NOTICE OF VARIATION
To the OFFER TO PURCHASE AND TAKEOVER BID CIRCULAR dated September 25, 1996
in respect of the offer by AOD Acquisition Corp., a wholly-owned subsidiary
of American Oilfield Divers, Inc., for all of the issued and outstanding
Common Shares of Hard Suits Inc.
TO: THE HOLDERS OF COMMON SHARES
OF HARD SUITS INC.
This Notice of Variation amends the offer (the "Offer") made by
AOD Acquisition Corp. (the "Offeror"), a wholly-owned subsidiary of American
Oilfield Divers, Inc., to purchase all of the common shares without par
value ("Common Shares") of Hard Suits Inc. ("Hard Suits") issued and
outstanding at the Expiry Time, on the terms and conditions set forth in the
offer to purchase (the "Offer to Purchase") and the accompanying circular
(the "Circular") dated September 25, 1996, as amended by the Notice of
Extension dated October 16, 1996 (the "Notice of Extension"), by increasing
the consideration offered for each Common Share from $1.50 to $1.65, payable
in cash.
This Notice of Variation also effects certain consequential
amendments to the Offer to Purchase and the Circular, as amended by the
Notice of Extension (together the "Offer Documents"). Except as otherwise
set forth in this Notice of Variation, the terms and conditions previously
set forth in the Offer Documents will continue to be applicable in all
respects, and this Notice of Variation should be read in conjunction with
the Offer Documents. Unless the context requires otherwise, the capitalized
terms not defined herein have the meanings set forth in the Offer Documents.
The term "Amended Offer" means the Offer Documents, as amended by this
Notice of Variation.
1. Variation of the Offer
The Offeror gives notice that it has varied the Offer by
increasing the consideration offered for each Common Share under the Offer
from $1.50 to $1.65, payable in cash.
The Offer, as varied, is at a 55% premium to the closing price
of the Common Shares on The Toronto Stock Exchange (the "TSE") on September
24, 1996, the trading day immediately prior to the announcement of the
Offer. The closing price of the Common Shares on the TSE on September 24,
1996 was $1.06.
2. Background to Amendment of the Offer
(a) Hard Suits' Response to the Offer
As disclosed in the Notice of Extension, on October 10, 1996 the
board of directors of Hard Suits issued a supplement to its
director's circular which advised that the board is making no
recommendation with respect to the acceptance or rejection of
the Offer. The supplemental directors' circular disclosed a
fairness opinion dated October 9, 1996, prepared by C.M. Oliver
& Company Limited, which concluded that the consideration
offered to the holders of Common Shares pursuant to the Offer
was adequate from a financial point of view.
(b) Debt Financing Proposed by Hard Suits
On October 10, 1996 Hard Suits also announced its intention to
enter into a $2.5 million financing arrangement with British
Columbia Mercantile Corp. and Ventura Management Inc. (the "Debt
Financing"), on terms which, in the opinion of the Offeror, are
not in the best interests of either Hard Suits or its
shareholders. The proposed Debt Financing would involve the
issuance of debentures and warrants on terms which include,
among other things, an average interest rate of 14% per annum, a
redemption premium which could be as high as 100% and the
issuance of warrants which, when exercised, would represent more
than 27% of the outstanding Common Shares.
(c) Hearing Before the British Columbia Securities Commission
It is the Offeror's position that the Debt Financing would
deprive Hard Suits' shareholders of the opportunity to sell
their Common Shares under the Offer by making it impossible to
fulfill two of the conditions stipulated in the Offer.
Accordingly, the Offeror has made an application to the British
Columbia Securities Commission (the "Commission") for, among
other things, an order cease trading the debentures and warrants
proposed to be issued by Hard Suits in connection with the Debt
Financing.
On October 17, 1996 the Commission issued a notice of hearing
under sections 96 and 144 of the Securities Act of British
Columbia (the "Act") to consider:
(i) the allegations of the Offeror that Hard Suits has made
misleading and improper disclosure in connection with the
Offer and the Offeror's request for orders under
Section 96(1) of the Act relating to such disclosure;
(ii) the Offeror's request for orders under Section 144 of the
Act cease trading the debentures and warrants proposed to
be issued by Hard Suits in connection with the Debt
Financing; and
(iii) such other matters as may properly come before the
Commission.
This hearing is scheduled for 10:00 a.m. on Friday, October 18,
1996. As of the time of this Notice of Variation, the
Commission has not announced its decision with respect to the
foregoing. However, the Offeror understands that Hard Suits has
been advised by the TSE that certain of the terms of the Debt
Financing are not acceptable, and, accordingly, that such
financing, as originally structured, will not proceed.
(d) Offer to Provide Interim Financing
Since making the Offer, the Offeror has had discussions with
Hard Suits and Mr. Nuytten relating, among other things, to the
deposit of Mr. Nuytten's Common Shares under the Offer and the
interim financing of Hard Suits. As of the date of this Notice
of Variation, no undertakings, arrangements, agreements or
commitments have been concluded or entered into with either
Mr. Nuytten or Hard Suits with respect to any matters relating
to the Offer.
On October 17, 1996 the solicitors for Hard Suits and
Mr. Nuytten requested AOD to make an offer to provide interim
financing to Hard Suits. In response to this request, AOD has
advised Hard Suits that it is prepared to advance the sum of
$500,000, which is the amount which AOD understands to be
initially required by Hard Suits to satisfy its immediate
working capital requirements. AOD has offered to provide this
financing at an interest rate equal to AOD's cost of funds
(which is currently about 8.5% per annum), on the condition
that:
(i) Hard Suits provides AOD with security which is customary
for such loans, including a first charge over all of Hard
Suits' assets (subject to prior existing security in
favour of Western Economic Diversification Fund);
(ii) Mr. Nuytten resigns as a director and officer of Hard
Suits and a nominee of AOD is appointed to the board in
his place; and
(iii) board approval is required for any disbursement of funds.
If the Offer is not successful, AOD's nominee would resign from
the board and Hard Suits would have 30 days to repay the loan
and all accrued and unpaid interest thereon.
(e) Purpose of Amendment of the Offer
The Offeror believes that, by offering to provide interim
financing to Hard Suits on commercially reasonable terms and
increasing the consideration offered for Common Shares under the
Offer, it has taken reasonable steps in order to satisfy the
concerns of the board of directors of Hard Suits with respect to
the initial Offer. The Offeror is of the opinion that the
Offer, as varied, provides the shareholders of Hard Suits with
an excellent opportunity to realize a return on their
investment, at a price which is now more than adequate from a
financial point of view, particularly in light of the opinion of
C. M. Oliver & Company Limited that the initial Offer was
financially adequate.
3. Time for Acceptance
As disclosed in the Notice of Extension, the Amended Offer is
open for acceptance until 12:01 a.m. (Vancouver time) on October 30, 1996,
or until such later time and date to which the Amended Offer may be further
extended, unless withdrawn by the Offeror.
4. Manner of Acceptance
The varied Offer may be accepted in the manner set out in
Section 3 of the Offer to Purchase, "Manner of Acceptance".
5. Withdrawal of Deposited Common Shares
As disclosed in the Offer Documents, any Common Shares deposited
under the Offer may be withdrawn by or on behalf of the depositing
Shareholder at the place of deposit at any time before 12:01 a.m. (Vancouver
time) on October 30, 1996.
The manner in which withdrawals of the Common Shares deposited
pursuant to the Offer to Purchase must be effected are set out in Section 8
of the Offer to Purchase, "Withdrawal of Deposited Common Shares", as
amended by the Notice of Extension.
6. Date by Which Common Shares Must be Taken up by the Offeror
If all of the conditions referred to under Section 4 of the
Offer to Purchase, "Conditions of the Offer", have been fulfilled or waived,
the Offeror will become obligated to take up and pay for the Common Shares
validly deposited and not withdrawn pursuant to the Offer not later than 10
days after the Expiry Time and to make such payment for the Common Shares
taken up as soon as practicable, but in any event not later than three days,
after taking up the Common Shares. In accordance with applicable law, the
Offeror will take up and pay for Common Shares deposited under the Offer
subsequent to the date on which it first takes up Common Shares deposited
under the Offer not later than 10 days after the deposit of such Common
Shares.
7. Price Range and Trading Volume of the Common Shares Since the
Date of the Offer
The Common Shares are listed and posted for trading on the TSE.
The volume of trading and price ranges of the Common Shares on the TSE since
the date of the Offer are set forth in the following table:
Period (1996) High Low Volume
September 25.................... $1.45 $1.33 61,000
September 26.................... 1.55 1.40 47,900
September 27.................... 1.50 1.42 20,100
September 30.................... 1.51 1.43 91,700
October 1....................... 1.42 1.42 11,300
October 2....................... 1.47 1.30 57,800
October 3....................... 1.45 1.43 128,100
October 4....................... 1.46 1.40 7,800
October 7....................... 1.50 1.30 303,000
October 8....................... 1.52 1.48 74,400
October 9....................... 1.53 1.48 53,500
October 10...................... 1.52 1.45 106,600
October 11...................... 1.50 1.48 84,200
October 15...................... 1.50 1.48 171,133
October 16...................... 1.49 1.40 101,900
October 17...................... 1.49 1.40 75,033
8. Source of Funds
The Offeror estimates that, if it acquires all of the Common
Shares sought under the Amended Offer, the total amount of cash required to
purchase such Common Shares and to pay related fees and expenses will be
approximately $17,100,000. AOD has agreed to fund the Offeror in an amount
sufficient to satisfy such cash requirement by way of equity investment in
and/or loans to the Offeror. AOD will satisfy such cash requirements from
the sources disclosed under "Source of Funds" in the Circular.
9. Statutory Rights
Securities legislation in certain of the provinces and
territories of Canada provides holders of Common Shares with, in addition to
any other rights they may have at law, rights of rescission or to damages,
or both, if there is a misrepresentation in a circular or notice that is
required to be delivered to the holders of Common Shares. However, such
rights must be exercised within prescribed time limits. Holders of Common
Shares should refer to the applicable provisions of the securities
legislation of their province or territory for particulars of those rights
or consult with a lawyer.
APPROVAL AND CERTIFICATE
The contents of the Offer and accompanying Circular, as amended
by the Notice of Extension dated October 16, 1996 and by this Notice of
Variation (collectively, the "Amended Offer"), have been approved, and the
sending, communication or delivery thereof to the Shareholders of Hard Suits
Inc. has been authorized, by the Board of Directors of the Offeror. The
Amended Offer contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of the
circumstances in which it was made. In addition, the Amended Offer does not
contain any misrepresentation likely to affect the value or the market price
of the common shares of Hard Suits Inc. which are the subject of the Offer.
DATE: October 18, 1996
(Signed) GEORGE C. YAX (Signed) CATHY M. GREEN
Chairman of the Board, Vice President-Finance and
President and Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
(Signed) RODNEY W. STANLEY (Signed) QUINN J. HEBERT
Director Director