benefit plan held 12,250 shares
of the Company's stock at both February 28, 2002 and 2001.
The following table sets forth the changes in benefit obligations, changes in
fair value of plan assets, funded status and net amounts recognized for the
defined benefit plan (in thousands). Such amounts are reported on a two month
lag to coincide with the December 31 fiscal year end of the plan.
February 28, February 28, February 29,
2002 2001 2000
------------ ------------ ------------
Changes in Benefit Obligations
Benefit obligation at beginning of year .......... $ 12,304 $ 11,001 $ 11,663
Service cost ..................................... 299 261 397
Interest cost .................................... 888 864 791
Experience loss .................................. 339 232 138
Distributions .................................... (873) (1,010) (971)
Effect of curtailment (Note 16) .................. -- (178) --
Effect of assumption changes ..................... 397 1,134 (1,017)
-------- -------- --------
Benefit obligation end of year ................... 13,354 12,304 11,001
-------- -------- --------
Change in Fair Value of Plan Assets
Fair value of plan assets at beginning of year ... 15,324 14,069 14,530
Actual return on assets .......................... 1,229 2,265 510
Benefits paid .................................... (873) (1,010) (971)
-------- -------- --------
Fair value of plan assets at end of year ......... 15,680 15,324 14,069
-------- -------- --------
Funded status .................................... 2,326 3,020 3,068
Unrecognized net actuarial loss .................. 2,530 1,886 1,953
Unrecognized past service cost ................... (81) (97) (104)
-------- -------- --------
Prepaid pension expense .......................... $ 4,775 $ 4,809 $ 4,917
-------- -------- --------
Experience losses are comprised primarily of variances in employee turnover, the
amount of salary increases and the Plan's mortality experience. The effect of
assumption changes is primarily comprised of changes in the discount rate used
to calculate the projected benefit obligations.
For FY02, FY01 and FY00, the projected benefit obligations and pension expense
were determined using the following assumptions:
2002 2001 2000
--------------------------------------------------------------------------------
Discount rate .............................. 7.00% 7.25% 7.75%
Future compensation growth rate ............ 5.00% 5.00% 5.00%
Long-term rate of return on plan assets .... 8.00% 8.00% 8.00%
F-24
Net pension expense for the Company's funded defined benefit plan in FY02, FY01
and FY00 includes the following components (in thousands):
2002 2001 2000
--------------------------------------------------------------------------------
Service cost of benefits accrued .............. $ 299 $ 261 $ 397
Interest cost on projected benefit obligations 888 864 791
Expected return on plan assets ................ (1,192) (1,086) (1,124)
Unrecognized net gain ......................... 39 69 52
--------------------------------------------------------------------------------
Pension expense ............................... $ 34 $ 108 $ 116
--------------------------------------------------------------------------------
(15) Post-retirement Benefit Obligations
At February 28, 2002 and 2001, the accumulated benefit obligation for its
unfunded retiree health care plan was approximately $674,000 and $697,000,
respectively, and the net unrecognized actuarial gain was approximately $6,000
and $115,000, respectively. The Company's cost for this plan for FY02, FY01, and
FY00 was approximately $35,000, $2,000, and $7,000, respectively. Such expenses
were comprised of interest cost of $40,000, $30,000 and $37,000, respectively,
and amortization of unrecognized net actuarial gains of $5,000, $28,000 and
$30,000, respectively. Benefit payments made under this plan for FY02, FY01 and
FY00 were approximately $58,000, $41,000, and $40,000, respectively. At February
28, 2002, 32 retirees and their spouses were receiving benefits under this plan.
The accumulated benefit obligation was determined using the unit credit method
and assumed discount rates of 7.00% and 7.25% at February 28, 2002 and 2001,
respectively. At February 28, 2002, the accumulated benefit obligation was
compiled using assumed health care cost trend rates of 12%, gradually declining
to 6% for the remainder of the projected payout period of the benefits.
The estimated effect on the present value of the accumulated benefit obligation
at March 1, 2002 of a 1% increase each year in the health care cost trend rate
used would result in an estimated increase of approximately $3,000 in the
service and interest cost, and approximately $41,000 in the accumulated benefit
obligation. A 1% decrease each year in the health care trend rate would result
in a decrease of approximately $3,000 in the service and interest costs, and a
decrease of approximately $38,000 in the accumulated benefit obligation.
(16) Leases
The Company leases various manufacturing and office facilities and equipment
under operating lease agreements expiring through December 2005. Lease expense
was $602,000, $472,000 and $382,000 for FY02, FY01 and FY00, respectively.
Future minimum lease payments under the terms of the leases for each of the next
five years, are as follows as of February 28, 2002 (in thousands):
Electronics Corporate
Segment Segment Total
----------- --------- ------
2003 .................. $ 590 $ 45 $ 635
2004 .................. 469 7 476
2005 .................. 405 -- 405
2006 .................. 240 -- 240
------ ------ ------
$1,704 $ 52 $1,756
The above amounts include the principal portion of capital lease payments of
$9,000 in FY03. Pursuant to the discussion in Note 2, the commitments of the
Electronics Segment were assigned to the buyers of JM Ney's operating assets.
F-25
(17) Restructuring Costs
In February 2001, JM Ney announced a restructuring of its operations which
involved the reduction of 33 employees from its workforce. The cost of this
restructuring, which is primarily comprised of severance payments and benefits,
was $256,000, of which $134,000 was paid prior to February 28, 2001. The
remaining costs were paid during FY02.
(18) Export Sales and Customer Concentrations
JM Ney's export sales for FY02, FY01 and FY00 were $7,373,000, $9,552,000 and
$5,941,000, respectively. Such sales were made primarily to customers in Europe
and the Pacific Rim.
During FY02, FY01 and FY00 JM Ney's sales to one customer accounted for 12.0%,
14.4% and 17.7% of net sales, respectively. At February 28, 2002 and February
28, 2001 accounts receivable from this customer represented 9.5% and 14.7%,
respectively, of consolidated net accounts receivable.
(19) Estimated Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, short
term borrowings, accounts payable and other accrued liabilities are reasonable
estimates of their fair value based upon their current maturities. The carrying
value of marketable securities approximates fair value as determined by quoted
market prices less any reserves for liquidity and volatility concerns.
The carrying values of long-term debt issued by banks and capital lease
obligations approximate fair value based on interest rate and repayment terms,
and the extent to which the individual debts are collateralized. At February 28,
2002 the fair value of the Company's 10.5% convertible debentures was
approximately $2,070,000 based on a quoted market value of the security.
(20) Litigation
The Company is involved in various legal proceedings generally incidental to its
business. The outcome of any litigation or regulatory issues contains an element
of uncertainty. Given the legal and factual issues that remain outstanding
related to the Company's litigation, the Company currently has no basis to
ascertain the range of loss, should any occur, with respect to an outcome that
may be considered unfavorable.
(21) Supplemental Disclosure of Cash Flow Information
The information below supplements the cash flow data presented in the Company's
Consolidated Statements of Cash Flows (in thousands):
2002 2001 2000
------- ------- -------
Cash paid (received) for:
Interest ................. $ 1,038 $ 1,898 $ 1,692
Income taxes, net ........ $ (13) $ (140) $ (140)
During FY02, FY01 and FY00, the Company issued 25,650, 30,447 and 76,886 shares,
respectively, of its common stock from the conversion of preferred stock; and
during FY02, FY01 and FY00, it issued 247, 0 and 988 shares of its common stock
from conversion of 10 1/2% convertible notes.
(22) Related Party Transactions
During FY02 and FY01, the Company allocated approximately $125,000 and $204,000
of expenses to Moscow Broadband for administrative services provided.
F-26
During FY01, the Company's Chairman and Secretary was granted a bonus in the
form of the forgiveness of $111,743 of a $223,487 unsecured non-interest-bearing
note payable to the Company. During FY02 the remaining $111,744 balance of this
note was repaid to the Company.
The Company leases office space from a company owned by its President and Chief
Executive Officer, for which it paid $40,476 during the fiscal year ended
February 28, 2002.
(23) Quarterly Financial Data (unaudited)
2002 Quarterly Financial Data May 31 August 31 November 30 February 28
====== ========= =========== ===========
Revenues .................................... $ 290 $ 101 $ 76 $ 123
Net loss before equity in losses of
unconsolidated subsidiary and income taxes .. (354) (322) (654) (607)
Net income (loss) from continuing
operations .................................. (413) (444) (562) (234)
Income (loss) applicable to common shares ... (311) (652) (349) 932
===== ====== ====== =======
Earnings (Loss) Per Common Share-
Basic: ...................................... $0.15 $(0.31) $(0.17) $ 0.45
Diluted: .................................... $0.15 $(0.31) $(0.17) $ 0.40
===== ====== ====== =======
2001 Quarterly Financial Data May 31 August 31 November 30 February 28
====== ========= =========== ===========
Net sales and revenues (losses) ............. $ 132 $ 418 $ (221) $ 369
Net loss before equity in losses of
unconsolidated subsidiary and income taxes .. (336) (174) (572) (475)
Net loss from continuing operations ......... (285) (223) (515) (837)
Loss applicable to common shares ............ (202) (137) (544) (1,044)
====== ====== ====== =======
Loss Per Common Share, Basic and
Diluted: .................................... $(0.10) $(0.07) $(0.26) $ (0.51)
====== ====== ====== =======
(24) Subsequent Event
ComCor-TV Transaction
In April 2002, the Company entered into agreements, subject to shareholder
approval, under which the Company will acquire the 50% equity ownership of
ComCor-TV presently owned by COMCOR in exchange for approximately $28 million of
the Company's common stock. The number of shares to be issued to purchase this
equity will be determined based upon the average price of the Company's stock
during a defined period prior to the closing of the transaction, provided that
the price remains between $8 and $12 per share. The agreements require COMCOR to
contribute defined operating assets and additional shares of IAS to ComCor-TV.
The Company is required to acquire substantially all of the outstanding shares
of Moscow Broadband that it currently does not own and to contribute additional
cash totaling $16.7 million, as well as Moscow Broadband's remaining shares of
IAS to ComCor-TV. At this date, the Company has not entered into any agreements
or formalized any terms or plans to acquire additional ownership of Moscow
Broadband. If these transactions occur substantially as planned, both Moscow
Broadband and ComCor-TV will be substantially wholly-owned by the Company and
become consolidated subsidiaries of the Company.
F-27
ANDERSEN GROUP, INC.
COMBINED SPECIAL AND ANNUAL MEETING
OF STOCKHOLDERS [_____] [__], 2002
THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS
The undersigned hereby appoints Francis E. Baker and Andrew M. O'Shea, and each
of them, proxies, with full power of substitution, acting unanimously and voting
or if only one is present and voting then that one, to vote the shares of stock
of Andersen Group, Inc., which the undersigned is entitled to vote, at the
Combined Meeting of Stockholders to be held at [_____] on [_____], 2002, at
[_____] a.m. New York City time, and at any adjournment or adjournments thereof,
with all the powers the undersigned would possess if present.
1. APPROVAL OF THE ISSUANCE OF COMMON STOCK PURSUANT TO THE CCTV SHARE
ACQUISITION AS DESCRIBED IN THE PROXY STATEMENT.
FOR |_| AGAINST |_| ABSTAIN |_|
2. APPROVAL OF THE ISSUANCE OF COMMON STOCK PURSUANT TO THE MBC SHARE
ACQUISITION AS DESCRIBED IN THE PROXY STATEMENT.
FOR |_| AGAINST |_| ABSTAIN |_|
3. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES AS DESCRIBED IN THE PROXY STATEMENT.
FOR |_| AGAINST |_| ABSTAIN |_|
4. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION ADOPTING A
CLASSIFIED BOARD OF DIRECTORS AS DESCRIBED IN THE PROXY STATEMENT.
FOR |_| AGAINST |_| ABSTAIN |_|
5. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION ADOPTING A CHANGE
IN THE NAME OF THE COMPANY AS DESCRIBED IN THE PROXY STATEMENT.
FOR |_| AGAINST |_| ABSTAIN |_|
6. ELECTION OF ALL DIRECTORS
FOR |_| WITHHOLD ALL |_| FOR ALL EXCEPT |_|
AS NOTED BELOW
PLEASE WRITE IN THE NAME OF ANY DIRECTOR NOMINEE FOR WHOM YOU WISH TO WITHHOLD
YOUR VOTE.
WITHHELD: __________________________________
Oliver R. Grace, Jr., Francis E. Baker, Peter N. Bennett, John S. Grace, Louis
A. Lubrano, Thomas McPartland, James J. Pinto
7. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THIS MEETING.
IF YOU RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS YOU
DIRECT. IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, THEY WILL BE COUNTED AS A VOTE AGAINST PROPOSAL 3, PROPOSAL 4 AND
PROPOSAL 5 AND WE WILL VOTE THEM FOR PROPOSAL 6 AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such shares at said meeting or at any adjournment thereof.
Please sign EXACTLY as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. If there is more than one trustee, all should sign. If shares are held
jointly, both owners must sign.
DATED: _________________, 2002 ________________________________________
SIGNATURE
________________________________________
SIGNATURE IF HELD JOINTLY
PLEASE VOTE, SIGN, DATE, AND
RETURN THE PROXY CARD USING
THE ENCLOSED ENVELOPE
2
ANNEX A
J'son & Partners
Management Consultancy
Board Of Directors
Andersen Group, Inc.
405 Park Avenue
Suite 1202
New York, NY 10022
September 13, 2002
Members of the Board of Directors:
You have requested our opinion as to the fairness from a financial point of view
to the existing shareholders of Andersen Group, Inc., a Delaware corporation
(the "Company"), of the exchange of 2,250,000 shares of its stock for 15,000
shares of Moscow Broadband Communication Ltd., a Cyprus limited liability
company ("MBC") (the "MBC Share Exchange").
We assume that simultaneously with the closing of the MBC Share Exchange the
Company will issue 4,000,000 shares of its common stock with a mutually agreed
implied aggregate value of US $28 million to Asinio Commercial Ltd. ("ACL") in
exchange for a 50% equity interest in ZAO Comcor-TV, a closed joint stock
company organized under the laws of the Russian Federation ("CCTV"), presently
owned by OAO Moscow Telecommunications Corporation ("COMCOR") (the"ACL Share
Exchange"). The consummation of the ACL Share Exchange is subject to COMCOR
having first contributed approximately US $17 million of assets to CCTV.
Pursuant to the terms of the ACL Share Exchange, the Company will issue
4,000,000 shares of its common stock to ACL. We have further assumed that the
ACL Share Exchange will also call for the Company to contribute additional cash
in the amount of approximately US $11.6 million to CCTV equity capital.
Although the ACL Share Exchange and the MBC Share Exchange may not be completed
simultaneously, they are deemed to be effectively a part of a single arrangement
for the purpose of rendering a fairness opinion, regardless of the timing of
each individual transaction and the sequence of transactions. Furthermore, the
opinion refers to the entirety of the arrangements described herein and shall be
deemed to be null and void, should one or several of the said transactions not
be completed.
We understand that the Company may issue additional shares of its common stock
to raise capital to support both its and CCTV's operations. This transaction may
be accomplished in whole or in part through the exchange into the Company's
common stock of newly issued MBC shares pursuant to a Rights Offering to MBC
shareholders and other accredited investors who may subscribe to unused MBC
rights. The cost of the new capital and the resultant dilution to the existing
shareholders of the Company, and the impact that such dilution may have on the
J'son & Partners Opinion
--------------------------------------------------------------------------------
market price of the Company's common stock are not within the scope of our
opinion.
J'son & Partners has been retained to render an opinion that the consideration
to be paid by the Company in the MBC Share Exchange is fair to the Company's
stockholders, and therefore, our opinion should not imply that the consideration
is necessarily fair to other parties involved.
In connection with our opinion, we examined certain publicly available
information related to the Company, CCTV and MBC, as well as certain financial
forecasts and other projected information and data for CCTV and MBC that were
provided to us or otherwise discussed with us by the respective management of
CCTV, MBC and the Company. In addition to the foregoing study, we conducted
other analyses and examinations and considered other information, financial
studies, analyses, and investigations as well as financial, economic,
regulatory, and market criteria that we deemed as relevant.
In arriving at our fairness opinion we have, among other things:
1. Reviewed the Company's audited financial data and Annual Reports on the
Form 10-K filed with the Securities and Exchange Commission for the years
ended February 2002 and February 2001;
2. Reviewed the Company's reports on Forms 8-K filed with Securities and
Exchange Commission dated May 1, 2002; June 25, 2002; July 3, 2002; July
22, 2002; July 24, 2002; August 2, 2002; and September 3, 2002;
3. Reviewed the Company's report on Form 10-Q for the three months ended May
31, 2002;
4. Reviewed the unaudited balance sheets and income statements for MBC as of
March 31, 2002 provided by the Company's management and pro forma balance
sheets as of May 31, 2002;
5. Discussed the structure of the transaction with the Company's management,
and reviewed several draft documents including the draft agreement on the
stock exchange between the Company and the shareholders of MBC;
6. Reviewed Memorandum for Investors on Moscow Broadband Communication Ltd.
prepared by ING Barings in November 2001;
7. Reviewed CCTV's projections developed by the management and discussed the
underlying assumptions with CCTV's CFO - Nina Plastinina and Company's CFO
- Andrew M. O'Shea.
With respect to financial forecasts and other projected information and data
provided to or otherwise reviewed by or discussed with us, we have been advised
by the respective management of the companies in question that such forecasts
and projections were reasonably prepared on bases reflecting the best currently
available estimates and judgements of the applicable management as to the future
results of their respective companies.
--------------------------------------------------------------------------------
J'Son & Partners Page 2 September 13th, 2002
J'son & Partners Opinion
--------------------------------------------------------------------------------
Although we undertook all possible efforts to establish whether the such
estimates and projections could be deemed to be reasonable, based on current
market trends, expected macroeconomic scenario, and regulatory developments, we
express no opinion with respect to the accuracy of such forecasts and
projections or the assumptions on which they are based.
Our opinion as set forth herein, relates to the relative value of the assets in
question, namely MBC, CCTV and the Company as of the date hereof and based on
the assumptions and limitations herein. Since CCTV is one of the core assets of
both MBC and ultimately the Company, our fairness opinion is based to a large
extent on CCTV's valuation.
In order to arrive to a fair valuation of CCTV we used the following independent
approaches:
o Discounted cash flow analysis of CCTV's projected financial
performance; and
o For MBC and the Company, we also evaluated their net assets on the
basis of unaudited balance sheet data with such adjustments and
modifications that we deem necessary and relevant, based on the
detailed explanation provided by the Company's management.
We do not express any opinion as to the price at which the companies' respective
securities will trade subsequent to the MBC Share Exchange. The value of the
Company as well as the price at which its securities will trade subsequent to
the proposed MBC Share Exchange may vary depending upon, among other factors,
changes in interest rates, market conditions, general economic and political
conditions, dividend rates and other factors that generally influence the value
of such assets or the price of securities, respectively. We have not been
provided with any independent evaluation or appraisal of the assets or
liabilities pertaining to CCTV and MBC, nor have we examined the procedures of
transferring cash and assets from MBC and the Company to CCTV.
Our opinion is based upon information available to us, the financial and
telecommunications industry, Russian and international stock markets and other
conditions and circumstances existing and disclosed to us as of the date
thereof.
We have not acted as financial advisor to the Boards of Directors of the Company
or MBC in connection with the MBC Share Exchange, and our fee is not contingent
upon consummation of the MBC Share Exchange. Neither we, nor our affiliates have
previously rendered any investment banking or advisory services to the Company
or MBC, but may have had business relationships with such companies in the
ordinary course of their businesses.
Our advisory services and the opinion expressed herein are provided solely for
the use of the Board of Directors of the Company in their evaluation of the
consideration to be paid by the Company in the MBC Share Exchange, and are not
on behalf of, and are not intended to confer rights upon, any security holder of
the Company, MBC or CCTV, or any other person.
We understand and agree that our opinion may be referred to and reproduced in
full in a proxy statement to be filed with the Securities and Exchange
Commission in connection with the MBC Share Exchange; provided, however, our
opinion may not be otherwise published, used or referred to, nor shall any
public reference to us be made, without our prior written consent.
--------------------------------------------------------------------------------
J'Son & Partners Page 3 September 13th, 2002
J'son & Partners Opinion
--------------------------------------------------------------------------------
Based upon and subject to the foregoing, our experience as advisers and
professional consultants, our work as described above and other factors we
deemed relevant, we are of the opinion that, as of the day hereof, the
consideration to be paid by the Company in the MBC Share Exchange is fair, from
a financial point of view to the existing shareholders of the Company.
Faithfully yours,
Karl Johannesson
Managing Partner
--------------------------------------------------------------------------------
J'Son & Partners Page 4 September 13th, 2002
ANNEX B
STOCK SUBSCRIPTION AGREEMENT
BETWEEN
ANDERSEN GROUP, INC.
AND
ASINIO COMMERCIAL LIMITED
TABLE OF CONTENTS
1. Definitions...............................................................1
2. Purchase and Sale of CCTV Shares..........................................4
a) Basic Transaction................................................4
b) Purchase Price...................................................4
c) The Closing......................................................4
d) Deliveries at Closing............................................4
3. Representations and Warranties Concerning the Transaction.................5
a) Representations and Warranties of ACL............................5
i) Organization of ACL.......................................5
ii) Authorization of Transaction..............................5
iii) Noncontravention..........................................5
iv) Brokers' Fees.............................................5
v) Investment................................................6
vi) Restrictions on Resale....................................6
vii) CCTV Shares...............................................7
viii) CCTV Business and Licenses................................8
b) Representations, and Warranties and Covenants of AGI.............8
i) Organization of AGI.......................................8
ii) Authorization of Transaction..............................8
iii) Capitalization of AGI.....................................9
iv) Noncontravention.........................................10
v) Brokers' Fees............................................10
vi) Disclosure...............................................10
vii) Consents.................................................11
viii) Material Adverse Change..................................11
ix) Insurance................................................11
x) Litigation...............................................11
xi) No General Solicitation..................................11
xii) No Integrated Offering...................................11
xiii) S-3 Registration.........................................12
xiv) Employees................................................12
xv) Compliance with Laws.....................................12
xvi) Title to Property and Assets; Leases.....................12
xvii) Tax Matters..............................................12
xviii)Nasdaq Listing...........................................13
4. Pre-Closing Covenants....................................................13
a) General.........................................................13
b) Notices and Consents............................................13
c) Notice of Developments..........................................13
d) Form D; Blue Sky Laws...........................................13
e) AGI Capitalization..............................................13
5. Post-Closing Covenants...................................................14
a) General.........................................................14
b) Contribution to CCTV............................................14
c) Maintenance of Control over CCTV................................14
d) Reporting Status................................................14
e) Nasdaq National Market..........................................14
f) Litigation Support..............................................14
g) Confidentiality.................................................15
h) Regulatory Compliance...........................................15
6. Conditions to Obligation to Close........................................15
a) Conditions to Obligation of AGI.................................15
b) Conditions to Obligation of ACL.................................17
7. Survival of Representations and Warranties...............................18
8. Indemnification..........................................................18
9. Termination..............................................................19
a) Termination of Agreement........................................19
b) Effect of Termination...........................................19
10. Miscellaneous...........................................................20
a) Press Releases and Public Announcements.........................20
b) No Third-Party Beneficiaries....................................20
c) Entire Agreement................................................20
d) Succession and Assigns..........................................20
e) Counterparts....................................................20
f) Headings........................................................20
g) Notices.........................................................20
h) Governing Law and Language......................................21
i) Arbitration.....................................................21
j) Agreement Not to Asset Claims/Sovereign Immunity................22
k) Amendments and Waivers..........................................22
l) Severability....................................................22
m) Expenses........................................................22
n) Construction....................................................22
o) Incorporation of Exhibits and Annexes...........................22
p) Specific Performance............................................23
i
ATTACHMENTS
Exhibit A-1 Certificate of Amendment to Certificate of Incorporation
-----------
Exhibit A-2 First Amendment to Bylaws
-----------
Exhibit B Registration Rights Agreement
---------
Exhibit C Obligations and Pledge Agreements
----------
Exhibit D Voting Agreement
---------
Exhibit E Opinion of Cyprus counsel
---------
Exhibit F Opinion of Russian counsel
---------
Annex I ACL Disclosure Schedule
-------
Annex II AGI Disclosure Schedule
--------
Annex III AGI Post-Closing Contributions to CCTV
---------
ii
STOCK SUBSCRIPTION AGREEMENT
Stock Subscription Agreement ("Agreement") entered into as of April 30,
2002, by and between Andersen Group, Inc., a Delaware corporation ("AGI"), and
Asinio Commercial Limited, a limited liability company organized under the laws
of Cyprus ("ACL").
This Agreement contemplates a transaction in which AGI or its designee will
acquire from or on behalf of ACL, and ACL will transfer to AGI at the Closing
(as defined below), all of the outstanding capital stock of ZAO COMCOR TV, a
closed joint stock company organized under the laws of the Russian Federation
("CCTV") owned by or held for the benefit of ACL, in return for AGI Common Stock
(as defined below).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. Definitions. Unless expressly provided otherwise, the following meanings
shall apply equally to the singular and plural forms of the following terms.
"ACL" has the meaning set forth in the preface above.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AGI" has the meaning set forth in the preface above.
"AGI Common Stock" means the common stock, par value $.01 per share, of
AGI.
"Agreement" has the meaning set forth in the preface above.
"Amendment" means an amendment to the certificate of incorporation of AGI
in the form attached as Exhibit A-1 or an amendment to the bylaws of AGI in the
form attached as Exhibit A-2.
"CCTV" has the meaning set forth in the preface above.
"CCTV Share" means any share of the common stock, par value 10 rubles per
share, of CCTV.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
1
"COMCOR" means Moskovskaya Telecommunikatsionnaya Corporatsiya, an open
joint stock company organized under the laws of the Russian Federation.
"Confidential Information" means any information concerning the businesses
and affairs of CCTV that is not already generally available to the public.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, arbitral panel, legislature, government, ministry, committee,
inspectorate, authority, agency, commission, official or other competent
authority of the Russian Federation, the Republic of Cyprus, the United States,
any other country or any state, as well as any county, city, municipality or
other political subdivision of any of the foregoing.
"Hart-Scott-Rodino Act" means the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or any successor federal statute.
"Knowledge" means actual knowledge after reasonable investigation.
"Laws" means (a) all laws, decrees, resolutions, instructions, statutes,
rules, regulations, acts, ordinances and other pronouncements having the effect
of law or regulation of the Russian Federation, the Republic of Cyprus, the
United States or any state or province thereof and (b) all rules or regulations
of any securities exchange on which the securities of AGI are now or hereafter
traded, quoted or listed.
"Liability" means any indebtedness, obligation and other liability of a
Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due), including without limitation all obligations of such
Person (a) for borrowed money or investment commitments, (b) evidenced by notes,
bonds, debentures or similar instruments, (c) for the deferred purchase price of
goods or services (other than trade payables or accruals incurred in the
ordinary course of business consistent with past practice), (d) under capital
leases, (e) for Taxes or (f) in the nature of guarantee of any obligation
described in clauses (a) through (d) above of any other Person.
"Lien" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other contract to give
any of the foregoing.
"License" means any license or licenses necessary for a Party to lawfully
own and operate its business, assets and properties or enter into and perform
the Party's obligations under the Transaction Documents.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on or with respect to the business, assets, financial condition
or results of operations of such Person and its Subsidiaries taken as a whole,
or upon such Person's ability to perform its obligations under this Agreement or
any Transaction Document to which it is a party.
2
"MBC" means ABC Moscow Broadband Communication Limited, a limited liability
company organized under the laws of Cyprus.
"MBC Agreement" means an agreement to be entered into after the date hereof
between AGI and the shareholders of MBC, pursuant to which the holders (other
than AGI) of substantially all of the outstanding capital stock of MBC shall
agree to transfer such MBC stock to AGI or a designee thereof in exchange for
AGI Common Stock.
"Party" means AGI or ACL, and "Parties" means AGI and ACL collectively.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
or a governmental entity (or any department, agency or political subdivision
thereof).
"Registration Rights Agreement" means an agreement in the form attached as
Exhibit B, pursuant to which AGI shall grant to ACL contractual registration
rights with respect to AGI Common Stock as of the Closing.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor to such rule.
"SEC Documents" means the documents filed by AGI with the Securities and
Exchange Commission pursuant to sections 13 or 14(a) of the Securities Exchange
Act.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"Securities and Exchange Commission" means the United States Securities and
Exchange Commission or any United States governmental body or agency succeeding
to substantially all of the functions thereof.
"Securities Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
"Subsidiary" means any corporation or other entity with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the capital stock
or other equity interests or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other managers.
"Tax" means any Russian Federation, Cypriot or United States federal,
provincial, state, local or other income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment,
3
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"Transaction Document" means each of this Agreement, the Registration
Rights Agreement, the Obligations and Pledge Agreements and the Voting
Agreement.
"Obligations and Pledge Agreements" means an agreement in the form attached
as Exhibit C, pursuant to which the CCTV Shares shall be pledged and the voting
rights transferred in accordance therewith.
"Voting Agreement" means an agreement in the form attached as Exhibit D,
pursuant to which certain holders of AGI Common Stock other than ACL shall agree
to vote for a number of Persons nominated by ACL in the election of directors of
AGI.
2. Purchase and Sale of CCTV Shares.
--------------------------------
a) Basic Transaction. Subject to obtaining all requisite approvals required
to consummate the transaction, AGI or its designee shall acquire from ACL, and
ACL shall transfer to AGI or its designee, at the Closing, 67,341 CCTV Shares in
exchange for the consideration specified below in ss.2(b) below and on the terms
and conditions otherwise set forth herein.
b) Purchase Price. AGI shall transfer to ACL at the Closing that whole
number of shares of AGI Common Stock that is nearest to the value of
US$28,000,000. For purposes of this provision, the value of each share of AGI
Common Stock shall be deemed to be the average of the final bid and asking
prices of AGI Common Stock over a ten-day trading period ending with the trading
day preceding the Closing Date.
c) The Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of McDermott, Will &
Emery in New York, New York commencing at 9:00 a.m. local time not less than one
nor more than five business days after the first business day on which the
closing conditions set forth at ss.ss. 6(a) and 6(b) below may be simultaneously
satisfied or waived, or such other date as the Parties may agree (the "Closing
Date").
d) Deliveries at Closing. At the Closing, (i) ACL shall deliver or cause to
be delivered to AGI or its designee the various certificates, instruments and
documents referred to in ss.6(a) below, (ii) AGI or its designee, as
appropriate, shall deliver or cause to be delivered to ACL the various
certificates, instruments and documents referred to in ss.6(b) below, (iii) AGI
and ACL shall enter into the Registration Rights Agreement, and (iv) ACL shall
enter into the Voting Agreements with AGI and stockholders of AGI reasonably
satisfactory to ACL, which stockholders together with ACL shall hold at least 50
percent of the shares of AGI Common Stock to be issued and outstanding
immediately after the consummation of this transaction, calculated on a fully
diluted basis tracking all exercisable securities as exercised and all
convertible securities as converted.
4
3. Representations and Warranties Concerning the Transaction.
---------------------------------------------------------
a) Representations and Warranties of ACL. ACL represents, warrants and
covenants to AGI that the statements and understandings contained in this
ss.3(a) are true, complete and correct as of the date of this Agreement and will
be true, correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss.3(a)), except as set forth on Annex I attached hereto.
i) Organization of ACL. ACL is a limited liability company duly
organized and validly existing under the laws of Republic of Cyprus. ACL
has all necessary power and authority as a limited liability company to own
its assets and to carry on its business as now being conducted and
presently proposed to be conducted. ACL is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
its ownership or leasing of assets, or the conduct of its business, makes
such qualification necessary, except where the failure to be so qualified
or in good standing would not have a material adverse effect on ACL.
ii) Authorization of Transaction. ACL has full power and authority
(including full power and authority as a limited liability company) to
execute and deliver the Transaction Documents and to perform its
obligations thereunder. On the Closing Date, ACL will have full power and
authority (including full power and authority as a limited liability
company) to convey, the CCTV Shares held by or for the benefit of ACL to
AGI pursuant to this Agreement. All action on the part of ACL as a limited
liability company required for the lawful execution and delivery of the
Transaction Documents and the transfer and delivery of the CCTV Shares to
be transferred to AGI under this Agreement has been taken or prior to the
Closing will have been taken. This Agreement constitutes, and on the
Closing Date each of the Transaction Documents other than this Agreement
will constitute, the valid and legally binding obligation of ACL,
enforceable in accordance with its terms and conditions. ACL need not give
any notice to, make any filing with or obtain any authorization, consent or
approval of any Governmental or Regulatory Authority in order to consummate
the transactions contemplated by this Agreement.
iii) Noncontravention. Neither the execution and the delivery of the
Transaction Documents nor the consummation of the transactions contemplated
thereby will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of
any Governmental or Regulatory Authority or court to which ACL is subject
or any provision of its memorandum and articles of association or other
organizational documents.
iv) Brokers' Fees. ACL has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the
transactions
5
contemplated by the Transaction Documents for which AGI could reasonably
become liable or obligated.
v) Investment. ACL (A) understands that the AGI Common Stock to be
received pursuant to this Agreement has not been, and will not be,
registered under the Securities Act, or under any state securities Laws,
and is being offered and sold in reliance upon United States federal and
state exemptions for transactions not involving any public offering, (B) is
acquiring such AGI Common Stock solely for its own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with such knowledge and experience in business and
financial matters as to be capable of evaluating the merits and risks of
its investment, is familiar with the risks associated with the business and
operations of companies that operate in similar lines of business to AGI,
and has the ability to bear the economic risks of its investment, including
the potential loss of its investment, (D) has received sufficient
information concerning AGI and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding AGI Common Stock and (E) is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
vi) Restrictions on Resale. ACL understands that the AGI Common Stock
to be received pursuant to this Agreement may not be sold, transferred or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the sale of such AGI Common Stock, or an available
exemption from registration under the Securities Act or a sale under and in
compliance with Rule 144, such AGI Common Stock must be held indefinitely.
In no event will ACL transfer or dispose of any of the AGI Common Stock to
be received pursuant to this Agreement (other than pursuant to an effective
registration statement under the Securities Act) unless and until (A) ACL
shall have notified AGI of the proposed disposition and (B) if requested by
AGI, ACL shall have furnished to AGI at the expense of ACL or its
transferee an opinion of counsel reasonably satisfactory to AGI to the
effect that such transfer may be made without registration under the
Securities Act. Any certificate or instrument evidencing the AGI Common
Stock to be issued pursuant to this Agreement shall contain a legend
substantially to the following effect:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States or in any other
jurisdiction. The securities represented hereby may not be offered,
sold or transferred in the absence of an effective registration
statement for the securities under applicable securities laws, unless
offered, sold or transferred pursuant to an available exemption from
the registration requirements of those laws and provided that the
availability of such exemption is confirmed by an opinion of
6
counsel reasonably satisfactory to Andersen Group, Inc. delivered to
Andersen Group, Inc.
Unless otherwise required by applicable securities Laws, the legend set
forth above shall be removed, and AGI or its transfer agent shall issue or
cause to be issued a certificate without such legend to the holder of any
certificate, if (x) the sale of such shares of AGI Common Stock is
registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise, (y) such holder provides AGI with an opinion
of counsel reasonably satisfactory to AGI, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of the shares evidenced by such certificate
may be made without registration under the Securities Act or (z) such
holder provides AGI with reasonable assurance and an opinion of counsel
reasonably satisfactory to AGI, in form, substance and scope customary for
opinions of counsel in comparable transactions, that the shares evidenced
by such certificate may be sold in compliance with Rule 144. In the event
that the above legend is removed from any certificate and thereafter the
effectiveness of a registration statement covering the shares evidenced by
such certificate is suspended, or if AGI reasonably determines that a
supplement or amendment to such registration statement is required by
applicable securities law, then upon reasonable advance written notice to
the holder of such certificate, AGI may require that the above legend be
placed on any such certificate evidencing shares that cannot be sold
pursuant to an effective registration statement or under Rule 144, and ACL
shall cooperate in the placement of such legend. Such legend shall
thereafter be removed from such certificate when such shares may again be
sold pursuant to an effective registration statement or under Rule 144.
vii) CCTV Shares. On the Closing Date, ACL will hold of record or
beneficially 67,341 CCTV Shares, free and clear of any restrictions on
transfer, Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. All such CCTV Shares were duly
authorized and validly issued, are fully paid and non-assessable and were
properly registered with the appropriate Governmental or Regulatory
Authorities competent for registration of the issuance of such CCTV Shares.
All such CCTV Shares were owned by COMCOR free and clear of all Liens, and
the transfer of such CCTV Shares by COMCOR to ACL, after the date hereof
but prior to the Closing Date will not be subject to the consent or
approval of any Governmental or Regulatory Authority that will not have
been obtained on or before the Closing Date. All such CCTV Shares will have
been transferred by COMCOR to ACL in compliance with all applicable Laws
and for legally sufficient consideration. ACL is not a party to any option,
warrant, purchase right or other contract or commitment other than this
Agreement that could require ACL to sell, transfer or otherwise dispose of
any capital stock of CCTV. ACL is not a party to any voting trust, proxy,
agreement with respect to the voting of any capital stock of CCTV other
than Obligations and Pledge Agreements.
7
viii) CCTV Business and Licenses. The Licenses held by CCTV on the
date hereof and the Closing Date are and will be sufficient to enable CCTV
to conduct its business in all material respects as conducted on the date
hereof and are usual and customary for the purposes contemplated. To the
Knowledge of ACL based on representations of COMCOR, all assets transferred
to CCTV by COMCOR have been transferred free and clear of any material
Liens or other restrictions, other than as disclosed by COMCOR to CCTV. To
the Knowledge of ACL based on representations of COMCOR, Annex I lists all
Licenses held and to be held by CCTV as of the date hereof and the Closing
Date, the failure of which to be obtained or maintained by CCTV would have
a Material Adverse Effect on the ability of CCTV lawfully to own and
operate its business, assets and properties. Each such License is or on the
Closing Date will be valid, binding and in full force and effect. No
License contains on its face any restrictions that, individually or
cumulatively, have or could reasonably be expected to have a Material
Adverse Effect on CCTV. To the Knowledge of ACL based on representations of
COMCOR, no Person is infringing on the date hereof or will be infringing on
the Closing Date on any such License. To the Knowledge of ACL based on
representations of COMCOR, CCTV has fulfilled and performed all material
obligations with respect to each such License, and no event has occurred
which results or could reasonably be expected to result in the suspension,
revocation or termination of any such License or any other material
impairment of the rights of CCTV pursuant to such License.
b) Representations, Warranties and Covenants of AGI. AGI represents,
warrants and covenants to ACL that the statements and understandings contained
in this ss.3(b) are true, correct and complete as of the date of this Agreement
and will be true, correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this ss.3(b)), except as set forth on Annex II attached
hereto.
i) Organization of AGI. AGI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. AGI
has all necessary corporate power and authority to own its assets and to
carry on its business as now being conducted and presently proposed to be
conducted. AGI is qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which its ownership or leasing of
assets, or the conduct of its business, makes such qualification necessary,
except where the failure to be so qualified or in good standing would not
have a Material Adverse Effect on AGI.
ii) Authorization of Transaction. AGI has full power and authority
(including full corporate power and authority) to execute and deliver the
Transaction Documents, to perform its obligations thereunder and to issue
the shares of AGI Common Stock to be issued pursuant to this Agreement. All
corporate action on the part of AGI required for the lawful execution and
delivery of the Transaction Documents, the adoption of the Amendments and
the issuance and delivery of the shares of AGI Common Stock to be received
pursuant to this
8
Agreement has been taken or prior to the Closing will have been taken. Upon
the approval of this Agreement by AGI's stockholders and bondholders, and,
with respect to the Transaction Documents other than this Agreement, upon
execution, each of the Transaction Documents will constitute the valid and
legally binding obligation of AGI, enforceable in accordance with its terms
and conditions. AGI need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any Governmental or
Regulatory Authority in order to consummate the transactions contemplated
by this Agreement.
iii) Capitalization of AGI.
A) The capitalization of AGI as of the date hereof, including the
authorized capital stock, the number of shares issued and outstanding,
the number of shares issuable and reserved for issuance pursuance to
AGI's stock option plans and the number of shares issuable and
reserved for issuance pursuant to securities exercisable or
exchangeable for, or convertible into, any shares of capital stock, is
as set forth on Annex II. As of the Closing Date, the shares of AGI
Common Stock to be issued to ACL and all of the other issued and
outstanding shares of AGI Common Stock will have been duly authorized
and validly issued, will be fully paid and non-assessable and will not
be subject to any preemptive or similar rights. Except as described on
Annex II, as of the Closing Date there will be no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into or exercisable or exchangeable for, any shares of AGI Common
Stock or other securities of AGI, and (other than the Registration
Rights Agreement) there will be no agreements or arrangements under
which AGI is obligated to register the sale of any of its securities
under the Securities Act. Annex II describes all of the securities or
instruments issued by AGI that contain anti-dilution or similar
provisions that will be triggered by, and all of the resulting
adjustments that will be made, to such securities and instruments as a
result of the issuance of securities pursuant to this Agreement and
the MBC Agreement. AGI is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
its capital stock or any warrants, options or other rights to acquire
its capital stock. Except as described in Annex II, other than the
Voting Agreement, AGI is not and, as of the Closing, will not be a
party to any voting or similar agreement or proxies relating to the
voting of shares of its capital stock and is not aware of any such
agreements or proxies to which it is not a party.
B) AGI has furnished to ACL true and correct copies of its
certificate of incorporation as in effect on the date hereof, its
bylaws as in effect on the date hereof and all other instruments and
agreements that to
9
the Knowledge of AGI govern securities convertible or exchangeable
into capital stock of AGI.
C) The shares of AGI Common Stock to be issued pursuant to this
Agreement will be validly issued, fully paid and non-assessable, free
from all Taxes, Liens, claims and encumbrances and issued in
compliance with United States federal securities Laws and the
securities Laws of other applicable jurisdictions. Such shares will
not be subject to preemptive rights, rights of first refusal or
similar rights of stockholders and will not impose personal liability
upon the holder thereof.
iv) Noncontravention. Neither the execution and the delivery of the
Transaction Documents nor the consummation of the transactions contemplated
thereby will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of
any Governmental or Regulatory Authority or court to which AGI is subject
or any provision of its certificate of incorporation or bylaws, including
the amendments thereto in the forms attached as Exhibit A-1 and Exhibit
A-2.
v) Brokers' Fees. AGI has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the
transactions contemplated by the Transaction Documents for which ACL could
reasonably become liable or obligated.
vi) Disclosure. AGI has furnished to ACL all SEC Documents that AGI
was required to file with the Securities and Exchange Commission since
February 28, 1999. Except as set forth in Annex II, all such SEC Documents
were timely filed. As of their respective filing dates, or such later date
on which such documents were amended, such documents complied in all
material respects with the requirements of the Securities Exchange Act. As
of their respective dates, or such later date on which such documents were
amended, such documents did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in such documents comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the Securities and Exchange Commission with
respect thereto. Except as may be indicated in the notes to such financial
statements or, in the case of unaudited financial statements, as permitted
by Form 10-Q of the Securities and Exchange Commission, such financial
statements have been prepared in accordance with United States generally
accepted accounting principles consistently applied and fairly present the
consolidated financial position of AGI and its subsidiaries at the dates
thereof and the consolidated results of their operations and consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal recurring adjustments).
10
vii) Consents. As of the Closing, all consents necessary for AGI to
perform its obligations hereunder, which consent are described on Annex II,
will have been obtained.
viii) Material Adverse Change. Since February 28, 1999, except as
described in Annex II or as set forth in the SEC Documents, there has not
been:
A) any changes in the assets, liabilities, financial condition or
operations of AGI from that reflected in the financial statements
included in the SEC Documents, except changes in the ordinary course
of business which have not had a Material Adverse Effect, individually
or in the aggregate, on AGI;
B) any material change, except in the ordinary course of
business, in the contingent Liabilities of AGI whether by way of
guarantee, endorsement, indemnity, warranty or otherwise;
C) any damage, destruction or loss, whether or not covered by
insurance, materially or adversely affecting the properties or
business of AGI; or
D) any declaration or payment of any dividend or other
distribution of the assets of AGI or its subsidiaries.
ix) Insurance. AGI and its subsidiaries maintain such insurance
relating to their business, operations and assets as is appropriate to
their business and operations, in such amounts and against such risks as
are customarily carried and insured against by owners of comparable
businesses, assets and operations, and such insurance coverages will be
continued in full force and effect up to and following the Closing Date,
other than those insurance coverages in respect of which the failure to
continue in full force and effect could not reasonably be expected to have
a Material Adverse Effect on AGI.
x) Litigation. Except as described in the SEC Documents filed since
February 28, 1999, there is no action, suit, proceeding or investigation
pending or, to the Knowledge of AGI, currently threatened against AGI or
its subsidiaries.
xi) No General Solicitation. Neither AGI nor any of its Affiliates nor
any Person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer and sale of any
shares of AGI Common Stock to be issued pursuant to this Agreement.
xii) No Integrated Offering. Neither AGI nor any of its Affiliates nor
any Person acting on AGI's behalf has, directly or indirectly, made any
offers or sales of any securities or solicited any offers to buy any
securities under circumstances that would require (A) registration of any
shares of AGI Common Stock under the Securities Act or cause the offering
of any of the shares of AGI
11
Common Stock to be issued pursuant to this Agreement to be integrated with
prior offerings by AGI for purposes of the Securities Act or (B) compliance
with any applicable stockholder approval provisions, including without
limitation under the rules and regulations of the National Association of
Securities Dealers.
xiii) S-3 Registration. AGI is currently eligible to use Form S-3 for
registration of the sale by ACL of the Registrable Securities (as such term
is defined in the Registration Rights Agreement), and AGI has filed in the
preceding twelve (12) months and will file all reports required to be filed
by AGI with the Securities and Exchange Commission in a timely manner so as
to obtain and maintain eligibility to use Form S-3 for the resale of the
Registrable Securities.
xiv) Employees. AGI is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his or her employment
with AGI, nor does AGI have a present intention to terminate the employment
of any of the foregoing. Neither AGI nor, to its Knowledge, any employee of
AGI is or will be in violation of any term of any employment contract or
other contract or agreement because of the nature of the business conducted
by AGI or the use by any employee of his or her best efforts with respect
to such business. None of the employees of AGI belongs to any union or
collective bargaining unit.
xv) Compliance with Laws. AGI is in compliance with all applicable
Laws relating to the operation of its business and the maintenance and
operation of its properties and assets, including without limitation those
relating to environmental and occupational health and safety, except where
the failure to so comply would not have a Material Adverse Effect on AGI.
No material expenditures are, or to the Knowledge of AGI will be, required
in order to comply with any existing statutes, Laws and regulations.
xvi) Title to Property and Assets; Leases. Except (A) as reflected in
the SEC Documents, (B) for Liens for current Taxes not yet delinquent, (C)
for Liens imposed by law and incurred in the ordinary course of business
for obligations not past due to carriers, warehousemen, laborers,
materialmen and the like, (D) for Liens in respect of pledges or deposits
under worker compensation Laws or similar legislation, (E) for minor
defects in title, none of which individually or in the aggregate materially
interferes with the use of such property, or (F) with respect to property
or assets that are leased, AGI has good and marketable title to its
property and assets, free and clear of all Liens. With respect to any
property and assets that it leases, AGI holds a valid leasehold interest
free and clear of any Liens (subject to clauses (A) through (E) above).
xvii) Tax Matters. AGI has timely filed all tax returns and reports as
required by law. AGI has paid all taxes and other assessments due pursuant
to such returns or pursuant to any assessment received by it, other than
those contested by it in good faith, except where the failure to pay such
taxes would not have a Material Adverse Effect on AGI. The provision for
Taxes of AGI as
12
shown in its financial statements filed in the SEC Documents is adequate,
to the Knowledge of AGI, for Taxes due and accrued as of the date thereof.
xviii) Nasdaq Listing. The AGI Common Stock is listed on the Nasdaq
National Market. AGI has no Knowledge of any proceedings to revoke such
listing. The sales of shares of AGI Common Stock in accordance with the
terms of this Agreement will not violate any rules of the Nasdaq National
Market or the National Association of Securities Dealers as in effect on
the date hereof and the Closing Date.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
a) General. Each of the Parties shall use its reasonable best efforts to
take all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ss.6 below). Such action shall include ACL's acquisition of CCTV Shares or
interests therein from COMCOR, the pledge of all or a portion of such CCTV
Shares.
b) Notices and Consents. Each of the Parties shall give any notices to,
make any filings with and use its reasonable best efforts to obtain any
authorizations, consents and approvals of Governmental and Regulatory
Authorities in connection with the matters referred to in ss.3(a)(ii) and
ss.3(b)(ii) above.
c) Notice of Developments. Each Party shall give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its representations and warranties in ss.3 above. No disclosure by either Party
pursuant to this ss.4(c), however, shall be deemed to amend or supplement Annex
I or Annex II or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
d) Form D; Blue Sky Laws. Promptly after the Closing Date, AGI shall file
with the Securities and Exchange Commission a Form D with respect to the AGI
Common Stock to be issued pursuant to ss.2 above and shall provide a copy
thereof to ACL. AGI shall, on or before the Closing Date, take any such action
as AGI shall reasonably determine is necessary to qualify the AGI Common Stock
to be issued pursuant to ss.2 for sale to ACL under applicable securities or
"blue sky" Laws of the states of the United States or any other jurisdiction (or
to obtain exemption therefrom), and AGI shall provide evidence of any such
action to be taken to ACL on or prior to the Closing Date.
e) AGI Capitalization. Between the date of this Agreement through and
including the Closing Date, AGI shall not issue any additional shares of its
capital stock except (i) pursuant to currently outstanding instruments which
provide for exercise or conversion into capital stock and (ii) as required to
consummate the MBC Agreement. Notwithstanding the foregoing, in no event shall
the total number of shares of AGI Common Stock to be issued and outstanding
immediately following the Closing Date, as
13
calculated on a fully diluted basis as reported in the SEC Documents excluding
the shares to be issued pursuant to this Agreement, exceed 5,000,000.
5. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties shall take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request. ACL acknowledges and agrees that, from and after the Closing, AGI will
be entitled to possession of all documents, books, records (including Tax
records), agreements and financial data of any sort relating to CCTV.
b) Contribution to CCTV. AGI shall make or shall cause MBC to be made
capital contributions to CCTV in the amounts, at the times and in the manner set
forth on Annex III attached hereto.
c) Maintenance of Control over CCTV. So long as ACL owns not less than
12.5% of the issued and outstanding AGI Common Stock, calculated on a fully
diluted basis treating all options as exercised and all convertible securities
as converted, without the prior written consent of ACL, AGI shall not permit
CCTV to cease to be an Affiliate of AGI.
d) Reporting Status. So long as ACL owns any of the shares of the AGI
Common Stock to be issued hereunder, AGI shall timely file, or seek permissible
extensions for filing, all reports required to be filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act, and AGI shall not
terminate its status as an issuer required to file reports under the Securities
Exchange Act even if the Securities Exchange Act or the rules and regulations
thereunder would permit such termination.
e) Nasdaq National Market. So long as ACL owns at least 10 percent of the
shares of the AGI Common Stock to be issued hereunder, AGI shall use reasonable
efforts such that the AGI Common Stock will continue to be quoted on the Nasdaq
National Market and shall comply in all respects with the reporting, filing and
other obligations of the bylaws or rules of the National Association of
Securities Dealers.
f) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving CCTV and to the extent to which the Parties are
not adverse to each other, each of the Parties shall cooperate with the other
Party and its counsel in the contest or defense, shall make available its
personnel at the expense of the requesting party and shall provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense.
14
g) Confidentiality. ACL shall treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with the Transaction Documents and deliver promptly to AGI
or destroy, at the request and option of AGI, all tangible embodiments (and all
copies) of the Confidential Information which are in its possession. In the
event that ACL is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any Confidential
Information, ACL shall notify AGI promptly of the request or requirement so that
AGI may seek an appropriate protective order or waive compliance with the
provisions of this ss.5(g). If, in the absence of a protective order or the
receipt of a waiver hereunder, ACL is, on the advice of counsel, compelled by
law or regulation to disclose any Confidential Information to any tribunal, then
ACL may disclose such Confidential Information to the tribunal; provided,
however, that ACL shall use its reasonable best efforts to obtain, at the
reasonable request of AGI, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as AGI shall designate. The foregoing provisions shall
not apply to any Confidential Information that is generally available to the
public immediately prior to the time of disclosure.
h) Regulatory Compliance. ACL shall provide AGI, promptly upon request,
with all information that AGI requires from ACL in order to complete any
securities or regulatory filings that AGI is required or deems advisable to
make.
6. Conditions to Obligation to Close.
a) Conditions to Obligation of AGI. The obligation of AGI to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
i) the representations and warranties set forth inss.3(a) above shall
be true and correct in all material respects at and as of the Closing Date;
ii) ACL shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
iii) no action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by the
Transaction Documents, (B) cause any of the transactions contemplated by
the Transaction Documents to be rescinded following consummation, (C)
materially adversely effect the right of AGI to own the CCTV Shares or to
control CCTV directly or (D) materially adversely effect the right of CCTV
to own its assets and operate its businesses, and in each case no such
injunction, judgment, order, decree, ruling or charge shall be in effect;
15
iv) ACL shall have delivered to AGI a certificate to the effect that
each of the conditions specified in ss.6(a)(i)-(iii) above is satisfied in
all respects;
v) all applicable waiting periods, if any, and any extensions thereof
under the Hart-Scott-Rodino Act, if applicable, shall have expired or
otherwise been terminated, and each Party shall have received all other
authorizations, consents and approvals of Governmental and Regulatory
Authorities referred to in ss.3(a)(ii) and ss.3(b)(ii) above and on Annex I
and Annex II;
vi) the transactions contemplated by the MBC Agreement shall have been
consummated or shall be consummated simultaneously with the Closing, and
AGI shall hold or shall have rights to acquire simultaneously with the
Closing substantially all of the capital stock of MBC;
vii) AGI shall have obtained the approval of its stockholders with
respect to the adoption of the Amendments and the transactions contemplated
hereby and as required by the National Association of Securities Dealers,
the Laws of the State of Delaware, the Securities Act and the Securities
Exchange Act;
vii) the Transaction Documents shall have been executed and delivered
by the parties thereto other than AGI;
ix) AGI shall have received an opinion of Cyprus counsel to ACL, with
respect to issues of Cyprus law in substantially the form attached as
Exhibit E, and an opinion of Russian counsel to ACL, with respect to issues
of Russian law in substantially the form attached to Exhibit F; and
x)ACL shall have provided AGI with (i) copies of all documentation
relating to the acquisition of the CCTV Shares by ACL, including all board
resolutions and shareholder approvals, if any, of COMCOR and all
submissions of either COMCOR or ACL to any regulatory agency for approval
of the issuance and transfer of the CCTV Shares and (ii) all other due
diligence material reasonably requested by AGI relating to the transfer of
CCTV Shares, and AGI shall find that such due diligence material raises no
issues, in AGI's sole determination, relating to compliance with the terms
of the Transaction Documents.
AGI may waive any condition specified in this ss.6(a) if it executes a writing
so stating at or prior to the Closing. With regard to full performance of each
of the conditions, set forth above in Section 6 (a) v)-viii) AGI shall deliver
to ACL the certificate immediately prior to the contribution by COMCOR all of
the agreed assets to the charter capital of CCTV.
16
b) Conditions to Obligation of ACL. The obligation of ACL to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
i) the representations and warranties set forth in ss.3(b) above shall
be true and correct in all material respects at and as of the Closing Date;
ii) AGI shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
iii) no action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by the
Transaction Documents or (B) cause any of the transactions contemplated by
the Transaction Documents to be rescinded following consummation;
iv) AGI shall have delivered to ACL, on or prior to the date on which
COMCOR contributes assets to CCTV pursuant to the share purchase agreement,
a certificate to the effect that each of the conditions specified below in
ss.6(b)(v)-(viii) is satisfied in all respects;
v) all applicable waiting periods, if any, and any extensions thereof
under the Hart-Scott-Rodino Act, if applicable, shall have expired or
otherwise been terminated, and each Party shall have received all other
authorizations, consents and approvals of Governmental and Regulatory
Authorities referred to in ss.3(a)(ii) and ss.3(b)(ii) above and on Annex I
and Annex II;
vi) the transactions contemplated by the MBC Agreement shall have been
consummated or shall be to be consummated simultaneously with the Closing,
and AGI shall hold or shall have rights to acquire simultaneously with the
Closing substantially all of the shares of capital stock of MBC;
vii) AGI shall have obtained approval of its stockholders with respect
to the transactions contemplated hereby as required by the National
Association of Securities Dealers, the Laws of the State of Delaware, the
Securities Exchange Act and the Exchange Act;
viii) the Amendments shall have been adopted in accordance with
applicable Law and regulations and shall be in full force and effect;
ix) the Transaction Documents shall have been executed and delivered
by the parties thereto other than ACL; and
x) AGI shall have provided ACL with (i) copies of documentation
relating to the ownership by AGI Common Stock by the stockholders who shall
17
be parties to the Voting Agreement, satisfactory in form and substance to
ACL and its counsel, and (ii) all other due diligence material reasonably
requested by ACL relating to the ownership of AGI Common Stock by such
stockholders, and ACL shall find that such due diligence material raises no
issues, in ACL's sole determination, relating to whether the designated
parties to the Voting Agreement hold at least the percentage of AGI Common
Stock set forth in section 2(d) hereof.
ACL may waive any condition specified in this ss.6(b) if it executes a writing
so stating at or prior to the Closing.
7. Survival of Representations and Warranties. All of the representations
and warranties of the Parties contained in this Agreement shall survive the
Closing, even if the other Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing and
shall continue in full force and effect thereafter (subject to any applicable
statutes of limitation).
8. Indemnification.
---------------
a) To the fullest extent permitted by law, ACL shall hold AGI harmless from
and against any and all third-party actions, suits, claims, proceedings, costs,
losses, damages, judgments, amounts paid in settlement and reasonable expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
suffered or incurred directly by AGI to the extent relating to or arising out of
any material inaccuracy in or material breach, violation or nonobservance of the
representations, warranties, covenants or other agreements made by ACL in the
Transaction Documents. Notwithstanding the foregoing, no general decline in the
value of the AGI Common Stock after the date hereof or the Closing Date shall be
the sole basis for a claim against ACL pursuant to this ss.8(a).
b) In connection with (i) any filings made with the Securities and Exchange
Commission under the Securities Act or the Securities Exchange Act related to
the approval of the transactions contemplated by the Transaction Documents by
the stockholders of AGI, save and except for filings made in connection with
registrations undertaken in accordance with the Registration Rights Agreement,
and (ii) any filings made with any securities agency of any state or other
jurisdiction of the United States in connection with the issuance of the AGI
Common Stock to ACL pursuant hereto, ACL shall and hereby does indemnify and
hold harmless AGI and its directors, officers, legal counsel, independent
accountant and other representatives against any losses, claims, damages or
liabilities, joint or several, to which any such Person may become subject under
the Securities Act, the Securities Exchange Act or the securities Laws of any
such state, including such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) that arise out
of or are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in any such filings, including any document incorporated
therein by reference, or any amendment or supplement to such filing, or (b) any
omission or alleged omission to state in such filing a material fact required to
be stated or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, to the
18
extent and only to the extent that such losses, claims, damages or liabilities
are alleged under the foregoing clauses (a) or (b) to arise from any information
furnished in writing on or after the date hereof by ACL to AGI expressly for
inclusion in any such filing. ACL shall reimburse any Person indemnified
hereunder for reasonable legal or other expenses incurred by it in connection
with investigating or defending any such loss, claim, damage or liability. In
addition to and without limiting the foregoing or the provisions of ss.10(h),
all such claims under this ss.8 shall not be subject to the arbitration
provision of ss.10(i) and ACL may be joined as a party, if permissible under
governing Law, to any litigation or proceeding commenced against any Indemnified
Party which gives rise to indemnity claims by such Parties under this ss.8. The
indemnification provided by this ss.8 shall be made by periodic payments by ACL
of the amount thereof during the course of the investigation or defense, as and
when bills are received by any Person indemnified hereunder and as such loss,
claim, damage or liability is incurred.
9. Termination.
-----------
a) Termination of Agreement. The Parties may terminate this Agreement as
provided below:
i) AGI and ACL may terminate this Agreement by mutual written consent
at any time prior to the Closing;
ii) Either AGI or ACL may terminate this Agreement if the value per
share of AGI Common Stock for purposes of ss.2(b) above is equal to less
than Eight Dollars ($8.00) per share or greater than Twelve Dollars
($12.00) per share on the date on which the Closing can first be scheduled
pursuant to ss.2(b).
iii) AGI may terminate this Agreement by giving written notice to ACL
at any time prior to the Closing in the event that ACL has breached any
material representation, warranty or covenant contained in this Agreement
in any material respect, provided that AGI has notified ACL of the alleged
breach and the breach has continued without cure for a period of 20 days
after the notice of breach; and
iv) ACL may terminate this Agreement by giving written notice to AGI
at any time prior to the Closing in the event that AGI has breached any
material representation, warranty or covenant contained in this Agreement
in any material respect, provided that ACL has notified AGI of the alleged
breach and the breach has continued without cure for a period of 20 days
after the notice of breach.
b) Effect of Termination. If any Party terminates this Agreement pursuant
to ss.9(a) above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of either Party to the other Party (except for
any Liability of any Party then in breach).
19
10. Miscellaneous.
-------------
a) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Party; provided, however, that any Party may issue any press release, make any
filing or make any other public disclosure that it believes in good faith that
it is required to make by applicable law or any listing or trading agreement
concerning its publicly traded securities, in which case the disclosing Party
shall advise the other Party prior to making the disclosure.
b) No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
c) Entire Agreement. The Transaction Documents constitute the entire
agreement among the Parties and supersede any prior understandings, agreements
or representations by or between the Parties, written or oral, to the extent
that they relate in any way to the subject matter hereof.
d) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Party; provided, however, that AGI may (i) assign any or all of its rights
and interests hereunder to one of its Subsidiaries and (ii) designate one of its
Subsidiaries to perform its obligations hereunder, provided that notwithstanding
such designation AGI shall remain responsible for the performance of its
obligations hereunder.
e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
f) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g) Notices. All notices, demands and other communications shall be
sufficiently given for all purposes hereunder if in writing and delivered and
sent by documented overnight delivery service or, to the extent receipt is
confirmed, by facsimile or other electronic transmission service to the
appropriate address or number set forth below.
20
If to ACL: 163, Spyrou Araouzou Street Copy to: McDermott, Will & Emery
Lordos Waterfront, 2nd Floor 50 Rockefeller Plaza
Office 201 New York, NY 10020
Limassol, Cyprus Attention: Kathryn Beller, Esq.
Facsimile: (212) 547-5444
If to AGI: Anderson Group, Inc. Copy to: Akin, Gump, Strauss, Hauer &
515 Madison Avenue Feld, L.L.P.
20th Floor 590 Madison Avenue
New York, NY 10022 New York, NY 10022
Attention: Francis E. Baker Attention: Robert Langer, Esq.
Facsimile: (212) 888-5620 Facsimile: (212) 872-1002
Any Party may change the address to which notices, requests, demands and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
h) Governing Law and Language.
---------------------------
i) This Agreement shall be governed by and construed in accordance
with the domestic Laws of the State of New York without giving effect to
any choice or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the
Laws of any jurisdiction other than the State of New York; provided,
however, that any agreements referred to herein which by their terms are
expressly governed by the laws of another jurisdiction shall be governed by
such laws; and further provided that nothing in this ss.10(h) shall permit
any Party to bring any action, claim, demand, litigation or other legal
proceeding arising out of or relating to this Agreement in any tribunal
other than as set forth in ss.10(i) below, except to enforce an award
issued by the arbitrators in accordance with ss.10(i) below.
ii) This Agreement is written in English, and any Russian language
text is provided only for the convenience of the parties. In the case of
inconsistency or issues of interpretation between the English and Russian
texts, the English text shall control.
i) Arbitration. Subject to ss.10(p) below, any dispute, controversy or
claim between the Parties arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be referred to and finally resolved
by arbitration in New York, New York, to the exclusion of all other procedures,
in accordance with the rules then in force of the American Arbitration
Association, which are deemed to be incorporated by reference into this
ss.10(i). In any such arbitration, three arbitrators shall be appointed in
accordance with the such rules. Where the rules of the American Arbitration
Association do not provide for a particular situation, the arbitrators shall
determine the course of
21
action to be followed. The English language shall be used throughout any
arbitral proceeding. Subject to ss.10(p) below, to the maximum extent permitted
by applicable Law, the Parties agree not to assert any rights to have any court
rule on a question of law affecting the arbitration or to hear any appeal from
or entertain any judicial review of the arbitral award.
j) Agreement Not to Asset Claims/Sovereign Immunity. Each Party hereby
agrees, to the fullest extent permitted by applicable Laws, that it will not
assert a claim with regard to (i) any objection that it may have now or in the
future to the venue of any action, suit, arbitral proceeding or proceeding in
any court referred to in this ss.10(j), including forum non conveniens, (ii) any
claim that any such action, suit or proceeding has been brought in an
inconvenient forum, (iii) any and all rights to demand a trial by jury in any
such action, suit, or proceeding brought pursuant to this ss.10(j) or (iv) with
respect to all disputes, claims, controversies and all other matters of any
nature whatsoever that may arise under or in connection with this Agreement, all
immunity it may otherwise have as a sovereign, quasi-sovereign or state-owned
entity (or similar entity) from any and all proceedings (whether legal,
equitable, arbitral, administrative or otherwise), attachment of assets or
enforceability of judicial or arbitral awards.
k) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Parties. No
waiver by any Party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
l) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
m) Expenses. Each Party shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
n) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event that an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.
o) Incorporation of Exhibits and Annexes. The exhibits and annexes
identified in this Agreement are incorporated herein by reference and made a
part hereof.
22
p) Specific Performance. Each Party acknowledges and agrees that the other
Party would be damaged irreparably in the event that ACL shall fail to deliver
the CCTV Shares to be delivered on the Closing Date in accordance herewith or
AGI shall fail to issue the AGI Common Stock to ACL on the Closing Date in
accordance herewith. Accordingly, each Party agrees that the other Party shall
be entitled to an injunction or injunctions for specific performance to the
extent but only to the extent that a failure described in the preceding sentence
shall occur in addition to any other remedy to which such Party may be entitled
at law or in equity, so long as the Party seeking specific performance has met
all conditions to the performance of such obligations and the performance of
such obligations is reasonably within the control of the Party with respect to
which specific performance of an obligation is sought. In no event shall this
ss.10(p) be construed to entitle either Party to specific performance of any
other obligation in the Transactions Documents.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
23
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
ANDERSEN GROUP, INC.
By: /s/ Frank Baker
Title: Secretary
ASINIO COMMERCIAL LIMITED
By: /s/Khamidoulin Olisme Yalkin
Title: __________________________
24
ANNEX C
Amendment
OAO "Moscow Telecommunications Corporation" ("COMCOR"), Asinio Commercial
Limited ("ACL") and Andersen Group Incorporated ("AGI"), hereby amend the Stock
Subscription Agreement, the Undertaking Agreement and the Registration Rights
Agreement (collectively called "the Agreements") to the extent such Agreements
require amendment and incorporate the following changes:
1. The pricing collar of $8-$12 is deleted, and the transaction payment is
fixed at 4.0 million shares of AGI common stock in exchange for the ACL 50%
interest in the COMCOR-TV.
All other provisions of the Agreements continue in effect.
For and on behalf of
OAO "Moscow Telecommunications Corporation"
BY /s/ Yuri I. Pripachkin
Name Yuri I. Pripachkin
Date August 1, 2002
For and on behalf of
Asinio Commercial Limited
BY /s/ Khamidoulin Olisme Yalkin
Name Khamidoulin Olisme Yalkin
Date August 1, 2002
For and on behalf of
Andersen Group, Incorporation
BY /s/ Francis E. Baker
Name Francis E. Baker
Date August 1, 2002
1
ANNEX D
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of ____________, 2002 among Andersen Group, Inc., a Delaware corporation
(the "Company"), and Asinio Commercial Limited, a limited liability company
organized under the laws of Cyprus ("ACL").
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings set forth in this Article I:
"ACL" has the meaning specified in the preface.
"Agreement" has the meaning specified in the preface.
"Commission" means the United States Securities and Exchange Commission or
any successor governmental agency that administers the Securities Act and the
Exchange Act.
"Commission Registration Form" means a registration statement complying
with the rules and regulations of the Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company, as constituted on the date hereof, any shares of the Company's capital
stock into which such Common Stock shall be changed, and any shares of the
Company's capital stock resulting from any reclassification of such Common Stock
or any recapitalization of the Company.
"Company" has the meaning specified in the preface.
"Company Registration" has the meaning specified in Section 2.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute thereto, and the rules and regulations of the Commission
promulgated from time to time thereunder, all as the same shall be in effect at
the time.
"Holders" means ACL and any other Person who may hold Registrable
Securities in the future under this Agreement or under any other agreement with
the Company granting rights to register Registrable Securities.
"Incidental Registration" has the meaning specified in Section 2.3(a).
"Indemnified Parties" has the meaning specified in Section 5.1(a).
"Indemnifying Party" has the meaning specified in Section 5.1(c).
1
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
"Registrable Securities" means, in each case as adjusted for stock splits,
recapitalizations and other similar events, (i) shares of Common Stock held by
Holders and (ii) securities issued in replacement or exchange of any shares of
Common Stock held by Holders; provided, however, that any and all shares
described in clauses (i) and (ii) above shall cease to be Registrable Securities
upon any sale pursuant to a registration statement declared effective under the
Securities Act, any sale exempt from registration under the Securities Act
pursuant to section 4(1) of the Securities Act or Rule 144 promulgated under the
Securities Act, or any sale, transfer or assignment in any manner to any Person
who is not entitled to the rights provided by this Agreement.
"Registration Expenses" means all expenses incurred by the Company incident
to the Company's performance of or compliance with this Agreement in connection
with each Registration, including without limitation all registration, filing,
listing and National Association of Securities Dealers, Inc. fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, all messenger and delivery expenses, any
transfer taxes, the fees and expenses of the Company's legal counsel and
independent public accountants; provided, however, that Registration Expenses
shall not include underwriting discounts and commissions.
"Registration" means any of a Company Registration, a Requested
Registration or an Incidental Registration.
"Registration Notice" has the meaning specified in Section 2.1(a).
"Registration Request" has the meaning set forth in Section 2.2(a).
"Requested Registration" has the meaning specified in Section 2.2(a).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute thereto, and the rules and regulations of the Commission
promulgated from time to time thereunder, all as the same shall be in effect at
the time.
"Underwriter's Maximum Number" has the meaning specified in Section 2.1(b).
ARTICLE II
REGISTRATION
SECTION 2.1. Company Registration.
----------------------------------
(a) Registration. Subject to market conditions and customary underwriter's
conditions for a firm commitment underwriting, the Company shall use its best
efforts to effect one firm commitment underwritten registration under the
Securities Act (and any related
2
qualification under blue sky laws or other compliance) of the offering and sale
of all or part of the Registrable Securities (the "Company Registration") on or
before the first anniversary of the date of this Agreement. The Company shall
promptly give all Holders written notice of the Company Registration (a
"Registration Notice"). Any Holder that desires to participate in the Company
Registration shall notify the Company in writing, within 20 days following the
date of the Registration Notice, of the number of Registrable Securities that
such Holder desires to be included in the Company Registration. Such written
request may specify all or a part of the Registrable Securities held by a
Holder. Subject to Section 2.1(b), the Company may also include in the Company
Registration other securities of the Company offered for the account of the
Company or any other Person. A Company Registration may be accomplished on Form
S-3 under the Securities Act, if available, at the option of the Company. If the
Company Registration has not been completed on or before the first anniversary
of the date hereof, then the Company shall use commercially reasonable efforts
to complete the Company Registration as soon as practicable thereafter. If any
Holder does not agree to the terms of such underwriting, then the Registrable
Securities of such Holder may be excluded from the Company Registration upon
written notice by the Company or the representatives of the underwriters. Any
Registrable Securities withdrawn from such underwriting shall be withdrawn from
the Company Registration.
(b) Priority. If the representative of the underwriters for the Company
Registration gives written advice to Holders and the Company that, in its
opinion, market conditions dictate that no more than a specified maximum number
of securities (the "Underwriter's Maximum Number") could successfully be
included in the Company Registration within a price range acceptable to Holders
and the Company, then the Company shall be required by this Section 2.1 to
include in the Company Registration only such number of securities as equals the
Underwriter's Maximum Number. In such event, Holders, the Company and any other
Person participating in the Company Registration shall participate in the
Company Registration as follows:
(i) First, there shall be included in the Company Registration that
number of securities that the Company proposes to offer and sell for its own
account to the full extent of the Underwriter's Maximum Number; and
(ii) Second, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that Holders have requested to be included in the Company
Registration to the full extent of the remaining portion of the Underwriter's
Maximum Number; and
(iii) Third, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that any Persons other than Holders and the Company have
requested to be included in the Company Registration to the full extent of the
remaining portion of the Underwriter's Maximum Number.
In the event that this Section 2.1(b) results in less than all of the
Registrable Securities that are requested by Holders to be included in the
Company Registration actually being included in the Company Registration, then
the number of Registrable Securities that is included in the
3
Company Registration shall be allocated pro rata among all Holders based on the
number of Registrable Securities that each such Holder desires to offer. The
Company shall promptly notify Holders if any Registrable Securities will not be
included in the Company Registration pursuant to this Section 2.1(b). If any
securities are withdrawn from the registration pursuant to Section 2.1(a) and if
the number of Registrable Securities to be included in the Company Registration
was previously reduced pursuant to this Section 2.1(b), then the Company shall
then offer to all Holders the right to include additional Registrable Securities
in the Company Registration equal to the number of securities so withdrawn, with
such Registrable Securities to be allocated among the Holders requesting
additional inclusion on a pro rata basis.
SECTION 2.2. Requested Registration.
----------------------
(a) Request for Registration. Subject to Section 2.2(b), if at any time
after the first anniversary of this Agreement the Company shall receive a
written request from any Holder (a "Registration Request") that the Company
effect a registration under the Securities Act of all or any part of the
Registrable Securities held by such Holder (a "Requested Registration") in
accordance with the terms of this Section 2.2, then the Company shall use its
best efforts to effect the registration under the Securities Act (and any
related qualification under blue sky laws or other compliance) of the offering
and sale of such Registrable Securities within 90 days after receipt of the
Registration Request. The Company may also include in any Requested Registration
other securities of the Company offered for the account of the Company or any
other Person, including Registrable Securities held by other Holders entitled to
include such securities in such Requested Registration pursuant to Section 2.3.
A Requested Registration may be accomplished on Form S-3 under the Securities
Act, if available, at the option of the Company.
(b) Limitation on Requested Registrations.
-------------------------------------
i. Share Limitation. The Company shall not be obligated to effect a
Requested Registration unless such registration involves the greater of (i)
an aggregate offering price of $1,000,000 or (ii) less than one percent of
the Common Stock issued or outstanding as of the date of such Registration
Request.
ii. Limitation on the Number of Requested Registrations. The Company
shall only be obligated to effect one Requested Registration hereunder in
any six month (calendar) period.
iii. Prior Registration Limitation. If a registration statement
related to another Registration has been declared effective under the
Securities Act within the preceding six calendar months and the
participating Holders have not sold all Registrable Securities included in
such registration statement, then the Company shall have the right to defer
a Requested Registration for a period of not more than 90 days.
iv. Delay Limitation. If the Company shall furnish to Holders
requesting a Requested Registration a certificate signed by the chief
executive officer or chairman of the board of directors of the Company
stating that, in the good faith judgment of the board of directors, the
effecting of the Requested Registration at the time requested would
4
be detrimental to the Company or its stockholders, then the Company shall
have the right to defer such Requested Registration for a period of not
more than 180 days.
v. Simultaneous Company Registration Limitation. From the date of
filing of any registration statement under the Securities Act by the
Company until the date 180 days following the effective date of such
registration statement, the Company shall not be obligated to effect a
Requested Registration without the consent of the representative of the
underwriters of the offering as to which such registration statement is
filed, so long as the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become or remain
effective.
vi. Termination. The right to request a Requested Registration shall
terminate on the fifth anniversary of this Agreement.
vii. Allocation. The inclusion of Registerable Securities in a
Requested Registration shall be made on a pro rata basis among Holders. In
the event that any Holder withdraws his Registrable Securities from a
Requested Registration, then the Company shall promptly notify other
Holders of such withdrawal. In such event, other Holders shall be entitled
to increase the number of Registrable Securities to be included in such
Requested Registration on a pro rata basis based on the number of
Registrable Securities that each such Holder desires to include in such
Requested Registration.
SECTION 2.3. Incidental Registrations.
-------------------------
(a) Incidental Registration. If the Company, for itself or any of its
security holders other than pursuant to a Requested Registration, at any time
after the first anniversary of the date hereof and through the fifth anniversary
hereof, undertakes to effect a registration under the Securities Act of the
offering and sale of any shares of its capital stock or other securities (other
than (i) the registration of an offer, sale or other disposition of securities
solely to employees of, or other Persons providing services to, the Company or
any subsidiary of the Company pursuant to an employee or similar benefit plan or
(ii) in connection with to a merger, acquisition or other transaction of the
type described in Rule 145 under the Securities Act or a comparable or successor
rule, registered on Form S-4 or similar or successor forms promulgated by the
Commission), then on each such occasion the Company shall notify each Holder of
such undertaking at least 30 days prior to the filing of a registration
statement relating thereto. In such event, upon the written request of any
Holder within 20 days after the receipt of such notice, subject to Section
2.2(b), the Company shall use its best efforts as soon as practicable thereafter
to cause any Registrable Securities specified by such Holder to be included in
such registration statement (an "Incidental Registration"). If a Holder desires
to include less than all Registrable Securities held by it in any Incidental
Registration, then such Holder shall nevertheless continue to have the right to
include any remaining Registrable Securities in any subsequent Incidental
Registration upon the terms and conditions set forth herein. The Company shall
have the right to terminate or withdraw any Incidental Registration initiated by
it under this Section 2.3 prior to the effectiveness of such registration,
whether or not any Holder has elected to include Registrable Securities in such
Incidental Registration. The Registration Expenses of such
5
terminated or withdrawn registration shall be borne by the Company in accordance
with Section 2.4.
(b) Priority in Registration. If an Incidental Registration is an
underwritten offering, and the representative of the underwriters gives written
advice to Holders and the Company that, in its opinion, market conditions
dictate that no more than an Underwriter's Maximum Number could successfully be
included in such Incidental Registration, then the Company shall be required by
this Section 2.3 to include in such Incidental Registration only such number of
securities as equals the Underwriter's Maximum Number. In such event, Holders,
the Company and any other Person participating in such Incidental Registration
shall participate in such Incidental Registration as follows:
(i) First, there shall be included in such Incidental Registration
that number of securities that the Company proposes to offer and sell for its
own account in such registration to the full extent of the Underwriter's Maximum
Number; and
(ii) Second, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in such Incidental Registration that number of
Registrable Securities that Holders have requested to be included in such
Incidental Registration to the full extent of the remaining portion of the
Underwriter's Maximum Number; and
(iii) Third, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that any Persons other than Holders and the Company have
requested to be included in the Company Registration to the full extent of the
remaining portion of the Underwriter's Maximum Number.
In the event that this Section 2.3(b) results in less than all of the
Registrable Securities that are requested by Holders to be included in such
Incidental Registration actually being included in such Incidental Registration,
then the number of Registrable Securities that is included in such Incidental
Registration shall be allocated pro rata among all Holders based on the number
of Registrable Securities that each such Holder desires to offer. The Company
shall promptly notify Holders if any Registrable Securities will not be included
in the Company Registration pursuant to this Section 2.3(b). If any securities
are withdrawn from the registration pursuant to Section 2.3(a) and if the number
of Registrable Securities to be included in such Incidental Registration was
previously reduced pursuant to this Section 2.3(b), then the Company shall then
offer to all Holders the right to include additional Registrable Securities in
such Incidental Registration equal to the number of securities so withdrawn,
with such Registrable Securities to be allocated among the Holders requesting
additional inclusion on a pro rata basis.
SECTION 2.4. Expenses. The Company shall pay all Registration Expenses
incurred in connection with any Registration.
SECTION 2.5. Effective Registration Statement. No Registration shall be
deemed to have been effected unless the registration statement filed with
respect thereto in accordance with the Securities Act has been declared
effective by the Commission and remain effective in accordance with Section 3.1.
Notwithstanding the foregoing, no registration shall be deemed to
6
have been effected if (a) after the related registration statement has been
declared effective by the Commission, such registration is made subject to any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or any court proceeding for any reason, other than solely by
reason of a misrepresentation or omission by any Holder, or (b) the conditions
to closing specified in the underwriting agreement entered into in connection
with such registration are not satisfied, other than solely by reason of an act
or omission by any Holder.
SECTION 2.6. Jurisdictional Limitations. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be obligated to take any action
to effect registration, qualification or compliance with respect to Registrable
Securities:
(a) In any particular jurisdiction in which the Company would be required
to execute a general consent to service of process, unless the Company is
already subject to service in such jurisdiction and except as required by the
Securities Act;
(b) That would require it to qualify generally to do business in any
jurisdiction in which it is not already so qualified or obligated to qualify; or
(c) That would subject it to taxation in a jurisdiction in which it is not
already subject generally to taxation.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1. Company Obligations. If and whenever the Company is required
to use its efforts to effect a Registration as provided in Article II, then as
expeditiously as possible and subject to the terms and conditions of Article II,
the Company shall:
(a) Prepare and file with the Commission the appropriate registration
statement to effect such Registration and use its best efforts to cause such
registration statement to become and remain effective for the period set forth
in Section 3.1(c);
(b) Permit any Holder that, in the reasonable judgment of the Company's
counsel, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration statement
(including by making available for inspection by any such Person and any
attorney, accountant or other agent retained by such Person, all financial and
other records, pertinent corporate documents and all other information
reasonably requested in connection therewith), furnish to all Holders, the
underwriters, if any, and their respective counsel and accountants advance draft
copies of such registration statement and each prospectus included therein or
filed with the Commission at least five business days prior to the filing
thereof with the Commission, and any amendments and supplements thereto promptly
as they become available, and provide each such Person such access to the books
and records of the Company and such opportunities to discuss the business of the
Company with its officers and the independent public accountants that have
certified the financial statements of the Company as is
7
necessary, in the opinion of such Person, to conduct a reasonable investigation
within the meaning of the Securities Act;
(c) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement, until the earlier of such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement or the expiration of 180 days after such
registration statement becomes effective (such period of 180 days to be extended
one day for each day or portion thereof during such period that such
registration statement is subject to any stop order suspending the effectiveness
of the registration statement, any order suspending or preventing the use of any
related prospectus or any order suspending the qualification of any Registrable
Securities included in such registration statement for sale in any
jurisdiction);
(d) Furnish to Holders that participate in such Registration, without
charge to such Holders, such number of conformed copies of such registration
statement and each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents as the purchaser or any such Holder may reasonably request;
(e) Use its best efforts to register or qualify all Registrable Securities
covered by such registration statement under the United States state securities
or blue sky laws of such jurisdictions as any Holder that participate in such
Registration reasonably requests, keep such registration or qualification in
effect for the time period set forth in Section 3.1(c) and take such other
action as may be reasonably necessary or advisable to enable such Holders to
sell the Registrable Securities covered by such Registration in such
jurisdictions;
(f) Use commercially reasonable efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other United States state governmental agencies or authorities as may be
necessary to enable any Holder that participates in such Registration to sell
the Registrable Securities covered by such Registration as intended by such
registration statement;
(g) Use its best efforts to obtain the withdrawal of any stop order
suspending the effectiveness of such registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction;
(h) Immediately notify Holders that participate in such Registration, at
any time during which a prospectus relating to such registration statement is
required to be delivered under the Securities Act, if the Company becomes aware
of any event as result of which such prospectus, as then in effect, would
include an untrue statement of material fact or would omit to
8
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and at the request of such Holders promptly prepare and furnish
to such Holders a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus would not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(i) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least 12 months but not more than 18 months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(j) Provide a transfer agent and registrar for all Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement; and
(k) Use its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange on which the same class of
securities issued by the Company are then listed or to secure designation and
quotation of all Registrable Securities covered by such Registration on the
Nasdaq National Market System and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. as such with respect to such
Registrable Securities and pay all fees and expenses in connection with the
satisfaction of the obligations set forth in this Section 3.1(k).
SECTION 3.2. Holder Obligations.
------------------
(a) Each Holder that participates in a Registration shall furnish to the
Company, upon its written request, such information as it may reasonably request
in writing (i) regarding the proposed distribution by such Holder of the
Registrable Securities held by such Holder and (ii) as required in connection
with any registration (including an amendment to a registration statement or
prospectus), qualification or compliance referred to in this Article III.
(b) Upon receipt of any notice from the Company, or upon a Holder's
otherwise becoming aware, of the happening of any event of the kind described in
Section 3.1(h), such Holder shall discontinue its disposition of Registrable
Securities pursuant to the registration statement relating to the offering and
sale of such Registrable Securities until the receipt by such Holder of the
supplemented or amended prospectus contemplated by Section 3.1(h). If so
directed by the Company, such Holder shall deliver to the Company all copies
other than permanent file copies then in possession of such Holder of the
prospectus relating to the offering and sale of such Registrable Securities
current at the time of receipt of such notice. In addition, each Holder shall
immediately notify the Company, at any time during which a prospectus relating
to the registration of such Registrable Securities is required to be delivered
under the
9
Securities Act, of the happening of any event as a result of which information
previously furnished in writing by such Holder to the Company specifically for
inclusion in such prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made. In the event that the Company or any such Holder
shall give any such notice, the period referred to in Section 3.1(c) shall be
extended by a number of days equal to the number of days during the period from
and including the giving of notice pursuant to Section 3.1(c) to and including
the date on which such Holder receives copies of the supplemented or amended
prospectus contemplated by Section 3.1(c).
ARTICLE IV
UNDERWRITTEN OFFERINGS
SECTION 4.1. Underwritten Offerings.
----------------------
(a) Underwritten Offering. In connection with any underwritten offering
pursuant to the Company Registration, the Company shall enter into an
underwriting agreement (and any other customary agreements) with the
underwriters for such offering, such agreement to be in form and substance
reasonably satisfactory to such underwriters in their reasonable judgment and to
contain such representations and warranties by the Company and such other terms
as are customarily contained in agreements of that type, including without
limitation indemnities to the effect and to the extent provided in Section 5.1.
Each Holder that participates in the Company Registration shall be a party to
such underwriting agreement and may, at such Holder's option, require that any
or all representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters be made to and for
the benefit of such Holder and that any or all conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder. No such Holder participating in any
such underwritten offering shall be required by the provisions hereof to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Holder and its intended method of distribution and any other representation
required by law.
(b) Selection of Underwriters. In the Company Registration, the Company
shall select the representative of the underwriters from underwriting firms of
national reputation in the United States that are reasonably acceptable to
Holders.
SECTION 4.2. Holdback Agreements. In connection with any underwritten
public offering of Registrable Securities by the Company under the Securities
Act, no Holder shall effect directly or indirectly (except as part of such
underwritten Registration in accordance with the provisions hereof or pursuant
to a transaction exempt from registration other than pursuant to Rule 144 or
Rule 145 of the Securities Act) any sale, distribution, short sale, loan, grant
of options for the purchase of or other disposition of any Registrable
Securities for such period as the representative of the underwriters requests,
which period shall in no event commence earlier than seven days prior to, or end
more than 180 days after, the date on which the registration
10
statement related to such offering is declared effective. The Company shall be
entitled to instruct its transfer agent to place stop transfer notations in its
records to enforce this Section 4.2(a).
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
SECTION 5.1. Indemnification.
---------------
(a) Indemnification by the Company. In connection with any Registration, to
the extent permitted by law, the Company shall and hereby does indemnify and
hold harmless each Holder that participates in such Registration, each such
Holder's legal counsel and independent accountants, each other Person who
participates as an underwriter in the offering or sale of securities (if so
required by such underwriter as a condition to including the Registrable
Securities of such Holders in such registration) and each other Person, if any,
who controls any such Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any losses,
claims, damages or liabilities, joint or several, to which such Holder,
underwriter or other Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which the offering
and sale of such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained therein
or any document incorporated therein by reference, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
arise out of any violation by the Company of any rule or regulation promulgated
under the Securities Act or state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration. The Company shall reimburse the Indemnified Parties for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 5.1(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld); and
provided, further, that the Company shall not be liable to any Indemnified Party
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with information furnished to the Company in writing by any
Indemnified Party specifically for use therein.
(b) Indemnification by Holders. As a condition to including any Registrable
Securities in any Registration, to the extent permitted by law, each Holder
shall and does hereby indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 5.1(a)) the Company, each director of the
Company, each officer of the Company and each other
11
Person, if any, who controls the Company within the meaning of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from any registration statement under which the offering and
sale of such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if and only if and to the
extent that such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with information furnished in
writing to the Company directly by such Person; provided, however, that the
obligation of any such Holder under this Section 5.1(b) shall be limited to an
amount equal to the gross proceeds received by such Holder upon the sale of
Registrable Securities sold in such Registration, unless such liability arises
out of or is based upon such Holder's willful misconduct.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party
of notice of the commencement of any action or proceeding involving a claim
referred to in this Section 5.1, if a claim in respect thereof is to be made
against a party required to provide indemnification (an "Indemnifying Party"),
the Indemnified Party shall give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligation under this Section 5.1, except to the
extent that the Indemnifying Party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Party,
unless in the reasonable judgment of such Indemnified Party a conflict of
interest between such Indemnified Party and the Indemnifying Party may exist in
respect of such claim, then each Indemnifying Party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party. After notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement without the consent of the Indemnified Party if such
judgment or settlement does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in
this Section 5.1 (with appropriate modifications) shall be given by the Company
and each Holder that participates in a Registration to each other and to any
underwriter, as applicable, with respect to any required registration or other
qualification of securities under any United States federal or state law or
regulation, other than the Securities Act, of any United States governmental
authority.
(e) Indemnification Payment. The indemnification required by this Section
5.1 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received and as expense,
loss, damage or liability is incurred.
(f) Survival of Obligations. The obligations of the Company and Holders
under this Section 5.1 and Section 5.2 shall survive the completion of any
offering of Registrable Securities.
12
SECTION 5.2. Contribution. If the indemnification provided for in Section
5.1 is unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in Section 5.1 an amount or additional amount, as the case may be,
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or Indemnifying Parties, on the one hand, and the Indemnified
Party, on the other, in connection with the statements or omissions which
resulted in such losses, claims, demands or liabilities as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or Indemnifying
Parties, on the one hand, or the Indemnified Party, on the other, and the
relative, intent, knowledge, access to information and opportunity of the
parties to correct or prevent such untrue statement or omission. The amount paid
to an Indemnified Party pursuant to this Section 5.2 shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any action or claim subject to this
Article V. No Person guilty of fraudulent misrepresentation within the meaning
of Section 11(f) of the Securities Act shall be entitled to contribution from
any Person that was not guilty of such fraudulent misrepresentation.
ARTICLE VI
COMPANY COVENANTS
SECTION 6.1. Covenants Relating to Rule 144; Reports Under Exchange Act.
With a view to (a) making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of securities
of the Company to the public without registration after such time as a public
market exists for the Common Stock and (b) causing the Company to be and remain
eligible to file use Form S-3 under the Securities Act, the Company shall:
(i) Make and keep public information available in accordance with Rule 144
under the Securities Act at all times after the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(ii) Take such action, including the voluntary registration of the Common
Stock under Section 12 of the Exchange Act, as necessary to enable the Company
to utilize Form S-3 for the sale of Registrable Securities;
(iii) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(iv) Furnish to each Holder forthwith upon request, so long as such Holder
owns any Registrable Securities, a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 under the Securities Act,
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents of the
Company as such Holder may reasonably request in availing itself of any
13
rule or regulation of the Commission that may allow such Holder to sell any
Registrable Securities without registration.
SECTION 6.2 Other Registration Rights. The Company may from time to time
grant additional registration rights to other holders of Common Stock, provided
that (i) any such rights granted in connection with the transactions
contemplated by the MBC Agreement (as defined in the Subscription Agreement
dated April 30, 2002 between the Company and ACL) may be pari passu with the
rights granted under this Agreement with respect to registration and cutback,
and (ii) no such registration rights shall be senior to the rights granted under
this Agreement with respect to registration and cutback (but that such rights
may at all times be pari passu).
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties. No waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
SECTION 7.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other party.
SECTION 7.3 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes any prior understandings, agreements
or representations by or among the parties, written or oral, to the extent that
they relate in any way to the subject matter hereof.
SECTION 7.4 Notices. All notices, demands and other communications shall be
sufficiently given for all purposes hereunder if in writing and delivered and
sent by documented overnight delivery service or, to the extent receipt is
confirmed, by facsimile or other electronic transmission service to the
appropriate address or number set forth below.
14
If to ACL: Copy to:
163, Spyrou Araouzou Street McDermott, Will & Emery
Lordos Waterfront, 2nd Floor 50 Rockefeller Plaza
Office 201 New York, NY 10020
Limassol, Cyprus Attention: Kathryn Beller, Esq.
Facsimile: (212) 547-5444
If to Company: Copy to:
Anderson Group, Inc. Akin, Gump, Strauss, Hauer &
515 Madison Avenue Feld, L.L.P.
20th Floor 590 Madison Avenue
New York, NY 10022 New York, NY 10022
Attention: Francis E. Baker Attention: Robert Langer, Esq.
Facsimile: (212) 888-5620 Facsimile: (212) 872-1002
Any party may change the address to which notices, requests, demands and other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
SECTION 7.5 Governing Law and Language. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the Laws of any jurisdiction other than the State of New
York; provided that nothing in this Section 7.5 shall permit any party to bring
any action, claim, demand, litigation or other legal proceeding arising out of
or relating to this Agreement in any tribunal other than as set forth in Section
7.6, except to enforce an award issued by the arbitrators in accordance with
Section 7.6. This Agreement is written in English, and any Russian language text
is provided only for the convenience of the parties. In the case of
inconsistency or issues of interpretation of the English and Russian texts, the
English text shall control.
SECTION 7.6 Arbitration. Any dispute, controversy or claim between the
parties arising out of or relating to this Agreement or the breach, termination
or validity hereof shall be referred to and finally resolved by arbitration in
New York, New York, to the exclusion of all other procedures, in accordance with
the rules then in force of the American Arbitration Association, which are
deemed to be incorporated by reference into this Section 7.6. In any such
arbitration, three arbitrators shall be appointed in accordance with the such
rules. Where the rules of the American Arbitration Association do not provide
for a particular situation, the arbitrators shall determine the course of action
to be followed. The English language shall be used throughout any arbitral
proceeding. To the maximum extent permitted by applicable law, the parties agree
not to assert any rights to have any court rule on a question of law affecting
the arbitration or to hear any appeal from or entertain any judicial review of
the arbitral award.
SECTION 7.7. Agreement Not to Asset Claims/Soverign Immunity. Each party
hereby agrees, to the fullest extent permitted by applicable laws, that it will
not assert a claim
15
with regard to (i) any objection that it may have now or in the future to the
venue of any action, suit, arbitral proceeding or proceeding in any court
referred to in this Section 7.7, including forum non conveniens, (ii) any claim
that any such action, suit or proceeding has been brought in an inconvenient
forum, (iii) any and all rights to demand a trial by jury in any such action,
suit, or proceeding brought pursuant to this Section 7.7 or (iv) with respect to
all disputes, claims, controversies and all other matters of any nature
whatsoever that may arise under or in connection with this Agreement, all
immunity it may otherwise have as a sovereign, quasi-sovereign or state-owned
entity (or similar entity) from any and all proceedings (whether legal,
equitable, arbitral, administrative or otherwise), attachment of assets or
enforceability of judicial or arbitral awards.
SECTION 7.8 Equitable Remedies. The parties agree that irreparable harm
would occur in the event that any of the agreements and provisions of this
Agreement were not performed fully by the parties in accordance with their
specific terms or conditions or were otherwise breached, and that money damages
are an inadequate remedy for breach of this Agreement because of the difficulty
of ascertaining and quantifying the amount of damage that would be suffered by
the parties in the event that this Agreement were not performed in accordance
with its terms or conditions or were otherwise breached. It is accordingly
hereby agreed that the parties shall be entitled to an injunction or injunctions
to restrain, enjoin and prevent breaches of this Agreement by the other party
and to enforce specifically such terms and provisions of this Agreement, such
remedy being in addition to and not in lieu of any other rights and remedies to
which the other Party is entitled to at law or in equity.
SECTION 7.9 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
SECTION 7.10 Severability; Titles and Subtitles; Gender; Singular and
Plural; Counterparts; Facsimile. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 7.11 Expenses. Each party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby except as expressly set forth herein.
SECTION 7.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event that an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ANDERSEN GROUP, INC.
By: --------------------------------
Name: ------------------------------
Title: -----------------------------
ASINIO COMMERCIAL LIMITED
By: --------------------------------
Name: ------------------------------
Title: ------------------------------
17
ANNEX E
STOCK EXCHANGE AGREEMENT
Stock Exchange Agreement (this "Agreement") entered into as of ________
July, 2002, by and among Andersen Group, Inc., a Delaware corporation ("AGI"),
and the stockholders (the "Transferors") of ABC Moscow Broadband Communication
Ltd. (the "Company"), a limited liability company organized under the laws of
the Republic of Cyprus whose names are set forth on the signature pages hereof.
Introduction
Whereas, the Company currently has two (2) classes of Shares, the Class A
Shares (the "Class A Shares") the Class B Shares (the "Class B Shares").
Whereas, there are 1,000 Class A Shares Outstanding owned by five (5)
stockholders, including AGI which owns 500 of the 1,000 outstanding Class A
Shares.
Whereas, there are 19,000 Class B Shares owned by fifty-three (53)
stockholders including AGI which owns 4,500 Class B Shares.
Whereas, in total there are 20,000 Class A Shares and Class B Shares and
AGI is the owner of 5,000 Class A and Class B Shares which is equal to 25% of
the issued and outstanding shares of all classes of the stock of the Company.
Whereas, except for some minor technical differences that are not relevant
with respect to the matters contemplated by this Agreement, there is no
difference between the rights and preferences of the Class A Shares and the
rights and preferences of the Class B Shares and the reference in this Agreement
to "Company Shares" shall mean and refer to both the Class A Shares and the
Class B Shares of the Company.
Whereas, the Transferors currently own the 15,000 Company Shares
(representing 75% of the issued and outstanding shares of stock of all classes
of the Company) that are not currently owned by AGI
Whereas, this Agreement contemplates a transaction in which AGI will
acquire from or on behalf of the Transferors all of 15,000 Company Shares owned
by the Transferors and in exchange therefor AGI will transfer to Transferors at
the Closing (as defined below), one hundred fifty (150) shares of Common Stock
of AGI, par value $.01 per share (the "AGI Common Stock") for each one (1)
Company Share owned by or held by Transferors.
Whereas, after giving effect to the transaction contemplated hereby, AGI
will own all 20,000 Company Shares and the Transferors collectively will have
acquired 2,250,000 shares of AGI Common Stock.
Now, therefore, in consideration of these premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties hereto hereby agree as follows:
1. Definitions. Unless expressly provided otherwise, the following meanings
shall apply equally to the singular and plural forms of the following terms.
"ACL" means Asinio Commercial Limited, a limited liability company
organized under the laws of the Republic of Cyprus.
"ACL Agreement" means the Subscription Agreement by which AGI acquires all
of the shares of CCTV owned by ACL in exchange for AGI Common Stock and, upon
the closing thereof, AGI becomes the owner of all of the issued and outstanding
shares of CCTV
1
"ACL Registration Rights Agreement" means an agreement pursuant to which
AGI shall grant to certain holders of AGI Common Stock other than the
Transferors contractual registration rights with respect to AGI Common Stock
being issued to them.
"ACL Voting Agreement" means an agreement pursuant to which certain holders
of AGI Common Stock other than the Transferors shall agree to vote for a number
of Persons nominated by the Transferors in the election of directors of AGI.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AGI" has the meaning set forth in the preface above.
"AGI Common Stock" means the common stock, par value $.01 per share, of
AGI.
"Agreement" has the meaning set forth in the preface above.
"Amendment" means an amendment to the certificate of incorporation of AGI
in the form attached as Exhibit A-1 or an amendment to the bylaws of AGI in the
form attached as Exhibit A-2.
"Company" has the meaning set forth in the preface above.
"Company Shares" has the meaning set forth in the preface above.
"CCTV" means ZAO ComCor TV, a closed joint stock company organized under
the laws of the Russian Federation.
"CCTV Share" means any share of the common stock, par value 10 rubles per
share, of CCTV.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"COMCOR" means Moskovskaya Telecommunikatsionnaya Corporatsiya, an open
joint stock company organized under the laws of the Russian Federation.
"COMCOR Agreement" means the Subscription Agreement by which AGI acquires
all of the shares of CCTV owned by COMCOR in exchange for AGI Common Stock and,
upon the closing thereof, AGI becomes the owner of all of the issued and
outstanding shares of CCTV.
"Confidential Information" means any information concerning the businesses
and affairs of CCTV that is not generally available to the public.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, arbitral panel, legislature, government, ministry, committee,
inspectorate, authority, agency, commission, official or other competent
authority of the Russian Federation, the Republic of Cyprus, the United States,
any other country or any state, as well as any county, city, municipality or
other political subdivision of any of the foregoing.
"Knowledge" means actual knowledge after reasonable investigation.
"Laws" means (a) all laws, decrees, resolutions, instructions, statutes,
rules, regulations, acts, ordinances and other pronouncements having the effect
of law or regulation of the Russian Federation, the Republic of Cyprus,
2
the United States or any state or province thereof and (b) all rules or
regulations of any securities exchange on which the securities of AGI are now or
hereafter traded, quoted or listed.
"Liability" means any indebtedness, obligation and other liability of a
Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due), including without limitation all obligations of such
Person (a) for borrowed money or investment commitments, (b) evidenced by notes,
bonds, debentures or similar instruments, (c) for the deferred purchase price of
goods or services (other than trade payables or accruals incurred in the
ordinary course of business consistent with past practice), (d) under capital
leases, (e) for Taxes or (f) in the nature of guarantee of any obligation
described in clauses (a) through (d) above of any other Person.
"Lien" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge, rights of first refusal, or other encumbrance
of any kind, or any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
"License" means any license or licenses necessary for a Party to lawfully
own and operate its business, assets and properties or enter into and perform
the Party's obligations under the Transaction Documents.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on or with respect to the business, assets, financial condition
or results of operations of such Person and its Subsidiaries taken as a whole,
or upon such Person's ability to perform its obligations under this Agreement or
any Transaction Document to which it is a party.
"Party" means AGI or anyone of the Transferors, and "Parties" means AGI and
the Transferors collectively.
"Person" means an individual, a partnership, `a limited liability company,
a corporation, an association, a joint stock company, a trust, a joint venture,
an unincorporated organization or a governmental entity (or any department,
agency or political subdivision thereof).
"Registration Rights Agreement" means an agreement in the form attached as
Exhibit B, pursuant to which AGI shall grant to the Transferors the contractual
registration rights with respect to AGI Common Stock.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor to such rule.
"Schedule A" means the schedule attached hereto containing the names of the
Tranferors and the number or Company Shares owned by each such Transferor and
the Class of Company Shares owned by each such Transferor.
"SEC Documents" means the documents filed by AGI with the Securities and
Exchange Commission pursuant to Sections 13 or 14(a) of the Securities Exchange
Act.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"Securities and Exchange Commission" means the United States Securities and
Exchange Commission or any United States governmental body or agency succeeding
to substantially all of the functions thereof.
"Securities Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, or any successor federal statute, and the rules and
regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
3
"Shareholder Representative" means Francis E. Baker and Oliver R. Grace,
Jr. acting jointly, and not individually, and having the duties and powers
specified in Section 10 below.
"Subsidiary" means any corporation or other entity with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the capital stock
or other equity interests or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other managers.
"Tax" means any Russian Federation, Cypriot or United States federal,
provincial, state, local or other income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
"Transaction Document" means each of this Agreement, the Registration
Rights Agreement, and the Company Stock Certificates held by each Transferor and
the stock powers relating thereto, and "Transaction Documents" means all of the
foregoing agreements.
"Transferors" means and refers to all of the holders or owners of Company
Shares other than AGI whose signatures are set forth on the signature pages
hereof and whose names and shareholdings in Company Shares are set forth on
Schedule A hereto. "Transferor" is the singular of Transferors means and refers
to one of the Transferors.
2. Exchange of Company Shares for AGI Common Stock.
-----------------------------------------------
a) Basic Transaction. Subject to obtaining all requisite approvals required
to consummate the transaction and subject to the simultaneous consummation of
the transaction contemplated by the ACL Agreement of ACL Transaction, AGI or its
designee or nominee .shall acquire from the Transferors the number of shares
held by each of the Transferors as set forth opposite their respective names on
Schedule A in exchange for the consideration specified below in ss.2(b) below
and on the terms and conditions otherwise set forth herein.
b) Exchange Ratio. At the Closing AGI shall transfer to each Transferor one
hundred fifty (150) shares of AGI Common Stock for each one (1) share of Company
Stock tendered for exchange by each Transferor.
c) The Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Akin, Gump,
Strauss, Hauer & Feld L.L.P., 590 Madison Avenue, New York, New York 10022,
commencing at 9:00 a.m. local time not less than one nor more than five business
days after the first business day on which the closing conditions set forth at
ss.ss. 6(a) and 6(b) below may be simultaneously satisfied or waived, or such
other date as the Parties may agree (the "Closing Date").
d) Deliveries upon Execution and Delivery of This Agreement Upon the
execution and delivery of this Agreement (i) each Transferor shall deliver or
cause to be delivered to AGI or its designee the various certificates,
instruments and documents referred to in ss.6(a) below and (ii) each Transferor
and AGI shall enter execute and deliver the Registration Rights Agreement.
Except for this Agreement signed by the Transferors, all of the documents and
instruments delivered by the Transferors shall be held in escrow until the
Closing.
3. Representations and Warranties Concerning the Transaction.
---------------------------------------------------------
a) Representations and Warranties of the Transferors. Each Transferor
severally (and not jointly and severally) and solely with respect to the
Transferor that is making such representations and warranties (and not with
respect to other Transferors), represents and warrants to AGI that the
statements and understandings contained in this ss.3(a) are true, complete and
correct as of the date of this Agreement and will be true, correct and complete
as of the Closing Date, except as set forth on Annex I attached hereto.
4
i) Organization of the Company. To the Knowledge of the each such
Transferor: (a) the Company is a limited liability company duly organized
and validly existing under the laws of Republic of Cyprus, and the Company
has all necessary power and authority as a limited liability company to own
its assets and to carry on its business as now being conducted and
presently proposed to be conducted; and (b) the Company is qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which its ownership or leasing of assets, or the conduct of
its business, makes such qualification necessary, except where the failure
to be so qualified or in good standing would not have a Material Adverse
Effect on the Company.
ii) Authorization of Transaction. Such Transferor has full power and
authority to execute and deliver the Transaction Documents and to perform
his/hers/its respective obligations thereunder. On the Closing Date, such
Transferor will have full power and authority to convey, the Company Shares
held by or for the benefit of such Transferor to AGI pursuant to this
Agreement. In the event that that the Transferor is an entity, all action
on the part of such Transferor for the lawful execution and delivery of the
Transaction Documents and the transfer and delivery of the Company Shares
hereunder has been taken or prior to the Closing will have been taken. This
Agreement constitutes, and on the Closing Date each of the Transaction
Documents will constitute, the valid and legally binding obligation of such
Transferor, enforceable in accordance with its terms and conditions. Each
Transferor does not need to give any notice to, make any filing with or
obtain any authorization, consent or approval of any Governmental or
Regulatory Authority in order to consummate the transactions contemplated
by the Transaction Documents.
iii) Noncontravention. Neither the execution and the delivery of the
Transaction Documents nor the consummation of the transactions contemplated
thereby will violate (A) any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of
any Governmental or Regulatory Authority or court to which such Transferor
is subject or (B) if such Transferor is an entity, any provision of its
memorandum and articles of association or other organizational documents of
any such Transferor that is an entity.
iv) Brokers' Fees. The Transferor has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which AGI could
reasonably become liable or obligated.
v) Investment. Each Transferor: (A) understands that the AGI Common
Stock to be received pursuant to this Agreement has not been, and will not
be, registered under the Securities Act, or under any state securities
Laws, and is being offered and sold in reliance upon United States federal
and state exemptions for transactions not involving any public offering,
(B) is acquiring such AGI Common Stock solely for its own account for
investment purposes, and not with a view to the distribution thereof, (C)
is a sophisticated investor with such knowledge and experience in business
and financial matters as to be capable of evaluating the merits and risks
of its investment, is familiar with the risks associated with the business
and operations of companies that operate in similar lines of business to
AGI, and has the ability to bear the economic risks of its investment,
including the potential loss of its investment, (D) has received sufficient
information concerning AGI and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding AGI Common Stock and (E) is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
vi) Restrictions on Resale. Such Transferor understands that the AGI
Common Stock to be received pursuant to this Agreement may not be sold,
transferred or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the sale of such AGI Common
Stock, or an available exemption from registration under the Securities Act
or a sale under and in compliance with Rule 144, such AGI Common Stock must
be held indefinitely. In no event will such Transferor transfer or dispose
of any of the AGI Common Stock to be received pursuant to this Agreement
(other than pursuant to an effective registration statement under the
Securities Act) unless and until (A) such Transferor shall have notified
5
AGI of the proposed disposition and (B) if requested by AGI, such
Transferor shall have furnished to AGI, at the expense of such Transferor,
an opinion of counsel reasonably satisfactory to AGI to the effect that
such transfer may be made without registration under the Securities Act.
Any certificate or instrument evidencing the AGI Common Stock to be issued
pursuant to this Agreement shall contain a legend substantially to the
following effect:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, or the securities laws of any state of the
United States or in any other jurisdiction. The
securities represented hereby may not be offered, sold
or transferred in the absence of an effective
registration statement for the securities under
applicable securities laws, unless offered, sold or
transferred pursuant to an available exemption from the
registration requirements of those laws and provided
that the availability of such exemption is confirmed by
an opinion of counsel reasonably satisfactory to
Andersen Group, Inc. delivered to Andersen Group, Inc."
Unless otherwise required by applicable securities Laws, the legend set
forth above shall be removed, and AGI or its transfer agent shall issue or
cause to be issued a certificate without such legend to the holder of any
certificate, if (x) the sale of such shares of AGI Common Stock is
registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise, (y) such holder provides AGI with an opinion
of counsel reasonably satisfactory to AGI, to the effect that a public sale
or transfer of the shares evidenced by such certificate may be made without
registration under the Securities Act or (z) such holder provides AGI with
reasonable assurance and an opinion of counsel reasonably satisfactory to
AGI, that the shares evidenced by such certificate may be sold in
compliance with Rule 144. In the event that the above legend is removed
from any certificate and thereafter the effectiveness of a registration
statement covering the shares evidenced by such certificate is suspended,
or if AGI reasonably determines that a supplement or amendment to such
registration statement is required by applicable securities law, then upon
reasonable advance written notice to the holder of such certificate, AGI
may require that the above legend be placed on any such certificate
evidencing shares that cannot be sold pursuant to an effective registration
statement or under Rule 144, and such Transferor shall cooperate in the
placement of such legend. Such legend shall thereafter be removed from such
certificate when such shares may again be sold pursuant to an effective
registration statement or under Rule 144.
vii) Company Shares. As of the date hereof and on the Closing Date,
each Transferor will hold of record and beneficially the number of the
Company Shares set forth opposite his/hers/its name on Schedule A, free and
clear of any restrictions on transfer, Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims and demands. All
such Company Shares were duly authorized and validly issued, are fully paid
and non-assessable and were properly registered with the appropriate
Governmental or Regulatory Authorities competent for registration of the
issuance of such Company Shares. Such Transferor is not a party to any
option, warrant, purchase right or other contract or commitment other than
this Agreement that could require such Transferor to sell, transfer or
otherwise dispose of any capital stock of the Company. Such Transferor is
not a party to any voting trust, proxy, agreement with respect to the
voting of any capital stock of the Company.
b) Representations and Warranties of AGI. AGI represents and warrants to
each Transferor that the statements and understandings contained in this ss.3(b)
are true, correct and complete as of the date of this Agreement and will be
true, correct and complete as of the Closing Date, except as set forth on Annex
II attached hereto.
i) Organization of AGI. AGI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. AGI
has all necessary corporate power and authority to own its assets and to
carry on its business as now being conducted and presently proposed to be
conducted. AGI is qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which its ownership or leasing of
assets, or the conduct of its business, makes such qualification necessary,
6
except where the failure to be so qualified or in good standing would not
have a Material Adverse Effect on AGI.
ii) Authorization of Transaction. AGI has full power and authority
(including full corporate power and authority) to execute and deliver the
Transaction Documents, to perform its obligations thereunder and to issue
the shares of AGI Common Stock to be issued pursuant to this Agreement. All
corporate action on the part of AGI required for the lawful execution and
delivery of the Transaction Documents, the adoption of the Amendments and
the issuance and delivery of the shares of AGI Common Stock has been taken
or prior to the Closing will to be received pursuant have been taken. Upon
the approval of this Agreement by AGI's stockholders and, with respect to
the Transaction Documents other than this Agreement, upon execution, each
of the Transaction Documents will constitute the valid and legally binding
obligation of AGI, enforceable in accordance with its terms and conditions.
AGI need not give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental or Regulatory
Authority in order to consummate the transactions contemplated by this
Agreement.
iii) Capitalization of AGI.
A) The capitalization of AGI as of the date hereof, including the
authorized capital stock, the number of shares issued and outstanding,
the number of shares issuable and reserved for issuance pursuance to
AGI's stock option plans and the number of shares issuable and
reserved for issuance pursuant to securities exercisable or
exchangeable for, or convertible into, any shares of capital stock, is
as set forth on Annex II. As of the Closing Date, the shares of AGI
Common Stock to be issued to the Transferors and all of the other
issued and outstanding shares of AGI Common Stock will have been duly
authorized and validly issued, will be fully paid and non-assessable
and will not be subject to any preemptive or similar rights. Except as
described on Annex II, as of the Closing Date there will be no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares
of AGI Common Stock or other securities of AGI, and (other than the
Registration Rights Agreement and the ACL Registration Rights
Agreement) there will be no agreements or arrangements under which AGI
is obligated to register the sale of any of its securities under the
Securities Act. Annex II describes all of the securities or
instruments issued by AGI that contain anti-dilution or similar
provisions that will be triggered by, and all of the resulting
adjustments that will be made, to such securities and instruments as a
result of the issuance of securities pursuant to this Agreement and
the COMCOR Agreement. AGI is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares
of its capital stock or any warrants, options or other rights to
acquire its capital stock. Except as described in Annex II, other than
the ACL Voting, AGI is not and, as of the Closing, will not be a party
to any voting or similar agreement or proxies relating to the voting
of shares of its capital stock and is not aware of any such agreements
or proxies to which it is not a party.
B) AGI has furnished to the Transferors true and correct copies
of its certificate of incorporation as in effect on the date hereof,
its bylaws as in effect on the date hereof and all other instruments
and agreements that to the Knowledge of AGI govern securities
convertible or exchangeable into capital stock of AGI.
C) The shares of AGI Common Stock to be issued pursuant to this
Agreement will be validly issued, fully paid and non-assessable, free
from all Taxes, Liens, claims and encumbrances and issued in
compliance with United States federal securities Laws and the
securities Laws of other applicable jurisdictions. Such shares will
not be subject to preemptive rights, rights of first refusal or
similar rights of stockholders and will not impose personal liability
upon the holder thereof.
7
iv) Noncontravention. Neither the execution and the delivery of the
Transaction Documents nor the consummation of the transactions contemplated
thereby will violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of
any Governmental or Regulatory Authority or court to which AGI is subject
or any provision of its certificate of incorporation or bylaws, including
the amendments thereto in the forms attached as Exhibit A-1 and Exhibit
A-2.
v) Brokers' Fees. AGI has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the
transactions contemplated by the Transaction Documents for which the
Transferors could reasonably become liable or obligated.
vi) Disclosure. AGI has furnished to the Transferors all SEC Documents
that AGI was required to file with the Securities and Exchange Commission
since February 28, 1999. Except as set forth in Annex II, all such SEC
Documents were timely filed. As of their respective filing dates, or such
later date on which such documents were amended, such documents complied in
all material respects with the requirements of the Securities Exchange Act.
As of their respective dates, or such later date on which such documents
were amended, such documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading at the time of
filing. The financial statements included in such documents comply as to
form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Securities and Exchange
Commission with respect thereto. Except as may be indicated in the notes to
such financial statements or, in the case of unaudited financial
statements, as permitted by Form 10-Q of the Securities and Exchange
Commission, such financial statements have been prepared in accordance with
United States generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of AGI and its
subsidiaries at the dates thereof and the consolidated results of their
operations and consolidated cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring adjustments).
vii) Consents. As of the Closing, all consents necessary for AGI to
perform its obligations hereunder will have been obtained.
viii) Material Adverse Change. Since February 28, 1999, except as
described in Annex II or as set forth in the SEC Documents, there has not
been:
A) any changes in the assets, liabilities, financial condition or
operations of AGI from that reflected in the financial statements
included in the SEC Documents, except changes in the ordinary course
of business which have not had a Material Adverse Effect, individually
or in the aggregate, on AGI;
B) any material change, except in the ordinary course of
business, in the contingent Liabilities of AGI whether by way of
guarantee, endorsement, indemnity, warranty or otherwise;
C) any damage, destruction or loss, whether or not covered by
insurance, materially or adversely affecting the properties or
business of AGI; or
D) any declaration or payment of any dividend or other
distribution of the assets of AGI or its subsidiaries.
ix) Insurance. AGI and its subsidiaries maintain such insurance
relating to their business, operations and assets as is appropriate to
their business and operations, in such amounts and against such risks as
are customarily carried and insured against by owners of comparable
businesses, assets and operations, and such insurance coverages will be
continued in full force and effect up to and following the
8
Closing Date, other than those insurance coverages in respect of which the
failure to continue in full force and effect could not reasonably be
expected to have a Material Adverse Effect on AGI.
x) Litigation. Except as described in the SEC Documents filed since
February 28, 1999, there is no action, suit, proceeding or investigation
pending or, to the Knowledge of AGI, currently threatened against AGI or
its subsidiaries.
xi) No General Solicitation. Neither AGI nor any of its Affiliates nor
any Person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer and sale of any
shares of AGI Common Stock to be issued pursuant to this Agreement.
xii) No Integrated Offering. Neither AGI nor any of its Affiliates nor
any Person acting on AGI's behalf has, directly or indirectly, made any
offers or sales of any securities or solicited any offers to buy any
securities under circumstances that would require (A) registration of any
shares of AGI Common Stock under the Securities Act or cause the offering
of any of the shares of AGI Common Stock to be issued pursuant to this
Agreement to be integrated with prior offerings by AGI for purposes of the
Securities Act or (B) compliance with any applicable stockholder approval
provisions, including without limitation under the rules and regulations of
the National Association of Securities Dealers.
xiii) S-3 Registration. AGI is currently eligible to use Form S-3 for
registration of the sale by the Transferors of the Registrable Securities
(as such term is defined in the Registration Rights Agreement), and AGI has
filed in the preceding twelve (12) months and will file all reports
required to be filed by AGI with the Securities and Exchange Commission in
a timely manner so as to obtain and maintain eligibility to use Form S-3
for the resale of the Registrable Securities.
xiv) Employees. AGI is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his or her employment
with AGI, nor does AGI have a present intention to terminate the employment
of any of the foregoing. Neither AGI nor, to its Knowledge, any employee of
AGI is or will be in violation of any term of any employment contract or
other contract or agreement because of the nature of the business conducted
by AGI or the use by any employee of his or her best efforts with respect
to such business. None of the employees of AGI belongs to any union or
collective bargaining unit.
xv) Compliance with Laws. AGI is in compliance with all applicable
Laws relating to the operation of its business and the maintenance and
operation of its properties and assets, including without limitation those
relating to environmental and occupational health and safety, except where
the failure to so comply would not have a Material Adverse Effect on AGI.
No material expenditures are, or to the Knowledge of AGI will be, required
in order to comply with any existing statutes, Laws and regulations.
xvi) Title to Property and Assets; Leases. Except (A) as reflected in
the SEC Documents, (B) for Liens for current Taxes not yet delinquent, (C)
for Liens imposed by law and incurred in the ordinary course of business
for obligations not past due to carriers, warehousemen, laborers,
materialmen and the like, (D) for Liens in respect of pledges or deposits
under worker compensation Laws or similar legislation, (E) for minor
defects in title, none of which individually or in the aggregate materially
interferes with the use of such property, or (F) with respect to property
or assets that are leased, AGI has good and marketable title to its
property and assets, free and clear of all Liens. With respect to any
property and assets that it leases, AGI holds a valid leasehold interest
free and clear of any Liens (subject to clauses (A) through (E) above).
xvii) Tax Matters. AGI has timely filed all tax returns and reports as
required by law. AGI has paid all taxes and other assessments due pursuant
to such returns or pursuant to any assessment received by it, other than
those contested by it in good faith, except where the failure to pay such
taxes
9
would not have a Material Adverse Effect on AGI. The provision for Taxes of
AGI as shown in its financial statements filed in the SEC Documents is
adequate, to the Knowledge of AGI, for Taxes due and accrued as of the date
thereof.
xviii) Nasdaq Listing. The AGI Common Stock is listed on the Nasdaq
National Market. AGI has no Knowledge of any proceedings to revoke such
listing. The sales of shares of AGI Common Stock in accordance with the
terms of this Agreement will not violate any rules of the Nasdaq National
Market or the National Association of Securities Dealers as in effect on
the date hereof and the Closing Date.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
a) General. Each of the Parties shall use its reasonable best efforts to
take all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ss.6 below).
b) Notices and Consents. Each of the Parties shall give any notices to,
make any filings with and use its reasonable best efforts to obtain any
authorizations, consents and approvals of Governmental and Regulatory
Authorities in connection with the matters referred to in ss.3(a)(ii) and
ss.3(b)(ii) above.
c) Notice of Developments. Each Party shall give prompt written notice to
the other Party of any material adverse development causing a breach of any of
its representations and warranties in ss.3 above. No disclosure by either Party
pursuant to this ss.4(c), however, shall be deemed to amend or supplement Annex
I or Annex II or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
d) Blue Sky Laws. AGI shall, on or before the Closing Date, take any such
action as AGI shall reasonably determine is necessary to qualify the AGI Common
Stock to be issued pursuant to ss.2 for sale to the Transferors under applicable
securities or "blue sky" Laws of the states of the United States or any other
jurisdiction (or to obtain exemption therefrom), and AGI shall provide evidence
of any such action to be taken to the Transfeors on or prior to the Closing
Date.
e) AGI Capitalization. Between the date of this Agreement through and
including the Closing Date, AGI shall not issue any additional shares of its
capital stock except (i) pursuant to this Agreement, (ii) pursuant to currently
outstanding instruments which provide for exercise or conversion into capital
stock and (iii) as required to consummate the ACL Agreement.
5. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties shall take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request. The Transferors acknowledges and agrees that, from and after the
Closing, AGI will be entitled to possession of all documents, books, records
(including Tax records), agreements and financial data of any sort relating to
the Company.
b) Contribution to CCTV. AGI shall make or shall cause the Company to be
made capital contributions to CCTV in the amounts, at the times and in the
manner set forth on Annex III attached hereto.
c) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving CCTV and to the extent to which the Parties are
not adverse to each other, each of the Parties shall cooperate with the other
Party and its counsel in the contest or
10
defense, shall make available its personnel at the expense of the requesting
party and shall provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense.
d) Regulatory Compliance. the Transferors shall provide AGI, promptly upon
request, with all information that AGI requires from the Transferors in order to
complete any securities or regulatory filings that AGI is required or deems
advisable to make.
e) Form D. 15 days after the Closing Date, AGI shall file with the
Securities and Exchange Commission a Form D with respect to the AGI Common Stock
to be issued pursuant to ss.2 above and shall provide a copy thereof to the
Transferors
6. Conditions to Obligation to Close.
---------------------------------
a) Conditions to Obligation of AGI. The obligation of AGI to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
i) the representations and warranties set forth inss.3(a) above shall
be true and correct in all material respects at and as of the Closing Date;
ii) each Transferor shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
iii) no action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by the
Transaction Documents, (B) cause any of the transactions contemplated by
the Transaction Documents to be rescinded following consummation, (C)
materially adversely effect the right of AGI to own the CCTV Shares or to
control CCTV directly or (D) materially adversely effect the right of CCTV
to own its assets and operate its businesses, and in each case no such
injunction, judgment, order, decree, ruling or charge shall be in effect;
iv) the Transferors shall have delivered to AGI a certificate to the
effect that each of the conditions specified inss.6(a)(i)-(iii) above is
satisfied in all respects;
v) each Party shall have received all other authorizations, consents
and approvals of Governmental and Regulatory Authorities referred to in
ss.3(a)(ii) and ss.3(b)(ii) above and on Annex I and Annex II;
vi) the transactions contemplated by the COMCOR Agreement shall have
been consummated or shall be to be consummated simultaneously with the
Closing, and AGI shall hold or shall have rights to acquire simultaneously
with the Closing substantially all of the capital stock of the Company;
vii) [Intentionally Omitted];
viii) AGI shall have obtained the approval of its stockholders with
respect to the adoption of the Amendments and the transactions contemplated
hereby;
ix) the Transaction Documents shall have been executed and delivered
by the parties thereto other than AGI;
x) AGI shall have received an opinion of Polakis Sarris with respect
to issues of Cyprus law; and
11
AGI may waive any condition specified in this ss.6(a) if it executes a writing
so stating at or prior to the Closing. With regard to full performance of each
of the conditions, set forth above in Section 6 (a) v)-viii) AGI shall deliver
to the Transferors the certificate immediately prior to the contribution by
COMCOR of all of the agreed assets to the charter capital of CCTV.
b) Conditions to Obligation of the Transferors. The obligation of the
Transferors to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
i) the representations and warranties set forth inss.3(b) above shall
be true and correct in all material respects at and as of the Closing Date;
ii) AGI shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
iii) no action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by the
Transaction Documents or (B) cause any of the transactions contemplated by
the Transaction Documents to be rescinded following consummation;
iv) AGI shall have delivered to the Transferors a certificate to the
effect that each of the conditions specified above inss.6(b)(i)-(iii) is
satisfied in all respects;
v) Each Party shall have received all other authorizations, consents
and approvals of Governmental and Regulatory Authorities referred to in
ss.3(a)(ii) and ss.3(b)(ii) above and on Annex I and Annex II;
vi) the transactions contemplated by the COMCOR Agreement shall have
been consummated or shall be to be consummated simultaneously with the
Closing;
vii) AGI shall have obtained approval of its stockholders with respect
to the transactions contemplated hereby as required by the National
Association of Securities Dealers, the Laws of the State of Delaware, the
Securities Exchange Act and the Exchange Act;
vii) the Amendments shall have been adopted in accordance with
applicable Law and regulations and shall be in full force and effect;
viii) the Transaction Documents shall have been executed and delivered
by the parties thereto other than the Transferors;
The Transferors may waive any condition specified in this ss.6(b) if it executes
a writing so stating at or prior to the Closing.
In the event that all of the conditions specified in this Section 6 have not
occurred or been waived by the respective parties hereto that are entitled to
grant such waivers on or before December 31, 2002, then in that event, all of
the documents submitted by the Transferors to AGI shall be promptly returned to
the respective Transferor(s) that submitted the documents to AGI, and upon such
return of the documents by AGI to the respective Transferor(s), this Agreement
shall be void and of no further force and effect; provided, however, AGI shall
have the right to extend
12
the deadline date of December 31, 2002 to a later date
or later dates in the event that AGI in its discretion deems such extension(s)
to be advisable.
7. Survival of Representations and Warranties. All of the representations and
warranties of the Parties contained in this Agreement shall survive the Closing,
even if the other Party knew or had reason to know of any misrepresentation or
breach of warranty or covenant at the time of Closing) and shall continue in
full force and effect thereafter for a period of one (1) year from and after the
date of the Closing.
8. Indemnification.
---------------
a) To the fullest extent permitted by law, the Transferors shall severally
hold AGI,0its Affiliates, directors, officers, counsel, and shareholders
(collectively, the "AGI Indemnitee") harmless from and against any and all
third-party actions, suits, claims, proceedings, costs, losses, damages,
judgments, amounts paid in settlement and reasonable expenses (including,
without limitation, reasonable attorneys' fees and disbursements) suffered or
incurred directly by any AGI Indemnitee to the extent relating to or arising out
of any material inaccuracy in or material breach, violation or nonobservance of
the representations, warranties, covenants or other agreements made by a
Transferor in this Agreement.
b) In connection with (i) any filings made with the Securities and Exchange
Commission under the Securities Act or the Securities Exchange Act related to
the approval of the transactions contemplated by the Transaction Documents by
the stockholders of AGI, save and except for filings made in connection with
registrations undertaken in accordance with the Registration Rights Agreement,
and (ii) any filings made with any securities agency of any state or other
jurisdiction of the United States in connection with the issuance of the AGI
Common Stock to the Transferors pursuant hereto, the Transferors shall severally
indemnify and hold harmless AGI and its directors, officers, legal counsel,
independent accountant and other representatives against any losses, claims,
damages or liabilities, joint or several, to which any such Person may become
subject under the Securities Act, the Securities Exchange Act or the securities
Laws of any such state, including such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
that arise out of or are based upon (a) any untrue statement or alleged untrue
statement of any material fact contained in any such filings, including any
document incorporated therein by reference, or any amendment or supplement to
such filing, or (b) any omission or alleged omission to state in such filing a
material fact required to be stated or necessary to make the statements therein
in light of the circumstances in which they were made not misleading, to the
extent and only to the extent that such losses, claims, damages or liabilities
are alleged under the foregoing clauses (a) or (b) to arise from any information
furnished in writing on or after the date hereof by the Transferors to AGI
expressly for inclusion in any such filing. the Transferors shall reimburse any
Person indemnified hereunder for reasonable legal or other expenses incurred by
it in connection with investigating or defending any such loss, claim, damage or
liability. In addition to and without limiting the foregoing or the provisions
of ss.10(h), all such claims under this ss.8 shall not be subject to the
arbitration provision of ss.10(i) and the Transferors may be joined as a party,
if permissible under governing Law, to any litigation or proceeding commenced
against any Indemnified Party which gives rise to indemnity claims by such
Parties under this ss.8. The indemnification provided by this ss.8 shall be made
by periodic payments by the Transferors of the amount thereof during the course
of the investigation or defense, as and when bills are received by any Person
indemnified hereunder and as such loss, claim, damage or liability is incurred.
9. Termination.
-----------
a) Termination of Agreement. AGI and the Shareholder Representative may
terminate this Agreement as provided below:
i) AGI and the Shareholder Representative may terminate this Agreement
by mutual written consent at any time prior to the Closing;
ii) Either AGI or the Shareholder Representative may terminate this
Agreement if the value per share of AGI Common Stock for purposes of
ss.2(b) above is equal to less than Eight Dollars ($8.00) per
13
share or greater than Twelve Dollars ($12.00) per share on the date on
which the Closing can first be scheduled pursuant to ss.2(b).
iii) AGI may terminate this Agreement by giving written notice to the
Shareholder Representative at any time prior to the Closing in the event
that any Transferor has breached any material representation, warranty or
covenant contained in this Agreement, provided that AGI has notified the
Shareholder Representative of the alleged breach and the breach has
continued without cure for a period of 20 days after the notice of breach;
and
iv) the Shareholder Representative may terminate this Agreement by
giving written notice to AGI at any time prior to the Closing in the event
that AGI has breached any material representation, warranty or covenant
contained in this Agreement, provided that the Transferors has notified AGI
of the alleged breach and the breach has continued without cure for a
period of 20 days after the notice of breach.
b) Effect of Termination. If any Party terminates this Agreement pursuant
to ss.9(a) above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of either Party to the other Party (except for
any Liability of any Party then in breach).
10. Shareholder Representatives.
---------------------------
(a) Each of the Transferors hereby designates Frank E. Baker and Oliver R.
Grace, acting jointly, and not individually, as the Shareholder Representatives
to perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by the Shareholder Representatives and hereby
acknowledges that the Shareholder Representatives shall be the only persons
authorized to take any action so required, authorized or contemplated by this
Agreement on behalf of any Transferor.
(b) Each Transferor shall severally indemnify the Shareholder
Representatives and hold each Shareholder Representative harmless against any
loss, liability or expense incurred without gross negligence or willful
misconduct on the part of such Shareholder Representative and arising out of or
in connection with the acceptance or administration of its duties hereunder.
(c) Each Transferor acknowledges and agrees that the
ShareholderRepresentatives shall be entitled to rely on the opinion of counsel
and that upon such reliance on counsel the Shareholder Representatives shall
have performed their duties in good faith.
(d) The appointment and designation of the Shareholder Representatives
pursuant to this Section 10 shall be irrevocable, except in the event of the
resignation of a Shareholder Representative, in which event the Transferors who
then hold a majority of the Company Shares begin transferred pursuant to this
Agreement shall promptly (i) designate the successor Shareholder Representative
or Representatives and (ii) deliver written notice to the other parties hereto
of such designation.
11. Miscellaneous.
-------------
a) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the AGI or
the Shareholder Representative, as the case may be; provided, however, that any
Party may issue any press release, make any filing or make any other public
disclosure that it believes in good faith that it is required to make by
applicable law or any listing or trading agreement concerning its publicly
traded securities, in which case the disclosing Party shall promptly advise the
other Party prior to making the disclosure.
14
b) Confidentiality. Each Transferors shall treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information, except in connection with the Transaction Documents and deliver
promptly to AGI or destroy, at the request and option of AGI, all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. In the event that such Transferor is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, such Transferor shall notify AGI promptly
of the request or requirement so that AGI may seek an appropriate protective
order or waive compliance with the provisions of this ss.5(g). If, in the
absence of a protective order or the receipt of a waiver hereunder, such
Transferor is, on the advice of counsel, compelled by law or regulation to
disclose any Confidential Information to any tribunal, then such Transferor may
disclose such Confidential Information to the tribunal; provided, however, that
such Transferor shall use its reasonable best efforts to obtain, at the
reasonable request of AGI, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as AGI shall designate.
c) No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
c) Entire Agreement. The Transaction Documents constitute the entire
agreement among the Parties and supersede any prior understandings, agreements
or representations by or between the Parties, written or oral, to the extent
that they relate in any w00ay to the subject matter hereof.
d) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Party; provided, however, that AGI may assign any or all of its rights and
interests hereunder to one of its Subsidiaries.
e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
f) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g) Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party to be notified, (b) when sent by confirmed facsimile if sent during
normal business hours of the Party, or, if not sent during such normal business
hours, then on the next business day, (c) five (5) days after having been sent
by registered or certified mail, return receipt requested, postage prepaid or
(d) three (3) days after deposit with a nationally recognized courier, with
written verification of receipt. All notices not delivered personally or by
facsimile will be sent with postage and other charges prepaid and properly
addressed to the party to be notified at the address set forth for such party:
If to the Transferors to each of the Shareholders
Representatives:
55 Brookville Road,
Glen Head, New York 11545
Attention: Oliver R. Grace, Jr.
Telephone Number: (516) 686-2207
Facsimile Number: (516) 626-1204
15
And to
Andersen Group, Inc.
405 Park Avenue-12th Floor,
New York, NY 10022,
Attention Francis E. Baker
Telephone Number: (212) 826-8942
Facsimile: (212) 888-5620
If to AGI:
Anderson Group, Inc.
405 Park Avenue-12th
Floor, New York, NY 10022
Attention: Francis E. Baker
Telephone Number: (212) 826-8942
Facsimile: (212) 888-5620
Any Party may change the address to which notices, requests, demands and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth. In the event that the Shareholder Representatives
receive notices intended for one, or more than one, or all of the Transferors,
then in that event, the Shareholder Representative shall promptly forward copies
of any such notices received by the Shareholder Representative to the respective
Transferor(s) for whom such notice was intended.
h) Governing Law and Language.
--------------------------
This Agreement shall be governed by and construed in accordance with the
domestic Laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of New York; provided, however, that any agreements
referred to herein which by their terms are expressly governed by the laws of
another jurisdiction shall be governed by such laws; and further provided that
nothing in this ss.11(h) shall permit any Party to bring any action, claim,
demand, litigation or other legal proceeding arising out of or relating to this
Agreement in any tribunal other than as set forth in ss.11(i) below, except to
enforce an award issued by the arbitrators in accordance with ss.11(i) below.
i) Arbitration. Subject to ss.11(p) below, any dispute, controversy or
claim between the Parties arising out of or relating to this Agreement or the
breach, termination or validity hereof shall be referred to and finally resolved
by arbitration in New York, New York, to the exclusion of all other procedures,
in accordance with the rules then in force of the American Arbitration
Association, which are deemed to be incorporated by reference into this
ss.11(i). In any such arbitration, three arbitrators shall be appointed in
accordance with the such rules. Where the rules of the American Arbitration
Association do not provide for a particular situation, the arbitrators shall
determine the course of action to be followed. The English language shall be
used throughout any arbitral proceeding. Subject to ss.11(p) below, to the
maximum extent permitted by applicable Law, the Parties agree not to assert any
rights to have any court rule on a question of law affecting the arbitration or
to hear any appeal from or entertain any judicial review of the arbitral award.
16
j) Agreement Not to Assert Claims. Each Party hereby agrees, to the fullest
extent permitted by applicable Laws, that it will not assert a claim with regard
to (i) any objection that it may have now or in the future to the venue of any
action, suit, arbitral proceeding or proceeding in any court referred to in this
ss.11(j), including forum non conveniens, (ii) any claim that any such action,
suit or proceeding has been brought in an inconvenient forum., (iii) any and all
rights to demand a trial by jury in any such action, suit, or proceeding brought
pursuant to this ss.11(j) or (iv) with respect to all disputes, claims,
controversies and all other matters of any nature whatsoever that may arise
under or in connection with this Agreement.
k) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Parties. No
waiver by any Party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
l) Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
m) Expenses. Each Party shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
n) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event that an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.
o) Incorporation of Exhibits and Annexes. The exhibits and annexes
identified in this Agreement are incorporated herein by reference and made a
part hereof.
p) Specific Performance. Each Party acknowledges and agrees that the other
Party would be damaged irreparably in the event that the Transferors shall fail
to deliver the CCTV Shares to be delivered on the Closing Date in accordance
herewith or AGI shall fail to issue the AGI Common Stock to the Transferors on
the Closing Date in accordance herewith.. Accordingly, each Party agrees that
the other Party shall be entitled to an injunction or injunctions for specific
performance to the extent but only to the extent that a failure described in the
preceding sentence shall occur in addition to any other remedy to which such
Party may be entitled at law or in equity, so long as the Party seeking specific
performance has met all conditions to the performance of such obligations and
the performance of such obligations is reasonably within the control of the
Party with respect to which specific performance of an obligation is sought. In
no event shall this ss.10(p) be construed to entitle either Party to specific
performance of any other obligation in the Transactions Documents.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
ANDERSEN GROUP, INC.
By:--------------------------
Title:-----------------------
17
Each of the undersigned Francis E. Baker and Oliver R.
Grace, Jr. hereby acknowledges his appointment and
designation as a Shareholder Representative and his
willingness to fulfill the duties of a Shareholder
Representative contemplated by this Agreement.
SHAREHOLDER REPRESENTATIVE
---------------------
Francis E. Baker
---------------------
Oliver R. Grace, Jr.
By signing below and following the "Instructions For Acceptance of the Exchange
Offer," (a copy of which is enclosed herewith), the undersigned Transferors
hereby accept the Exchange Offer:
Field Nominees Limited
By: -------------------------------
Name: ------------------------
Title: -----------------------
Sputnik Investment
By: -------------------------------
Name: ------------------------
Title: -----------------------
Brookside E Ventures
By: -------------------------------
Name: ------------------------
Title: -----------------------
Sterling Grace Capital Management L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
18
Drake Associates L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
Francis E. Baker
Firebird Republic Fund
By: -------------------------------
Name: ------------------------
Title: -----------------------
Islandia, L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Thomas McPartland
-----------------------------------
James Pinto
The Anglo American Security Fund, L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
Sage Venture Partners
By: -------------------------------
Name: ------------------------
Title: -----------------------
19
International Investment Fund L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
Diversified Long Term Growth Fund L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Dr. Phillip George
Firebird Fund
By: -------------------------------
Name: ------------------------
Title: -----------------------
Galt Nominees
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Hildgarde E. Mahoney
Maranello Holdings, LLC
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Peter Bennett
20
Firebird New Russia Fund
By: -------------------------------
Name: ------------------------
Title: -----------------------
Moretons Holdings Limited
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Anne Marie Lubrano
Churchill
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
John R. Grace
JOP Partners
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Robert M. Grace
Woodmont Capital LLC
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Allen Dulles Jebsen
21
PLFB, LLC
By: -------------------------------
Name: ------------------------
Title: -----------------------
Frank's Sports Corp.
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Arthur C. Merrill, Jr.
-----------------------------------
Damon Ball
Murdoch & Company
By: -------------------------------
Name: ------------------------
Title: -----------------------
Telcom Partners L.P.
By: -------------------------------
Name: ------------------------
Title: -----------------------
22
-----------------------------------
Harvey Sawikin
-----------------------------------
James D. Sterling
-----------------------------------
Kevin A. Daigh
PMTZ, LLC
By: -------------------------------
Name: ------------------------
Title: -----------------------
Ruth Jervis Trustee FBO Wayne Jervis
By: -------------------------------
Name: ------------------------
Title: -----------------------
-----------------------------------
Robert S. Field
-----------------------------------
John Cefaly
-----------------------------------
James Reeves
-----------------------------------
Oliver Grace C/F Courtland Palmer
-----------------------------------
Oliver Grace C/F Eric Royce Palmer
23
-----------------------------------
Oliver Grace C/F Randall Palmer
-----------------------------------
Oliver Grace C/F Reed Charles Palmer
-----------------------------------
Andrew M. O'Shea
-----------------------------------
Edward C. Lord, III
-----------------------------------
Michael Mullady
-----------------------------------
Eric Johnston
-----------------------------------
Mark Ford
24
SCHEDULE A
Balance
Class A Class B Total
Shares Shares Shares % of Total
Shares
FIELD NOMINEES 430 4,930 5,360 26.8%
SPUTNIK INVESTMENT 1,000 1,000 5.0%
BROOKSIDE eVENTURES 1,000 1,000 5.0%
STERLING GRACE 900 900 4.5%
CAPITAL MGMT LP
DRAKE ASSOCIATES 30 565 595 3.0%
F. BAKER 500 500 2.5%
FIREBIRD REPUBLIC 500 500 2.5%
FUND
ISLANDIA, L.P. 500 500 2.5%
T. MCPARTLAND 500 500 2.5%
JAMES PINTO 350 350 1.8%
ANGLO AMERICAN 300 300 1.5%
SECURITY
FUND L.P.
SAGE VENTURE 250 250 1.3%
PARTNERS
INTERNATIONAL 225 225 1.1%
INVESTMENT FUND, LP
DIVERSIFIED LONG 15 195 210 1.1%
TERM GROWTH FUND
Dr. PHILLIP GEORGE 200 200 1.0%
FIREBIRD FUND 200 200 1.0%
GALT NOMINEES 200 200 1.0%
H. MAHONEY 200 200 1.0%
MARANELLO HOLDINGS, 200 200 1.0%
LLC
P. BENNETT 200 200 1.0%
FIREBIRD NEW RUSSIA 150 150 0.8%
FUND
MORETONS HOLDINGS 150 150 0.8%
LIMITED
ANNE MARIE LUBRANO 100 100 0.5%
CHURCHILL 100 100 0.5%
JOHN R.. GRACE 100 100 0.5%
JOP PARTNERS 100 100 0.5%
ROBERT GRACE 100 100 0.5%
25
WOODMONT 100 100 0.5%
CAPITAL LLC
ALLEN JEBSEN 75 75 0.4%
PLFB, LLC 75 75 0.4%
FRANK SPORTS CORP 70 70 0.4%
A. MERRILL, JR. 25 25 50 0.3%
DAMON BALL 50 50 0.3%
MURDOCH & COMPANY 50 50 0.3%
ELCOM PARTNERS L.P. 50 50 0.3%
HARVEY SAWIKIN 40 40 0.2%
JAMES STERLING 25 25 0.1%
KEVIN A. DAIGH 25 25 0.1%
PMTZ,LLC 25 25 0.1%
RUTH JERVIS HEE 25 25 0.1%
FBO WAYNE JERVIS
ROBERT FIELD 23 23 0.1%
JOHN CEFALY 20 20 0.1%
JAMES REEVES 15 15 0.1%
OLIVER GRACE C/F 13 13 0.1%
Courtland Palmer
OLIVER GRACE C/F 13 13 0.1%
Eric Royce Palmer
OLIVER GRACE C/F 13 13 0.1%
Randall Palmer
OLIVER GRACE C/F 13 13 0.1%
Reed Charles Palmer
ANDREW M. O'SHEA 10 10 0.1%
EDWARD C. LORD III 10 10 0.1%
MICHAELA MULLADY 10 10 0.1%
ERIC JOHNSTON 5 5 0.0%
MARK FORD 5 5 0.0%
------- --------- --------- -----------
500 14,500 15,000 100.00%
------- --------- --------- -----------
26
ANNEX F
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of the _____ day of July, 2002 among Andersen Group, Inc., a Delaware
corporation (the "Company"), and the stockholders (the "MBC Stockholders") of
ABC Moscow Broadband Communication Limited ("MBC"), a limited liability company
organized under the laws of Cyprus whose names are set forth on the signature
pages hereof.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
The following terms shall have the meanings set forth in this Article I:
"ACL" means Asinio Commercial Limited, a limited liability company
organized under the laws of Cyprus ("ACL").
"ACL Agreement" means the agreement referred to in Section 6.2 of this
Agreement
"Agreement" has the meaning specified in the preface.
"Commission" means the United States Securities and Exchange Commission or
any successor governmental agency that administers the Securities Act and the
Exchange Act.
"Commission Registration Form" means a registration statement complying
with the rules and regulations of the Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company, as constituted on the date hereof, any shares of the Company's capital
stock into which such Common Stock shall be changed, and any shares of the
Company's capital stock resulting from any reclassification of such Common Stock
or any recapitalization of the Company.
"Company" has the meaning specified in the preface.
"Company Registration" has the meaning specified in Section 2.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute thereto, and the rules and regulations of the Commission
promulgated from time to time thereunder, all as the same shall be in effect at
the time.
"Holders" means each of the MBC Stockholders who are signatories to this
Agreement and any other Person who may hold Registrable Securities in the future
under this Agreement or under any other agreement with the Company granting
rights to register Registrable Securities.
"Incidental Registration" has the meaning specified in Section 2.3(a).
"Indemnified Parties" has the meaning specified in Section 5.1(a).
"Indemnifying Party" has the meaning specified in Section 5.1(c).
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
1
"Registrable Securities" means, in each case as adjusted for stock splits,
recapitalizations and other similar events, (i) shares of Common Stock held by
Holders and (ii) securities issued in replacement or exchange of any shares of
Common Stock held by Holders; provided, however, that any and all shares
described in clauses (i) and (ii) above shall cease to be Registrable Securities
upon any sale pursuant to a registration statement declared effective under the
Securities Act, any sale exempt from registration under the Securities Act
pursuant to section 4(1) of the Securities Act or Rule 144 promulgated under the
Securities Act, or any sale, transfer or assignment in any manner to any Person
who is not entitled to the rights provided by this Agreement.
"Registration Expenses" means all expenses incurred by the Company incident
to the Company's performance of or compliance with this Agreement in connection
with each Registration, including without limitation all registration, filing,
listing and National Association of Securities Dealers, Inc. fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, all messenger and delivery expenses, any
transfer taxes, the fees and expenses of the Company's legal counsel and
independent public accountants; provided, however, that Registration Expenses
shall not include underwriting discounts and commissions.
"Registration" means any of a Company Registration, a Requested
Registration or an Incidental Registration.
"Registration Notice" has the meaning specified in Section 2.1(a).
"Registration Request" has the meaning set forth in Section 2.2(a).
"Requested Registration" has the meaning specified in Section 2.2(a).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute thereto, and the rules and regulations of the Commission
promulgated from time to time thereunder, all as the same shall be in effect at
the time.
"Underwriter's Maximum Number" has the meaning specified in Section 2.1(b).
ARTICLE II
REGISTRATION
SECTION 2.1. Company Registration.
--------------------
(a) Registration. Subject to market conditions and customary underwriter's
conditions for a firm commitment underwriting, the Company shall use its best
efforts to effect one firm commitment underwritten registration under the
Securities Act (and any related qualification under blue sky laws or other
compliance) of the offering and sale of all or part of the Registrable
Securities (the "Company Registration") on or before the first anniversary of
the date of this Agreement. The Company shall promptly give all Holders written
notice of the Company Registration (a "Registration Notice"). Any Holder that
desires to participate in the Company Registration shall notify the Company in
writing, within 20 days following the date of the Registration Notice, of the
number of Registrable Securities that such Holder desires to be included in the
Company Registration. Such written request may specify all or a part of the
Registrable Securities held by a Holder. Subject to Section 2.1(b), the Company
may also include in the Company Registration other securities of the Company
offered for the account of the Company or any other Person. A Company
Registration may be accomplished on Form S-3 under the Securities Act, if
available, at the option of the Company. If the Company Registration has not
been completed on or before the first anniversary of the date hereof, then the
Company shall use commercially reasonable efforts to complete the Company
Registration as soon as practicable thereafter. If any Holder does not agree to
the terms of such underwriting, then the Registrable Securities of such Holder
may be excluded from the Company Registration upon written notice by the Company
or the representatives of the underwriters. Any Registrable Securities withdrawn
from such underwriting shall be withdrawn from the Company Registration.
2
(b) Priority. If the representative of the underwriters for the Company
Registration gives written advice to Holders and the Company that, in its
opinion, market conditions dictate that no more than a specified maximum number
of securities (the "Underwriter's Maximum Number") could successfully be
included in the Company Registration within a price range acceptable to Holders
and the Company, then the Company shall be required by this Section 2.1 to
include in the Company Registration only such number of securities as equals the
Underwriter's Maximum Number. In such event, Holders, the Company and any other
Person participating in the Company Registration shall participate in the
Company Registration as follows:
(i) First, there shall be included in the Company Registration that
number of securities that the Company proposes to offer and sell for its own
account to the full extent of the Underwriter's Maximum Number; and
(ii) Second, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that Holders have requested to be included in the Company
Registration to the full extent of the remaining portion of the Underwriter's
Maximum Number; and
(iii) Third, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that any Persons other than Holders and the Company have
requested to be included in the Company Registration to the full extent of the
remaining portion of the Underwriter's Maximum Number.
In the event that this Section 2.1(b) results in less than all of the
Registrable Securities that are requested by Holders to be included in the
Company Registration actually being included in the Company Registration, then
the number of Registrable Securities that is included in the Company
Registration shall be allocated pro rata among all Holders based on the number
of Registrable Securities that each such Holder desires to offer. The Company
shall promptly notify Holders if any Registrable Securities will not be included
in the Company Registration pursuant to this Section 2.1(b). If any securities
are withdrawn from the registration pursuant to Section 2.1(a) and if the number
of Registrable Securities to be included in the Company Registration was
previously reduced pursuant to this Section 2.1(b), then the Company shall then
offer to all Holders the right to include additional Registrable Securities in
the Company Registration equal to the number of securities so withdrawn, with
such Registrable Securities to be allocated among the Holders requesting
additional inclusion on a pro rata basis.
SECTION 2.2. Requested Registration.
----------------------
(a) Request for Registration. Subject to Section 2.2(b), if at any time
after the first anniversary of this Agreement the Company shall receive a
written request from any Holder (a "Registration Request") that the Company
effect a registration under the Securities Act of all or any part of the
Registrable Securities held by such Holder (a "Requested Registration") in
accordance with the terms of this Section 2.2, then the Company shall use its
best efforts to effect the registration under the Securities Act (and any
related qualification under blue sky laws or other compliance) of the offering
and sale of such Registrable Securities within 90 days after receipt of the
Registration Request. The Company may also include in any Requested Registration
other securities of the Company offered for the account of the Company or any
other Person, including Registrable Securities held by other Holders entitled to
include such securities in such Requested Registration pursuant to Section 2.3.
A Requested Registration may be accomplished on Form S-3 under the Securities
Act, if available, at the option of the Company.
(b) Limitation on Requested Registrations.
-------------------------------------
i. Share Limitation. The Company shall not be obligated to effect a
Requested Registration unless such registration involves the lesser of (i)
an aggregate offering price of $1,000,000 or (ii) less than one percent of
the Common Stock issued or outstanding as of the date of such Registration
Request.
ii. Limitation on the Number of Requested Registrations. The Company
shall only be obligated to effect one Requested Registration hereunder in
any six month (calendar) period.
3
iii. Prior Registration Limitation. If a registration statement
related to another Registration has been declared effective under the
Securities Act within the preceding six calendar months and the
participating Holders have not sold all Registrable Securities included in
such registration statement, then the Company shall have the right to defer
a Requested Registration for a period of not more than 90 days.
iv. Delay Limitation. If the Company shall furnish to Holders
requesting a Requested Registration a certificate signed by the chief
executive officer or chairman of the board of directors of the Company
stating that, in the good faith judgment of the board of directors, the
effecting of the Requested Registration at the time requested would be
detrimental to the Company or its stockholders, then the Company shall have
the right to defer such Requested Registration for a period of not more
than 180 days.
v. Simultaneous Company Registration Limitation. From the date of
filing of any registration statement under the Securities Act by the
Company until the date 180 days following the effective date of such
registration statement, the Company shall not be obligated to effect a
Requested Registration without the consent of the representative of the
underwriters of the offering as to which such registration statement is
filed, so long as the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become or remain
effective.
vi. Termination. The right to request a Requested Registration shall
terminate on the fifth anniversary of this Agreement.
vii. Allocation. The inclusion of Registerable Securities in a
Requested Registration shall be made on a pro rata basis among Holders. In
the event that any Holder withdraws his Registrable Securities from a
Requested Registration, then the Company shall promptly notify other
Holders of such withdrawal. In such event, other Holders shall be entitled
to increase the number of Registrable Securities to be included in such
Requested Registration on a pro rata basis based on the number of
Registrable Securities that each such Holder desires to include in such
Requested Registration.
SECTION 2.3. Incidental Registrations.
-----------------------
(a) Incidental Registration. If the Company, for itself or any of its
security holders other than pursuant to a Requested Registration, at any time
after the first anniversary of the date hereof and through the fifth anniversary
hereof, undertakes to effect a registration under the Securities Act of the
offering and sale of any shares of its capital stock or other securities (other
than (i) the registration of an offer, sale or other disposition of securities
solely to employees of, or other Persons providing services to, the Company or
any subsidiary of the Company pursuant to an employee or similar benefit plan or
(ii) in connection with to a merger, acquisition or other transaction of the
type described in Rule 145 under the Securities Act or a comparable or successor
rule, registered on Form S-4 or similar or successor forms promulgated by the
Commission), then on each such occasion the Company shall notify each Holder of
such undertaking at least 30 days prior to the filing of a registration
statement relating thereto. In such event, upon the written request of any
Holder within 20 days after the receipt of such notice, subject to Section
2.2(b), the Company shall use its best efforts as soon as practicable thereafter
to cause any Registrable Securities specified by such Holder to be included in
such registration statement (an "Incidental Registration"). If a Holder desires
to include less than all Registrable Securities held by it in any Incidental
Registration, then such Holder shall nevertheless continue to have the right to
include any remaining Registrable Securities in any subsequent Incidental
Registration upon the terms and conditions set forth herein. The Company shall
have the right to terminate or withdraw any Incidental Registration initiated by
it under this Section 2.3 prior to the effectiveness of such registration,
whether or not any Holder has elected to include Registrable Securities in such
Incidental Registration. The Registration Expenses of such terminated or
withdrawn registration shall be borne by the Company in accordance with Section
2.4.
(b) Priority in Registration. If an Incidental Registration is an
underwritten offering, and the representative of the underwriters gives written
advice to Holders and the Company that, in its opinion, market conditions
dictate that no more than an Underwriter's Maximum Number could successfully be
included in such Incidental Registration, then the Company shall be required by
this Section 2.3 to include in such Incidental
4
Registration only such number of securities as equals the Underwriter's Maximum
Number. In such event, Holders, the Company and any other Person participating
in such Incidental Registration shall participate in such Incidental
Registration as follows:
(i) First, there shall be included in such Incidental Registration
that number of securities that the Company proposes to offer and sell for its
own account in such registration to the full extent of the Underwriter's Maximum
Number; and
(ii) Second, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in such Incidental Registration that number of
Registrable Securities that Holders have requested to be included in such
Incidental Registration to the full extent of the remaining portion of the
Underwriter's Maximum Number; and
(iii) Third, if the Underwriter's Maximum Number has not yet been
reached, there shall be included in the Company Registration that number of
Registrable Securities that any Persons other than Holders and the Company have
requested to be included in the Company Registration to the full extent of the
remaining portion of the Underwriter's Maximum Number.
In the event that this Section 2.3(b) results in less than all of the
Registrable Securities that are requested by Holders to be included in such
Incidental Registration actually being included in such Incidental Registration,
then the number of Registrable Securities that is included in such Incidental
Registration shall be allocated pro rata among all Holders based on the number
of Registrable Securities that each such Holder desires to offer. The Company
shall promptly notify Holders if any Registrable Securities will not be included
in the Company Registration pursuant to this Section 2.3(b). If any securities
are withdrawn from the registration pursuant to Section 2.3(a) and if the number
of Registrable Securities to be included in such Incidental Registration was
previously reduced pursuant to this Section 2.3(b), then the Company shall then
offer to all Holders the right to include additional Registrable Securities in
such Incidental Registration equal to the number of securities so withdrawn,
with such Registrable Securities to be allocated among the Holders requesting
additional inclusion on a pro rata basis.
SECTION 2.4. Expenses. The Company shall pay all Registration Expenses
incurred in connection with any Registration.
SECTION 2.5. Effective Registration Statement. No Registration shall be
deemed to have been effected unless the registration statement filed with
respect thereto in accordance with the Securities Act has been declared
effective by the Commission and remain effective in accordance with Section 3.1.
Notwithstanding the foregoing, no registration shall be deemed to have been
effected if (a) after the related registration statement has been declared
effective by the Commission, such registration is made subject to any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or any court proceeding for any reason, other than solely by
reason of a misrepresentation or omission by any Holder, or (b) the conditions
to closing specified in the underwriting agreement entered into in connection
with such registration are not satisfied, other than solely by reason of an act
or omission by any Holder.
SECTION 2.6. Jurisdictional Limitations. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be obligated to take any action
to effect registration, qualification or compliance with respect to Registrable
Securities:
(a) In any particular jurisdiction in which the Company would be required
to execute a general consent to service of process, unless the Company is
already subject to service in such jurisdiction and except as required by the
Securities Act;
(b) That would require it to qualify generally to do business in any
jurisdiction in which it is not already so qualified or obligated to qualify; or
5
(c) That would subject it to taxation in a jurisdiction in which it is not
already subject generally to taxation.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1. Company Obligations. If and whenever the Company is required
to use its efforts to effect a Registration as provided in Article II, then as
expeditiously as possible and subject to the terms and conditions of Article II,
the Company shall:
(a) Prepare and file with the Commission the appropriate registration
statement to effect such Registration and use its best efforts to cause such
registration statement to become and remain effective for the period set forth
in Section 3.1(c);
(b) Permit any Holder that, in the reasonable judgment of the Company's
counsel, might be deemed to be an underwriter or a controlling person of the
Company, to participate in the preparation of such registration statement
(including by making available for inspection by any such Person and any
attorney, accountant or other agent retained by such Person, all financial and
other records, pertinent corporate documents and all other information
reasonably requested in connection therewith), furnish to all Holders, the
underwriters, if any, and their respective counsel and accountants advance draft
copies of such registration statement and each prospectus included therein or
filed with the Commission at least five business days prior to the filing
thereof with the Commission, and any amendments and supplements thereto promptly
as they become available, and provide each such Person such access to the books
and records of the Company and such opportunities to discuss the business of the
Company with its officers and the independent public accountants that have
certified the financial statements of the Company as is necessary, in the
opinion of such Person, to conduct a reasonable investigation within the meaning
of the Securities Act;
(c) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement, until the earlier of such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement or the expiration of 180 days after such
registration statement becomes effective (such period of 180 days to be extended
one day for each day or portion thereof during such period that such
registration statement is subject to any stop order suspending the effectiveness
of the registration statement, any order suspending or preventing the use of any
related prospectus or any order suspending the qualification of any Registrable
Securities included in such registration statement for sale in any
jurisdiction);
(d) Furnish to Holders that participate in such Registration, without
charge to such Holders, such number of conformed copies of such registration
statement and each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents as the purchaser or any such Holder may reasonably request;
(e) Use its best efforts to register or qualify all Registrable Securities
covered by such registration statement under the United States state securities
or blue sky laws of such jurisdictions as any Holder that participate in such
Registration reasonably requests, keep such registration or qualification in
effect for the time period set forth in Section 3.1(c) and take such other
action as may be reasonably necessary or advisable to enable such Holders to
sell the Registrable Securities covered by such Registration in such
jurisdictions;
(f) Use commercially reasonable efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other United States state governmental agencies or
6
authorities as may be necessary to enable any Holder that participates in such
Registration to sell the Registrable Securities covered by such Registration as
intended by such registration statement;
(g) Use its best efforts to obtain the withdrawal of any stop order
suspending the effectiveness of such registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction;
(h) Immediately notify Holders that participate in such Registration, at
any time during which a prospectus relating to such registration statement is
required to be delivered under the Securities Act, if the Company becomes aware
of any event as result of which such prospectus, as then in effect, would
include an untrue statement of material fact or would omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made, and
at the request of such Holders promptly prepare and furnish to such Holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus would not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(i) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least 12 months but not more than 18 months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(j) Provide a transfer agent and registrar for all Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement; and
(k) Use its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange on which the same class of
securities issued by the Company are then listed or to secure designation and
quotation of all Registrable Securities covered by such Registration on the
Nasdaq National Market System and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. as such with respect to such
Registrable Securities and pay all fees and expenses in connection with the
satisfaction of the obligations set forth in this Section 3.1(k).
SECTION 3.2. Holder Obligations.
(a) Each Holder that participates in a Registration shall furnish to the
Company, upon its written request, such information as it may reasonably request
in writing (i) regarding the proposed distribution by such Holder of the
Registrable Securities held by such Holder and (ii) as required in connection
with any registration (including an amendment to a registration statement or
prospectus), qualification or compliance referred to in this Article III.
(b) Upon receipt of any notice from the Company, or upon a Holder's
otherwise becoming aware, of the happening of any event of the kind described in
Section 3.1(h), such Holder shall discontinue its disposition of Registrable
Securities pursuant to the registration statement relating to the offering and
sale of such Registrable Securities until the receipt by such Holder of the
supplemented or amended prospectus contemplated by Section 3.1(h). If so
directed by the Company, such Holder shall deliver to the Company all copies
other than permanent file copies then in possession of such Holder of the
prospectus relating to the offering and sale of such Registrable Securities
current at the time of receipt of such notice. In addition, each Holder shall
immediately notify the Company, at any time during which a prospectus relating
to the registration of such Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event as a result of which
information previously furnished in writing by such Holder to the Company
specifically for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made. In the event that the
7
Company or any such Holder shall give any such notice, the period referred to in
Section 3.1(c) shall be extended by a number of days equal to the number of days
during the period from and including the giving of notice pursuant to Section
3.1(c) to and including the date on which such Holder receives copies of the
supplemented or amended prospectus contemplated by Section 3.1(c).
ARTICLE IV
UNDERWRITTEN OFFERINGS
----------------------
SECTION 4.1. Underwritten Offerings.
----------------------
(a) Underwritten Offering. In connection with any underwritten offering
pursuant to the Company Registration, the Company shall enter into an
underwriting agreement (and any other customary agreements) with the
underwriters for such offering, such agreement to be in form and substance
reasonably satisfactory to such underwriters in their reasonable judgment and to
contain such representations and warranties by the Company and such other terms
as are customarily contained in agreements of that type, including without
limitation indemnities to the effect and to the extent provided in Section 5.1.
Each Holder that participates in the Company Registration shall be a party to
such underwriting agreement and may, at such Holder's option, require that any
or all representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters be made to and for
the benefit of such Holder and that any or all conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder. No such Holder participating in any
such underwritten offering shall be required by the provisions hereof to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Holder and its intended method of distribution and any other representation
required by law.
(b) Selection of Underwriters. In the Company Registration, the Company
shall select the representative of the underwriters from underwriting firms of
national reputation in the United States that are reasonably acceptable to
Holders.
SECTION 4.2. Holdback Agreements. In connection with any underwritten
public offering of Registrable Securities by the Company under the Securities
Act, no Holder shall effect directly or indirectly (except as part of such
underwritten Registration in accordance with the provisions hereof or pursuant
to a transaction exempt from registration other than pursuant to Rule 144 or
Rule 145 of the Securities Act) any sale, distribution, short sale, loan, grant
of options for the purchase of or other disposition of any Registrable
Securities for such period as the representative of the underwriters requests,
which period shall in no event commence earlier than seven days prior to, or end
more than 180 days after, the date on which the registration statement related
to such offering is declared effective. The Company shall be entitled to
instruct its transfer agent to place stop transfer notations in its records to
enforce this Section 4.2(a).
ARTICLE V
INDEMNIFICATION AND CONTRIBUTION
--------------------------------
SECTION 5.1. Indemnification.
---------------
(a) Indemnification by the Company. In connection with any Registration, to
the extent permitted by law, the Company shall and hereby does indemnify and
hold harmless each Holder that participates in such Registration, each such
Holder's legal counsel and independent accountants, each other Person who
participates as an underwriter in the offering or sale of securities (if so
required by such underwriter as a condition to including the Registrable
Securities of such Holders in such registration) and each other Person, if any,
who controls any such Holder or any such underwriter within the meaning of the
Securities Act (collectively, the "Indemnified Parties"), against any losses,
claims, damages or liabilities, joint or several, to which such Holder,
underwriter or other Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
8
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which the
offering and sale of such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus contained
therein or any document incorporated therein by reference, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading, or
arise out of any violation by the Company of any rule or regulation promulgated
under the Securities Act or state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration. The Company shall reimburse the Indemnified Parties for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the indemnity agreement contained in this
Section 5.1(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld); and
provided, further, that the Company shall not be liable to any Indemnified Party
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with information furnished to the Company in writing by any
Indemnified Party specifically for use therein.
(b) Indemnification by Holders. As a condition to including any Registrable
Securities in any Registration, to the extent permitted by law, each Holder
shall and does hereby indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 5.1(a)) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from any
registration statement under which the offering and sale of such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if and only if and to the extent that such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished in writing to the Company directly by
such Person; provided, however, that the obligation of any such Holder under
this Section 5.1(b) shall be limited to an amount equal to the gross proceeds
received by such Holder upon the sale of Registrable Securities sold in such
Registration, unless such liability arises out of or is based upon such Holder's
willful misconduct.
(c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party
of notice of the commencement of any action or proceeding involving a claim
referred to in this Section 5.1, if a claim in respect thereof is to be made
against a party required to provide indemnification (an "Indemnifying Party"),
the Indemnified Party shall give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligation under this Section 5.1, except to the
extent that the Indemnifying Party is actually prejudiced by such failure to
give notice. In case any such action is brought against an Indemnified Party,
unless in the reasonable judgment of such Indemnified Party a conflict of
interest between such Indemnified Party and the Indemnifying Party may exist in
respect of such claim, then each Indemnifying Party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
Indemnifying Party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such Indemnified Party. After notice from the
Indemnifying Party to such Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement without the consent of the Indemnified Party if such
judgment or settlement does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in
this Section 5.1 (with appropriate modifications) shall be given by the Company
and each Holder that participates in a Registration to each other and to any
underwriter, as applicable, with respect to any required registration or other
qualification of
9
securities under any United States federal or state law or regulation, other
than the Securities Act, of any United States governmental authority.
(e) Indemnification Payment. The indemnification required by this Section
5.1 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received and as expense,
loss, damage or liability is incurred.
(f) Survival of Obligations. The obligations of the Company and Holders
under this Section 5.1 and Section 5.2 shall survive the completion of any
offering of Registrable Securities.
SECTION 5.2. Contribution. If the indemnification provided for in Section
5.1 is unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in Section 5.1 an amount or additional amount, as the case may be,
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or Indemnifying Parties, on the one hand, and the Indemnified
Party, on the other, in connection with the statements or omissions which
resulted in such losses, claims, demands or liabilities as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or Indemnifying
Parties, on the one hand, or the Indemnified Party, on the other, and the
relative, intent, knowledge, access to information and opportunity of the
parties to correct or prevent such untrue statement or omission. The amount paid
to an Indemnified Party pursuant to this Section 5.2 shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any action or claim subject to this
Article V. No Person guilty of fraudulent misrepresentation within the meaning
of Section 11(f) of the Securities Act shall be entitled to contribution from
any Person that was not guilty of such fraudulent misrepresentation.
ARTICLE VI
COMPANY COVENANTS
-----------------
SECTION 6.1. Covenants Relating to Rule 144; Reports Under Exchange Act.
With a view to (a) making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of securities
of the Company to the public without registration after such time as a public
market exists for the Common Stock and (b) causing the Company to be and remain
eligible to file use Form S-3 under the Securities Act, the Company shall:
(i) Make and keep public information available in accordance with Rule 144
under the Securities Act at all times after the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(ii) Take such action, including the voluntary registration of the Common
Stock under Section 12 of the Exchange Act, as necessary to enable the Company
to utilize Form S-3 for the sale of Registrable Securities;
(iii) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(iv) Furnish to each Holder forthwith upon request, so long as such Holder
owns any Registrable Securities, a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 under the Securities Act,
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company and such other reports and documents of the
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the Commission that may allow such Holder to sell any Registrable
Securities without registration.
10
SECTION 6.2 Other Registration Rights. The Company may from time to time
grant additional registration rights to other holders of Common Stock, provided
that (i) any such rights granted in connection with the transactions
contemplated by the ACL Agreement (as defined in the ACL Subscription Agreement
dated _____________, 2002 between the Company and ACL) may be pari passu with
the rights granted under this Agreement with respect to registration and
cutback, and (ii) no such registration rights shall be senior to the rights
granted under this Agreement with respect to registration and cutback (but that
such rights may at all times be pari passu).
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.1 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties. No waiver by any party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
SECTION 7.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other party.
SECTION 7.3 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes any prior understandings, agreements
or representations by or among the parties, written or oral, to the extent that
they relate in any way to the subject matter hereof.
SECTION 7.4 Notices. All notices, demands and other communications shall be
sufficiently given for all purposes hereunder if in writing and delivered and
sent by documented overnight delivery service or, to the extent receipt is
confirmed, by facsimile or other electronic transmission service to the
appropriate address or number set forth below.
11
If to MBC
C/o Polakis Sarris
Cyprus
If to Company:
Andersen Group, Inc.
405 Park Avenue
Suite 1202
New York, NY 10022
Attention: Francis E. Baker
Facsimile: (212) 888-5620
Any party may change the address to which notices, requests, demands and other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
SECTION 7.5 Governing Law and Language. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the Laws of any jurisdiction other than the State of New
York; provided that nothing in this Section 7.5 shall permit any party to bring
any action, claim, demand, litigation or other legal proceeding arising out of
or relating to this Agreement in any tribunal other than as set forth in Section
7.6, except to enforce an award issued by the arbitrators in accordance with
Section 7.6. This Agreement is written in English, and any Russian language text
is provided only for the convenience of the parties. In the case of
inconsistency or issues of interpretation of the English and Russian texts, the
English text shall control.
SECTION 7.6 Arbitration. Any dispute, controversy or claim between the
parties arising out of or relating to this Agreement or the breach, termination
or validity hereof shall be referred to and finally resolved by arbitration in
New York, New York, to the exclusion of all other procedures, in accordance with
the rules then in force of the American Arbitration Association, which are
deemed to be incorporated by reference into this Section 7.6. In any such
arbitration, three arbitrators shall be appointed in accordance with the such
rules. Where the rules of the American Arbitration Association do not provide
for a particular situation, the arbitrators shall determine the course of action
to be followed. The English language shall be used throughout any arbitral
proceeding. To the maximum extent permitted by applicable law, the parties agree
not to assert any rights to have any court rule on a question of law affecting
the arbitration or to hear any appeal from or entertain any judicial review of
the arbitral award.
SECTION 7.7. Agreement Not to Asset Claims/Soverign Immunity. Each party
hereby agrees, to the fullest extent permitted by applicable laws, that it will
not assert a claim with regard to (i) any objection that it may have now or in
the future to the venue of any action, suit, arbitral proceeding or proceeding
in any court referred to in this Section 7.7, including forum non conveniens,
(ii) any claim that any such action, suit or proceeding has been brought in an
inconvenient forum, (iii) any and all rights to demand a trial by jury in any
such action, suit, or proceeding brought pursuant to this Section 7.7 or (iv)
with respect to all disputes, claims, controversies and all other matters of any
nature whatsoever that may arise under or in connection with this Agreement, all
immunity it may otherwise have as a sovereign, quasi-sovereign or state-owned
entity (or similar entity) from any and all proceedings (whether legal,
equitable, arbitral, administrative or otherwise), attachment of assets or
enforceability of judicial or arbitral awards.
SECTION 7.8 Equitable Remedies. The parties agree that irreparable harm
would occur in the event that any of the agreements and provisions of this
Agreement were not performed fully by the parties in accordance with their
specific terms or conditions or were otherwise breached, and that money damages
are an inadequate remedy for
12
breach of this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that would be suffered by the parties in the
event that this Agreement were not performed in accordance with its terms or
conditions or were otherwise breached. It is accordingly hereby agreed that the
arties shall be entitled to an injunction or injunctions to restrain, enjoin and
prevent breaches of this Agreement by the other party and to enforce
specifically such terms and provisions of this Agreement, such remedy being in
addition to and not in lieu of any other rights and remedies to which the other
Party is entitled to at law or in equity.
SECTION 7.9 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
SECTION 7.10 Severability; Titles and Subtitles; Gender; Singular and
Plural; Counterparts; Facsimile. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
SECTION 7.11 Expenses. Each party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby except as expressly set forth herein.
SECTION 7.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event that an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ANDERSEN GROUP, INC.
By: -------------------------------
Name: -------------------------------
Title:-------------------------------
MBC Shareholders:
Field Nominees Limited
By: ------------------------------
Name:----------------------
Title: --------------------
Sputnik Investment
By: ------------------------------
Name:----------------------
Title: --------------------
Brookside E Ventures
By: ------------------------------
Name:----------------------
Title: --------------------
Sterling Grace Capital Management L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
14
Drake Associates L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Francis E. Baker
Firebird Republic Fund
By: ------------------------------
Name:----------------------
Title: --------------------
Islandia, L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Thomas Mc Partland
----------------------------------
James Pinto
The Anglo American Security Fund, L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
15
Sage Venture Partners
By: ------------------------------
Name:----------------------
Title: --------------------
International Investment Fund L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
Diversified Long Term Growth Fund L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Dr. Phillip George
Firebird Fund
By: ------------------------------
Name:----------------------
Title: --------------------
Galt Nominees
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Hildgarde E. Mahoney
16
Maranello Holdings, LLC
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Peter Bennett
Firebird New Russia Fund
By: ------------------------------
Name:----------------------
Title: --------------------
Moretons Holdings Limited
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Anne Marie Lubrano
Churchill
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
John R. Grace
17
JOP Partners
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Robert M. Grace
Woodmont Capital LLC
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Allen Dulles Jebsen
PLFB, LLC
By: ------------------------------
Name:----------------------
Title: --------------------
Frank's Sports Corp.
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Arthur C. Merrill, Jr.
----------------------------------
Damon Ball
18
Murdoch & Company
By: ------------------------------
Name:----------------------
Title: --------------------
Telcom Partners L.P.
By: ------------------------------
Name:----------------------
Title: --------------------
----------------------------------
Harvey Sawikin
----------------------------------
James D. Sterling
----------------------------------
Kevin A. Daigh
PMTZ, LLC
By: ------------------------------
Name:----------------------
Title: --------------------
Ruth Jervis Tstee FBO Wayne Jervis
By: ------------------------------
Name:----------------------
Title: --------------------
19
----------------------------------
Robert S. Field
----------------------------------
John Cefaly
----------------------------------
James Reeves
----------------------------------
Oliver Grace C/F Courtland Palmer
----------------------------------
Oliver Grace C/F Eric Royce Palmer
20
----------------------------------
Oliver Grace C/F Randall Palmer
----------------------------------
Oliver Grace C/F Reed Charles Palmer
----------------------------------
Andrew M. O'Shea
----------------------------------
Edward C. Lord, III
----------------------------------
Michael Mullady
----------------------------------
Eric Johnston
----------------------------------
Mark Ford
21
SCHEDULE A
Balance
Class A Class B Total % of Total
Shares Shares Shares Shares
------- ------- -------- ---------
FIELD NOMINEES 430 4,930 5,360 26.8%
SPUTNIK INVESTMENT 1,000 1,000 5.0%
BROOKSIDE eVENTURES 1,000 1,000 5.0%
STERLING GRACE 900 900 4.5%
CAPITAL MGMT LP
DRAKE ASSOCIATES 30 565 595 3.0%
F. BAKER 500 500 2.5%
FIREBIRD REPUBLIC 500 500 2.5%
FUND
ISLANDIA, L.P. 500 500 2.5%
T. MCPARTLAND 500 500 2.5%
JAMES PINTO 350 350 1.8%
ANGLO AMERICAN 300 300 1.5%
SECURITY
FUND L.P.
SAGE VENTURE 250 250 1.3%
PARTNERS
INTERNATIONAL 225 225 1.1%
INVESTMENT FUND, LP
DIVERSIFIED LONG 15 195 210 1.1%
TERM GROWTH FUND
Dr. PHILLIP GEORGE 200 200 1.0%
FIREBIRD FUND 200 200 1.0%
GALT NOMINEES 200 200 1.0%
H. MAHONEY 200 200 1.0%
MARANELLO HOLDINGS, 200 200 1.0%
LLC
P. BENNETT 200 200 1.0%
FIREBIRD NEW RUSSIA 150 150 0.8%
FUND
MORETONS HOLDINGS 150 150 0.8%
LIMITED
ANNE MARIE LUBRANO 100 100 0.5%
CHURCHILL 100 100 0.5%
JOHN R.. GRACE 100 100 0.5%
JOP PARTNERS 100 100 0.5%
ROBERT GRACE 100 100 0.5%
22
WOODMONT CAPITAL 100 100 0.5%
LLC
ALLEN JEBSEN 75 75 0.4%
PLFB, LLC 75 75 0.4%
FRANK SPORTS CORP 70 70 0.4%
A. MERRILL, JR. 25 25 50 0.3%
DAMON BALL 50 50 0.3%
MURDOCH & COMPANY 50 50 0.3%
TELCOM PARTNERS L.P. 50 50 0.3%
HARVEY SAWIKIN 40 40 0.2%
JAMES STERLING 25 25 0.1%
KEVIN A. DAIGH 25 25 0.1%
PMTZ,LLC 25 25 0.1%
RUTH JERVIS HEE 25 25 0.1%
FBO WAYNE JERVIS
ROBERT FIELD 23 23 0.1%
JOHN CEFALY 20 20 0.1%
JAMES REEVES 15 15 0.1%
OLIVER GRACE C/F 13 13 0.1%
Courtland Palmer
OLIVER GRACE C/F 13 13 0.1%
Eric Royce Palmer
OLIVER GRACE C/F 13 13 0.1%
Randall Palmer
OLIVER GRACE C/F 13 13 0.1%
Reed Charles Palmer
ANDREW M. O'SHEA 10 10 0.1%
EDWARD C. LORD III 10 10 0.1%
MICHAELA MULLADY 10 10 0.1%
ERIC JOHNSTON 5 5 0.0%
MARK FORD 5 5 0.0%
--- ------ ------ -------
500 14,500 15,000 100.00%
--- ------ ------ -------
23
ANNEX G
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ANDERSEN GROUP, INC.
The undersigned, Oliver Grace, Jr. hereby certifies that:
1. He is the duly elected and acting President of Andersen Group, Inc., a
Delaware corporation.
2. The Certificate of Incorporation of the corporation was filed with the
Secretary of State of Delaware on April 24, 1998.
3. The Certificate of Incorporation is hereby amended and restated to read as
follows:
FIRST: The name of the corporation is Moscow Broadband Group, Inc. (the
"Corporation").
SECOND: The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle, 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is (i) twelve million (12,000,000) shares of common stock,
$.01 par value (the "Common Stock"), and (ii) eight hundred thousand shares of
Series A Cumulative Convertible Preferred Stock, $.01 par value. The Series A
Cumulative Convertible Preferred Stock, hereinafter referred to as the Series A
Stock, shall have the following terms, preferences and rights:
1. Dividends.
(a) The holders of the Series A Stock shall be entitled to receive,
when and as declared by the Board of Directors but only out of funds
legally available therefor, cumulative cash dividends from the date of
issuance of the Series A Stock at the rate specified in subparagraph
(b) below, and no more, payable not later than 45 days after the end of
each fiscal quarter of the Company, commencing with the end of the
fiscal quarter during which the Series A Stock is initially issued.
Such dividends shall be subject to proportional adjustment if dividends
are payable for any part of a fiscal quarter. So long as any share of
Series A Stock remains outstanding no dividend or other distribution
shall be paid or declared on any shares of Common Stock of the Company,
other than dividends payable in shares of Common Stock of the Company,
unless all cumulative dividends on the Series A Stock shall have been
paid or declared and set apart for payment. Subject to the foregoing
1
and not otherwise, such dividends (payable in cash, stock or otherwise)
as may be determined by the Board of Directors may be declared and paid
on the Common Stock from time to time out of any funds legally
available therefor, and the Series A Stock shall not be entitled to
participate in any such dividends or distributions whether payable in
cash, stock or otherwise.
(b) Cumulative dividends shall be payable at a quarterly rate per
share upon the Series A Stock in an amount equal to $0.375.
2. Optional Redemption. All or any part of the Series A Stock may be
called for redemption by the Company at its option at any time or from time
to time, by paying therefor in cash a redemption price equal to $18.75 per
share, in each case plus accrued and unpaid dividends to the date fixed for
redemption. At least twenty (20) days' notice prior to the redemption date,
by prepaid certified mail, shall be given to the holders of record of the
Series A Stock to be redeemed, addressed to the last post office address
shown on the records of the Company. On the date fixed for redemption, and
stated in such notice, such holder of such Series A Stock shall surrender
such holder's certificate or certificates at the place designated in such
notice and thereupon be entitled to receive payment of the redemption
price. If notice of redemption is duly given and if funds for the
redemption have been set aside prior to the redemption date,
notwithstanding the fact that a shareholder may have failed to surrender
the same, no dividend shall be payable on such shares after the date fixed
for redemption, and all rights with respect to shares so called for
redemption shall forthwith, after such date, terminate, except only the
right of the holders to receive the redemption price thereof, without
interest. If fewer than all the outstanding shares of Series A Stock are to
be redeemed pursuant to this paragraph, the number of shares to be redeemed
shall be determined by the Board of Directors of the Company, and such
shares shall be redeemed pro rata from all record holders of the Series A
Stock in proportion to the number of such shares held by such holders
(rounding to the nearest whole share to avoid redemption of fractional
shares).
3. Voting Rights.
(a) General. The shares of Series A Stock shall not be entitled to
vote upon any matters upon which shareholders are entitled to vote,
except to the extent required by law, including the right to a class
vote in the event of any amendment to the Company's certificate of
incorporation which creates a new class of shares equal or senior to
the Series A Stock or changes an existing class of shares into a class
equal or senior to the Series A Stock, and except to the extent set
forth in subparagraph (b) of this paragraph 3.
(b) Certain Voting Rights. If and whenever six quarterly dividends or
the equivalent (whether or not consecutive) payable on the Series A
Stock shall be in arrears whether or not earned or declared, the number
of Directors then constituting the Board of Directors of the Company
shall be increased by one and the holders of the Series A Stock, voting
together as a class, shall be entitled to elect the one additional
Director at any annual meeting of shareholders or a special meeting
held in place thereof, or at a special meeting of the holders of the
2
Series A Stock called as hereinafter provided. Whenever all arrears in
dividends on the Series A Stock then outstanding shall have been paid
and dividends thereon for the current dividend period shall have been
paid or declared and set apart for payment, then the right of the
holders of the Series A Stock to elect such additional one Director
shall cease (but subject always to the same provisions for the vesting
of such voting rights in the case of any similar future arrearages in
dividends), and the term of office of any person elected as Director by
the holders of the Series A Stock shall forthwith terminate and the
number of the Board of Directors shall be reduced accordingly. At any
time after such voting power shall have been so vested in the Series A
Stock, the Secretary of the Company may, and upon the written request
of any holder of shares of the Series A Stock (addressed to the
Secretary at the principal office of the Company) shall, call a special
meeting of the holders of the Series A Stock for the election of the
one Director to be elected by them as herein provided, such call to be
made by notice similar to that provided in the by-laws for a special
meeting of the shareholders or as required by law. If any such special
meeting required to be called as above provided shall not be called by
the Secretary within twenty (20) days after receipt of any such
request, then any holder of shares of the Series A Stock may call such
meeting, upon the notice above provided, and for that purpose shall
have access to the stock books of the Company. The Director elected at
any such special meeting shall hold office until the next annual
meeting of the shareholders or special meeting held in place thereof if
such office shall not have previously terminated as above provided. In
case any vacancy shall occur with respect to the Director elected by
the holders of the Series A Stock, a successor shall be elected by the
Board of Directors to serve until the next annual meeting of the
shareholders or special meeting held in place thereof upon the
nomination by the holders of the Series A Stock.
4. Liquidation, Dissolution and Winding Up. In the event of any
liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, the holders of the Series A Stock shall
be entitled, before any assets of the Company shall be distributed among or
paid over to the holders of the Common Stock, to be paid $18.75 per share
together with any accrued and unpaid dividends thereon, and to no more. If,
upon such liquidation, dissolution or winding up, the assets of the Company
distributable as aforesaid among the holders of the Series A Stock shall be
insufficient to permit payment to them of said amount, the entire assets
shall be distributed ratably among the holders of the Series A Stock issued
and outstanding and having such priority.
5. Conversion.
(a) The holder of shares of Series A Stock shall have the right, at
its option, to convert one or more of such shares into fully paid and
nonassessable shares of Common Stock of the Company at any time and
from time to time after the date of issuance, at the rate of 1.875
shares of Common Stock for each one share of Series A Stock or at the
rate which results from the making of any adjustment specified in
subparagraph (e) hereof (the number of shares of Common Stock issuable
3
at any time, giving effect to the latest prior adjustment pursuant to
subparagraph (e) hereof, if any, in exchange for one share of Series A
Stock being hereinafter called the "Conversion Rate").
(b) The Series A Stock shall be convertible at the office of any
transfer agent of the Company, and at such other office or offices, if
any, that the Board of Directors may designate, into fully paid and
nonassessable shares of Common Stock at the Conversion Rate. In case of
the redemption for any shares of Series A Stock, such right of
conversation shall cease and terminate, as to the shares to be
redeemed, at the close of business on the date fixed for such
redemption, unless default shall be made in the payment of the
redemption price for the shares to be so redeemed.
(c) In order to convert shares of Series A Stock into shares of
Common Stock pursuant to the right of conversion set forth in
subparagraph (a), the holder thereof shall surrender the certificate or
certificates representing Series A Stock, duly endorsed to the Company
or in blank, at any office herein above mentioned and shall give
written notice to the Company at said office that such holder elects to
convert the same, stating in such notice the name or names in which
such holder wishes the certificate or certificates representing shares
of Common Stock to be issued. The Company shall, within five business
days, deliver at said office to such holder of Series A Stock, or to
such holder's nominee or nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be
entitled as aforesaid, together with cash to which such holder shall be
entitled in lieu of fractional shares in an amount equal to the same
fraction of the Market Price (as hereinafter defined) of a whole share
of Common Stock on the business day preceding the day of conversion.
The Company shall make no payment or adjustment on account of any
dividends accrued on the shares of the Series A Stock surrendered for
conversion or any dividends upon shares of Common Stock issued upon
conversion, except that the registered holder of shares of Series A
Stock being converted shall be entitled to receive payment of any
unpaid dividends which have accrued on such shares for dividend periods
up to the dividend payment date immediately preceding such surrender
for conversion at the time the Company makes payment to other holders
of the Series A Stock of accrued unpaid dividends for such dividend
periods; provided, that if the Company acquires at any time all
outstanding shares of Series A Stock, the Company shall on the date of
the acquisition of the last outstanding share, declare and pay such
accrued and unpaid dividends out of funds legally available therefor.
Shares of Series A Stock shall be deemed to have been converted as of
the date of the surrender of such shares for conversion as provided
above, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
on such date. Upon conversion of only a portion of the number of shares
covered by a certificate representing shares of Series A Stock
surrendered for conversion, the Company shall issue and deliver to, or
upon the written order of, the holder of the certificate so surrendered
for conversion, at the expense of the Company, a new certificate
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covering the number of shares of Series A Stock representing the
unconverted portion of the certificate so surrendered, which new
certificate shall entitle the holder thereof to the rights of the
shares of Series A Stock represented thereby to the same extent as if
the certificate theretofore covering such unconverted shares had not
been surrendered for conversion.
(d) The issuance of certificates for shares of Common Stock upon the
conversion of shares of Series A Stock shall be made without charge to
the converting stockholder for any original issue or transfer tax in
respect of the issuance of such certificates and any such tax shall be
paid by the Company. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common stock in a name other than that
in which the shares of Series A Stock so converted were registered, and
no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such
tax or has established to the satisfaction of the Company that such tax
has been paid.
(e) The Conversion Rate shall be subject to the following
adjustments:
(i) If the Company shall declare and pay to the holders of
Common Stock a dividend or other distribution payable in shares
of Common Stock or Convertible Securities (as hereinafter
defined), the Conversion Rate in effect immediately prior thereto
shall be adjusted so that the holders of Series A Stock hereafter
surrendered for conversion shall be entitled to receive the
number of shares of Common Stock which such holder would have
owned or been entitled to receive after the declaration and
payment of such dividend or other distribution if such shares of
Series A Stock had been converted immediately prior to the record
date for the determination of stockholders entitled to receive
such dividend or other distribution.
(ii) If the Company shall subdivide the outstanding shares of
Common Stock into a greater number of shares of Common Stock, or
combine the outstanding shares of Common Stock into a lesser
number of shares, or issue by reclassification of its shares of
Common Stock any shares of the Company, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the
holders of Series A Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock
which such holder would have owned or been entitled to receive
after the happening of any of the events described above if such
shares of Series A Stock had been converted immediately prior to
the happening of such event on the day upon which such
subdivision, combination or reclassification, as the case may be,
becomes effective.
(iii) If the Company shall issue or sell any Additional Shares
of Common Stock for a consideration per share less than the
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Conversion Amount, then the Conversion Rate shall be adjusted to
the number determined by multiplying the Conversion Rate in
effect immediately prior to such issuance or sale by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance or sale of
such Additional Shares of Common Stock plus the number of such
Additional Shares of Common Stock so issued or sold, and the
denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance or sale of
such Additional Shares of Common Stock plus the number of shares
of Common Stock which the aggregate consideration for such
Additional Shares of Common Stock so issued or sold would
purchase at a consideration per share equal to the Conversion
Amount. For the purposes of this subparagraph (iii), the date as
of which the Conversation Amount shall be computed shall be the
earlier of (x) the date on which the Company shall enter into a
firm contract for the issuance or sale of such Additional Shares
of Common Stock or (y) the date of the actual issuance or sale of
such shares.
(iv) If the Company shall issue or sell any warrants or
options or other rights entitling the holders thereof to
subscribe for or purchase either any Additional Shares of Common
Stock or evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property,
for Additional Shares of Common Stock (such convertible or
exchangeable evidences of indebtedness, shares of stock or other
securities hereinafter being called "Convertible Securities"),
and the consideration per share for which Additional Shares of
Common Stock may at any time thereafter be issuable pursuant to
such warrants or other rights or pursuant to the terms of such
Convertible Securities (when added to the consideration per share
of Common Stock, if any, received for such Convertible
Securities, warrants or other rights), shall be less than the
Conversion Amount, then the Conversion Rate shall be adjusted as
provided in subparagraph (iii) on the basis that (x) the maximum
number of Additional Shares of Common Stock issuable pursuant to
all such warrants or other rights or necessary to effect the
conversion or exchange of all such Convertible Securities shall
be deemed to have been issued and (y) the aggregate consideration
(plus the consideration, if any, received for such Convertible
Securities, warrants or other rights) for such maximum number of
Additional Shares of Common Stock shall be deemed to be the
consideration received and receivable by the Company for the
issuance of such Additional Shares of Common Stock pursuant to
such warrants or other rights or pursuant to the terms of such
Convertible Securities.
(v) If the Company shall issue or sell Convertible Securities
and the consideration per share for which Additional Shares of
Common Stock may at any time thereafter be issuable pursuant to
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the terms of such Convertible Securities shall be less than the
Conversion Amount, then the Conversion Rate shall be adjusted as
provided in subparagraph (iii) on the basis that (x) the maximum
number of Additional Shares of Common Stock necessary to effect
the conversion or exchange of all such Convertible Securities
shall be deemed to have been issued and (y) the aggregate
consideration for such maximum number of Additional Shares of
Common Stock shall be deemed to be the consideration received and
receivable by the Company for the issuance of such Additional
Shares of Common Stock pursuant to the terms of such Convertible
Securities. No adjustment of the Conversion Rate shall be made
under this subparagraph (v) upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any
warrants or other rights, if such adjustment shall previously
have been made upon the issuance of such warrants or other rights
pursuant to subparagraph (iv).
(vi) For the purposes of subparagraphs (iv) and (v), the date
as of which the Conversion Amount shall be computed shall be the
earliest of (x) the date of which the Company shall take a record
of the holders of its Common Stock for the purpose of entitling
them to receive any warrants or other rights referred to in
subparagraph (iv) or to receive any Convertible Securities, (y)
the date on which the Company shall enter into a firm contract
for the issuance of such warrants or other rights or Convertible
Securities or (z) the date of the actual issuance of such
warrants or other rights or Convertible Securities.
(vii) No adjustment of the Conversion Rate shall be made under
subparagraph (iii) upon the issuance of any Additional Shares of
Common Stock which are issued pursuant to the exercise of any
warrants or other rights or pursuant to the exercise of any
conversion or exchange rights in any Convertible Securities, if
such adjustment shall previously have been made upon the issuance
of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrants or
other rights therefor), pursuant to subparagraphs (iv) or (v).
(viii) If any warrants or other rights (or any portions thereof)
which shall have given rise to any adjustment pursuant to
subparagraph (iv) or conversion rights pursuant to Convertible
Securities which shall have given rise to any adjustment pursuant
to subparagraph (v) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such
warrants or other rights or Convertible Securities there shall
have been an increase or increases, with the passage of time or
otherwise, in the price payable upon the exercise or conversion
thereof, then the Conversion Rate hereunder shall be readjusted
(but to no greater extent than originally adjusted) on the basis
of (x) eliminating from the computation of any Additional Shares
of Common Stock corresponding to such warrants or other rights or
conversion rights as shall have expired or terminated, (y)
treating the Additional Shares of Common Stock, if any, actually
7
issued or issuable pursuant to the previous exercise of such
warrants or other rights or of conversion rights pursuant to any
Convertible Securities as having been issued for the
consideration actually received and receivable therefor, and (z)
treating any of such warrants or other rights or of conversion
rights pursuant to any Convertible Securities which remain
outstanding as being subject to exercise or conversion on the
basis of such exercise or conversion price as shall be in effect
at the time; provided, however, that any consideration which was
actually received by the Company in connection with the issuance
or sale of such warrants or other rights shall form part of the
readjustment computation even though such warrants or other
rights shall have expired without the exercise thereof.
(ix) To the extent that any Additional Shares of Common Stock,
any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock, or any Convertible Securities
shall be issued for a cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount
of the cash received by the Company therefor, or, if such
Additional Shares of Common Stock, warrants or other rights or
Convertible Securities are offered by the Company for
subscription, the subscription price or, if such Additional
Shares of Common Stock, warrants or other rights or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof. If and to the
extent that such issuance shall be for a consideration other than
cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair value
of such consideration at the time of such issuance as determined
by the Board of Directors of the Company. If Additional Shares of
Common Stock shall be issued as part of a unit with warrants or
other rights, then the amount of consideration for the warrant or
other right shall be deemed to be the amount determined at the
time of issuance by the Board of Directors of the Company. If the
Board of Directors of the Company shall not make any such
determination, the consideration for the warrant or other right
shall be deemed to be zero.
(x) In case the Company shall effect a reorganization, shall
merge with or consolidate into another corporation, or shall
sell, transfer or otherwise dispose of all or substantially all
of its property, assets or business and, pursuant to the terms of
such reorganization, merger, consolidation or disposition of
assets, shares of stock or other securities, property or assets
of the Company, successor or transferee or an affiliate thereof
8
or cash are to be received by or distributed to the holders of
Common Stock, then each holder of Series A Stock shall be given a
written notice from the Company informing each holder of the
terms of such reorganization, merger, consolidation, or
disposition of assets and of the record date, thereof for any
distribution pursuant thereto, at least ten days in advance of
such record date, and each holder of Series A Stock shall have
the right thereafter to receive, upon conversion of such Series A
Stock, the number of shares of stock or other securities,
property or assets of the Company, successor or transferee or
affiliate thereof or cash receivable upon or as a result of such
reorganization, merger, consolidation or disposition of assets by
a holder of the number of shares of Common Stock equal to the
Conversion Rate immediately prior to such event, multiplied by
the number of shares of Series A Stock as may be converted. The
provisions of this subparagraph (x) shall similarly apply to
successive reorganizations, mergers, consolidation or
dispositions of assets.
(xi) The Company may make such increases in the conversion
rate, so as to increase the number of shares of Common Stock into
which the Series A Stock may be converted, in addition to those
required by subparagraphs (i) - (v) and (x) above, as it
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients.
(xii) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the
account of the Company, and the disposition of such shares shall
be considered an issue or sale of Common Stock for the purposes
of this paragraph (e).
(xiii) If a state of facts shall occur which, without being
specifically controlled by the provisions of this paragraph (e),
would not in the reasonable opinion of the Board of Directors
fairly protect the conversion rights of the Series A Stock in
accordance with the essential intent and principles of such
provision, then the Board of Directors of the Company shall make
an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to
protect such conversion rights.
(xiv) Anything herein to the contrary notwithstanding, no
adjustment in the Conversion Rate shall be required unless such
adjustment, either by itself or with other adjustments not
previously made, would require a change of at least 1% in such
rate; provided, however, that any adjustment which by reason of
this subparagraph (xiv) is not required to be made shall be
carried forward and taken into account in any subsequent
adjustment.
(xv) All calculations under this paragraph (e) shall be made
to the nearest one-thousandth of a share.
9
(xvi) Whenever the Conversion Rate shall be adjusted pursuant
to this paragraph (e), the Company shall forthwith cause to be
delivered to each holder of Series A Stock, a notice setting
forth in reasonable detail the event requiring the adjustment and
the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors of the
Company determined the fair value of any consideration other than
cash pursuant to subparagraph (ix)) and specifying the new
Conversion Rate, accompanied by a letter of a firm of independent
certified public accountants (which may be the regular auditors
of the Company) of recognized national standing selected by the
Board of Directors of the Company, stating that such firm has
reviewed the relevant provisions of this paragraph 5 and the
Company's calculation of the new Conversion Rate. In the case
referred to in subparagraph (x), such notice shall be issued
describing the amount and kind of stock, securities, property or
assets or cash which shall be receivable upon conversion of the
Series A Stock after giving effect to the provision of such
subparagraph (x).
(xvii) The Company shall provide the holders of the Series A
Stock prompt notice of any tender or exchange offer made to
holders of the Common Stock to the extent such offer is subject
to the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder.
(f) The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of
Common Stock, solely for the purposes of effecting the conversion of
Series A Stock, the full number of shares of Common Stock then
deliverable upon the conversion of all shares of Series A Stock at the
time outstanding. The Company shall take at all times such corporate
action as shall be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon
the conversion of Series A Stock in accordance with the provision
hereof, free from all taxes, liens, charges and security interests with
respect to the issue thereof. The Company will, at its expense, use its
best efforts to cause such shares of Common Stock to be listed (subject
to issuance or notice of issuance on all stock exchanges, if any, on
which the Company's Common Stock may become listed.
(g) No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon any conversion
of Series A Stock, but, in lieu thereof, there shall be paid an amount
in cash equal to the same fraction of the Market Price of a whole share
of Common Stock on the business day preceding the day of conversion.
10
6. Definitions
(a) "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company after the Effective
Time, except (i) shares which may be issued pursuant to conversion of
the Series A Stock, and (ii) shares issued upon conversion of
convertible securities outstanding on the date of issuance of the
Series A Stock, or upon the exercise of options granted or to be
granted with respect to up to 100,000 shares pursuant to any stock
option plan approved by the shareholders of the Company.
(b) "Conversion Amount" shall mean at any applicable date, the amount
equal to the quotient resulting from dividing $15.45 by the Conversion
Rate in effect on such date for the Series A Stock.
(c) "Market Price" of a share of Common Stock on any day shall mean
the average closing price of a share of Common Stock for the 15
consecutive trading days preceding such day on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, the average closing price of a share of
Common Stock for the 15 consecutive trading days preceding such day on
the NASDAQ/National Market Systems, or if the shares of Common Stock
are not publicly traded, the Market Price for such day shall be the
Conversion Amount or the book value of a share of Common Stock of the
Company as disclosed in the last balance sheet of the Company regularly
prepared by the Company, whichever is higher.
7. Stated Value. The entire consideration received by the Company upon
issuance of the Series A Stock shall be allocated to capital surplus.
8. Shares Surrendered. Any shares of Series A Stock redeemed, purchased or
otherwise reacquired, or surrendered for conversion shall be canceled and
restored to the status of authorized but unissued shares of Preferred Stock
of the Company, but shall not thereafter be issued as shares of Series A
Stock.
9. Reports to Holders. The Company shall transmit to the holders of the
Series A Stock copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Securities and Exchange Commission may from time to time
by rules and regulations prescribe) which the Company may be required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended,
including, without limitation, its Annual Reports to Shareholders, its
Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q and its
Current Reports on Form 8-K. If the Company is not required to file such
information the Company shall transmit to the holders of the Series A
Stock, within 15 days after it would have been required to file such
information with the Securities and Exchange Commission, financial
statements, including any notes thereto, prepared in accordance with
generally accepted accounting principles, reasonably comparable to that
which the Company would have been required to include in such annual
11
reports, information, documents or other reports if the Company were
subject to the reporting requirements of the Securities Exchange Act of
1934, as amended.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the bylaws of the Corporation.
SEVENTH: The Board of Directors shall be constituted as follows:
1. The number of directors that shall constitute the whole Board of
Directors of the Corporation shall be fixed exclusively by one or more
resolutions adopted by the Board of Directors of the Corporation or as
otherwise provided in the bylaws of the Corporation.
2. At the first annual meeting of stockholders following the filing of the
Amended and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware, the directors of the Corporation shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as possible, of one-third of the number
of directors constituting the Board of Directors. The term of the office
for Class I directors shall first expire at the first annual meeting of the
stockholders next following their election; the term of office of Class II
directors shall first expire at the second annual meeting of stockholders
next following their election; and term of the Class III directors shall
first expire at the third annual meeting of the stockholders next following
their election. At each succeeding annual meeting of stockholders,
directors shall be elected for a term to expire at the third succeeding
annual meeting of stockholders following their election to succeed the
directors of the class whose terms expire at such annual meeting. Except as
otherwise provided herein or in the bylaws of the Corporation, increases in
the size of the Board of Directors shall be distributed among the classes
so as to render the classes as nearly equal in size as possible. Class I
shall initially consist of three (3) directors, Class II shall initially
consist of two (2) directors, and Class III shall initially consist of
two (2) directors.
3. Notwithstanding the foregoing provisions of this SEVENTH paragraph,
each director shall serve until his successor is duly elected and qualified
or until his death, resignation or removal. Neither the Board of Directors
nor any individual director may be removed without cause. No decrease in
the number of directors constituting the Board of Directors shall shorten
the term of any incumbent director.
4. A director need not be a stockholder of the Corporation.
12
EIGHTH: Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board or directors or in the bylaws of the Corporation.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of the General Corporation Law of the State of Delaware, as now or
hereafter in effect, indemnify all persons whom it may indemnify under such
provisions. The indemnification provided by this Section shall not limit or
exclude any rights, indemnities or limitations of liability to which any person
may be entitled, whether as a matter of law, under the by-laws of the
Corporation, by agreement, vote of the stockholders or disinterested directors
of the Corporation or otherwise. Except as specifically required by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended, no director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
4. The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has
been signed this ___ day of __________ 2002 by Oliver Grace, Jr., the President
of Andersen Group, Inc.
By:
------------------------
Name: Oliver Grace, Jr.
Title: President
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