<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
LUMEN TECHNOLOGIES, INC.
(NAME OF SUBJECT COMPANY)
LUMEN TECHNOLOGIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
------------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
550242 10 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
MARTIN E. FRANKLIN
CHAIRMAN OF THE BOARD
555 THEODORE FREMD AVENUE
SUITE B-302
RYE, NEW YORK 10580
(914) 967-9400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
------------------------
WITH A COPY TO:
ROBERT L. LAWRENCE, ESQ.
KANE KESSLER, P.C.
1350 AVENUE OF THE AMERICAS -- 26TH FLOOR
NEW YORK, NEW YORK 10019
(212) 541-6222
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
(This page intentionally left blank)
<PAGE> 3
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Lumen Technologies, Inc., a Delaware
corporation ("Lumen" or the "Company"), and the address of its principal
executive offices is 555 Theodore Fremd Avenue, Suite B-302, Rye, New York
10580. The title of the class of equity securities to which this statement
relates is the common stock, par value $0.01 per share, of the Company (the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1, dated October 27, 1998 (the "Schedule 14D-1"), of
Lighthouse Weston Corp., a Delaware corporation (the "Purchaser") and a wholly
owned subsidiary of EG&G, Inc., a Massachusetts corporation ("Parent"), to
purchase all outstanding Shares at a price of $7.75 per Share or any greater
amount per Share paid pursuant to such tender offer as it may be amended (the
"Merger Consideration"), net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated October 27, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 21, 1998, by and among Parent, the Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides, among other things, that
upon the terms and subject to the conditions contained therein, and in
accordance with the General Corporation Law of the State of Delaware (the
"Delaware Law"), after the satisfaction or waiver of the conditions contained
therein, and the purchase of Shares pursuant to the Offer (but in no event prior
to January 11, 1999, unless so requested by the Parent), the Purchaser will be
merged with and into the Company (the "Merger").
According to the Schedule 14D-1, the address of the principal executive
offices of each of the Purchaser and Parent is 45 William Street, Wellesley,
Massachusetts 02481.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as described in this Schedule and on Annex I attached hereto,
which is incorporated herein by reference, there are, to the knowledge of the
Company, no material contracts, agreements, arrangements or understandings or
any actual or potential conflicts of interest between the Company or its
affiliates and (i) its executive officers, directors or affiliates or (ii)
Parent, Purchaser, or their respective executive officers, directors or
affiliates.
AGREEMENT AND PLAN OF MERGER
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is filed as Exhibit 1 hereto and is incorporated herein by reference.
Capitalized terms used herein and not otherwise defined have the same meaning as
in the Merger Agreement.
The Offer In the Merger Agreement, the Purchaser has agreed, among other
things, subject to certain conditions, to commence the Offer for all Shares at a
price of $7.75 per Share, net to the seller in cash without interest thereon.
Subject to certain conditions, the Purchaser shall accept for payment, and pay
for, all Shares validly tendered and not withdrawn pursuant to the Offer that
the Purchaser becomes obligated to accept for payment, and pay for, pursuant to
the Offer as soon as practicable after the expiration of the Offer. The
Purchaser expressly reserves the right, subject to compliance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to modify the
terms of the Offer, except that, without the consent of the Company, the
Purchaser shall not amend or waive the Minimum Condition, reduce the maximum
number of Shares to be purchased, reduce the price to be paid per Share pursuant
to the Offer, change the form of
1
<PAGE> 4
consideration to be paid in the Offer, impose additional conditions to the Offer
or amend any other material term of the Offer in a manner adverse to the holders
of the Shares. Notwithstanding the foregoing, the Purchaser may, in its sole
discretion, (A) extend the Offer if at the scheduled or any extended expiration
date of the Offer any of the conditions set forth in the Merger Agreement
(including the Minimum Condition) shall not be satisfied or waived, until such
time as such conditions are satisfied or waived, and (B) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "Commission") or the staff thereof
applicable to the Offer; provided, however, that, without the Company's written
consent, the Purchaser may not extend the expiration date of the Offer to a date
later than 11:59 p.m. on December 31, 1998.
Approval of the Merger The Delaware Law requires, among other things, that
the adoption of any plan of merger or consolidation of the Company must be
approved and found advisable by the Board of Directors and generally by a
majority of the holders of the Company's outstanding voting securities. The
Board of Directors of the Company has approved the Offer, the Merger and the
Merger Agreement, and the transactions contemplated thereby, and, solely for the
purpose of satisfying the requirements of Section 203 of the Delaware Law, the
Stockholders' Agreement and the transactions contemplated thereby; consequently,
the only additional action of the Company that may be necessary to effect the
Merger is approval by the Company's stockholders if the "short-form" merger
procedure described below is not available. Under the Delaware Law, the
affirmative vote of holders of a majority of the outstanding Shares (including
any Shares owned by the Purchaser) is required to approve the Merger. Such
approval may be obtained by written consent in lieu of a stockholders' meeting.
If the Purchaser acquires, through the Offer or otherwise, voting power with
respect to at least a majority of the outstanding shares, it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. The Delaware Law also provides that if a parent
company owns at least 90% of each class of stock of a subsidiary, the parent
company can effect a short-form merger with that subsidiary without the action
of any of the other stockholders of the subsidiary. Accordingly, if, as a result
of the Offer or otherwise, the Purchaser acquires or controls the voting power
of at least 90% of the outstanding Shares, the Purchaser could effect the Merger
without prior notice to, or any action by, any other stockholder of the Company.
The Merger The Merger Agreement provides that as soon as practicable after
the satisfaction or waiver of certain conditions set forth in the Merger
Agreement (but in no event prior to January 11, 1999, unless so requested by the
Parent), subject to the terms and conditions thereof and the satisfaction or
waiver of the other conditions to the Merger and in accordance with the Delaware
Law, the Purchaser shall be merged with and into the Company, the separate
existence of the Purchaser shall cease and the Company shall continue as the
Surviving Corporation. Upon the Effective Time of the Merger, (i) each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares held by the Parent, the Purchaser or the Company or any direct or
indirect subsidiary of the Parent, the Purchaser or the Company and Shares held
by stockholders, if any, who are entitled to and who perfect their appraisal
rights (See "Appraisal Rights") under Section 262 of the Delaware Law) will be
cancelled and extinguished and be converted into and represent the right to
receive the Merger Consideration and (ii) each outstanding share of the
Purchaser's capital stock issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and nonassessable share of the same class of capital stock of the Surviving
Corporation. As a result of the Merger, the Company will become a wholly owned
subsidiary of the Parent.
The Merger Agreement provides that the Certificate of Incorporation and
By-Laws of the Purchaser as in effect immediately prior to the Effective Time
will become the Certificate of Incorporation and By-Laws of the Surviving
Corporation until thereafter amended as provided under the Delaware Law except
that the name of the Surviving Corporation will be "Lumen Technologies, Inc."
and the indemnification provisions set forth in the Certificate of Incorporation
and By-Laws of the Surviving Corporation shall be restated to conform to the
indemnification provisions set forth in the Certificate of Incorporation and
Bylaws, respectively, of the Company. In addition, under the Merger Agreement,
the directors of the Purchaser immediately prior to the Effective Time will be
the initial directors of the Surviving Corporation following the Merger, and the
officers of the Company immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation following the Merger, in each case
until their successors are elected and qualified.
2
<PAGE> 5
Designation of Directors The Merger Agreement provides that, promptly upon
the acceptance for payment of and payment by the Purchaser for any Shares
pursuant to the Offer, and from time to time thereafter as Shares are accepted
for payment and paid for by the Purchaser, the Purchaser shall be entitled to
designate such number of the Company's directors, rounded to the nearest whole
number, as will give the Purchaser representation on the Company's Board of
Directors equal to the greater of (i) a majority and (ii) the product of the
total number of the Company's directors (after giving effect to the directors
elected in accordance with this procedure) multiplied by the percentage that
such number of Shares so accepted for payment and paid for by the Purchaser
bears to the number of Shares outstanding, and the Company shall, at such time,
take such actions as are necessary to cause the Purchaser's designees to be so
elected or appointed, including increasing the size of the Company's Board of
Directors or using its best efforts to secure the resignations of incumbent
directors or both; provided, however, that, notwithstanding the Purchaser's
right to designate certain of the Company's directors as described above, until
the Effective Time, the Company's directors shall include at least three
directors who were directors on the date of the Merger Agreement (the
"Independent Directors"); provided, further, that, if the number of Independent
Directors shall be reduced below three for any reason whatsoever, any remaining
Independent Director shall be entitled to designate a person to fill such
vacancies and such person shall be deemed to be an Independent Director or, if
no Independent Directors then remain, the other directors shall designate three
persons to fill such vacancies who shall not be designees, stockholders,
directors, officers, employees or affiliates of the Parent or the Purchaser, and
such persons shall be deemed to be Independent Directors.
Notwithstanding anything in the Merger Agreement to the contrary, subject
to the terms of the Company's Certificate of Incorporation and Bylaws, in the
event that the Purchaser's designees are appointed or elected as the Company's
directors, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority (or, if there
are only one or two Independent Directors, the single or unanimous vote, as the
case may be) of the Independent Directors (who shall act as an independent
committee of the Board of Directors for this purpose) shall be required, and
alone shall be sufficient, to (i) amend or terminate the Merger Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
the Merger Agreement, (iii) extend the time for performance of the Parent's and
the Purchaser's respective obligations under the Merger Agreement, or (iv)
approve any other action by the Company that the Independent Directors
reasonably determine would materially adversely affect the interests of the
stockholders of the Company (other than the Parent, the Purchaser and their
affiliates) with respect to the transactions contemplated by the Merger
Agreement.
Representations and Warranties The Merger Agreement contains certain
customary representations and warranties of the parties. The Company has made
representations and warranties to the Parent and the Purchaser regarding, among
other things: (i) the Company's organization and qualification; (ii) the
Company's subsidiaries; (iii) the Company's capitalization; (iv) the Company's
authority to enter into and perform its obligations under the Merger Agreement;
(v) the compliance of the transactions contemplated by the Merger Agreement with
the Company's or its Subsidiaries' Certificate of Incorporation and Bylaws,
certain agreements and applicable laws; (vi) the accuracy and completeness of
the Company's Exchange Act filings with the Commission and any written
information provided by or on behalf of the Company which is included in the
Schedule 14D-1 and the Offer Documents; (vii) the absence of undisclosed
liabilities; (viii) the absence of certain specified changes in the condition
(financial or other), results of operations, stockholders' equity, business,
assets, properties, liabilities, capitalization or operation of the Company and
its subsidiaries since September 30, 1998; (ix) certain matters relating to the
Company's contracts; (x) transactions with affiliates of the Company; (xi)
employee benefits matters; (xii) properties and liens; (xiii) environmental
matters; (xiv) tax matters; (xv) compliance with laws; (xvi) intellectual
property matters; (xvii) litigation; (xviii) the right of the Company to prepay
its outstanding indebtedness; (xix) the vote required to approve the merger;
(xx) "Year 2000" compliance; (xxi) insurance matters; (xxii) the cessation of
discussions or negotiations with other persons regarding an Acquisition
Proposal; and (xxiii) brokerage fees or commissions.
The Parent and the Purchaser have made representations and warranties to
the Company regarding, among other things: (i) the Parent's and the Purchaser's
organization and qualification; (ii) the Parent's and
3
<PAGE> 6
the Purchaser's authority to enter into and perform their respective obligations
under the Merger Agreement; (iii) the compliance of the transactions
contemplated by the Merger Agreement with the Parent's and the Purchaser's
respective charters or By-Laws, certain agreements and applicable laws; (iv) the
accuracy and completeness of the documents filed by the Parent and the Purchaser
with the Commission in connection with the Offer or provided to the Company for
inclusion in the Schedule 14D-9; (v) the interim operations of the Purchaser;
(vi) the availability of funds necessary to purchase the Shares; and (vii)
brokerage fees or commissions.
The representations and warranties contained in the Merger Agreement shall
expire with, and be terminated and extinguished upon, consummation of the
Merger.
Certain Conditions of the Offer.
Pursuant to the Merger Agreement, the Minimum Condition and the other
conditions to the Offer are as follows:
Notwithstanding any other provisions of the Offer or the Merger
Agreement, the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act, to pay for any Shares
tendered pursuant to the Offer unless the number of Shares tendered and not
withdrawn not later than the date and time of expiration of the Offer,
shall equal at least a majority of the Fully Diluted Shares (as defined
below). For purposes of the Merger Agreement, "Fully Diluted Shares" means
all outstanding securities entitled generally to vote in the election of
directors of the Company after giving effect to the exercise or conversion
of all options, rights and securities exercisable or convertible into such
voting securities (other than (i) the exercise of Company Options that are
exercisable for Shares that would, following such exercise, be subject to
the Stockholders' Agreement and (ii) the conversion of the Convertible
Notes).
Furthermore, notwithstanding any other provisions of the Offer or the
Merger Agreement, the Purchaser shall not be required to accept for payment
or, subject as aforesaid, to pay for any Shares tendered pursuant to the
Offer unless all applicable waiting periods under the HSR Act shall have
expired or been terminated.
Furthermore, notwithstanding any other provisions of the Offer or the
Merger Agreement the Purchaser shall not be required to accept for payment
or, subject to the previous provisions, to pay for any Shares not accepted
for payment or paid for, and may terminate the Offer if, at any time on or
after the date of the Merger Agreement and before the acceptance of such
Shares for payment or the payment therefor, any of the following conditions
exists:
(a) the Purchaser is not entitled to vote its Shares for the
Merger; or
(b) except for matters (i) which are attributable to the
announcement or performance of the Merger Agreement and the transactions
contemplated thereby or (ii) which generally affect the economy or the
industry in which the Company is engaged, any change shall have occurred
in the condition (financial or other), results of operations,
stockholders' equity, business, assets, properties, liabilities or
capitalization of the Company and its Subsidiaries which has resulted in
a Material Adverse Effect; or
(c) there shall have been instituted or be pending before any
Governmental Entity any action, proceeding, application, claim or
counterclaim or any judgment, order or injunction sought or any other
action taken by any Governmental Entity or by any person who has made an
Acquisition Proposal, which (i) challenges the acquisition by the Parent
or the Purchaser (or any other affiliate of the Parent) of any Shares
pursuant to the Offer, the Merger or the Stockholders' Agreement,
restrains, prohibits or materially delays the making or consummation of
the Offer or the Merger or the transactions contemplated by the Merger
Agreement or the Stockholders' Agreement prohibits the performance of
any of the contracts or other arrangements entered into by the Parent or
the Purchaser (or any other affiliates of the Parent) in connection with
the acquisition of the Company, seeks to obtain any material amount of
damages, or otherwise directly or indirectly materially
4
<PAGE> 7
adversely affects the Offer or the Merger or the transactions
contemplated by the Merger Agreement or the Stockholders' Agreement,
(ii) seeks to prohibit or limit materially the ownership or operation by
the Company, the Parent or the Purchaser (or any other affiliate of the
Parent) of all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole or of the Parent and its
affiliates, or to compel the Company, the Parent or the Purchaser (or
any other affiliate of the Parent) to dispose of or to hold separate all
or any material portion of the business or assets of the Parent or any
of its affiliates or of the Company or any of its subsidiaries as a
result of the transactions contemplated by the Merger Agreement, (iii)
seeks to impose any material limitation on the ability of the Company,
the Parent, or the Purchaser (or any other affiliate of the Parent) to
conduct the Company's or any subsidiary's business or own such assets,
(iv) seeks to impose or confirm any material limitation on the ability
of the Parent or the Purchaser (or any other affiliate of the Parent) to
acquire or hold, or to exercise full rights of ownership of, any Shares,
including the right to vote such Shares on all matters properly
presented to the stockholders of the Company, (v) seeks to require
divestiture by the Purchaser or any of its affiliates of all or any of
the Shares, or (vi) otherwise has resulted in, or has a substantial
likelihood of resulting in, a Material Adverse Effect; or
(d) there shall have been entered or issued any preliminary or
permanent judgment, order, decree, ruling or injunction or any other
action taken by any Governmental Entity, whether on its own initiative
or the initiative of any other person, which (i) restrains, prohibits or
materially delays the making or consummation of the Offer or the Merger
or the transactions contemplated by the Merger Agreement or the
Stockholders' Agreement, prohibits the performance of any of the
contracts or other arrangements entered into by the Parent or the
Purchaser (or any other affiliates of the Parent) in connection with the
acquisition of the Company or otherwise directly or indirectly
materially adversely affects the Offer or the Merger or the transactions
contemplated by the Merger Agreement or the Stockholders' Agreement,
(ii) prohibits or limits materially the ownership or operation by the
Company, the Parent or the Purchaser (or any other affiliate of the
Parent) of all or any material portion of the business or assets of the
Company and its Subsidiaries taken as a whole or of the Parent and its
affiliates, or compels the Company, the Parent or the Purchaser (or any
other affiliate of the Parent) to dispose of or to hold separate all or
any material portion of the business or assets of the Parent or any of
its affiliates or of the Company or any of its Subsidiaries as a result
of the transactions contemplated by the Merger Agreement, (iii) imposes
any material limitation on the ability of the Company, the Parent, or
the Purchaser (or any other affiliate of the Parent) to conduct the
Company's or any Subsidiary's business or own such assets, (iv) imposes
or confirms any material limitation on the ability of the Parent or the
Purchaser (or any other affiliate of the Parent) to acquire or hold, or
to exercise full rights of ownership of, any Shares, including the right
to vote such Shares on all matters properly presented to the
stockholders of the Company, (v) requires divestiture by the Purchaser
or any of its affiliates of all or any of the Shares, or (vi) otherwise
has resulted in, or has a substantial likelihood of resulting in, a
Material Adverse Effect; or
(e) there shall be any statute, rule or regulation enacted,
promulgated, entered, enforced or deemed applicable to the Offer, the
Merger, the Merger Agreement or the Stockholders' Agreement, or any
other action shall have been taken by any Governmental Entity, other
than the routine application to the Offer, the Merger or the
transactions contemplated by the Stockholders' Agreement of waiting
periods under the HSR Act that results in, directly or indirectly, any
of the consequences referred to in clauses (i) through (vi) of paragraph
(c) above; or
(f) the Company shall have failed to perform any material
obligation or to comply with any material agreement or covenant of the
Company to be performed or complied with by it under the Merger
Agreement within five days following written notice of such failure by
the Parent to the Company; or
(g) (i) the Board of Directors of the Company or any committee
thereof shall have (A) withdrawn or modified in a manner adverse to the
Parent or the Purchaser its approval or
5
<PAGE> 8
recommendation of the Offer, the Merger, the Merger Agreement or the
Stockholders' Agreement or (B) approved or recommended any Acquisition
Proposal, (ii) the Company shall have entered into, or publicly
announced its intention to enter into, any agreement with respect to any
Acquisition Proposal or (iii) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the foregoing; or
(h) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality shall
have been breached or not be true and correct in any respect or any such
representations and warranties that are not so qualified shall have been
breached or not be true and correct in any material respect, in each
case at the date of the Merger Agreement (except to the extent that any
such representation or warranty refers specifically to another date, in
which case such representation or warranty shall be true and correct as
of such other date); or
(i) except as to matters which are attributable to the announcement
or performance of the Merger Agreement and the transactions contemplated
thereby, any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to having or
resulting in a Material Adverse Effect shall have been breached or not
be true and correct in any respect or any such representations and
warranties that are not so qualified shall have been breached or not be
true and correct and the effect of such breach or failure to be true or
correct shall be that the matter shall have a Material Adverse Effect,
in each case at the scheduled or extended expiration of the Offer
(except to the extent that any such representation or warranty refers
specifically to another date, in which case such representation or
warranty shall be true and correct as of such other date); or
(j) the Merger Agreement shall have been terminated in accordance
with its terms.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser (and the other affiliates of the Parent) and may be asserted by the
Parent and the Purchaser (and the other affiliates of the Parent) regardless of
the circumstances giving rise to any such condition and may be waived by the
Parent or the Purchaser, in whole or in part, at any time and from time to time,
in their sole discretion. The failure by the Parent or the Purchaser at any time
to exercise any of the foregoing rights will not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right will be deemed an ongoing right that may be
asserted at any time and from time to time.
Conditions to the Merger
The obligations of each of the Purchaser, the Parent and the Company to
consummate the Merger are subject to the fulfillment, at or prior to the
Effective Time, of each of the following conditions:
(i) the Parent or the Purchaser shall have made, or caused to be made,
the Offer on the terms and conditions set forth in the Merger Agreement and
shall have purchased, or caused to be purchased, all Shares validly
tendered and not withdrawn pursuant to the Offer;
(ii) the Merger Agreement and the Merger shall have been approved and
adopted by the requisite vote or consent of the stockholders of the
Company, if any, required by the Delaware Law and the Company's Certificate
of Incorporation;
(iii) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; and
(iv) no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by any Governmental
Entity, nor any statute, rule, regulation or executive order promulgated or
enacted by any Governmental Entity shall be in effect, which would make the
acquisition or holding by the Parent or its subsidiaries of the Shares or
shares of common stock of the Surviving Corporation illegal or otherwise
prevent the consummation of the Merger.
6
<PAGE> 9
In addition, the obligation of the Purchaser and the Parent to consummate
the Merger is subject to the further condition that at or prior to the Effective
Time, all governmental and third-party consents and approvals required to be
obtained by the Company to consummate the Merger shall have been obtained,
except for (a) consents required under the Company's credit facility with
NationsBank, National Association as in effect on the date of the Merger
Agreement and (b) such consents and approvals where the failure to obtain such
consent or approval would not have a Material Adverse Effect.
Acquisition Proposals
The Company has agreed in the Merger Agreement that it shall not, and shall
not authorize or permit any of its subsidiaries, or any of its or their
officers, directors, employees, representatives, agents or affiliates, including
any investment banker, attorney or accountant retained by the Company or any of
its subsidiaries, to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal or offer that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
or (ii) enter into, maintain, continue or otherwise participate in any
discussions or negotiations regarding any Acquisition Proposal with any person,
entity or group other than the Parent, the Purchaser or their respective direct
or indirect subsidiaries or affiliates (a "Third Party"). Notwithstanding the
foregoing, the Company, its subsidiaries, and their respective officers,
directors, employees, representatives, agents and affiliates, including any
investment banker, attorney or accountant retained by the Company or any of its
subsidiaries, may (i) in the case of a Qualified Acquisition Proposal only,
furnish or cause to be furnished information concerning the Company's business,
properties or assets to a Third Party (subject to such Third Party executing a
confidentiality agreement on terms no less favorable to the Company than those
in the confidentiality agreement previously entered into by the Parent and the
Company), (ii) in the case of a Qualified Acquisition Proposal only, enter into,
participate in, conduct or engage in discussions or negotiations with such Third
Party, (iii) to the extent that the Board of Directors of the Company is
required by its fiduciary duties, as advised by counsel, take any position with
respect to an Acquisition Proposal in accordance with Rules 14a-9 and 14e-2
promulgated under the Exchange Act, and (iv) in the case of a Qualified
Acquisition Proposal only and only prior to the acceptance for payment of that
number of Shares tendered pursuant to the Offer sufficient to satisfy the
Minimum Condition and in compliance with the provisions of the Merger Agreement,
enter into an agreement to consummate a Qualified Acquisition Proposal.
"Acquisition Proposal" means an inquiry, offer or proposal regarding any of
the following (other than the transactions contemplated by the Merger Agreement)
involving the Company or its subsidiaries: (i) any merger, reorganization,
consolidation, share exchange, recapitalization, business combination,
liquidation, dissolution or other similar transaction involving, or any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of, all or any
significant portion of the assets or 25% or more of the equity securities of,
the Company or any of its subsidiaries, in a single transaction or series of
related transactions; (ii) any tender offer or exchange offer for 25% or more of
the outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), in connection therewith; or (iii) any public announcement of
a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
"Qualified Acquisition Proposal" means an unsolicited, bona fide, written
Acquisition Proposal made by a Third Party that the Board of Directors of the
Company determines in its good faith judgment to be more favorable to the
Company's stockholders than the Offer and the Merger (based on the opinion, with
only customary qualifications, of the Company's independent financial advisor
that the value of the consideration to the Company's stockholders provided for
in such proposal exceeds the value of the consideration to the Company's
stockholders provided for in the Merger Agreement by the Offer and the Merger)
and for which financing, to the extent required, is then committed or which, in
the good faith judgment of the Board of Directors of the Company (based on the
advice of the Company's independent financial advisor), is reasonably capable of
being obtained by such Third Party and which Acquisition Proposal, in the good
faith judgment of the Board of Directors of the Company, is likely to be
consummated.
7
<PAGE> 10
Such provisions do not prohibit the Company from making such disclosure to
stockholders that, in the judgment of the Board of Directors of the Company, as
advised by counsel, may be required by law or necessary to discharge any
fiduciary duty imposed thereby.
Pursuant to the Merger Agreement, the Company must immediately notify the
Parent of, and disclose to the Parent all details of, (i) any Acquisition
Proposal it receives, (ii) any written indications that any person is interested
in making an Acquisition Proposal or (iii) the initiation and status of
discussions or negotiations relating to any Acquisition Proposal (it being
understood that pursuant to the Merger Agreement any Acquisition Proposal must
be a Qualified Acquisition Proposal). In the event that the Company furnishes
any nonpublic information to any party other than the Parent, it shall
simultaneously provide the Parent with copies of or access to all such
information.
In addition, the Company may not enter into any agreement with any Third
Party in connection with a Qualified Acquisition Proposal unless (i) at least
three business days prior thereto the Company shall have provided the Parent and
the Purchaser a copy of the Qualified Acquisition Proposal, (ii) within such
three business day period, the Parent and the Purchaser do not make an offer
which, in the good faith judgment of the Board of Directors of the Company
(based on the advice of the Company's independent financial advisor) is at least
as favorable to the Company's stockholders as such Acquisition Proposal, (iii)
the Company shall have terminated the Merger Agreement in accordance with its
terms, and (iv) prior thereto the Company shall have paid the fees specified in
the Merger Agreement, and shall have deposited $500,000 in trust with a
Qualified Commercial Bank for the payment of the expenses specified in the
Merger Agreement.
Conduct of Business
Pursuant to the Merger Agreement, the Company has agreed that, except as
otherwise expressly contemplated thereby, prior to the Effective Time: (a) the
business of the Company and it subsidiaries shall in all material respects be
conducted only in, and the Company and its subsidiaries shall not take any
material action except in, the ordinary course of business and consistent with
past practice, and the Company and its subsidiaries shall use all reasonable
efforts, consistent with past practice, to maintain and preserve its and each
subsidiary's business organization, assets, employees and advantageous business
relationships and (b) the Company shall not, and shall not permit any of its
subsidiaries to, directly or indirectly, do any of the following:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of the Company to its parent: (A) declare, set
aside or pay any dividends on, or make any other distributions (whether in
cash, stock or other property) in respect of, any of its capital stock; (B)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution of shares of its capital stock; or (C) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities, other than the payment to holders of Company Options
outstanding as of the date of the Merger Agreement of an amount equal to
the difference between the price per Share to be paid in the Offer and the
exercise price of such Company Options in exchange for the cancellation or
termination of such Company Options;
(ii) issue, deliver, sell, pledge or otherwise dispose of or encumber,
any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities (other than
the issuance of Shares upon the exercise of Company Options or conversion
of Convertible Notes outstanding as of the date of the Merger Agreement);
(iii) amend its Certificate of Incorporation or Bylaws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets or any stock of, or by
any other manner, any business or any corporation, partnership, joint
venture, limited liability company, association or other business
organization or division thereof or
8
<PAGE> 11
(B) any assets that are material, in the aggregate, to the Company and its
subsidiaries, taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
(v) except in the ordinary course of business and consistent with past
practice, sell, lease, license, pledge or otherwise dispose of or encumber
any assets of the Company or any of its subsidiaries (including any
indebtedness owed to them or any claims held by them);
(vi) whether or not in the ordinary course of business or consistent
with past practice, sell or dispose of any assets material to the Company
and its subsidiaries, taken as a whole (including any accounts, leases,
contracts or intellectual property or any assets or stock of any
subsidiary, but excluding the sale of products in the ordinary course of
business consistent with past practice);
(vii) except as permitted by the Merger Agreement, enter into an
agreement with respect to any merger, consolidation, liquidation or
business combination, or any acquisition or disposition of all or
substantially all of the assets or securities of the Company;
(viii) incur or suffer to exist any indebtedness for borrowed money
other than Permitted Indebtedness or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, or (B) make any loans, advances
(other than to employees of the Company in the ordinary course of business)
or capital contributions to, or investments in, any other person other than
between the Company and its subsidiaries or any of them;
(ix) make or agree to make any new capital expenditures or
expenditures not already in process on the date of the Merger Agreement
with respect to property, plant or equipment in excess of $150,000 in the
aggregate for the Company and its subsidiaries, taken as a whole;
(x) make any change in accounting methods, principles or practices,
except insofar as may have been required by a change in generally accepted
accounting principles or, except as so required, change any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve;
(xi) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Commission Filings or the September 30 Financial Information or incurred
thereafter in the ordinary course of business consistent with past
practice, or waive any material benefits of, or agree to modify in any
material respect, any material confidentiality, standstill or similar
agreements to which the Company or any of its subsidiaries is a party;
(xii) except in the ordinary course of business, materially modify,
amend or terminate any material contract or agreement to which the Company
or any of its subsidiaries is party, or knowingly waive, release or assign
any material rights or claims;
(xiii) other than in the ordinary course of business consistent with
past practice, enter into any material contracts or agreements relating to
the distribution, sale or marketing by third parties of the products of, or
products licensed by, the Company or any of its subsidiaries;
(xiv) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date of the Merger Agreement and
except as set forth on the Disclosure Schedules attached to the Merger
Agreement, (A) adopt, enter into, terminate or amend any written employment
agreement or any oral employment agreement that is not terminable by the
Company or any subsidiary without any penalty, on notice of thirty days or
less, or any benefit plan for the benefit or welfare of any current or
former director, officer or employee, (B) increase in any material respect
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or key employee, (C) pay any material benefit not provided for
under any benefit plan or employment or other compensation arrangement,
other than the
9
<PAGE> 12
payment of bonuses following the date of the Merger Agreement to employees
(other than officers and directors of the Company or any subsidiary) in the
ordinary course of business and of a nature and in amounts consistent with
past practice, (D) grant any awards under any bonus, incentive, performance
or other compensation plan or arrangement or benefit plan (including the
grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or awards made
thereunder), or (E) take any action other than in the ordinary course of
business consistent with past practice to fund or in any other way secure
the payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or benefit plan;
(xv) make any tax election or, except in the ordinary course of
business consistent with past practice, settle or compromise any federal,
state, local or foreign tax liability;
(xvi) issue any options or commence any offering of Shares pursuant to
the Company's employee stock purchase plan; or
(xvii) authorize, commit or agree, in writing or otherwise, to take
any of the foregoing actions.
Indemnification and Insurance
Through the third anniversary of the Effective Time, the Parent will
maintain in effect for the benefit of the directors and officers of the Company,
as of the date of the Merger Agreement, directors' and officers' liability
insurance policies with coverages and other terms substantially as favorable to
such directors and officers as is in effect on the date of the Merger Agreement.
In no event, however, will the Parent be required to expend more than an amount
per year equal to 150% of the current annual premium paid by the Company as of
the date of the Merger Agreement for such insurance coverage.
The Parent and the Purchaser have agreed in the Merger Agreement that all
rights to indemnification, limitation of liability, exculpation, advancement of
expenses and any and all similar rights existing on the date of the Merger
Agreement in favor of present or former employees, agents, directors or officers
of the Company and its subsidiaries as provided in their respective charters or
by-laws (each as in effect on the date of the Merger Agreement) shall survive
the Offer and the Merger and shall continue in full force and effect for a
period of six years from the Effective Time; provided, however, that in the
event any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect to any such claim or claims shall continue
until the disposition of such claims.
The Merger Agreement also provides that the Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the Effective Time,
the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company and each Subsidiary and
their respective heirs, executors, administrators, personal representatives or
assigns (collectively, the "Indemnified Parties") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), whether civil, criminal, administrative or investigative (a
"Proceeding"), arising out of or pertaining to any action or omission in their
capacity as an officer, director, employee, fiduciary or agent, whether
occurring before or after the Effective Time, to the same extent as provided in
the Company's Certificate of Incorporation or By-laws as in effect on the date
of the Merger Agreement, in each case for a period of six years after the date
of the Merger Agreement. In the event that any claim for indemnification is
asserted or made within such six-year period, all rights to indemnification in
respect of such claim shall continue until the disposition of such claim.
Each Indemnified Party shall give written notice to the Company or the
Surviving Corporation, as the case may be (the "Indemnifying Party"), promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any Proceeding resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the
10
<PAGE> 13
defense of such Proceeding, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld, conditioned or delayed); and,
provided, further, that the failure of any Indemnified Party to give notice as
provided in the Merger Agreement shall not relieve the Indemnifying Party of its
obligations under the Merger Agreement unless and to the extent that the
Indemnifying party is adversely affected by such failure. The Indemnified party
may participate in such defense at such party's expense; provided, however, that
the Indemnifying Party shall pay such expense if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. In the event that the Indemnifying Party does not assume the defense
pursuant to the terms of the Merger Agreement of any Proceeding of which the
Indemnifying Party receives notice, any expenses incurred by the Indemnified
Party in defending such Proceeding shall be paid by the Indemnifying Party in
advance of the final disposition of such matter, provided, however, that the
payment of such expenses incurred by the Indemnified Party in advance of the
final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnified Party to repay all amounts so
advanced in the event that it shall ultimately be determined that the
Indemnified Party is not entitled to be indemnified by the Indemnifying Party in
accordance with the Merger Agreement. The Indemnified Party shall cooperate with
the Indemnifying Party and provide access to all documents necessary or
beneficial to the defense of any Proceeding. Neither the Company nor the
Surviving Corporation shall be liable for any settlement of any Proceeding
effected without its written consent.
The Merger Agreement also provides that in the event the Company or the
Surviving Corporation or any of their respective successors or assigns
consolidates with or merges into any other person and will not be the continuing
or surviving corporation or entity of such consolidation or merger, then, and in
each such case, the Parent will either guarantee the indemnification obligations
described above or cause to be made proper provision so that the successors and
assigns of the Company or the Surviving Corporation, as the case may be, assume
the indemnification obligations described above.
Fees and Expenses
The Merger Agreement provides that, except as otherwise provided in the
Merger Agreement, each party thereto shall bear all of the fees and expenses
incurred by it in connection with the negotiation and performance of the Merger
Agreement and no party to the Merger Agreement may recover any such fees and
expenses from another party upon termination of the Merger Agreement.
If, however, (i) the Company's Board of Directors, whether or not in the
exercise of its fiduciary or other legal duties, either (A) shall have failed to
approve or recommend, or shall have withdrawn or adversely modified or taken a
public position materially inconsistent with its approval or recommendation of,
the Offer, the Merger or the Merger Agreement and the Parent shall have elected
to terminate the Merger Agreement as a result thereof, or (B) take any action
(other than as expressly permitted under the terms of the Merger Agreement) with
respect to any Qualified Acquisition Proposal other than to recommend rejection
of the Qualified Acquisition Proposal (including taking a position of neutrality
or failing to take any position within ten business days after the making or
commencement of a Qualified Acquisition Proposal); or (ii) prior to the final
expiration of the Offer, an Acquisition Proposal shall have become publicly
known and the Merger Agreement is terminated (other than as a result of a
material breach of the Merger Agreement by the Parent or the Purchaser) and,
within 12 months after such termination, (A) the Company enters into a merger or
other agreement that contemplates the consummation of an Acquisition Proposal at
a price equal to or greater than the aggregate consideration payable for Shares
pursuant to the Offer and the Merger or (B) the holders of Shares become
entitled to receive consideration per Share greater than the Merger
Consideration in a transaction or series of transactions in connection with an
Acquisition Proposal or (iii) the Company elects to terminate the Merger
Agreement in order to enter into an agreement with a Third Party to consummate a
Qualified Acquisition Proposal, then, in each such case, the Company shall pay
the Parent $7,450,000 in cash and an amount equal to the reasonable
out-of-pocket expenses incurred by the Parent and the Purchaser in connection
with the evaluation, negotiation, implementation and consummation of the
transactions contemplated by the Merger Agreement (including fees and expenses
of legal counsel, solicitors, accountants, printers
11
<PAGE> 14
and financial advisors and investment bankers); provided, however, that, in no
event shall the amount of such expenses exceed $500,000. The Company is also
required to reimburse the Parent for up to $500,000 in expenses in certain
circumstances if the Parent terminates the Merger Agreement because of a failure
by the Company to perform in any respect any of its material obligations under
the Merger Agreement.
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Time (whether prior to or after approval by the stockholders of the Company), as
follows:
(a) by the mutual written consent of the Boards of Directors of the
Parent and the Company; or
(b) by the Company:
(i) if neither the Parent nor any of its subsidiaries or affiliates
shall have (A) publicly announced its intention to make the Offer no
later than the first business day following the date of the Merger
Agreement or (B) commenced the Offer within five business days of such
announcement unless such failure to commence is due to a material breach
of the Merger Agreement by the Company; or
(ii) if, in the absence of any material breach of the Merger
Agreement by the Company, (A) the Offer shall have been terminated or
the Purchaser shall have allowed the Offer to expire without the
purchase of such number of Shares thereunder as satisfies the Minimum
Condition; or (B) neither the Parent nor any of its subsidiaries or
affiliates shall have paid for all Shares validly tendered pursuant to
the Offer and not withdrawn within 60 days after the commencement of the
Offer; or
(iii) if the Effective Time shall not have occurred on or before
March 31, 1999 due to a failure of any of the conditions to the
obligation of the Company to effect the Merger set forth in the Merger
Agreement; or
(iv) if, prior to the purchase of any Shares pursuant to the Offer,
the Parent or the Purchaser fails to perform any of their respective
obligations under the Merger Agreement and such failure or
nonperformance materially impairs the Parent's and the Purchaser's
ability to consummate the Offer or the Merger; or
(v) if the Company has, in accordance with the terms of the Merger
Agreement, entered into an agreement with a Third Party to consummate a
Qualified Acquisition Proposal; or
(vi) if there shall have been a breach of any material
representation and warranty of the Purchaser or the Parent set forth in
the Merger Agreement prior to the expiration or termination of the
Offer, which breach is not cured within five days following written
notice thereof by the Company to the Purchaser and the Parent; or
(c) by the Parent:
(i) if, due to an occurrence that would result in a failure to
satisfy any of the conditions to the Offer described in the Merger
Agreement, the Parent or any of its subsidiaries or affiliates shall
have (A) failed to commence the Offer within five business days of the
date on which the Purchaser's intention to make the Offer is publicly
announced; (B) terminated the Offer without the purchase of any Shares
thereunder; or (C) failed to pay for Shares pursuant to the Offer within
60 days after the commencement of the Offer; or
(ii) if the Effective Time shall not have occurred on or before
March 31, 1999 due to a failure of any of the conditions to the
obligations of the Parent and the Purchaser to effect the Merger set
forth in the Merger Agreement otherwise than as a result of a material
breach or default by the Parent or Purchaser under the Merger Agreement;
or
12
<PAGE> 15
(iii) if the Company's Board of Directors, whether or not in the
exercise of their fiduciary or other legal duties, either (A) shall have
failed to approve or recommend, or shall have withdrawn or adversely
modified or taken a public position materially inconsistent with its
approval or recommendation of, the Offer, the Merger or the Merger
Agreement or (B) takes any action (other than as expressly permitted
under the Merger Agreement) with respect to any Qualified Acquisition
Proposal other than to recommend rejection of the Qualified Acquisition
Proposal (including taking a position of neutrality or failing to take
any position within 10 business days after the making or commencement of
a Qualified Acquisition Proposal); or
(iv) if, prior to the purchase of any Shares pursuant to the Offer,
the Company fails to perform in any respect any of its material
obligations under the Merger Agreement which failure to perform, (other
than failure to perform an obligation described under the heading
"Acquisition Proposals," as to which there will be no cure period) is
not cured within five days following notice thereof by the Parent to the
Company; or
(d) by either the Company or the Parent, if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance
for payment of, or payment for, Shares pursuant to the Offer or the Merger
and such order, decree or ruling or other action shall have become final
and nonappealable; provided, however, that the party seeking to terminate
the Merger Agreement pursuant to this provision shall have performed its
obligations under the Merger Agreement to use reasonable efforts to avoid
such event.
Amendment
Subject to the amendment provision described above under "-- Designation of
Directors," the Merger Agreement may not be amended except by action of the
Boards of Directors of each of the parties to the Merger Agreement, set forth in
an instrument in writing signed on behalf of each of the parties; provided,
however, that if the Merger Agreement and the Merger are subject to stockholder
approval, then after such approval, no amendment shall be made which by law
requires further approval by such stockholders without obtaining such further
approval.
Waiver
At any time prior to the Effective Time, whether before or after any
meeting of the stockholders of the Company to vote on the Merger, any party to
the Merger Agreement, subject to the waiver provisions described above under
"-- Designation of Directors," by action taken by its Board of Directors,
subject to the provisions of the Merger Agreement, may (i) extend the time for
the performance of any of the obligations or other acts of any other party to
the Merger Agreement or (ii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations, provided, however,
that if the Merger Agreement and the Merger are subject to stockholder approval
then, after such approval, no waiver shall be made which by law requires further
approval by such stockholders without obtaining such further approval. Any
agreement on the part of a party to the Merger Agreement to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party by a duly authorized officer.
Guarantee
Pursuant to the Merger Agreement, the Parent has unconditionally and
irrevocably guaranteed the Purchaser's obligations under the Merger Agreement
and has agreed to be liable for any breach of the Merger Agreement by the
Purchaser.
Treatment of Options
Pursuant to terms of the Merger Agreement, as of the Effective Time, the
Parent shall assume the Option Plan and the obligations of the Company
thereunder and all of the Company Options which are then outstanding shall be
assumed by the Parent. Immediately after the Effective Time, each Company Option
shall constitute an option to acquire, on the same terms and conditions as were
applicable to Company Options
13
<PAGE> 16
immediately prior to the Effective Time, such number of shares of common stock,
par value $1.00 per share, of the Parent (the "Parent Common Stock") as is equal
to the number of Shares subject to such Company Option immediately prior to the
Effective Time multiplied by a fraction, the numerator of which is the Merger
Consideration and the denominator of which is the average closing price of the
Parent Common Stock on the NYSE, as reported in The Wall Street Journal (or if
not so reported in another authoritative source), for the ten trading days
ending on the date of the expiration of the Offer (with any fraction resulting
from such multiplication to be rounded down to the nearest whole number). The
exercise price per share of each such assumed Company Option shall be equal to
the per share exercise price of such Company Option immediately prior to the
Effective Time multiplied by a fraction, the numerator of which is the average
closing price of the Parent Common Stock on the NYSE, as reported in The Wall
Street Journal (or if not so reported in another authoritative source), for the
ten trading days ending on the date of the expiration of the Offer and the
denominator of which is the Merger Consideration (with any fraction resulting
from such multiplication to be rounded up to the nearest whole cent). Except as
otherwise provided in the Merger Agreement, the term, exercisability, vesting
schedule, status and all of the other terms of the Company Options shall
otherwise remain unchanged.
As soon as practicable after the Effective Time, the Parent shall, with
respect to all shares of Parent Common Stock subject to such Company Options,
(i) either (x) file a Registration Statement on Form S-8 (or any successor form)
under the Securities Act or (y) file any necessary amendments to the Company's
previously filed Registration Statements on Form S-8 in order that the Parent
will be deemed a "successor registrant" thereunder, and, in either event, shall
use all reasonable efforts to maintain the effectiveness of such registration
statement for so long as such Company Options remain outstanding, and (ii) take
all actions necessary to have such shares of Parent Common Stock approval for
listing on the NYSE subject to official notice of issuance.
Notwithstanding the foregoing, pursuant to the terms of the Merger
Agreement and the Option Plan, the Compensation Committee of the Board of
Directors has resolved to vest all Company Options upon the closing of the Offer
and to cash out the Company Options of holders requesting the Company to do so.
Holders of Company Options who request that such Company Options be cashed out
shall be paid an amount equal to the difference between the price per Share to
be paid in the Offer and the exercise price, and such Company Options shall
thereupon be cancelled. Such payment shall be made within one business day of
the closing of the Offer.
THE STOCKHOLDERS' AGREEMENT
The following is a summary of the Stockholders' Agreement, a copy of which
is filed as Exhibit 5 hereto and is incorporated herein by reference. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Stockholders' Agreement.
The Parent and the Purchaser have entered into the Stockholders' Agreement,
dated as of October 21, 1998 with Martin E. Franklin, Ian G.H. Ashken, Richard
D. Capra and George B. Clairmont (the "Management Stockholders"), with respect
to 993,684 Shares outstanding as of the date of the Merger Agreement and
beneficially owned by the Management Stockholders and an additional 1,752,338
shares subject to options held by the Management Stockholders. Pursuant to the
Stockholders' Agreement, each of the Management Stockholders agreed: (i) to
validly tender and not withdraw, pursuant to and in accordance with the terms of
the Offer, (x) within five business days after the commencement of the Offer,
all Shares owned by such Management Stockholder as of the date of the
Stockholders' Agreement, and (y) prior to the scheduled expiration of the Offer,
any additional Shares acquired after the date of the Stockholders' Agreement by
such Management Stockholder; (ii) to vote all Shares that such Management
Stockholder is entitled to vote to approve and adopt the Merger Agreement, the
Merger and all agreements related to the Merger and any actions related thereto;
(iii) not to vote in favor of any Acquisition Proposal reorganization,
recapitalization, liquidation or winding up of the Company or any other
extraordinary transaction involving the Company, or any corporate actions the
consummation of which would frustrate the purposes, or prevent or delay the
consummation, of the transactions contemplated by the Merger Agreement; (iv)
revoke any and all previous proxies granted with respect to such Management
Stockholders' Shares, and to appoint the Purchaser
14
<PAGE> 17
as such Management Stockholder's attorney-in-fact and proxy to vote the Shares
in such manner and upon such matters as the Purchaser shall, in the Purchaser's
sole discretion, deem proper; (v) not to grant any proxies or enter into any
voting trust or other arrangement with respect to the voting of any Shares; and
(vi) not to sell, assign, transfer, encumber or otherwise dispose of any Shares,
or enter into any contract, option or other arrangement or understanding with
respect to the sale, assignment, transfer, encumbrance or other disposition of,
any Shares, except for transfers by gift of options to purchase Shares to any
charitable organization, with the prior written consent of the Purchaser.
The proxy grant pursuant to the Stockholders' Agreement shall be revoked
upon termination of the Stockholders' Agreement in accordance with its terms.
The Stockholders' Agreement, and the Management Stockholders' obligations
thereunder, shall expire on the first to occur of (i) the Effective Time or (ii)
the termination of the Merger Agreement in accordance with its terms. In
addition, the Stockholders' Agreement may be terminated by the Purchaser and the
Parent upon written notice to the Management Stockholders.
OTHER ARRANGEMENTS
On October 21, 1998, each of William Sullivan, George Clairmont, Harrison
Augur and David Moore was granted a stipend in the amount of $15,000, which
amount is equal to the annual remuneration received by such non-executive
directors, by the Board of Directors of the Company in recognition of their
extraordinary efforts in connection with the negotiations with the Parent
concerning the Offer and the Merger Agreement.
Reference is hereby made to the information contained in Annex I attached
hereto under the heading "EXECUTIVE COMPENSATION -- Summary Compensation Table,"
"-- Options/SAR Grants Table," "-- Employment Agreements," and "-- Other" for a
description, among other things, of certain payments that will be payable to
certain executive officers of the Company upon the occurrence of a "Change in
Control" of the Company, and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
and by such reference, such information is incorporated herein as though fully
set forth herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors has unanimously determined that the Offer and
the Merger are fair to, and in the best interests of, the stockholders of the
Company, has approved and found advisable the Merger Agreement, the Offer and
the Merger and recommends that the stockholders of the Company accept the Offer
and tender their Shares pursuant to the Offer.
(b) As part of its strategic business plan with a view to increasing
stockholder value by improving its technological capacity and competitive
position, management of the Company meets periodically with representatives of
other companies to explore opportunities for potential acquisitions and other
strategic business ventures. Over the past few years, representatives of the
Parent and the Company have had informal contacts at trade shows and lighting
industry events.
At the beginning of May, 1998, Angelo D. Castellana, Senior Vice President
of the Parent, called Martin E. Franklin, Chairman of the Board of Directors of
the Company. During their conversation, the parties acknowledged their mutual
interest to continue discussions regarding possible strategic opportunities
between the Parent and the Company.
On May 5, 1998, Messrs. Castellana and Franklin had dinner, at which they
continued to discuss a variety of strategic opportunities, including
alternatives involving the Company and the Parent's Optoelectronics Business
Unit. They agreed to meet the following day at the Company's headquarters in
Rye, New York, to continue discussions.
On May 6, 1998, Mr. Castellana met with Mr. Franklin and Ian Ashken, Chief
Financial Officer of the Company, at the Company's offices in Rye, New York. No
formal proposals regarding any business combination transaction were made, but
the parties agreed that Mr. Franklin should meet with Mr. Gregory Summe, the
newly appointed President and Chief Operating Officer of the Parent at a
mutually convenient date and site in the near future.
15
<PAGE> 18
On June 8, 1998, Mr. Franklin had dinner with Messrs. Summe and Castellana
in Boston, Massachusetts, where Mr. Summe outlined the Parent's strategy for its
Optoelectronic Business Unit and Mr. Summe advised Mr. Franklin that the Parent
was interested in augmenting its Optoelectronic Business Unit. Mr. Summe asked
Mr. Franklin if he would consider a possible combination of the Company with the
Parent's Optoelectronic Business Unit. Mr. Franklin advised that the Company
would consider such a possibility.
On June 9, 1998, the parties executed a mutual confidentiality agreement
and agreed to exchange information. However, very limited information was
exchanged and there were no substantive contacts between the companies during
the summer of 1998.
In early September, 1998, Mr. Castellana called Mr. Franklin to schedule a
further meeting. On September 9, 1998, Mr. Castellana and Stephen P. DeFalco,
the Parent's Vice President of Strategic Planning and Business Development, met
at the Company's offices with Messrs. Franklin and Ashken and with Richard
Capra, the Company's Chief Executive Officer, at which they reviewed the
Company's summary financial data and business strategy. At the end of the
meeting, Mr. Castellana advised Mr. Franklin that the Parent would review the
information and get back to him.
On September 14, 1998, Mr. Summe called Mr. Franklin in the United Kingdom
to express the Parent's interest in proposing an acquisition transaction. The
possible structure and pricing of such an acquisition were not determined;
however, Mr. Franklin agreed to consider such a possibility and to arrange for
the Parent's representatives to visit the Company sites upon Mr. Franklin's
return to the United States.
On September 29 and October 1, 1998, representatives of the Parent visited
the facilities of the Company's U.S. business operations.
On October 7, 1998, Messrs. Franklin and Ashken met with members of the
Parent's management at Parent's headquarters. Following a general discussion of
the strategic fit of the two companies, Mr. Summe expressed the Parent's
interest in making an all cash offer for the Company in a price range of
$7.50-$8.00 per share; however, no formal proposal was made.
On October 8, 1998, Mr. Franklin informally advised each of the members of
the Board of the discussions with Parent concerning a possible acquisition
transaction.
On October 9, 1998, Mr. Summe called Mr. Franklin and expressed the
Parent's willingness to make an all cash offer for all outstanding shares of the
Company at a price of $7.75 per share, subject to, among other things,
satisfactory completion of the Parent's due diligence investigation and entering
into a mutually satisfactory merger agreement. Mr. Franklin stated that such
price was within the range of valuation that he was willing to present to the
Company's Board. Mr. Franklin agreed to authorize the Parent to commence its due
diligence investigation at the Company's headquarters.
On October 12, 1998, representatives of the Parent, including its internal
and outside counsel, and tax and accounting advisors, commenced their due
diligence review of the Company.
On October 15, 1998, the Parent's counsel delivered a first draft of the
proposed Merger Agreement to the Company and its counsel. During the next week,
the Parent and the Company and their respective counsel proceeded with intensive
negotiations of the terms of the Merger Agreement and Messrs. Franklin and
Ashken, on behalf of themselves and Mr. Capra and George B. Clairmont, a
director of the Company, discussed the terms of a Stockholders' Agreement
requested by the Parent.
On October 19, 1998, the Company's Board of Directors met and Mr. Franklin
presented the details of the Parent's Offer and the Merger Agreement. The Board
thereupon determined that it was advisable to create a Special Committee
comprised of three non-management directors (Messrs. William Sullivan, George
Clairmont and David Moore) to evaluate potential transactions, including the
proposed Merger Agreement with the Parent, with the full Board retaining the
exclusive authority to enter into any transaction agreement on behalf of the
Company. The Special Committee was authorized to engage professional advisors.
Immediately thereafter, the Special Committee met and engaged Company counsel to
act as counsel to the Special Committee and Raymond James & Associates, Inc.
("Raymond James") to render a fairness opinion to the Board with respect to the
proposed Merger Agreement, recognizing Raymond James' familiarity with
16
<PAGE> 19
the Company as a result of having advised the Company with respect to its March,
1998 acquisition of ILC Technology, Inc. The Special Committee authorized
Messrs. Franklin and Ashken, with the advice of Company counsel, to continue
negotiation with Parent and to advise the Special Committee as to the progress
of negotiations and material issues that arise.
On October 20, 1998, Mr. Summe called Mr. Franklin to confirm that $7.75
per Share was the highest price the Parent could offer for the Company. Mr.
Franklin stated that he would present the offer to the Company's Board for its
consideration at its meeting which was scheduled for the next day, subject to
Raymond James confirming that such price was fair to the Company and its
stockholders (other than the Parent and its affiliates) from a financial point
of view. Representatives of Parent, the Company, and the stockholder parties to
the Stockholders' Agreement continued to negotiate the definitive terms of the
Merger Agreement and the Stockholders' Agreement, which were finalized on
October 21, 1998.
On October 21, the Special Committee met to review the terms of the Merger
Agreement and the Stockholders' Agreement and to hear Raymond James' analysis of
the fairness of the consideration to be paid in the Offer and the Merger. After
hearing the opinion of Raymond James that the Offer price of $7.75 per share was
fair to the Company and its stockholders (other than the Parent and its
affiliates) from a financial point of view, the Special Committee recommended to
the Board of Directors that the Merger Agreement be approved. The Board of
Directors of the Company then convened to review the terms of the Merger
Agreement and the Stockholders' Agreement, to consider the recommendation of the
Special Committee, and to review the written opinion of Raymond James that the
consideration to be paid in the Offer and the Merger were fair to the Company
and its stockholders (other than the Parent and its affiliates) from a financial
point of view. After extensive discussion of the terms of the Offer and Merger
with counsel and Raymond James, the Board unanimously approved the Offer and the
Merger and determined that they were fair to, and in the best interests of, the
Company and its stockholders (other than the Parent and its affiliates). The
Board thereupon authorized the execution of the Merger Agreement and the
Stockholders' Agreement (for the limited purpose of complying with Section 203
of the General Corporation Law of Delaware) and unanimously voted to recommend
that stockholders accept the Offer and tender their Shares pursuant to the
Offer. Following such actions, the Merger Agreement and the Stockholders'
Agreement were executed and delivered by the parties thereto. Shortly
thereafter, the Parent and the Company jointly announced that the Merger
Agreement had been signed and Purchaser's intention to commence the Offer.
On October 27, 1998, the Purchaser commenced the Offer.
In making the determinations and recommendations set forth in Item 4(a)
above, the Board considered a number of factors, including, without limitation,
the following:
(i) The terms and conditions of the Offer and the Merger Agreement.
(ii) Presentations by management at Board meetings and Board committee
meetings held on and before October 21, 1998, and the knowledge of the
Board of Directors with respect to the financial condition, results of
operations, business and prospects of the Company and possible alternative
strategic transactions.
(iii) Since its inception, the Company has had numerous contacts with
companies within the industry to discuss strategic alternatives. None of
such parties has made a cash offer for the Company on terms superior to
those contained in the Offer.
(iv) The Offer price of $7.75 net in cash for each of the Shares
constitutes an approximate 30% premium to the closing market price for the
Shares on the New York Stock Exchange on October 21, 1998, the date the
Merger Agreement was approved by the Company's Board of Directors, and an
approximate 80% premium to the closing market price of the Company's shares
on October 9, 1998, the date on which Parent initially expressed its
willingness to make an offer at the price of $7.75 per share.
(v) The recent historical market prices for the Shares.
(vi) The uncertain outlook of the stock price and earnings multiples
in respect of small market cap companies and the short term effect of
potential future credit tightening.
17
<PAGE> 20
(vii) The presentations of Raymond James at the October 21, 1998
meetings of the Special Committee and the full Board of the Company and the
written opinion of Raymond James delivered to the Board at the October 21
meeting that as of the date of such opinion and based upon factors set
forth therein, the consideration of $7.75 per share net in cash to be
received by the Company's stockholders pursuant to the Offer and Merger is
fair from a financial point of view, to the Company and its stockholders
(other than the Parent and its affiliates). The full text of such opinion,
dated October 21, 1998, which sets forth the assumptions made, the matters
considered and the limitations on the review undertaken by Raymond James is
attached as Exhibit 2 hereto and is incorporated herein by reference. Such
opinion should be read carefully in its entirety by stockholders in
conjunction with the foregoing matters.
(viii) That the Special Committee recommended to the Board that the
Merger Agreement be approved.
(ix) That under the terms of the Merger Agreement, the Board is not
prohibited from (a) furnishing information or entering into or
participating in negotiations with a third party who submits an
unsolicited, written, bona fide Qualified Acquisition Proposal, and (b)
entering into an agreement to consummate a Qualified Acquisition Proposal
by terminating the Merger Agreement upon payment of certain fees and
expenses to the Parent.
The Board did not assign relative weights to the foregoing factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of an Engagement Letter (the "Raymond James
Engagement Letter"), dated as of October 19, 1998, between Raymond James and the
Company, the Company has retained Raymond James to act as the Board's external
investment banker for the purposes of providing a fairness opinion in connection
with the Offer and the Merger (the "Opinion") opining as to the fairness to the
Company and to the Company's stockholders (other than the Parent and its
affiliates), from a financial point of view, of the total consideration to be
received by the Company's stockholders in connection with the Offer and Merger.
Pursuant to the terms of the Raymond James Engagement Letter, the Company agreed
to pay Raymond James a cash fee in the amount of $250,000 (the "Fee") to be paid
by the Company as follows: (a) a non-refundable portion of the Fee equal to
$10,000 to be paid in cash to Raymond James by the Company upon the Company's
signing of the Raymond James Engagement Letter; (b) an additional non-refundable
$40,000 of the Fee to be paid in cash to Raymond James upon request by the Board
for the Opinion; and (c) the final $200,000 of the Fee to be paid to Raymond
James in cash at the closing under the Offer and Merger.
In the past, Raymond James has provided investment banking, financial
advisory and other services to the Company and has received fees for the
rendering of such services.
The Company has also agreed to reimburse Raymond James, within thirty (30)
days of receipt of an invoice therefor, for its reasonable out-of-pocket
expenses (including reasonable legal fees) incurred in connection with this
engagement, up to a maximum of $15,000, unless otherwise authorized or unless
any testimony in litigation, depositions or similar proceedings are required as
further described in the Raymond James Engagement Letter.
The Company agreed to indemnify and hold harmless Raymond James and each of
its directors, officers, agents, employees and controlling persons (within the
meaning of the Securities Act of 1933, as amended) to the extent and as provided
in the Raymond James Engagement Letter.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders with respect to the Offer or the Merger.
18
<PAGE> 21
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth herein or on Annex I attached hereto, which is
incorporated herein by reference, there have been no transactions in Shares
which were effected during the past sixty (60) days by the Company, or to the
best knowledge of the Company, by any executive officer, director, affiliate or
subsidiary of the Company.
During the month of September, 1998, the Company repurchased 501,000 shares
of Common Stock in the market at an average price of approximately $5.01 per
share, pursuant to its stock repurchase program announced on September 11, 1998
and in compliance with Rule 10b-18, promulgated under the Securities and
Exchange Act of 1934.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates or subsidiaries presently intend to tender to Parent
pursuant to the Offer, all Shares which are owned beneficially by such persons,
subject to and consistent with any fiduciary obligations in the case of Shares
held by fiduciaries. The Management Stockholders have agreed, among other
things, to validly tender, and not withdraw, the Shares owned by them, in the
Offer within five business days after the commencement of the Offer pursuant to
the terms of the Stockholders' Agreement. See "The Stockholders' Agreement"
above.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above in Item 3 or in Item 4(b) above, or in Annex
I hereto, the Company is not engaged in any negotiations in response to the
Offer which relates to or would result in (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) above, there are no transactions,
Board of Directors resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex I is being furnished in
connection with the contemplated designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders, following
the acceptance for payment of, and payment by the Purchaser in accordance with
the Offer for, Shares pursuant to the Offer.
19
<PAGE> 22
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 1 -- Agreement and Plan of Merger, dated as of October 21, 1998,
among the Company, Parent and the Purchaser.
Exhibit 2 -- Opinion of Raymond James, dated October 21, 1998.*
Exhibit 3 -- Letter to Stockholders of the Company.*
Exhibit 4 -- Text of Joint Press Release as published October 21, 1998,
issued by the Company and Parent.
Exhibit 5 -- Stockholders' Agreement, dated October 21, 1998, among Parent,
Purchaser and Martin E. Franklin, Ian G.H. Ashken, Richard D.
Capra and George B. Clairmont.
Exhibit 6 -- Amendment No. 2 to Employment Agreement between Lumen
Technologies, Inc. and Martin E. Franklin, dated as of July
31, 1998.
Exhibit 7 -- Amendment No. 2 to Employment Agreement between Lumen
Technologies, Inc. and Ian Ashken, dated as of July 31, 1998.
Exhibit 8 -- Amendment No. 1 to Management Services Agreement, dated
September 23, 1998, between Bolle Inc., Lumen Technologies,
Inc. and Marlin Holdings, Inc.
- ---------------
* Included in copies mailed to stockholders
20
<PAGE> 23
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
LUMEN TECHNOLOGIES, INC.
By: /s/ MARTIN E. FRANKLIN
------------------------------------
Name: Martin E. Franklin
Title: Chairman of the Board
Dated: October 27, 1998
21
<PAGE> 24
(This page intentionally left blank)
<PAGE> 25
ANNEX I
LUMEN TECHNOLOGIES, INC.
555 THEODORE FREMD AVENUE
SUITE B-302
RYE, NEW YORK 10580
INFORMATION STATEMENT
PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about October 27, 1998 as
part of the Lumen Technologies, Inc. (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") with respect to the tender
offer by Lighthouse Weston Corp. ("Purchaser") to the holders of record of the
Company's Common Stock, par value $0.01 per share ("Common Stock"). Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
the Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by Purchaser to a majority of
the seats on the Board of Directors of the Company (the "Board") pursuant to an
Agreement and Plan of Merger among EG&G, Inc. ("Parent"), Purchaser and the
Company dated as of October 21, 1998 (the "Merger Agreement"). The Merger
Agreement provides, among other things, that promptly upon the acceptance for
payment of and payment by the Purchaser for any Shares pursuant to the Offer,
and from time to time thereafter as Shares are accepted for payment and paid for
by the Purchaser, the Purchaser shall be entitled to designate such number of
the Board of Directors of the Company (the "Company's Directors"), rounded to
the nearest whole number, as will give the Purchaser representation on the
Company's Board of Directors equal to the greater of (i) a majority and (ii) the
product of the total number of the Company's Directors (after giving effect to
the directors elected in accordance with this procedure) multiplied by the
percentage that such number of Shares so accepted for payment and paid for by
the Purchaser bears to the number of Shares outstanding, and the Company shall,
at such time, take such actions as are necessary to cause the Purchaser's
designees to be so elected or appointed, including increasing the size of the
Company's Board of Directors or using its best efforts to secure the
resignations of incumbent directors or both; provided, however, that,
notwithstanding the Purchaser's right to designate certain of the Company's
Directors, until the Effective Time, the Company's Directors shall include at
least three directors who are directors on the date of the Merger Agreement (the
"Independent Directors"); provided further, that, if the number of Independent
Directors shall be reduced below three for any reason whatsoever, any remaining
Independent Directors shall be entitled to designate a person to fill such
vacancies and such person shall be deemed to be an Independent Director or, if
no Independent Directors then remain, the other directors shall designate three
persons to fill such vacancies who shall not be designees, stockholders,
directors, officers, employees or affiliates of the Parent or the Purchaser, and
such persons shall be deemed to be Independent Directors.
The Merger Agreement further provides that, in the event that the
Purchaser's designees are appointed or elected as Company Directors, after the
acceptance for payment of Shares pursuant to the Offer and prior to the
Effective Time, the affirmative vote of a majority (or, if there is only one or
two Independent Directors, the single or unanimous vote, as the case may be) of
the Independent Directors (who shall act as an independent committee of the
Board of Directors for this purpose) shall be required, and alone shall be
sufficient, to (i) amend or terminate the Merger Agreement by the Company, (ii)
exercise or waive any of the Company's rights or remedies under the Merger
Agreement, (iii) extend the time for performance of the Parent's and the
Purchaser's respective obligations under the Merger Agreement, or (iv) approve
any other action by the Company that the Independent Directors reasonably
determine would materially adversely affect the interests of the stockholders of
the Company (other than the Parent, the Purchaser and their affiliates) with
respect to the transactions contemplated by the Merger Agreement.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
A-1
<PAGE> 26
WE ARE NOT NOW ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY AT THIS TIME.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on October
27, 1998. Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment and pay all
shares validly tendered prior to the Expiration Date (as defined below) and not
properly withdrawn. The term "Expiration Date" means 12:00 midnight, New York
City time, on Tuesday, November 24, 1998, unless and until the Purchaser, in its
sole discretion (but subject to the terms and conditions of the Merger
Agreement) shall have extended the period during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire.
The information contained in this Information Statement concerning
Purchaser and Parent has been furnished to the Company by Parent and the Company
assumes no responsibility for the accuracy, completeness or fairness of any such
information.
ACQUISITION DESIGNEES
Purchaser has informed the Company that it currently intends to designate
the following persons (the "Acquisition Designees") for election:
Set forth in the table below are the name, age, and principal occupation
and business experience of each of the persons who may be designated by the
Purchaser as the Acquisition Designees. Unless otherwise indicated, the business
address for each individual listed below is 45 William Street, Wellesley,
Massachusetts 02481. Each of the Individuals listed below is a citizen of the
United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING PAST FIVE
NAME AGE YEARS AND OTHER DIRECTORSHIPS
- ---- --- -------------------------------------
<S> <C> <C>
John F. Alexander, II.......... 42 Mr. Alexander serves as Senior Vice President and Chief
Financial Officer of the Parent, positions he has held since
1996. From 1991 to 1996, Mr. Alexander served as corporate
controller to the Parent, a title he retained when he was
promoted to Vice President in 1995.
Murray Gross................... 61 Mr. Gross serves as Senior Vice President of the Parent, a
position which he has held since 1996, and as General
Counsel and Clerk of the Parent, positions he has held since
1990.
Angelo D. Castellana........... 57 Mr. Castellana serves as Senior Vice President of the
Parent, serving as principal executive in the office of the
Chief Operating Officer, a position he has held since 1997.
From 1991 to 1997, he served as Vice President of the
Parent.
Philip Ayers................... 57 Mr. Ayers serves as Assistant General Counsel of the Parent,
a position he has held since 1995. From 1993 to 1995, he
served as Managing Attorney for the Parent.
Stephen DeFalco................ 37 Mr. DeFalco serves as Vice President of Strategic Planning
and Business Development of the Parent, a position he had
held since September 1998. From 1997 to 1998, he served as
Vice President of Strategic Planning for Carrier
Corporation. Prior to 1997, he served as Director of
Strategic Planning for United Technologies, from 1996 to
1997, and as Senior Engagement Manager for McKinsey & Co,
from 1988 to 1996.
Deborah S. Lorenz.............. 49 Ms. Lorenz serves as Vice President responsible for Investor
Relations and Corporate Communications of the Parent, a
position she has held since 1990.
</TABLE>
A-2
<PAGE> 27
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING PAST FIVE
NAME AGE YEARS AND OTHER DIRECTORSHIPS
- ---- --- -------------------------------------
<S> <C> <C>
Gregory Perry.................. 38 Mr. Perry serves as a Controller of the Parent, a position
he has held since September 1998. From 1997 to 1998, he
served as Chief Financial Officer of the Automotive Products
Group of Allied Signal, Inc. ("Allied Signal") and as Chief
Financial Officer of Allied Signal's Fram and Autolite
Units. Prior to 1997, he served as Vice President, Finance
of GE Medical Systems, Europe, from 1994 to 1997, and served
as Manager in charge of Business Development for GE Motors,
from 1991 to 1994.
</TABLE>
Any other officer of the Parent or the Purchaser listed in Schedule I to
the Offer to Purchase dated October 27, 1998, filed as an exhibit to the Tender
Offer Statement on Schedule 14D-1 of Parent and the Purchaser may also be
designated by the Purchaser as a Acquisition Designee. The information with
respect to the Acquisition Designees has been supplied by the Purchaser for
inclusion herein.
It is expected that the Acquisition Designees may assume office at any time
following the purchase by Purchaser of a majority of Shares pursuant to the
Offer, and that, upon assuming office, the Acquisition Designees will thereafter
constitute at least a majority of the Board. Purchaser has informed the Company
that each of the Acquisition Designees listed in Schedule I of the Offer to
Purchase has consented to act as a director of the Company, if so designated.
Except as provided in the Merger Agreement, the Stockholders' Agreement and
as otherwise described in the Offer to Purchase, the Company has been advised
that to the best knowledge of Purchaser and Parent, none of the Acquisition
Designees has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or voting of such securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties against
loss, guarantees of profits, division of profits or loss or giving or
withholding of proxies. The Company has been advised that, to the best knowledge
of Purchaser and Parent, none of the Acquisition Designees has had any business
relationship or transaction with the Company or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. The Company has been
advised that there have been no contacts, negotiations or transactions, to the
best knowledge of Purchaser and Parent, between any of the Acquisition
Designees, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
INFORMATION WITH RESPECT TO THE COMPANY
As of October 21, 1998, there were 20,209,606 shares of Common Stock
outstanding and entitled to vote, with each share entitled to one vote. The
Common Stock is the only class of voting securities of the Company which is
outstanding.
A-3
<PAGE> 28
INFORMATION CONCERNING CURRENT OFFICERS AND DIRECTORS
The executive officers and directors as of the date hereof are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ----------------------------------------
<S> <C> <C>
Martin E. Franklin(1)(2)......................... 33 Chairman of the Board of Directors and
Director
Richard D. Capra(1).............................. 66 Chief Executive Officer and Director
Ian G.H. Ashken(1)............................... 38 Executive Vice President of Finance and
Administration, Chief Financial Officer,
Assistant Secretary and Director
Harrison H. Augur(2)(3).......................... 55 Director
George B. Clairmont(3)(4)(5)..................... 49 Director
David L. Moore(2)(4)(5).......................... 42 Director
William T. Sullivan(3)(4)(5)..................... 55 Director
</TABLE>
- ---------------
(1) Member of Executive Committee
(2) Member of Nominating Committee
(3) Member of Audit Committee
(4) Member of Compensation/Stock Option Committee
(5) Member of Special Committee
Directors of the Company are elected annually at the Annual Meeting of
Stockholders. Their respective terms of office would continue until the next
Annual Meeting of Stockholders and until their successors have been elected and
qualified in accordance with the Company's Restated Bylaws. Pursuant to the
terms of the ILC Merger Agreement (as defined below), for a period of two years
following the date of the ILC Merger (as defined below), the Board of Directors
was to be composed of five (5) members designated by the Company (or the
successors of such designees) and four (4) members designated by ILC Technology,
Inc. ("ILC") (or the successors of such designees). In connection with the
retirement of two directors from the Board in June 1998, the Board previously
agreed to a composition of four (4) members designated by the Company and three
(3) members designated by ILC. In addition, in connection with the transactions
contemplated by the Merger Agreement, the Company's Directors have by unanimous
vote resolved in accordance with Section 5.13 of the Agreement and Plan of
Merger dated as of October 30, 1997, among the Company, BILC Acquisition Corp.
and ILC Technology Inc. (the "ILC Merger Agreement"), that (i) prior to the
Effective Time any of the Company's Directors elected on behalf of the Purchaser
pursuant to Section 1.3(a) of the Merger Agreement shall constitute "Company
Nominees" and "BEC Nominees" (as such terms are defined in the ILC Merger
Agreement) and (ii) from and after the Effective Time, all of the Company's
Directors nominated or designated for election by the Parent or the Purchaser
shall constitute "Company Nominees" and "BEC Nominees" pursuant to Section 5.13
of the ILC Merger Agreement and that to the extent permitted by applicable law,
such resolution shall be irrevocable and not subject to amendment, repeal or
modification. There are no family relationships among any of the directors or
executive officers of the Company.
Martin E. Franklin is currently Chairman of the Company, Chairman of Bolle
Inc., a NASDAQ listed company, and non-executive Chairman of Eyecare Products
plc, a London Stock Exchange listed company. Mr. Franklin has been Chairman of
the Company since December 1995 and also served as the Chief Executive Officer
from December 1995 to March 1998. Mr. Franklin was Chairman and Chief Executive
Officer of Benson Eyecare Corporation ("Benson"), the predecessor company of the
Company, from October 1992 through May 1996. Mr. Franklin has been Chairman and
Chief Executive Officer of Marlin Holdings, Inc., the general partner of Marlin
Capital, L.P., a private investment partnership, since October 1996. Mr.
Franklin also serves on the Boards of Specialty Catalog Corp., a NASDAQ listed
company, and
A-4
<PAGE> 29
certain private companies. Mr. Franklin received a B.A. in political science
from the University of Pennsylvania. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Richard D. Capra was elected to the Company's Board of Directors on March
12, 1998, on which date he also was named its Chief Executive Officer. Mr. Capra
served as a member of the ILC Board from 1995 through March 1998. From July 1996
through March 1998, Mr. Capra served as President and Chief Operating Officer of
ILC. From January 1991 to July 1996, Mr. Capra served as a management consultant
and a director of several companies in the electrical and lighting business. He
was President and Chief Executive Officer of Philips Lighting Inc., U.S., from
1983 to 1991.
Ian G.H. Ashken, A.C.A., was appointed Executive Vice President, Chief
Financial Officer, Assistant Secretary and a Director of the Company in December
1995. Mr. Ashken was Chief Financial Officer of Benson and a director of Benson
from October 1992 to May 1996. Mr. Ashken also served as Benson's Executive Vice
President from October 1994 to May 1996; Secretary from October 1992 to December
1993; and, Assistant Secretary from December 1993 to May 1996. Since October
1996, Mr. Ashken has been Vice Chairman of Marlin Holdings, Inc., the general
partner of Marlin Capital, L.P. Mr. Ashken is a director of Eyecare Products
plc, a London Stock Exchange listed company, a director and an executive officer
of Bolle Inc., a NASDAQ listed company, and certain private companies. Mr.
Ashken received his B.A. (Hons) in Economics and Accounting from the University
of Newcastle in England. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Harrison H. Augur was elected to the Company's Board of Directors on March
12, 1998. Mr. Augur served as a member of the Board of Directors of ILC since
1989. He has been General Partner of Capital Asset Management since June 1987.
From April 1981 to August 1991, Mr. Augur served as Executive Vice President and
Director of Worms & Co., Inc.
George B. Clairmont was elected to the Company's Board of Directors on
March 12, 1998. Mr. Clairmont served as a member of the Board of Directors of
ILC from July 1997 through March 1998. He has been President of Clairvest
Corporation, a New York-based registered investment adviser, since 1983. Mr.
Clairmont also serves as a director of Thomson-Leeds Corporation, a designer and
manufacturer of point of sales displays.
David L. Moore became a member of the Company Board in May 1996. For more
than the last five years Mr. Moore has been President and Chief Executive
Officer of Century 21 Home Improvements, and for more than fifteen years he has
been President and Chief Executive Officer of Garden State Brickface, Inc., a
leading New York metropolitan area residential and commercial remodeling firm.
Mr. Moore also serves on the Board of Bolle Inc. Mr. Moore received his B.A. in
Economics from Amherst College and his M.B.A. from Harvard University.
William T. Sullivan became a member of the Company Board in May 1996. Mr.
Sullivan has been President and Chief Executive Officer, and a member of the
Board of Directors of Sight Resource Corporation, an optical retailer, since
January 1998. Mr. Sullivan was President and Chief Operating Officer of the
Company from April 1996 to April 1997. Upon Benson's acquisition of Optical
Radiation Corporation ("ORC") in October 1994, Mr. Sullivan was appointed
Benson's Executive Vice President of Operations. From July 1993 to October 1994,
Mr. Sullivan served as the President of the Consumer Optical Group of ORC. From
August 1987 through July 1993, Mr. Sullivan served as Group Vice President of
the Consumer Optical Group of ORC. Prior to joining ORC, Mr. Sullivan was
President of Pearle Vision Centers.
A-5
<PAGE> 30
INFORMATION CONCERNING MEETINGS OF THE BOARD OF
DIRECTORS AND BOARD COMMITTEES AND DIRECTOR COMPENSATION
During 1997 the Board of Directors held nine meetings.
The Board of Directors has standing Audit, Nominating, and Compensation
Committees. From time to time the Board of Directors may appoint special
committees for specific purposes.
The functions of the Audit Committee are to recommend to the Board of
Directors the appointment of independent accountants for the Company, to analyze
the reports and recommendations of such accountants and to review internal audit
procedures and controls. The Audit Committee, which met once in 1997, currently
comprises Messrs. Clairmont (Chairman), Augur and Sullivan; during 1997, the
Audit Committee comprised Mr. Richard Hanselman (who subsequently resigned from
the Board of Directors in connection with the ILC Merger in order to accommodate
the election to the Board of ILC's designees, as described above), Ms. Bailey,
who subsequently resigned from the Board of Directors, and Mr. Moore.
The Compensation Committee is responsible for setting and administering the
Company's policies governing annual compensation of key employees, managers,
officers and executive officers, including setting individual annual base
salaries or salary guidelines, annual bonus plans and individual participation
levels, and participation in the Company's 1996 Stock Incentive Plan. The
Compensation Committee met one time during 1997. The Compensation Committee
currently consists of Mr. Moore (Chairman), Mr. Clairmont and Mr. Sullivan;
during 1997, Dr. Charles Sydnor, (who like Mr. Hanselman subsequently resigned
from the Board of Directors in connection with the ILC Merger), Mr. Richard
Hanselman and Mr. Moore formed the Compensation Committee.
The functions of the Nominating Committee include recommending nominees for
election to the Board of Directors. The Nominating Committee, which did not meet
in 1997, currently comprises Messrs. Franklin (Chairman), Augur and Moore;
during 1997, the Nominating Committee comprised Messers. Franklin and Ashken.
In addition to their regular and special meetings, both the Board of
Directors and the committees from time to time take action by unanimous written
consent, as permitted under applicable law, the Company's Restated Certificate
of Incorporation and the Company's Bylaws.
In 1997, all of the Directors attended 75% or more of the aggregate
meetings of the Board and all committees thereof on which they served.
On October 19, 1998, the Board of Directors created a Special Committee
comprised of three non-management directors (Messrs. William Sullivan, George
Clairmont and David Moore) to evaluate potential transactions, including the
proposed Offer and Merger Agreement with Parent.
A-6
<PAGE> 31
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid to, deferred or
accrued for the benefit of the Company's Chief Executive Officer and of all
other executive officers of the Company who earned total compensation for 1997
exceeding $100,000 (the "Executive Group"). Except as disclosed below, no
executive officer of the Company had a total annual salary and bonus for 1997
exceeding $100,000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION(2) YEAR SALARY BONUS SARS(3) COMPENSATION
- ------------------------------ ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Martin E. Franklin................. 1997 $257,500 $300,000 550,000 $ 34,541(4)
Chairman, Chief Executive 1996 $277,455 $602,477 550,000 $ 5,700(4)
Officer 1995 $300,000 $ 50,000 0 0
Ian G.H. Ashken.................... 1997 $206,000 $168,750 100,000 $ 27,546(4)
Chief Financial Officer, 1996 $212,981 $ 86,813 275,000 $132,275(4)(5)
Executive Vice President of 1995 $190,000 0 0 0
Finance and Administration
and Assistant Secretary
William T. Sullivan(6)............. 1997 $ 71,464 0 0 $350,000(6)
Chief Operating Officer 1996 $212,981 $ 84,775 372,250 $961,618(4)(5)
and President 1995 $195,000 0 40,000 $106,340(4)(5)
</TABLE>
- ---------------
(1) Included in the table are amounts received as compensation from Benson
during the periods in question and prior to the spinoff of the Company by
Benson (the "Company Spinoff") on May 3, 1996.
(2) Indicates positions held during fiscal year ended December 31, 1997.
(3) All awards reflected in this column represent stock options granted under
the Company's 1996 Stock Incentive Plan (as amended). Option numbers are not
adjusted to reflect the effect of the one-for-two split of the Company's
common stock effective March 11, 1998.
(4) The Company maintains "split dollar" life insurance policies for Messrs.
Franklin and Ashken, respectively, in amounts of $5 million and $3 million;
amounts indicated as "All Other Compensation" for Messrs. Franklin and
Ashken for 1997 reflect $28,877 and $21,882, respectively, reported as
income in connection with such life insurance. "All Other Compensation" also
includes employer matching contributions under the Company's 401(k) Savings
Plan, as follows: Mr. Franklin, $5,700 for 1996 and $5,664 for 1997; Mr.
Ashken, $5,700 for 1996 and $5,664 for 1997; and, Mr. Sullivan, $5,700 for
1996. Bonus earned by Mr. Franklin in 1996 included a one-time bonus of
$400,000 in recognition of Mr. Franklin's successful efforts in connection
with the merger of Benson with and into Essilor Acquisition Corporation (the
"Essilor Merger") and the Company Spinoff.
(5) Includes cash payments received in connection with the cancellation on May
3, 1996 of then outstanding Benson Options upon the consummation of the
Essilor Merger and the Company Spinoff.
(6) Mr. Sullivan resigned as an executive officer of the Company effective March
29, 1997; he remains a Director of the Company. "All Other Compensation" for
Mr. Sullivan for 1997 reflects payments received pursuant to a severance
agreement relating to Mr. Sullivan's resignation. See "Executive
Compensation -- Employment Agreements."
(7) Represents options granted under the former Benson option plan, all of which
were cancelled in connection with the Essilor Merger and the Company Spinoff
on May 3, 1996.
A-7
<PAGE> 32
OPTIONS/SAR GRANTS TABLE
Except as stated below, no stock options or stock appreciation rights
(SARs) were granted in 1997 to the named executive officers. The figures
disclosed below have not been adjusted to take into account the effect of the
Bolle Spinoff, ILC Merger and a one-for-two reverse split of the Company's
common stock occurring in March 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin..... 550,000(3) 31% $4.25 03/25/2007(3) $1,322,290 $1,831,261
Ian G.H. Ashken........ 100,000 6% $4.25 05/03/2007(3) $ 240,416 $ 332,957
William T. Sullivan.... 0 0 N/A N/A N/A N/A
</TABLE>
- ---------------
(1) For additional information concerning stock options, see "Executive
Compensation -- Compensation Under Plans."
(2) These columns illustrate the hypothetical appreciation of the stock options
under the assumption that each option appreciates at the rate of 5% and 10%,
respectively, compounded annually until the date of expiration.
(3) These options vest on the earlier of (a) the date on which the Company's
common stock has traded at an average closing bid price equal to $7.50/share
for a twenty (20) consecutive trading day period or (b) March 25, 2005.
OPTIONS/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table provides information on options/SARs exercised during
fiscal 1997 by the Executive Group and the value of each such officer's
unexercised options/SARs as of the end of such fiscal year. The figures
disclosed below have not been adjusted to take into account the effect of the
spinoff by the Company of its equity interest in Bolle Inc. (the "Bolle
Spinoff"), the ILC Merger and a one-for-two reverse split of the Company's
common stock occurring in March 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
IN-THE-MONEY OPTIONS/
SARS AT FY-END
(#) VALUE OF UNEXERCISED
SHARES ACQUIRED -------------------------------------- IN-THE-MONEY-OPTIONS/
ON EXERCISE VALUE SARS AT FY-END($)
--------------- ($) ---------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin(1)...... 0 N/A 137,500 962,500 $1,131,656 $1,352,844
Ian G.H. Ashken(2)......... 0 N/A 93,750 281,250 $ 124,453 $ 356,484
William T. Sullivan(3)..... 0 N/A 295,000 2,500 $ 359,015 $ 2,968
</TABLE>
- ---------------
(1) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and average exercise prices of $4.98
to $4.56 per share, respectively, for exercisable and unexercisable options.
(2) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and average exercise prices of $4.61
to $4.67 per share, for exercisable and unexercisable options.
A-8
<PAGE> 33
(3) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and exercise prices of $4.72 to
$4.75 per share, for exercisable and unexercisable options.
DIRECTORS' COMPENSATION
Except as stated below, the Company's directors received no compensation in
connection with their services as directors on the Board of Directors in 1997.
For services rendered in 1997, all non-executive directors received fees or
remuneration in the amount of $15,000; fees are paid quarterly, in arrears. Ms.
Bailey's law firm has received payment for legal services from time to time
provided to the Company, but such payments were not made in consideration of Ms.
Bailey's services as a director. See "Certain Relationships and Related
Transactions." Additionally, all non-executive directors are entitled to receive
automatic grants of stock options of the Company's common stock in compensation
for their services. See "Compensation Under Plans-1996 Stock Incentive Plan."
See, also, "Employment Agreements." In addition, upon the retirement of Mr.
Richard D. Hanselman and Dr. Charles S. Sydnor from the Company's Board of
Directors, effective March 12, 1998, the Company caused all then-outstanding
options granted to such Directors to vest fully.
On October 21, 1998, each of William Sullivan, George Clairmont, Harrison
Augur and David Moore were granted a stipend in the amount of $15,000, which
amount is equal to the annual remuneration received by such non-executive
directors, by the Board of Directors of the Company in recognition of their
extraordinary efforts in connection with the negotiations with EG&G, Inc.
concerning the Offer and the Merger Agreement.
EMPLOYMENT AGREEMENTS
Martin E. Franklin. Mr. Franklin has entered into an employment agreement,
as amended, with the Company (the "Franklin Employment Agreement"), pursuant to
which he served as Chief Executive Officer and Chairman of the Company for an
initial period of three years and thereafter subject to annual renewal. By
agreement, Mr. Franklin presently serves as Chairman of the Board and Mr. Capra
has assumed duties as Chief Executive Officer, effective March 12, 1998.
Pursuant to the Franklin Employment Agreement, Mr. Franklin receives an annual
base salary which is subject to (i) increase each year by a minimum of the
annual rate of increase in the Consumer Price Index, and (ii) discretionary
increases determined by the Compensation Committee of the Board of Directors
from time to time; Mr. Franklin also may receive a bonus based on performance
criteria to be approved by the Board of Directors. Mr. Franklin's annual base
salary for 1998 has been set at $265,000. The agreement may be terminated by
either party upon at least 90 days' notice prior to the end of the initial term
or any subsequent renewal term. The Company may terminate the agreement with
cause in the event of the death, permanent disability or certain misconduct of
Mr. Franklin. The Company may terminate Mr. Franklin's employment without cause
upon 30 days' notice, in which event Mr. Franklin will be entitled to receive,
among other things, his existing benefits for a period of one year and any
non-vested stock options then outstanding will automatically vest. The agreement
contains noncompetition and nonsolicitation restrictions effective during the
employment term and for a period of one year thereafter. Effective July 31,
1998, the Company and Mr. Franklin entered into Amendment No. 2 to the Franklin
Employment Agreement ("Amendment No. 2"), which provides, among other things,
that Mr. Franklin shall be entitled to a severance payment equal to two years'
current base salary compensation in the event of a change of control of the
Company, any termination without cause or in the event the Company at any time
permits the Agreement to expire or elects not to renew the Agreement.
Ian G.H. Ashken. Mr. Ashken has entered into an employment agreement with
the Company. Under the agreement, Mr. Ashken serves as Chief Financial Officer
of the Company and receives an annual base salary which is subject to (i) an
increase each year by a minimum of the annual rate of increase in the Consumer
Price Index, and (ii) discretionary increases determined by the Compensation
Committee of the Board of Directors from time to time; Mr. Ashken also may
receive a bonus based on performance criteria to be determined by the Board of
Directors. Mr. Ashken's annual base salary for 1998 has been set at $212,000.
The other terms of Mr. Ashken's employment agreement are the same as the terms
of the Franklin Employment Agreement, including the provisions of Amendment No.
2.
A-9
<PAGE> 34
Richard D. Capra. Mr. Capra has entered into an employment agreement with
the Company, effective March 12, 1998. Under the agreement, Mr. Capra will serve
as Chief Executive Officer of the Company for a period of one (1) year. Mr.
Capra will receive a base salary in the amount of $250,000. In addition, Mr.
Capra, in consideration of his agreement to terminate his previously existing
employment arrangements, will receive the sum of $980,000, payable over a period
of four (4) years. Mr. Capra is not eligible for a bonus or any other additional
compensation, except as approved by the Board of Directors. The other terms of
Mr. Capra's employment agreement are materially the same as Mr. Franklin's and
Mr. Ashken's employment agreements, except with respect to the termination and
severance provisions thereof.
COMPENSATION UNDER PLANS
1996 Stock Incentive Plan.
On April 2, 1996, the Company's Board of Directors adopted the Company's
1996 Stock Incentive Plan (as amended) (the "Plan") and on April 2, 1996,
Benson, as the then sole shareholder of the Company, approved the Plan.
Effective March 12, 1998, the Company's stockholders approved an Amended Plan in
connection with the ILC Merger and Bolle Spinoff, to increase the number of
shares reserved for issuance pursuant to awards granted under the Plan and to
effect certain technical changes to conform to current SEC regulations and
provisions of the Internal Revenue Code. Pursuant to the Plan, employees and
consultants of the Company and its subsidiaries and affiliates (other than
employees subject to a collective bargaining agreement) are eligible to be
selected by the Compensation Committee as participants to receive discretionary
awards of various forms of equity-based incentive compensation, including stock
options, stock appreciation rights ("SARs"), restricted stock awards,
performance share unit awards and phantom stock unit awards, and awards
consisting of a combination of such incentives. Approximately 250 persons are
eligible to participate in the Plan.
The Plan is administered by the Compensation Committee of the Company's
Board of Directors (the "Compensation Committee"). The Compensation Committee,
in its sole discretion, will determine which eligible employees and consultants
of the Company and its subsidiaries may participate in the Plan and the type,
extent and terms of the equity-based awards to be granted to them. Members of
the Compensation Committee, because of their status as non-employee Directors,
will receive automatic non-discretionary annual grants of stock options pursuant
to the Plan.
Under the Plan, at the time of the Essilor Merger and the Company Spinoff,
each non-employee Director automatically was granted an option to purchase
10,000 shares of the Company's common stock. Additionally, effective upon the
date of the Bolle Spinoff, each non-employee Director was granted an option to
purchase 10,000 shares of the Company's common stock. Finally, in addition to
the foregoing, on the date that a person first becomes a non-employee Director,
he or she is automatically granted an option to purchase 10,000 shares of the
Company's common stock. Thereafter, on the date of each annual meeting of
stockholders of the Company, each non-employee Director will automatically be
granted an option to purchase 2,500 shares of the Company's common stock. All
such automatic grants to non-employee Directors are hereafter called "Director
Options." Each Director Option has an exercise price per share equal to the fair
market value of one share of the Company's common stock on the date of grant and
vests and becomes exercisable over a four year period beginning on the first
anniversary of the date of grant at the rate of 25% of each Director Option on
each of the four years immediately following the date of grant. These grants are
the only grants made to non-employee Directors under the Plan. The Compensation
Committee has no discretion to make any grants under the Plan to non-employee
Directors. All Director Options will be NQSO's (as defined below).
Stock options granted by the Compensation Committee under the Plan may be
"incentive stock options" ("ISOs"), within the meaning of Section 422 of the
Code, or "non qualified stock options" ("NQSO's"). The exercise price of the
options will be determined by the Compensation Committee when the options are
granted, subject to a minimum price in the case of ISOs of the fair market value
of the Company's common stock on the date of grant, unless the Compensation
Committee, in its sole discretion, determines to grant a discount NQSO in lieu
of a reasonable amount of salary or cash bonus, in which case the exercise price
may be 85% of the fair market value of the Company's common stock on the date of
grant. The option exercise
A-10
<PAGE> 35
price for all options granted under the Plan may be paid in cash or in shares of
the Company's common stock having a fair market value on the date of exercise
equal to the exercise price or, in the discretion of the Compensation Committee,
by delivery to the Company of (i) other property having a fair market value on
the date of exercise equal to the option exercise price, or (ii) a copy of
irrevocable instructions to a stockbroker to deliver promptly to the Company an
amount of sale or loan proceeds sufficient to pay the exercise price.
An SAR may be granted by the Compensation Committee as a supplement to a
related stock option or may be granted independent of any option. SARs granted
in connection with an option will become exercisable and lapse according to the
same vesting schedule and lapse rules that are established for the corresponding
option. SARs granted independent of any option will vest and lapse according to
the terms and conditions set by the Compensation Committee. An SAR will entitle
its holder to be paid an amount equal to the excess of the fair market value of
the Company's common stock subject to the SAR on the date of exercise over the
exercise price of the related stock options, in the case of an SAR granted in
connection with an option, or the fair market value of the Company's common
stock on the date of grant in the case of an SAR granted independent of an
option.
Shares of the Company's common stock covered by a restricted stock award
will not be issued to the recipient at the time the award is granted but will be
deposited with an escrow agent until the end of the restricted period set by the
Compensation Committee. During the restricted period, restricted stock will be
subject to transfer restrictions and forfeiture in the event of termination of
employment with the Company or a subsidiary and other restrictions and
conditions established by the Compensation Committee at the time the award is
granted.
A phantom stock unit award will provide for the future payment of cash or
the issuance of shares of the Company's common stock to the recipient if
continued employment or other conditions established by the Compensation
Committee at the time of grant are attained.
A performance share unit award will provide for the future payment of cash
or the issuance of shares of the Company's common stock to the recipient upon
the attainment of certain corporate performance goals established by the
Compensation Committee over three to five year performance award periods. At the
end of each performance award period, the Compensation Committee decides the
extent to which the corporate performance goals have been attained and the
amount of cash or the Company's common stock to be distributed to the
participant.
1996 Employee Stock Purchase Plan
The Company has authorized the 1996 Employee Stock Purchase Plan (the
"Stock Purchase Plan") for persons who have been employed full-time by the
Company or its subsidiaries for at least one year, pursuant to which 500,000
shares of common stock will be reserved for issuance, subject to adjustment.
Eligible employees will be able to contribute, for each semi-annual period
beginning on the first business day after January 1 and July 1 (each, an
"Enrollment Date") and ending excess of $10,000 per semi-annual period, to
purchase shares of common stock on the Exercise Date. The purchase price for
each share of common stock purchased pursuant to the 1996 Employee Stock
Purchase Plan will be the lesser of 85% of the fair market value of the common
stock on the Enrollment Date or 85% of the fair market value of the common stock
on the Exercise Date. The Stock Purchase Plan has not yet been formally
implemented, and consequently no shares of common stock have been issued
thereunder.
Other
The Company does not maintain a pension plan or other actuarial or defined
benefit retirement plan for its named executive officers. The Company does not
maintain any long-term incentive plans, and there was no repricing of
outstanding options or SARs held by any of the Company's executive officers
during fiscal year 1997. The Company's named executive officers are eligible to
participate in benefit plans generally available to the Company's employees,
including a 401(k) savings plan and the health and life insurance programs.
A-11
<PAGE> 36
On September 23, 1998, the Compensation Committee of the Company determined
that, due to recent stock market developments, it was in the Company's best
interest to offer holders of 1,065,000 options granted in March 1998 (including
options to purchase 550,000 and 187,500 shares of Common Stock granted to Martin
Franklin and Ian Ashken, respectively) the opportunity and option to exchange
all of such options for an equal number of new options having an exercise price
of $4.50 per share, the market price of the Common Stock on the effective date
of the grant, in lieu of the original exercise price per share. Such options
represented approximately 25% of the Options granted under the Plan. However,
the foregoing was made expressly subject to the option holders accepting a
shortened expiration date of September 22, 2003 instead of March 12, 2005, the
expiration date of the existing options.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
Effective March 12, 1998, the Compensation Committee comprises of Mr. Moore
(Chairman), Mr. Clairmont and Mr. Sullivan. During 1997 and through March 12,
1998 the Company's Compensation Committee was composed of Dr. Sydnor (Chairman),
Mr. Hanselman, and Mr. Moore. For information concerning certain transactions
between members of the Compensation Committee and the Company, see "Executive
Compensation -- Directors' Compensation."
REPORT OF THE COMPENSATION COMMITTEE
This report is made by the Compensation Committee of the Board of
Directors. The Compensation Committee of the Company's Board of Directors is
composed of Mr. David L. Moore (Chairman), Mr. George B. Clairmont and Mr.
William T. Sullivan. The committee is responsible for setting and administering
the Company's policies governing annual compensation of key employees, managers,
officers and executive officers, including setting individual annual base
salaries or salary guidelines, annual bonus plans and individual participation
levels, and participation in the Company's Plan. See "Information Concerning
Meetings of the Board of Directors and Board Committees" and "Director
Compensation". Compensation of executive officers, including compensation of the
Chief Executive Officer, is subject to approval of the Board of Directors. The
proposed compensation of any member of the Compensation Committee who also is an
executive officer would be subject to ratification by the disinterested members
of the Board of Directors; none of the present members of the committee are or
have been executive officers of the Company, and it is the Company's policy to
appoint only disinterested directors as members of the Committee.
COMPLIANCE WITH FEDERAL TAX LAW
The committee has considered the potential impact of Section 162(m) (the
"Section") of the Internal Revenue Code, as amended. The Section disallows a tax
deduction for any publicly-held corporation for individual compensation
exceeding $1 million in any tax year for any executive officer, unless
compensation is based on performance. The Company maintains executive cash
compensation significantly below the $1 million threshold, and the Company
believes that any options granted under the Plan to any of its executive
officers will qualify as performance-based compensation, to the extent that any
of the same may result in compensation in excess of the threshold. Consequently,
the committee does not believe that the Section will have any impact on the
deductibility to the Company of any compensation paid to executive officers.
OVERVIEW
The Company's executive compensation program currently includes the
following key elements: base salary, cash bonuses and awards of stock options.
The Company's general executive officer compensation policy is intended to: (i)
support achievement of the Company's strategic goals; (ii) retain and reward
sufficiently committed and talented individuals prepared to invest their talents
for long term rather than short term gain and, (iii) tie executive officers'
interests to Stockholder interests.
A-12
<PAGE> 37
The Compensation Committee determines base salaries for new executive
officers and base salary adjustments for current executive officers by
evaluating the responsibilities of the position held, the experience of the
individual and individual performance. It determines stock option awards based
on the same factors. In reviewing executive compensation matters, the committee
may consult with the Company's human resources professionals and/or independent
compensation consultants. The committee also may make use of independently
available compensation survey data and other publicly available information,
including publicly-disclosed compensation information of other companies of
comparable size engaged in similar industries, as well as information gained
through their experience as directors of other publicly and privately held
corporations. The committee's determinations also are made with reference to the
Company's available financial resources.
While the Company may make use of publicly available data and other surveys
in setting its general compensation policies, the Company is relatively young
and has experienced a period of rapid change. Consequently, it is not possible
to compare the Company or its compensation policies directly with more
established companies, and the Company's executive officer compensation is not
rigidly dominated by a lock-step approach to keeping executive compensation
competitive with compensation levels of companies of similar size or in
comparable industries. Additionally, the Company's brief history, combined with
the significant changes experienced by Benson, its predecessor for accounting
purposes, has rendered financial results difficult to compare from one period to
another. Therefore, achievement of financial goals set by the Board on an annual
basis is only one of the factors considered in setting the Company's
compensation policy; successful implementation of the Company's more
broadly-based strategic goals also is considered an important factor. Moreover,
the Company's focus on rapid internal growth and expansion through acquisitions
further affects its executive compensation policy by causing the Company
carefully to husband its resources. The committee believes that annual cash
compensation of its executive officers is below that which executives of
comparable ability and talent could receive competitively elsewhere.
It is the policy of the committee and the Company that a portion of an
executive officer's compensation be composed of long-term performance-based
compensation. In this way, the Company can conserve its financial resources
while aligning the executive group's interests more strongly with the interests
of the Company's Stockholders; at the same time, the Company thereby attracts
executives of proven skill and ability who are prepared to invest their talents
over the long term. In furtherance of this policy, the Company adopted, and the
Compensation Committee has made awards and grants pursuant to, the Company's
"Plan". In determining the number of stock options granted during 1996, the
committee considered the same criteria discussed above with respect to base
salaries.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Franklin, the Company's Chief Executive Officer, has entered into an
employment agreement, under which he received an annual base salary for 1997 in
the amount of $257,500. For 1998, Mr. Franklin's base salary has been set at
$265,000. Mr. Franklin is eligible to participate in the bonus program for
executive officers. See "Executive Compensation -- Employment Agreements". The
Bonus paid to Mr. Franklin for services rendered in 1997 was $300,000, awarded
in recognition of extraordinary services provided in connection with the
acquisition of Bolle France in July 1997 and of the acquisition of ILC
Technology, Inc. and the spinoff by the Company of its interest in Bolle Inc.,
both of which transactions closed in March 1998 and related transactions,
whereby Mr. Franklin personally helped to limit significantly transactional
costs that otherwise would have been paid to third parties. The committee
believes that Mr. Franklin's compensation under the employment agreement is
consistent with the general policies described above. Mr. Franklin's
compensation for 1998 has been determined also in recognition of the demands
made upon Mr. Franklin in effecting the strategic goals of the Company and his
successful efforts in positioning the Company for future growth.
COMPENSATION COMMITTEE
Mr. David L. Moore (Chairman)
Mr. George B. Clairmont
Mr. William T. Sullivan.
A-13
<PAGE> 38
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total Stockholder return on the
Company's Common Stock, based on the market price of the Common Stock, with the
cumulative total return of (i) companies included in the Wilshire Small Cap
Index and (ii) companies included in the Russell 1000 Index, assuming a $100
investment in the Company's Common Stock and in each such index on May 3, 1996.
The Company was formed in December 1995 and the Company's Common Stock first
began to trade publicly on the New York Stock Exchange on May 3, 1996.
Consequently, the comparative information presented below corresponds only to
the period during which the Company's Common Stock has been registered under
Section 12 of the Securities Exchange Act of 1934. The Company has never paid
cash dividends.
Stock Performance Graph
<TABLE>
<CAPTION>
LUMEN RUSSELL WILSHIRE
<S> <C> <C> <C>
May-96 121.39 103.95 103.64
Jun-96 89.11 103.87 98.96
Jul-96 103.96 98.74 91.06
Aug-96 99.01 101.17 96.36
Sep-96 101.58 106.69 100.54
Oct-96 96.63 108.90 99.98
Nov-96 94.06 116.66 105.46
Dec-96 101.58 114.54 107.27
Jan-97 91.68 121.23 110.83
Feb-97 94.06 121.43 110.43
Mar-97 91.68 115.83 106.01
Apr-97 91.68 121.92 107.65
May-97 86.73 129.46 117.66
Jun-97 90.30 134.66 121.43
Jul-97 89.11 145.41 131.76
Aug-97 100.20 138.27 134.14
Sep-97 102.77 145.67 142.18
Oct-97 113.86 140.75 135.11
Nov-97 116.44 146.68 134.05
Dec-97 117.62 149.45 134.54
</TABLE>
A-14
<PAGE> 39
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into indemnification agreements with each of its
directors, executive officers and certain other officers, pursuant to which the
Company has agreed to indemnify each indemnitee to the fullest extent authorized
by law against any and all damages, judgments, settlements and fines ("losses")
in connection with any action, suit, arbitration or proceeding or any inquiry or
investigation, whether brought by or in the right of the Company or otherwise,
whether civil, criminal, administrative, investigative or other, or any appeal
therefrom, by reason of an indemnitee's serving as a director or officer of the
Company. An indemnitee is not entitled to indemnification for any losses that
are (i) based or attributable to the indemnitee gaining in fact any personal
profit or advantage to which the indemnitee is not entitled, (ii) for the return
by the indemnitee of any remuneration paid to the indemnitee without the
previous approval of the stockholders of the Company which is illegal, (iii) for
violations of Section 16 of the Securities Exchange Act of 1934 or similar
provisions of state law, (iv) based upon knowingly fraudulent, dishonest or
willful misconduct and (v) not permitted to be covered by applicable law. The
agreements provide that the indemnification under the agreement is not exclusive
of any other rights the indemnitee may have under the Company's Restated
Certificate of Incorporation, Restated By-laws, applicable Delaware corporate
statutes or any agreement or vote of stockholders.
The Company's non-employee Directors receive automatically stock option
grants under the terms of the Plan. Each of Mr. Franklin, Mr. Ashken and Mr.
Sullivan (prior to his resignation as an officer) also has received stock option
grants under the terms of the Plan, and Messrs. Franklin, Ashken and Capra have
entered into continuing agreements with the Company. See "Executive
Compensation." On September 23, 1998, the Compensation Committee of the Company
determined that, due to recent stock market developments, it was in the
Company's best interest to offer holders of 1,065,000 options granted in March
1998 (including options to purchase 550,000 and 187,500 shares of Common Stock
granted to Martin Franklin and Ian Ashken, respectively) the opportunity and
option to exchange all of such options for an equal number of new options having
an exercise price of $4.50 per share, the market price of the Common Stock on
the effective date of the grant, in lieu of the original exercise price per
share. Such options represented approximately 25% of the Options granted under
the plan. See "Executive Compensation -- Other."
In connection with Mr. Sullivan's resignation as an executive officer and
employee of the Company, to be effective March 29, 1997 Mr. Sullivan received
payment of $350,000. The Company additionally agreed to vest at March 29, 1997
all options previously granted to Mr. Sullivan then outstanding and not yet
vested; all presently unexercised options granted to Mr. Sullivan remained
exercisable through September 30, 1998.
Mr. Baumgartner, who retired from the Board of Directors effective May 12,
1998 has entered into an agreement with the Company, effective March 12, 1998,
pursuant to which he agreed to terminate all previously existing employment
arrangements with ILC in return for payments totaling $1,100,000, payable over a
term of five years.
Ms. Nora A. Bailey, a member of the Company's Board of Directors from May
1996 to May 12, 1998, is an attorney specializing in federal tax law. In her
professional capacity she has rendered legal advice and related services to both
the Company and its predecessor, Benson. Ms. Bailey has rendered such services
both prior to and subsequent to her appointment to the Company's Board of
Directors, and it is anticipated that she from time to time in the future will
be engaged to provide similar legal services to the Company. All fees paid to
Ms. Bailey in connection with such services have been agreed in arms' length
negotiations and are in accordance with Ms. Bailey's usual and customary billing
practices. Fees paid to Ms. Bailey by the Company in connection with such
services are not paid in consideration of her services as a director. Aggregate
fees billed to the Company by Ms. Bailey during 1997 and year to date for 1998
were approximately $90,000 and $20,000, respectively.
On September 23, 1998, the Company entered into Amendment No. 1 to
Management Services Agreement (the "Management Services Agreement"), among the
Company, Bolle Inc. ("Bolle"), of which Mr. Franklin is Chairman of the Board
and approximately a 10% stockholder and Mr. Ashken is a director and executive
officer, and Marlin Holdings, Inc. ("Marlin"), of which Mr. Franklin is the
Chairman, Chief Executive Officer and a principal stockholder and Mr. Ashken is
the Vice Chairman and a principal
A-15
<PAGE> 40
stockholder, pursuant to which, in effect, the Company assigned its rights and
obligations under the Management Services Agreement to Marlin, which assumed the
Company's obligation thereunder, and the monthly management fee payable by Bolle
was reduced from $60,000 to $50,000. In connection therewith, (i) Bolle
consented to the assignment and released the Company from its obligations
pursuant to the Management Services Agreement arising from October 1998 through
the remainder of the term and (ii) the Company assigned to Bolle any and all
claims it has or may have relating to certain litigation and Bolle agreed to
defend, indemnify and hold the Company harmless against all claims, damages,
losses, liabilities, cost and expenses incurred in connection with such
litigation, including without limitation defending any counterclaims.
Furthermore, the Company entered into Amendment No. 1 to the indemnification
agreement between the Company, ILC Technology, Inc. and Bolle (the "Bolle
Indemnification Agreement") pursuant to which, among other things, the Bolle
Indemnification Agreement was amended to clarify that Bolle was not required to
indemnify and hold the Company harmless from and against losses incurred or
arising from any environmental laws relating to Voltarc Technologies, Inc.
In connection with the transactions contemplated by the Merger Agreement,
on October 21, 1998, the Company entered into a Bill of Sale, Assignment and
Assumption Agreement (the "Bill of Sale") with Marlin pursuant to which, among
other things, effective as of the time that the Purchaser shall accept the
payment, and be paid for, all Shares validly tendered and not withdrawn pursuant
to the Offer, (i) the Company will transfer to Marlin its rights and obligations
to certain immaterial assets held at the Company's offices in Rye, New York,
certain benefits and obligations under the Management Services Agreement, from
the closing of the Offer through December 31, 1998, and certain rights and
obligations prior to April 30, 1999 under the terms of an aviation agreement and
(ii) Marlin will assume and agree to pay when and as due and to discharge
certain debts, liabilities, obligations and taxes in respect of the assets and
liabilities conveyed to it by the Company, including obligations under the
Company's lease in Rye, New York (the "Lease"). In connection therewith, the
Company entered into an Assignment and Assumption of Lease Agreement with
Marlin, pursuant to which Marlin agreed to accept the premises and assume all
the obligations of the Company under such lease arising and accruing after the
closing of the Offer and to indemnify the Company and hold it harmless from and
against liabilities in connection therewith. Management of the Company believes
that the lease rate payable in connection with the Lease was at the fair market
value.
Pursuant to the Merger Agreement, the Parent and the Purchaser agreed that
all rights to indemnification, advancement of expenses, exculpation, limitation
of liability and any and all similar rights existing on the date of the Merger
Agreement in favor of each present and former director, officer, employee,
fiduciary and agent of the Company and each Subsidiary and their respective
heirs, executors, administrators, personal representatives or assigns
(collectively, the "Indemnified Parties"), as provided in their respective
charters or by-laws (each as in effect on the date of the Merger Agreement),
shall survive the Offer and the Merger and shall continue in full force for a
period of six years from the Effective Time; provided, however, that in the
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect to any such claim or claims shall continue
until the disposition of any such claims.
The Merger Agreement also provides that, the Company shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and, after the Effective Time,
the surviving corporation of the merger (the "Surviving Corporation") shall, to
the fullest extent permitted under applicable law, indemnify and hold harmless,
the Indemnified Parties against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative (a "Proceeding"), arising out
of or pertaining to any action or omission in their capacity as an officer,
director, employee, fiduciary or agent, whether occurring before or after the
Effective Time, to the same extent as provided in the Company's Certificate of
Incorporation or By-laws as in effect on the date of the Merger Agreement, in
each case for a period of six years after the date of the Merger Agreement. In
the event that any claim for indemnification is asserted or made within such
six-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim. Pursuant to the Merger Agreement,
A-16
<PAGE> 41
the above provisions are intended to be for the benefit of, and will be
enforceable by, each of the Indemnified Parties.
The Merger Agreement further provides that through the third anniversary of
the Effective Time, the Parent will maintain in effect for the benefit of the
directors and officers of the Company as of the date of the Merger Agreement,
directors' and officers' liability insurance policies with coverages and other
terms substantially as favorable to such directors and officers as is in effect
on the date of the Merger Agreement. In no event, however, will the Parent be
required to expend more than an amount per year equal to 150% of the current
annual premium paid by the Company as of the date of the Merger Agreement for
such insurance coverage.
In connection with the Merger Agreement, the Board of Directors of the
Company approved, solely for the purposes of satisfying the requirements of
Section 203 of the General Corporation Law of the State of Delaware, the
Stockholders' Agreement.
The Merger Agreement also provides that the Parent shall cause the Company
to pay, in accordance with their respective terms, certain bonuses under the
Company's bonus plan for 1998, accrued vacation pay and all other payments
expressly disclosed to the Parent to each of Martin E. Franklin, Ian Ashken and
certain other employees of the Company who will be terminated as of the closing
of the Offer. In addition, the Merger Agreement provides that the Parent shall
cause the Company to make severance payments, in the amount of $530,000 and
$424,000 to each of Martin Franklin and Ian Ashken, respectively, in accordance
with the terms of their respective employment agreements, as amended. See
"EXECUTIVE COMPENSATION -- Employment Agreements."
No other significant transactions, business relationships, or indebtedness
are known to exist between the Company and related parties (defined as
directors, executive officers, nominees for director, security holders of more
than 5% of the voting stock or any members of the immediate family of any of the
foregoing persons).
A-17
<PAGE> 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company and as of
October 21, 1998, (unless otherwise indicated), (i) the number of shares of
Common stock owned of record or beneficially, or both, by each person who owned
of record, or is known by the Company to have beneficially owned, individually,
or with his associates, more than 5% of such shares then outstanding; (ii) the
number of shares owned beneficially by each director of the Company; and (iii)
the number of shares owned beneficially by all directors and executive officers
as a group. Unless otherwise noted, each person holds sole voting and investment
power with respect to the shares shown opposite his name. All figures are
adjusted (as appropriate) to reflect the effect of the one-for-two reverse split
of the Common Stock that was effected on March 11, 1998 and the merger of ILC
Technology, Inc. ("ILC") with and into a subsidiary of the Company (the "ILC
Merger"), which was effective March 12, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
------------------------ ----------------------- ----------
<S> <C> <C>
Martin E. Franklin.......................................... 1,039,682(2) 5.0%
555 Theodore Fremd Avenue, Suite B302
Rye, New York
Richard D. Capra............................................ 312,338(3) 1.5%
Ian G.H. Ashken............................................. 231,250(4) 1.1%
Harrison H. Augur........................................... 136,660(5) *
George B. Clairmont......................................... 392,127(6) 1.9%
David L. Moore.............................................. 10,487(7) *
William T. Sullivan......................................... 189,048(8) *
All Executive Officers and Directors as a group (7
persons).................................................. 2,302,217(9) 10.6%
Westport Asset Management, Inc.............................. 1,544,152(10) 7.5%
253 Riverside Avenue
Westport CT. 06880
Marvin Schwartz............................................. 1,324,615(11) 6.4%(8)
c/o Neuberger & Berman, LLC,
605 Third Avenue, New York, NY 10158-3698
Royce & Associates, Inc..................................... 1,146,007(12) 5.5%
1414 Avenue of the Americas
New York N.Y 10019
</TABLE>
- ---------------
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of an individual to acquire them within 60 days upon the exercise of an
option are treated as outstanding for purposes of determining beneficial
ownership and the percent beneficially owned by such individual and for the
executive officers and directors as a group.
(2) Includes 391,875 shares that Mr. Franklin has a right to acquire within 60
days upon the exercise of options. Excludes 7,691 shares held in trust for
Mr. Franklin's minor children, as to which shares Mr. Franklin disclaims
beneficial ownership. This director entered into the Stockholders'
Agreement.
(3) Includes 308,588 shares that Mr. Capra has right to acquire within 60 days
upon exercise of options. This director entered into the Stockholders'
Agreement.
(4) Includes 131,250 shares that Mr. Ashken has a right to acquire within 60
days upon the exercise of options. Excludes 2,500 shares held in trust for
Mr. Ashken's minor children, as to which shares Mr. Ashken disclaims
beneficial ownership. This director entered into the Stockholders'
Agreement.
(5) Includes 77,147 shares that Mr. Augur has right to acquire within 60 days
upon exercise of options.
A-18
<PAGE> 43
(6) Includes 150,000 shares held by Mr. Clairmont in a representative capacity,
which he has a right to vote, and, as or to which, he disclaims beneficial
ownership. This director entered into the Stockholders' Agreement.
(7) Includes 2,812 shares that Mr. Moore has a right to acquire within 60 days
upon the exercise of options.
(8) Includes 147,500 shares that Mr. Sullivan has a right to acquire within 60
days upon the exercise of options and 848 shares with respect to which Mr.
Sullivan shares voting and investment power with his spouse.
(9) Includes 1,059,172 shares that members of the group have a right to acquire
within 60 days upon the exercise of options. Excludes 10,191 shares held in
trust for directors' children, as to which they disclaim beneficial
ownership.
(10) Shareholdings indicated are adjusted to reflect the effect of the ILC
Merger and the Company's one-for-two reverse stock split, occurring on
March 12, 1998 and March 11, 1998, respectively, based on a Schedule 13G
dated February 13, 1997. Westport Asset Management, Inc. ("Westport")
reported beneficial ownership of 700,500 shares of ILC common stock, of
which it reported 691,500 shares were held in discretionary managed
accounts and 8,900 shares were beneficially owned by officers and
stockholders of Westport.
(11) Based on a Schedule 13D dated March 30, 1998, Marvin Schwartz, acting in
his personal capacity and not as a principal of Neuberger & Berman, LLC
("N&B"), reported that he is the beneficial owner of 1,324,615 shares of
the Company's common stock outstanding as of that date. Mr. Schwartz
reported that 500,307 of such shares are held in his personal account. Mr.
Schwartz reported that 824,308 of such shares are held in street name in
accounts for the benefit of Mr. Schwartz's family. Mr. Schwartz reported
that he holds discretionary and shared dispositive power over such
accounts. Mr. Schwartz reported that N&B has no voting or dispositive power
over any of such shares.
(12) Shareholdings indicated are adjusted to reflect the effect of the ILC
Merger and the Company's one-for-two reverse stock split, occurring on
March 11 and March 12, 1998, respectively, based on a Schedule 13G/A dated
June 6, 1997. A group including Mr. Charles Royce, Royce & Associates
("Royce") and Royce Management Company ("RMC") reported beneficial
ownership of 519,920 shares of ILC common stock, of which 461,620 shares
were reported to be owned by Royce and 58,300 were reported to be owned by
RMC. Mr. Royce disclaimed beneficial ownership of any such shares.
A-19
<PAGE> 44
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership in respect of the Company's securities with the
Securities and Exchange Commission. Such persons are required by SEC regulation
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations of certain of its directors and officers,
the Company believes that during 1997 all persons subject to the reporting
requirements of Section 16(a) filed the required reports on a timely basis.
A-20
<PAGE> 45
INDEX TO EXHIBITS
The following Exhibits are filed herewith:
Exhibit 1 -- Agreement and Plan of Merger, dated as of October 21, 1998,
among the Company, Parent and the Purchaser.
Exhibit 2 -- Opinion of Raymond James, dated October 21, 1998.*
Exhibit 3 -- Letter to Stockholders of the Company.*
Exhibit 4 -- Text of Joint Press Release as published October 21, 1998,
issued by the Company and Parent.
Exhibit 5 -- Stockholders' Agreement, dated October 21, 1998, among Parent,
Purchaser and Martin E. Franklin, Ian G.H. Ashken, Richard D.
Capra and George B. Clairmont.
Exhibit 6 -- Amendment No. 2 to Employment Agreement between Lumen
Technologies, Inc. and Martin E. Franklin, dated as of July
31, 1998.
Exhibit 7 -- Amendment No. 2 to Employment Agreement between Lumen
Technologies, Inc. and Ian Ashken, dated as of July 31, 1998.
Exhibit 8 -- Amendment No. 1 to Management Services Agreement, dated
September 23, 1998, between Bolle Inc., Lumen Technologies,
Inc. and Marlin Holdings, Inc.
- ---------------
* Included in copies mailed to stockholders
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
by and among
EG&G, INC.
LIGHTHOUSE WESTON CORP.
and
LUMEN TECHNOLOGIES, INC.
Dated as of October 21, 1998
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
THE OFFER.................................................................. 2
1.1 The Offer............................................................ 2
1.2 Company Action....................................................... 4
1.3 Directors............................................................ 6
ARTICLE 2
THE MERGER................................................................. 7
2.1 The Merger........................................................... 7
2.2 Effect of the Merger................................................. 7
2.3 Consummation of the Merger........................................... 7
2.4 Certificate of Incorporation; By-Laws; Directors and Officers........ 8
2.5 Conversion of Securities; Payment of Merger Consideration............ 8
2.6 Exchange of Certificates............................................. 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER........................................... 11
3.1 Organization and Qualification...................................... 11
3.2 Authority........................................................... 12
3.3 Compliance.......................................................... 12
3.4 Information Provided................................................ 13
3.5 Interim Operations of the Purchaser................................. 13
3.6 Financing........................................................... 13
3.7 Brokers............................................................. 13
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 13
4.1 Organization and Qualification...................................... 14
4.2 Subsidiaries........................................................ 14
4.3 Capitalization...................................................... 15
4.4 Authority........................................................... 17
4.5 Compliance.......................................................... 17
4.6 Commission Filings; Financial Statements; Information Provided...... 18
4.7 No Undisclosed Liabilities.......................................... 19
4.8 Changes............................................................. 19
4.9 Contracts........................................................... 19
4.10 Transactions with Affiliates........................................ 20
4.11 Employee Benefits and Contracts..................................... 20
4.12 Properties and Liens................................................ 22
4.13 Environmental Matters............................................... 22
-ii-
<PAGE> 3
4.14 Taxes............................................................... 24
4.15 Compliance with Laws; Permits....................................... 27
4.16 Intellectual Property............................................... 27
4.17 Litigation.......................................................... 27
4.18 Prepayment of Indebtedness.......................................... 27
4.19 Voting Requirements................................................. 28
4.20 Year 2000 Compliance................................................ 28
4.21 Insurance........................................................... 29
4.22 No Existing Discussion.............................................. 29
4.23 Brokers............................................................. 29
ARTICLE 5
CONDUCT OF BUSINESS....................................................... 29
5.1 Conduct Prior to Effective Time..................................... 29
ARTICLE 6
ADDITIONAL AGREEMENTS..................................................... 33
6.1 Company Stockholder Approval; Preparation of Proxy Statement........ 33
6.2 Disposition of the Shares........................................... 34
6.3 Fees and Expenses................................................... 34
6.4 Additional Agreements............................................... 35
6.5 No Solicitation..................................................... 36
6.6 Notification of Certain Matters..................................... 38
6.7 Access to Information............................................... 39
6.8 Indemnification and Insurance....................................... 40
6.9 Filings and Other Matters........................................... 41
6.10 Fair Price Structure................................................ 42
6.11 Parent Guaranty..................................................... 42
6.12 Company Options..................................................... 42
6.13 Certain Payments.................................................... 43
ARTICLE 7
CONDITIONS................................................................ 44
7.1 Conditions to Obligation of Each Party to Effect the Merger......... 44
7.2 Conditions to the Parent's and the Purchaser's Obligation to
Effect the Merger................................................... 44
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER......................................... 44
8.1 Termination......................................................... 44
8.2 Effect of Termination............................................... 46
8.3 Amendment........................................................... 46
8.4 Waiver.............................................................. 47
-iii-
<PAGE> 4
ARTICLE 9
GENERAL PROVISIONS........................................................ 47
9.1 Publicity........................................................... 47
9.2 Notices............................................................. 47
9.3 Interpretation...................................................... 48
9.4 Representations and Warranties; etc................................. 49
9.5 Miscellaneous....................................................... 49
9.6 Validity............................................................ 50
9.7 Counterparts. ..................................................... 50
9.8 Severability........................................................ 50
ANNEX I
CONDITIONS OF THE OFFER................................................... 1
-iv-
<PAGE> 5
TABLE OF DEFINED TERMS
Acquisition Proposal 6.5(a)
Affiliated Group 4.14(a)
Affiliated Period 4.14(a)
Agreement Preamble
business day 9.3
Certificate of Merger 2.3
Certificates 2.6(a)
CERCLA 4.13(a)
Code 1.1(e)
Company Preamble
Company Options 4.3(a)
Company's Directors 1.2(a)
Commission 1.1(b)
Commission Filings 4.6(a)
Convertible Notes 4.3(a)
Delaware Law 1.2(a)
Disclosure Schedule 4
Dissenting Shares 2.5(b)
Effective Time 2.3
Environmental Law 4.13(a)
Environmental Permits 4.13(e)
ERISA 4.11(b)
ESPP 4.3(a)
Exchange Act 1.1(a)
Fairness Opinion 1.2(c)
Financial Advisor 1.2(c)
Fully Diluted Shares Annex I
Governmental Entity 4.13(a)
Hart-Scott-Rodino Act 3.3(b)
ILC Merger Agreement 1.3(c)
Indemnified Parties 6.8
Indemnifying Party 6.8
Independent Directors 1.3(a)
Insurance Policies 4.21
Intellectual Property 4.16
Liens 4.12(b)
Material Adverse Effect 4.1
Materials of Environmental Concern 4.13(b)
Merger Background
Merger Consideration 2.5(a)
Minimum Condition Annex I
Offer Background
-v-
<PAGE> 6
Offer Documents 1.1(c)
Option Plan 4.3(a)
Parent Preamble
Parent Common Stock 6.12(a)
Payment Agent 2.6(a)
Payment Fund 2.6(a)
Permitted Indebtedness 5.1
Preferred Stock 4.3(a)
Proceeding 6.8(b)
Proxy Statement 6.1(b)
Purchaser Preamble
Qualified Acquisition Proposal 6.5(a)
Qualified Commercial Bank 2.6(b)
Schedule 14D-1 1.1(c)
Schedule 14D-9 1.2(b)
Section 16 Shares 1.2(d)
Securities Act 4.3(c)
September 30 Financial Information 4.6(c)
Shares Background
Stockholders' Agreement Background
Stockholders Meeting 6.1(a)
Subsidiary; Subsidiaries 4.2(a)
Surviving Corporation 2.1
Tax Returns 4.14(a)
Taxes 4.14(a)
Third Party 6.5(a)
Trigger Event 6.3(e)
Year 2000 Compliant 4.20
-vi-
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 21, 1998, is by and among EG&G, Inc., a corporation organized under the
laws of the Commonwealth of Massachusetts (the "Parent"), Lighthouse Weston
Corp., a corporation organized under the laws of the State of Delaware and a
wholly owned subsidiary of the Parent (the "Purchaser"), and Lumen Technologies,
Inc., a corporation organized under the laws of the State of Delaware (the
"Company").
BACKGROUND
A. The respective Boards of Directors of the Parent, the
Purchaser and the Company have duly approved and found advisable this Agreement
and the acquisition of the Company by the Parent and the Purchaser pursuant to
the terms and conditions of this Agreement.
B. In furtherance of such acquisition, it is proposed that the
Purchaser will make a tender offer (the "Offer") to purchase all of the issued
and outstanding shares of Common Stock, $0.01 par value per share, of the
Company (the "Shares"), at a price of $7.75 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in this Agreement.
C. The Board of Directors of the Company unanimously has
determined that the Offer is fair to, and in the best interests of, the
Company's stockholders and has duly approved the Offer and unanimously resolved
to recommend its acceptance by the holders of Shares.
D. The respective Boards of Directors of the Parent, the
Purchaser and the Company have each duly approved the merger of the Purchaser
and the Company on the terms and subject to the conditions of this Agreement
(the "Merger") following consummation of the Offer and the Boards of Directors
of the Company and the Purchaser have each, by unanimous vote, duly resolved to
recommend approval of the Merger by their respective stockholders.
E. In connection with such acquisition, the Parent and the
Purchaser have entered into a Stockholders' Agreement dated of even date
herewith (the "Stockholders' Agreement") with certain stockholders of the
Company.
F. The respective Boards of Directors of the Parent, the
Purchaser and the Company have each duly approved all of the other transactions
contemplated by this Agreement, including without limitation, for the purposes
of satisfying the requirements of Section 203 of the Delaware General
Corporation Law, the Stockholders' Agreement.
-1-
<PAGE> 8
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Parent, the Purchaser
and the Company hereby agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.1 hereof and nothing shall have occurred
and be continuing that would result in a failure to satisfy any of the
conditions set forth in ANNEX I hereto, the Purchaser shall (i) no later than
the business day following the date of this Agreement, publicly announce its
intention to make the Offer and (ii) within five business days of such
announcement, commence (within the meaning of Rule 14d-2(a) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), the Offer for all
Shares, subject to the conditions set forth in ANNEX I, at a price of $7.75 per
Share, net to the seller in cash, without interest thereon. Subject to the
conditions set forth in ANNEX I, the Purchaser shall accept for payment, and pay
for, all shares validly tendered and not withdrawn pursuant to the Offer that
the Purchaser becomes obligated to accept for payment, and pay for, pursuant to
the Offer as soon as practicable after the expiration of the Offer and in no
event later than five business days after the expiration of the Offer.
(b) The Offer shall be made by means of the Offer
Documents (as defined below), which shall not contain any condition not set
forth in ANNEX I hereto and shall be open for a period of not less than 20
business days. The Purchaser expressly reserves the right, subject to compliance
with the Exchange Act, to modify the terms of the Offer, except that, without
the consent of the Company, the Purchaser shall not amend or waive the Minimum
Condition (as defined in ANNEX I hereto), reduce the maximum number of Shares to
be purchased, reduce the price to be paid per Share pursuant to the Offer,
change the form of consideration to be paid in the Offer, impose conditions to
the Offer in addition to those set forth in ANNEX I, or amend any other material
term of the Offer in a manner adverse to the holders of the Shares.
Notwithstanding the foregoing, the Purchaser may, in its sole discretion, (A)
extend the Offer if at the scheduled or any extended expiration date of the
Offer any of the conditions set forth on ANNEX I (including the Minimum
Condition) shall not be satisfied or waived, until such time as such conditions
are satisfied or waived, and (B) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "Commission") or the staff thereof applicable to the Offer;
provided, however, that, without the Company's written consent, the Purchaser
may not extend the expiration date of the Offer pursuant to this sentence to a
date later than 11:59 p.m. on December 31, 1998.
-2-
<PAGE> 9
(c) On the date of commencement of the Offer, the Parent
and the Purchaser shall file with the Commission a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer that will contain an offer to
purchase and the related letter of transmittal (which documents, together with
any supplements or amendments thereto, are referred to herein collectively as
the "Offer Documents") and shall promptly mail the Offer Documents to the
Company's stockholders. The Parent and the Purchaser agree that the Offer
Documents shall comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder, and
the Offer Documents, on the date first filed with the Commission and on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by the Parent or
the Purchaser with respect to written information supplied by the Company or any
of its stockholders specifically for inclusion or incorporation by reference in
the Offer Documents. The Parent, the Purchaser and the Company each agrees
promptly to correct any written information provided by it for use in the
Schedule 14D-1 or the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and the Parent
and the Purchaser further agree to take all steps necessary to amend or
supplement the Schedule 14D-1 and, as applicable, the Offer Documents and to
cause the Schedule 14D-1 as so amended and supplemented to be filed with the
Commission and the Offer Documents as so amended and supplemented to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable securities laws. The Company and its counsel shall be given
reasonable opportunity to review and comment upon the Offer Documents prior to
their filing with the Commission or dissemination to the stockholders of the
Company. The Parent and the Purchaser shall provide the Company and its counsel
with a copy of any written comments or telephonic notification of any verbal
comments the Parent or the Purchaser may receive from the Commission or its
staff with respect to the Offer promptly after the receipt thereof and shall
provide the Company and its counsel with a copy of any written responses thereto
and telephonic notification of any verbal responses thereto of the Parent or the
Purchaser or their counsel.
(d) The Parent shall provide or cause to be provided to
the Purchaser on a timely basis the funds necessary to purchase any and all
Shares that the Purchaser becomes obligated to purchase pursuant to the Offer.
(e) The Purchaser shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the Offer such
amounts as may be required to be deducted and withheld with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or under any applicable law.
-3-
<PAGE> 10
1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the
Offer and represents and warrants that the Board of Directors of the Company
(the "Company's Directors"), at a meeting duly called and held, (i) has duly
adopted and approved, by unanimous vote, (A) the Offer, the Merger and this
Agreement, and the transactions contemplated hereby and thereby, and (B) solely
for the purpose of satisfying the requirements of Section 203 of the Delaware
Law, the Stockholders' Agreement and the transactions contemplated thereby; (ii)
has determined that each of the transactions contemplated by this Agreement,
including the Offer and the Merger are fair to and in the best interests of the
stockholders of the Company; and (iii) after consideration of its fiduciary
duties under applicable laws, has resolved to recommend acceptance of the Offer
by holders of Shares and to recommend adoption and approval of the Merger
pursuant to the Delaware General Corporation Law (the "Delaware Law") by holders
of Shares (if stockholder approval of the Merger is required by the Delaware
Law).
(b) The Company agrees to file with the Commission,
contemporaneously with the commencement of the Offer, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") and to disseminate the
Schedule 14D-9, to the extent required by Rule 14d-9 promulgated under the
Exchange Act and any other applicable laws, to the stockholders of the Company
no later than the date on which the Purchaser mails the Offer Documents to such
stockholders. Except and to the extent otherwise permitted pursuant to Section
6.5 below, the Offer Documents and the Schedule 14D-9 shall contain the
recommendation of the Company's Directors that the holders of Shares accept the
Offer, and the Company hereby consents to the inclusion in the Offer Documents
of such recommendation. The Company agrees that the Schedule 14D-9 shall comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder and the Schedule 14D-9, on
the date first filed with the Commission and on the date first published, sent
or given to the Company's stockholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made by the Company with respect to written
information supplied by the Parent or the Purchaser specifically for inclusion
or incorporation by reference in the Schedule 14D-9. The Company, the Parent and
the Purchaser each agrees promptly to correct any written information provided
by it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or supplement the Schedule
14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed
with the Commission and disseminated to the Company's stockholders, in each case
as and to the extent required by applicable securities laws. The Parent and its
counsel shall be given reasonable opportunity to review and comment upon the
Schedule 14D-9 prior to its filing with the Commission or dissemination to
stockholders of the Company. The Company shall provide the Parent and its
counsel with a copy of any written comments or telephonic
-4-
<PAGE> 11
notification of any verbal comments the Company may receive from the Commission
or its staff with respect to the Offer promptly after the receipt thereof and
shall provide the Parent and its counsel with a copy of any written responses
thereto and telephonic notification of any verbal responses thereto of the
Company or its counsel.
(c) The Company has received the written opinion of
Raymond James & Associates, Inc. (the "Financial Advisor"), that, on the basis
of and subject to the assumptions set forth therein, the cash consideration of
$7.75 per Share to be received by holders of Shares pursuant to the Offer and
the Merger is fair to the holders of Shares from a financial point of view (the
"Fairness Opinion"). The Company has delivered to the Parent and the Purchaser a
copy of the Fairness Opinion, together with the Financial Advisor's written
consent to the inclusion of or reference to the Fairness Opinion in the Schedule
14D-1, the Offer Documents, the Schedule 14D-9 and the Proxy Statement (as
defined in Section 6.1).
(d) The Company represents that each member of the
Company's Board of Directors and each executive officer of the Company has
advised the Company that his current intention is to tender all Shares, if any,
beneficially owned by him pursuant to the Offer, other than those individuals,
if any, for whom the tender of such Shares would cause them to incur liability
under the provisions of Section 16(b) of the Exchange Act (the "Section 16
Shares"). As to Section 16 Shares, the Company represents that each executive
officer and director holding Section 16 Shares, if any, has advised the Company
that it is his current intention to vote such Shares in favor of the Merger.
(e) In connection with the Offer and the Merger, the
Company will promptly furnish to the Purchaser or its designee mailing labels
containing the names and addresses of the record holders of the Shares as of a
recent date and of those persons becoming record holders subsequent to such date
and, to the extent known, a list of the beneficial owners of the Shares as of a
recent date, together with copies of all security position listings and all
other computer files and other information in the Company's possession or
control regarding the beneficial owners' ownership of the Shares, and shall
furnish to the Purchaser such information and assistance (including updated
lists and information) as it may reasonably request for the purpose of
communicating the Offer to the Company's stockholders. From and after the date
of this Agreement, all such information concerning the Company's record and, to
the extent known, beneficial holders shall be made available to the Purchaser.
Subject to the requirements of applicable laws and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer and the Merger, the Parent and the Purchaser shall,
until consummation of the Offer, hold in confidence the information contained in
any of such labels and lists, shall use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated in
accordance with Section 8.1, shall deliver to the Company all copies of such
information then in their possession or under their control.
-5-
<PAGE> 12
1.3 DIRECTORS.
(a) Promptly upon the acceptance for payment of and
payment by the Purchaser for any Shares pursuant to the Offer, and from time to
time thereafter as Shares are accepted for payment and paid for by the
Purchaser, the Purchaser shall be entitled to designate such number of the
Company's Directors, rounded to the nearest whole number, as will give the
Purchaser representation on the Company's Board of Directors equal to at least
that number of directors which equals the greater of (i) a majority and (ii) the
product of the total number of the Company's Directors (after giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that such number of Shares so accepted for payment and paid for by the Purchaser
bears to the number of Shares outstanding, and the Company shall, upon the
written request of the Purchaser, at such time, promptly take such actions as
are necessary to cause the Purchaser's designees to be so elected or appointed,
including without limitation increasing the size of the Company's Board of
Directors or using its best efforts to secure the resignations of incumbent
directors or both; PROVIDED, HOWEVER, that, notwithstanding the Purchaser's
right to designate certain of the Company's Directors, until the Effective Time
(as defined in Section 2.3), the Company's Directors shall include at least
three directors who are directors on the date hereof (the "Independent
Directors"); provided further, that, if the number of Independent Directors
shall be reduced below three for any reason whatsoever, any remaining
Independent Directors shall be entitled to designate a person to fill such
vacancies and such person shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate three persons to fill such vacancies who shall
not be designees, stockholders, directors, officers, employees or affiliates of
the Parent or the Purchaser, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable laws, the
Company shall take all action necessary to effect the election of directors as
provided in this Section 1.3(a), including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder as part of the Schedule 14D-9. The Parent and the
Purchaser shall supply to the Company and be solely responsible for any
information with respect to them and their designees required by Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder.
(b) Notwithstanding anything in this Agreement to the
contrary, subject to the terms of the Company's Certificate of Incorporation and
By-laws, in the event that the Purchaser's designees are appointed or elected as
Company Directors, after the acceptance for payment of Shares pursuant to the
Offer and prior to the Effective Time, the affirmative vote of a majority (or,
if there is only one or two Independent Directors, the single or unanimous vote,
as the case may be) of the Independent Directors (who shall act as an
independent committee of the Board of Directors for this purpose) shall be
required, and alone shall be sufficient, to (i) amend or terminate this
Agreement by the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of the Parent's and
the Purchaser's respective obligations hereunder, or (iv) approve any other
action by the Company that the Independent Directors reasonably determine would
materially
-6-
<PAGE> 13
adversely affect the interests of the stockholders of the Company (other than
the Parent, the Purchaser and their affiliates) with respect to the transactions
contemplated hereby. The Board of Directors shall not delegate any matter set
forth in this Section 1.3(b) to any committee of the Board.
(c) The Company hereby represents and warrants that the
Company's Directors, at a meeting duly called and held, has by unanimous vote,
acknowledging that such vote will be relied upon by the Parent and the Purchaser
in connection with the transactions contemplated hereby and, to the extent
permitted by applicable law, shall therefore be irrevocable and not subject to
amendment, repeal or modification, resolved in accordance with Section 5.13 of
the Agreement and Plan of Merger dated as of October 30, 1997, among the
Company, BILC Acquisition Corp, and ILC Technology Inc. (the "ILC Merger
Agreement"), that (i) prior to the Effective Time any of the Company's Directors
elected on behalf of the Purchaser pursuant to paragraph (a) above shall
constitute "Company Nominees" and "BEC Nominees" (as such terms are defined in
the ILC Merger Agreement) and (ii) from and after the Effective Time, all of the
Company's Directors nominated or designated for election by the Parent or the
Purchaser shall constitute "Company Nominees" and "BEC Nominees" pursuant to
Section 5.13 of the ILC Merger Agreement.
ARTICLE 2
THE MERGER
2.1 THE MERGER. At the Effective Time (as defined in Section 2.3),
in accordance with this Agreement and the Delaware Law, the Purchaser shall be
merged with and into the Company, the separate existence of the Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger.
The Company is hereinafter sometimes referred to as the "Surviving Corporation."
At the election of the Parent, any direct or indirect wholly owned subsidiary of
the Parent organized under the laws of a state of the United States may be
substituted for the Purchaser as a constituent corporation in the Merger for
purposes of this Section 2.1. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
2.2 EFFECT OF THE MERGER. At the Effective Time, the Surviving
Corporation shall continue its corporate existence under the laws of the State
of Delaware and the Merger shall have the effects set forth in Section 259 of
the Delaware Law.
2.3 CONSUMMATION OF THE MERGER. As soon as is practicable after
the satisfaction or waiver of the conditions set forth in Article 7 hereof, but
not prior to January 11, 1999 unless requested otherwise by the Parent, the
parties hereto will cause the Merger to be consummated by delivering to the
Secretary of State of the State of Delaware a certificate of merger or a
certificate of ownership and merger (the "Certificate of Merger") in such form
or forms as may be required by, and executed and acknowledged in accordance
with, the relevant provisions of the Delaware Law, and shall make all other
filings and recordings
-7-
<PAGE> 14
required by the Delaware Law in connection with the Merger. The Merger shall
become effective at the time that the Secretary of State of the State of
Delaware files the Certificate of Merger in accordance with the relevant
provisions of the Delaware Law (or at such later time, which shall be as soon as
reasonably practicable, specified as the effective time in the Certificate of
Merger). The term "Effective Time" shall mean the date and time of the filing of
the Certificate of Merger by the Secretary of State of the State of Delaware (or
such later time, which shall be as soon as reasonably practicable, as may be
specified in the Certificate of Merger).
2.4 CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-laws of the Purchaser as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and By-laws of the Surviving Corporation until thereafter amended
as provided under the Delaware Law, provided that at the Effective Time (a)
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is LUMEN
TECHNOLOGIES, INC.", (b) the indemnification provisions set forth in the
Certificate of Incorporation and By-laws of the Surviving Corporation shall be
restated to conform to the indemnification provisions set forth in the
Certificate of Incorporation and By-laws, respectively, of the Company, and (c)
the title of the By-laws of the Surviving Corporation shall be amended to read
as follows: "By-laws LUMEN TECHNOLOGIES, INC." The directors of the Purchaser
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation, and the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation, in
each case until their successors are elected and qualified.
2.5 CONVERSION OF SECURITIES; PAYMENT OF MERGER CONSIDERATION.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of the Purchaser, the Company, the Surviving
Corporation or the holder of any of the following securities:
(i) subject to Section 2.5(b), each Share issued
and outstanding immediately prior to the Effective Time (other
than Shares to be cancelled pursuant to clause (ii) below and
any Dissenting Shares (as defined in Section 2.5(b))) shall be
cancelled and extinguished and be converted into and become a
right to receive $7.75 net in cash per Share (or any such
higher price per Share as may be paid in the Offer) without
any interest thereon (the "Merger Consideration");
(ii) each Share that is owned immediately prior
to the Effective Time by the Parent, the Purchaser or the
Company or any direct or indirect subsidiary of the Parent,
the Purchaser or the Company, including all Shares held by the
Company as "treasury stock," shall be cancelled and retired,
and no payment shall be made with respect thereto; and
-8-
<PAGE> 15
(iii) each share of the Purchaser's capital stock
issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully
paid and nonassessable share of the same class of capital
stock of the Surviving Corporation.
(b) (i) If, pursuant to the Delaware Law, an
affirmative vote of the Company's stockholders is required to approve the
Merger, then notwithstanding Section 2.5(a), Shares outstanding immediately
prior to the Effective Time and held by a holder who, acting in accordance with
Section 262 of the Delaware Law, (A) prior to the meeting at which the Company's
stockholders vote to approve the Merger, has delivered to the Company written
notice of such holder's intention to demand payment of the fair value of his
Shares if the Merger is effectuated and (B) has not voted in favor of the Merger
or consented thereto in writing ("Dissenting Shares"), shall not be converted
into a right to receive the Merger Consideration, unless such holder withdraws
or otherwise loses his right to demand payment for his Shares. If after the
Effective Time such holder withdraws or loses his right to demand payment for
his Shares, such Shares shall be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration payable in
respect of such Shares pursuant to Section 2.5(a)(i).
(ii) If, after consummation of the Offer, the
Purchaser is not required under the Delaware Law to obtain the consent of the
other stockholders of the Company in order to effect the Merger and effects the
Merger without holding a meeting of the stockholders, then, after consummating
the Merger, the Purchaser will provide notice, as required by the Delaware Law,
that it has consummated the Merger and that stockholders are entitled to
exercise their dissenters' rights. Shares of any stockholders who thereafter
fail to perfect or preserve their dissenter's rights under the Delaware Law will
be treated as if such Shares had been converted as of the Effective Time into
the right to receive the Merger Consideration payable in respect of such Shares
pursuant to Section 2.5(a)(i).
(iii) The Company shall give the Parent and the
Purchaser prompt notice of any demands for payment, or notices of intent to
demand payment, received by the Company with respect to Shares, and the Parent
and the Purchaser shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of the Parent and the Purchaser or as
otherwise required by law, make any payment with respect to, or settle, or offer
to settle, any such demands.
2.6 EXCHANGE OF CERTIFICATES.
(a) Upon the Effective Time, a bank or trust company to
be designated by the Parent (the "Payment Agent") shall act as payment agent in
effecting the exchange, for the Merger Consideration multiplied by the number of
Shares formerly represented thereby, of certificates (the "Certificates") that,
prior to the Effective Time, represented Shares entitled to payment pursuant to
Section 2.5(a)(i). Upon the Effective Time, the Parent shall, or shall
-9-
<PAGE> 16
cause the Purchaser to, deposit with the Payment Agent in trust for the benefit
of the holders of Certificates, as needed to pay for surrendered Shares as
provided in this Section 2.6, within such time as is necessary for the Payment
Agent to make the requisite payments for Shares, immediately available funds in
an aggregate amount (the "Payment Fund") equal to the product of the Merger
Consideration multiplied by the number of Shares entitled to payment pursuant to
Section 2.5(a)(i). Promptly after the Effective Time, the Parent or the
Purchaser shall cause to be mailed to each record holder of Certificates that
immediately prior to the Effective Time represented Shares a form of letter of
transmittal and instructions for use in surrendering such Certificates and
receiving the Merger Consideration therefor. Upon the surrender of each such
Certificate together with a duly completed and executed letter of transmittal,
the Payment Agent shall promptly pay the holder of such Certificate the Merger
Consideration multiplied by the number of Shares formerly represented by such
Certificate, without any interest thereon, in exchange therefor, and such
Certificate shall forthwith be cancelled. Until so surrendered and exchanged,
each such Certificate (other than Certificates representing Shares held by the
Parent, the Purchaser or the Company or any direct or indirect subsidiary of the
Parent, the Purchaser or the Company or Dissenting Shares) shall represent
solely the right to receive the Merger Consideration multiplied by the number of
Shares represented by such Certificate, without any interest thereon. If any
cash is to be paid to a person other than the holder in whose name the
Certificate representing Shares surrendered in exchange therefor is registered,
it shall be a condition to such payment that the person requesting such payment
shall pay to the Payment Agent any transfer or other taxes required by reason of
the payment of such cash to a person other than the registered holder of the
Certificate surrendered, or such person shall establish to the satisfaction of
the Payment Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Payment Agent nor any party hereto
shall be liable to a holder of Shares for any Merger Consideration delivered to
a public official pursuant to applicable abandoned property, escheat and similar
laws.
(b) To the extent not immediately required for payment
for surrendered Shares as provided in Section 2.6(a), the Payment Fund shall be
invested by the Payment Agent, as directed by the Parent (so long as such
directions do not impair the rights of holders of Shares or the ability of the
Payment Agent to timely pay the Merger Consideration), in direct obligations of
the United States of America, obligations for which the full faith and credit of
the United States of America is pledged to provide for the payment of principal
and interest, commercial paper rated of the highest quality by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, or certificates of deposit
issued by a commercial bank having at least $300,000,000 in assets (a "Qualified
Commercial Bank"); and any net earnings with respect thereto shall be paid to
the Parent as and when requested by the Parent.
(c) The Payment Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 2.5(a)(i) out of the
Payment Fund. Promptly following the date that is six months after the date of
the Effective Time, the Payment Agent shall deliver to the Parent all cash,
certificates and other documents in its possession relating to the
-10-
<PAGE> 17
transactions described in this Agreement, and the Payment Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly representing a
Share may surrender such Certificate to the Surviving Corporation or the Parent
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Merger Consideration, without any interest thereon, but
shall have no greater rights against the Surviving Corporation or the Parent
than may be accorded to general creditors of the Surviving Corporation or the
Parent under applicable law.
(d) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any Shares. If,
after the Effective Time, Certificates formerly representing Shares are
presented to the Surviving Corporation or the Payment Agent, they shall be
cancelled and exchanged for the Merger Consideration, as provided in this
Article 2, subject to applicable law in the case of Dissenting Shares.
(e) From and after the Effective Time, holders of
Certificates theretofore evidencing Shares shall cease to have any rights as
stockholders of the Company, except as provided herein or by law.
(f) In the event any Certificate evidencing Shares shall
have been lost, stolen or destroyed, the Paying Agent shall pay to such holder
the Merger Consideration required pursuant to Section 2.5(a)(i), in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof with such assurances as the Parent, in its
discretion and as a condition precedent to the payment of the Merger
Consideration, may reasonably require of the holder of such lost, stolen or
destroyed Certificates.
(g) The Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement such amounts as may be required to be deducted and
withheld with respect to the making of such payment under the Code, or under any
applicable law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser each represents and warrants to the
Company as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of the Parent and the
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and has all requisite corporate
power and authority to carry on its business as it is now being conducted. Each
of the Parent and the Purchaser is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which would not, in the
-11-
<PAGE> 18
aggregate, materially impair the ability of the Parent or the Purchaser to
perform its obligations hereunder.
3.2 AUTHORITY. Each of the Parent and the Purchaser has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Parent and the
Purchaser and the consummation by the Parent and the Purchaser of the
transactions contemplated hereby have been duly authorized by the respective
Boards of Directors of the Parent and the Purchaser and by the Parent as the
sole stockholder of the Purchaser and no other corporate proceedings on the part
of the Parent or the Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Parent and
the Purchaser and, assuming this Agreement constitutes a valid and binding
obligation of the other parties hereto, constitutes a valid and binding
obligation of each of them, enforceable against each of them in accordance with
its terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability of
creditors' rights generally and to the effect of general principles of equity
which may limit the availability of remedies (whether in a proceeding at law or
in equity).
3.3 COMPLIANCE.
(a) Neither the execution and delivery of this Agreement
by the Parent and the Purchaser, nor the consummation by them of the
transactions contemplated hereby, nor compliance by them with any of the
provisions hereof will (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance or payment required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Parent or the Purchaser or any other direct or indirect subsidiary of the
Parent under, any of the terms, conditions or provisions of (x) the charter
documents or by-laws of the Parent or the Purchaser or any other direct or
indirect subsidiary of the Parent or (y) any note, bond, mortgage, indenture,
deed of trust, license, lease, distribution agreement, joint venture agreement
or any other agreement or instrument or obligation to which the Parent or the
Purchaser or any other direct or indirect subsidiary of the Parent is a party,
or to which any of them, or any of their respective properties or assets, may be
subject, or (ii) subject to compliance with the statutes and regulations
referred to in the next paragraph, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to the Parent or the
Purchaser or any other direct or indirect subsidiary of the Parent or any of
their respective properties or assets; except, in the case of each of clause (i)
and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances that, in the aggregate, would not materially impair the ability
of the Parent and the Purchaser to perform their obligations hereunder.
-12-
<PAGE> 19
(b) Other than in connection with or in compliance with
the provisions of the Delaware Law, the Exchange Act, the "takeover" or "blue
sky" laws of various states and the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules and regulations thereunder (the "Hart-Scott-Rodino Act"),
and except for any notices, filings, authorizations, consents or approvals which
are required because of the regulatory status of the Company and its
Subsidiaries (as defined in Section 4.2) or facts specifically pertaining to
them, no notice to, filing with, or authorization, consent or approval of, any
domestic or foreign public body or authority is necessary for the consummation
by the Parent or the Purchaser of the transactions contemplated by this
Agreement, unless the failure to give such notices, make such filings, or obtain
such authorizations, consents or approvals would not, in the aggregate,
materially impair the ability of the Parent and the Purchaser to perform their
obligations hereunder.
3.4 INFORMATION PROVIDED. Any written information provided by or
on behalf of the Parent or the Purchaser for inclusion in the Schedule 14D-9
(including the Schedule 14f that is a part thereof), on the date the Schedule
14D-9 is filed with the Commission, and on the date the Schedule 14D-9 is first
published, sent or given to stockholders of the Company, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.5 INTERIM OPERATIONS OF THE PURCHASER. The Purchaser was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has not engaged in any other business activities and has conducted
its operations only as contemplated hereby.
3.6 FINANCING. At the expiration of the Offer and at the Effective
Time, the Parent and the Purchaser will have available all the funds necessary
to purchase all the Shares pursuant to the Offer and the Merger and to pay all
fees and expenses payable by the Parent or the Purchaser related to the
transactions contemplated by this Agreement.
3.7 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Offer
or the Merger based upon arrangements made by or on behalf of the Parent, the
Purchaser or any of their respective subsidiaries or affiliates.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule previously delivered by
the Company to the Parent (the "Disclosure Schedule"), the Company represents
and warrants to the Parent and the Purchaser as follows:
-13-
<PAGE> 20
4.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to carry
on its business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, except for failures to be
so qualified or in good standing that, in the aggregate, have not resulted in,
and could not reasonably be expected to result in, a Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the condition (financial or other), results of operations,
stockholders' equity, business, assets, properties, liabilities, capitalization
or operations of the Company and its Subsidiaries taken as a whole or prevents
or materially interferes with the ability of the Company to perform its
obligations hereunder or to consummate the transactions contemplated by this
Agreement. Copies of the Certificate of Incorporation and By-Laws of the Company
have heretofore been delivered to the Parent and such copies are accurate and
complete. The Company's original Certificate of Incorporation contains a
provision expressly electing not to be governed by Section 203 of the Delaware
Law and such election is in full force and effect such that Section 203 of the
Delaware Law is inapplicable to any of the transactions contemplated by this
Agreement. The resolution of the Company's Directors referred to in Section
1.3(c) is in full force and effect and has not been amended or modified.
4.2 SUBSIDIARIES.
(a) The only direct or indirect subsidiaries of the
Company (each a "Subsidiary" and collectively, the "Subsidiaries") are those
listed in the Disclosure Schedule.
(b) Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry on
its business as it is now being conducted. Each Subsidiary is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, except for failures to be
so qualified or in good standing that, in the aggregate, have not resulted in,
and could not reasonably be expected to result in, a Material Adverse Effect.
Copies of the charter documents and by-laws of each Subsidiary have heretofore
been made available to the Parent and such copies are accurate and complete.
(c) Except for directors' qualifying shares, if any (all
of which the Company has the power to cause to be transferred for no or nominal
consideration to the Purchaser or the Purchaser's designee), the Company is,
directly or indirectly, the record and beneficial owner of all of the
outstanding shares of capital stock in each of the Subsidiaries, there are no
irrevocable proxies with respect to such shares, and no securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or
-14-
<PAGE> 21
rights convertible into or exchangeable for, shares of any capital stock of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is bound to issue additional shares or
purchase shares of its capital stock or securities convertible into or
exchangeable for such shares. All of such shares so owned by the Company are
validly issued, fully paid and nonassessable and are owned by the Company free
and clear of any claim, lien, encumbrance or agreement of any kind with respect
thereto.
(d) Except for the Subsidiaries, the Company does not
directly or indirectly own any equity or similar or other interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar or other interest in, any other corporation, partnership, joint venture,
limited liability company or other business association or entity, other than
any interests with an individual value of less than $250,000 and an aggregate
value of less than $1,000,000 and which do not require any future payments or
impose any other liabilities or obligations on the part of the Company or any of
its Subsidiaries.
4.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of 50,000,000 shares of Common Stock, $.01 par value, and 500,000 shares of
Preferred Stock, $1.00 par value (the "Preferred Stock"), of which 10,000 shares
of Preferred Stock are designated as Series A Preferred Stock and 490,000 shares
are undesignated. As of the date of this Agreement (except in the case of clause
(iii) below, which is stated as of the day prior to the date of this Agreement):
(i) 20,710,606 Shares are issued and 20,209,606
Shares are issued and outstanding;
(ii) 501,000 Shares are held in the treasury of
the Company;
(iii) 3,613,325 Shares are reserved for issuance
pursuant to outstanding Options (the
"Company Options") heretofore granted under
the Company's Amended and Restated 1996
Stock Incentive Plan (the "Option Plan");
(iv) no Shares are reserved for issuance in
connection with the Company's 1996 Employee
Stock Purchase Plan (the "ESPP");
(v) 1,252,835 Shares are reserved for issuance
upon conversion, at the conversion price of
$9.89 per share, of the Company's 8%
Convertible Notes due 2002 (the "Convertible
Notes") (calculated based on the outstanding
principal under the Convertible Notes and
the Conversion Price in effect as of the
date of this Agreement) and $2,774,285 is
the accrued interest payable under the
Convertible Notes; and
-15-
<PAGE> 22
(vi) no shares of Preferred Stock are issued and
outstanding.
(b) All outstanding Shares are, and all Shares which may
be issued will be, when issued in accordance with the terms of the agreements,
plans or other documents governing their issuance, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the Delaware Law,
the Certificate of Incorporation or the By-laws of the Company or any contract,
agreement, arrangement of understanding to which the Company is a party or
otherwise bound.
(c) Except as set forth above in this Section 4.3, there
are no other shares of capital stock or other securities of the Company
outstanding and no other outstanding options, warrants, rights to subscribe to
(including any preemptive rights), calls or commitments of any character
whatsoever to which the Company is a party or may be bound requiring the
issuance, transfer or sale of any shares of capital stock or other securities of
the Company or any securities or rights convertible into or exchangeable or
exercisable for any such shares or securities, and there are no contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of its capital stock or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable or exercisable for any such
shares. As of the date of this Agreement, no awards are outstanding under the
Option Plans other than the Company Options listed on the Disclosure Schedule,
no options are outstanding under the ESPP and no other stock appreciation
rights, phantom stock, performance based rights or similar such equity rights or
obligations were outstanding. The Disclosure Schedule sets forth with respect to
each Company Option, the name of the option holder, the exercise price, the date
of grant, vesting schedule and expiration date and with respect to the Option
Plan, the number of Shares or Company Options reserved for issuance or grant and
actually issued or granted under the Option Plan and the weighted average
exercise price of all Company Options outstanding under the Option Plan as of
the date hereof. Copies of the Option Plan, the ESPP and the Indenture governing
the Convertible Notes (including the form of Convertible Notes) have heretofore
been made available to the Parent and such copies are accurate and complete.
(d) There are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its Subsidiaries.
Neither the Company nor any of it Subsidiaries is a party to any voting
agreement with respect to the voting of any of its securities. To the best of
the Company's knowledge, none of the Shares is subject to any voting trust,
transfer restrictions or other similar arrangements, except for vesting
arrangements pursuant to agreements with the Company or restrictions on transfer
imposed by the Securities Act of 1933, as amended (the "Securities Act"), and
state securities laws.
-16-
<PAGE> 23
4.4 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Company's Directors and,
except for the approval and adoption of this Agreement by the holders of a
majority of the Shares (if required under the Delaware Law), no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of the other
parties hereto, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effect of any applicable bankruptcy, moratorium, insolvency, reorganization or
other similar law affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may limit the
availability of remedies (whether in a proceeding at law or in equity).
4.5 COMPLIANCE.
(a) Neither the execution and delivery of this Agreement
by the Company, nor the consummation by the Company of the transactions
contemplated hereby, nor compliance by the Company with any of the provisions
hereof will (i) violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance or payment required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of (x) the charter documents or by-laws of the Company or any of its
Subsidiaries, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, distribution agreement, joint venture agreement or any other
agreement or instrument or obligation to which the Company or any of its
Subsidiaries is a party, or to which any of them or any of their respective
properties or assets, may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets; except, in the case of each of clauses (i)(y) and (ii)
above, for such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or encumbrances
that, in the aggregate, have not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect.
(b) Other than in connection with or in compliance with
the provisions of the Delaware Law, the Exchange Act, the "takeover" or "blue
sky" laws of various states and the Hart-Scott-Rodino Act, no notice to, filing
with, or authorization, consent or approval of, any domestic or foreign public
body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement, unless the failure to give such
-17-
<PAGE> 24
notices, make such filings, or obtain such authorizations, consents or
approvals, in the aggregate, has not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect.
4.6 COMMISSION FILINGS; FINANCIAL STATEMENTS; INFORMATION
PROVIDED.
(a) The Company has filed with the Commission all
required reports, schedules, forms, proxy and information statements,
registration statements and other documents (including exhibits) required to be
filed by it since February 14, 1996 (the "Commission Filings"). The Commission
Filings, all of which were filed on a timely basis, (i) complied, in all
material respects, with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations thereunder, (ii) did not at the
time they were filed contain any untrue statement of material fact, and (iii)
did not at the time they were filed omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(b) Each of the audited consolidated financial statements and
unaudited interim consolidated financial statements (including any related notes
or schedules) included in the Commission Filings complied as to form in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto, was prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
except as may be indicated therein or in the notes or schedules thereto, and
fairly present, in all material respects, the consolidated financial position of
the Company and its Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended, subject,
in the case of the unaudited interim financial statements, to normal year-end
audit adjustments and the absence of complete notes.
(c) The unaudited consolidated financial information with respect
to the quarter ended September 30, 1998 (including any related notes or
schedules) (the "September 30 Financial Information") included in the Disclosure
Schedule was prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as may be indicated therein or
in the notes or schedules thereto, and fairly presents, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended, subject to normal year-end
audit adjustments and the absence of complete notes.
(d) Any written information provided by or on behalf of the
Company which is included in the Schedule 14D-1 or the Offer Documents, on the
date the Schedule 14D-1 is filed with the Commission and on the date the Offer
Documents are first published, sent or given to Stockholders of the Company, as
the case may be, will comply in all material respects with the provisions of
applicable securities laws and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or
-18-
<PAGE> 25
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.7 NO UNDISCLOSED LIABILITIES. Except as specifically and
individually disclosed in the Commission Filings, the Disclosure Schedule or the
September 30 Financial Information, neither the Company nor any Subsidiary has
any liabilities or obligations of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, except for (a)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since September 30, 1998, and (b) liabilities and
obligations that, in the aggregate, have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect.
4.8 CHANGES. Except as expressly contemplated by this Agreement,
set forth in the Commission Filings or reflected in the September 30 Financial
Information, since September 30, 1998, the Company and the Subsidiaries have
conducted their respective businesses only in the ordinary and usual course
consistent with past practice, and none of the following has occurred:
(a) any adverse change in the condition (financial or
other), results of operations, stockholders' equity, business, assets,
properties, liabilities, capitalization or operations of the Company and its
Subsidiaries, that has resulted in, or could reasonably be expected to result
in, a Material Adverse Effect, except as to matters which are attributable to
the announcement or performance of this Agreement and the transactions
contemplated hereby;
(b) any damage, destruction or loss, whether or not
covered by insurance, that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect;
(c) any reevaluation by the Company or any of its
Subsidiaries of any of their respective assets, including writing down the value
of inventory or writing off notes or accounts receivables other than in the
ordinary course of business consistent with past practice, that has resulted in,
or could reasonably be expected to result in, a Material Adverse Effect;
(d) any action or event listed in Section 5.1; or
(e) any agreement by the Company to do any of the things
described in the preceding clauses (a) through (d) other than as expressly
contemplated or provided for herein.
4.9 CONTRACTS.
(a) Except as identified on the exhibit indices of the
Commission Filings, there are no contracts or agreements that are material
contracts (as defined in Item 601(b)(10) of Regulation S-K) with respect to the
Company and its Subsidiaries. Neither the Company
-19-
<PAGE> 26
nor any of its Subsidiaries is in violation of or in default under (nor does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) any material
lease, permit, concession, franchise, license or any other contract or agreement
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that, in the aggregate, have not
resulted in, or could not reasonably be expected to result in, a Material
Adverse Effect.
(b) Section 4.9(b) of the Disclosure Schedule sets forth
a complete list of each contract or agreement to which the Company or any
Subsidiary is a party or bound (A) with any affiliate of the Company (other than
any Subsidiary which is a direct or indirect wholly owned subsidiary of the
Company), other than any agreements which are or have been fully performed and
under which neither the Company nor any Subsidiary has any continuing liability
or obligation, or (B) that includes any non-competition or similar provision
imposing any restrictions or undertakings on the Company or any Subsidiary,
other than any non-competition or similar provision relating solely to the eye
wear and/or lens grinding business. Copies of all the agreements, contracts and
arrangements set forth in Section 4.9(b) of the Disclosure Schedule have
heretofore been made available to the Parent and such copies are accurate and
complete.
4.10 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Commission Filings, since December 28, 1995, neither the Company nor any of its
Subsidiaries has entered into any transaction with any director, officer or
other affiliate of the Company or any Subsidiary or any transaction which would
be subject to disclosure pursuant to Item 404 of Regulation S-K.
4.11 EMPLOYEE BENEFITS AND CONTRACTS. Except as set forth in
Schedule 4.11(b) of the Disclosure Schedule:
(a) Neither the Company nor any ERISA Affiliate maintains
or contributes to, or has any material obligation under, any Employee Benefit
Plans other than those identified on Schedule 4.11(b) of the Disclosure
Schedule. For the purposes of this Section 4.11, "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to time, and any
successor statute and all rules and regulations promulgated thereunder; "ERISA
Affiliate," as applied to the Company, means any person or trade or business
which is a member of a group which is under common control with the Company, who
together with the Company, is treated as a single employer within the meaning of
Section 414(b) and (c) of the Code; and "Employee Benefit Plan" means any
employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is
maintained for employees of the Company or has been assumed by the Company in
connection with any acquisition or any of its ERISA Affiliates or (b) has at any
time since October 16, 1992 been maintained for the employees of the Company or
any current or former ERISA Affiliate.
(b) The Company and each ERISA Affiliate is in compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder
-20-
<PAGE> 27
and in compliance with all Foreign Benefit Laws with respect to all Employee
Benefit Plans, except for failures to comply that in the aggregate have not
resulted in, and could not reasonably be expected to result in, a Material
Adverse Effect and except for any required amendments for which the remedial
amendment period as defined in Section 401(b) of the Code has not yet expired.
Each Employee Benefit Plan that is intended to be qualified under Section 401(a)
of the Code has been determined by the Internal Revenue Service to be so
qualified, and each trust related to such plan has been determined to be exempt
under Section 501(a) of the Code. No material liability has been incurred by the
Company or any ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan. For the purposes of this
Section 4.11, "Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign nation or any
province, state, territory, protectorate or other political subdivision thereof
regulating, relating to, or imposing liability or standards of conduct
concerning, any Employee Benefit Plan.
(c) Neither the Company nor any affiliate is a party to
any collective bargaining agreement. Neither the Company nor any affiliate has
ever (i) maintained an Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA, or (ii) had an obligation to contribute to a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
(d) Neither the Company nor any ERISA Affiliate has
engaged in a nonexempt prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code.
(e) There are no unfunded obligations under any Employee
Benefit Plan of the Company or any affiliate providing benefits after
termination of employment to any employee or former employee, including but not
limited to retiree health coverage and deferred compensation but excluding
continuation of health coverage required to be continued under Section 4980(B)
of the Code. Each Employee Benefit Plan of the Company, any Subsidiary or any of
their respective affiliates may be amended or terminated by the Company, such
Subsidiary or such affiliate without the consent or approval of any other person
and without any termination fees, market value adjustments, surrender charges or
other costs. There is no employment agreement, Employee Benefit Plan, stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, or severance benefit plan of the Company or any affiliate, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated by the occurrence of any of the transactions contemplated by
this Agreement or the benefits under which will be due as a result of or
calculated on the basis of the transactions contemplated by this Agreement.
-21-
<PAGE> 28
(f) No material proceeding, claim, lawsuit and/or
investigation exists or to the best knowledge of the Company after due inquiry,
is threatened concerning or involving any Employee Benefit Plan.
4.12 PROPERTIES AND LIENS.
(a) All real property owned or leased by the Company or
any Subsidiary is listed on the Disclosure Schedule, other than real property
with a cost or fair market value of less than $10,000.
(b) Each of the Company and its Subsidiaries has good and
valid title to, or valid leasehold interests in or valid rights to, all of its
material tangible properties and assets (personal and real) reflected in the
balance sheet for the period ended September 30, 1998 included in the September
30 Financial Information, except for such as have been disposed of in the
ordinary course of business since September 30, 1998. All such material tangible
assets and properties, other than assets and properties in which the Company or
any Subsidiary has a leasehold interest, are free and clear of all mortgages,
security interests, pledges, liens and encumbrances ("Liens"), except for Liens
that, in the aggregate, do not materially interfere with the ability of the
Company and its Subsidiaries to conduct their business as currently conducted
and have not resulted in, and could not reasonably be expected to result in, a
Material Adverse Effect.
(c) Each of the Company and each Subsidiary has complied
in all material respects with the term of all material leases for real or
personal property to which it is a party, and all such leases are in full force
and effect. Each of the Company and each Subsidiary enjoys peaceful and
undisturbed possession under all such material leases, except for failures to do
so that, in the aggregate, have not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect.
(d) The properties and assets of the Company and its
Subsidiaries, taken as a whole, are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purposes for which they are presently used.
4.13 ENVIRONMENTAL MATTERS.
(a) The Company and the Subsidiaries are in compliance with
and have complied with all applicable Environmental Laws (as defined below),
except for failures to comply that, in the aggregate, have not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect. There
is no pending or, to the best knowledge of the Company, threatened civil or
criminal litigation, written notice of violation, formal administrative
proceedings or investigations, inquiries or information requests by any court,
arbitration tribunal, administrative agency or commission or other governmental
or regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity"), relating to
-22-
<PAGE> 29
any Environmental Law involving the Company or any of its Subsidiaries the
adverse resolution of which would, either singularly or in the aggregate, result
in, or could reasonably be expected to result in, a Material Adverse Effect. For
purposes of this Agreement, "Environmental Law" means any foreign, federal,
state, local or supranational law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety, including without
limitation, any statute, regulation or order pertaining to (i) treatment,
storage, disposal, generation or transportation of industrial, toxic or
hazardous substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine sanctuaries and wetlands, including all
endangered and threatened species; (vi) underground and other storage tanks or
vessels, abandoned, disposed or discarded barrels, containers and other closed
receptacles; (vii) health and safety of employees and the public; and (viii)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or solid or hazardous
waste. As used in this Section 4.13, the terms "release" and "environment" shall
have the meaning set forth in the federal Comprehensive Environmental
Compensation, Liability and Response Act of 1980 ("CERCLA"). As used above, the
phrase "investigation, inquiry or information request" includes, but is not
limited to, any Notice of Responsibility or Section 104(e) Information Request
issued pursuant to CERCLA or to any similar state law addressing the
investigation and/or remediation of any environmental contamination.
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment by the Company or
any of its Subsidiaries, or, to the best knowledge of the Company, by any other
party at any parcel of real property or any facility formerly or currently
owned, operated or controlled by the Company or any of its Subsidiaries that, in
the aggregate, have resulted in, or could reasonably be expected to result in, a
Material Adverse Effect. With respect to any such releases of Materials of
Environmental Concern, the Company has given all notices required to be given by
the Company or any of its Subsidiaries to Governmental Entities. The Company has
no actual knowledge of any releases of Materials of Environmental Concern at
parcels of real property or facilities other than those owned, operated or
controlled by the Company or any of its Subsidiaries that, in the aggregate,
have, or could reasonably be expected to have, a material impact on the real
property or facilities owned, operated or controlled by the Company or any of
its Subsidiaries or that have resulted in, or could reasonably be expected to
result in, a Material Adverse Effect. For purposes of this Agreement, "Materials
of Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law.
-23-
<PAGE> 30
(c) Set forth in the Disclosure Schedule is a list of all
material environmental reports, investigations and audits conducted by or on
behalf of the Company or any of its Subsidiaries or, to the best knowledge of
the Company, conducted by or on behalf of a third party (whether done at the
initiative of the Company or directed by a Governmental Entity or other third
party) issued or conducted during the past five years relating to premises
currently owned or operated by the Company or any of its Subsidiaries. Copies of
each such report, or the results of each such investigation or audit, have
heretofore been made available to the Parent and such copies are accurate and
complete, except that the Company makes no representation as to the accuracy or
completeness of any reports prepared by or for third parties.
(d) To the best knowledge of the Company, there is no
material environmental liability of any solid or hazardous waste transporter or
treatment, storage or disposal facility that has been utilized by the Company or
any of its Subsidiaries, which have resulted in, or could reasonably be expected
to result in, either singularly or in the aggregate, a Material Adverse Effect.
(e) The Company and the Subsidiaries have all requisite
licenses, permits, certificates, permits-by-rule and approvals under the
Environmental Laws from Governmental Entities necessary to conduct its business
and operate its assets (collectively, the "Environmental Permits"), except for
such licenses, permits, certificates, permits-by-rule and approvals the absence
of which, in the aggregate, have not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect. No Environmental Permit will
cease to be effective as a result of the consummation of transactions
contemplated by this Agreement. The Environmental Permits do not contain
restrictions, limitations or other terms or conditions that will restrict the
ability of the Surviving Corporation to continue to operate its business
subsequent to the Effective Time in substantially the same manner as it is
currently being operated.
(f) To the best knowledge of the Company, neither the
Company nor any of its Subsidiaries have assumed any liability, responsibility,
commitment or obligation under any Environmental Law arising in any way from the
existence or operation of any company, organization or entity that is or was a
predecessor to the Company or any of its Subsidiaries, which liability,
responsibility, commitment or obligation has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
4.14 TAXES.
(a) Except as set forth in Section 4.14(a) of the
Disclosure Schedule, each of the Company and the Subsidiaries has filed all Tax
Returns (as defined below) that it was required to file, and all such Tax
Returns were complete and accurate in all material respects. Except as set forth
in Section 4.14(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary is or has ever been a member of a group of corporations with which it
has filed (or been required to file) consolidated, combined or unitary Tax
Returns, other than a
-24-
<PAGE> 31
group of which only the Company and the Subsidiaries are or were members. To the
best knowledge of the Company, each group of corporations with which the Company
or any Subsidiary has filed (or was required to file) consolidated, combined,
unitary or similar Tax Returns (an "Affiliated Group") has filed all material
Tax Returns that it was required to file with respect to any period in which the
Company or a Subsidiary was a member of such Affiliated Group (an "Affiliated
Period"), and all such Tax Returns were complete and accurate in all material
respects. Each of the Company and the Subsidiaries has paid on a timely basis
all Taxes (as defined below) that were shown to be due and payable on such Tax
Returns and, to the best knowledge of the Company, each Affiliated Group has
paid all Taxes that were shown to be due and payable on such Tax Returns with
respect to all such Tax Returns filed for Affiliated Periods, except in either
case for failures to pay Taxes that, in the aggregate, have not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect. The
unpaid Taxes of the Company and the Subsidiaries for Tax periods through
September 30, 1998 do not exceed the accruals and reserves for Taxes (excluding
any assets, accruals, and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the balance sheet
as of September 30, 1998 referred to in Section 4.6(c) of this Agreement and
included in the Disclosure Schedule. All Taxes that the Company or any
Subsidiary is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
taxing authority, except for failures to withhold, collect or pay that, in the
aggregate, have not resulted in, and could not reasonably be expected to result
in, a Material Adverse Effect. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any such tax. For
purposes of this Agreement, "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Company has made available to the Buyer complete
and accurate copies of all federal income Tax Returns filed by, and examination
reports and statements of deficiencies assessed against or agreed to by, the
Company or any Subsidiary since December 28, 1995. Except as set forth in
Section 4.14(b) of the Disclosure Schedule, the federal income Tax Returns of
the Company and each Subsidiary have been audited by the Internal Revenue
Service or are closed by the applicable statute of limitations for all taxable
years through the taxable year specified in the Disclosure Schedule. The Company
has made available to the Buyer complete and accurate copies of all other Tax
Returns of the Company and the Subsidiaries together with all related
examination reports and statements of deficiency for all periods from and after
December 28, 1995. Except as set forth in Section 4.14(b) of the Disclosure
Schedule, no examination or audit of any Tax Return of the Company or any
Subsidiary by any taxing authority is currently in progress or, to the best
knowledge of the
-25-
<PAGE> 32
Company, threatened or contemplated, except in either case for matters that, in
the aggregate, have not resulted in, and could not reasonably be expected to
result in, a Material Adverse Effect. Neither the Company nor any Subsidiary has
been informed by any taxing authority that the taxing authority believes that
the Company or Subsidiary was required to file any Tax Return that was not
filed, except for matters that, in the aggregate, have not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect.
Neither the Company nor any Subsidiary has waived any statute of limitations
with respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency, except for any waivers and extensions that, in the
aggregate, have not resulted in, and could not reasonably be expected to result
in, a Material Adverse Effect.
(c) Except as set forth in Section 4.14(c) of the
Disclosure Schedule, neither the Company nor any Subsidiary: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or the Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; or
(iii) has any actual or potential liability for any Taxes of any person (other
than the Company and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of federal, state, local, or foreign law), or
as a transferee or successor, by contract, or otherwise.
(d) None of the assets of the Company or any Subsidiary:
(i) is property that is required to be treated as being owned by any other
person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii)
is "tax-exempt use property" within the meaning of Section 168(h) of the Code;
or (iii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(e) Neither the Company nor any Subsidiary has undergone,
or will undergo as a result of the transactions contemplated by this Agreement,
a change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481(a) of the Code.
(f) Except as set forth in Section 4.14(f) of the
Disclosure Schedule, no state or federal "net operating loss" of the Company
determined as of the Effective Time is subject to limitation on its use pursuant
to Section 382 of the Code or comparable provisions of state law as a result of
any "ownership change" within the meaning of Section 382(g) of the Code
occurring prior to the Effective Time.
(g) Except as set forth in Section 4.14(g) of the
Disclosure Schedule, there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of the Company or any Subsidiary.
-26-
<PAGE> 33
(h) Except as set forth in Section 4.14(h) of the
Disclosure Schedule, neither the Company nor any Subsidiary is a party to or
bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
4.15 COMPLIANCE WITH LAWS; PERMITS. Neither the Company nor any
Subsidiary (a) is in violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances or regulations or (b) has received any notice
from any Governmental Entity or any other person that either the Company or any
Subsidiary is in violation of, or has violated, any applicable provisions of any
laws, statutes, ordinances or regulations, except for violations that, in the
aggregate, have not resulted in, and could not reasonably be expected to result
in, a Material Adverse Effect. The Company and each of its Subsidiaries have all
permits, licenses and franchises from Governmental Entities required to conduct
their businesses as now being conducted or as presently contemplated to be
conducted, except for such permits, licenses and franchises the absence of
which, in the aggregate, have not resulted in, and could not reasonably be
expected to result in, a Material Adverse Effect.
4.16 INTELLECTUAL PROPERTY. The Company, or a Subsidiary, has
exclusive ownership of or rights to use each patent, patent application,
copyright (whether or not registered), copyright application, trademark (whether
or not registered), trademark application, trade name, service mark, and other
trade secret or proprietary intellectual property (collectively, "Intellectual
Property") owned by or used in and material to the business of the Company and
the Subsidiaries, taken as a whole. The Disclosure Schedule sets forth a
description of all patents, trademarks and copyrights and applications therefor
owned by or licensed to the Company or any Subsidiary that are material to the
conduct of the business of the Company and the Subsidiaries, taken as a whole,
as now operated. None of the previous or current development, manufacture,
marketing or distribution of products or services of or by the Company or any
Subsidiary infringes the right of any other person, except for any such
infringements that, in the aggregate, have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect. To the best
knowledge of the Company, no other person is infringing the rights of the
Company or any Subsidiary in any such Intellectual Property, except for any such
infringements that, in the aggregate, have not resulted in, and could not
reasonably be expected to result in, a Material Adverse Effect.
4.17 LITIGATION. There are no actions, suits, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries, nor is the Company or any of its
Subsidiaries subject to any order, judgment, writ, injunction or decree, except
in either case for matters that, in the aggregate, have not resulted in, and
could not reasonably be expected to result in, a Material Adverse Effect.
4.18 PREPAYMENT OF INDEBTEDNESS. All of the outstanding
indebtedness (whether secured or unsecured) for borrowed money of the Company
and each of its Subsidiaries may be prepaid by the Company or its Subsidiaries
without the consent or approval of, or prior notice to, any other person, and
without payment of any premium or penalty.
-27-
<PAGE> 34
4.19 VOTING REQUIREMENTS. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock or other securities necessary to
approve the Merger. There are no bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote.
4.20 YEAR 2000 COMPLIANCE.
(a) All of (i) the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems, and (ii) the software, hardware, firmware and other technology which
constitute part of the products and services manufactured, marketed or sold by
the Company or licensed by the Company to third parties are Year 2000 Compliant
(as defined below), except in either case for any failures to be Year 2000
Compliant that in the aggregate have not resulted in, and could not reasonably
be expected to result in, a Material Adverse Effect. The Company is not aware of
any failure to be Year 2000 Compliant of any third-party system that is material
to the business or operations of the Company, including without limitation any
system belonging to any of the Company's suppliers, service providers or
customers.
(b) For purposes of this Agreement, "Year 2000 Compliant"
means that the applicable system or item:
(i) will accurately receive, record, store,
provide, recognize and process all date and
time data from, during, into and between the
twentieth and twenty-first centuries, the
years 1999 and 2000 and all leap years;
(ii) will accurately perform all date-dependent
calculations and operations (including,
without limitation, mathematical operations,
sorting, comparing and reporting) from,
during, into and between the twentieth and
twenty-first centuries, the years 1999 and
2000 and all leap years; and
(iii) will not malfunction, cease to function or
provide invalid or incorrect results as a
result of (x) the change of years from 1999
to 2000, (y) date data, including date data
which represents or references different
centuries, different dates during 1999 and
2000, or more than one century or (z) the
occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system
-28-
<PAGE> 35
or item which are not owned or licensed by the Company correctly exchange date
data with or provide data to such system or item.
4.21 INSURANCE. The Company maintains insurance policies (the
"INSURANCE POLICIES") against all risks of a character and, to the Company's
best knowledge, in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Each Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. To the Company's best knowledge,
none of the Insurance Policies that are material to the business of the Company
and its Subsidiaries taken as a whole will terminate or lapse (or be affected in
any other materially adverse manner) by reason of the transactions contemplated
by this Agreement. The Company and its Subsidiaries have complied in all
material respects with the provisions of each Insurance Policy under which it is
the insured party. Since January 1, 1996, no insurer under any Insurance Policy
that is material to the business of the Company and its Subsidiaries taken as a
whole has, in writing, canceled or generally disclaimed liability under any such
policy or indicated any intent to do so or not to renew any such policy. All
material claims under the Insurance Policies have been filed in a timely
fashion.
4.22 NO EXISTING DISCUSSION. As of the date hereof, the Company has
ceased any and all discussions or negotiations with any other party with respect
to an Acquisition Proposal (as defined in Section 6.5).
4.23 BROKERS. No broker, finder or investment banker other than the
Financial Advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Offer or the Merger based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries or affiliates.
The Company has provided to the Parent a true and complete copy of its entire
agreement with the Financial Advisor.
ARTICLE 5
CONDUCT OF BUSINESS
5.1 CONDUCT PRIOR TO EFFECTIVE TIME. Except as a result of
entering into or as expressly contemplated by this Agreement or any Disclosure
Schedule relating to this Article 5, the Company covenants and agrees that,
unless the Parent shall otherwise agree in writing, prior to the Effective Time,
the business of the Company and its Subsidiaries shall in all material respects
be conducted only in, and the Company and its Subsidiaries shall not take any
material action except in, the ordinary course of business and consistent with
past practice, and the Company shall use all reasonable efforts, consistent with
past practice, to maintain and preserve its and each Subsidiary's business
organization, assets, employees and advantageous business relationships. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement until the Effective Time, except as a result of entering into or
as expressly contemplated by this Agreement or any Disclosure Schedule
-29-
<PAGE> 36
relating to this Article 5, the Company shall not, and not permit any of its
Subsidiaries to, directly or indirectly, do any of the following:
(i) other than dividends and distributions by a
direct or indirect wholly owned subsidiary of the Company to
its parent: (A) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or other
property) in respect of, any of its capital stock; (B) split,
combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of,
in lieu of or in substitution of shares of its capital stock;
or (C) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities, other than the payment to holders of Company
Options outstanding on the date hereof of an amount equal to
the difference between the price per Share to be paid in the
Offer and the exercise price of such Company Option in
exchange for the cancellation or termination of such Company
Option;
(ii) issue, deliver, sell, pledge or otherwise
dispose of or encumber any shares of its capital stock, any
other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than the
issuance of Shares upon the exercise of Company Options or
conversion of Convertible Notes outstanding on the date of
this Agreement in accordance with their present terms);
(iii) amend its Certificate of Incorporation or
By-laws or other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (A) by merging
or consolidating with, or by purchasing a substantial portion
of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture,
limited liability company, association or other business
organization or division thereof or (B) any assets that are
material, in the aggregate, to the Company and the
Subsidiaries, taken as a whole, except purchases of inventory
in the ordinary course of business consistent with past
practice;
(v) except in the ordinary course of business
and consistent with past practice, sell, lease, license,
pledge or otherwise dispose of or encumber any assets of the
Company or of any of its Subsidiaries (including any
indebtedness owned to them or any claims held by them);
(vi) whether or not in the ordinary course of
business or consistent with past practice, sell or dispose of
any assets material to the Company and its Subsidiaries, taken
as a whole (including any accounts, leases, contracts or
-30-
<PAGE> 37
intellectual property or any assets or the stock of any
Subsidiaries, but excluding the sale of products in the
ordinary course of business consistent with past practice);
(vii) except as permitted by Section 6.5, enter
into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or
disposition of all or substantially all of the assets or
securities of the Company;
(viii) (A) incur or suffer to exist any
indebtedness for borrowed money, other than Permitted
Indebtedness (as defined below), or guarantee any such
indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries,
guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any
arrangement having the economic effect of any of the
foregoing, or (B) make any loans, advances (other than to
employees of the Company in the ordinary course of business)
or capital contributions to, or investments in, any other
person other than between the Company and its Subsidiaries or
any of them. For purposes of this Section 5.1, "Permitted
Indebtedness" means (I) indebtedness for borrowed money that
existed as of September 30, 1998 as reflected on the balance
sheet included in the September 30, 1998 Financial
Information, (II) indebtedness for borrowed money of not more
than $2,000,000 incurred thereafter in the ordinary course of
business and consistent with past practice under loan
agreements in existence as of September 30, 1998, and (III)
indebtedness for borrowed money in an amount not exceeding the
total amount paid to the holders of Company Options as payment
for the cancellation or termination of such Company Options as
described in Section 5.1(i)(C);
(ix) make or agree to make any new capital
expenditures or expenditures not already in process on the
date of this Agreement with respect to property, plant or
equipment in excess of $150,000 in the aggregate for the
Company and the Subsidiaries, taken as a whole;
(x) make any change in accounting methods,
principles or practices, except insofar as may have been
required by a change in generally accepted accounting
principles or, except as so required, change any assumption
underlying, or method of calculating, any bad debt,
contingency or other reserve;
(xi) pay, discharge, settle or satisfy any
material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction, in the
ordinary course of
-31-
<PAGE> 38
business consistent with past practice or in accordance with
their terms, of liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in
the Commission Filings or the September 30 Financial
Information or incurred thereafter in the ordinary course of
business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any
material confidentiality, standstill or similar agreements to
which the Company or any of its Subsidiaries is a party;
(xii) except in the ordinary course of business,
materially modify, amend or terminate any material contract or
agreement to which the Company or any of its Subsidiaries is
party, or knowingly waive, release or assign any material
rights or claims;
(xiii) other than in the ordinary course of
business consistent with past practice, enter into any
material contracts or agreements relating to the distribution,
sale or marketing by third parties of the products of, or
products licensed by, the Company or any of its Subsidiaries;
(xiv) except as required to comply with applicable
law or agreements, plans or arrangements existing on the date
hereof or except as set forth in Section 5.1(xiv) of the
Disclosure Schedule, (A) adopt, enter into, terminate or amend
any written employment agreement, or any oral employment
agreement that is not terminable by the Company or any
Subsidiary without any penalty on notice of 30 days or less,
or any benefit plan for the benefit or welfare of any current
or former director, officer or employee, (B) increase in any
material respect the compensation or fringe benefits of, or
pay any bonus to, any director, officer or key employee, (C)
pay any material benefit not provided for under any benefit
plan or employment or other compensation arrangement, other
than the payment of bonuses following the date of this
Agreement to employees (other than officers and directors of
the Company or any Subsidiary) in the ordinary course of
business and of a nature and in amounts consistent with past
practice, (D) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or
benefit plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or
awards made thereunder), or (E) take any action other than in
the ordinary course of business consistent with past practice
to fund or in any other way secure the payment of compensation
or benefits under any employee plan, agreement, contract or
arrangement or benefit plan;
-32-
<PAGE> 39
(xv) make any tax election or, except in the
ordinary course of business consistent with past practice,
settle or compromise any federal, state, local or foreign tax
liability;
(xvi) issue any options or commence any offering
of Shares pursuant to the ESPP; or
(xvii) authorize, commit or agree, in writing or
otherwise, to take any of the foregoing actions.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 COMPANY STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) If approval of the Merger by the stockholders of the
Company is required under Delaware Law in order to consummate the Merger, the
Company will, as soon as practicable following the acceptance for payment of,
and payment for, Shares by the Purchaser pursuant to and subject to the
conditions of the Offer (coordinating the timing thereof with the Parent), duly
call, give notice of, convene and hold a special or annual meeting of its
stockholders (the "Stockholders Meeting") for the purpose of obtaining
stockholder approval of this Agreement, the Merger and the transactions
contemplated hereby. Except and to the extent otherwise permitted pursuant to
Section 6.5, the Company will, through its Board of Directors, recommend to its
stockholders that they approve the Merger. Notwithstanding the foregoing, if the
Purchaser or any other subsidiary of the Parent shall acquire at least 90% of
the outstanding Shares, the parties shall, at the request of the Parent, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable (but in no event earlier than January 11, 1999, unless
otherwise requested by the Parent) after the expiration of the Offer without a
stockholders meeting in accordance with Section 253 of the DGCL. The Parent and
the Purchaser shall vote or cause to be voted any Shares beneficially owned by
them in favor of this Agreement, the Merger and the transactions contemplated
hereby.
(b) If approval of the Merger by the stockholders of the
Company is required under Delaware Law in order to consummate the Merger, the
Company will, at the Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary proxy or information
statement (the "Proxy Statement") with the Commission in accordance with the
Exchange Act and any other applicable laws, and will use its best efforts to
respond to any comments of the Commission or its staff and to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the Commission or
its staff. The Company will notify the Parent promptly of the receipt of any
comments from the Commission or its staff and of any request by the Commission
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply the Parent with copies of all
-33-
<PAGE> 40
correspondence between the Company or any of its representatives, on the one
hand, and the Commission or its staff, on the other hand, with respect to the
Proxy Statement or the Merger. If at any time prior to the Stockholders Meeting
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail to
its stockholders and file with the Commission such an amendment or supplement.
The Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to the Company's stockholders unless it has first obtained the consent
of the Parent to such mailing, which consent will not be unreasonably withheld.
6.2 DISPOSITION OF THE SHARES. The Parent and the Purchaser shall
not, and they shall cause their direct and indirect subsidiaries not to, sell,
transfer, assign, encumber or otherwise dispose of the Shares beneficially owned
by the Parent, the Purchaser or their respective direct or indirect
subsidiaries, as of the date of this Agreement, or acquired pursuant to the
Offer or otherwise prior to the meeting of the Company's stockholders, if any is
required, pursuant to which the Shares are voted with respect to the Merger,
this Agreement and the transactions contemplated hereby; provided, however, that
this Section 6.2 shall not apply to the sale, transfer, assignment, encumbrance
or other disposition of any or all of such Shares in transactions involving
solely the Parent, the Purchaser and/or one or more of their direct or indirect
subsidiaries or in connection with any Qualified Acquisition Proposal (as
defined in Section 6.5).
6.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Section 6.3,
each party shall bear all of the fees and expenses incurred by it in connection
with the negotiation and performance of this Agreement, and neither party may
recover any such fees and expenses from the other party upon any termination of
this Agreement.
(b) The Company shall immediately pay to the Parent
$7,450,000 in cash if:
(i) the Trigger Event specified in Section
6.3(e)(i) shall have occurred, and the Parent shall have
elected to terminate this Agreement pursuant to Section
8.1(c)(iii); or
(ii) the Trigger Event specified in Section
6.3(e)(ii) shall have occurred; or
(iii) the Company shall have elected to terminate
this Agreement pursuant to Section 8.1(b)(v).
(c) In addition to any payment provided for above in this
Section 6.3, if (x) any of the events specified in Section 6.3(b)(i), (ii) or
(iii) shall have occurred or (y) the Parent terminates this Agreement pursuant
to Section 8.1(c)(iv), then, the Company shall
-34-
<PAGE> 41
immediately pay to the Parent an amount equal to the reasonable out-of-pocket
expenses incurred by the Parent and the Purchaser in connection with the
evaluation, negotiation, implementation and consummation of the transactions
contemplated by this Agreement (including fees and expenses of legal counsel,
solicitors, accountants, printers and financial advisors and investment
bankers); PROVIDED, HOWEVER, that, in no event shall the amount payable by the
Company pursuant to this Section 6.3(c) exceed $500,000. The Purchaser and the
Parent shall promptly provide the Company with invoices or other reasonable
evidence of such expenses upon written request by the Company, and the Parent
shall forthwith return any portion of expenses reimbursed by the Company as to
which such invoices or other evidence are not provided.
(d) Nothing contained in this Section 6.3 shall relieve
the Company of its obligation (except and to the extent otherwise permitted
pursuant to Section 6.5 below) to recommend that the Company's stockholders
accept and approve the Offer and the Merger. The provisions contained in this
Section 6.3 shall survive any termination of this Agreement.
(e) As used in this Agreement, the term "Trigger Event"
shall mean any of the following events:
(i) the Company's Directors, whether or not in
the exercise of their fiduciary or other legal duties, either
(A) shall have failed to approve or recommend, or shall have
withdrawn or adversely modified or taken a public position
materially inconsistent with its approval or recommendation
of, the Offer, the Merger or this Agreement or (B) take any
action (other than as expressly permitted under clauses (i)
and (ii) of the second sentence of Section 6.5(a)) with
respect to any Qualified Acquisition Proposal other than to
recommend rejection of the Qualified Acquisition Proposal
(including taking a position of neutrality or failing to take
any position within 10 business days after the making or
commencement of a Qualified Acquisition Proposal); or
(ii) prior to the final expiration of the Offer,
an Acquisition Proposal shall have become publicly known and
this Agreement is terminated (other than as a result of a
material breach of this Agreement by the Parent or the
Purchaser) and, within 12 months after such termination, (A)
the Company enters into a merger or other agreement that
contemplates the consummation of an Acquisition Proposal at a
price equal to or greater than the aggregate consideration
payable for Shares pursuant to the Offer and the Merger or (B)
the holders of Shares become entitled to receive consideration
per Share greater than the Merger Consideration in a
transaction or series of transactions in connection with an
Acquisition Proposal.
6.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to
-35-
<PAGE> 42
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, and to cooperate with each of the other parties
hereto in connection with the foregoing, including using all reasonable efforts:
(A) to obtain all necessary waivers, consents and approvals from other parties
to loan agreements, leases and other contracts; (B) to obtain all necessary
consents, approvals and authorizations as are required to be obtained under any
federal, state or foreign laws or regulations; (C) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby; (D) to effect
all necessary registrations and filings, including filings under the Hart-
Scott-Rodino Act and submissions of information requested by governmental
authorities; and (E) to fulfill all conditions to this Agreement. Each of the
Company, the Parent and the Purchaser further covenants and agrees that, prior
to the exercise by the Parent or the Purchaser of the right to terminate the
Offer under paragraphs (c) or (d) of ANNEX I hereto, each of the Company, the
Parent and the Purchaser shall use all reasonable efforts (which shall not be
construed to require the payment of any money to a third party or the
divestiture of or requirement to hold separate (through a trust or otherwise)
any business or assets) to prevent, with respect to a threatened or pending
preliminary or permanent injunction or other order, decree or ruling or statute,
rule, regulation or executive order specified in such paragraphs, the entry,
enactment or promulgation thereof, as the case may be. For purposes of the
foregoing, the obligation of the Parent and the Purchaser to use "all reasonable
efforts" to obtain waivers, consents and approvals to loan agreements, leases
and other contracts shall not include any obligation to agree to a modification
of the terms of such documents, except as expressly contemplated hereby or to
make any guaranty or monetary payment in consideration of such waiver, consent
or approval.
6.5 NO SOLICITATION.
(a) The Company shall not, and shall not authorize or
permit any of its Subsidiaries, or any of its or their officers, directors,
employees, representatives, agents or affiliates, including any investment
banker, attorney or accountant retained by the Company or any of its
Subsidiaries, to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal or offer that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below) or (ii) enter into, maintain, continue or otherwise
participate in any discussions or negotiations regarding any Acquisition
Proposal with any person, entity or group other than the Parent, the Purchaser
or their respective direct or indirect subsidiaries or affiliates (a "Third
Party"). Notwithstanding the foregoing, the Company, its Subsidiaries, and their
respective officers, directors, employees, representatives, agents and
affiliates, including any investment banker, attorney or accountant retained by
the Company or any of its Subsidiaries, may (i), in the case of a Qualified
Acquisition Proposal (as defined below) only, furnish or cause to be furnished
information concerning the Company's business, properties or assets to a Third
Party (subject to such Third Party executing a confidentiality agreement on
terms no less favorable to the Company than those in the confidentiality
agreement previously entered into by the Parent and the Company), (ii), in the
case of a Qualified Acquisition Proposal only, enter into, participate in,
conduct or
-36-
<PAGE> 43
engage in discussions or negotiations with such Third Party, (iii) to the extent
that the Board of Directors of the Company is required by its fiduciary duties,
as advised by counsel, take any position with respect to an Acquisition Proposal
in accordance with Rules 14a-9 and 14e-2 promulgated under the Exchange Act, and
(iv) may, in the case of a Qualified Acquisition Proposal only and only prior to
the acceptance for payment of that number of Shares tendered pursuant to the
Offer sufficient to satisfy the Minimum Condition and in compliance with the
provisions of this Section 6.5 (including Section 6.5(c)), enter into an
agreement to consummate a Qualified Acquisition Proposal. For purposes of this
Agreement, "Acquisition Proposal" means an inquiry, offer or proposal regarding
any of the following (other than the transactions contemplated by this
Agreement) involving the Company or its Subsidiaries: (i) any merger,
reorganization, consolidation, share exchange, recapitalization, business
combination, liquidation, dissolution, or other similar transaction involving,
or, any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of, all or any significant portion of the assets or 25% or more of the equity
securities of, the Company or any of its Subsidiaries, in a single transaction
or series of related transactions; (ii) any tender offer or exchange offer for
25% or more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith; or (iii) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing. For
purposes of this Agreement, "Qualified Acquisition Proposal" means an
unsolicited, bona fide, written Acquisition Proposal made by a Third Party that
the Board of Directors of the Company determines in its good faith judgment to
be more favorable to the Company's stockholders than the Offer and the Merger
(based on the opinion, with only customary qualifications, of the Company's
independent financial advisor that the value of the consideration to the
Company's stockholders provided for in such proposal exceeds the value of the
consideration to the Company's stockholders provided for in this Agreement by
the Offer and the Merger) and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of Directors of
the Company (based on the advice of the Company's independent financial
advisor), is reasonably capable of being obtained by such Third Party and which
Acquisition Proposal, in the good faith judgment of the Board of Directors of
the Company, is likely to be consummated. Nothing contained herein shall be
construed to prohibit the Company from making such disclosure to stockholders
that, in the judgment of the Board of Directors of the Company, as advised by
counsel, may be required by law or necessary to discharge any fiduciary duty
imposed thereby.
(b) The Company will immediately notify the Parent of,
and will disclose to the Parent all details of, (i) any Acquisition Proposal it
receives, (ii) any written indications that any person is interested in making
an Acquisition Proposal or (iii) the initiation and status of discussions or
negotiations relating to any Acquisition Proposal (it being understood that
pursuant to Section 6.3, any such Acquisition Proposal must be a Qualified
Acquisition Proposal). In the event that the Company furnishes any nonpublic
information to any party other than the Parent, it shall simultaneously provide
the Parent with copies of or access to all such information. Nothing in this
paragraph (b) shall be construed as interfering with the
-37-
<PAGE> 44
Company's obligations to its stockholders under Rule 14e-2 promulgated under the
Exchange Act.
(c) Notwithstanding any other provision in this
Agreement, the Company may not enter into any agreement with any Third Party in
connection with a Qualified Acquisition Proposal unless (i) at least three
business day prior thereto the Company shall have provided the Parent and the
Purchaser a copy of the Qualified Acquisition Proposal, (ii) within such three
business day period, the Parent and the Purchaser do not make an offer which, in
the good faith judgment of the Board of Directors of the Company (based on the
advice of the Company's independent financial advisor) is at least as favorable
to the Company's stockholders as such Acquisition Proposal, (iii) the Company
shall have terminated this Agreement pursuant to Section 8.1(b)(v) below, and
(iv) prior thereto the Company shall have paid the fees specified in Section
6.3(b) and shall have deposited $500,000 in trust with a Qualified Commercial
Bank for the payment of the expenses specified in Section 6.3(c).
(d) The Company will use reasonable efforts to have all
copies of all nonpublic information it or its officers, directors, employees,
representatives or affiliates have distributed on or prior to the date of this
Agreement to other potential purchasers returned to the Company as soon as
possible.
6.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to the Parent,
of (i) any representation or warranty made by the Company contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, or (ii) the failure by
the Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall be deemed to cure
any breach or otherwise affect the representations or warranties of the Company
or the conditions to the obligations of the parties hereunder.
(b) Without limiting the foregoing, the Company shall,
within 24 hours after it has notice of any of the following, notify the Parent
of:
(i) any notice or other communication from any
person alleging that the consent of such person is or may be
required in connection with the transactions contemplated by
this Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the transactions
contemplated by this Agreement; and
-38-
<PAGE> 45
(iii) any actions, suits, claims, investigations
or proceedings commenced or, to the best of its knowledge,
threatened against, relating to or involving or otherwise
affecting the Company or any Subsidiary which, if pending on
the date of this Agreement would have been required to have
been disclosed pursuant to this Agreement or which relate to
the consummation of the transaction contemplated hereby.
(c) The Parent shall give prompt notice to the Company of
(i) any representation or warranty made by the Parent or the Purchaser contained
in this Agreement that is qualified as to materiality becoming untrue or
inaccurate in any respect or any such representation or warranty that is not so
qualified becoming untrue or inaccurate in any material respect, or (ii) the
failure by the Parent or the Purchaser to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
them under this Agreement; provided, however, that no such notification shall be
deemed to cure any breach or otherwise affect the representations or warranties
of the Parent or the Purchaser or the conditions to the obligations of the
parties hereunder.
6.7 ACCESS TO INFORMATION. Except as restricted under applicable
law and the restrictions noted below, the Company shall, and shall cause its
Subsidiaries, and the Company's and such Subsidiaries' respective officers,
directors, employees and agents to, afford to the Parent and to the officers,
employees, representatives and agents of the Parent (including attorneys,
accountants and environmental consultants) reasonable access at reasonable
times, from the date hereof to the Effective Time, to the Company's and any
Subsidiary's officers, employees, agents, facilities, properties, books, records
and contracts, and shall furnish the Parent all relevant financial, operating
and other data and information as the Parent, through its officers, employees or
agents, may reasonably request, except for information (other than information
subject to disclosure to the Parent or the Purchaser pursuant to Section 6.5)
received or held by the Company pursuant to a confidentiality agreement with a
third party which confidentiality agreement would be breached by such
disclosure. Without limiting the generality of the foregoing, the parties
expressly agree that such access will include full cooperation with the Parent
in connection with any environmental investigation to be undertaken by the
Parent. All such investigations and access shall be conducted in a manner as not
to interfere unreasonably with the business operations of the Company. All
access to personnel and facilities of the Company or any Subsidiary prior to the
closing of the Offer shall be made only with the prior written consent of the
Chairman of the Board or the Chief Financial Officer, which consent shall not be
unreasonably withheld or delayed. In addition, the Company agrees to cooperate,
as reasonably requested, in connection with filings by the Parent or the
Purchaser (or any affiliate of the Parent or the Purchaser) with the Commission
(including registration statements), including, without limitation, obtaining
financial information and related accountants' consents for inclusion in the
Parent's or the Purchaser's (or any of their affiliates') Commission filings.
Without limiting the generality of the foregoing, the Company shall use its best
efforts to secure for the Company access to and copies of the workpapers of its
independent public accountants.
-39-
<PAGE> 46
6.8 INDEMNIFICATION AND INSURANCE.
(a) The Parent and the Purchaser agree that all rights to
indemnification, advancement of expenses, exculpation, limitation of liability
and any and all similar rights now existing in favor of the present or former
employees, agents, directors or officers of the Company and its Subsidiaries
(the "Indemnified Parties"), as provided in their respective charters or by-laws
in effect on the date hereof, shall survive the Offer and the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time and shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, employees or agents of the Company, unless such
modification shall be required by law; PROVIDED, HOWEVER, that in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect to any such claim or claims shall continue until the
disposition of any and all such claims.
(b) Subject to the terms and conditions of this Section
6.8, the Company shall, to the fullest extent permitted under applicable law and
regardless of whether the Merger becomes effective, indemnify and hold harmless,
and, after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted under applicable law, indemnify and hold harmless, each present
and former director, officer, employee, fiduciary and agent of the Company and
each Subsidiary and their respective heirs, executors, administrators, personal
representatives or assigns (collectively, the "Indemnified Parties") against all
costs and expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), whether civil, criminal, administrative or
investigative (a "Proceeding"), arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee, fiduciary or
agent, whether occurring before or after the Effective Time, to the same extent
as provided in the Company's Certificate of Incorporation or By-laws as in
effect on the date hereof, in each case for a period of six years after the date
hereof. In the event that any claim for indemnification is asserted or made
within such six-year period, all rights to indemnification in respect of such
claim shall continue until the disposition of such claim.
(c) Each Indemnified Party shall give written notice to
the Company or the Surviving Corporation, as the case may be (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any Proceeding resulting therefrom; provided, that counsel
for the Indemnifying Party, who shall conduct the defense of such Proceeding,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld, conditioned or delayed); and, provided, further, that the
failure of any Indemnified Party to given notice as provided herein shall not
relieve the Indemnifying Party of its obligations under Section 6.8(b) unless
and to the extent that the Indemnifying Party is adversely affected by such
failure. The Indemnified Party may participate in such defense at
-40-
<PAGE> 47
such party's expense; provided, however, that the Indemnifying Party shall pay
such expense if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding. In the event that the
Indemnifying Party does not assume the defense pursuant to this paragraph (c) of
any Proceeding of which the Indemnifying Party receives notice as provided
herein, any expenses incurred by the Indemnified Party in defending such
Proceeding shall be paid by the Indemnifying Party in advance of the final
disposition of such matter, provided, however, that the payment of such expenses
incurred by the Indemnified Party in advance of the final disposition of such
matter shall be made only upon receipt of an undertaking by or on behalf of the
Indemnified Party to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnified Party is not entitled to be
indemnified by the Indemnifying Party in accordance with this Section 6.8. The
Indemnified Party shall cooperate with the Indemnifying Party and provide access
to all documents necessary or beneficial to the defense of any Proceeding.
Neither the Company nor the Surviving Corporation shall be liable for any
settlement of any Proceeding effected without its written consent.
(d) In the event the Company or the Surviving Corporation
or any of their respective successors or assigns consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, then, and in each such case, the
Parent will either guaranty the indemnification obligations referred to in this
Section 6.8 or will make or cause to be made proper provision so that the
successors and assigns of the Company or the Surviving Corporation, as the case
may be, assume the indemnification obligations described herein for the benefit
of the Indemnified Parties.
(e) The provisions of this Section 6.8 are (i) intended
to be for the benefit of, and will be enforceable by, each of the Indemnified
Parties and (ii) in addition to, and not in substitution for, any other rights
to indemnification or contribution that any such person may have by contract or
otherwise.
(f) The Parent shall maintain in effect for three years
from the date of the Effective Time, if available, directors' and officers'
liability insurance policies covering the directors and officers of the Company
as of the date hereof, with coverages and other terms substantially as favorable
to such directors and officers as is currently in effect; PROVIDED, HOWEVER,
that the Parent shall not be required to spend more than an amount per year
equal to 150% of the current annual premium paid by the Company as of the date
hereof for such insurance; and provided, further, that if the premium for such
coverage exceeds such amount, the Parent shall purchase a policy with the
greatest coverage available for such 150% of the annual premium.
6.9 FILINGS AND OTHER MATTERS. The Company shall confer with the
Parent on a regular and frequent basis as reasonably requested by the Parent
concerning operational
-41-
<PAGE> 48
matters and promptly advise the Parent orally and in writing of any change or
event having, or which, insofar as reasonably can be foreseen, could have, a
Material Adverse Effect. The Company shall promptly provide to the Parent (or
its counsel) copies of all filings made by the Company with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
6.10 FAIR PRICE STRUCTURE. If any "fair price" or "control share
acquisition" or "anti-takeover" statute, or other similar statute or regulation
or any state "blue sky" statute shall become applicable to the transactions
contemplated hereby or by the Stockholders' Agreement, the Company and the
members or the Board of Directors of the Company shall grant such approvals and
take such actions as are necessary so that the transactions contemplated hereby
and thereby may be consummated as promptly as practicable on the terms
contemplated hereby and thereby, and otherwise act to minimize the effects of
such statute or regulation on the transactions contemplated hereby or thereby.
6.11 PARENT GUARANTY. The Parent hereby unconditionally and
irrevocably guarantees the Purchaser's obligations under this Agreement and
agrees to be liable for any breach of this Agreement by the Purchaser. The
guaranty described in this Section 6.11 is a guaranty of payment and not of
collection.
6.12 COMPANY OPTIONS.
(a) As of the Effective Time, the Parent shall assume the
Option Plan and the obligations of the Company thereunder and all of the Company
Options which are then outstanding shall be assumed by the Parent. Immediately
after the Effective Time, each such Company Option shall be deemed to constitute
an option to acquire, on the same terms and conditions as were applicable under
such Company Option immediately prior to the Effective Time, such number of
shares of common stock, par value $1.00 per share, of the Parent (the "Parent
Common Stock") as is equal to the number of Shares subject to such Company
Option immediately prior to the Effective Time multiplied by a fraction, the
numerator of which is the Merger Consideration and the denominator of which is
the average closing price of the Parent Common Stock on the New York Stock
Exchange, as reported in The Wall Street Journal (or if not so reported in
another authoritative source), for the ten trading days ending on the date of
the expiration of the Offer (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number). The exercise
price per share of each such assumed Company Option shall be equal to the per
share exercise price of such Company Option immediately prior to the Effective
Time multiplied by a fraction, the numerator of which is the average closing
price of the Parent Common Stock on the New York Stock Exchange, as reported in
The Wall Street Journal (or if not so reported in another authoritative source),
for the ten trading days ending on the date of the expiration of the Offer and
the denominator of which is the Merger Consideration (with any fraction
resulting from such multiplication to be rounded up to the nearest whole cent).
Except as otherwise provided in this Section 6.12, the term, exercisability,
vesting schedule, status as an "incentive stock option" under Section 422 of the
Code and all of the other terms of the Company
-42-
<PAGE> 49
Options shall otherwise remain unchanged. This Section 6.12 is intended to meet
the requirements of Section 424(a) of the Code and shall be interpreted
consistent with such intent.
(b) As soon as practicable after the Effective Time, the
Parent shall deliver to each holder of an outstanding Company Option an
appropriate notice setting forth such holder's rights pursuant to such Company
Options, as amended by this Section 6.12, and the agreements evidencing such
Company Options shall continue in effect on the same terms and conditions
(subject to the amendments provided for in this Section 6.12 and such notice).
(c) The Parent shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Company Options assumed in accordance with this
Section 6.12. As soon as practicable after the Effective Time, the Parent shall,
with respect to all shares of Parent Common Stock subject to such Options, (i)
either (x) file a Registration Statement on Form S-8 (or any successor form)
under the Securities Act or (y) file any necessary amendments to the Company's
previously filed Registration Statements on Form S-8 in order that the Parent
will be deemed a "successor registrant" thereunder, and, in either event, shall
use all reasonable efforts to maintain the effectiveness of such registration
statement for so long as such Company Options remain outstanding, and (ii) take
all actions necessary to have such shares of Parent Common Stock approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
Notwithstanding any other term of this Agreement, after the Effective Time, no
assumed Company Option may be exercised until such registration statement has
become effective and such approval has been obtained.
(d) The Company shall take all necessary actions pursuant
to the Option Plan and the agreements evidencing the Company Options to provide
for the assumption of the Company Options in accordance with this Section 6.12.
6.13 CERTAIN PAYMENTS. The Parent shall cause the Company to pay,
in accordance with their respective terms, all bonuses, severance payments,
accrued vacation pay and all other payments expressly set forth in Section 6.13
of the Disclosure Schedule to the persons set forth on such Disclosure Schedule
who will be terminated as of the closing of the Offer, within one business day
following payment and acceptance of the Shares in the Offer (except as otherwise
specifically set forth in Section 6.13 of the Disclosure Schedule, which shall
be paid in accordance therewith). The Company hereby represents and warrants
that, upon receipt of the payments listed in Section 6.13 of the Disclosure
Schedule, neither the Company nor any Subsidiary will have any further
obligation to any of the individuals listed in Section 6.13 other than (a)
pursuant to Company Options held by such individuals as set forth in Section 4.3
of the Disclosure Schedule or (b) as otherwise expressly provided for or
disclosed in this Agreement or the Disclosure Schedule.
-43-
<PAGE> 50
ARTICLE 7
CONDITIONS
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver by all parties at or prior to the Effective Time of
each of the following conditions:
(a) The Parent or the Purchaser shall have made, or
caused to be made, the Offer on the terms and conditions set forth therein and
shall have purchased, or caused to be purchased, all Shares validly tendered and
not withdrawn pursuant to the Offer;
(b) this Agreement and the Merger shall have been
approved and adopted by the requisite vote or consent of the stockholders of the
Company, if any, required by the Delaware Law and the Company's Certificate of
Incorporation;
(c) any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the Hart-Scott-Rodino Act
shall have expired or been terminated; and
(d) no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by any
Governmental Entity, nor any statute, rule, regulation or executive order
promulgated or enacted by any Governmental Entity, shall be in effect, which
would make the acquisition or holding by the Parent or its subsidiaries of the
Shares or shares of common stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger.
7.2 CONDITIONS TO THE PARENT'S AND THE PURCHASER'S OBLIGATION TO
EFFECT THE MERGER. The obligation of the Parent and the Purchaser to consummate
the Merger shall be further subject to the condition that, at or prior to the
Effective Time, all governmental and third-party consents and approvals required
to be obtained by the Company to consummate the Merger shall have been obtained,
except for (a) consents required under the Company's credit facility with
NationsBank, National Association as in effect on the date of this Agreement and
(b) such consents and approvals where the failure to obtain such consent or
approval would not have a Material Adverse Effect.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether prior to or after approval by the
stockholders of the Company, as follows:
-44-
<PAGE> 51
(a) Subject to Section 1.3, by mutual written consent of
the Boards of Directors of the Parent and the Company; or
(b) By the Company:
(i) if neither the Parent nor any of its
subsidiaries or affiliates shall have (A) publicly announced
its intention to make the Offer no later than the first
business day following the date of this Agreement or (B)
commenced the Offer within five business days of such
announcement unless such failure to commence the Offer is due
to the material breach of this Agreement by the Company; or
(ii) if, in the absence of any material breach of
this Agreement by the Company, (A) the Offer shall have been
terminated or the Purchaser shall have allowed the Offer to
expire without the purchase of such number of Shares
thereunder as satisfies the Minimum Condition (as defined in
ANNEX I hereto); or (B) neither the Parent nor any of its
subsidiaries or affiliates shall have paid for all Shares
validly tendered pursuant to the Offer and not withdrawn
within 60 days after the commencement of the Offer; or
(iii) if the Effective Time shall not have
occurred on or before March 31, 1999 due to a failure of any
of the conditions to the obligation of the Company to effect
the Merger set forth in Section 7.1; or
(iv) if, prior to the purchase of any Shares
pursuant to the Offer, the Parent or the Purchaser fails to
perform any of their respective obligations under this
Agreement and such failure or nonperformance materially
impairs the Parent's and the Purchaser's ability to consummate
the Offer or the Merger; or
(v) if the Company has, in accordance with the
terms of Section 6.5 above, entered into an agreement with a
Third Party to consummate a Qualified Acquisition Proposal; or
(vi) if there shall have been a breach of any
material representation and warranty of the Purchaser or the
Parent set forth herein prior to expiration or termination of
the Offer, which breach is not cured within five days
following written notice thereof by the Company to the
Purchaser and the Parent.
(c) By the Parent:
(i) if, due to an occurrence that would result
in a failure to satisfy any of the conditions set forth in
ANNEX I hereto, the Parent or any of its
-45-
<PAGE> 52
subsidiaries or affiliates shall have (A) failed to commence
the Offer within five business days of the date on which the
Purchaser's intention to make the Offer is publicly announced;
(B) terminated the Offer without the purchase of any Shares
thereunder; or (C) failed to pay for Shares pursuant to the
Offer within 60 days after the commencement of the Offer; or
(ii) if the Effective Time shall not have
occurred on or before March 31, 1999 due to a failure of any
of the conditions to the obligations of the Parent and the
Purchaser to effect the Merger set forth in Sections 7.1 and
7.2 otherwise than as a result of a material breach or default
by the Parent or the Purchaser hereunder; or
(iii) if a Trigger Event specified in Section
6.3(e)(i) occurs; or
(iv) if, prior to the purchase of any Shares
pursuant to the Offer, the Company fails to perform in any
respect any of its material obligations under this Agreement,
which failure to perform (other than a failure to perform an
obligation set forth in Section 6.5, as to which there shall
be no cure period) is not cured within five days following
written notice thereof by the Parent to the Company.
(d) By either the Company or the Parent, if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger and such order, decree or ruling or other action shall have become final
and nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this provision shall have performed its obligations under
Section 6.4.
(e) Notwithstanding any other provision of this
Agreement, the termination of this Agreement by the Company pursuant to Section
8.1(b)(v) above shall be of no force or effect unless prior thereto the Company
shall have complied with Section 6.5(c) above.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, all obligations and agreements of the
parties set forth in this Agreement shall forthwith terminate and be of no
further force or effect, and there shall be no liability on the part of the
Parent, the Purchaser or the Company hereunder, except as set forth in Section
6.3 or Section 9.4; provided that the foregoing shall not relieve any party for
liability for damages actually incurred as a result of any breach of this
Agreement.
8.3 AMENDMENT. This Agreement may not be amended except, subject
to Section 1.3, by action of the Board of Directors of each of the parties
hereto set forth in an instrument in writing signed on behalf of each of the
parties hereto; provided, however, that if this Agreement and the Merger are
subject to stockholder approval then, after such approval,
-46-
<PAGE> 53
no amendment shall be made which by law requires further approval by such
stockholders without obtaining such further approval.
8.4 WAIVER. At any time prior to the Effective Time, whether
before or after any special meeting of the stockholders of the Company to vote
on the Merger, any party hereto, subject to Section 1.3, by action taken by its
Board of Directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) waive compliance
with any of the agreements of any other party or with any conditions to its own
obligations; provided, however, that if this Agreement and the Merger are
subject to stockholder approval then, after such approval, no waiver shall be
made which by law requires further approval by such stockholders without
obtaining such further approval. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party by a duly authorized officer. For
purposes of this Section 8.4, the Parent and the Purchaser shall be considered
to be one party.
ARTICLE 9
GENERAL PROVISIONS
9.1 PUBLICITY. The Parent and the Purchaser, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other with a reasonable opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue, or permit any of their respective subsidiaries to issue, any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange or
national securities quotation system, in which case the party making such
release will use reasonable efforts to obtain comments from the other party
before issuance of such release or statement. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.
9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been fully given if (i) delivered
personally, (ii) sent by certified or registered mail, return receipt requested,
(iii) sent by overnight courier for delivery on the next business day or (iv)
sent by confirmed telecopy, provided that a confirmation copy of all such
telecopied materials is thereafter sent within 24 hours in the manner described
in clauses (i), (ii) or (iii), to the parties at the following addresses or at
such other addresses as shall be
-47-
<PAGE> 54
specified by the parties by like notice:
(a) If to the Parent or the Purchaser:
EG&G, Inc.
45 William Street
Wellesley, Massachusetts 02181
Attention: General Counsel
Telecopy No.: 781-431-4115
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
Telecopy No.: 617-526-5000
(b) If to the Company:
Lumen Technologies, Inc.
555 Theodore Fremd Avenue
Suite B302
Rye, New York 10580
Attention: President
Telecopy No.: 914-967-9405
with a copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
Attention: Robert L. Lawrence, Esq.
Telecopy No.: 212-245-3009
Notices provided in accordance with this Section 9.2 shall be deemed
delivered (i) on the date of personal delivery, (ii) four business days after
deposit in the mail, (iii) one business day after delivery to an overnight
courier, or (iv) on the date of confirmation of the telecopy transmission, as
the case may be.
9.3 INTERPRETATION. When a reference is made in this Agreement to
an Article or a Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this
-48-
<PAGE> 55
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, including ANNEX I, they shall be deemed to be followed by the
words "without limitation". As used in this Agreement, including ANNEX I, the
term "subsidiary" of any person means another person whether foreign or
domestic, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first person. For avoidance of doubt, the parties acknowledge
that Voltarc Technologies, Inc. is a Subsidiary of the Company. As used in this
Agreement, including ANNEX I, the term "affiliate" of any person means any
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first person.
For purposes of this Agreement, the Company shall not be deemed to be an
affiliate or subsidiary of the Purchaser or the Parent. Inclusion of information
in the Disclosure Schedule does not constitute an admission or acknowledgment of
the materiality of such information. For purposes of this Agreement, "business
day" shall have the meaning set forth in Rule 14d-1(c)(6) of the Exchange Act.
9.4 REPRESENTATIONS AND WARRANTIES; ETC. The respective
representations and warranties of the Company, the Parent and the Purchaser
contained herein shall expire with, and be terminated and extinguished upon, the
Effective Time. This Section 9.4 shall have no effect upon any other obligation
of the parties hereto, which by their terms contemplate performance after the
Effective Time. If this Agreement shall terminate after acceptance for payment
by the Purchaser of Shares pursuant to the Offer, but prior to the Effective
Time, the agreements of the parties contained in Sections 6.3, 6.8, 6.11 and
6.13 shall also survive the termination of this Agreement.
9.5 MISCELLANEOUS. This Agreement together with the
Confidentiality Agreement between the Parent and the Company dated June 9, 1998
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement (i) except as provided in
Sections 6.8, 6.11 and 6.13 is not intended to confer upon any other person any
rights or remedies hereunder, create any agreement of employment with any person
or otherwise create any third-party beneficiary hereto; (ii) shall not be
assigned, except that the Purchaser may assign its rights and obligations to one
or more direct or indirect wholly owned subsidiaries of the Parent which in a
written instrument shall make all the representations and warranties of the
Purchaser set forth herein and shall agree to assume all of the Purchaser's
obligations hereunder and be bound by all of the terms and conditions of this
Agreement; provided, however, that no such assignment shall relieve the Parent
or the Purchaser of its obligations hereunder; and (iii) shall be governed in
all respects, including validity, interpretation and effect, by the internal
laws of the State of Delaware, without giving effect to the principles of
conflict of laws thereof.
-49-
<PAGE> 56
9.6 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
[Remainder of page intentionally left blank.]
-50-
<PAGE> 57
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
EG&G, INC.
By: /s/ Gregory L. Summe
---------------------------------------
Name: Gregory L. Summe
Title: President and
Chief Operating Officer
LIGHTHOUSE WESTON CORP.
By: /s/ Daniel T. Heaney
---------------------------------------
Name: Daniel T. Heaney
Title: Treasurer
LUMEN TECHNOLOGIES, INC.
By: /s/ Martin Franklin
---------------------------------------
Name: Martin E. Franklin
Title: Chairman Of The Board
-51-
<PAGE> 58
ANNEX I
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer or this Agreement,
the Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, to pay for any Shares tendered pursuant to the Offer
unless the number of Shares tendered and not withdrawn not later than the date
and time of expiration of the Offer, shall equal at least a majority of the
Fully Diluted Shares (as defined below) (such number of Shares, the "Minimum
Condition"). For purposes of this Agreement: "Fully Diluted Shares" shall mean
all outstanding securities entitled generally to vote in the election of
directors of the Company after giving effect to the exercise or conversion of
all options, rights and securities exercisable or convertible into such voting
securities (other than (i) the exercise of Company Options that are exercisable
for Shares that would, following such exercise, be subject to the Stockholders'
Agreement and (ii) conversion of the Convertible Notes).
Furthermore, notwithstanding any other provisions of the Offer or this
Agreement, the Purchaser shall not be required to accept for payment or, subject
as aforesaid, to pay for any Shares tendered pursuant to the Offer unless all
applicable waiting periods under the Hart-Scott- Rodino Act shall have expired
or been terminated.
Furthermore, notwithstanding any other provisions of the Offer or this
Agreement, the Purchaser shall not be required to accept for payment or, subject
as aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate the Offer if, at any time on or after the date of this
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exists:
(a) the Purchaser is not entitled to vote its Shares for the
Merger; or
(b) except for matters (i) which are attributable to the
announcement or performance of this Agreement and the transactions contemplated
hereby or (ii) which generally affect the economy or the industry in which the
Company is engaged, any change shall have occurred in the condition (financial
or other), results of operations, stockholders' equity, business, assets,
properties, liabilities or capitalization of the Company and its Subsidiaries
which has resulted in a Material Adverse Effect; or
(c) there shall have been instituted or pending before any
Governmental Entity any action, proceeding, application, claim or counterclaim
or any judgement, order or injunction sought or any other action taken by any
Governmental Entity or by any person who has made an Acquisition Proposal, which
(i) challenges the acquisition by the Parent or the Purchaser (or any other
affiliate of the Parent) of any Shares pursuant to the Offer, the Merger or the
Stockholders' Agreement, restrains, prohibits or materially delays the making or
A-1
<PAGE> 59
consummation of the Offer or the Merger or the transactions contemplated by the
Agreement or the Stockholders' Agreement, prohibits the performance of any of
the contracts or other arrangements entered into by the Parent or the Purchaser
(or any other affiliates of the Parent) in connection with the acquisition of
the Company, seeks to obtain any material amount of damages, or otherwise
directly or indirectly materially adversely affects the Offer or the Merger or
the transactions contemplated by the Agreement or the Stockholders' Agreement,
(ii) seeks to prohibit or limit materially the ownership or operation by the
Company, the Parent or the Purchaser (or any other affiliate of the Parent) of
all or any material portion of the business or assets of the Company and its
Subsidiaries taken as a whole or of the Parent and its affiliates, or to compel
the Company, the Parent or the Purchaser (or any other affiliate of the Parent)
to dispose of or to hold separate all or any material portion of the business or
assets of the Parent or any of its affiliates or of the Company or any of its
Subsidiaries as a result of the transactions contemplated by the Agreement,
(iii) seeks to impose any material limitation on the ability of the Company, the
Parent, the Purchaser (or any other affiliate of the Parent) to conduct the
Company's or any Subsidiary's business or own such assets, (iv) seeks to impose
or confirm any material limitation on the ability of the Parent or the Purchaser
(or any other affiliate of the Parent) to acquire or hold, or to exercise full
rights of ownership of, any Shares, including the right to vote such Shares on
all matters properly presented to the stockholders of the Company, (v) seeks to
require divestiture by the Purchaser or any of its affiliates of all or any of
the Shares, or (vi) otherwise has resulted in, or has a substantial likelihood
of resulting in, a Material Adverse Effect; or
(d) there shall have been entered or issued any preliminary or
permanent judgement, order, decree, ruling or injunction or any other action
taken by any Governmental Entity, whether on its own initiative or the
initiative of any other person, which (i) restrains, prohibits or materially
delays the making or consummation of the Offer or the Merger or the transactions
contemplated by the Agreement or the Stockholders' Agreement, prohibits the
performance of any of the contracts or other arrangements entered into by the
Parent or the Purchaser (or any other affiliates of the Parent) in connection
with the acquisition of the Company or otherwise directly or indirectly
materially adversely affects the Offer or the Merger or the transactions
contemplated by the Agreement or the Stockholders' Agreement, (ii) prohibits or
limits materially the ownership or operation by the Company, the Parent or the
Purchaser (or any other affiliate of the Parent) of all or any material portion
of the business or assets of the Company and its Subsidiaries taken as a whole
or of the Parent and its affiliates, or compels the Company, the Parent or the
Purchaser (or any other affiliate of the Parent) to dispose of or to hold
separate all or any material portion of the business or assets of the Parent or
any of its affiliates or of the Company or any of its Subsidiaries as a result
of the transactions contemplated by the Agreement, (iii) imposes any material
limitation on the ability of the Company, the Parent, the Purchaser (or any
other affiliate of the Parent) to conduct the Company's or any Subsidiary's
business or own such assets, (iv) imposes or confirms any material limitation on
the ability of the Parent or the Purchaser (or any other affiliate of the
Parent) to acquire or hold, or to exercise full rights of ownership of, any
Shares, including the right to vote such Shares on all matters properly
presented to the stockholders of the Company, (v) requires divestiture by the
Purchaser or any of its affiliates
A-2
<PAGE> 60
of all or any of the Shares, or (vi) otherwise has resulted in, or has a
substantial likelihood of resulting in, a Material Adverse Effect; or
(e) there shall be any statute, rule or regulation enacted,
promulgated, entered, enforced or deemed applicable to the Offer, the Merger,
the Agreement or the Stockholders' Agreement, or any other action shall have
been taken by any Government Entity, other than the routine application to the
Offer, the Merger or the transactions contemplated by the Stockholders'
Agreement of waiting periods under the Hart-Scott-Rodino Act that results in,
directly or indirectly, any of the consequences referred to in clauses (i)
through (vi) of paragraph (c) above; or
(f) the Company shall have failed to perform any material
obligation or to comply with any material agreement or covenant of the Company
to be performed or complied with by it under this Agreement within five days
following written notice of such failure by the Parent to the Company; or
(g) (i) the Board of Directors of the Company or any committee
thereof shall have (A) withdrawn or modified in a manner adverse to the Parent
or the Purchaser its approval or recommendation of the Offer, the Merger, this
Agreement or the Stockholders' Agreement or (B) approved or recommended any
Acquisition Proposal, (ii) the Company shall have entered into, or publicly
announced its intention to enter into, any agreement with respect to any
Acquisition Proposal or (iii) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing; or
(h) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall have been
breached or not be true and correct in any respect or any such representations
and warranties that are not so qualified shall have been breached or not be true
and correct in any material respect, in each case at the date of the Agreement
(except to the extent that any such representation or warranty refers
specifically to another date, in which case such representation or warranty
shall be true and correct as of such other date); or
(i) except as to matters which are attributable to the
announcement or performance of this Agreement and the transactions contemplated
hereby, any of the representations and warranties of the Company set forth in
this Agreement that are qualified as to having or resulting in a Material
Adverse Effect shall have been breached or not be true and correct in any
respect or any such representations and warranties that are not so qualified
shall have been breached or not be true and correct and the effect of such
breach or failure to be true or correct shall be that the matter shall have a
Material Adverse Effect, in each case at the scheduled or extended expiration of
the Offer (except to the extent that any such representation or warranty refers
specifically to another date, in which case such representation or warranty
shall be true and correct as of such other date); or
(j) this Agreement shall have been terminated in accordance with
its terms.
A-3
<PAGE> 61
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser (and the other affiliates of the Parent) and may be asserted by the
Parent and the Purchaser (and the other affiliates of the Parent) regardless of
the circumstances giving rise to any such condition and may be waived by the
Parent or the Purchaser, in whole or in part, at any time and from time to time,
in their sole discretion. The failure by the Parent or the Purchaser at any time
to exercise any of the foregoing rights will not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right will be deemed an ongoing right that may be
asserted at any time and from time to time.
Terms used in this ANNEX I but not defined herein shall have the
meanings assigned to such terms in the Agreement of which this ANNEX I is a
part.
A-4
<PAGE> 1
EXHIBIT 2
October 21, 1998
Board of Directors
Lumen Technologies, Inc.
International Corporate Center at Rye
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of common stock of Lumen Technologies, Inc. ("Lumen" or
the "Company") of the consideration to be paid to the shareholders of Lumen by
EG&G, Inc. ("EG&G") in the tender offer ("Offer") and the merger ("Merger")
transactions (the Offer and Merger are hereinafter collectively referred to as
the "Transaction") contemplated by the draft definitive agreement (the "Merger
Agreement") dated October 19, 1998. The terms of the Transaction include, among
other things, that EG&G will offer to acquire all of the stock of Lumen in
exchange for $7.75 net in cash per share of Lumen.
In connection with our review of the Transaction and the preparation of
this opinion, we have examined (i) the financial terms and conditions of the
Transaction as contained in the executed Merger Agreement, (ii) the audited
financial statements of the Company for the years ended December 31, 1996 and
1997, (iii) the unaudited interim financial statements of the Company for the
periods ending March 31 and June 30, 1998 and the draft unaudited interim
financial statements for the period ending September 30, 1998, (iv) certain
internal financial forecasts and projections prepared by the management of the
Company for the Company and (v) certain other publicly available financial
information. Additionally, we held discussions with senior management of the
Company regarding past and current operations and the financial condition and
prospects of the Company, and considered other matters which we deemed relevant
to our inquiry.
We have assumed and relied upon the accuracy and completeness of all such
information provided to us or publicly available and have not independently made
any attempt to verify such information. We have not made any attempt to make or
obtain an independent appraisal of the value of the assets or the liabilities
(contingent or otherwise) of the Company. This opinion is not meant to be an
indication of the price at which Lumen's common stock will trade at any time or
a recommendation as to any action a Lumen shareholder should take. With respect
to all information provided by management of Lumen, we have assumed that it
represents the best currently available knowledge and judgment of such
management and has been reasonably prepared. We have relied on the management of
Lumen to advise us promptly if any information previously provided became
inaccurate or was required to be updated during the period of our review.
We express no opinion as to the underlying business decision to effect the
Transaction or the availability or advisability of any alternatives to the
Transaction. Raymond James did not structure the Transaction or negotiate the
terms of the Transaction.
We have also been assured by Lumen's management that the Company is not
party to any pending material transactions including, but not limited to,
external financing, recapitalizations, acquisitions or merger discussions, other
than the Transaction. Our opinion is based on market, financial, economic and
other conditions existing as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of the Company and certain other
companies we believe to be comparable to the Company, including other companies
in the lighting industry, (ii) the current financial position and operating
results of the Company and forecasted results of the Company, (iii) the
historical market prices and trading activities of the Company's common stock,
(iv) reported financial terms of business combinations comparable to the
Ex. 2-1
<PAGE> 2
Board of Directors
Lumen Technologies, Inc.
October 21, 1998
Page 2
Transaction, (v) the consideration to be paid in the Transaction, and (vi) the
general condition of the securities markets, and (vii) such other financial
criteria as we deemed appropriate.
Raymond James & Associates, Inc. ("Raymond James") is actively involved in
investment banking activities and regularly undertakes the evaluation of
investment securities in connection with public offerings, private placements,
business combinations and similar transactions. Raymond James has been paid a
fee by the Company for services provided pursuant to this engagement and will be
paid an additional fee for this opinion upon closing of the Transaction. In
addition, the Company has agreed to reimburse Raymond James for its expenses
incurred during this engagement and to indemnify Raymond James against certain
liabilities arising out of issuance of this opinion.
In the ordinary course of business, Raymond James may trade in the
securities of Lumen for Raymond James' own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors of Lumen. This letter does not constitute a recommendation of any type
to any shareholder as to whether such shareholder should tender or how such
shareholder should vote his shares in connection with the Transaction, and is
not intended to confer rights or remedies upon EG&G or its affiliates or the
shareholders of Lumen. Except as provided in our engagement letter with Lumen,
this opinion is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering or sale of securities, without our prior
written consent. We have consented to the inclusion of this opinion in documents
to be filed with the Securities and Exchange Commission or with any court or
other governmental agency in connection with the Transaction.
Based upon and subject to the foregoing, it is our opinion that as of
October 21, 1998 the cash consideration to be received by the holders of Lumen
common stock (other than EG&G and its affiliates) in the Transaction is fair,
from a financial point of view, to the Company and its shareholders.
Very truly yours,
RAYMOND JAMES & ASSOCIATES, INC.
Ex. 2-2
<PAGE> 1
[LUMEN TECHNOLOGIES LETTERHEAD]
October 27, 1998
To Our Stockholders:
Your Board of Directors is pleased to inform you that on October 21, 1998,
Lumen Technologies, Inc. (the "Company") entered into an Agreement and Plan of
Merger (the "Merger Agreement") with EG&G, Inc., a Massachusetts corporation
(the "Parent"), and Lighthouse Weston Corp. (the "Purchaser"), a Delaware
corporation and a wholly owned subsidiary of the Parent, pursuant to which
Purchaser has commenced a tender offer (the "Offer") to purchase all outstanding
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), at a purchase price of $7.75 per share, net to the seller in cash,
without interest thereon. Following the successful completion of the Offer and
the satisfaction of the other conditions set forth in the Merger Agreement (but
in no event prior to January 11, 1999, unless so requested by the Parent), the
Purchaser will be merged with and into the Company (the "Merger"), and each
share of the Company's untendered Common Stock will be converted into the right
to receive $7.75 net per share in cash, the same price per share paid pursuant
to the Offer.
Your Board of Directors has unanimously determined that the Offer and the
Merger are fair to, and in the best interests of, the stockholders of the
Company, has approved and found advisable the Merger Agreement, the Offer and
the Merger and recommends that the stockholders of the Company accept the Offer
and tender their Shares pursuant to the Offer.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Raymond James & Associates, Inc.,
the Company's investment banker, that the cash consideration to be received by
stockholders of the Company in payment for the Common Stock pursuant to the
Offer and the Merger is fair to the Company and such stockholders from a
financial point of view. The enclosed Schedule 14D-9 describes the Board's
decision and contains other important information relating to that decision. We
urge you to read it carefully.
Accompanying this letter, in addition to the Schedule 14D-9, is the Offer
to Purchase, together with related materials including a Letter of Transmittal
for use in tendering shares. These documents set forth the terms and conditions
of the Offer and provide instructions as to how you can tender your Common
Stock. We urge you to read the enclosed materials carefully and consider all the
factors set forth therein before making your decision with respect to the Offer.
The management and directors thank you for the support you have given the
Company.
Sincerely,
MARTIN E. FRANKLIN
Chairman of the Board of Directors
<PAGE> 1
[EG&G LETTERHEAD]
FOR IMMEDIATE RELEASE
- ---------------------
21 October 1998
EG&G AND LUMEN TECHNOLOGIES ANNOUNCE ACQUISITION
------------------------------------------------
$250M DEAL BROADENS EG&G'S SPECIALTY LIGHTING PRODUCT OFFERING
--------------------------------------------------------------
WELLESLEY, MASS ... EG&G, Inc (NYSE: EGG) and Lumen Technologies, Inc.
(NYSE: LNM), Rye, New York, jointly announced today that they have entered into
a definitive agreement for EG&G to acquire Lumen, a maker of high-technology
specialty light sources for approximately $250 million in cash and assmed debt.
The acquisition has been approved by the Boards of both companies. Under the
agreement, a wholly owned subsidiary of EG&G will commence a tender offer to
purchase all outstanding shares of Lumen common stock for $7.75 per share in
cash. The offer will be conditioned upon the tender of at least a majority of
the Lumen common shares outstanding and certain other conditions. Following
consummation of the offer, EG&G's subsidiary will be merged with Lumen and any
remaining shares of Lumen common stock will be converted into the right to
receive $7.75 per share.
As a result of this acquisition, Lumen will add a product line that includes
high-intensity specialty discharge lamps for medical fiberoptic illumination,
cinema projection and stage and studio lighting to EG&G's Optoelectronics
product offerings. EG&G products include specialty flashlamps, as well as
flashtubes used every year in more than 100 million single use cameras.
Together, the companies will be positioned to serve a diverse customer base in
high-growth, specialty light-source markets.
Lumen had pro forma 1997 sales of $138.4 million and pro forma six month 1998
sales of $77 million. Lumen has an employee base of 1,140 and operations in
California, Connecticut, the United Kingdom and Italy.
EG&G Chairman and CEO John M. Kucharski said: "The acquisition of Lumen
Technologies reinforces and complements EG&G's positioning strategy. It
provides a broading vehicle for EG&G's technology to move up the
optoelectronics value chain."
"Lumen Technologies is a strong strategic fit for EG&G and will complement our
Optoelectronics' product mix," explained Gregory L. Summe, EG&G President and
COO. "Our combined manufacturing, selling, distribution and R&D expertise will
greatly improve our ability to serve our customers.
"This is a win-win situation," Summe continued. "We gain a company renowned for
developing state-of-the-art lamps and related products used for medical and
projection applications and we gain access to leading suppliers of medical
fiberoptic systems. Lumen benefits from our low-cost manufacturing facilities
and the opportunity to work with suppliers for the major components of lamps
and related systems. We expect this acquisition to be slightly accretive to
1999 earnings per share."
-more-
<PAGE> 2
EG&G AND LUMEN TECHNOLOGIES ANNOUNCE ACQUISITION
PAGE 2 OF 2
Lumen Technologies Chairman Martin E. Franklin said: "EG&G and Lumen
Technologies are a perfect fit. Through this combination, Lumen will have the
capacity to generate faster growth than it could as an independent company.
EG&G is acquiring a company with industry-leading management and technology.
We wish EG&G every success."
The 51-year history of EG&G started with high-technology application of light.
EG&G founder Harold "Doc" Edgerton commercialized the use of the stroboscopic
light for engineering analyses and built the Company from there. Today, the
EG&G Optoelectronic Strategic Business Unit designs and manufactures optical
sensors ranging from simple photocells to sophisticated imaging systems, light
sources that include flashlamps and laser diodes, and complex devices for
secure pyrotechnic arming and triggering. Micromachined sensors and amorphous
silicon detectors are part of the EG&G product line.
FORWARD-LOOKING INFORMATION
This press release contains a number of "forward-looking statements", including
statements about the expected consummation of EG&G's acquisition of Lumen, the
future benefits EG&G expects to derive as a result of this acquisition and the
effect of the acquisition on 1999 earnings. There are a number of important
factors that could cause actual events or results to differ materially from
those expected or indicated by such statements. These factors include, without
limitation, and the risk that the acquisition may not be consummated, EG&G's
success in integrating Lumen into its own operations, and the risk that
anticipated benefits of acquisitions may not occur or may be delayed or reduced
in their realization.
EG&G, Inc. is a global technology company that provides complete systems, as
well as products to medical, aerospace, semiconductor, photographic and other
industries. It delivers skilled support services to government and industrial
customers. Based in Wellesley, Massachusetts, EG&G has annual sales of $1.4
billion and about 12,000 employees worldwide.
###
For further information:
EG&G Lumen Technologies
- ---- ------------------
Financial Inquiries
Deborah S. Lorenz Martin E. Franklin, Chairman
Vice President (914) 976-9400
Investor Relations and
Corporate Communications
(781) 431-4306
Media
Martin A. Reynolds
Manager of Corporate Communications
(781) 431-4282
<PAGE> 1
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of October
21, 1998, is made by and among EG&G, Inc., a Massachusetts corporation (the
"Parent"), Lighthouse Weston Corp., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Purchaser"), and the holders (the "Stockholders")
of the shares of Common Stock, $0.01 par value (the "Shares"), of Lumen
Technologies, Inc., a Delaware corporation (the "Company"), listed on SCHEDULE A
hereto.
WHEREAS, concurrently herewith, the Parent, the Purchaser and the
Company are entering into an Agreement and Plan of Merger (as it may be amended
from time to time in the future in accordance with its terms, the "Merger
Agreement"), pursuant to which the Purchaser agrees to make a tender offer (the
"Offer") for all of the Shares at $7.75 per share, net to the seller in cash, to
be followed by the merger of the Purchaser with and into the Company (the
"Merger"), with the Company being the entity surviving the Merger and becoming a
wholly owned subsidiary of the Parent; and
WHEREAS, in order to induce the Parent and the Purchaser to enter into
the Merger Agreement, the Parent and the Purchaser have requested the
Stockholders, and the Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO TENDER
Section 1.1 TENDER OF SHARES. Each Stockholder hereby agrees to
validly tender, and not to withdraw, pursuant to and in accordance with the
terms of the Offer, (i) within five business days after the commencement of the
Offer, all Shares owned by such Stockholder as of the execution and delivery of
this Agreement (as indicated on SCHEDULE A hereto) and, (ii) prior to the
scheduled expiration of the Offer, any additional Shares hereafter acquired by
such Stockholder (whether by purchase, exercise of options or otherwise).
Section 1.2 PROCEDURE FOR TENDERING. Within the time periods
specified in Section 1.1, the Stockholder shall deliver to the depositary
designated in the Offer (i) a duly completed and signed letter of transmittal
with respect to the Shares required to be tendered pursuant to Section 1.1, (ii)
certificates representing such Shares and (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Offer.
<PAGE> 2
Section 1.3 PAYMENT OF OFFER PRICE. The parties agree that each
Stockholder will, for all Shares tendered in the Offer and accepted for payment
and paid for by the Purchaser, receive the same per share consideration paid to
other stockholders of the Company who have tendered Shares into the Offer.
ARTICLE II
VOTING AGREEMENT; IRREVOCABLE GRANT OF PROXY
Section 2.1 VOTING AGREEMENT. Each Stockholder hereby agrees to vote
all Shares that such Stockholder is entitled to vote at the time of any vote to
approve and adopt the Merger Agreement, the Merger and all agreements related to
the Merger and any actions related thereto at any meeting of the stockholders of
the Company, and at any adjournment thereof (or by written consent in lieu of a
meeting), at which such Merger Agreement and other related agreements (or any
amended version thereof), or such other actions, are submitted for the
consideration and vote of the stockholders of the Company. Each Stockholder
hereby agrees that it will not vote (or give a written consent with respect to)
any Shares in favor of the approval of any (i) Acquisition Proposal, (ii)
reorganization, recapitalization, liquidation or winding up of the Company or
any other extraordinary transaction involving the Company, (iii) corporate
action the consummation of which would frustrate the purposes, or prevent or
delay the consummation, of the transactions contemplated by the Merger
Agreement, or (iv) other matter relating to, or in connection with, any of the
foregoing matters.
Section 2.2 IRREVOCABLE PROXY. Each Stockholder hereby revokes any
and all previous proxies granted with respect to such Stockholder's Shares. Each
Stockholder hereby grants a proxy appointing the Purchaser as such Stockholder's
attorney-in-fact and proxy, with full power of substitution, for and in such
Stockholder's name, to vote, express consent or dissent, or otherwise to utilize
such voting power in such manner and upon such matters as the Purchaser or its
proxy or substitute shall, in the Purchaser's sole discretion, deem proper with
respect to such Stockholder's Shares. The proxy granted by each Stockholder
pursuant to this Section 2.2 is irrevocable and is granted in consideration of
the Purchaser's entering into this Agreement and the Merger Agreement and
incurring certain related fees and expenses. The proxy grant by each Stockholder
shall be revoked upon termination of this Agreement in accordance with its
terms. At the Purchaser's request, each Stockholder shall perform such further
acts and execute such further documents as may reasonably be required to vest in
the Purchaser the sole power to vote the Shares during the term of the proxy
granted herein.
-2-
<PAGE> 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to the
Purchaser that:
Section 3.1 VALID TITLE. Such Stockholder is the sole, true, lawful
beneficial owner of such Stockholder's Shares with no restrictions on such
Stockholder's voting rights or rights of disposition pertaining thereto, other
than restrictions imposed under applicable securities laws. None of such
Stockholder's Shares is subject to any voting trust or other agreement or
arrangement with respect to the voting of such Shares.
Section 3.2 NON-CONTRAVENTION. The execution, delivery and
performance by such Stockholder of this Agreement and the consummation of the
transactions contemplated hereby (i) are within such Stockholder's powers, have
been duly authorized by all necessary action (including any consultation,
approval or other action by or with any other person), (ii) require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority (except as required under Section 16 of the Exchange Act), and (iii)
do not and will not contravene or constitute a default under, or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
such Stockholder or to a loss of any benefit of such Stockholder under, any
statute, rule or regulation applicable to such Stockholder, or injunction,
order, decree, or other instrument binding on such Stockholder or result in the
imposition of any lien on any asset of such Stockholder.
Section 3.3 BINDING EFFECT. This Agreement has been duly executed and
delivered by such Stockholder and is the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and except as may be
limited by general principles of equity which may limit the availability of
remedies (whether in a proceeding at law or in equity). If this Agreement is
being executed in a representative or fiduciary capacity, the person signing
this Agreement has full power and authority to enter into and perform such
Agreement.
Section 3.4 TOTAL SHARES. The number of Shares set forth on
SCHEDULE A hereto are the only Shares legally or beneficially owned by such
Stockholder and, except as set forth on SCHEDULE A or Section 4.3 of the
Disclosure Schedule, such Stockholder owns no options to purchase or rights to
subscribe for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any securities of the
Company.
-3-
<PAGE> 4
Section 3.5 FINDER'S FEES. No investment banker, broker or finder is
entitled to a commission or fee from the Company in respect of this Agreement
based upon any arrangement or agreement made by or on behalf of such
Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER AND THE PARENT
Each of the Purchaser and the Parent represents and warrants to each of
the Stockholders that the Purchaser and the Parent has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by each of the Purchaser and
the Parent of this Agreement and the consummation by the Purchaser and the
Parent of the transactions contemplated hereby have been duly authorized by the
Board of Directors of each of the Purchaser and the Parent, and no other
corporate action on the part of the Purchaser or the Parent is necessary to
authorize the execution, delivery or performance by the Purchaser and the Parent
of this Agreement and the consummation by the Purchaser and the Parent of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and the Parent and is a valid and binding agreement
of the Purchaser and the Parent, enforceable against each of them in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
except as may be limited by general principles of equity which may limit the
availability of remedies (whether in a proceeding at law or in equity).
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
Section 5.1 NO PROXIES FOR OR ENCUMBRANCES ON STOCKHOLDER SHARES.
Except as provided in this Agreement, such Stockholder shall not, during the
term of this Agreement, without the prior written consent of the Purchaser,
directly or indirectly, (i) grant any proxies or enter into any voting trust or
other agreement or arrangement with respect to the voting of any Shares or (ii)
except for any transfer by gift of options to acquire Shares by the Stockholder
to any charitable organization made with the prior written consent of the
Purchaser, sell, assign, transfer, encumber or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the direct or indirect sale, assignment, transfer, encumbrance or other
disposition of, any Shares. Such Stockholder shall not seek or solicit any such
sale, assignment, transfer, encumbrance or other disposition or any
-4-
<PAGE> 5
such contract, option or other arrangement or assignment or understanding and
agrees to notify the Purchaser promptly and to provide all details required by
the Purchaser if such Stockholder shall be approached or solicited, directly or
indirectly, by any person with respect to any of the foregoing.
Section 5.2 CONDUCT OF STOCKHOLDERS. Such Stockholder will not (i)
take, agree or commit to take any action that would make any representation and
warranty of such Stockholder hereunder inaccurate in any respect as of any time
prior to the termination of this Agreement or (ii) omit, or agree or commit to
omit, to take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time.
ARTICLE VI
MISCELLANEOUS
Section 6.1 EXPENSES. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
Section 6.2 FURTHER ASSURANCES. Except as otherwise provided in the
Merger Agreement, the Stockholders will each execute and deliver or cause to be
executed and delivered all further documents and instruments and use their
respective best efforts to secure such consents and take all such further action
as may be reasonably necessary in order to consummate the transactions
contemplated hereby or to enable the Purchaser and any assignee to exercise and
enjoy all benefits and rights of the Stockholders with respect to the
Stockholder Shares.
Section 6.3 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations and which may be required under any agreements,
contracts, commitments, instruments, understandings, arrangements or
restrictions of any kind to which such party is a party or by which such party
is governed or bound, to consummate and make effective the transactions
contemplated by this Agreement.
Section 6.4 SPECIFIC PERFORMANCE. The parties hereto agree that the
Purchaser may be irreparably damaged if for any reason any Stockholder failed to
perform any of its obligations under this Agreement, and that the Purchaser
would not have any adequate remedy at law for money damages in such event.
Accordingly, the Purchaser shall be entitled to specific performance and
injunctive and other equitable relief to enforce the performance of this
Agreement by each Stockholder. This provision is without prejudice to any other
rights that the Purchaser may have
-5-
<PAGE> 6
against any Stockholder for any failure to perform its obligations under this
Agreement.
Section 6.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) or by reputable overnight courier: if to the Parent or
the Purchaser, at its address set forth below its signature hereto; and if to a
Stockholder, to such Stockholder at his address set forth on SCHEDULE A hereto.
Section 6.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Stockholder Shares.
Section 6.7 AMENDMENTS; TERMINATION; EXPIRATION. This Agreement may
not be modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This Agreement
may be terminated by the Parent and the Purchaser upon written notice to the
Stockholders. This Agreement and the Stockholder's obligations hereunder shall
expire on the first to occur of (a) the Effective Time and (b) the termination
of the Merger Agreement in accordance with its terms.
Section 6.8 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that Purchaser may assign its rights
and obligations to any affiliate of Purchaser and provided, further, that no
Stockholder may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the Purchaser.
Section 6.9 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware without given
effect to the principles of conflicts of laws thereof.
Section 6.10 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instruments.
Section 6.11 PARENT GUARANTY. Parent hereby unconditionally
guarantees the Purchaser's obligations under this Agreement and agrees to be
liable for any breach of this Agreement by the Purchaser or any permitted
assignee of the Purchaser.
Section 6.12 HEADINGS. The headings and captions used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
-6-
<PAGE> 7
Section 6.13 OBLIGATIONS SEPARATE. The obligations of the
Stockholders hereunder are several and not joint.
Section 6.14 DEFINED TERMS. Capitalized terms used in this Agreement
and not otherwise defined shall have the meaning given to such terms in the
Merger Agreement.
Section 6.15 BENEFICIALLY OWNED SHARES. To the extent that any
Stockholder is the beneficial owner, but not the record owner, of any Shares
subject to this Agreement, such Stockholder shall take any and all action
necessary to cause the record owner of such Shares to satisfy each of the
Stockholder's obligations hereunder with respect to such Shares.
Section 6.16 CERTAIN PAYMENTS. Each of Martin E. Franklin and
Ian G.H. Ashken, severally and not jointly, acknowledges and agrees that, upon
his receipt of the payments listed in Section 6.13 of the Disclosure Schedule as
being payable to him, neither the Company nor any Subsidiary will have any
further obligation to such Stockholder other than (a) pursuant to Company
Options held by such Stockholder as set forth in Section 4.3 of the Disclosure
Schedule or (b) as otherwise expressly provided for or disclosed in the Merger
Agreement or the Disclosure Schedule.
[Remainder of page intentionally left blank.]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PARENT:
EG&G, INC.
By: /s/ Gregory L. Summe
-----------------------------------
Name: Gregory L. Summe
Title: President and
Chief Operating Officer
Address: 45 William Street
Wellesley, MA 02181
copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David E. Redlick, Esq.
PURCHASER:
LIGHTHOUSE WESTON CORP.
By: /s/ Daniel T. Heaney
-----------------------------------
Name: Daniel T. Heaney
Title: Treasurer
Address: 45 William Street
Wellesley, MA 02181
STOCKHOLDERS:
/s/ Martin Franklin
---------------------------------------
Martin E. Franklin
/s/ Ian Ashken
---------------------------------------
Ian G.H. Ashken
/s/ Richard D. Capra
---------------------------------------
Richard D. Capra
/s/ George B. Clairmont
---------------------------------------
George B. Clairmont
-8-
<PAGE> 9
SCHEDULE A
Stockholder Name and Address Number of Shares
- ---------------------------- ----------------
Martin E. Franklin 647,807
62 Rye Ridge Road
Harrison, New York 10528
Ian G.H. Ashken 100,000
22 Blue Water Hill
Westport, Connecticut 06880
Richard D. Capra 3,750
5764 Diamond Point Circle
El Paso, TX 79912
George B. Clairmont 392,127*
1172 Park Avenue
Apartment 2A
New York, New York 10028
- ----------
* Includes Shares held by Mr. Clairmont in a representative capacity, which
Mr. Clairmont represents is no more than 150,000 Shares (which Shares are
not subject to this Agreement).
-9-
<PAGE> 1
Exhibit 6
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
Dated July 1, 1993
THIS AMENDMENT (the "Amendment"), dated as of July 31, 1998, is entered into by
and between LUMEN TECHNOLOGIES, INC., a Delaware corporation ("Company") and
MARTIN E. FRANKLIN ("Employee").
RECITALS:
The Employee and the Company (as assignee of Benson Eyecare Corporation) are
parties to that certain Employment Agreement dated as of July 1, 1993
as amended on October 31, 1996 (the "Agreement").
The parties mutually desire to amend the Agreement on the terms and conditions
set forth more fully below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment, and for other good and valuable consideration, receipt
of which is acknowledged hereby, the parties agree as follows:
AGREEMENTS:
Section 3 of the Agreement is hereby amended to insert "Bolle Inc." in front of
"Pembridge Holdings, Inc.".
Section 8 of the Agreement is hereby amended to delete the words "including
without limitation, the development, manufacture, packaging
distribution or sale of a "managed dispensary" program for
Ophthalmologists".
Paragraph 3 of Amendment No. 1 to the Agreement is hereby amended in its
entirety to read as follows:
"Notwithstanding anything contained in the Agreement to the contrary,
it is understood and agreed that the Employee shall be entitled to a
severance payment equal to two year's current base salary compensation,
plus continuance of his existing benefits for a one year period at the
Company's expense, in the event of a change of control of the Company,
any termination without cause or in the event the Company at any time
permits the Agreement to expire or elects not to renew the Agreement.
In addition, the Company will pay the remaining balance of any payments
due on the split-dollar life insurance policy maintained by the Company
for the benefit of the Employee if any of the events outlined in the
preceding sentence occur."
<PAGE> 2
Except as set forth expressly herein, the Agreement shall remain in full force
and effect as originally set forth, and all remaining terms and
conditions of the Agreement shall apply to this Amendment, except to
the extent expressly amended or modified hereby.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
LUMEN TECHNOLOGIES, INC.
By: /s/ Ian Ashken
_________________________
Its: CFO
_________________________
/s/ Martin E. Franklin
__________________________________
Martin E. Franklin
<PAGE> 1
Exhibit 7
AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
Dated July 1, 1993
THIS AMENDMENT (the "Amendment"), dated as of July 31, 1998, is entered into by
and between LUMEN TECHNOLOGIES, INC., a Delaware corporation ("Company") and IAN
ASHKEN ("Employee").
RECITALS:
The Employee and the Company (as assignee of Benson Eyecare Corporation) are
parties to that certain Employment Agreement dated as of July 1, 1993
as amended on October 31, 1996 (the "Agreement").
The parties mutually desire to amend the Agreement on the terms and conditions
set forth more fully below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment, and for other good and valuable consideration, receipt
of which is acknowledged hereby, the parties agree as follows:
AGREEMENTS:
Section 3 of the Agreement is hereby amended to insert "Bolle Inc." in front of
"Pembridge Holdings, Inc.".
Section 8 of the Agreement is hereby amended to delete the words "including
without limitation, the development, manufacture, packaging
distribution or sale of a "managed dispensary" program for
Ophthalmologists".
Paragraph 3 of Amendment No. 1 to the Agreement is hereby amended in its
entirety to read as follows:
"Notwithstanding anything contained in the Agreement to the contrary,
it is understood and agreed that the Employee shall be entitled to a
severance payment equal to two year's current base salary compensation,
plus continuance of his existing benefits for a one year period at the
Company's expense, in the event of a change of control of the Company,
any termination without cause or in the event the Company at any time
permits the Agreement to expire or elects not to renew the Agreement.
In addition, the Company will pay the remaining balance of any payments
due on the split-dollar life insurance policy maintained by the Company
for the benefit of the Employee if any of the events outlined in the
preceding sentence occur."
<PAGE> 2
Except as set forth expressly herein, the Agreement shall remain in full force
and effect as originally set forth, and all remaining terms and
conditions of the Agreement shall apply to this Amendment, except to
the extent expressly amended or modified hereby.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
LUMEN TECHNOLOGIES, INC.
By: /s/ Martin E. Franklin
_________________________
Its: Chairman
_________________________
/s/ Ian Ashken
__________________________________
Ian Ashken
<PAGE> 1
Exhibit 8
AMENDMENT NO. 1
TO
MANAGEMENT SERVICES AGREEMENT
DATED SEPTEMBER 23, 1998
This AMENDMENT (the "Amendment") dated as of September 23, 1998, is entered into
by and between Bolle Inc., a Delaware Corporation ("Bolle"), Lumen Technologies,
Inc. (f/k/a BEC Group, Inc.), a Delaware Corporation ("Lumen") and Marlin
Holdings, Inc. a Delaware Corporation ("Marlin").
RECITALS:
A. Lumen and Bolle are parties to that certain Management Services
Agreement dated as of March 11, 1998 (the "Agreement").
B. The parties mutually desire to amend the Agreement on the terms and
conditions set forth more fully below.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
in this Amendment, and for other good and valuable consideration, receipt of
which is acknowledged hereby, the parties agree as follows:
AGREEMENTS:
1. All references to "BEC Group, Inc." and "BEC" are hereby amended and
changed to "Marlin Holdings, Inc." and "Marlin", respectively.
2. Section 3.1 of the Agreement is hereby amended to change the monthly
fee from "$60,000" to "$50,000" per month.
3. Section 6 of the Agreement is hereby amended in its entirety to read as
follows:
"TERMS. The initial term of this Amendment to the Agreement shall
commence as of January 1, 1999 and shall continue through and include
the 4th (fourth) anniversary of this date. Thereafter, the term of this
Agreement shall automatically continue in full force and effect for
succeeding one-year periods unless either Bolle or Marlin shall give
notice of termination to the other no later than ninety (90) days prior
to the expiration of the initial term, or any renewal term then in
effect, as the case may be. The respective rights and obligations of
Bolle and Marlin which have accrued hereunder at the time of expiration
of this Agreement shall not be affected by such expiration."
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
<TABLE>
<S> <C> <C>
Lumen Technologies, Inc. Bolle Inc. Marlin Holdings, Inc.
By: /s/ Richard D. Capra By: /s/ Gary Kiedaisch By: /s/ Martin E. Franklin
_____________________ ____________________ ______________________
Richard D. Capra, CEO Gary Kiedaisch, CEO Martin E. Franklin
</TABLE>
