<PAGE> 1
As filed with the Securities and Exchange Commission on February 23, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALLEGHENY TELEDYNE INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
<TABLE>
<S> <C>
3316 25-1792394
(Primary Standard Industrial Classification Code
Number) (I.R.S. Employer Identification No.)
</TABLE>
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
(412) 394-2800
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
JON D. WALTON
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ALLEGHENY TELEDYNE INCORPORATED
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
(412) 394-2836
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Ronald D. West Carmen M. Calzacorta
Kirkpatrick & Lockhart LLP Schwabe Williamson & Wyatt P.C.
1500 Oliver Building 1211 Southwest Fifth Avenue, Suites 1600-1950
Pittsburgh, Pennsylvania 15222-2312 Portland, Oregon 97204-3795
(412) 355-6500 (503) 222-9981
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: At the effective time of the Merger described in this registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
=================================================================================================================================
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock, par value $.10 per
share............................ 21,645,214 shares -- $544,888,200 $160,743
=================================================================================================================================
</TABLE>
(1) Represents the maximum number of shares issuable to holders of Common Stock,
par value $1.00 per share, of Oregon Metallurgical Corporation pursuant to
the Agreement and Plan of Merger described in this registration statement.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(f) based upon the average of the high
and low sales prices of Oregon Metallurgical Corporation Common Stock on
February 13, 1998 as reported on The Nasdaq National Market, and the ratio
at which such Common Stock will be converted into shares of Allegheny
Teledyne Incorporated Common Stock pursuant to the Agreement and Plan of
Merger described in this registration statement.
(3) Offset in accordance with Rule 457(b) by fees aggregating $108,160
previously paid in connection with the filing of the preliminary Proxy
Statement/Prospectus on November 26, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
(OREGON METALLURGICAL CORPORATION LOGO)
OREGON METALLURGICAL CORPORATION
FEBRUARY 23, 1998
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Oregon Metallurgical Corporation (the "Company") to be held on March 24, 1998,
in the auditorium of the Company's building at 530 Southwest 34th Avenue,
Albany, Oregon commencing at 9:00 a.m., local time.
At the Special Meeting, you will be asked to approve an Agreement and Plan
of Merger dated as of October 31, 1997 among the Company, Allegheny Teledyne
Incorporated ("Allegheny Teledyne") and Sea Merger Inc., a wholly owned
subsidiary of Allegheny Teledyne ("Merger Sub") (the "Merger Agreement") and the
transactions contemplated thereby. The Merger Agreement provides for the merger
of Merger Sub into the Company (the "Merger"), with the Company surviving as a
wholly owned subsidiary of Allegheny Teledyne. Subject to the terms and
conditions of the Merger Agreement, each share of Company Common Stock
outstanding at the effective time of the Merger will be converted into the right
to receive 1.296 shares of Allegheny Teledyne Common Stock ("Conversion Number")
(with cash paid in lieu of fractional shares of Allegheny Teledyne Common
Stock).
THE BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND HAS APPROVED THE MERGER
AGREEMENT. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. SALOMON BROTHERS
INC, THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED ITS OPINION, DATED OCTOBER
31, 1997, TO THE BOARD OF DIRECTORS TO THE EFFECT THAT, BASED UPON AND SUBJECT
TO VARIOUS CONSIDERATIONS SET FORTH IN SUCH OPINION, AS OF THE DATE OF SUCH
OPINION, THE CONVERSION NUMBER IS FAIR TO THE HOLDERS OF COMPANY COMMON STOCK
FROM A FINANCIAL POINT OF VIEW.
The accompanying Proxy Statement/Prospectus describes the proposal to be
considered at the Special Meeting more fully. You are urged to give it your
careful attention.
It is very important that your shares be represented at the Special Meeting
whether or not you are personally able to attend. We ask you to complete, sign
and return the enclosed proxy card promptly in the return envelope provided. If
your shares are registered in your name and you do attend and wish to vote in
person, you can revoke your proxy at that time.
You should not send in certificates representing Company Common Stock at
this time. Following the Merger, information will be sent to you regarding the
procedure for surrendering your stock certificates and receiving certificates
for the shares of Allegheny Teledyne Common Stock issued in exchange for your
Company shares.
Sincerely,
/s/ CARLOS E. AGUIRRE
Carlos E. Aguirre
Chairman of the Board, President
and Chief Executive Officer
Telephone (541) 967-9000 530 34th Avenue, S.W. P.O. Box 580 Albany, Oregon
97321 FAX (541) 917-0657
<PAGE> 3
OREGON METALLURGICAL CORPORATION
530 SOUTHWEST 34TH AVENUE--P. O. BOX 580
ALBANY, OREGON 97321-0177
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 24, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Oregon Metallurgical Corporation, an Oregon corporation (the
"Company"), will be held on March 24, 1998, in the auditorium of the Company's
office building at 530 Southwest 34th Avenue, Albany, Oregon commencing at 9:00
a.m., local time, to consider and vote upon the following matters described in
the accompanying Proxy Statement/Prospectus:
1. Approval of the Agreement and Plan of Merger, dated as of October 31, 1997
(the "Merger Agreement"), among Allegheny Teledyne Incorporated, a Delaware
corporation ("Allegheny Teledyne"), Sea Merger Inc., an Oregon corporation
and wholly owned subsidiary of Allegheny Teledyne ("Merger Sub"), and the
Company, and the transactions contemplated thereby, including the merger (the
"Merger") of Merger Sub with and into the Company, pursuant to which, among
other things, the Company will become a wholly owned subsidiary of Allegheny
Teledyne and each outstanding share of Company Common Stock (other than
shares owned by Allegheny Teledyne or any subsidiary of Allegheny Teledyne or
shares held in the Company's treasury immediately prior to the effective time
of the Merger) will be converted into the right to receive 1.296 shares of
Allegheny Teledyne Common Stock, with cash paid in lieu of fractional shares
of Allegheny Teledyne Common Stock. A copy of the Merger Agreement is
attached as Appendix A to the accompanying Proxy Statement/Prospectus.
2. The transaction of such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only shareholders of record as of the close of business on February 16,
1998 will be entitled to notice of and to vote at the Meeting and any
adjournment or postponement thereof.
Whether or not you plan to attend the Meeting, please complete, date, sign
and return the enclosed proxy card promptly. A return envelope is enclosed for
your convenience and requires no postage for mailing in the United States.
By Order of the Board of Directors,
/s/ DENNIS P. KELLY
Dennis P. Kelly
Vice President Finance, Treasurer
and Secretary
Albany, Oregon
February 23, 1998
YOUR VOTE IS VERY IMPORTANT.
TO VOTE YOUR SHARES PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE> 4
(OREGON METALLURGICAL CORPORATION LOGO) ALLEGHENY TELEDYNE INCORPORATED
PROXY STATEMENT
OF
OREGON METALLURGICAL CORPORATION
---------------------
PROSPECTUS
OF
ALLEGHENY TELEDYNE INCORPORATED
This Proxy Statement/Prospectus is being furnished to holders of common
stock, par value $1.00 per share ("Company Common Stock"), of Oregon
Metallurgical Corporation, an Oregon corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company (the
"Company Board") for use at the Special Meeting of Shareholders of the Company
(the "Meeting") to be held on March 24, 1998 in the auditorium of the Company's
office building at 530 Southwest 34th Avenue, Albany, Oregon, commencing at 9:00
a.m., local time, and at any adjournment or postponement thereof.
At the Meeting, holders of record of Company Common Stock as of the close
of business on February 16, 1998 (the "Record Date") will consider and vote upon
a proposal to approve the Agreement and Plan of Merger, dated as of October 31,
1997 (the "Merger Agreement"), among Allegheny Teledyne Incorporated, a Delaware
corporation ("Allegheny Teledyne"), Sea Merger Inc., an Oregon corporation and a
wholly owned subsidiary of Allegheny Teledyne ("Merger Sub"), and the Company,
and the transactions contemplated thereby, pursuant to which, among other
things, Merger Sub will be merged with and into the Company (the "Merger") and
each outstanding share of Company Common Stock (other than shares owned by
Allegheny Teledyne or any subsidiary of Allegheny Teledyne, or shares held in
the Company's treasury immediately prior to the effective time of the Merger
(the "Effective Time")) will be converted into the right to receive 1.296 shares
of Common Stock, par value $.10 per share, of Allegheny Teledyne ("Allegheny
Teledyne Common Stock"), with cash paid in lieu of fractional shares of
Allegheny Teledyne Common Stock.
This Proxy Statement/Prospectus also constitutes the prospectus of
Allegheny Teledyne with respect to up to 21,645,214 shares of Allegheny Teledyne
Common Stock to be issued in the Merger in exchange for outstanding shares of
Company Common Stock.
All information in this Proxy Statement/Prospectus relating to the Company
has been supplied by the Company, and all information in this Proxy
Statement/Prospectus relating to Allegheny Teledyne has been supplied by
Allegheny Teledyne.
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY COMPANY SHAREHOLDERS.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
This Proxy Statement/Prospectus and accompanying proxy card are first being
mailed to shareholders of the Company on or about February 24, 1998.
The date of this Proxy Statement/Prospectus is February 23, 1998.
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ALLEGHENY TELEDYNE OR ANY
OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO WHOM, IT
IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES OFFERED
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ALLEGHENY TELEDYNE SINCE THE
DATE HEREOF OR THAT THE INFORMATION INCLUDED OR INCORPORATED BY REFERENCE HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WHICH CAN BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES,"
"CONTEMPLATES," "EXPECTS," "MAY," "WILL," "SHOULD," "WOULD" OR "ANTICIPATES" OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY. NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS
ENCOMPASSED WITHIN THE FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED. IMPORTANT
FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS
AND UNCERTAINTIES, THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE
FUTURE RESULTS ENCOMPASSED WITHIN SUCH FORWARD-LOOKING STATEMENTS ARE DISCUSSED
HEREIN UNDER THE CAPTION "RISK FACTORS." OTHER FACTORS COULD ALSO CAUSE ACTUAL
RESULTS TO VARY MATERIALLY FROM THE FUTURE RESULTS ENCOMPASSED WITHIN SUCH
FORWARD-LOOKING STATEMENTS.
---------------------
AVAILABLE INFORMATION
Each of the Company and Allegheny Teledyne is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such reports, proxy and information
statements and other information may be found on the Commission's World Wide Web
site address, http://www.sec.gov. The periodic reports, proxy statements and
other information filed by Allegheny Teledyne with the Commission may also be
inspected at the offices of The New York Stock Exchange, Inc. (the "NYSE") 20
Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus is part of a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") that has been filed by Allegheny Teledyne under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of
Allegheny Teledyne Common Stock to be issued pursuant to the Merger Agreement.
As permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Proxy Statement/Prospectus or in any document incorporated by reference in this
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete. In each instance,
reference is hereby made to the copy of such contract or other document filed as
an exhibit to the Registration Statement or such other document and each such
statement is qualified in all respects by such reference.
2
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-1339) and by Allegheny Teledyne (File No. 1-12001) pursuant to the Exchange
Act are incorporated by reference in this Proxy Statement/ Prospectus:
1. Annual Report on Form 10-K of the Company for the fiscal year ended December
31, 1996.
2. Quarterly Reports on Form 10-Q of the Company for the fiscal quarters ended
March 30, 1997, June 29, 1997 and September 28, 1997.
3. Current Reports on Form 8-K of the Company dated April 30, 1997, October 20,
1997 (as amended by Form 8-K/A dated October 22, 1997) and November 5, 1997.
4. Description of Company Common Stock contained in Registration Statement on
Form 10 filed on April 30, 1965 (as amended by Form 8 filed on December 3,
1965, Form 8-A filed on October 20, 1997, Form 8-A/A filed on October 22,
1997 and Form 8-A/A-2 filed on December 16, 1997).
5. Proxy Statement relating to the April 24, 1997 Company Annual Meeting of
Shareholders.
6. Annual Report on Form 10-K of Allegheny Teledyne for the fiscal year ended
December 31, 1996.
7. Quarterly Reports on Form 10-Q of Allegheny Teledyne for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997.
8. Current Reports on Form 8-K of Allegheny Teledyne dated February 13, 1997,
February 20, 1997, March 11, 1997, November 3, 1997, December 23, 1997 and
January 30, 1998.
9. Description of Allegheny Teledyne Common Stock contained in Registration
Statement on Form 8-A filed on July 30, 1996.
All documents and reports subsequently filed by the Company or Allegheny
Teledyne pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement/Prospectus and prior to the date of the Meeting
shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents and reports. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE FILED
BY THE COMPANY OR ALLEGHENY TELEDYNE WITH THE COMMISSION THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE
AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT/ PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, WITHOUT
CHARGE, DIRECTED, IN THE CASE OF DOCUMENTS RELATING TO THE COMPANY, TO VICE
PRESIDENT FINANCE, SECRETARY AND TREASURER, OREGON METALLURGICAL CORPORATION,
530 SOUTHWEST 34TH AVENUE--P.O. BOX 580, ALBANY, OREGON 97321-0177 (TELEPHONE
(541) 967-9000) AND, IN THE CASE OF DOCUMENTS RELATING TO ALLEGHENY TELEDYNE, TO
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, ALLEGHENY TELEDYNE
INCORPORATED, 1000 SIX PPG PLACE, PITTSBURGH, PENNSYLVANIA 15222-5479 (TELEPHONE
(412) 394-2800). IN ORDER TO ENSURE TIMELY DELIVERY OF ANY DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY MARCH 17, 1998.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 3
SUMMARY.............................................................................. 5
RISK FACTORS......................................................................... 19
COMPARATIVE PER SHARE DATA........................................................... 23
MARKET PRICE AND DIVIDEND DATA....................................................... 24
THE MEETING.......................................................................... 25
General............................................................................ 25
Matters to be Considered at the Meeting............................................ 25
Voting at the Meeting; Record Date................................................. 25
Proxies............................................................................ 25
THE MERGER........................................................................... 27
Background of the Merger........................................................... 27
Company Reasons for the Merger; Recommendation of the Company Board................ 29
Opinion of Financial Advisor to the Company........................................ 30
Allegheny Teledyne Reasons for the Merger.......................................... 35
Interests of Certain Persons in the Merger......................................... 35
Company Stock Plans and Warrants................................................... 36
Accounting Treatment............................................................... 37
Certain Federal Income Tax Consequences............................................ 37
Regulatory Approvals............................................................... 39
Resale Restrictions................................................................ 39
No Dissenters' Rights.............................................................. 39
THE MERGER AGREEMENT................................................................. 40
The Merger......................................................................... 40
Conversion of Securities........................................................... 40
Representations and Warranties..................................................... 41
Certain Covenants.................................................................. 41
Company Rights Agreement........................................................... 42
Acquisition Proposals; Company Board Recommendation................................ 42
Indemnification and Insurance...................................................... 44
Company Stock Plans and Warrants................................................... 44
Conditions......................................................................... 44
Termination; Termination Fees and Expenses......................................... 45
Amendment and Waiver............................................................... 47
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION..................... 48
COMPARISON OF SHAREHOLDER RIGHTS..................................................... 56
LEGAL MATTERS........................................................................ 61
EXPERTS.............................................................................. 62
SHAREHOLDER PROPOSALS................................................................ 62
APPENDIX A Agreement and Plan of Merger
APPENDIX B Opinion of Salomon Brothers Inc
</TABLE>
4
<PAGE> 8
SUMMARY
Following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement/Prospectus. Capitalized terms
used and not defined in this summary have the meanings ascribed thereto
elsewhere in this Proxy Statement/Prospectus. Reference is made to, and this
summary is qualified in its entirety by, the more detailed information contained
or incorporated by reference in this Proxy Statement/ Prospectus and in the
Appendices hereto. Shareholders are urged to read this Proxy
Statement/Prospectus and the Appendices hereto in their entireties.
THE COMPANIES
The Company........................ The Company is an integrated producer and
distributor of titanium sponge, ingot,
mill products and castings for use in the
aerospace, industrial, golf and military
markets. The principal executive offices
of the Company are located at 530
Southwest 34th Avenue, Albany, Oregon
97321-0177 and its telephone number is
(541) 967-9000.
Allegheny Teledyne................. Allegheny Teledyne is a group of
technology-based manufacturing companies
with significant concentration in
specialty metals, complemented by
aerospace and electronics, industrial,
and consumer products. The principal
executive offices of Allegheny Teledyne
are located at 1000 Six PPG Place,
Pittsburgh, Pennsylvania 15222-5479 and
its telephone number is (412) 394-2800.
THE MEETING
Date, Place and Time............... The Meeting is scheduled to be held on
March 24, 1998, in the auditorium of the
Company's office building at 530
Southwest 34th Avenue, Albany, Oregon
commencing at 9:00 a.m., local time.
Record Date; Shares Entitled to
Vote............................... Only holders of record of shares of
Company Common Stock as of the close of
business on the Record Date are entitled
to notice of and to vote at the Meeting.
As of the close of business on the Record
Date, there were 16,612,440 shares of
Company Common Stock outstanding held by
1,890 holders of record. Each holder of
record of shares of Company Common Stock
on the Record Date is entitled to cast
one vote per share on each matter to be
acted upon or which may properly come
before the Meeting.
Purpose of the Meeting............. The purpose of the Meeting is to consider
and vote upon a proposal to approve the
Merger Agreement and the transactions
contemplated thereby, and to consider and
vote upon such other matters as may
properly be brought before the Meeting.
Vote Required...................... The approval by Company shareholders of
the Merger Agreement and the transactions
contemplated thereby will require the
affirmative vote of the holders of at
least a majority of all votes entitled to
be cast by the holders of Company Common
Stock outstanding on the Record Date.
Each director and executive officer of
the Company who
5
<PAGE> 9
owns Company Common Stock has indicated
his intention to vote or direct the vote
of all shares of Company Common Stock
over which he has voting control in favor
of approval of the Merger Agreement and
the transactions contemplated thereby. As
of the close of business on the Record
Date, the directors and executive
officers of the Company and their
affiliates were the beneficial owners of
approximately 1.0% of the outstanding
shares of Company Common Stock. See "THE
MEETING."
THE MERGER
Risk Factors....................... For a discussion of certain risk factors
that Company shareholders should take
into account in determining whether to
approve the Merger Agreement and the
transactions contemplated thereby, see
"RISK FACTORS."
Effects of the Merger.............. At the Effective Time, pursuant to the
Merger Agreement, (i) Merger Sub will be
merged with and into the Company, which
will be the surviving corporation of the
Merger and thereby become a wholly owned
subsidiary of Allegheny Teledyne, and
(ii) each issued and outstanding share of
Company Common Stock (other than shares
owned by Allegheny Teledyne or any
subsidiary of Allegheny Teledyne, or
shares held in the Company's treasury
immediately prior to the Effective Time)
will be converted into the right to
receive 1.296 shares of Allegheny
Teledyne Common Stock (the "Conversion
Number"). Fractional shares of Allegheny
Teledyne Common Stock will not be
issuable in connection with the Merger.
Company shareholders otherwise entitled
to a fractional share will be paid the
value of such fraction in cash determined
as described under "THE
MERGER--Conversion of Securities."
The following table sets forth the
respective closing prices per share of
Company Common Stock on The Nasdaq
National Market and of Allegheny Teledyne
Common Stock on the NYSE Composite
Transactions Tape on October 31, 1997,
the last full trading day prior to the
public announcement of the execution and
delivery of the Merger Agreement, and on
February 20, 1998, the most recent
practicable date prior to the printing of
this Proxy Statement/Prospectus, and the
equivalent per share prices for Company
Common Stock based on the Allegheny
Teledyne Common Stock prices and the
Conversion Number.
<TABLE>
<CAPTION>
ALLEGHENY COMPANY
TELEDYNE COMPANY COMMON
COMMON COMMON STOCK
STOCK STOCK EQUIVALENT
--------- ------- ----------
<S> <C> <C> <C> <C>
October 31,
1997............. $26 5/16 $23 7/16 $34 1/8
February 20,
1998............. $26 3/8 $33 1/2 $34 1/8
</TABLE>
Although the Conversion Number is fixed,
the market value of the shares of
Allegheny Teledyne Common Stock that
holders of Company Common Stock will
receive in the
6
<PAGE> 10
Merger is subject to fluctuation and may
increase or decrease prior to and
following the Merger. Shareholders are
urged to obtain current market
quotations. See "MARKET PRICE AND
DIVIDEND DATA."
Based on the number of outstanding shares
of Company Common Stock and Allegheny
Teledyne Common Stock as of the Record
Date and the Conversion Number, the
shareholders of the Company immediately
prior to consummation of the Merger will
own approximately 11.0% of the
outstanding shares of Allegheny Teledyne
Common Stock immediately following
consummation of the Merger.
As provided in the Merger Agreement, at
the Effective Time each outstanding
option to acquire shares of Company
Common Stock granted pursuant to the
Company's 1996 Employee Stock Option Plan
and 1997 Employee Stock Option Plan (the
"Company Option Plans"), each outstanding
warrant to purchase shares of Company
Common Stock and each right to receive
shares of Company Common Stock under the
Company's Excess Benefit Plan will be
converted into and become a right with
respect to Allegheny Teledyne Common
Stock, and Allegheny Teledyne will
reserve for issuance a sufficient number
of shares of Allegheny Teledyne Common
Stock for delivery upon exercise of such
options and warrants and pursuant to the
Company's Excess Benefit Plan. As of
January 31, 1998, there were outstanding
options to purchase an aggregate of
284,400 shares of Company Common Stock at
a weighted average exercise price of
$29.67 per share, outstanding warrants to
purchase an aggregate of 120,000 shares
of Company Common Stock at an exercise
price of $6.375 per share and rights to
receive an aggregate of 14,476 shares of
Company Common Stock under the Company's
Excess Benefit Plan.
No Dissenters' Rights.............. Holders of Company Common Stock will not
be entitled to dissenters' rights in
connection with the Merger. See "THE
MERGER--No Dissenters' Rights."
Background......................... For a description of the background of
the Merger, including the circumstances
leading up to the execution of the Merger
Agreement, see "THE MERGER--Background of
the Merger."
Recommendation of the Company
Board; Company Reasons for the
Merger........................... The Company Board, by unanimous vote, has
determined that the Merger is in the best
interests of the Company and its
shareholders, has approved the Merger
Agreement and recommends a vote FOR
approval of the Merger Agreement and the
transactions contemplated thereby by the
shareholders of the Company. For a
discussion of the factors considered by
the Company Board in reaching its
decision with respect to the Merger
Agreement and the
7
<PAGE> 11
transactions contemplated thereby, see
"THE MERGER-- Company Reasons for the
Merger; Recommendation of the Company
Board."
Allegheny Teledyne Reasons for the
Merger............................. For a discussion of the factors
considered by the Board of Directors of
Allegheny Teledyne in reaching its
decision with respect to the Merger
Agreement and the transactions
contemplated thereby, see "THE
MERGER--Allegheny Teledyne Reasons for
the Merger."
Opinion of Financial Advisor....... Salomon Brothers Inc ("Salomon") has
delivered its written opinion, dated
October 31, 1997, to the Company Board to
the effect that, based upon and subject
to various considerations set forth in
such opinion, as of the date of such
opinion, the Conversion Number is fair to
the holders of Company Common Stock from
a financial point of view. The full text
of the opinion of Salomon, which sets
forth assumptions made, general
procedures followed, matters considered
and limits of review undertaken, is
attached to this Proxy
Statement/Prospectus as Appendix B and is
incorporated herein by reference.
Shareholders of the Company are urged to
read Salomon's opinion carefully and in
its entirety. See "THE MERGER--Opinion of
Financial Advisor to the Company."
Interests of Certain Persons in the
Merger............................. In considering the recommendation of the
Company Board that Company shareholders
vote in favor of the approval of the
Merger Agreement, shareholders should be
aware that certain members of the
Company's management and the Company
Board have certain interests in the
Merger that are in addition to the
interests of shareholders of the Company.
Pursuant to a performance payment
arrangement with the Company, upon
consummation of the Merger, Carlos E.
Aguirre, Chairman of the Board, President
and Chief Executive Officer of the
Company, and Dennis P. Kelly, Vice
President Finance, Secretary and
Treasurer of the Company, will be
entitled to receive $1,000,000 and
$500,000, respectively, for their efforts
in negotiating and implementing a
business combination on behalf of the
Company.
Under the terms of an employment
agreement with the Company, Carlos E.
Aguirre, Chairman of the Board, President
and Chief Executive Officer of the
Company, would be entitled, if
concurrently with or within 36 months
after a "change in control" of the
Company, his employment with the Company
is terminated, to receive (i) a lump sum
severance payment equal to three times
his annual base compensation as in effect
as of the date of termination or
immediately prior to the change in
control, whichever is greater, and his
bonus, (ii) all legal fees and expenses
incurred by him in seeking to obtain or
enforce any right or benefit under the
employment agreement, and (iii) certain
health and disability insurance benefits.
The Merger will constitute a "change in
control" of the Company for
8
<PAGE> 12
purposes of the employment agreement.
Based on annual base compensation and
target bonus levels in effect on October
31, 1997 and assuming that employment
with the Company was terminated within 36
months following the Merger, the cash
severance payment payable to Mr. Aguirre
under the employment agreement would be
approximately $1,663,200. It is expected
that Mr. Aguirre will head a high
performance group of specialty metals
companies of Allegheny Teledyne that will
include the Company following the Merger.
The Merger Agreement provides that, from
and after the Effective Time, the Company
will indemnify and hold harmless each
director and officer of the Company
against all losses, claims, damages,
costs, expenses, liabilities or judgments
incurred in connection with any claim
arising out of matters existing or
occurring at or prior to the Effective
Time to the full extent that the Company
is permitted to do so under its Restated
Articles of Incorporation and Bylaws, any
indemnity agreement with the Company and
under Oregon law. The Merger Agreement
also provides that the Company will
maintain in effect for a specified period
directors' and officers' liability
insurance coverage, including coverage
with respect to claims arising from acts,
omissions or other events which occur
prior to or as of the Effective Time.
See "THE MERGER--Interests of Certain
Persons in the Merger."
Effective Time of the Merger....... It is anticipated that the Merger will
become effective as promptly as
practicable after the requisite Company
shareholder approval has been obtained
and all other conditions to the Merger
have been satisfied or waived. See "THE
MERGER AGREEMENT--Conditions."
Conditions to the Merger;
Termination of the Merger
Agreement........................ The obligations of the Company and
Allegheny Teledyne to consummate the
Merger are subject to the satisfaction of
certain conditions, including obtaining
requisite Company shareholder approval;
receipt of all requisite governmental and
regulatory approvals, including
expiration or termination of any waiting
periods applicable to consummation of the
Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); the absence of
any injunction prohibiting, or the
enactment of any law making illegal,
consummation of the Merger; receipt of
any material third party consents; the
absence of a material adverse change
affecting Allegheny Teledyne or the
Company; the receipt of certain legal
opinions; and the receipt of accountants'
letters with respect to qualification of
the Merger as a pooling of interests for
accounting purposes. See "THE
MERGER--Certain Federal Income Tax
Consequences," "THE MERGER--Regulatory
9
<PAGE> 13
Approvals" and "THE MERGER AGREEMENT--
Conditions."
The required waiting period under the HSR
Act with respect to the Merger has been
terminated.
The Merger Agreement is subject to
termination at the option of either
Allegheny Teledyne or the Company if the
Merger is not consummated before March
31, 1998, or prior to such time upon the
occurrence of certain events. Under
certain circumstances, the Company may be
required to reimburse Allegheny Teledyne
for its expenses of up to $2,000,000 and
to pay Allegheny Teledyne a fee of up to
$22,000,000 (less reimbursed expenses) if
the Merger Agreement is terminated. See
"THE MERGER AGREEMENT--Termination;
Termination Fees and Expenses."
Exchange of Stock Certificates..... Upon consummation of the Merger, each
holder of a certificate or certificates
representing shares of Company Common
Stock outstanding immediately prior to
the Merger will, upon the surrender
thereof (duly endorsed, if required) to
ChaseMellon Shareholder Services, LLC
(the "Exchange Agent"), be entitled to
receive a certificate or certificates
representing the number of shares of
Allegheny Teledyne Common Stock into
which such shares of Company Common Stock
will have been automatically converted as
a result of the Merger, together with
cash in lieu of fractional shares of
Allegheny Teledyne Common Stock. The
Exchange Agent will mail a letter of
transmittal with instructions to all
holders of record of Company Common Stock
as of the Effective Time for use in
surrendering their stock certificates in
exchange for certificates representing
shares of Allegheny Teledyne Common Stock
and any cash payable in lieu of
fractional shares of Allegheny Teledyne
Common Stock. CERTIFICATES SHOULD NOT BE
SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE
RECEIVED. See "THE MERGER
AGREEMENT--Conversion of Securities."
Certain Federal Income Tax
Consequences....................... It is intended that the Merger will
constitute a reorganization within the
meaning of Section 368(a) of the Code,
and that no gain or loss will be
recognized by the Company and no gain or
loss will be recognized by Company
shareholders on the exchange of shares of
Company Common Stock for Allegheny
Teledyne Common Stock pursuant to the
Merger Agreement. Consummation of the
Merger is conditioned upon the receipt of
opinions of counsel to the Company and
Allegheny Teledyne to such effect. For a
further discussion of certain federal
income tax consequences of the Merger,
see "THE MERGER--Certain Federal Income
Tax Consequences" and "THE MERGER
AGREEMENT-- Conditions."
10
<PAGE> 14
Accounting Treatment............... The Merger is intended to qualify as a
pooling of interests for accounting
purposes. Consummation of the Merger is
conditioned upon receipt by Allegheny
Teledyne of letters, dated the date on
which the Effective Time occurs, from the
independent accountants of the Company
and Allegheny Teledyne to the effect that
the Merger will qualify as a pooling of
interests for accounting purposes. See
"THE MERGER--Accounting Treatment" and
"THE MERGER AGREEMENT--Conditions."
Comparison of Shareholder Rights... Upon consummation of the Merger, the
shareholders of the Company, an Oregon
corporation, will become stockholders of
Allegheny Teledyne, a Delaware
corporation. For a discussion of certain
differences between the Restated Articles
of Incorporation and Bylaws of the
Company and the Restated Certificate of
Incorporation and Amended and Restated
Bylaws of Allegheny Teledyne, as well as
differences between certain provisions of
the Oregon Business Corporation Act (the
"OBCA") and the Delaware General
Corporation Law (the "DGCL"), see
"COMPARISON OF SHAREHOLDER RIGHTS."
11
<PAGE> 15
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
Company Summary Selected Financial Data
The summary selected historical financial information of the Company set
forth below has been derived from audited financial statements of the Company
for each of the five years in the period ended December 31, 1996. The selected
consolidated financial data of the Company for the nine month periods ended
September 28, 1997 and September 30, 1996 have been derived from unaudited
consolidated financial statements which include, in the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the consolidated results of operations and financial position of
the Company for such periods. The results of operations for any interim period
are not necessarily indicative of results to be expected for future periods or
for the full fiscal year. This summary should be read in conjunction with the
financial statements and other financial information of the Company included in
documents incorporated herein by reference.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
---------------------- YEAR ENDED DECEMBER 31,
SEPT. 28, SEPT. 30, -----------------------------------------------------
1997 1996 1996 1995 1994(1) 1993 1992(2)
--------- --------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $214,419 $174,798 $236,917 $146,853 $71,166 $55,351 $56,785
Income (loss) from
operations(3)........ 38,759 24,362 35,080 (256) (2,494) (6,179) (5,934)
Income (loss) before
cumulative effect of
changes in accounting
principles(2)........ 24,646 14,976 22,258 (2,415) (2,023) (4,098) (4,122)
Net income (loss)(2)... 24,646 14,976 22,258 (2,415) (2,023) (4,098) (4,191)
Income (loss) per
common share before
cumulative effect of
changes in accounting
principles........... $ 1.49 $ 1.24 $ 1.69 $ (0.22) $ (0.18) $ (0.38) $ (0.38)
BALANCE SHEET DATA (AT
PERIOD END):
Working capital........ $180,136 $167,078 $180,482 $ 63,769 $49,082 $36,467 $37,296
Total assets........... 288,003 249,943 263,045 133,077 111,972 83,326 85,701
Long-term debt......... 4,650 4,595 4,212 26,746 17,164 1,400 4,750
Shareholders' equity... 235,261 191,407 203,853 65,887 67,282 67,065 68,402
</TABLE>
- ---------
(1) Includes Titanium Industries, Inc. after its acquisition by the Company on
September 20, 1994.
(2) The cumulative effect of changes in accounting principles reflects the
adoption in 1992 of Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which resulted in the recognition of
$602, or $0.05 per share, of income. Simultaneously, the Company adopted
SFAS No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions," which resulted in the recognition of $671, or $0.06 per share, of
expense, net of tax benefits of $459. The combined effect of adopting SFAS
No.'s 109 and 106 was the recognition of $69 or $0.01 per share, of
additional expense.
(3) Income (loss) from operations includes restructuring and environmental
charges of $240 in 1994, $2,997 in 1993, and $200 in 1992. A provision for a
loss on long-term agreements of $4,417 was recorded in the fourth quarter of
1995.
12
<PAGE> 16
Company Earnings Release
On January 21, 1998, the Company issued a press release the text of which
follows:
"Oregon Metallurgical Corporation--Year-End Results
ALBANY, Ore., Jan. 21--Oregon Metallurgical Corporation (OREMET(R)
Titanium) (Nasdaq: OREM) announced today that it earned $6.5 million, or
$0.39 per share, on net sales of $70.6 million during the fourth quarter of
1997. For the same period in 1996, the Company reported earnings of $7.3
million, or $0.45 per share, on net sales of $62.1 million.
Fourth quarter 1997 sales exceeded sales for the comparable period of
1996 by $8.4 million or 14%, primarily due to increased pricing. Fourth
quarter 1997 sales were less than sales for the third quarter of 1997 by
$4.5 million or 6%. The decrease in sales between the third and fourth
quarters of 1997 resulted from domestic aerospace customer inventory
adjustments as they responded to changes in aircraft production schedules.
Carlos E. Aguirre, Chairman, President and Chief Executive Officer of
OREMET Titanium, stated that results were also adversely impacted by a
change in the sales mix and higher costs due to production difficulties.
Mr. Aguirre commented that the Company's proposed merger with
Allegheny Teledyne Incorporated ("ATI") continues to progress. The
Company's stock price increased substantially on the announcement of the
proposed merger with ATI. The increase in the Company's stock price
impacted the Company's stock compensation programs, resulting in a fourth
quarter charge of $1.0 million. In addition, during the fourth quarter, the
Company incurred $0.8 million of direct merger related costs. The total
fourth quarter merger and associated pre-tax charges of $1.8 million are
reported in SG&A expenses.
For the year ended December 28, 1997, the Company recorded earnings of
$31.2 million, or $1.88 per share, on net sales of $285.0 million. This
compares with 1996 reported net income of $22.3 million, or $1.69 per
share, on net sales of $236.9 million.
Mr. Aguirre was pleased to announce that 1997 sales had increased by
20%, compared to 1996, and stated that 1997 shipments were a record for the
Company. Mr. Aguirre noted that the increase in 1997 sales was primarily
due to increased pricing for ingot and mill products and higher
distribution sales. Distribution and service center sales increased 11%,
due to the acquisition of Rome Metals on July 1, 1997. Mr. Aguirre further
stated that the Company's 1997 gross profit margin had increased to 26.0%,
compared to 24.4% for 1996.
Commercial aerospace related sales represented approximately 60% of
the Company's sales for 1997, compared to approximately 40% for 1996.
International and export sales represented approximately 22% of sales for
1997, primarily to customers located in Western Europe. The Company's
twelve-month sales order backlog was $158 million at December 28, 1997,
compared to $183 million at December 31, 1996, and $150 million at
September 28, 1997.
Recognition of Federal and State tax credits combined to reduce the
Company's effective fourth quarter and annualized 1997 tax rate to 28.1%
and 35.6%, respectively.
The Statements in this release relating to matters that are not
historical facts are forward looking statements that involve risks and
uncertainties, which could cause actual results to differ materially from
those set forth in this release, including, but not limited to, the
cyclicality of the military and commercial aerospace industries, future
global economic conditions, global productive capacity, competitive
products, and other risks and uncertainties as detailed in the Company's
Securities and Exchange Commission filings.
Oregon Metallurgical Corporation is an integrated producer and
distributor of titanium sponge, ingot, mill products and castings for use
in the aerospace, industrial, golf, and military markets."
13
<PAGE> 17
Allegheny Teledyne Summary Selected Financial Data
The selected consolidated financial data of Allegheny Teledyne for each of
the five full fiscal years set forth below are derived from audited consolidated
financial statements of Allegheny Teledyne. The selected consolidated financial
data of Allegheny Teledyne for the nine month periods ended September 30, 1997
and 1996 have been derived from unaudited consolidated financial statements
which include, in the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the consolidated
results of operations and financial position of Allegheny Teledyne for such
periods. The results of operations for any interim period are not necessarily
indicative of results to be expected for future periods or for the full fiscal
year. This summary should be read in conjunction with the financial statements
and other financial information of Allegheny Teledyne included in documents
incorporated herein by reference.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992(1)
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Continuing................... $2,792.3 $2,811.7 $3,720.2 $3,725.6 $3,047.1 $3,034.9 $3,033.9
Operations sold or held for
sale....................... 31.9 83.6 95.4 322.5 410.2 527.1 863.9
-------- -------- -------- -------- -------- -------- --------
2,824.2 2,895.3 3,815.6 4,048.1 3,457.3 3,562.0 3,897.8
Income from operations(2)...... 314.8 253.8 340.9 403.8 68.4 209.2 190.6
Income, after tax, before
extraordinary loss and
cumulative effect of
accounting changes........... $ 214.7 $ 161.6 $ 226.5 $ 276.8 $ 9.8 $ 143.6 $ 92.8
Extraordinary loss on
redemption of debt........... -- -- (13.5) (2.9) -- (3.7) (2.7)
Cumulative effect of accounting
changes(3)(4)................ -- -- -- -- -- (185.6) (135.2)
-------- -------- -------- -------- -------- -------- --------
Net income
(loss)(5)(6)(7)(8)(9)........ $ 214.7 $ 161.6 $ 213.0 $ 273.9 $ 9.8 $ (45.7) $ (45.1)
======== ======== ======== ======== ======== ======== ========
Per common share:
Income, after tax, before
extraordinary loss and
cumulative effect of
accounting change.......... $ 1.22 $ 0.91 $ 1.28 $ 1.56 $ 0.06 $ 0.83 $ 0.54
Extraordinary loss on
redemption of debt......... -- -- (0.08) (0.02) -- (0.02) (0.02)
Cumulative effect of
accounting changes......... -- -- -- -- -- (1.07) (0.78)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) per common
share...................... $ 1.22 $ 0.91 $ 1.20 $ 1.54 $ 0.06 $ (0.26) $ (0.26)
======== ======== ======== ======== ======== ======== ========
Cash dividends declared(10):
Allegheny Teledyne......... $ 0.48 $ -- $ 0.16 $ -- $ -- $ -- $ --
Allegheny Ludlum
Corporation.............. -- 0.42 0.42 0.49 0.48 0.47 0.44
Teledyne, Inc.............. -- 0.44 0.44 0.21 -- 0.42 0.42
BALANCE SHEET DATA (AT PERIOD
END):
Working capital................ $ 695.3 $ 729.1 $ 614.0 $ 679.8 $ 540.1 $ 635.8 $ 787.6
Total assets................... 2,639.3 2,673.2 2,606.4 2,628.9 2,479.4 2,535.1 2,304.9
Long-term debt................. 409.6 590.7 443.4 561.1 489.7 495.5 587.8
Redeemable preferred stock..... -- -- -- 33.1 -- -- --
Stockholders' equity........... 964.0 844.7 871.5 785.8 655.4 686.3 698.0
</TABLE>
- ---------
(1) The historical selected financial data reflect the results of Allegheny
Ludlum Corporation and of Teledyne, Inc. as if they had been combined for
all periods presented. Historical selected financial data for the year
ended December 31, 1996 and the nine months ended September 30, 1997 and
September 30, 1996 do not reflect subsequent reclassifications.
(2) Results for 1994 were adversely affected by a ten-week strike at Allegheny
Ludlum Corporation called by the United Steelworkers of America.
14
<PAGE> 18
(3) Net losses for 1993 and 1992 included charges of $185.6 and $125.2,
respectively, for the cumulative effect of changing the accounting for
postretirement health care and life insurance benefits for Teledyne, Inc.
in 1993 and Allegheny Ludlum Corporation in 1992. Prior year financial
statements have not been restated.
(4) Effective January 1, 1992, Allegheny Ludlum Corporation and Teledyne, Inc.
changed their method of accounting for income taxes to comply with the
provisions of SFAS No. 109. The cumulative effect of the accounting change
was a charge of $10.0.
(5) Results include after-tax charges of $4.7 in 1996, $88.0 in 1994, $10.7 in
1993 and $19.0 in 1992 related to the settlement by Teledyne, Inc. of
certain legal matters with the U.S. Government.
(6) Net income included after-tax gains of $37.6 on the sale of the Teledyne,
Inc. defense vehicle business and surplus California real estate in 1996,
$30.3 on the sale of the Teledyne, Inc. defense electronic systems business
in 1995, $24.2 on the sale of an investment in Litton Industries common
stock in 1993, and $14.8 on sales of other operations in 1992.
(7) Net income was adversely affected by after-tax merger, restructuring and
proxy contest charges of $42.9 in 1996 and $3.9 in 1995.
(8) The nine months ended September 1997 included an $8.4 gain on the sale of
Teledyne Economic Development, a $27.6 gain on the sale of an investment in
Semtech Corporation common stock, a gain of $15.3 on the sale of an
investment in Nitinol Development Corporation, and a $3.1 gain on other
investments. These gains were partially offset by a charge of $6.8 for a
settlement of a U.S. government contract dispute related to a unit divested
in 1995 and by a charge of $5.3 to write-off an investment in a research
and development venture.
(9) The nine months ended September 1996 included a gain of $41.0 on the sale
of a defense vehicle business.
(10) Teledyne, Inc. also declared dividends of $0.08 per equivalent share in
1996 and $0.31 per equivalent share in 1995 paid in face amount of
Teledyne, Inc. Series E Cumulative Preferred Stock. The Teledyne, Inc.
Series E Cumulative Preferred Stock was redeemed for cash in 1996.
Allegheny Teledyne Earnings Release
On January 21, 1998, Allegheny Teledyne issued a press release the text of
which follows:
"Allegheny Teledyne Reports Higher Fourth Quarter
And Full Year Earnings
Pittsburgh, PA, January 21, 1998--Allegheny Teledyne Incorporated
(NYSE:ALT) today announced that its net income for the quarter ended
December 31, 1997 was $82.9 million, or $0.48 per share, compared to
$51.4 million, or $0.30 per share, in the same year-ago period. Before
special items, net income was $76.6 million, or $0.44 per share,
compared to $68.2 million, or $0.40 per share, in the same period a year
ago. Sales from continuing operations in the fourth quarter 1997
improved to $909.8 million compared to $892.5 million in the fourth
quarter 1996.
For the year ended December 31, 1997, net income was $297.6 million, or
$1.70 per common share, compared to $213.0 million, or $1.20 per common
share in 1996. Before special items, net income was $273.9 million, or
$1.56 per common share for the year ended December 31, 1997, compared to
$234.9 million, or $1.33 per common share, for the 1996 period. Sales
from continuing operations in 1997 were $3,647.1 million compared to
$3,629.7 million in 1996.
Richard P. Simmons, chairman, president and chief executive officer,
said, 'We are pleased with the progress that was made in the fourth
quarter and full year 1997 in restructuring the company. We focused on
cost reductions and quality improvements, improved use of working
capital, and continued with substantial reductions in corporate overhead
and the disposal of non-strategic assets. Despite severe price weakness
in the commodity stainless steel sheet business, the company had an
excellent year with return on capital at 21.6 percent and return on
stockholders' equity at 29.3 percent before special items.'
Specialty Metals Segment
Operating profit for the specialty metals segment declined 7 percent to
$61.6 million in the fourth quarter 1997 compared to $66.0 million for
the same quarter last year. This decline is due to a special fourth
quarter charge of $4.9 million for an environmental reserve. Sales
increased 4 percent to
15
<PAGE> 19
$465.8 million. Both operating profit and sales were affected by the
continued difficult pricing environment for stainless steel commodity
grades.
Operating profit from businesses other than flat-rolled products
increased 10 percent compared to the fourth quarter 1996 with sales
increasing 20 percent. These results reflected strong demand from
commercial aerospace and chemical processing industries for specialized
metals such as nickel-based superalloys, titanium, niobium, and
zirconium.
Tons of flat-rolled specialty metals shipped from Allegheny Ludlum and
Rodney Metals increased 2 percent in the 1997 fourth quarter to 129,000
from 127,000 in the same period of 1996, but operating profits from
these businesses fell 19 percent and sales dropped 4 percent. Declines
were due to depressed prices. The average price per ton shipped from
these businesses in the fourth quarter declined 6 percent to $2,291 from
$2,428 in the 1996 fourth quarter.
Aerospace and Electronics Segment
Fourth quarter 1997 operating profit for the aerospace and electronics
segment decreased 31 percent to $24.5 million compared to the same
period in 1996, and sales decreased 4 percent to $238.1 million.
Teledyne Brown Engineering experienced declines in operating profit and
sales due to lower shipments and funding levels on defense and NASA
contracts and costs associated with restructuring its operations.
Operating profit and sales declined at Teledyne Ryan Aeronautical
primarily due to the scheduled wind-down of the current phase of the
Global Hawk unmanned aerial vehicle program. In fourth quarter 1996,
Ryan Aeronautical results were higher due to the completion of a
contract to supply mid-range unmanned aerial vehicles. Fourth quarter
1997 operating profits continued strong at Teledyne Electronic
Technologies especially at its circuit board contract manufacturing and
microelectronic hybrid products businesses.
Industrial Segment
Operating profit for the 1997 fourth quarter in the industrial segment
declined 4 percent to $13.7 million while sales increased 5 percent to
$133.6 million compared to the fourth quarter of 1996. Results improved
for Teledyne Metalworking Products as operating profit and sales
increased for cutting tools and tungsten products. In addition,
operating profit and sales improved at Portland Forge and at Teledyne
Specialty Equipment's material handling equipment business. These
improvements in operating results were offset by a decline in operating
profit and sales at Casting Service due primarily to discontinuing
certain product lines and costs associated with other restructuring
activities.
Consumer Segment
Operating profit in the 1997 fourth quarter for the consumer segment
more than doubled to $11.6 million compared to the fourth quarter 1996,
and sales grew 9 percent to $72.3 million. Teledyne Water Pik's
operating profit improvement was particularly strong due to the
favorable performance of new products, and cost reductions. Operating
results improved at Teledyne Laars due to increased sales of pool
products to distributors.
Special Items
Special items resulted in a net after-tax gain of $6.3 million, or $0.04
per share, in the 1997 fourth quarter. These items included gains on
divestitures of non-strategic operations and a favorable adjustment of
estimated tax liabilities related to prior years. These gains were
partially offset by a charge for the previously mentioned environmental
reserve. Allegheny Teledyne expects to continue realizing net gains from
its previously announced non-strategic divestitures and the sale of
surplus real estate holdings.
Fourth quarter 1996 special items reduced after-tax income by $16.8
million, or $0.10 per share. This reduction was due primarily to charges
for the redemption of debt, merger and restructuring costs, and
16
<PAGE> 20
settlement of legal cases involving U.S. government contracting issues
related to divested operations. Partially offsetting these charges was a
gain on the sale of surplus real estate.
Financial Performance
Allegheny Teledyne's financial performance remained strong in the 1997
fourth quarter and for the total year. Return on capital employed was
21.6 percent, and return on stockholders' equity was 29.3 percent for
the year ended December 31, 1997, before special items. Cash flow from
operating activities for 1997 was $256.7 million compared to $233.2
million for 1996. Net debt as a percent of total capitalization was 21.8
percent at December 31, 1997 compared to 30.7 percent a year ago.
Net after-tax proceeds from sales of non-strategic businesses,
investments, surplus real estate, and company aircraft totaled $82.4
million in 1997.
Share Repurchase Program
In 1997, the company repurchased 3.8 million shares for a cost of $107.7
million at per-share prices ranging from $25 1/8 to $32 3/4. However,
average common shares outstanding are slightly higher because of stock
option exercises which exceeded share repurchases. The 12 million share
repurchase program initiated earlier this year was terminated October
31, 1997 in connection with the announced proposed acquisition of Oregon
Metallurgical Corporation, which will be accounted for as a pooling of
interests.
This news release contains forward-looking statements related to
anticipated earnings. Realization of the anticipated results could take
longer than expected and implementation difficulties and market factors
could alter the anticipated results. Actual results could differ
materially from those projected in the forward-looking statements.
Additional information concerning factors that could cause actual
results to differ materially from those projected in the forward-looking
statements is contained in the company's filings with the Securities and
Exchange Commission, including its report on Form 10-K for the year
ended December 31, 1996.
Allegheny Teledyne Incorporated is a group of technology-based
manufacturing companies with significant concentration in specialty
metals, complemented by aerospace and electronics, industrial, and
consumer products. Allegheny Teledyne's website can be found at
http://www.alleghenyteledyne.com."
17
<PAGE> 21
Unaudited Pro Forma Condensed Consolidated Summary Financial Information
The unaudited pro forma condensed consolidated summary financial
information set forth below gives effect to the Merger under the pooling of
interests accounting method. Pro forma consolidated balance sheet information as
of September 30, 1997 combines the balance sheet information of the Company as
of September 28, 1997 and Allegheny Teledyne as of September 30, 1997 and gives
effect to the Merger as if it had occurred on such date. Pro forma consolidated
statement of income financial information for the nine month periods ended
September 30, 1997 and 1996 and for each of the three years ended December 31,
1996 combines the results of the Company and Allegheny Teledyne for such fiscal
periods and gives effect to the Merger as if it had occurred at the beginning of
the period presented.
The pro forma consolidated balance sheet as of September 30, 1997 gives
effect to anticipated expenses and nonrecurring charges related to the Merger
and assumes that each outstanding share of the Company Common Stock is converted
into 1.296 shares of Allegheny Teledyne Common Stock. The pro forma financial
information excludes the effect of anticipated revenue enhancement and expense
reductions associated with the combination of the operations of the Company and
Allegheny Teledyne.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the combined operating results or financial
position that would have occurred if the Merger had been consummated during the
periods or as of the dates indicated, nor is it necessarily indicative of future
operating results or financial position. See "COMPARATIVE PER SHARE DATA" and
"UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales:
Continuing............................... $3,006.7 $2,986.5 $3,957.2 $3,872.4 $3,118.3
Operations sold or held for sale......... 31.9 83.6 95.4 322.5 410.2
-------- -------- -------- -------- --------
3,038.6 3,070.1 4,052.6 4,194.9 3,528.5
Income, after tax, before extraordinary
items.................................... 239.3 176.6 248.8 274.3 7.8
Net income................................. 239.3 176.6 235.3 271.4 7.8
Net income per common share................ 1.22 0.92 1.22 1.41 0.04
BALANCE SHEET DATA (AT PERIOD END):
Working capital............................ $ 862.5 $ 896.1 $ 794.5 $ 743.6 $ 589.1
Total assets............................... 2,921.7 2,922.7 2,863.9 2,758.6 2,562.2
Long-term debt............................. 414.2 595.3 447.6 587.9 506.9
Redeemable preferred stock................. -- -- -- 33.1 --
Stockholders' equity....................... 1,186.3 1,036.1 1,075.4 851.7 722.6
</TABLE>
18
<PAGE> 22
RISK FACTORS
The following factors should be taken into account by holders of Company
Common Stock in evaluating whether to approve the Merger Agreement and the
transactions contemplated thereby, which approval will, if the other conditions
to the Merger are satisfied, result in their becoming holders of Allegheny
Teledyne Common Stock. These factors should be taken into account in conjunction
with the other information included or incorporated by reference in this Proxy
Statement/Prospectus.
DIFFERENT BUSINESS PROFILES OF THE COMPANY AND ALLEGHENY TELEDYNE
The Company's operations are conducted in one business segment, the
production and marketing of titanium metal and related products. Allegheny
Teledyne currently has four business segments: specialty metals, aerospace and
electronics, industrial, and consumer. On a pro forma basis after giving effect
to the Merger (treating the Company's revenues as attributable to Allegheny
Teledyne's specialty metals segment), Allegheny Teledyne sales from continuing
operations attributable to its specialty metals, aerospace and electronics,
industrial, and consumer business segments would have been 58%, 24%, 11% and 7%
for the year ended December 31, 1996 and 60%, 22%, 11% and 7% for the nine
months ended September 30, 1997, respectively. The following table sets forth
for the periods indicated Allegheny Teledyne business segment sales data on a
pro forma basis after giving effect to the Merger.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA SALES
(IN MILLIONS)
------------------------------------------------------------
NINE MONTHS ENDED PERCENT YEAR ENDED PERCENT
SEPTEMBER 30, 1997 OF TOTAL DECEMBER 31, 1996 OF TOTAL
------------------ -------- ----------------- --------
<S> <C> <C> <C> <C>
BUSINESS SEGMENT
Specialty Metals
Stainless steel............................ $ 756.0 25% $1,078.3 27%
Titanium................................... 333.7 11 355.7 9
Nickel-based super alloys.................. 209.5 7 247.7 7
Other specialty metals..................... 499.4 17 600.5 15
-------- --- -------- ---
1,798.6 60 2,282.2 58
Aerospace and Electronics.................... 654.0 22 940.0 24
Industrial................................... 327.6 11 447.1 11
Consumer..................................... 226.5 7 287.9 7
-------- --- -------- ---
Sales from continuing operations........... $3,006.7 100% $3,957.2 100%
======== === ======== ===
</TABLE>
By virtue of the Merger, former Company shareholders will become stockholders of
a company the financial results of which will depend in significant part on the
performance of businesses not engaged in by the Company.
FIXED EXCHANGE RATIO
Under the terms of the Merger Agreement, each share of Company Common Stock
issued and outstanding at the Effective Time (other than shares held by
Allegheny Teledyne or its subsidiaries) will be converted into the right to
receive 1.296 shares of Allegheny Teledyne Common Stock. The Merger Agreement
does not contain any provision for adjustment of the Conversion Number based on
fluctuations in the market price of Allegheny Teledyne Common Stock or
otherwise. On October 31, 1997, the last trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the closing
price of Allegheny Teledyne Common Stock as reported on the NYSE Composite
Transactions Tape was $26 5/16 per share. On February 20, 1998, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus, the
closing price of Allegheny Teledyne Common Stock as reported on the NYSE
Composite Transactions Tape was $26 3/8 per share. Although the Conversion
Number is fixed, the market value of the shares of Allegheny Teledyne Common
Stock that holders of Company Common Stock will receive in the Merger is subject
to fluctuation and may
19
<PAGE> 23
increase or decrease prior to and following the Merger. Shareholders of the
Company are urged to obtain current market quotations for Allegheny Teledyne
Common Stock.
CERTAIN BUSINESS RISKS AFFECTING ALLEGHENY TELEDYNE
Demand for Specialty Metals. Demand for various of the products of
Allegheny Teledyne's specialty metals businesses, which account for a
significant portion of Allegheny Teledyne's total sales and total income, is
cyclical because the industries in which customers of such businesses operate
are cyclical and are subject to changes in general economic conditions,
including decreases in the rate of consumption or use of their products due to
economic recessions or due to increases in use or decreases in price of other
materials which may be used in lieu of the materials they produce. From time to
time, these industries have experienced significant downturns. Significant
downturns in the domestic economy have adversely affected the results of
operations of Allegheny Teledyne from time to time. Demand for such products is
also subject to fluctuation due to national and international overcapacity,
fluctuations in the value of the U.S. dollar against other currencies, and
levels of lower priced imports, all of which affect market demand for specialty
materials. As a result, Allegheny Teledyne's operating results could be subject
to significant fluctuation. In 1997, sales and operating profit of Allegheny
Teledyne's specialty metals business segment have been adversely affected by a
difficult pricing environment for commodity grades of stainless steel.
Raw Materials for Specialty Metals. Certain of the principal raw materials
used to produce specialty metals can be acquired in large part only from foreign
sources, some of which are located in countries that may be subject to unstable
political and economic conditions which might disrupt supplies or affect the
prices of these materials. Purchase prices of certain critical raw materials are
volatile. As a result, Allegheny Teledyne's operating results could be subject
to significant fluctuation. Allegheny Teledyne enters into raw material futures
contracts from time to time to hedge its exposure to price fluctuations.
Allegheny Teledyne believes that adequate controls are in place to monitor these
activities, which are not financially material.
Environmental Matters. Allegheny Teledyne is subject to various federal,
state, local and foreign environmental laws and regulations. Environmental laws
and regulations have changed rapidly in recent years, and it is likely that
Allegheny Teledyne will be subject to increasingly stringent environmental
standards in the future. Allegheny Teledyne believes that its businesses are
being operated in compliance in all material respects with applicable
environmental laws and regulations. Allegheny Teledyne is a party to lawsuits
and other proceedings involving alleged violations of environmental laws.
Allegheny Teledyne records environmental liabilities when Allegheny Teledyne's
liability is probable and the costs are reasonably estimable. In many cases,
however, investigations are not yet at a stage where Allegheny Teledyne has been
able to determine whether it is liable or, if liability is probable, to
reasonably estimate the loss or range of loss, or certain components thereof.
Estimates of Allegheny Teledyne's liability are further subject to uncertainties
regarding the nature and extent of site contamination, the range of remediation
alternatives available, evolving remediation standards, imprecise engineering
evaluations and estimates of appropriate cleanup technology, methodology and
cost, the extent of corrective actions that may be required, and the number and
financial condition of other potentially responsible parties, as well as the
extent of their responsibility for the remediation. Accordingly, as
investigation and remediation of these sites proceeds, it is likely that
adjustments in Allegheny Teledyne's accruals will be necessary to reflect new
information. The amounts of any such adjustments could have a material adverse
effect on Allegheny Teledyne's results of operations in a given period, but are
not reasonably estimable. Based on currently available information, management
does not believe that future environmental costs in excess of those accrued with
respect to sites with which Allegheny Teledyne has been identified are likely to
have a material adverse effect on Allegheny Teledyne's financial condition or
liquidity. However, there can be no assurance that additional future
developments, administrative actions or liabilities relating to environmental
matters will not have a material adverse effect on Allegheny Teledyne's
financial condition or results of operations.
Government Contracts. A number of Allegheny Teledyne's subsidiaries perform
work on contracts with the U.S. Government. Many of these contracts include
price redetermination clauses, and most are terminable at the convenience of the
government. Certain of these contracts are fixed-priced or fixed-price incentive
development contracts which involve a risk that costs may exceed those expected
when the contracts were negotiated. Absent modification of these contracts, any
costs incurred in excess of the fixed or ceiling prices must be borne by
20
<PAGE> 24
Allegheny Teledyne. In addition, virtually all defense programs are subject to
curtailment or cancellation due to the year-to-year nature of the government
appropriations and allocations process. A material reduction in U.S. Government
appropriations may have an adverse effect on Allegheny Teledyne's business,
depending upon the specific programs affected by any such reduction. Since
certain contracts extend over a long period of time, all revisions in cost and
funding estimates during the progress of work have the effect of adjusting the
current period earnings on a cumulative catch-up basis. When the current
contract estimate indicates a loss, provision is made for the total anticipated
loss. Allegheny Teledyne obtains many U.S. Government contracts through the
process of competitive bidding. There can be no assurance that Allegheny
Teledyne will continue to be successful in having its bids accepted.
Various claims (whether based on U.S. Government or Allegheny Teledyne
audits and investigations or otherwise) have been or may be asserted against
Allegheny Teledyne related to its U.S. Government contract work, including
claims based on business practices and cost classifications and actions under
the False Claims Act. The False Claims Act permits a person to assert the rights
of the U.S. Government by initiating a suit under seal against a contractor if
such person purports to have information that the contractor falsely submitted a
claim to the U.S. Government for payment. If it chooses, the U.S. Government may
intervene and assume control of the case.
Although government contracting claims are generally resolved by detailed
fact-finding and negotiation, on those occasions when they are not so resolved,
civil or criminal legal or administrative proceedings may ensue. Depending on
the circumstances and the outcome, such proceedings could result in fines,
penalties, compensatory and treble damages or the cancellation or suspension of
payments under one or more U.S. Government contracts. Under government
regulations, a company, or one or more of its operating divisions or units, can
also be suspended or debarred from government contracts based on the results of
investigations. Given the extent of Allegheny Teledyne's business with the U.S.
Government, a suspension or debarment of Allegheny Teledyne could have a
material adverse effect on future operating results and the consolidated
financial condition of Allegheny Teledyne. However, although the outcome of
these matters cannot be predicted with certainty, management does not believe
there is any audit, review or investigation currently pending against Allegheny
Teledyne of which management is aware that is likely to result in suspension or
debarment of Allegheny Teledyne, or that is otherwise likely to have a material
adverse effect on Allegheny Teledyne's financial condition or liquidity,
although the resolution in any reporting period of one or more of these matters
could have a material adverse effect on Allegheny Teledyne's results of
operations for that period.
Export Sales. It is anticipated that export sales will continue to account
for a significant percentage of Allegheny Teledyne's sales. Among the risks
associated with export sales are export controls, changes in legal and
regulatory requirements, policy changes affecting the markets for Allegheny
Teledyne's products, changes in tax laws and tariffs, exchange rate fluctuations
(which may affect sales to foreign customers and the value of, and profits
earned on, such sales when translated into U.S. dollars), political and economic
instability, accounts receivable collection, and the seasonality of foreign
sales. Any of these factors could have a material adverse effect on Allegheny
Teledyne's results of operations.
Allegheny Teledyne Acquisition and Disposition Strategy. Allegheny Teledyne
intends to continue to strategically position its businesses in order to improve
its competitive posture by seeking specialty niches, expanding its global
presence, acquiring businesses complementary to existing strengths and
continually evaluating the performance and strategic fit of existing businesses.
Accordingly, Allegheny Teledyne regularly considers acquisition and business
combination opportunities as well as possible business dispositions, and its
management from time to time holds discussions with managements of other
companies to explore such opportunities and possible dispositions. As a result,
the businesses comprising Allegheny Teledyne are subject to change.
Labor Matters. Allegheny Teledyne and its subsidiaries employ approximately
23,000 persons, including approximately 10,000 persons employed by companies
comprising its specialty metals segment. A substantial portion of specialty
metals segment employees are employed subject to collective bargaining
agreements with the United Steelworkers of America (the "USWA") that are
effective through various dates, including approximately 3,600 production and
maintenance employees of Allegheny Teledyne's Allegheny Ludlum Corporation
subsidi-
21
<PAGE> 25
ary ("Allegheny Ludlum") who are employed subject to a collective bargaining
agreement with the USWA that is effective through July 1, 1998. In connection
with the expiration of a prior collective bargaining agreement between Allegheny
Ludlum and the USWA in 1994, the USWA authorized a strike by its members that
lasted for 10 weeks and had a material adverse effect on Allegheny Ludlum's
operating results. There can be no assurance that concluding collective
bargaining agreements with the USWA to replace those to expire will be
successful.
INHERENT UNCERTAINTIES RELATING TO CERTAIN EFFECTS OF THE MERGER
The senior managements of Allegheny Teledyne and the Company have
identified cost savings and operating and sales synergies expected to result
from the Merger amounting to more than $15 million in combined pre-tax earnings
in the first full year following the Merger and increasing to over $45 million
in combined pre-tax earnings annually by the end of the third full year
following the Merger. Achieving such results involves inherent uncertainties,
including those relating to whether the operations, product offerings and sales
and marketing efforts of the Company can be integrated successfully into those
of Allegheny Teledyne in a timely manner and whether key management, technical
and sales personnel can be retained, as well as business risks affecting the
businesses of Allegheny Teledyne and the Company generally. Accordingly, there
can be no assurance that Allegheny Teledyne will be able to realize, or do so
within any particular time frame, the expected cost savings and operating and
sales synergies anticipated to be achieved as a result of the Merger or to
generate additional revenue to offset any unanticipated inability to realize
such expected cost savings and operating and sales synergies.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company Board that Company
shareholders vote in favor of the approval of the Merger Agreement, shareholders
of the Company should be aware that certain directors and executive officers of
the Company have certain interests in the Merger that are in addition to the
interests of the shareholders of the Company generally. Such interests, together
with other relevant factors, were taken into account by the Company Board in
approving the Merger Agreement and recommending the Merger to the shareholders
of the Company. See "THE MERGER--Interests of Certain Persons in the Merger."
22
<PAGE> 26
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends declared and book value per
common share data of the Company and Allegheny Teledyne on both historical and
unaudited pro forma combined bases and on a per share equivalent unaudited pro
forma basis. Unaudited pro forma combined per share information is derived from
the unaudited pro forma combined information presented elsewhere herein. Company
per share equivalent pro forma financial information is based upon the exchange
ratio of 1.296 shares of Allegheny Teledyne Common Stock for each share of
Company Common Stock. The information set forth below should be read in
conjunction with the respective financial statements of the Company and
Allegheny Teledyne that are incorporated by reference herein and with the
unaudited pro forma combined data included under "UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION." The comparative per share data are not
necessarily indicative of the results of future operations or the actual results
that would have occurred if the Merger had been consummated at the beginning of
the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER, (1) YEAR ENDED DECEMBER 31,
----------------- -----------------------------
1997 1996 1996 1995 1994
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
COMPANY-HISTORICAL
Net income (loss)............................... $ 1.49 $ 1.24 $ 1.69 $ (0.22) $ (0.18)
Cash dividends declared(2)...................... $ -- $ -- $ -- $ -- $ --
Book value (at period end)...................... $14.31 $ -- $ -- $ -- $ --
ALLEGHENY TELEDYNE-HISTORICAL
Net income...................................... $ 1.22 $ 0.91 $ 1.20 $ 1.54 $ 0.06
Cash dividends declared(3):
Allegheny Teledyne........................... $ 0.48 $ -- $ 0.16 $ -- $ --
Allegheny Ludlum............................. $ -- $ 0.42 $ 0.42 $ 0.49 $ 0.48
Teledyne, Inc.(4)............................ $ -- $ 0.44 $ 0.44 $ 0.21 $ --
Book value (at period end)...................... $ 5.51 $ -- $ -- $ -- $ --
PRO FORMA COMBINED
Net income...................................... $ 1.22 $ 0.92 $ 1.22 $ 1.41 $ 0.04
Cash dividends declared......................... $ 0.48 $ -- $ 0.64 $ -- $ --
Book value (at period end)...................... $ 6.04 $ -- $ -- $ -- $ --
EQUIVALENT PRO FORMA COMBINED PER COMPANY COMMON
SHARE
Net income...................................... $ 1.58 $ 1.19 $ 1.58 $ 1.83 $ 0.05
Cash dividends declared......................... $ 0.62 $ -- $ 0.83 $ -- $ --
Book value (at period end)...................... $ 7.83 $ -- $ -- $ -- $ --
</TABLE>
- ---------
(1) Information concerning Allegheny Teledyne and the Company are as of or for
the periods ended September 30, 1997 and September 28, 1997, respectively.
(2) Does not include a special federal tax refund dividend of $0.5227 per share
of Company Common Stock paid on December 20, 1996 to shareholders of record
on November 27, 1987, or a special tax refund dividend of $0.0686 per share
of Company Common Stock paid on December 29, 1997 to shareholders of record
on November 27, 1987.
(3) Allegheny Teledyne was formed in connection with the business combination of
Allegheny Ludlum and Teledyne, Inc. which was consummated on August 15,
1996, as a result of which their respective stockholders received shares of
Allegheny Teledyne Common Stock in exchange for their shares of Allegheny
Ludlum and Teledyne, Inc. common stock.
(4) Cash dividends declared reflect the per equivalent share due to the August
15, 1996 business combination of Allegheny Ludlum and Teledyne, Inc.
23
<PAGE> 27
MARKET PRICE AND DIVIDEND DATA
Company Common Stock is listed on The Nasdaq National Market and traded
under the symbol "OREM" and Allegheny Teledyne Common Stock is listed on the
NYSE and traded under the symbol "ALT." The table below sets forth, for the
calendar quarters indicated, the range of high and low sales prices of Company
Common Stock as reported on The Nasdaq National Market, the range of high and
low sale prices of Allegheny Teledyne Common Stock as reported on the NYSE
Composite Transactions Tape, and the cash dividends declared on Allegheny
Teledyne Common Stock. The Company declared a special federal tax refund
dividend of $0.5227 per share of Company Common Stock which was paid on December
20, 1996 to shareholders of record as of November 27, 1987 and a special state
tax refund dividend of $0.0686 per share of Company Common Stock which was paid
on December 29, 1997 to shareholders of record on November 27, 1987. No other
cash dividends were declared on Company Common Stock during the periods
presented.
<TABLE>
<CAPTION>
COMPANY ALLEGHENY TELEDYNE
COMMON STOCK COMMON STOCK
-------------- ------------------------------
HIGH LOW HIGH LOW DIVIDENDS
---- --- ---- --- ---------
<S> <C> <C> <C> <C> <C>
1996
First Quarter................................... $22 1/8 $11 $-- $-- $ --
Second Quarter.................................. 35 17 5/8 -- -- --
Third Quarter (in the case of Allegheny
Teledyne,
from August 16, 1996)......................... 35 1/4 21 1/2 23 1/2 19 7/8 --
Fourth Quarter.................................. 38 3/4 28 23 3/4 20 1/8 0.16
1997
First Quarter................................... 34 1/2 18 3/8 29 1/2 21 0.16
Second Quarter.................................. 29 1/4 17 1/2 28 7/8 25 1/8 0.16
Third Quarter................................... 28 5/8 21 32 13/16 25 7/8 0.16
Fourth Quarter.................................. 34 1/4 20 1/8 29 7/8 23 1/8 0.16
1998
First Quarter (through February 20, 1998)....... 34 28 1/2 26 13/16 22 5/8 0.16
</TABLE>
In August 1996, Allegheny Ludlum and Teledyne, Inc. combined to form
Allegheny Teledyne. As a result, there is no stock price activity prior to the
combination.
The following table sets forth the respective closing prices per share of
Company Common Stock on The Nasdaq National Market and of Allegheny Teledyne
Common Stock on the NYSE Composite Transactions Tape on October 31, 1997, the
last full trading day prior to the public announcement of the execution and
delivery of the Merger Agreement, and on February 20, 1998, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus, and
the equivalent per share prices for Company Common Stock based on the Allegheny
Teledyne Common Stock prices and the Conversion Number.
<TABLE>
<CAPTION>
COMPANY
ALLEGHENY TELEDYNE COMPANY COMMON
COMMON STOCK COMMON STOCK STOCK EQUIVALENT
------------------ ------------ ----------------
<S> <C> <C> <C>
October 31, 1997............................ $26 5/16 $23 7/16 $34 1/8
February 20, 1998........................... $26 3/8 $33 1/2 $34 1/8
</TABLE>
Although the Conversion Number is fixed, the market value of the shares of
Allegheny Teledyne Common Stock that holders of Company Common Stock will
receive in the Merger is subject to fluctuation and may increase or decrease
prior to and following the Merger. Shareholders are urged to obtain current
market quotations.
The declaration and payment by Allegheny Teledyne of dividends and the
amount thereof will depend upon Allegheny Teledyne's results of operations,
financial condition, cash requirements, future prospects, limitations imposed by
credit agreements or senior securities and other factors deemed relevant by its
Board of Directors.
24
<PAGE> 28
THE MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Company
Common Stock in connection with the solicitation of proxies by the Company Board
for use at the Meeting to be held on March 24, 1998, commencing at 9:00 a.m.,
local time, and at any adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, holders of Company Common Stock will consider and vote upon
a proposal to approve the Merger Agreement and the transactions contemplated
thereby and consider and vote upon such other matters as may properly be brought
before the Meeting.
The Company Board has determined that the Merger is in the best interests
of the Company and its shareholders, has approved the Merger Agreement and
recommends that Company shareholders vote FOR approval of the Merger Agreement
and the transactions contemplated thereby.
VOTING AT THE MEETING; RECORD DATE
Only holders of record of Company Common Stock as of the close of business
on the Record Date will be entitled to notice of and to vote at the Meeting. As
of the close of business on the Record Date, there were 16,612,440 shares of
Company Common Stock outstanding, held by 1,890 holders of record. Each holder
of record of shares of Company Common Stock on the Record Date is entitled to
cast one vote per share on the proposal to approve the Merger Agreement and the
transactions contemplated thereby and on any other matters properly submitted to
a vote of the Company's shareholders at the Meeting, exercisable in person or by
properly executed proxy. The presence, in person or by properly executed proxy,
of the holders of a majority of the outstanding shares of Company Common Stock
as of the close of business on the Record Date is necessary to constitute a
quorum at the Meeting. Shares represented by duly completed proxies submitted by
nominee holders on behalf of beneficial owners will be counted as present for
purposes of determining the existence of a quorum for all purposes (even if some
such proxies reflect broker non-votes). In addition, abstentions will be counted
as present for purposes of determining the existence of a quorum.
The approval of the Merger Agreement and the transactions contemplated
thereby by Company shareholders will require the affirmative vote of the holders
of at least a majority of all votes entitled to be cast by the holders of
Company Common Stock outstanding on the Record Date. Because abstentions and
broker non-votes with respect to the proposal will not be recorded as votes in
favor of the proposal, both abstentions and broker non-votes will have the
effect of votes against the proposal. Failure to return a proxy or vote in
person at the Meeting will also have the effect of a vote against approval of
the Merger Agreement.
Each director and executive officer of the Company who owns Company Common
Stock has indicated his intention to vote or direct the vote of all shares of
Company Common Stock over which he has voting control in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby. As
of the Record Date, the directors and executive officers of the Company and
their affiliates were the beneficial owners of approximately 1.0% of the
outstanding shares of Company Common Stock.
PROXIES
All shares of Company Common Stock which are entitled to vote and are
represented at the Meeting by properly executed proxies received prior to or at
the Meeting, and not revoked, will be voted in accordance with the instructions
indicated on such proxies. If no instructions are indicated, such proxies will
in each case be voted FOR approval of the Merger Agreement and the transactions
contemplated thereby.
If any other matters are properly presented at the Meeting for
consideration, including, among other things, a motion to adjourn the meeting to
another time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the enclosed form of proxy
and acting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
25
<PAGE> 29
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, prior to the convening of the Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a later dated proxy relating to the same shares and delivering it to
the Secretary of the Company before the taking of the vote at the Meeting or
(iii) attending the Meeting and voting in person (although attendance at the
Meeting will not in and of itself constitute a revocation of a proxy). Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to Oregon Metallurgical Corporation, 530 Southwest 34th Avenue,
Albany, Oregon 97321-0177, Attention: Secretary, or hand delivered to the
Secretary of the Company, at or before the convening at the Meeting.
All expenses of this solicitation, excluding the cost (other than
attorneys' and accounting fees and expenses) of printing and filing this Proxy
Statement/Prospectus and the Registration Statement (which will be shared
equally by the Company and Allegheny Teledyne), will be paid by the party
incurring the expenses. See "THE MERGER AGREEMENT--Termination; Termination Fees
and Expenses." In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of the Company in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. The
Company has retained D. F. King & Co., Inc., at an estimated cost of $5,500,
plus reimbursement of expenses, to assist in the solicitation of proxies from
brokers, nominees, institutions and individuals on behalf of the Company.
Arrangements will also be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and the Company will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARD.
26
<PAGE> 30
THE MERGER
BACKGROUND OF THE MERGER
Representatives of Allegheny Teledyne and the Company have from time to
time held discussions regarding various possible business and commercial
relationships that could be developed between them. Allvac, an Allegheny
Teledyne company, produces titanium alloys and nickel-based superalloys in
ingot, billet, bar and rod product forms. Allegheny Teledyne's Wah Chang unit,
the principal operations of which are located near those of the Company in
Albany, Oregon, produces zirconium and other reactive and refractory metals
products, including titanium products. The Company is one of two United States
integrated producers of titanium products, including titanium sponge which is
the commercially pure, elemental form of titanium metal used by Allegheny
Teledyne's Allvac and Wah Chang businesses to form alloys and manufacture other
products.
At the October 24, 1996 meeting of the Company Board, Company management
presented its three-year strategic plan, which included information and analyses
on the changes occurring in the titanium industry and related markets, the
apparent continued consolidation of the industry, the potential effects of those
changes on the Company's business and prospects and the potential strategic
opportunities and alternatives available to the Company in the context of those
developments.
On October 30, 1996, Carlos E. Aguirre, President and Chief Executive
Officer of the Company, met with Arthur H. Aronson, Executive Vice President of
Allegheny Teledyne and segment executive for its specialty metals segment, and
John V. Andrews, President of Allvac, to discuss various possible commercial
relationships that could be developed between the companies, including the
Company's utilization of Allvac capabilities to produce titanium flat rolled
products and the Company's ability to supply titanium sponge to Allvac.
At the December 12, 1996 meeting of the Company Board, senior management
updated the Company Board regarding general industry developments and then
current activities within the industry, and the Company's performance relative
to that of other industry participants.
In January 1997, Mr. Aguirre contacted Mr. Aronson and indicated that the
Company was interested in exploring the possibility of acquiring Allvac from
Allegheny Teledyne. Mr. Aronson responded that although Allegheny Teledyne was
not interested in selling Allvac, it might be interested in exploring other
business opportunities of mutual interest with the Company. The Company and
Allegheny Teledyne thereafter entered into a mutual Confidentiality Agreement,
dated as of February 3, 1997 (the "Confidentiality Agreement"), governing the
providing of any confidential information by either company to the other.
On February 18, 1997, representatives of the Company and Allegheny Teledyne
again met and discussed general developments in the titanium industry, the
development of titanium and titanium-based alloys for commercial and industrial
applications, and possible future business and commercial relationships between
the two companies. Opportunities discussed included the ability of the Company
to become a supplier of titanium sponge and other products and by-products to
Allvac and Wah Chang, and the ability of various Allegheny Teledyne specialty
metals units to perform product conversion and other services for the Company.
On April 16, 1997, Mr. Aguirre and Dennis P. Kelly, Vice President Finance,
Secretary and Treasurer of the Company, met with Richard P. Simmons, Chairman of
the Board, President and Chief Executive Officer of Allegheny Teledyne, and Mr.
Aronson to continue the discussions of possible future business and commercial
relationships between the companies. At that meeting, Mr. Simmons indicated that
Allegheny Teledyne might be interested in considering a strategic merger with
the Company. Mr. Aguirre stated that the Company was currently evaluating its
strategic opportunities and alternatives and the Company would take the matter
under consideration.
At the April 24, 1997 meeting of the Company Board, Mr. Aguirre described
the various strategic opportunities and alternatives available to the Company
both on a stand-alone basis and as a strategic merger partner, as well as the
preliminary discussions with Allegheny Teledyne.
At its May 1, 1997 meeting, the Board of Directors of Allegheny Teledyne
received a report regarding the discussions that had taken place with the
Company as well as background information regarding the Company.
27
<PAGE> 31
The Board of Directors thereafter received periodic updates regarding the
discussions between Allegheny Teledyne and the Company.
Periodic discussions continued between members of the senior managements of
the two companies during May 1997.
By letter to Mr. Simmons dated May 21, 1997, Mr. Aguirre indicated that the
Company might be interested in pursuing a merger transaction with Allegheny
Teledyne and identified several operational and other synergies that the Company
believed could be achieved if such a transaction were consummated. By letter
dated May 27, 1997, Mr. Simmons responded to Mr. Aguirre and suggested a process
by which the potential transaction could be evaluated, including the
identification and quantification of the various synergies that could reasonably
be expected to result from a merger.
At the July 24, 1997 meeting of the Company Board, senior management
reported on the discussions that had taken place with Allegheny Teledyne
concerning a possible merger and Salomon presented its analysis of the titanium
industry, the opportunities available to the Company and a proposed merger with
Allegheny Teledyne. Following discussion, the Company Board authorized senior
officers of the Company to discuss the possibility of a merger with Allegheny
Teledyne.
On August 9, 1997, Allegheny Teledyne and the Company amended and
supplemented the Confidentiality Agreement to include, among other things, a
provision pursuant to which Allegheny Teledyne agreed not to take certain
actions relating to an acquisition of the Company's assets or securities for a
period of one year without the Company's consent.
On August 13, 1997, Messrs. Aguirre and Kelly met with representatives of
senior management of Allegheny Teledyne, to discuss various aspects of the
Company's business and various possible financial, operational, sales and other
synergies that could be created by a merger.
During September 1997 and through October 10, 1997, various representatives
of Allegheny Teledyne, Goldman Sachs & Co. ("Goldman Sachs"), Allegheny
Teledyne's financial advisor, and Ernst & Young LLP, Allegheny Teledyne's
independent accountants, met with representatives of the Company and of Salomon.
During the course of these meetings, various financial and structural terms and
other issues regarding a possible merger were reviewed and discussed, and
possible financial, operational and sales synergies that could be expected to be
achieved by such a merger were considered in detail.
On October 16, 1997, the senior managements of both companies and their
financial advisors met to further discuss the possible financial terms and
structure of the proposed merger, including tax and accounting issues and the
financial, operational and sales synergies that could be created. On October 17,
1997, a first draft of the Merger Agreement was circulated. During the remainder
of October, the Company and Allegheny Teledyne, assisted by their respective
advisors, continued due diligence investigations with respect to each other and
negotiated the terms of the Merger Agreement, including the terms on which
shares of Company Common Stock would be exchanged for shares of Allegheny
Teledyne Common Stock in the Merger, the scope of representations, warranties
and covenants of the parties, the conditions precedent to the parties'
obligations to consummate the Merger, the terms on which the Merger Agreement
could be terminated and amounts payable if the Merger Agreement were terminated
under certain circumstances, and the amendment to the Company Rights Agreement
(See "THE MERGER AGREEMENT").
At the October 23, 1997 meeting of the Company Board, Mr. Aguirre provided
an update regarding the status of the negotiations with Allegheny Teledyne; the
Company's senior management made presentations regarding the reasons for the
Merger and the potential benefits to the Company and its shareholders from the
Merger; the Company's legal advisors reviewed the Company Board's obligations in
considering the Merger; and Salomon discussed the strategic, business and
operational fit, rationale and financial aspects of the Merger. As a result of
these presentations and its discussions, at the conclusion of the meeting, the
Company Board authorized the Company's senior officers to continue to negotiate
with Allegheny Teledyne regarding a merger.
At the October 23, 1997 meeting of the Board of Directors of Allegheny
Teledyne, the Board of Directors was updated by senior management and Goldman
Sachs regarding the meetings with representatives of the
28
<PAGE> 32
Company and due diligence matters regarding the Company. Senior management also
reviewed with the Board of Directors the history of the development of titanium,
background information regarding the Company, the titanium industry, the status
of negotiations regarding the draft Merger Agreement and the principal terms
thereof, and the various financial, operating and sales synergies that had been
identified that could be expected to result from a merger. Representatives of
Goldman Sachs also reviewed with the Board of Directors various financial
aspects of the possible transaction. Following discussion, the Board of
Directors authorized senior management of Allegheny Teledyne to continue the
negotiations with representatives of the Company regarding the Merger Agreement
and authorized the Executive Committee of the Board of Directors to consider and
approve a definitive Merger Agreement.
On October 31, 1997, at a special meeting of the Company Board, Messrs.
Aguirre and Kelly again reviewed the reasons for and the potential benefits of
the Merger and updated the Company Board on discussions with Allegheny Teledyne;
Mr. Kelly and Salomon updated the Company Board on due diligence matters; the
Company's legal advisors reviewed the terms of the Merger Agreement and related
legal issues; and Salomon made a presentation regarding the financial terms of
the Merger and delivered its opinion regarding the fairness, from a financial
point of view, of the Conversion Number to the holders of Company Common Stock.
See "THE MERGER--Opinion of Financial Advisor to the Company." After discussion
and detailed consideration of the Merger Agreement and of the factors discussed
below under "THE MERGER--Company Reasons for the Merger; Recommendation of the
Company Board," the Company Board (with all directors present) unanimously
approved and authorized the Merger, approved the execution of the Merger
Agreement and determined to submit the Merger Agreement to Company shareholders
with the Company Board's recommendation for approval.
On October 31, 1997, the Executive Committee of the Board of Directors of
Allegheny Teledyne met to consider approval of the Merger Agreement. The
Executive Committee and other directors present at the meeting were updated
regarding the negotiations with the Company and due diligence matters. Terms of
the Merger Agreement were also reviewed. After discussion, the Executive
Committee unanimously approved the Merger Agreement.
On October 31, 1997, following the meetings of the Company Board and the
Executive Committee of the Board of Directors of Allegheny Teledyne, the Merger
Agreement was executed and publicly announced.
COMPANY REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY BOARD
THE COMPANY BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE COMPANY VOTE IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT AT
THE MEETING.
Following are the material factors considered by the Company Board in
reaching the foregoing determination, certain of which contained both positive
and negative elements:
1. the present and anticipated environment in the titanium industry, and the
continued consolidation within the industry;
2. information concerning the financial condition, results of operations,
prospects and businesses of Allegheny Teledyne and the Company;
3. the Company Board's belief that the Merger would help to moderate the
effects of the cyclical swings inherent in the Company's business while
continuing to utilize its skills and investment in the titanium industry;
4. the Company Board's review of possible other strategic alternatives
available to the Company and their relative advantages and disadvantages as
compared to the Merger;
5. potential financial and business prospects for the combined business,
including information relating to possible synergies, cost reductions and
operating efficiencies and consolidations, as well as the advantages to the
combined companies of being able to expand Company product offerings into
flat-rolled products and of being less dependent on third parties for
product conversion;
29
<PAGE> 33
6. the possible advantages to Company shareholders of becoming stockholders of
a larger, more diversified company with greater financial resources and a
significantly greater stock market capitalization;
7. information indicating that, based on the last reported sales prices of
Company Common Stock and Allegheny Teledyne Common Stock on October 30,
1997, the last full trading day prior to approval of the Merger Agreement by
the Company Board, the Conversion Number represented a premium of 45% over
the last reported sale price of Company Common Stock on such date;
8. recent and current market prices of Company Common Stock and Allegheny
Teledyne Common Stock, and the risk of stock price fluctuations prior to and
following completion of the Merger;
9. the advantages to Company shareholders resulting from their becoming holders
of shares as to which regular cash dividends have been paid, although it was
recognized that there could be no assurance as to the length of time that
the current level of such dividends or other future dividends that may be
declared by the Board of Directors of Allegheny Teledyne would be
maintained;
10. the expectation that the Merger will generally be a tax-free transaction to
the Company and its shareholders, and will qualify for pooling of interests
accounting treatment;
11. presentations from, and discussions with, senior executives of the Company,
representatives of its outside legal counsel and representatives of Salomon
regarding the business, financial, accounting and legal due diligence
investigations performed with respect to Allegheny Teledyne and the terms
and conditions of the Merger Agreement;
12. the Company Board's understanding of the complexities involved in the
successful integration of the businesses of two companies;
13. the expressed intention of certain key Company personnel, including Mr.
Aguirre, to continue to serve the Company and related businesses of
Allegheny Teledyne following the Merger, and the expressed desire of
Allegheny Teledyne that such service so continue;
14. the Company Board's recognition that certain members of the Company Board
and management have interests in the Merger that are in addition to the
interests of Company shareholders generally; and
15. the analysis of Salomon and the Company Board's receipt of an opinion from
Salomon dated October 31, 1997 that, as of such date and subject to the
various considerations set forth therein, the Conversion Number was fair
from a financial point of view to the Company shareholders.
The foregoing discussion of the information and factors considered by the
Company Board is not intended to be exhaustive. In reaching its determination to
approve the Merger Agreement and the transactions contemplated thereby, the
Company Board did not find it practical to and did not quantify or assign any
relative or specific weights to the various factors considered by it nor did it
specifically regard any factor as positive or negative (except as described
above), and individual directors may have given different weights to different
factors and may have viewed certain factors more positively or negatively than
others.
OPINION OF FINANCIAL ADVISOR TO THE COMPANY
The Company engaged Salomon to act as its financial advisor in connection
with the transactions contemplated by the Merger Agreement based upon Salomon's
qualifications, expertise and reputation as well as Salomon's prior investment
banking relationship and familiarity with the Company. On October 31, 1997,
Salomon delivered a written opinion to the Company Board (the "Salomon Opinion")
to the effect that, as of such date, and based upon and subject to the
assumptions, limitations and qualifications set forth in the Salomon Opinion,
the Conversion Number was fair to the common shareholders of the Company from a
financial point of view.
THE FULL TEXT OF THE SALOMON OPINION IS SET FORTH AS APPENDIX B TO THIS
PROXY STATEMENT/PROSPECTUS AND SHOULD BE READ CAREFULLY IN ITS ENTIRETY,
INCLUDING WITHOUT LIMITATION, THE DESCRIPTIONS OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW
UNDERTAKEN IN ARRIVING AT SUCH OPINION. THE SALOMON OPINION ADDRESSES ONLY THE
FAIRNESS OF THE CONVERSION NUMBER TO THE COMMON SHAREHOLDERS OF THE COMPANY FROM
A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF THE COMPANY AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
30
<PAGE> 34
MEETING. THE SUMMARY OF THE SALOMON OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE SALOMON OPINION.
The Salomon Opinion does not constitute an opinion as to the price at which
Allegheny Teledyne Common Stock will actually trade at any time. Salomon was
requested to evaluate, from a financial point of view, the fairness of the
Conversion Number to the common shareholders of the Company. No restrictions or
limitations were imposed upon Salomon with respect to the investigations made or
procedures followed by Salomon in rendering its opinion. Although Salomon
evaluated the Conversion Number from a financial point of view, Salomon was not
requested to, and did not, recommend the specific consideration payable in the
Merger, which consideration was determined through arm's length negotiations
between the Company and Allegheny Teledyne. In addition, Salomon received no
instructions to, and did not, seek or solicit alternative transactions. In
arriving at its opinion, Salomon, among other things, reviewed the October 31,
1997 draft of the Merger Agreement, including Annexes I, II and III thereto, as
well as financial and other information that was publicly available or furnished
to it by the Company and Allegheny Teledyne including information provided
during discussions with their respective managements regarding their businesses
and prospects. Included in the information provided during discussions with the
respective managements were certain financial forecasts of the Company and other
information relating to the business operations, financial condition and
prospects of the Company and Allegheny Teledyne, respectively, prepared by their
respective managements. In addition, Salomon compared certain financial and
securities data of the Company and Allegheny Teledyne with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the Company Common Stock and Allegheny
Teledyne Common Stock, reviewed prices and premiums paid in certain other
business combinations and conducted such other financial studies, analyses and
investigations as Salomon deemed appropriate for purposes of rendering its
opinion.
In rendering its opinion, Salomon did not independently verify the
information provided to it or available from public sources and assumed the
accuracy and completeness of all of the financial and other information provided
to it or available from public sources. Salomon did not conduct a physical
inspection of the properties or facilities, or make an independent evaluation or
appraisal of the assets or liabilities, of the Company or Allegheny Teledyne,
nor was Salomon furnished with any such evaluation or appraisal. Salomon relied
upon the estimates of the respective managements of the Company and Allegheny
Teledyne of the operating savings and other benefits and cost reductions
achievable as a result of the Merger. Salomon also assumed that the Company's
financial forecasts and other information relating to the prospects of the
Company were reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the management of the Company as
to the likely future financial performance of the Company, and Salomon expressed
no opinion with respect to such forecasts or the assumptions on which they are
based. Salomon did, however, note that the financial forecasts for the Company
were within the range of data from published research reports and analysts'
estimates. Salomon did not make any independent investigation of any legal
matters affecting the Company or Allegheny Teledyne, and assumed the correctness
of all legal advice given to each of them and to the Company Board, including
advice as to the tax consequences of the Merger. While Salomon believes that its
review as described herein is an adequate basis for the Salomon Opinion, the
Salomon Opinion is necessarily based upon financial, economic, monetary,
political, market and other conditions that existed and could be evaluated as of
the date of the Salomon Opinion and does not speak to any date other than the
date on which the Salomon Opinion was delivered. Salomon does not have any
obligation to update, revise or reaffirm its opinion as a result of changes in
such conditions or otherwise.
The following is a brief summary of the analyses performed by Salomon in
connection with the Salomon Opinion and included in its presentations to the
Company Board. All analyses discussed below, unless otherwise indicated, exclude
synergies resulting from the Merger estimated by the managements of the Company
and Allegheny Teledyne.
Implied Transaction Price and Premium Analysis. Salomon calculated the
premium of the Conversion Number multiplied by the closing price of the
Allegheny Teledyne Common Stock over the average closing price of the Company
Common Stock. The time periods (each ending on October 27, 1997) selected for
analysis were: last six months, last three months, last two months and last 20
trading days. The premium for such time periods were 50.9%, 65.1%, 64.0% and
57.3%, respectively. Salomon also noted that the implied offer premium was
31
<PAGE> 35
62.0% based on the closing prices of the Company Common Stock and the Allegheny
Teledyne Common Stock as of October 27, 1997.
Historical Exchange Ratio Analysis. Salomon compared the Conversion Number
to the ratio implied by dividing the Company Common Stock closing stock price by
the Allegheny Teledyne Common Stock closing stock price. The time periods (each
ending on October 27, 1997) selected for analysis were: last 12 months, last six
months, last three months and last 20 trading days. The average implied exchange
ratios for such time periods were 1.019, 0.866, 0.787 and 0.824, respectively.
Salomon noted that each such ratio was less than the Conversion Number of 1.296.
Earnings Per Share Impact Analysis. Salomon analyzed the pro forma effect
of the Merger on the projected earnings per share ("EPS") of Allegheny Teledyne.
Such analysis was based on certain discussions with the Company's management and
the financial advisors to Allegheny Teledyne, data from published research
reports, First Call estimates and synergies as forecasted by the managements of
the Company and Allegheny Teledyne contemplated to result from the Merger. This
analysis is based on a number of assumptions, including, among other things, the
projected financial performance of the Company and Allegheny Teledyne and the
estimated amounts and timing of the synergies. The analysis indicated that
(accounting for the transaction as a pooling of interests, and giving effect to
the most probable synergies but excluding one-time estimated merger-related
expenses), the pro forma EPS estimates for Allegheny Teledyne are anticipated to
be higher than EPS estimates for Allegheny Teledyne on a stand-alone basis for
fiscal years 1998 and 1999.
Premiums Paid in Public Merger and Acquisition Transactions. Salomon
performed a comparison of the premium represented by the Conversion Number to
publicly available information regarding the premiums paid over market price in
acquisitions of $300 million to $1.0 billion in size ("Comparable Acquisitions")
since January 1, 1993 and nineteen merger and acquisition transactions in the
specialty metals industry since January 1, 1993 ("Selected Metals M&A
Transactions"). Salomon reviewed the consideration paid in each such transaction
in terms of the percentage premium represented by the offer prices (represented,
in the case of transactions in which all or part of the consideration was in the
form of common stock of the acquiror, by the acquiror's stock price on the day
prior to the announcement of the transaction multiplied by the exchange ratio)
over the trading prices one day, one week and one month prior to the
announcement date of each respective transaction. The median premiums to the
market price one day, one week and one month prior to the announcement date for
Comparable Acquisitions and Selected M&A Metals Transactions were approximately
25.8%, 32.1% and 38.1% and 31.6%, 30.6% and 33.8%, respectively. This compares
to the percentage premiums by which the product of the Conversion Number and the
closing price of Allegheny Teledyne Common Stock on October 27, 1997 (the
"Consideration per Share") exceeded the closing price of the Company Common
Stock on October 27, October 21, and September 30, 1997, which premiums were
62.0%, 48.2% and 36.4%, respectively. Salomon also noted that the percentage
premium by which the product of the Conversion Number and the average closing
stock price of the Allegheny Teledyne Common Stock for the 20 trading days ended
October 27, 1997 exceeded the average closing stock price of the Company Common
Stock for the 20 trading days ended October 27, 1997 was 57.3%.
Comparable Company Analysis. To provide contextual data and comparative
market information, Salomon compared the operating performance of the Company to
certain market trading statistics of several integrated companies that produce,
manufacture and distribute metals and related products whose securities are
publicly traded (the "Comparable Companies"). The Comparable Companies consisted
of: Brush Wellman Inc., Carpenter Technology Corporation, Precision Castparts
Corporation, RMI Titanium Company, Special Metals Corporation, Titanium Metals
Corporation and Wyman-Gordon Company. Historical financial information used in
connection with the ratios provided below with respect to the Comparable
Companies is as of the most recent financial statements publicly available for
each company as of October 27, 1997.
Salomon examined certain publicly available financial data of the
Comparable Companies including Firm Value (defined as market value of fully
diluted common equity less any option proceeds ("Equity Value") plus book value
of total debt, minority interest and preferred stock and out-of-the-money
convertible securities, less investments in unconsolidated affiliates and cash)
as a multiple of last twelve months ("LTM") revenues, earnings before interest,
taxes, depreciation and amortization ("EBITDA") and earnings before interest and
taxes
32
<PAGE> 36
("EBIT"), and price to earnings ratios ("P/E") based on estimated EPS for
calendar years 1997 and 1998. Salomon analyzed the implied multiples for the
Company at the Consideration per Share without including the projected
synergies. As of October 27, 1997 this analysis resulted in (i) Firm Value to
LTM revenues multiples for the Comparable Companies ranging from 1.1x to 1.8x,
with a median of 1.6x, as compared to 1.9x for the Company at the Consideration
per Share; (ii) Firm Value to LTM EBITDA multiples for the Comparable Companies
ranging from 6.6x to 11.6x, with a median of 9.0x, as compared to 9.4x for the
Company at the Consideration per Share; (iii) Firm Value to LTM EBIT multiples
for the Comparable Companies ranging from 8.6x to 16.2x, with a median of 10.8x,
as compared to 10.4x for the Company at the Consideration per Share; and (iv)
estimated P/E ratios based on 1997 and 1998 calendar year estimates ranging from
9.4x to 17.9x, with a median of 13.9x, and 7.5x to 15.3x, with a median of
11.4x, respectively, for the Comparable Companies, as compared to 16.4x and
11.3x, respectively, for the Company at the Consideration per Share, in each
case without giving effect to the projected synergies. EPS estimates for the
Company were based on certain financial forecasts prepared by the management of
the Company and for the Comparable Companies by First Call.
No company utilized in the comparable company analysis is identical to the
Company or Allegheny Teledyne. Accordingly, an analysis of the results of the
foregoing necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of the Company and
Allegheny Teledyne and other factors that could affect the public trading value
of the Comparable Companies or Company to which they are being compared.
Mathematical analysis (such as determining the mean or median) is not in itself
a meaningful method of using comparable company data.
Comparable Transaction Analysis. Salomon reviewed publicly available
information with respect to the Selected Metals M&A Transactions. Salomon
reviewed the consideration paid in the Selected Metals M&A Transactions in terms
of Firm Value as a multiple of LTM revenues, EBITDA and EBIT of the acquired
entity prior to its acquisition. This analysis resulted in (i) Firm Value to LTM
revenues multiples ranging from 0.4x to 1.6x, with a median of 0.9x, as compared
to 1.9x for the Company at the Consideration per Share; (ii) Firm Value to LTM
EBITDA multiples ranging from 5.1x to 14.0x, with a median of 8.0x, as compared
9.4x for the Company at the Consideration per Share; (iii) Firm Value to LTM
EBIT multiples ranging from 6.0x to 20.7x, with a median of 10.9x, as compared
to 10.4x for the Company at the Consideration per Share.
No transaction utilized in the Comparable Transaction Analysis is identical
to the Merger. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of the Company and Allegheny Teledyne
and other factors such as variation in the merger and acquisition transaction
environment over time because of macroeconomic factors such as interest rate and
equity market fluctuations and microeconomics factors such as industry results
and growth expectations that could affect the acquisition value of the companies
to which they are being compared. Mathematical analysis (such as determining the
mean or median) is not itself a meaningful method of using comparable
transaction data.
Discounted Cash Flow Analysis. Using a discounted cash flow ("DCF")
methodology, Salomon valued the Company estimating the present value of
unlevered future free cash flows available to its debt and equity holders if the
Company were to perform on a stand-alone basis (without giving effect to the
Merger). The discounted cash flow analysis for the Company was based upon
certain discussions with management of the Company and data from published
research reports. Free cash flow represented the amount of cash generated and
available for principal and interest payments after providing for ongoing
business operations. Salomon aggregated (x) the present value of the free cash
flows of the Company over a five-year forecast period with (y) the present value
of the range of terminal values. The range of terminal values represented the
Company's value beyond the applicable forecast period. This range of terminal
values was generally calculated by applying a range of selected EBITDA multiples
between 6.5x and 8.0x, such range of multiples being consistent with those
exhibited by the Comparable Companies and the Selected Metals M&A Transactions,
to the Company's EBITDA in the final year of the forecast period. As part of the
DCF analysis, Salomon used discount rates between 11.5% and 13.0% reflecting the
Company's specific financial characteristics. This analysis indicated an implied
equity value range of $27.74 to $33.61 for each share of the Company Common
Stock. Salomon also performed a DCF analysis including the value of half of the
most probable synergies. The value of the synergies was calculated using the
discount rates listed above and was comprised of the sum of the present value of
half of the annual amounts of
33
<PAGE> 37
most probable synergies plus the present value of a terminal value based on the
terminal multiples listed above. This analysis indicated an implied equity value
range of $35.13 to $42.70 for each share of the Company Common Stock. Salomon
also noted that the implied equity value of Company Common Stock at the
Consideration per Share was $34.18.
Contribution Analysis. Salomon noted the contribution of each of the
Company and Allegheny Teledyne to revenues, EBITDA and EBIT of the pro forma
combined company for the last twelve months as of October 27, 1997, and, based
on data from published research reports, the projected calendar years 1997 and
1998, in each case without including projected synergies. The analysis indicated
that for the last twelve months as of October 27, 1997, and the projected
calendar years 1997 and 1998, the Company would contribute 6.9%, 6.9% and 7.9%
of combined revenue; 10.0%, 9.8% and 12.5% of combined EBITDA; and 11.0%, 10.5%
and 12.5% of combined EBIT, respectively. Salomon noted that for the projected
calendar year 1998, the Company's contribution to EBITDA, and for the last
twelve months as of October 27, 1997, and the projected calendar year 1998, the
Company's contribution to EBIT, were greater than 10.7%, the pro forma ownership
of Allegheny Teledyne by the Company's shareholders based on the Conversion
Number and number of outstanding shares of Company Common Stock and Allegheny
Teledyne Common Stock (including shares underlying all outstanding options,
calculated using the treasury stock method) as of October 27, 1997. The
Company's contributions to projected 1998 EBITDA, LTM EBIT and projected 1998
EBIT do not individually support the conclusions reached in the Salomon Opinion;
however, Salomon considered numerous qualitative factors including the cyclical
nature of the Company's operating performance when evaluating the Contribution
Analysis. Furthermore, the Contribution Analysis was one of several analyses
performed by Salomon in arriving at the Salomon Opinion.
The summary set forth above does not purport to be a complete description
of the analyses performed by Salomon, but describes, in summary form, the
principal elements of the analyses made by Salomon in arriving at the Salomon
Opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily summarized. Each of the analyses conducted by
Salomon was carried out in order to provide a different perspective on the
transaction and add to the total mix of information available. Salomon did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness from a
financial point of view. Rather, in reaching its conclusion, Salomon considered
the results of the analyses in light of each other and ultimately reached its
opinion based on the results of the analyses taken as a whole. Further,
Salomon's conclusion involved significant elements of judgment and qualitative
analyses as well as the financial and quantitative analyses. Salomon did not
place particular reliance or weight on any individual factor, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, Salomon
believes that its analyses must be considered as a whole and that selecting
portions of its analysis and the factors considered by it, without considering
all analyses and factors, could create an incomplete or misleading view of the
evaluation process underlying its opinion. In performing its analyses, Salomon
made numerous assumptions with respect to industry performance, business and
regulatory, financial, economic, monetary, political and market conditions and
other matters, many of which are beyond the control of the Company or Allegheny
Teledyne. In addition, analyses relating to the value of the businesses or
securities do not purport to be appraisals, or to reflect the prices at which
such businesses or securities can actually be sold. The analyses performed by
Salomon are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Salomon was selected to render an opinion in connection with the Merger
based upon Salomon's qualifications, expertise and reputation, including the
fact that Salomon, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
Pursuant to a letter agreement between the Company and Salomon dated
October 1, 1997 (the "Salomon Engagement Letter"), Salomon is entitled to (i) a
retainer fee of $150,000 payable upon execution of the Salomon Engagement
Letter; (ii) a fee of $350,000 at the earlier of the time Salomon delivered its
opinion to the
34
<PAGE> 38
Company Board, the execution of a definitive agreement or agreement in principal
regarding a Business Combination Transaction, or the public disclosure by the
Combining Company regarding a Business Combination Transaction with the Company;
and (iii) an additional fee of 0.70% of the Aggregate Consideration, less the
$500,000 previously paid pursuant to (i) and (ii) above, upon the consummation
of a Business Combination Transaction and payable upon the closing thereof. A
"Business Combination Transaction" is defined therein as a business combination,
by merger, tender offer or otherwise, between the Company and another company
(the "Combining Company") or the possible sale of all or a significant portion
of the Company's assets, or more than 10% of the Company's equity securities, to
the Combining Company. "Aggregate Consideration" is defined therein as the total
amount of cash and the fair market value (on the date of payment) of all other
property paid or payable by the Combining Company directly or indirectly to the
Company or its security holders in connection with a Business Combination
Transaction or a transaction related thereto. The Company has agreed to
reimburse Salomon for its out-of-pocket expenses, including reasonable fees and
expenses of its counsel, and to indemnify Salomon for liabilities and expenses,
including liabilities under federal securities laws, arising out of its
engagement thereunder. The terms of the fee arrangement with Salomon, which
Salomon and the Company believe are customary in transactions of this nature,
were negotiated at arm's length between the Company and Salomon and the Company
Board was aware of such arrangement, including the fact that a significant
portion of the aggregate fee payable to Salomon is contingent upon consummation
of the Merger.
In the ordinary course of business, Salomon may actively trade the
securities of the Company and Allegheny Teledyne for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, Salomon has previously rendered
certain investment banking and financial advisory and other services to the
Company for which it has received customary compensation. Salomon has also
provided investment banking, financial advisory and other services to Allegheny
Teledyne and its predecessors and affiliates.
ALLEGHENY TELEDYNE REASONS FOR THE MERGER
The Board of Directors of Allegheny Teledyne believes that the Merger will
enhance Allegheny Teledyne's ability to become a more effective global
competitor in the highly competitive specialty metals industry. Allegheny
Teledyne's specialty metals operations are acknowledged to be among the world's
leading producers of a wide array of specialty metals, including stainless
steels, high performance nickel-based superalloys, titanium, thin-rolled and
coated metals, tool steels and high purity metals such as zirconium, hafnium and
niobium and their alloys. In its stainless steel operations alone, Allegheny
Teledyne makes products in over 150,000 combinations of properties, chemistries,
finishes, forms, sizes and other characteristics. The Board of Directors
believes that the Company's business represents an excellent strategic fit with
the specialty metals segment of Allegheny Teledyne. Acquisition of the Company's
business will complement Allegheny Teledyne's current operations, including
those of its Allvac and Wah Chang units, and enable it to be more competitive in
higher value-added high performance specialty metals markets. Allegheny Teledyne
also believes that it will benefit from the expected continued services of Mr.
Aguirre as head of a high performance group of specialty metals companies that
will include Allvac, Wah Chang and the Company.
Allegheny Teledyne believes that the Merger will also create opportunities
for financial and operating synergies, which are currently estimated to amount
to more than $15 million in combined pre-tax earnings in the first full year
following the Merger and increasing to over $45 million in combined pre-tax
earnings annually by the end of the third full year following the Merger.
Important synergies are expected to result from more effective and efficient
utilization of the operating facilities of the combined companies, consolidation
of administrative, sales and marketing and research and development functions
and lower raw materials costs. Allegheny Teledyne also believes that
improvements in operating results of the combined companies can be achieved
through the ability to offer a wider array of titanium-based and other specialty
metals and alloys to customers and on coordinated utilization of service center
and other distribution and sales attributes of the companies both in the United
States and abroad. In addition, the Merger is expected to further improve the
capital structure of Allegheny Teledyne and better position it to complete other
business combinations and acquisitions as appropriate strategic opportunities
emerge.
35
<PAGE> 39
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company Board that Company
shareholders vote in favor of the approval of the Merger Agreement, shareholders
of the Company should be aware that certain members of the management and the
Company Board have certain interests in the Merger that are in addition to the
interests of shareholders of the Company generally. The Company Board was aware
of these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
Company Performance Payment Arrangement. Pursuant to a performance payment
arrangement with the Company, upon consummation of the Merger, Carlos E.
Aguirre, Chairman of the Board, President and Chief Executive Officer of the
Company and Dennis P. Kelly, Vice President Finance, Secretary and Treasurer of
the Company will be entitled to receive $1,000,000 and $500,000, respectively,
for their efforts in negotiating and implementing a business combination on
behalf of the Company. If the Merger is not consummated, no payment is required
under the arrangement.
Employment Agreement. Under the terms of an employment agreement with the
Company, Mr. Aguirre would be entitled, if concurrently with or within 36 months
after a "change in control" of the Company, his employment with the Company is
terminated, to receive (i) a lump sum severance payment equal to three times his
annual base compensation as in effect as of the date of termination or
immediately prior to the change in control, whichever is greater, and his bonus,
(ii) all legal fees and expenses incurred by him in seeking to obtain or enforce
any right or benefit under the employment agreement, and (iii) certain health
and disability insurance benefits. The Merger will constitute a "change in
control" of the Company for purposes of the employment agreement. Based on
annual base compensation and target bonus levels in effect on October 31, 1997
and assuming that employment with the Company was terminated within 36 months
following the Merger, the cash severance payments payable to Mr. Aguirre under
the employment agreement would be approximately $1,663,200. It is expected that
Mr. Aguirre will head a high performance group of specialty metals companies of
Allegheny Teledyne that will include the Company following the Merger.
Indemnification; Insurance. Pursuant to the Merger Agreement, the Company
will indemnify and hold harmless each director and officer of the Company
against any losses, claims, damages, costs, expenses, liabilities or judgments
incurred in connection with any claim arising out of matters existing or
occurring at or prior to the Effective Time to the full extent that the Company
is permitted to do so under its Restated Articles of Incorporation and Bylaws,
any indemnity agreement with the Company and under Oregon law. The Merger
Agreement also provides that there be maintained in effect for a specified
period policies of directors' and officers' liability insurance coverage,
including coverage with respect to claims arising from acts, omissions or other
events which occur prior to or as of the Effective Time.
COMPANY STOCK PLANS AND WARRANTS
As provided in the Merger Agreement, the Company will take such actions as
may be necessary such that at the Effective Time each option ("Option") to
acquire Company Common Stock outstanding after the Effective Time under the
Company Option Plans and each warrant ("Warrant") outstanding after the
Effective Time under the Warrant Agreement, dated September 19, 1994, between
the Company and James S. Paddock (the "Warrant Agreement"), whether or not then
exercisable, shall be converted into and become a right with respect to
Allegheny Teledyne Common Stock. From and after the Effective Time, (i) each
Option or Warrant assumed by Allegheny Teledyne may be exercised solely for
Allegheny Teledyne Common Stock, (ii) the number of shares of Allegheny Teledyne
Common Stock subject to each Option or Warrant shall be equal to the product of
(A) the number of shares of Company Common Stock previously subject to such
Option or Warrant and (B) the Conversion Number, and (iii) the per share
exercise price for each Option or Warrant shall be equal to (y) the exercise
price per share for the shares of Company Common Stock previously purchasable or
subject to such Option or Warrant divided by (z) the Conversion Number, rounded
to the nearest cent. At or prior to the Effective Time, the Company will make
all necessary arrangements with respect to the Company Option Plans and the
Warrant Agreement and the Options and Warrants to permit the assumption of
unexercised Options and Warrants by Allegheny Teledyne.
36
<PAGE> 40
Prior to the Effective Time, the Company will take such actions as are
satisfactory to Allegheny Teledyne and as may be necessary such that at the
Effective Time each stock appreciation right ("SAR") outstanding after the
Effective Time under the Company's Long Term Incentive Compensation Stock
Appreciation Rights Plan, whether or not then exercisable, will be converted
into and become a right with respect to Allegheny Teledyne Common Stock, and
each right to receive shares of Company Common Stock under the Company's Excess
Benefit Plan will become a right with respect to Allegheny Teledyne Common
Stock.
The Company is also required under the Merger Agreement to take such
actions as may be necessary to amend or clarify the Company's Stock Compensation
Plans for union and salaried employees in a manner satisfactory to Allegheny
Teledyne such that at the Effective Time, all rights thereunder to acquire
Company Common Stock after the Effective Time shall become rights with respect
to Allegheny Teledyne Common Stock.
As of the Effective Time, Allegheny Teledyne will assume each Option and
Warrant in accordance with the terms of the Company Option Plans, the Warrant
Agreement and any agreement by which they are evidenced, and shall assume the
obligation to issue shares of Allegheny Teledyne Common Stock under the
Company's Excess Benefit Plan and the Stock Compensation Plans (as amended or
clarified as indicated above). At or prior to the Effective Time, Allegheny
Teledyne will also take all corporate action necessary to reserve for issuance a
sufficient number of shares of Allegheny Teledyne Common Stock for delivery upon
exercise of all Options and Warrants assumed by it and for delivery under the
Excess Benefit Plan and the Stock Compensation Plans (as amended or clarified as
indicated above). As soon as practicable after the Effective Time, Allegheny
Teledyne will file one or more registration statements on Form S-8 or any
successor or other appropriate form with respect to the shares of Allegheny
Teledyne Common Stock subject to the Options and the Warrants, the SARs and the
shares of Allegheny Teledyne Common Stock issuable under the Excess Benefit Plan
and the Stock Compensation Plans (as amended or clarified as indicated above)
and will use all reasonable efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Options, Warrants or SARs
remain outstanding or shares of Allegheny Teledyne Common Stock are issuable
under the Excess Benefit Plan and the Stock Compensation Plans.
As of January 31, 1998, there were outstanding Options to purchase an
aggregate of 284,400 shares of Company Common Stock at a weighted average
exercise price of $29.67 per share, outstanding Warrants to purchase an
aggregate of 120,000 shares of Company Common Stock at an exercise price of
$6.375 per share and outstanding rights to receive an aggregate of 14,476 shares
of Company Common Stock under the Company's Excess Benefit Plan.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes under Accounting Principles Board Opinion No.
16. Under this method of accounting, the assets and liabilities of the Company
and Allegheny Teledyne will be carried forward to the combined company at their
recorded amounts, income of the combined company on a consolidated basis will
include income of the Company and Allegheny Teledyne for the entire fiscal
period in which the Merger occurs and the reported income of the separate
companies for prior periods will be combined and restated as consolidated income
of the combined company.
Pursuant to the Merger Agreement, the Company is required to exercise its
best efforts to cause each of its affiliates to execute a written agreement as
of the Effective Time to the effect that such person has not transferred shares
of Company Common Stock or Allegheny Teledyne Common Stock within the 30 days
preceding the Effective Time and will not transfer any shares of Allegheny
Teledyne Common Stock prior to the date that Allegheny Teledyne publishes
results covering at least 30 days of post-Merger operations.
One of the conditions to consummation of the Merger is that Allegheny
Teledyne shall have received letters from each of Coopers & Lybrand L.L.P. and
Ernst & Young LLP, each such letter to be dated the date on which the Effective
Time occurs, to the effect that the Merger will be treated as a business
combination for which the pooling of interests method of accounting is
available. See "THE MERGER AGREEMENT--Conditions" and "UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION."
37
<PAGE> 41
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of material federal income tax consequences of the
Merger based on current law. The Company has not requested and will not request
any ruling from the Internal Revenue Service (the "IRS") as to the United States
federal income tax consequences of the Merger. Future legislative, judicial or
administrative changes or interpretations, which may be retroactive, could alter
or modify the statements set forth herein. This summary may not apply to certain
classes of taxpayers, including, without limitation, insurance companies, tax-
exempt organizations, financial institutions, dealers in securities,
non-resident aliens, foreign corporations, persons who acquired shares of
Company Common Stock pursuant to the exercise of employee stock options or
rights or otherwise as compensation and persons who hold shares of Company
Common Stock in a hedging transaction or as part of a straddle or conversion
transaction. Also, the summary does not address state, local or foreign tax
consequences of the Merger. Consequently, each holder of Company Common Stock (a
"Holder") should consult such Holder's own tax advisor as to the specific tax
consequences of the Merger to such Holder.
Allegheny Teledyne has received the opinion of Kirkpatrick & Lockhart LLP,
its counsel, and the Company has received the opinion of Schwabe, Williamson &
Wyatt, P.C., its counsel, concerning certain federal income tax consequences of
the Merger, based upon certain customary representations and assumptions. Such
opinions have been filed as exhibits to the Registration Statement (see
"Available Information"). Based in part upon such representations and
assumptions, such counsel are of the opinion that the Merger will be treated as
a reorganization within the meaning of Section 368(a) of the Code; that,
accordingly, for federal income tax purposes, no gain or loss will be recognized
by the Company as a result of the Merger; and that Holders (other than the
classes of Holders enumerated and excluded in the italicized introductory
paragraph under this caption) who exchange shares of Company Common Stock for
shares of Allegheny Teledyne Common Stock pursuant to the Merger will generally
be treated as follows:
(i) no gain or loss will be recognized by a Holder with respect to the
receipt of Allegheny Teledyne Common Stock;
(ii) the aggregate adjusted tax basis of shares of Allegheny Teledyne
Common Stock (including a fractional share interest in Allegheny Teledyne Common
Stock deemed received and redeemed as described below) received by a Holder will
be the same as the aggregate adjusted tax basis of the shares of Company Common
Stock exchanged therefor;
(iii) the holding period of shares of Allegheny Teledyne Common Stock
received by a Holder will include the holding period of Company Common Stock
exchanged therefor, provided that such shares of Company Common Stock are held
as capital assets at the Effective Time; and
(iv) a Holder of Company Common Stock who receives cash in lieu of a
fractional share interest in Allegheny Teledyne Common Stock will be treated as
having received such fractional share interest and then as having received the
cash in redemption of such fractional share interest. Under Section 302 of the
Code, if such deemed distribution is "substantially disproportionate" with
respect to the Holder or is "not essentially equivalent to a dividend" after
giving effect to the constructive ownership rules of the Code, the Holder will
generally recognize capital gain or loss equal to the difference between the
amount of cash received and the Holder's adjusted tax basis in the fractional
share interest. Under these rules, a minority shareholder of the Company should
recognize capital gain or loss on the receipt of cash in lieu of a fractional
share interest in Allegheny Teledyne Common Stock. The capital gain or loss will
be long-term capital gain or loss if the Holder's holding period in the
fractional share interest is more than one year.
Other than as set forth above, such counsel express no opinion as to the
U.S. federal, state, local, foreign or other tax consequences of the Merger that
may be applicable to a particular shareholder of the Company.
The obligation of the Company to consummate the Merger is conditioned on
the receipt by the Company of an opinion of its counsel, Schwabe, Williamson &
Wyatt P.C., dated as of the Effective Time, substantially to the effect that the
Merger will be treated for federal income tax purposes either as a tax-free
reorganization within the meaning of Section 368(a) of the Code or as a
non-recognition exchange of stock pursuant to Section 351 of the Code. The
obligation of Allegheny Teledyne to consummate the Merger is conditioned on the
receipt by Allegheny Teledyne of an opinion of its counsel, Kirkpatrick &
Lockhart LLP, dated as of the Effective Time,
38
<PAGE> 42
substantially to the effect that the Merger will be treated for federal income
tax purposes either as a reorganization within the meaning of Section 368(a) of
the Code or as a non-recognition exchange of stock pursuant to Section 351 of
the Code. The opinions of Schwabe, Williamson & Wyatt P.C. and Kirkpatrick &
Lockhart LLP referred to in this paragraph will be based in part upon certain
assumptions and representations substantially similar to those made and obtained
in connection with their respective opinions filed as exhibits to the
Registration Statement. Subject to the receipt of such representations, Schwabe,
Williamson & Wyatt P.C. and Kirkpatrick & Lockhart LLP anticipate that they will
render such opinions. If such opinions are not received, the Merger will not be
consummated unless the conditions requiring their receipt are waived and the
approval of the Company shareholders is resolicited by means of an updated Proxy
Statement/Prospectus. The Company and Allegheny Teledyne currently anticipate
that such opinions will be delivered and that neither the Company nor Allegheny
Teledyne will waive the conditions requiring receipt of such opinions. Such
opinions will not be binding upon the IRS and no assurance can be given that the
IRS will not take a contrary position.
REGULATORY APPROVALS
Antitrust. Under the HSR Act and the rules promulgated thereunder, the
Company and Allegheny Teledyne were each required to file a pre-merger
notification and report under the HSR Act with the United States Department of
Justice and the Federal Trade Commission in connection with the Merger. The
required waiting period under the HSR Act with respect thereto has been
terminated. Notwithstanding the termination of such waiting period under the HSR
Act, at any time before or after the Effective Time, governmental agencies or
others could take action under the antitrust laws with respect to the Merger,
including seeking to enjoin the consummation of the Merger, to rescind the
Merger or to require divestiture of substantial assets of the Company or
Allegheny Teledyne. There can be no assurance that a challenge to the Merger on
antitrust grounds will not be made or that if such a challenge were made that it
would not be successful.
Foreign Approvals. Each of Allegheny Teledyne and the Company conducts
operations in foreign countries where regulatory filings or approvals may be
required in connection with the Merger. Allegheny Teledyne and the Company each
intend to make such filings and seek such approvals as may be necessary to
consummate the Merger or that are otherwise material.
Consummation of the Merger is conditioned upon the receipt of all material
governmental authorizations, consents, orders and approvals, subject to waiver
of such condition in accordance with the terms of the Merger Agreement. The
Company and Allegheny Teledyne intend to pursue vigorously all required
regulatory approvals. However, there can be no assurance that such approvals
will, in fact, be obtained, or, if obtained, as to the timing of their receipt.
See "THE MERGER AGREEMENT--Conditions."
RESALE RESTRICTIONS
All shares of Allegheny Teledyne Common Stock received by Company
shareholders in the Merger will be freely transferable, except that shares of
Allegheny Teledyne Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of the Company
prior to the Merger may be resold by them only in transactions permitted by the
resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144
in the case of such persons who become affiliates of the Company) or as
otherwise permitted under the Securities Act. The Merger Agreement requires the
Company to exercise its best efforts to cause each of its affiliates to execute
a written agreement to the effect that such person will not offer or sell,
transfer or otherwise dispose of any of the shares of Allegheny Teledyne Common
Stock issued to such person pursuant to the Merger Agreement unless (a) such
sale, transfer or other disposition has been registered under the Securities
Act, (b) such sale, transfer or other disposition is made in conformity with
Rule 145 under the Securities Act or (c) in the opinion of counsel, such sale,
transfer or other disposition is exempt from registration under the Securities
Act.
NO DISSENTERS' RIGHTS
In accordance with the OBCA, holders of Company Common Stock will not be
entitled to dissenters' rights in connection with the Merger.
39
<PAGE> 43
THE MERGER AGREEMENT
Following is a summary of the terms of the Merger Agreement, a copy of
which is attached as Appendix A to this Proxy Statement/Prospectus and is
incorporated herein by reference. Such summary is qualified in its entirety by
reference to the Merger Agreement. Shareholders of the Company are urged to read
the Merger Agreement in its entirety for a more complete description of the
Merger.
THE MERGER
The Merger Agreement provides that, following the approval of the Merger
Agreement and the transactions contemplated thereby by the shareholders of the
Company, and the satisfaction or waiver of the other conditions to the Merger,
Merger Sub will be merged with and into the Company, whereupon the Company will
be a subsidiary of Allegheny Teledyne.
If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing of duly executed Articles of Merger with
the Secretary of State of the State of Oregon, or at such time thereafter as is
provided in the Articles of Merger.
CONVERSION OF SECURITIES
Upon consummation of the Merger, pursuant to the Merger Agreement, each
issued and outstanding share of Company Common Stock (other than shares owned by
Allegheny Teledyne or any subsidiary of Allegheny Teledyne, or shares held in
the Company's treasury immediately prior to the Effective Time, all of which
will be canceled) will be converted into the right to receive 1.296 shares of
Allegheny Teledyne Common Stock. At the Effective Time, all shares of Company
Common Stock will cease to be outstanding and will be canceled and retired and
will cease to exist (except as set forth above), and each holder of a
certificate formerly representing shares of Company Common Stock will thereafter
cease to have any rights with respect thereto, except the right to receive
shares of Allegheny Teledyne Common Stock (and cash in lieu of any fractional
shares of Allegheny Teledyne Common Stock) to be issued in consideration
therefor upon the surrender of such certificate, without interest.
Neither certificates nor scrip for fractional shares of Allegheny Teledyne
Common Stock will be issued in the Merger, but in lieu thereof each holder of
Company Common Stock otherwise entitled to a fraction of a share of Allegheny
Teledyne Common Stock (after aggregating all fractional shares of Allegheny
Teledyne Common Stock that would otherwise be received by such holder) will be
entitled to receive a cash payment. The amount of such cash payment will equal,
in the case of each fractional share, an amount, without interest, calculated as
the product of (i) such fraction, multiplied by (ii) the average of the high and
low per share sales prices for Allegheny Teledyne Common Stock on the NYSE
Composite Transactions Tape on the date of the Meeting if within five days of
the Effective Time, otherwise on the trading day immediately preceding the date
of the Effective Time. No such fractional share interest will entitle the owner
thereof to vote or to any rights of a stockholder of Allegheny Teledyne.
Promptly after the Effective Time, the Exchange Agent will mail transmittal
forms and exchange instructions to each holder of record of Company Common Stock
to be used to surrender and exchange certificates evidencing shares of Company
Common Stock for certificates evidencing the shares of Allegheny Teledyne Common
Stock to which such holder has become entitled. After receipt of such
transmittal forms, each holder of certificates formerly representing Company
Common Stock will be able to surrender such certificates to the Exchange Agent,
and each such holder will receive in exchange therefor certificates evidencing
the number of shares of Allegheny Teledyne Common Stock to which such holder is
entitled and cash in lieu of any fractional shares as indicated above. Such
transmittal forms will be accompanied by instructions specifying other details
of the exchange. COMPANY SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Time, each certificate evidencing Company Common Stock,
until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive the number of shares of Allegheny Teledyne
Common Stock (and cash in lieu of any fractional shares of Allegheny Teledyne
Common
40
<PAGE> 44
Stock) which the holder of such certificate is entitled to receive, without
interest. The holder of such unexchanged certificate will not be entitled to
receive any dividends or other distributions payable by Allegheny Teledyne until
the certificate has been exchanged. Following such exchange, such dividends or
other distributions will be paid to the holder entitled thereto, without
interest.
Allegheny Teledyne or the Exchange Agent will be entitled to deduct and
withhold from the consideration otherwise payable or issuable pursuant to the
Merger Agreement to any holder of Company Common Stock such amounts as Allegheny
Teledyne or the Exchange Agent is required to deduct and withhold with respect
to the making of such payment or issuance under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Allegheny Teledyne or the Exchange Agent, such withheld amounts shall be treated
as having been paid to the holder of shares of Company Common Stock in respect
of which such deduction and withholding was made by Allegheny Teledyne or the
Exchange Agent.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the Company (which will terminate upon consummation of the Merger)
relating to, among other things, (a) the corporate organization and
qualification of the Company and its subsidiaries and certain similar corporate
matters; (b) the capital structure of the Company; (c) the authorization,
execution, delivery and enforceability of the Merger Agreement and the
consummation of the transactions contemplated thereby and related matters; (d)
required governmental filings and absence of violations under charters, bylaws,
and certain instruments and laws; (e) filings by the Company with the Commission
and financial statements of the Company; (f) the absence of undisclosed
liabilities; (g) the absence of certain material adverse changes or events; (h)
compliance with laws and regulations; (i) environmental matters; (j) taxes, tax
returns and audits; (k) certain "related party" transactions; (l) litigation;
(m) labor matters; (n) title to assets; (o) intellectual property; (p)
insurance; (q) employment and change of control agreements; (r) employee benefit
plans; (s) agreements, contracts and commitments; (t) the accuracy of
information supplied by the Company in connection with the Registration
Statement and this Proxy Statement/Prospectus; (u) restrictions on business
activities; (v) tax and accounting matters; (w) brokers and finders; (x) absence
of existing discussions; (y) receipt of the opinion of the Company's financial
advisor; (z) certain provisions of the OBCA not being applicable to the Merger;
(aa) amendments to the Company's Rights Agreement; and (bb) the accuracy of
certain disclosures by the Company.
The Merger Agreement also contains various representations and warranties
of Allegheny Teledyne (which will terminate upon consummation of the Merger)
relating to, among other things, (a) the corporate organization of Allegheny
Teledyne and its subsidiaries and certain similar corporate matters; (b) the
capital structure of Allegheny Teledyne; (c) the authorization, execution,
delivery and enforceability of the Merger Agreement and the consummation of the
transactions contemplated thereby and related matters; (d) required governmental
filings and absence of violations under charters, bylaws, and certain
instruments and laws; (e) filings by Allegheny Teledyne with the Commission and
financial statements of Allegheny Teledyne; (f) the absence of undisclosed
liabilities; (g) the absence of certain material adverse changes or events; (h)
compliance with laws and regulations; (i) litigation; (j) agreements, contracts
and commitments; (k) the accuracy of information supplied by Allegheny Teledyne
in connection with the Registration Statement and this Proxy
Statement/Prospectus; (l) restrictions on business activities; and (m) the
accuracy of certain disclosures by Allegheny Teledyne.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, the Company has agreed that, during the
period from the date of the Merger Agreement until the earlier of the
termination of the Merger Agreement in accordance with its terms or the
Effective Time, except as otherwise disclosed to Allegheny Teledyne in writing
in connection with the Merger Agreement or consented to in writing by Allegheny
Teledyne, the Company and each of its subsidiaries will, with certain
exceptions: (a) carry on its business in the ordinary course in substantially
the same manner as previously conducted; (b) pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, and pay or perform
other obligations when due; (c) use all reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others
41
<PAGE> 45
having business dealings with it, to the end that its goodwill and ongoing
businesses be substantially unimpaired at the Effective Time; (d) not
accelerate, amend or change the period of exercisability of outstanding options
or warrants to acquire Company Common Stock or authorize cash payments in
exchange for any such options except as required by the terms of a Company
benefit plan or any related agreements as in effect as of the date of the Merger
Agreement; (e) not declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or 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 for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock; (f) not issue,
deliver or sell or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or securities convertible into shares of its capital
stock, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than shares of Company Common
Stock issuable pursuant to options granted under the Company Option Plans that
are outstanding on the date of the Merger Agreement or shares of Company Common
Stock issuable upon exercise of the Warrants or shares of Company Common Stock
issuable under the Stock Compensation Plans or the Company's Excess Benefit
Plan; (g) not acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets otherwise than in the ordinary course of business;
(h) not, directly or indirectly, sell, lease, license or otherwise dispose of
any of its properties or assets except in the ordinary course of business; (i)
not (A) increase or agree to increase the compensation payable or to become
payable to its officers or employees, except for routine increases in salary or
wages of employees of the Company in accordance with past practice, (B) increase
or agree to increase the compensation payable or to become payable to officers
or grant any additional severance or termination pay to or enter into or amend
or modify any employment agreement with, any such officers, (C) grant any
additional severance or termination pay to or enter into any employment
agreement with any employee, (D) enter into any collective bargaining agreement,
or (E) establish, adopt, enter into or amend any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;
provided, however, that the Company may take such action as is required to
comply with applicable laws; (j) not revalue any of its assets, including
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business; (k) not incur any indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities or guarantee any debt securities of others, other than indebtedness
incurred in the ordinary course of business in such amounts and pursuant to such
terms as are consistent with past practice; (l) not amend or propose to amend
its Restated Articles of Incorporation or its Bylaws, each as amended; (m) not
authorize or make any capital expenditure otherwise than in the ordinary course
of business; and (n) not take, or agree in writing or otherwise to take, any of
the actions prohibited above, or any action which is reasonably likely to make
any of its representations or warranties contained in the Merger Agreement
untrue or incorrect on the date made (to the extent so limited) or as of the
Effective Time.
COMPANY RIGHTS AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement, the
Company amended the Rights Agreement, dated as of December 12, 1996, as amended,
between the Company and ChaseMellon Shareholders Services, LLC, as Rights Agent
(the "Company Rights Agreement") so that, among other things, the rights created
thereunder do not apply to the Merger Agreement and the transactions
contemplated thereby and will expire immediately prior to the Effective Time.
ACQUISITION PROPOSALS; COMPANY BOARD RECOMMENDATION
The Merger Agreement provides that the Company will, and will cause its
directors, officers, employees, representatives and agents to, cease any
discussions or negotiations with any other parties with respect to an
Acquisition Proposal (as defined below). The Merger Agreement further provides
that the Company will not, nor will it permit any of its subsidiaries to, nor
will it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its
42
<PAGE> 46
subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing any confidential information), or take any other
action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
or (ii) participate in any discussions or negotiations regarding any Acquisition
Proposal; provided, however, that if the Company Board determines in good faith,
after consultation with and based upon the advice of outside counsel to the
Company, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's shareholders under applicable law, the Company may, in
response to an Acquisition Proposal that was not solicited or initiated by the
Company, and subject to certain notice requirements, (x) furnish information to
any person pursuant to a confidentiality agreement no less favorable to the
Company than the Confidentiality Agreement, dated February 3, 1997, as
supplemented on August 9, 1997, between the Company and Allegheny Teledyne and
(y) participate in discussions or negotiations regarding such Acquisition
Proposal. "Acquisition Proposal" means any proposal or offer from any person
with respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of, all or substantially all of the assets or more
than 20% of the voting securities of the Company.
Except as described below, the Merger Agreement provides that neither the
Company Board nor any committee thereof will (i) withdraw or modify, or propose
publicly to withdraw or modify in a manner adverse to Allegheny Teledyne, the
approval or recommendation by such Board of Directors or such committee of the
Merger or the Merger Agreement, (ii) approve or recommend, or propose publicly
to approve or recommend, any Acquisition Proposal or (iii) cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") related to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that the
Company Board determines in good faith, after consultation with and based upon
the advice of outside counsel, that it is necessary to do so in order to comply
with its fiduciary duties to the Company's shareholders under applicable law,
the Company Board may (x) withdraw or modify its approval or recommendation of
the Merger and the Merger Agreement or (y) approve or recommend a Superior
Proposal (as defined below) or (z) terminate the Merger Agreement (and
concurrently with or after such termination, if it so chooses, cause the Company
to enter into any Acquisition Agreement with respect to any Superior Proposal),
but in each case only at a time that is not less than two business days
following Allegheny Teledyne's receipt of written notice advising Allegheny
Teledyne that the Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. The rights of the Company Board described
in the preceding sentence are hereafter referred to as the "Company Board
Acquisition Proposal Rights." A "Superior Proposal" means any bona fide written
Acquisition Proposal made by a third party the terms of which the Company Board
determines in its good faith judgment (based on the advice of a financial
advisor to the Company of nationally recognized reputation) to be more favorable
to the Company's shareholders from a financial point of view than the Merger and
the other transactions contemplated by the Merger Agreement and for which any
required financing is committed or which, in the good faith judgment of the
Company Board (based on the advice of a financial advisor to the Company of
nationally recognized reputation), is reasonably capable of being financed by
such third party.
In addition to the obligations of the Company described above, the Merger
Agreement further provides that the Company will promptly advise Allegheny
Teledyne orally and in writing of any request for confidential information in
connection with an Acquisition Proposal or of any Acquisition Proposal, the
material terms and conditions of such request or Acquisition Proposal and the
identity of the person making such request or Acquisition Proposal.
The Merger Agreement provides that none of the foregoing will prohibit the
Company from making any disclosure to the Company's shareholders if, in the good
faith judgment of the Company Board, after consultation with outside counsel,
failure so to disclose would violate applicable law, including Rule 14e-2
promulgated under the Exchange Act; provided, however, neither the Company nor
the Company Board nor any committee thereof will, except as permitted by the
Merger Agreement, withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to the Merger Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an Acquisition Proposal.
43
<PAGE> 47
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Company shall indemnify, defend and
hold harmless each officer and director of the Company or any of its
subsidiaries, as the case may be, against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of it or any of its subsidiaries, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time, in each case
to the full extent that the Company is permitted to do so under its Restated
Articles of Incorporation and Bylaws, any indemnity agreement to which it is a
party and under Oregon law.
The Merger Agreement provides that, subject to certain limitations, the
Company will maintain in effect for a specified period policies of directors'
and officers' liability insurance coverage, including coverage with respect to
claims arising from acts, omissions or other events which occur prior to or as
of the Effective Time.
COMPANY STOCK PLANS AND WARRANTS
For a description of the provisions of the Merger Agreement relating to the
Company's stock plans and warrants and rights to acquire shares of Company
Common Stock outstanding thereunder, see "THE MERGER--Company Stock Plans and
Warrants."
CONDITIONS
The respective obligations of Allegheny Teledyne and the Company to effect
the Merger are subject to the following conditions, among others: (a) the
approval and adoption of the Merger Agreement and the Merger by the shareholders
of the Company; (b) the expiration or termination of any waiting period
applicable to the consummation of the Merger under the HSR Act; (c) the receipt
of all required authorizations necessary for the consummation of the
transactions contemplated by the Merger Agreement and all other authorizations,
consents, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity (as defined
in the Merger Agreement), the failure to obtain which would have a material
adverse effect on Allegheny Teledyne or the Company; (d) the effectiveness of
the Registration Statement, which shall not be the subject of a stop order or
proceedings seeking a stop order; (e) the absence of any temporary restraining
order, preliminary or permanent injunction or other order to be in effect that
prevents, or seeks to prevent, the consummation of the Merger; (f) no statute,
rule, regulation, or order shall be enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal; (g)
approval of the shares of Allegheny Teledyne Common Stock to be issued in the
Merger for listing on the NYSE subject to official notice of issuance; and (h)
receipt of all consents required to consummate the transactions contemplated by
the Merger Agreement, including the Merger, and all other consents in connection
with the Merger and the other transactions contemplated by the Merger Agreement,
the failure to obtain which would have a material adverse effect on Allegheny
Teledyne or the Company.
The obligations of Allegheny Teledyne and Merger Sub to effect the Merger
are subject to the following further conditions: (a) the representations and
warranties of the Company set forth in the Merger Agreement (i) that are
qualified as to materiality or as to a material adverse effect with respect to
the Company being true and correct and (ii) that are not so qualified being true
and correct in all material respects, in each case as of the date of the Merger
Agreement and as of the closing as though made as of the closing (with certain
exceptions set forth in the Merger Agreement), and receipt of a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect; (b) the obligations required to
be performed by the Company under the Merger Agreement at or prior to the
closing having been performed in all material respects, and receipt of a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect; (c) receipt by
Allegheny Teledyne of a written opinion of Kirkpatrick & Lockhart LLP, counsel
to Allegheny Teledyne, to the effect that the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a) of the Code; (d) the Company Rights Agreement having been amended or
terminated immediately prior to the Effective Time
44
<PAGE> 48
such that the holders of Company Common Stock have no rights under the Company
Rights Agreement as a result of the consummation of the transactions
contemplated by the Merger Agreement or otherwise; (e) receipt by Allegheny
Teledyne of an updated "comfort letter" from Coopers & Lybrand L.L.P., the
Company's independent auditors, dated the date of the closing; (f) receipt by
Allegheny Teledyne of letters from Coopers & Lybrand L.L.P., the Company's
independent auditors, and Ernst & Young LLP, Allegheny Teledyne's independent
auditors, each dated the date of the Proxy Statement/Prospectus, and written
confirmation of such letters as of the Effective Time, stating that the business
combination to be effected by the Merger will qualify as a pooling of interests
under generally accepted accounting principles; (g) receipt by Allegheny
Teledyne from each of the Company's affiliates of an executed copy of an
Affiliate Agreement substantially in the form of Annex III to the Merger
Agreement; (h) submission of the written resignation of all of the members of
the Company Board as directors of the Company effective as of the Effective
Time; and (i) there having been no changes, occurrences or circumstances
involving the business, results of operations or financial condition or
prospects of the Company and its subsidiaries that, individually or taken
together, constitute a material adverse effect with respect to the Company since
the date of the Merger Agreement.
The obligations of the Company to effect the Merger is further subject to
the following further conditions: (a) the representations and warranties of
Allegheny Teledyne and Merger Sub set forth in the Merger Agreement (i) that are
qualified as to materiality or as to a material adverse effect with respect to
Allegheny Teledyne being true and correct and (ii) that are not so qualified
being true and correct in all material respects, in each case as of the date of
the Merger Agreement and as of the closing as though made as of the closing
(with certain exceptions set forth in the Merger Agreement), and receipt of a
certificate signed on behalf of Allegheny Teledyne by the chief executive
officer and the chief financial officer of Allegheny Teledyne to such effect;
(b) obligations required to be performed by Allegheny Teledyne and Merger Sub
under the Merger Agreement at or prior to the closing having been performed in
all material respects, and receipt of a certificate signed on behalf of
Allegheny Teledyne by the chief executive officer and the chief financial
officer of Allegheny Teledyne to such effect; (c) receipt by the Company of the
opinion of Schwabe, Williamson & Wyatt P.C., counsel to the Company, to the
effect that the Merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section 368(a) of the Code; and
(d) there having been no changes, occurrences or circumstances involving the
business, results of operations or financial condition or prospects of Allegheny
Teledyne and its subsidiaries that, individually or taken together, constitute a
material adverse effect with respect to Allegheny Teledyne since the date of the
Merger Agreement.
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time:
(a) by mutual written consent of Allegheny Teledyne and the Company; or
(b) by either Allegheny Teledyne or the Company if the Merger shall not
have been consummated by March 31, 1998 (provided that the right to terminate
the Merger Agreement under this clause shall not be available to any party whose
failure to fulfill any material obligation under the Merger Agreement has been a
cause of or resulted in the failure of the Merger to occur on or before such
date); or
(c) by either Allegheny Teledyne or the Company if a court of competent
jurisdiction or other Governmental Entity (as defined in the Merger Agreement)
shall have issued a nonappealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by either Allegheny Teledyne or the Company, if, at the Meeting
(including any adjournment or postponement thereof), the requisite vote of the
shareholders of the Company in favor of the Merger Agreement and the Merger
shall not have been obtained; or
(e) by Allegheny Teledyne, if the Company Board shall have exercised any of
the Company Board Acquisition Proposal Rights (See "THE MERGER
AGREEMENT--Acquisition Proposals; Company Board Recommendation"); or
45
<PAGE> 49
(f) by Allegheny Teledyne, if any of the covenants or agreements of the
Company described under the heading "THE MERGER AGREEMENT--Acquisition
Proposals; Company Board Recommendation" shall have been breached; or
(g) by Allegheny Teledyne, if for any reason the Company fails to call and
hold the Meeting by March 31, 1998, unless such failure is due to the fact that
(A) the Registration Statement was not declared effective sufficiently in
advance of such date to enable the Company to hold the Meeting by such date or
(B) a court has enjoined or temporarily restrained the Merger, and any such
occurrence or omission has not resulted from any breach of the Merger Agreement
by the Company; or
(h) by Allegheny Teledyne or the Company, if (i) the other party has
breached any representation or warranty contained in the Merger Agreement, and
such breach shall not have been cured prior to the Effective Time (except where
such breach would not have a material adverse effect on the party having made
such representation or warranty and its subsidiaries taken as a whole and would
not have a material adverse effect upon the transactions contemplated by the
Merger Agreement), or (ii) there has been a breach of a covenant or agreement
set forth in the Merger Agreement on the part of the other party (other than the
covenants or agreements of the Company described under the heading "THE MERGER
AGREEMENT--Acquisition Proposals; Company Board Recommendation"), which shall
not have been cured within three days following receipt by the breaching party
of written notice of such breach from the other party; or
(i) by the Company pursuant to the Company Board Acquisition Proposal
Rights (See "THE MERGER AGREEMENT--Acquisition Proposals; Company Board
Recommendation").
In the event of any termination of the Merger Agreement by either Allegheny
Teledyne or the Company as provided above, the Merger Agreement will become void
and there will be no liability or obligation on the part of Allegheny Teledyne,
the Company, Merger Sub or their respective officers, directors, stockholders or
affiliates, except to the extent otherwise provided in the Merger Agreement and
further except to the extent that such termination results from the willful
breach by a party of any of its representations, warranties, covenants or
agreements set forth in the Merger Agreement, provided that the provisions
relating to fees and expenses will survive such termination.
Except as set forth below, whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by the party incurring such
expenses, except that fees and expenses (other than attorneys' and accounting
fees and expenses) incurred in connection with the printing and filing of this
Proxy Statement/Prospectus and the Registration Statement will be borne equally
by the Company and Allegheny Teledyne.
The Merger Agreement provides that the Company will reimburse Allegheny
Teledyne for all reasonable out-of-pocket expenses incurred by Allegheny
Teledyne relating to the transactions contemplated by the Merger Agreement prior
to termination (including, but not limited to, reasonable fees and expenses of
Allegheny Teledyne's outside counsel, accountants and financial advisors) in an
amount not to exceed $2.0 million (i) upon the termination of the Merger
Agreement by Allegheny Teledyne pursuant to clause (g) above, (ii) upon
termination of the Merger Agreement by Allegheny Teledyne pursuant to clause (h)
above as a result of a willful breach of any representation, warranty, covenant
or agreement of the Company contained in the Merger Agreement, or (iii) in the
event a termination fee is payable as described below, and Allegheny Teledyne
shall reimburse the Company for reasonable out-of-pocket expenses incurred by
the Company relating to the transactions contemplated by the Merger Agreement
prior to termination (including, but not limited to, reasonable fees and
expenses of the Company's outside counsel, accountants and financial advisors),
in an amount not to exceed $2.0 million upon the termination of this Agreement
by the Company pursuant to clause (h) above as a result of a willful breach of
any representation, warranty, covenant or agreement of Allegheny Teledyne
contained in the Merger Agreement.
The Company will be required to pay Allegheny Teledyne a termination fee of
$11.0 million (less the amount of any expenses of Allegheny Teledyne reimbursed
by the Company) upon the termination of the Merger Agreement by Allegheny
Teledyne or the Company pursuant to clause (d) above, and if prior to such
termination an Acquisition Proposal with respect to the Company was commenced,
publicly proposed or publicly disclosed
46
<PAGE> 50
and, shall pay Allegheny Teledyne an additional $11.0 million, if within 12
months after such termination the Company shall have entered into an Acquisition
Agreement relating to an Acquisition Proposal or any Acquisition Proposal shall
have been consummated.
The Company will be required to pay Allegheny Teledyne a termination fee of
$22.0 million (less the amount of expenses of Allegheny Teledyne reimbursed by
the Company) upon the earliest to occur of the following events:
(i) the termination of the Merger Agreement by Allegheny Teledyne pursuant
to clause (e) above or clause (f) above; or
(ii) the termination of the Merger Agreement by Allegheny Teledyne pursuant
to clause (h) above as a result of a willful breach of any representation,
warranty, covenant or agreement of the Company contained in the Merger
Agreement; or
(iii) the termination of the Merger Agreement by Allegheny Teledyne
pursuant to clause (g) above if prior to such termination an Acquisition
Proposal with respect to the Company was commenced, publicly proposed or
publicly disclosed or communicated to the Company Board (or the willingness
of any person to make such an Acquisition Proposal was publicly disclosed
or was communicated to the Company Board) and within 12 months after such
termination the Company shall have entered into an Acquisition Agreement
relating to an Acquisition Proposal or any Acquisition Proposal shall have
been consummated; or
(iv) the termination of the Merger Agreement by the Company pursuant to
clause (i) above.
If applicable, any fees and expenses payable as described are to be paid
within five business days after the first to occur of the relevant termination
events, provided, that in no event will the Company or Allegheny Teledyne, as
the case may be, be required to pay such expenses and fee to the other if,
immediately prior to the termination of the Merger Agreement, the party to
receive such expenses and fee was in material breach of its obligations under
the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended at any time by action taken or
authorized by the respective Boards of Directors of Allegheny Teledyne and the
Company, but after approval by the shareholders of the Company of the Merger
Agreement and the transactions contemplated thereby, no amendment shall be made
which by law requires further approval by such shareholders without such further
approval. Allegheny Teledyne and the Company, by action taken or authorized by
their respective Boards of Directors, may extend the time for performance of the
obligations or other acts of the other parties to the Merger Agreement, may
waive inaccuracies in the representations or warranties contained in the Merger
Agreement and may waive compliance with any agreements or conditions contained
in the Merger Agreement.
47
<PAGE> 51
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information gives effect to
the Merger on the basis that it will be accounted for as a pooling of interests.
See "THE MERGER--Accounting Treatment." The consolidated financial information
on the following pages presents the historical unaudited consolidated balance
sheets of the Company and Allegheny Teledyne at September 28, 1997 and September
30, 1997, respectively, and the pro forma unaudited consolidated balance sheet
of Allegheny Teledyne as of September 30, 1997, giving effect to the Merger as
if it had occurred on that date; and the historical consolidated statements of
income of each of the Company and Allegheny Teledyne for the nine months ended
September 28, 1997 and September 30, 1996 and the nine months ended September
30, 1997 and 1996, respectively, and for each of the three years in the period
ended December 31, 1996, and the pro forma unaudited consolidated statements of
income for the nine months ended September 30, 1997 and 1996 and for each of the
three years in the period ended December 31, 1996, giving effect to the Merger
as if it had been effected at the beginning of the period presented. Certain
reclassifications have been made to the historical financial information to
conform to current presentation. Intercompany transactions between the Company
and Allegheny Teledyne are immaterial and, accordingly, have not been
eliminated.
The unaudited pro forma consolidated balance sheet gives effect to
anticipated expenses and nonrecurring charges related to the Merger and assumes
each of the outstanding shares of Company Common Stock is converted into 1.296
shares of Allegheny Teledyne Common Stock. However, pro forma financial
information excludes the estimated effect of revenue enhancements and expense
savings associated with the consolidation of the operations of the Company and
Allegheny Teledyne. See "RISK FACTORS--Inherent Uncertainties Relating to
Certain Effects of the Merger" and "THE MERGER--Allegheny Teledyne Reasons for
the Merger."
The unaudited pro forma consolidated financial statements are intended for
informational purposes and may not be indicative of the combined financial
position or results of operations that actually would have occurred had the
transaction been consummated during the periods or as of the dates indicated, or
which will be attained in the future. The pro forma consolidated financial
information should be read in conjunction with the respective 1996 Annual
Reports on Form 10-K and the Quarterly Reports on Form 10-Q for the quarterly
periods ended September 28, 1997 and September 30, 1997 of the Company and
Allegheny Teledyne, respectively, incorporated by reference herein.
48
<PAGE> 52
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ALLEGHENY PRO FORMA
TELEDYNE COMPANY ADJUSTMENTS PRO FORMA(1)
--------- ------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 32.9 $ 2.4 $ -- $ 35.3
Short-term investments
available-for-sale..................... -- 34.3 -- 34.3
Receivables............................... 533.4 62.2 -- 595.6
Inventories............................... 550.4 116.8 -- 667.2
Deferred income taxes..................... 47.7 2.0 -- 49.7
Tax refund................................ 51.5 -- -- 51.5
Prepaid expenses.......................... 27.8 0.6 -- 28.4
-------- ------ ------- ---------
Total current assets................... 1,243.7 218.3 -- 1,462.0
Property and equipment...................... 701.6 52.0 -- 753.6
Prepaid pension cost........................ 395.3 -- -- 395.3
Cost in excess of net assets acquired....... 174.0 17.0 -- 191.0
Other assets................................ 124.7 0.7 (5.6)(2) 119.8
-------- ------ ------- ---------
Total assets........................... $2,639.3 $288.0 $ (5.6) $ 2,921.7
======== ====== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 210.5 $ 17.5 $ -- $ 228.0
Accrued liabilities....................... 334.5 17.7 13.0(3) 365.2
Current portion of long-term debt......... 3.4 2.9 -- 6.3
-------- ------ ------- ---------
Total current liabilities.............. 548.4 38.1 13.0 599.5
Long-term debt.............................. 409.6 4.6 -- 414.2
Accrued postretirement benefits............. 577.0 1.7 -- 578.7
Other long-term liabilities................. 140.3 8.3 (5.6)(2) 143.0
-------- ------ ------- ---------
Total liabilities...................... 1,675.3 52.7 7.4 1,735.4
-------- ------ ------- ---------
Stockholders' equity:
Common stock.............................. 17.6 16.5 (14.3)(4) 19.8
Additional paid-in capital................ 288.4 155.4 14.3(4) 458.1
Retained earnings......................... 699.4 63.4 (13.0)(3) 749.8
Net unrealized appreciation............... 3.1 -- -- 3.1
Treasury stock............................ (42.1) -- -- (42.1)
Other..................................... (2.4) -- -- (2.4)
-------- ------ ------- ---------
Total stockholders' equity............. 964.0 235.3 (13.0) 1,186.3
-------- ------ ------- ---------
Total liabilities and stockholders'
equity.................................... $2,639.3 $288.0 $ (5.6) $ 2,921.7
======== ====== ======= =========
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
49
<PAGE> 53
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ALLEGHENY
TELEDYNE COMPANY PRO FORMA(5)
--------- ------- -------------
<S> <C> <C> <C>
Net sales..................................... $2,824.2 $214.4 $ 3,038.6
Costs and expenses:
Cost of sales............................... 2,147.2 157.1 2,304.3
Selling and administrative expenses......... 351.8 18.6 370.4
Merger and restructuring costs.............. 10.4 -- 10.4
Interest expense (income), net.............. 15.9 (1.8) 14.1
-------- ------ ---------
2,525.3 173.9 2,699.2
-------- ------ ---------
Earnings before other income.................. 298.9 40.5 339.4
Other income (expense)........................ 47.6 (0.8) 46.8
-------- ------ ---------
Income before income taxes.................... 346.5 39.7 386.2
Provision for income taxes.................... 131.8 15.1 146.9
-------- ------ ---------
Net income.................................... $ 214.7 $ 24.6 $ 239.3
======== ====== =========
Net income per common share................... $ 1.22 $ 1.49 $ 1.22
======== ====== =========
Average common shares outstanding............. 175,479,511 16,526,000 196,897,207
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
50
<PAGE> 54
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ALLEGHENY
TELEDYNE COMPANY PRO FORMA(5)
--------- ------- -------------
<S> <C> <C> <C>
Net sales..................................... $2,895.3 $174.8 $ 3,070.1
Costs and expenses:
Cost of sales............................... 2,219.8 134.0 2,353.8
Selling and administrative expenses......... 383.1 16.5 399.6
Merger and restructuring costs.............. 38.6 -- 38.6
Interest expense, net....................... 29.1 1.6 30.7
-------- ------ ---------
2,670.6 152.1 2,822.7
-------- ------ ---------
Earnings before other income.................. 224.7 22.7 247.4
Other income (expense)........................ 52.5 (0.7) 51.8
-------- ------ ---------
Income before income taxes.................... 277.2 22.0 299.2
Provision for income taxes.................... 115.6 7.0 122.6
-------- ------ ---------
Net income.................................... 161.6 15.0 176.6
Preferred stock dividends..................... 2.0 -- 2.0
-------- ------ ---------
Net income available to common stockholders... $ 159.6 $ 15.0 $ 174.6
======== ====== =========
Net income per common share................... $ 0.91 $ 1.24 $ 0.92
======== ====== =========
Average common shares outstanding............. 174,010,470 12,118,000 189,715,398
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
51
<PAGE> 55
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ALLEGHENY
TELEDYNE COMPANY PRO FORMA(5)
--------- ------- -------------
<S> <C> <C> <C>
Net sales..................................... $3,815.6 $237.0 $ 4,052.6
Costs and expenses:
Cost of sales............................... 2,901.7 179.3 3,081.0
Selling and administrative expenses......... 515.5 22.7 538.2
Merger and restructuring costs.............. 57.5 -- 57.5
Interest expense, net....................... 34.7 0.4 35.1
-------- ------ ---------
3,509.4 202.4 3,711.8
-------- ------ ---------
Earnings before other income.................. 306.2 34.6 340.8
Other income (expense)........................ 78.5 (0.9) 77.6
-------- ------ ---------
Income before income taxes and extraordinary
losses...................................... 384.7 33.7 418.4
Provision for income taxes.................... 158.2 11.4 169.6
-------- ------ ---------
Income before extraordinary losses............ 226.5 22.3 248.8
Extraordinary losses on redemptions of debt... (13.5) -- (13.5)
-------- ------ ---------
Net income.................................... 213.0 22.3 235.3
Preferred stock dividends..................... 2.0 -- 2.0
-------- ------ ---------
Net income available to common stockholders... $ 211.0 $ 22.3 $ 233.3
======== ====== =========
Net income per common share before
extraordinary losses........................ $ 1.28 $ 1.69 $ 1.29
Extraordinary losses on redemptions of debt... (0.08) -- (0.07)
-------- ------ ---------
Net income per common share................... $ 1.20 $ 1.69 $ 1.22
======== ====== =========
Average common shares outstanding............. 174,082,298 13,167,000 191,146,730
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
52
<PAGE> 56
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ALLEGHENY
TELEDYNE COMPANY PRO FORMA(5)
--------- ------- -------------
<S> <C> <C> <C>
Net sales..................................... $4,048.1 $146.8 $ 4,194.9
Costs and expenses:
Cost of sales............................... 3,158.9 131.0 3,289.9
Selling and administrative expenses......... 479.0 16.1 495.1
Merger and restructuring costs.............. 6.4 -- 6.4
Interest expense, net....................... 37.6 2.1 39.7
-------- ------ ---------
3,681.9 149.2 3,831.1
-------- ------ ---------
Earnings (loss) before other income........... 366.2 (2.4) 363.8
Other income (expense)........................ 74.7 (0.5) 74.2
-------- ------ ---------
Income (loss) before income taxes and
extraordinary losses........................ 440.9 (2.9) 438.0
Provision (credit) for income taxes........... 164.1 (0.4) 163.7
-------- ------ ---------
Income (loss) before extraordinary losses..... 276.8 (2.5) 274.3
Extraordinary losses on redemptions of debt... (2.9) -- (2.9)
-------- ------ ---------
Net income (loss)............................. 273.9 (2.5) 271.4
Preferred stock dividends..................... 1.6 -- 1.6
-------- ------ ---------
Net income (loss) available to common
stockholders................................ $ 272.3 $ (2.5) $ 269.8
======== ====== =========
Net income (loss) per common share before
extraordinary losses........................ $ 1.56 $(0.22) $ 1.43
Extraordinary losses on redemptions of debt... (0.02) -- (0.02)
-------- ------ ---------
Net income (loss) per common share............ $ 1.54 $(0.22) $ 1.41
======== ====== =========
Average common shares outstanding............. 176,386,341 11,219,000 190,926,165
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
53
<PAGE> 57
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
ALLEGHENY
TELEDYNE COMPANY PRO FORMA(5)
--------- ------- -------------
<S> <C> <C> <C>
Net sales..................................... $3,457.3 $ 71.2 $ 3,528.5
Costs and expenses:
Cost of sales............................... 2,766.8 64.6 2,831.4
Selling and administrative expenses......... 622.1 9.1 631.2
Interest expense, net....................... 44.0 0.3 44.3
-------- ------ ---------
3,432.9 74.0 3,506.9
-------- ------ ---------
Earnings (loss) before other income........... 24.4 (2.8) 21.6
Other income.................................. 4.8 -- 4.8
-------- ------ ---------
Income (loss) before income taxes............. 29.2 (2.8) 26.4
Provision (credit) for income taxes........... 19.4 (0.8) 18.6
-------- ------ ---------
Net income (loss)............................. 9.8 (2.0) 7.8
======== ====== =========
Net income (loss) per common share............ $ 0.06 $(0.18) $ 0.04
======== ====== =========
Average common shares outstanding............. 177,561,482 11,001,000 191,818,778
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
54
<PAGE> 58
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(1) The pro forma consolidated balance sheet gives effect to the Merger by
combining the respective balance sheets of the Company at September 28, 1997
and Allegheny Teledyne at September 30, 1997 on a pooling of interests
basis.
(2) Reflects reclassification of deferred income tax liabilities.
(3) A liability of $13.0 million has been recorded in the pro forma consolidated
balance sheet to reflect management's estimate of anticipated expenses
related to the Merger.
(4) The capital accounts have been adjusted to reflect the issuance of 21.3
million shares of Allegheny Teledyne Common Stock in exchange for all the
outstanding shares of Company Common Stock.
(5) The pro forma consolidated statements of income give effect to the Merger by
combining the respective statements of income of the Company for the nine
months ended September 28, 1997 and September 30, 1996 and Allegheny
Teledyne for the nine months ended September 30, 1997 and 1996 and the
respective statements of income of the two companies for each of the three
years in the period ended December 31, 1996. The pro forma consolidated
statements of income do not give effect to anticipated expenses and
nonrecurring charges related to the Merger and the estimated effect of
revenue enhancements and expense savings associated with the combination of
the operations of Allegheny Teledyne and the Company. Earnings per common
share amounts for Allegheny Teledyne and the Company are based on the
historical weighted average number of common shares outstanding, and
equivalents, where appropriate, for each company during the period. With
respect to the pro forma earnings per share computation, shares have been
adjusted to the equivalent shares of Allegheny Teledyne for each period.
55
<PAGE> 59
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, the shareholders of the Company, an Oregon
corporation, will become stockholders of Allegheny Teledyne, a Delaware
corporation. Differences between the OBCA and the DGCL, as well as between the
Company's Restated Articles of Incorporation, as amended (the "Company
Articles"), and Bylaws, as amended (the "Company Bylaws"), and Allegheny
Teledyne's Restated Certificate of Incorporation (the "Allegheny Teledyne
Certificate") and Allegheny Teledyne's Amended and Restated Bylaws (the
"Allegheny Teledyne Bylaws") will result in changes in the rights of the
shareholders of the Company when they become stockholders of Allegheny Teledyne.
Following is a description of certain of such differences, based on the OBCA and
the DGCL as in effect on the date hereof and the respective charters and bylaws
of the Company and Allegheny Teledyne.
AUTHORIZED CAPITAL STOCK
Allegheny Teledyne. The authorized capital of Allegheny Teledyne consists
of 600,000,000 shares of Allegheny Teledyne Common Stock and 50,000,000 shares
of Preferred Stock, par value $.10 per share, with respect to which the Board of
Directors of Allegheny Teledyne is empowered to establish series and to
determine the relative rights, preferences and limitation of any such series.
The Company. The authorized capital of the Company consists of 80,000,000
shares of Company Common Stock.
ELECTION AND CLASSIFICATION OF BOARD OF DIRECTORS
Allegheny Teledyne. The Board of Directors of Allegheny Teledyne currently
consists of 14 members. The Allegheny Certificate provides that the number of
directors shall be fixed from time to time by the affirmative vote of a majority
of the whole Board, except that no decrease in the number of directors may
shorten the term of any incumbent director. In addition, in the case of a
vacancy or any increase in the number of directors, the new director must be
elected only by a majority of the directors then in office, even though less
than a quorum, or by a sole remaining director and not by the stockholders,
unless otherwise provided by law or by resolution adopted by a majority of the
whole Board. The Board of Directors of Allegheny Teledyne consists of three
classes of directors comprised as nearly as practicable of one-third of the
Board and one class of directors is elected at each annual meeting of
stockholders to serve a three-year term. Cumulative voting in the election of
directors is not permitted.
The Company. The Company Board consists of eight members and the directors
are elected annually to serve one-year terms. The Company Articles provide that,
in the election of directors, Company shareholders have cumulative voting rights
and are therefore entitled to cast a number of votes equal to the number of
shares held by such shareholder multiplied by the number of directors to be
elected. Such votes may all be cast for a single nominee or distributed in any
proportion among any number of nominees.
REMOVAL OF DIRECTORS
Allegheny Teledyne. Under the Allegheny Teledyne Certificate, a director
may be removed only for cause and only with the approval of 75 percent of the
voting power of the outstanding voting stock, voting together as a single class.
The Company. Because the Company Articles do not provide otherwise,
Company shareholders may remove directors with or without cause. However, a
Company director may not be removed if the number of votes sufficient to elect
the director pursuant to cumulative voting is voted against the director's
removal. Under the OBCA, a director may also be removed by judicial proceeding.
NOMINATIONS AND STOCKHOLDER PROPOSALS
Allegheny Teledyne. Nominations of persons for election to the board of
directors of Allegheny Teledyne may be made at a special meeting of stockholders
at which directors are to be elected pursuant to Allegheny Teledyne's notice of
meeting (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of
56
<PAGE> 60
record at the time of the giving of notice of such meeting. Nominations by a
stockholder of persons for election to the board of directors may be made if the
stockholder's notice is delivered to the Secretary of Allegheny Teledyne not
earlier than the 90th day prior to such special meeting and not later than the
75th day prior to such special meeting or the 10th day following the day on
which a public announcement is first made of the special meeting and of the
nominees proposed by the board of directors to be elected at such meeting. The
Allegheny Teledyne Certificate further provides that only such business will be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to Allegheny Teledyne's notice thereof.
The Company. The Company Articles provide that, if less than 25% of the
Company's outstanding stock is held by defined contribution employee benefit
plans which are qualified under Code Section 401(a), two of the nine members of
the Company Board will be nominated as follows: one shall be nominated by the
Company's employees affiliated with the United Steelworkers of America, Local
7150 ("Union") and one will be nominated by the Company's employees who are not
affiliated with the Union. Employees of the Company's subsidiaries or employed
outside the United States do not participate in the nomination process.
BUSINESS COMBINATION STATUTES
Allegheny Teledyne. Allegheny Teledyne is subject to Section 203 of the
DGCL ("Section 203") which provides that any person who acquires 15% or more of
a corporation's voting stock (thereby becoming an "interested stockholder") may
not engage in a "business combination" with the corporation for a period of
three years following the time the person became an interested stockholder,
unless (i) the board of directors of the corporation approved, prior to such
time, either the business combination or the transaction that resulted in the
person becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in that person becoming an interested stockholder,
that person owns at least 85% of the corporation's voting stock outstanding at
the time the transaction commenced (excluding shares owned by persons who are
directors and officers of that corporation and shares owned by employee stock
plans in which participants do not have the right to determine confidentially
whether shares will be tendered in a tender or exchange offer), or (iii) the
business combination is approved by the board of directors and authorized by the
affirmative vote (at an annual or special meeting and not by written consent) of
at least 66 2/3% of the outstanding shares of voting stock not owned by the
interested stockholder. In determining whether a stockholder is the "owner" of
15% or more of a corporation's voting stock for purposes of Section 203,
ownership is defined to include the right, directly or indirectly, to acquire
stock or to control the voting or disposition of stock. A "business combination"
is defined to include (A) mergers or consolidations of a corporation with an
interested stockholder, (B) sales or other dispositions of ten percent or more
of the assets of a corporation with or to an interested stockholder, (C) certain
transactions resulting in the issuance or transfer to an interested stockholder
of any stock of a corporation or its subsidiaries, (D) certain transactions
which would result in increasing the proportionate share of the stock of a
corporation or its subsidiaries owned by an interested stockholder, and (E)
receipt by an interested stockholder of the benefit (except proportionately as a
stockholder) of any loans, advances, guarantees, pledges or other financial
benefits from, by or to a corporation or any of its majority-owned subsidiaries.
The Company. The Company is subject to the provisions of Section 60.835 of
the OBCA, which is substantially similar to Section 203 as described above.
CONTROL SHARE STATUTE
Allegheny Teledyne. The DGCL does not contain a "control share" provision.
The Company. As permitted by the OBCA, the Company Bylaws contain a
provision "opting out" of the application of the Oregon Control Share Act.
TRANSACTIONS INVOLVING A FUNDAMENTAL CHANGE
Allegheny Teledyne. Article Twelve of the Allegheny Teledyne Certificate
requires the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Allegheny Teledyne Common Stock to approve certain
fundamental changes such as a merger, consolidation, sale of substantially all
of Allegheny Teledyne's assets, dissolution, certain purchases by Allegheny
Teledyne or one of its subsidiaries of shares of Allegheny
57
<PAGE> 61
Teledyne Common Stock or other assets from a "significant shareholder," any
merger of a "significant shareholder" into Allegheny Teledyne or one of its
subsidiaries, or any reclassification or recapitalization of Allegheny Teledyne
consummated within five years after a "significant shareholder" becomes such, if
the result of such reclassification or recapitalization is to reduce the number
of outstanding shares of Allegheny Teledyne Common Stock or convert any such
shares into cash or other securities. This supermajority voting requirement is
not applicable if the fundamental change has been approved at a meeting of the
Board of Directors of Allegheny Teledyne by the vote of more than two-thirds of
the incumbent directors. A "significant shareholder" is defined as any person
who owns beneficially a number of shares of Allegheny Teledyne Common Stock that
is greater than 10% of the outstanding shares of Allegheny Teledyne Common
Stock, and any and all associates and affiliates of such person. Under the DGCL,
the affirmative vote of the holders of at least a majority of the outstanding
shares entitled to vote is required to approve certain transactions of the type
referred to above.
The Company. Neither the Company Articles nor the Company Bylaws contains
a similar provision relating to transactions involving a fundamental change.
RIGHT TO CALL A SPECIAL MEETING
Allegheny Teledyne. The DGCL provides that a special meeting of the
stockholders of a Delaware corporation may be called by the board of directors
or by such person or persons as may be authorized by the certificate of
incorporation or bylaws of such corporation. The Allegheny Teledyne Certificate
provides that special meetings of the stockholders may only be called by the
Chairman of the Board or the Chief Executive Officer or by the Board of
Directors pursuant to a resolution passed by a majority of the directors then in
office. Accordingly, stockholders of Allegheny Teledyne do not have the right to
call a special meeting of the stockholders.
The Company. The OBCA provides that a special meeting of the shareholders
of an Oregon corporation may be called (i) by the board of directors, (ii) by
such persons as may be authorized to do so by the articles of incorporation or
bylaws or (iii) upon the written demand of the holders of at least 10% of all
votes entitled to be cast on any issue proposed to be considered at the meeting.
The Company Bylaws provide that a special meeting may be called by the President
or Vice President or by the Secretary or by a majority of the Board of Directors
or whenever one or more holders of at least 40% of the capital stock issued and
outstanding apply therefor stating the time, place and purpose of the meeting.
PROCEDURES TO BRING BUSINESS BEFORE AN ANNUAL MEETING AND ACTION BY CONSENT
Allegheny Teledyne. The Allegheny Teledyne Certificate provides that in
order for nominations or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must give timely notice thereof in
writing to the Secretary. To be timely, a stockholder's notice must be delivered
to the Secretary not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event the date of the annual meeting is advanced by more than 30 days or
delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. The DGCL provides that unless otherwise
provided in the corporation's certificate of incorporation, any action to be
taken at a meeting of stockholders may be taken by written consent signed by the
holders of stock having not less than the minimum number of votes that would be
necessary to take such action at a meeting. The Allegheny Teledyne Certificate
provides that any action required to be taken by the stockholders of Allegheny
Teledyne must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by the written consent of such
stockholders.
The Company. Neither the Company Articles nor the Company Bylaws contain a
similar provision relating to procedures to bring business before a meeting of
Company shareholders. The OBCA provides that action required or permitted to be
taken at a shareholders meeting may be taken by written consent so long as that
consent is signed by all of the shareholders entitled to vote on such action.
58
<PAGE> 62
FIDUCIARY DUTIES OF DIRECTORS; PROPER FACTORS FOR CONSIDERATION IN EVALUATING
BUSINESS COMBINATIONS
Both Delaware and Oregon law provide that a corporation's board of
directors has the ultimate responsibility for managing the business and affairs
of the corporation.
Allegheny Teledyne. The DGCL is silent as to the nature of the duties of
directors of a Delaware corporation. Delaware courts have held that the duty of
care requires the directors to exercise an informed business judgment. Under
Delaware case law, an informed business judgment means that the directors have
informed themselves of all material information reasonably available to them.
Having become so informed, they then must act with requisite care in the
discharge of their duties. Delaware courts have also imposed a heightened
standard of scrutiny regarding the conduct of directors in resisting unsolicited
takeover attempts. Liability of directors of a Delaware corporation to the
corporation or its stockholders for breach of the duty of care generally
requires a finding by a court that the directors were grossly negligent.
Delaware courts have also held that the directors of a Delaware corporation owe
the corporation and its stockholders a duty of loyalty, requiring them to act in
good faith and in what they believe to be the best interests of the corporation
and its stockholders and that, whenever their interests with respect to a
transaction conflict with those of the corporation, the transaction be fair to
the corporation.
The Allegheny Teledyne Certificate provides that the directors of Allegheny
Teledyne may take into account the effects of their actions on employees,
suppliers, distributors and customers of Allegheny Teledyne and its subsidiaries
and the effect upon communities in which the offices or facilities of Allegheny
Teledyne and its subsidiaries are located or any other factors considered
pertinent.
The Company. Section 60.357 of the OBCA expressly provides that directors
of an Oregon corporation are obligated to perform their duties in good faith, in
a manner they reasonably believe to be in the best interests of the corporation
and with such care as a person of ordinary prudence would use under similar
circumstances. Such section also provides that when evaluating any offer of
another party to make a tender or exchange offer for any equity security of the
corporation, or any proposal to merge or consolidate the corporation with
another corporation or to purchase or otherwise acquire all or substantially all
the properties and assets of the corporation, the directors of the corporation
may, in determining what they believe to be in the best interests of the
corporation, give due consideration to the social, legal and economic effects on
employees, customers and suppliers of the corporation and on the communities and
geographical areas in which the corporation and its subsidiaries operate, the
economy of the state and nation, the long-term as well as short-term interests
of the corporation and its shareholders, including the possibility that these
interests may be best served by the continued independence of the corporation,
and other relevant factors. Such section further provides that a director is not
liable for any action taken as a director, or any failure to take any action, if
the director performed the duties of the director's office in compliance with
such section.
LIMITATION ON DIRECTOR LIABILITY
Allegheny Teledyne. Under the DGCL, a Delaware corporation may include in
its certificate of incorporation a provision eliminating the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for unlawful payment of a dividend or an
unlawful stock purchase or redemption, and (iv) for any transaction from which
the director derives an improper personal benefit. The Allegheny Teledyne
Certificate contains such a provision and further provides that, if the DGCL is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of an Allegheny Teledyne
director shall be eliminated or limited to the fullest extent so permitted. The
Allegheny Teledyne Certificate further specifies that no amendment to or repeal
of the provision shall apply to or have any effect on the liability or alleged
liability of any director of Allegheny Teledyne for or with respect to any acts
or omissions of such director occurring prior to such amendment or repeal.
The Company. The Company Articles contain a provision stating that to the
fullest extent permitted by Oregon law, no director of the Company will be
personally liable to the Company or its shareholders for monetary damages for
conduct as a director. The OBCA and DGCL contain similar provisions with respect
to
59
<PAGE> 63
limiting director liability, except that, as permitted under the OBCA, damages
are limited for monetary damages "for conduct as a director," which differs from
the DGCL provision, which permits limits on monetary damages "for breach of
fiduciary duty as a director."
CHARTER AMENDMENTS
Allegheny Teledyne. To amend a Delaware corporation's certificate of
incorporation, the DGCL requires approval first by that corporation's board of
directors and then by the holders of a majority of the outstanding shares of
stock entitled to vote thereon and a majority of each class of stock entitled to
vote thereon as a class, unless a larger proportion is specified in its
certificate of incorporation or except when the provision being amended or
repealed provides for a supermajority vote of the board or the stockholders, in
which case, the same percentage of the board or the stockholders, as the case
may be, is needed to amend or repeal that provision.
The Allegheny Teledyne Certificate provides that the affirmative vote of
the holders of at least 75% of the combined voting power of the outstanding
shares of capital stock of Allegheny Teledyne is required to amend or rescind,
or adopt any provision inconsistent with the purpose or intent of the provisions
of the Allegheny Teledyne Certificate relating to the adoption, amendment and
repeal of the Allegheny Teledyne Bylaws, limitations of certain liabilities of
directors, actions of stockholders, classification of directors, certain factors
permitted to be considered by the directors, approval of certain fundamental
changes, and amendments to the Allegheny Teledyne Certificate.
The Company. Under the OBCA, amendments to the articles of incorporation
of an Oregon corporation may only be proposed by its board of directors. Subject
to class or group voting requirements and except for certain amendments which do
not require shareholder approval and unless a greater vote is required by its
articles of incorporation or is a condition to the submission of the amendment
to the vote of shareholders by the board of directors, amendments of the
articles of incorporation of an Oregon corporation are deemed approved if the
votes cast favoring the amendment exceed the votes cast opposing the amendment.
Under the Company Articles, the approval of the holders of at least 75% of the
outstanding shares of Company Common Stock is required to amend the provisions
of the Company Articles related to the approval of certain issuances of Company
Common Stock.
BYLAW AMENDMENTS
Allegheny Teledyne. Under the DGCL, the stockholders entitled to vote have
the power to adopt, amend or repeal bylaws as do the directors to the extent
that the certificate of incorporation confers such powers on the directors. The
Allegheny Teledyne Certificate authorizes the Board of Directors of Allegheny
Teledyne to adopt, amend or repeal the Allegheny Teledyne Bylaws. The Allegheny
Teledyne Certificate also provides that the stockholders may not adopt, amend or
repeal the Allegheny Teledyne Bylaws other than by the same affirmative vote
that is required to amend certain provisions of the Allegheny Teledyne
Certificate (see "COMPARISON OF SHAREHOLDER RIGHTS--Charter Amendments").
The Company. Under the OBCA, and with certain exceptions, an Oregon
corporation's board of directors may amend or repeal the corporation's bylaws
unless (i) the articles of incorporation reserve such power exclusively to the
shareholders in whole or in part, or (ii) the shareholders in amending or
repealing a particular bylaw provide expressly that the board of directors may
not amend or repeal that bylaw. In addition, an Oregon corporation's
shareholders may amend or repeal the corporation's bylaws even though the bylaws
may also be amended or repealed by its board of directors. The Company Articles
provide that the Company Board shall have the power to adopt, amend, alter or
repeal the Company's Bylaws and that the Company Bylaws regardless whether made
by the shareholders or the Board of Directors may be amended, added to or
repealed by vote of the holders of not less than 75% of the issued and
outstanding capital stock of the Company at any meeting of the shareholders. In
addition, the Company Articles provide that certain provisions of the Company's
Bylaws relating to selection of nominees to the board of directors shall not be
amended without the approval of the holders of 75% of the issued and outstanding
shares of Company Common Stock.
60
<PAGE> 64
INDEMNIFICATION
Allegheny Teledyne. The Allegheny Teledyne Certificate contains provisions
under which Allegheny Teledyne will indemnify, to the fullest extent permitted
by law, persons who are made a party to an action or proceeding by virtue of the
fact that the person is or was a director, officer, or, in certain
circumstances, an employee or agent, of Allegheny Teledyne or another entity at
Allegheny Teledyne's request. The DGCL generally permits such indemnification to
the extent that the person acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to criminal matters if the individual had no
reasonable cause to believe his or her conduct was unlawful.
The Company. The Company Bylaws provide that the Company will indemnify
its directors and officers to the fullest extent not prohibited by law and the
Company Articles provide that the Company has the power to indemnify, to the
fullest extent not prohibited by law, persons who are made a party to an action
or proceeding by virtue of the fact that the person is or was a director,
officer, employee, agent or fiduciary of an employee benefit plan of the Company
or another entity at the Company's request. The OBCA generally permits such
indemnity to the extent that the person acted in good faith and in a manner
which he or she reasonably believed to be in the best interest of the
corporation or at least not opposed to its best interests and with respect to
criminal matters, if the individual had no reasonable cause to believe his or
her conduct was unlawful.
DIVIDENDS AND STOCK REPURCHASES
Allegheny Teledyne. The DGCL provides that a corporation may pay dividends
from its surplus or from its net profits during the current or immediately
preceding year, unless capital is less than the liquidation preferences of
outstanding preferred shares. The statute permits surplus to be determined by
valuing the corporation's net assets at fair market value rather than historical
book value. A Delaware corporation may not purchase or redeem its shares when
the capital of the corporation is impaired or such purchase or redemption would
cause any impairment of its capital (except that the corporation may redeem
preferred stock and then reduce the capital of the corporation in the manner
permitted by the statute) and may not purchase shares that are subject to
redemption at the option of the corporation at a price greater than the
applicable redemption price.
The Company. The OBCA provides that, subject to any restrictions contained
in the articles of incorporation, a corporation may make a distribution to its
shareholders unless, after giving effect to the distribution (which is defined
to include a repurchase of shares), (i) the corporation would not be able to pay
its debts as they come due in the usual course of business or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The board
of directors may base a decision that a distribution is not prohibited on (a)
financial statements prepared on the basis of accounting practices that are
reasonable in the circumstances, (b) a fair valuation, or (c) any other method
that is reasonable in the circumstances.
FORM OF CONSIDERATION FOR CAPITAL STOCK
Allegheny Teledyne. The DGCL provides that the consideration for which
capital stock is issued must consist of cash, services rendered, personal
property, real property, leases of real property or a combination thereof.
The Company. Under the OBCA, shares may be issued for a consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed, contracts for services to
be performed or other securities of the corporation.
LEGAL MATTERS
The validity of the shares of Allegheny Teledyne Common Stock to be issued
in connection with the Merger will be passed upon by Jon D. Walton, Senior Vice
President, General Counsel and Secretary of Allegheny Teledyne. As of February
12, 1998, Mr. Walton owned beneficially 117,659 shares of Allegheny Teledyne
Common Stock. Mr. Walton's business address is 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479.
61
<PAGE> 65
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995 and the consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Proxy Statement/Prospectus, have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Allegheny Teledyne at December 31,
1996 and 1995, and for each of the three fiscal years in the period ended
December 31, 1996, incorporated by reference to the Annual Report on Form 10-K
of Allegheny Teledyne for the year ended December 31, 1996 and incorporated in
this Proxy Statement/Prospectus, which is referred to and made part of this
Proxy Statement/Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference therein
and incorporated herein by reference which, as to the years 1995 and 1994, are
based in part on the reports of Arthur Andersen LLP, independent public
accountants, on the financial statements of Teledyne, Inc. Allegheny Teledyne's
financial statements have been incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
SHAREHOLDER PROPOSALS
If for any reason the Merger is not consummated and there is a 1998 annual
meeting of shareholders of the Company, then to be considered for inclusion in
the proxy statement for such meeting, shareholder proposals must have been
received by November 14, 1997 and must otherwise have complied with applicable
provisions of the Exchange Act. Pursuant to Rule 14a-8 under the Exchange Act,
Company shareholders may present proper proposals for inclusion in the Company's
proxy statement and for consideration at the next annual meeting of shareholders
by submitting such proposals to the Company in a timely manner.
62
<PAGE> 66
APPENDIX
A
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 31, 1997
AMONG
ALLEGHENY TELEDYNE INCORPORATED,
SEA MERGER INC.
AND
OREGON METALLURGICAL CORPORATION
<PAGE> 67
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I
THE MERGER.......................................................................... A-1
Section 1.1 The Merger.............................................................. A-1
Section 1.2 Effective Time.......................................................... A-1
Section 1.3 Closing................................................................. A-1
Section 1.4 Articles of Incorporation of the Surviving Corporation.................. A-1
Section 1.5 Directors of the Surviving Corporation.................................. A-2
Section 1.6 Officers of the Surviving Corporation................................... A-2
ARTICLE II
CONVERSION OF SECURITIES............................................................ A-2
Section 2.1 Conversion of Capital Stock............................................. A-2
Section 2.2 Company Stock Options and Rights........................................ A-2
Section 2.3 Exchange of Certificates................................................ A-2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... A-2
Section 3.1 Organization of the Company............................................. A-3
Section 3.2 Capitalization of the Company........................................... A-3
Section 3.3 Subsidiaries............................................................ A-3
Section 3.4 Authority............................................................... A-4
Section 3.5 Governmental Filings; No Violations..................................... A-4
Section 3.6 SEC Filings; Financial Statements....................................... A-5
Section 3.7 Absence of Undisclosed Liabilities...................................... A-5
Section 3.8 Absence of Certain Changes.............................................. A-5
Section 3.9 Compliance with Law; Regulatory Compliance.............................. A-6
Section 3.10 Environmental Matters.................................................. A-6
Section 3.11 Tax Matters............................................................ A-7
Section 3.12 Certain Transactions................................................... A-8
Section 3.13 Litigation............................................................. A-8
Section 3.14 Labor Matters.......................................................... A-8
Section 3.15 Title to Assets........................................................ A-8
Section 3.16 Intellectual Property.................................................. A-9
Section 3.17 Insurance.............................................................. A-9
Section 3.18 Employment Agreements.................................................. A-9
Section 3.19 Benefit Plans; ERISA................................................... A-9
Section 3.20 Agreements, Contracts and Commitments.................................. A-12
Section 3.21 Information in Disclosure Documents.................................... A-12
Section 3.22 Restrictions on Business Activities.................................... A-12
Section 3.23 Tax and Accounting Matters............................................. A-12
Section 3.24 Brokers and Finders.................................................... A-12
Section 3.25 No Existing Discussions................................................ A-12
Section 3.26 Opinion of Financial Advisor........................................... A-13
Section 3.27 Certain Provisions of the OBCA Not Applicable.......................... A-13
Section 3.28 Company Rights Agreement............................................... A-13
Section 3.29 Disclosure............................................................. A-13
</TABLE>
A-i
<PAGE> 68
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ATI............................................... A-13
Section 4.1 Organization of ATI..................................................... A-13
Section 4.2 Capitalization of ATI................................................... A-13
Section 4.3 Authority; No Conflict; Required Filings and Consents................... A-14
Section 4.4 SEC Filings; Financial Statements....................................... A-14
Section 4.5 Absence of Undisclosed Liabilities...................................... A-14
Section 4.6 Absence of Certain Changes.............................................. A-15
Section 4.7 Information in Disclosure Documents..................................... A-15
Section 4.8 Interim Operations of Sub............................................... A-15
Section 4.9 Compliance with Law; Regulatory Compliance.............................. A-15
Section 4.10 Litigation............................................................. A-15
Section 4.11 Agreements, Contracts and Commitments.................................. A-16
Section 4.12 Restrictions on Business Activities.................................... A-16
Section 4.13 Disclosure............................................................. A-16
ARTICLE V
CONDUCT OF BUSINESS OF THE COMPANY.................................................. A-16
Section 5.1 Covenants of the Company................................................ A-16
Section 5.2 Consultation............................................................ A-17
ARTICLE VI
ADDITIONAL AGREEMENTS............................................................... A-17
Section 6.1 Acquisition Proposals................................................... A-17
Section 6.2 Proxy Statement/Prospectus; Registration Statement...................... A-18
Section 6.3 Letter of the Company's Accountants..................................... A-19
Section 6.4 Access to Information................................................... A-19
Section 6.5 Company Shareholders Meeting............................................ A-19
Section 6.6 Legal Conditions to the Merger.......................................... A-19
Section 6.7 Public Disclosure....................................................... A-19
Section 6.8 Tax-Free Transaction.................................................... A-19
Section 6.9 Pooling Accounting...................................................... A-19
Section 6.10 Affiliate Agreements................................................... A-19
Section 6.11 NYSE Listing........................................................... A-20
Section 6.12 Company Stock Options and Rights....................................... A-20
Section 6.13 Indemnification........................................................ A-21
Section 6.14 Additional Agreements; Reasonable Efforts.............................. A-22
ARTICLE VII
CONDITIONS TO THE MERGER............................................................ A-22
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.............. A-22
Section 7.2 Additional Conditions to Obligations of ATI and Sub..................... A-23
Section 7.3 Additional Conditions to Obligations of the Company..................... A-23
ARTICLE VIII
TERMINATION AND AMENDMENT........................................................... A-24
Section 8.1 Termination............................................................. A-24
Section 8.2 Effect of Termination................................................... A-25
Section 8.3 Fees and Expenses....................................................... A-25
Section 8.4 Amendment............................................................... A-26
Section 8.5 Extension; Waiver....................................................... A-26
</TABLE>
A-ii
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE IX
MISCELLANEOUS....................................................................... A-26
Section 9.1 Nonsurvival of Representations, Warranties and Agreements............... A-26
Section 9.2 Notices................................................................. A-26
Section 9.3 Certain Definitions; Interpretation..................................... A-27
Section 9.4 Knowledge............................................................... A-28
Section 9.5 Counterparts............................................................ A-28
Section 9.6 Entire Agreement; No Third Party Beneficiaries.......................... A-28
Section 9.7 Governing Law........................................................... A-28
Section 9.8 Assignment.............................................................. A-28
Section 9.9 Severability............................................................ A-28
Section 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative.................. A-28
Annexes
Annex I--Exchange Procedures
Annex II--Form of Amendment to Company Rights Agreement
Annex III--Form of Company Affiliate Agreement
</TABLE>
A-iii
<PAGE> 70
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of October 31, 1997,
by and among ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation ("ATI"),
SEA MERGER INC., an Oregon corporation and a wholly owned subsidiary of ATI
("Sub"), and OREGON METALLURGICAL CORPORATION, an Oregon corporation (the
"Company");
WHEREAS, the Boards of Directors of ATI and the Company deem it advisable
and in the best interests of their respective corporations and stockholders that
the business of the Company be combined with that of ATI in order to advance the
long-term business interests of ATI and the Company; and
WHEREAS, the combination of the business of the Company with that of ATI
will be effected pursuant to the terms of this Agreement through a transaction
in which Sub will merge with and into the Company (the "Merger"), whereupon the
Company will become a wholly owned subsidiary of ATI and the shareholders of the
Company will become stockholders of ATI; and
WHEREAS, for financial accounting purposes, it is intended that the Merger
be accounted for as a pooling of interests; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.2), Sub
will be merged with and into the Company and the separate corporate existence of
Sub will thereupon cease. The Company, as the surviving corporation of the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), will
continue to be governed by the laws of the State of Oregon. The Merger will have
the effects specified in the Oregon Business Corporation Act (the "OBCA").
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all of the properties, rights, privileges, powers, franchises,
debts, liabilities, obligations and duties of the Company will continue in the
Surviving Corporation unaffected by the Merger.
Section 1.2 Effective Time. As soon as practicable following the
satisfaction of the conditions set forth in Article VII, the parties will file
articles of merger (the "Articles of Merger") with the Secretary of State of
Oregon, executed in accordance with the relevant provisions of the OBCA, and
will make all other filings or recordings required under the OBCA to consummate
the Merger. The Merger will become effective upon the filing of the Articles of
Merger with the Secretary of State of Oregon or at such other time as the
parties hereto may agree and as may be specified in the Articles of Merger in
accordance with applicable law. The date and time when the Merger becomes
effective is herein referred to as the "Effective Time."
Section 1.3 Closing. The Closing of the Merger (the "Closing") will take
place (i) at the principal executive offices of ATI beginning at 12:00 noon,
Eastern time, on the first business day on which all of the conditions set forth
in Article VII (other than those that are waived by the party or parties for
whose benefit such conditions exist) are satisfied or (ii) at such other place,
date and/or time as the parties hereto may agree. The date upon which the
Closing occurs is herein referred to as the "Closing Date."
Section 1.4 Articles of Incorporation of the Surviving Corporation. At the
Effective Time, in accordance with the OBCA, the Restated Articles of
Incorporation, as amended, of the Company as in effect immediately prior to the
Effective Time will be amended and restated to become substantially identical
(except as to the name of the Surviving Corporation, which shall continue to be
"Oregon Metallurgical Corporation", and except for
A-1
<PAGE> 71
Article VIII thereof) to the Articles of Incorporation of Sub, and be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law.
Section 1.5 Directors of the Surviving Corporation. At the Effective Time,
the directors of Sub then in office will become the directors of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
Section 1.6 Officers of the Surviving Corporation. At the Effective Time,
the officers of Sub will become the officers of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company or the holder of any shares of capital
stock of Sub:
(a) The issued and outstanding shares of capital stock of Sub shall be
converted into and become such number of fully paid and nonassessable shares of
Common Stock, par value $.01 per share, of the Surviving Corporation as shall be
provided for in the Articles of Merger.
(b) All shares of Company Common Stock that are owned by the Company as
treasury stock and any shares of capital stock of the Company owned by ATI, Sub
or any other wholly owned Subsidiary of ATI shall be canceled and retired and
shall cease to exist and no stock of ATI or other consideration shall be
delivered in exchange therefor. All shares of Common Stock, par value $.10 per
share, of ATI ("ATI Common Stock") owned by the Company or any Subsidiary of the
Company shall remain unaffected by the Merger.
(c) Each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted into
the right to receive 1.296 (the "Conversion Number") fully paid and
nonassessable shares of ATI Common Stock. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto except the right to receive the foregoing shares of ATI Common
Stock and any cash in lieu of fractional shares of ATI Common Stock to be issued
or paid in consideration therefor upon the surrender of such certificate in
accordance with Section 2.3, without interest.
Section 2.2 Company Stock Options and Rights. All then outstanding (i)
options to purchase Company Common Stock under the Company's 1996 Employee Stock
Option Plan, 1997 Employee Stock Option Plan and Nontransferable Stock Option
Agreement (the "Company Option Plans") and (ii) warrants to purchase up to
120,000 shares of Company Common Stock under the Warrant Agreement, dated
September 19, 1994, between the Company and James S. Paddock (the "Warrant
Agreement"), together with the obligation to issue shares of ATI Common Stock
pursuant to the Company's Amended and Restated Excess Benefit Plan (the "Excess
Benefit Plan") and the Stock Compensation Plans (as defined in Section 3.2 and
as amended or clarified pursuant to Section 6.12(c)), will be assumed by ATI in
accordance with Section 6.12.
Section 2.3 Exchange of Certificates. The procedures for exchanging
outstanding shares of Company Common Stock for ATI Common Stock pursuant to the
Merger are set forth in Annex I hereto, which is deemed to be a part of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to ATI and Sub that, except as
specifically set forth and described in the Disclosure Letter (the "Company
Disclosure Letter") delivered by the Company to ATI prior to the execution and
delivery of this Agreement, the statements set forth below in this Article III
are true and correct. The
A-2
<PAGE> 72
Company Disclosure Letter is arranged in paragraphs corresponding to the
numbered and lettered Sections and paragraphs contained in this Article III.
Section 3.1 Organization of the Company. The Company is a corporation duly
organized and validly existing under the laws of the State of Oregon. The
Company has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. The Company is duly qualified and validly existing (and in good
standing where appropriate) in each jurisdiction in which the failure to be so
qualified, validly existing or in good standing would have a Material Adverse
Effect on the Company. Set forth in the Company Disclosure Letter is a complete
list of the jurisdictions in which the Company is qualified or licensed to do
business as a foreign corporation.
Section 3.2 Capitalization of the Company. The authorized capital stock of
the Company consists of 80,000,000 shares of Company Common Stock, of which
16,445,346 shares are issued and outstanding and no shares are held in the
Company's treasury as of the date hereof. As of the date hereof, there are
outstanding options to acquire an aggregate of 286,900 shares of Company Common
Stock, all of which were granted under the Company Option Plans, and outstanding
warrants (the "Warrants") issued under the Warrant Agreement to acquire 120,000
shares of Company Common Stock at an exercise price of $6.375 per share. The
Company has no shares of Company Common Stock reserved for issuance, other than
(i) 322,000 shares of Company Common Stock reserved for issuance pursuant to the
Company Option Plans, (ii) 120,000 shares of Company Common Stock reserved for
issuance upon exercise of the Warrants, (iii) 736,584 shares of Company Common
Stock reserved for issuance pursuant to the Company's Stock Compensation
Plan--Salaried Employees, the Company's Stock Compensation Plan--Union Employees
and the Savings Plan (the "Stock Compensation Plans"), (iv) 14,476 shares
reserved for issuance under the Excess Benefit Plan and (v) 20,000,000 shares of
Company Common Stock reserved for issuance pursuant to the Rights Agreement,
dated as of December 12, 1996, between the Company and ChaseMellon Shareholder
Services, LLC, as Rights Agent, as amended (the "Company Rights Agreement").
Except for 296,289 shares of Company Common Stock issued pursuant to the Stock
Compensation Plans, 16,114 shares of Company Common Stock issued pursuant to the
Excess Benefit Plan and 6,200 shares of Company Common Stock issued to directors
as a retainer, no shares of Company Common Stock have been issued since December
31, 1996. Except for options to acquire an aggregate of 49,400 shares of Company
Common Stock granted pursuant to the Company Option Plans (details of which are
included as part of the Company Disclosure Letter), shares issuable under the
Stock Compensation Plans and 1,300 shares issuable to directors as a retainer,
no option, warrant or other right to acquire Company Common Stock or other
capital stock of the Company has been granted by the Company since December 31,
1996. All of the shares of Company Common Stock outstanding are, and all such
shares reserved for issuance, upon such issuance and upon receipt by the Company
of the consideration for such issuance, will be, duly authorized and validly
issued, fully paid and nonassessable. Except as set forth in this Agreement,
there are no options, warrants, rights, calls, subscriptions, stock appreciation
rights, commitments, understandings or agreements of any character obligating
the Company or any Subsidiary of the Company to issue any shares of capital
stock or voting securities or any security representing the right to purchase or
otherwise receive any such shares or securities. The Company has outstanding no
bonds, debentures, notes or other obligations or securities the holders of which
have the right to vote (or are convertible into or exchangeable or exercisable
for securities (other than Company Common Stock) having the right to vote) with
the shareholders of the Company on any matter. There are no existing
restrictions on transfer, voting trusts, shareholder agreements or registration
covenants known to the Company relating to any outstanding shares of capital
stock of the Company or any Subsidiary of the Company. None of the outstanding
shares of Company Common Stock was issued in violation of the preemptive rights
of any present or former shareholder and the Company's shareholders are not
entitled to preemptive rights. There are no outstanding agreements of the
Company or any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company. The Company's Employee Stock
Ownership Plan holds less than 10% of the outstanding shares of Company Common
Stock.
Section 3.3 Subsidiaries. The Company Disclosure Letter sets forth a
complete and accurate list of each of the direct and indirect Subsidiaries of
the Company, together with the jurisdiction of incorporation and the equity
capitalization thereof and a complete list of the jurisdictions where it is
qualified or licensed to do business as a foreign corporation. All outstanding
shares of capital stock of each Subsidiary of the Company are owned of
A-3
<PAGE> 73
record and beneficially by the Company or by another Subsidiary of the Company,
free and clear of all mortgages, deeds of trust, pledges, liens, leases,
security interests, security agreements, conditional sales agreements, notes,
easements, restrictions, encroachments and other charges or encumbrances of any
kind whatsoever ("Liens"), other than any restrictions under applicable federal
and state securities laws, and are validly issued, fully paid and nonassessable.
There are no voting trusts or other agreements or understandings with respect to
the voting of the capital stock of any Subsidiary of the Company; and there are
no existing options, warrants, calls, commitments or agreements of any character
obligating any Subsidiary of the Company to issue shares of its capital stock or
obligating the Company or any Subsidiary to acquire or to transfer any
outstanding shares of capital stock of any Subsidiary of the Company. Each
Subsidiary of the Company is an entity duly organized and validly existing (and
in good standing where appropriate) under the laws of the jurisdiction of its
organization, has all requisite corporate or company power and authority to own
or lease and operate its properties and to carry on its business as it is now
being conducted and is duly qualified and validly existing (and in good standing
where appropriate) to do business in each jurisdiction in which the failure to
be so qualified, validly existing or to be in good standing would have a
Material Adverse Effect on the Company. Except for the capital stock of the
Subsidiaries of the Company, the Company and its Subsidiaries do not own any
equity securities of or other equity interests in any corporation, partnership,
joint venture, business trust or other legal entity (together with individuals
and governmental bodies, a "Person"). The Company has provided ATI with true and
correct copies of the articles or certificates of incorporation and bylaws or
other comparable governing documents of each Subsidiary of the Company.
Section 3.4 Authority. The Company has the requisite corporate power and
authority and has taken all corporate action necessary in order to execute and
deliver this Agreement and any other agreement, instrument or certificate
("Ancillary Document") to be executed or delivered by it pursuant hereto or
thereto, and, subject only to approval of this Agreement by at least a majority
of all votes cast by the holders of Company Common Stock outstanding on the
record date for the meeting of the Company's shareholders to be called and held
to consider the approval of this Agreement and the Merger (the "Company
Shareholders Meeting"), to consummate the transactions contemplated hereby and
thereby. The Board of Directors of the Company has determined that the Merger is
in the best interests of the Company and its shareholders, has approved this
Agreement and the Merger, has directed that this Agreement be submitted to the
shareholders of the Company for approval in accordance with applicable law and
the Restated Articles of Incorporation and Bylaws of the Company, each as
amended, and, subject to Section 6.1, has recommended that the shareholders of
the Company approve this Agreement and the Merger. Each of this Agreement and
the Ancillary Documents is a valid and binding agreement, certificate or
instrument, as the case may be, of it enforceable against it in accordance with
its terms.
Section 3.5 Governmental Filings; No Violations. (a) Other than the
filings provided for in Section 1.2, and filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and other than as contemplated by Section 3.5(c), no notices, reports or other
filings are required to be made by the Company or any Subsidiary of the Company
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company or any Subsidiary of the Company from,
any governmental or regulatory authority, agency, court, commission or other
similar entity, domestic or foreign ("Governmental Entity"), in connection with
the execution and delivery of this Agreement by it and the consummation by it of
the transactions contemplated hereby and thereby, the failure of which to make
or obtain would constitute a Material Adverse Effect with respect to the
Company.
(b) The execution and delivery of this Agreement and each Ancillary
Document by the Company does not, and the consummation by it of any of the
transactions contemplated hereby or thereby will not, constitute or result in
(i) a breach or violation of, or a default (or an event which with notice or
lapse of time or both would become a default) under, its Restated Articles of
Incorporation or its Bylaws, each as amended, or the comparable governing
documents of any Subsidiary of the Company, (ii) a breach or violation of, a
default (or an event which with notice or lapse of time or both would become a
default) under, the creation of any payment or other material obligation
pursuant to, or a right to terminate, amend or cancel, or accelerate vesting
under, any of its existing Benefit Plans referred to in Section 3.19 or any
grant or award made thereunder, (iii) a breach or violation of, a default (or an
event which with notice or lapse of time or both would become a default) under,
a right to
A-4
<PAGE> 74
terminate, amend, cancel or accelerate, or the creation of a Lien on any assets
of the Company or any of its Subsidiaries (with or without the giving of notice
or the lapse of time) pursuant to, any provision of any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of the
Company or any of its Subsidiaries ("Company Agreements") or any law, statute,
rule, ordinance or regulation or judgment, decree, order, award, injunction or
governmental or non-governmental permit or license to which the Company or any
of its Subsidiaries is subject or by which the Company or any of its
Subsidiaries or any of their property is bound or affected, or (iv) any change
in the rights or obligations of any party under any of the Company Agreements
except, in the case of clauses (iii) or (iv) above, for such breaches,
violations, defaults, accelerations or changes that would not constitute a
Material Adverse Effect with respect to the Company.
(c) The Company Disclosure Letter sets forth a true and complete list of
all notices, permits, approvals, consents, qualifications, waivers or other
actions of third parties under any material Company Agreement, any Labor
Agreement, any Employment Agreement or any material Company Approval, each as
defined in this Agreement, or under any other material third-party franchise,
license or permit, which the Company or any Subsidiary of the Company is
required to give or obtain in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of any of the
transactions contemplated hereby or thereby.
Section 3.6 SEC Filings; Financial Statements. (a) The Company has filed
and made available to ATI all forms, reports and documents required to be filed
by the Company with the Securities and Exchange Commission (the "SEC") since
January 1, 1995 (collectively, the "Company SEC Reports"). The Company SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Company SEC Reports or necessary in order to make the statements
in such Company SEC Reports, in the light of the circumstances under which they
were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes and schedules) of the Company contained in the Company SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates and the consolidated results of its operations and cash flows for the
periods indicated. The balance sheet of the Company (including any related
notes) as of September 28, 1997 is referred to herein as the "Company Balance
Sheet."
Section 3.7 Absence of Undisclosed Liabilities. Except to the extent set
forth or provided for in the Company Balance Sheet, as of September 28, 1997
neither the Company nor any Subsidiary of the Company had any liabilities of any
kind whatsoever, whether absolute or contingent, direct or indirect, accrued or
unaccrued, matured or unmatured, liquidated or unliquidated, joint or several,
which, individually or in the aggregate, were material to the business,
properties, results of operations, financial condition or prospects of the
Company and its Subsidiaries taken as a whole. Since September 28, 1997, except
for normal or recurring liabilities incurred in the ordinary course of business
of the Company consistent with past practice, neither the Company nor any of the
Subsidiaries of the Company has incurred any liabilities of any nature, whether
accrued, contingent or otherwise, which, individually or in the aggregate, are
material to the business, properties, results of operations, financial condition
or prospects of the Company and its Subsidiaries taken as a whole.
Section 3.8 Absence of Certain Changes. Since September 28, 1997, the
Company and its Subsidiaries have conducted their businesses in the ordinary
course and in a manner consistent with past practice and, since such date, (i)
no event or change has occurred that constitutes a Material Adverse Effect with
respect to the Company, and no fact or condition exists or is contemplated or
threatened which is reasonably likely to constitute a Material Adverse Effect
with respect to the Company in the future, (ii) no dividend or other
distribution has been declared or paid with respect to any capital stock of the
Company, and (iii) there has been no change by the
A-5
<PAGE> 75
Company in its accounting methods, principles or practices except as required by
concurrent changes in generally accepted accounting principles.
Section 3.9 Compliance with Law; Regulatory Compliance. (a) Except as
described in the Company SEC Reports filed prior to the date hereof and except
as otherwise provided in Sections 3.10, 3.14 and 3.19 of this Agreement, to the
knowledge of the Company, neither the Company nor any Subsidiary of the Company
(i) is or has been in violation of any applicable federal, state, local or
foreign law, statute, regulation, ordinance or other requirement of any
Governmental Entity relating to it or to its securities, property, operations or
business, except for possible violations which, individually or in the
aggregate, do not constitute a Material Adverse Effect with respect to the
Company; or (ii) has engaged in any activity or omitted to take any action as a
result of which it is in violation of any applicable order, injunction or decree
of any Governmental Entity affecting the Company or any Subsidiary of the
Company, except for such violations, individually or in the aggregate, that do
not constitute a Material Adverse Effect with respect to the Company. Except as
described in the Company SEC Reports filed prior to the date hereof and except
as otherwise provided in Sections 3.10, 3.14 and 3.19 of this Agreement, as of
the date of this Agreement, there is no outstanding order, writ, judgment,
stipulation, injunction, decree, determination, award or other order of any
Governmental Entity affecting the Company or any Subsidiary of the Company in
any material respect.
(b) Except as otherwise provided in Sections 3.10, 3.14 and 3.19 of this
Agreement, the Company and each Subsidiary of the Company possess, or has made
timely application for, all permits, licenses, approvals, authorizations of and
registrations with all Governmental Entities under all federal, state, local and
foreign laws that are or will be required for the Company or any of its
Subsidiaries to carry on any substantial part of their respective businesses as
presently conducted ("Company Approvals"), the absence of which would not
constitute a Material Adverse Effect with respect to the Company. The Company
Disclosure Letter sets forth a list of all material Company Approvals,
indicating the holder, the issuer and the nature thereof. Except as otherwise
provided in Sections 3.10, 3.14 and 3.19 of this Agreement, all material Company
Approvals are in full force and effect and, to the knowledge of the Company,
neither the Company nor any Subsidiary of the Company is in violation of any
Company Approval or any other permit, license, approval, authorization or
registration applicable to it or to the operation of its business which
violations, individually or in the aggregate, constitute a Material Adverse
Effect with respect to the Company. Except as otherwise provided in Sections
3.10, 3.14 and 3.19 of this Agreement, the Company has no reason to believe that
any pending application for a Company Approval will not be timely granted and no
proceeding is pending or, to the knowledge of the Company, threatened, to
revoke, suspend or materially modify any Company Approval or deny any renewal
thereof.
Section 3.10 Environmental Matters. (a) The Company and each of its
Subsidiaries has applied for and has in effect all federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Environmental Permits")
under applicable statutes, laws, ordinances, rules, orders and regulations which
are administered, interpreted or enforced by a Governmental Entity with
jurisdiction over pollution or protection of the environment (collectively,
"Environmental Laws") necessary for it to carry on its business as now
conducted, and there has occurred no violation under any such Environmental
Permit, except for the lack of Environmental Permits and for violations under
Environmental Permits that, individually or in the aggregate, do not constitute
a Material Adverse Effect with respect to the Company.
(b) Except as disclosed in the Company SEC Reports filed prior to the date
hereof, to the knowledge of the Company, the Company and each of its
Subsidiaries is, and has been, in compliance with applicable Environmental Laws
except for instances of possible noncompliance which, individually or in the
aggregate, do not constitute a Material Adverse Effect with respect to the
Company.
(c) Except as disclosed in the Company SEC Reports filed prior to the date
hereof, there is no suit, action, formal proceeding or formal inquiry pending
or, to the Company's knowledge, threatened before any Governmental Entity in
which the Company or any of its Subsidiaries has been or, with respect to
threatened suits, actions and proceedings, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release into the environment of any Hazardous Material
(as hereinafter defined), asbestos, polychlorinated biphenyls or oil, whether or
not occurring at, on,
A-6
<PAGE> 76
under or involving a site owned, leased or operated by the Company or any of its
Subsidiaries, or (iii) any site or location for which it or its Subsidiaries has
been designated as a potentially responsible party under any federal, state,
local or foreign superfund law, or (iv) any claim, potential claim or express
reservation of responsibility for damages to natural resources, except in the
cases of clauses (i) through (iv) above for any such suits, actions, proceedings
and inquiries that, individually or in the aggregate, do not constitute a
Material Adverse Effect with respect to the Company.
(d) Except as disclosed in the Company SEC Reports filed prior to the date
hereof and to the knowledge of the Company, during the period of ownership or
operation by the Company and its current or former Subsidiaries of any of their
respective current or formerly owned properties, there have been no underground
storage tanks (whether currently active or not) and no polychlorinated biphenyls
in transformers or other electrical equipment and there have been no releases of
Hazardous Material or of asbestos, polychlorinated biphenyls or oil in, on,
under or affecting such properties or, to the Company's knowledge, any
surrounding site except for those that, individually or in the aggregate, do not
constitute a Material Adverse Effect with respect to the Company. Except as
disclosed in the Company SEC Reports filed prior to the date hereof, prior to
the period of ownership or operation by the Company or its current or former
Subsidiaries of any of their respective current or formerly owned properties, to
the Company's knowledge, there were no releases of Hazardous Material or
asbestos, polychlorinated biphenyls or oil or other petroleum products in, on,
under or affecting any such property or any surrounding site in such quantities
or otherwise under such circumstances that violate an Environmental Law, except
for those that, individually or in the aggregate, do not constitute a Material
Adverse Effect with respect to the Company. "Hazardous Material" means any
pollutant, contaminant, or hazardous substance within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act or other
Environmental Laws.
(e) The Company will provide ATI with access to all written information in
its possession or control pertaining to the matters set forth in paragraphs (a)
through (d) of this Section 3.10, including all documents pertaining to
environmental audits or assessments prepared by or for the Company, any
Subsidiary of the Company or any Governmental Entity.
Section 3.11 Tax Matters. (a) The Company and each Subsidiary of the
Company has timely filed or requests for extension have been timely filed with
respect to all federal, state, local and foreign income tax returns and all
other tax returns required to be filed by it ("Tax Returns"), other than those
returns with respect to which failure to timely file or failure to request an
extension of time for filing would not constitute a Material Adverse Effect with
respect to the Company.
(b) Each such Tax Return was true, correct and complete in all material
respects on the respective date on which it was filed and, to the knowledge of
the Company, no event has since occurred requiring any amendment thereto, which
amendment has not been made in a manner such that each such Tax Return remains
true, correct and complete in all material respects.
(c) The Company and each of its Subsidiaries (as the case may be) has paid
or adequate provision on the Company Balance Sheet has been made for the full
payment or discharge of all federal, state, local and foreign taxes, including
any interest, penalties, or other additions to tax thereon, except where such
failure to pay or discharge local or foreign taxes would not constitute a
Material Adverse Effect with respect to the Company.
(d) No issues are currently pending with any taxing authority in connection
with any Tax Returns of the Company or any of its Subsidiaries that, if
determined adversely to the Company and its Subsidiaries (whether individually
or in the aggregate), would constitute a Material Adverse Effect with respect to
the Company. No waivers of statutes of limitation with respect to such Tax
Returns have been given by or requested from the Company or any of its
Subsidiaries. The Company Disclosure Letter sets forth with respect to federal
income taxation (i) the taxable years of the Company and its Subsidiaries as to
which the respective statutes of limitations with respect to taxes have not
expired, and (ii) with respect to the taxable years of the Company and its
Subsidiaries, those years for which examinations have been completed, those
years for which examinations have not been initiated, and those years for which
required Tax Returns have not been filed. Information with respect to state and
material local and foreign income and other taxation to which the Company or any
of its Subsidiaries is subject equivalent to that referred to in the preceding
sentence shall be provided to ATI by the Company on or
A-7
<PAGE> 77
before November 30, 1997. Except to the extent set forth in the Company
Disclosure Letter, all deficiencies asserted or assessments made as a result of
any examinations have been fully paid, or are fully reflected as a liability in
the Company Balance Sheet, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the Company Balance
Sheet.
(e) Neither the Company nor any of its Subsidiaries nor, to the knowledge
of the Company, any of its predecessors has, with regard to any asset or
property held or acquired, filed a consent, election or agreement under Section
341(f) of the Code, or predecessors of such Section.
Section 3.12 Certain Transactions. Except as disclosed in the Company SEC
Reports filed prior to the date hereof, none of the officers or directors of the
Company or of any of its Subsidiaries nor any affiliate (as defined in Rule
12b-2 under the Exchange Act) of the Company, and, to the knowledge of the
Company, none of the key employees of the Company or of any Subsidiary of the
Company is currently a party to any transaction with the Company or any
Subsidiary of the Company (other than for services as an employee, officer or
director), including, without limitation, any contract, agreement or other
arrangement (a) providing for the furnishing of services to or by, (b) providing
for rental of real or personal property to or from, or (c) otherwise requiring
payments to or from, any such officer, director, affiliate or key employee, any
member of the family of any such officer, director or key employee or any
corporation, partnership, trust or other entity in which any such officer,
director or key employee has a substantial interest or which is an affiliate of
such officer, director or key employee.
Section 3.13 Litigation. Except as disclosed in the Company SEC Reports
filed prior to the date hereof, there are no suits, litigations, investigations,
actions or proceedings of any kind pending or, to the knowledge of the Company,
threatened, against the Company or any Subsidiary of the Company, nor to the
knowledge of the Company is any such matter pending or threatened against any
other Person, which, if determined adversely to the Company, would constitute a
Material Adverse Effect with respect to the Company. The Company Disclosure
Letter sets forth a list of all pending litigation to which the Company or any
Subsidiary of the Company is a party or to which it or any of its properties is
subject as of the date of this Agreement.
Section 3.14 Labor Matters. The Company Disclosure Letter sets forth a
true and complete list of all labor and collective bargaining agreements to
which the Company or any Subsidiary of the Company is a party or by which the
Company or any Subsidiary of the Company is bound (collectively, the "Labor
Agreements"). The Company has previously furnished to ATI true and complete
copies of all Labor Agreements, together with all amendments thereto. There are
no strikes or other work stoppages involving any employees of the Company or any
Subsidiary of the Company and there are no material labor disputes by any labor
organization in progress or pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary of the Company, that would
constitute a Material Adverse Effect with respect to the Company. To the
knowledge of the Company, the Company and its Subsidiaries are in compliance
with all applicable laws and regulations in respect of employment and employment
practices, terms and conditions of employment, wages and hours, occupational
safety, health or welfare conditions relating to premises occupied, and civil
rights, non-compliance with which would constitute a Material Adverse Effect
with respect to the Company. There are no charges of unfair labor practices
pending before any Governmental Entity involving or affecting the Company or any
Subsidiary of the Company that, if adversely determined, would constitute a
Material Adverse Effect with respect to the Company. The Company has not been
notified that any customer of or supplier to the Company or any Subsidiary of
the Company is involved in or threatened with or affected by any strike or other
labor disturbance or dispute, litigation or administrative proceeding or
judgment, order, injunction, decree or award that has had or could reasonably be
expected to have a Material Adverse Effect on the Company.
Section 3.15 Title to Assets. The Company and each of its Subsidiaries has
good and marketable title to its properties and assets (other than property as
to which it is a lessee) except for such (i) defects in title that, individually
or in the aggregate, would not constitute a Material Adverse Effect with respect
to the Company and (ii) Liens and encumbrances for obligations incurred in the
ordinary course of business and reflected in the Company Balance Sheet or
incurred thereafter in the ordinary course of business consistent with past
practice. The Company Disclosure Letter sets forth a true and complete list of
all real property owned by the Company or its Subsidiaries and all leases
("Leases") of real property by the Company or its Subsidiaries including, in the
A-8
<PAGE> 78
case of Leases, the name of the lessor, the date of the Lease and each amendment
to the Lease and the aggregate annual rental or other amounts payable under each
Lease. All such Leases are in good standing, valid and effective in accordance
with their respective terms, and no default exists thereunder, except where the
lack of such good standing, validity and effectiveness or the existence of such
default, individually or in the aggregate, does not constitute a Material
Adverse Effect with respect to the Company.
Section 3.16 Intellectual Property. The Company and its Subsidiaries
either own or, to the Company's knowledge, have valid, binding and enforceable
rights to use all patents, trademarks, trade names, service marks, service
names, copyrights, other proprietary intellectual property rights, applications
therefor and licenses or other rights in respect thereof ("Intellectual
Property") used or held for use or necessary in connection with the business of
the Company or its Subsidiaries, without any conflict with the rights of others,
except for such conflicts that, individually or in the aggregate, do not
constitute a Material Adverse Effect with respect to the Company. Neither the
Company nor any of its Subsidiaries has, as of the date hereof, received any
notice from any other person pertaining to or challenging the right of the
Company or its Subsidiaries to use any Intellectual Property or any trade
secrets, proprietary information, inventions, know-how, processes and procedures
owned or used by or licensed to the Company or any of its Subsidiaries, except
with respect to rights the loss of which, individually or in the aggregate, do
not constitute a Material Adverse Effect with respect to the Company. To the
Company's knowledge, none of the Company's or its Subsidiaries' personnel is in
violation of any term of any employment contract, patent disclosure agreement or
any other contract or agreement relating to the relationship of any such
employee with the Company or its Subsidiaries or any other party that,
individually or in the aggregate, constitute a Material Adverse Effect with
respect to the Company.
Section 3.17 Insurance. The Company and each of its Subsidiaries has in
effect valid and effective policies of insurance, issued by companies believed
by it to be sound and reputable, insuring the Company or such Subsidiary (as the
case may be) for losses customarily insured against by others engaged in similar
lines of business. Such policies are reasonable, in both scope and amount, in
light of the risks attendant to the businesses conducted by the Company and its
Subsidiaries. During the past five years, all insurance policies covering
products liability and general liability maintained by or for the benefit of the
Company or its Subsidiaries have been "occurrence" policies and not "claims
made" policies.
Section 3.18 Employment Agreements. The Company Disclosure Letter sets
forth a true and complete list of all agreements (except collective bargaining
agreements and Company and its Subsidiaries employment manuals) with any
officer, director or key employee of the Company to which the Company or any
Subsidiary of the Company is a party, providing for the terms of his or her
employment with the Company or any Subsidiary of the Company and/or the terms of
his or her severance or other payments upon termination of or change in such
employment or any change of control of the Company (the "Employment
Agreements"). The Company has previously furnished to ATI true and complete
copies of all Employment Agreements, together with all amendments thereto (if
any). Since December 31, 1996, neither the Company nor any Subsidiary of the
Company has (i) effected any increase in salary, wage or other compensation of
any kind, whether current or deferred, to any officer, director or key employee,
other than routine increases in the ordinary course of business, (ii) entered
into any Employment Agreement, (iii) adopted, amended or modified any Benefit
Plan, or (iv) made any contribution to any trust or plan for the benefit of
employees except as required by the terms of Benefit Plans as in effect as of
such date.
Section 3.19 Benefit Plans; ERISA. (a) The Company Disclosure Letter sets
forth an accurate and complete list of all written and unwritten employee
benefit plans, programs, policies, agreements, all deferred compensation plans,
programs or arrangements, all stock option, restricted stock or other
compensation plans (including, without limitation, plans described in Section
3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") and
multiemployer plans as defined in Sections 4001(a)(3) and (3)(37)(A) of ERISA
and any labor agreements relating to any of the foregoing) (i) under which the
Company or any Subsidiary of the Company has liability material to the Company
and its Subsidiaries taken as a whole or which is maintained, sponsored,
contributed to or (ii) required to be contributed to during the five-year period
ending on the date of this Agreement by the Company or any Subsidiary of the
Company on behalf of any current or former employee or director of the Company
or any Subsidiary of the Company or any former Subsidiary of the Company or
other Person formerly controlled by the Company ("Benefit Plans"); provided that
the information referred to in the
A-9
<PAGE> 79
foregoing clause (ii) may be provided to ATI by the Company on or prior to
November 30, 1997 in lieu of being provided in the Company Disclosure Letter.
(b) With respect to each Benefit Plan currently in effect, the Company has
delivered to ATI accurate and complete copies of each of the following, to the
extent applicable: (i) all current plan texts and agreements (and all
amendments, supplements and modifications thereto), including all trust
agreements and other agreements related to custody or investment of plan assets,
or, in the case of unwritten arrangements, written summaries thereof, (ii) the
most recent summary plan description and summary of material modifications
delivered to employees, (iii) the three most recent annual reports (IRS Form
5500 series), including all schedules and attachments thereto, (iv) the three
most recent annual and periodic accountings of plan assets, (v) the most recent
determination letter received from the Internal Revenue Service, and (vi) the
three most recent actuarial valuation reports. The Company will also provide to
ATI copies of all employee manuals, handbooks, policy statements and other
written materials given to employees relating to any Benefit Plans.
(c) Except for such incidents of actual or possible noncompliance which
would not constitute a Material Adverse Effect on the Company, and to the
knowledge of the Company, with respect to each Benefit Plan: (i) each such plan
currently in effect is legally valid and binding, benefits under such plan are
as represented in the documents provided pursuant to paragraph (b) above, the
Company and its Subsidiaries have no announced plan or commitment to modify or
amend any such plan, except for required amendments described in clause (ii)
below, or to increase benefits payable thereunder and, except for Benefit Plans
listed on the Company Disclosure Letter as having been terminated, each such
plan has been maintained in full force and effect through the Effective Time;
(ii) if intended to qualify under Section 401(a) or 403(a) of the Code, (A) the
Company Disclosure Letter so identifies each such Benefit Plan, (B) such Benefit
Plan so qualifies in both form and operation, and (C) its trust is exempt from
taxation under Section 501(a) of the Code (except insofar as such qualification
or exemption is dependent upon the adoption of amendments required as a result
of recent legislation, the remedial amendment period for which has not yet
expired); (iii) such Benefit Plan has been administered and enforced in
substantial compliance with the applicable provisions of the Code and ERISA and
the terms of such Benefit Plan and any related collective bargaining agreement,
except to the extent the terms of such Benefit Plan are inconsistent with the
legislation referred to in clause (ii) above, in which case such Benefit Plan
has been administered and enforced in substantial compliance with such
legislation; (iv) there are no actions, suits or claims pending against such
Benefit Plan or affecting any fiduciary thereof other than claims for benefits
made in the ordinary course; (v) there are presently no outstanding judgments,
decrees or orders of any court or any governmental or administrative agency
against or affecting the Benefit Plans, any fiduciaries thereof or the assets of
any trust or insurance contract thereunder, (vi) no reportable event (within the
meaning of Section 4043(b) of ERISA and the regulations thereunder) has occurred
during the five-year period ending on the date of this Agreement; (vii) all
material reports and material disclosures relating to the Benefit Plans required
to be filed with or furnished to Governmental Entities, participants or
beneficiaries on or prior to the Effective Time have been or will be filed or
furnished in a timely manner and in accordance with applicable law; (viii) all
required contributions have been made on a timely basis; (ix) all contributions
made or required to be made under such Benefit Plan and intended to be
deductible under the Code meet the requirements for deductibility under the
Code; (x) with respect to each Benefit Plan subject to either Section 412 of the
Code or Section 302 of ERISA (A) the Company Disclosure Letter identifies each
such Benefit Plan, (B) such Benefit Plan uses a funding method permissible under
ERISA and the actuarial assumptions used in connection therewith are reasonable,
(C) such Benefit Plan has not incurred an accumulated funding deficiency during
the five-year period ending on the date of this Agreement, whether or not
waived, nor does any liability or obligation exist with respect to any
accumulated funding deficiency for any time prior to such period and (D) the
fair market value of the assets of such Benefit Plan equals or exceeds the
present value of all "benefit liabilities" within the meaning of Section
4001(a)(16) of ERISA; and (xi) future compliance with the requirements of ERISA
or the Code as in effect at the Effective Time or with any collective bargaining
agreements to which the Company or any Subsidiary of the Company is a party at
the Effective Time will not result in any increase in the rate of benefit
accrual or the liabilities of the Company or any Subsidiary under the Benefit
Plan (except as such increase may result from changes in applicable law). No
event has occurred in connection with which the Company or any Subsidiary of the
Company could be subject to any material liability under Section 406, 409,
502(i) or 502(1) of ERISA, or Section 4975 of the Code, or under any agreement
or other instrument pursuant to which the Company
A-10
<PAGE> 80
or any Subsidiary of the Company has agreed or is required to indemnify any
Person against any such material liability.
(d) To the knowledge of the Company, no amount is due or owing by the
Company or any Subsidiary of the Company to the Pension Benefit Guaranty
Corporation ("PBGC") under Title IV of ERISA in respect of any Benefit Plan for
any reason (other than the payment of premiums in the ordinary course, all of
which have been paid when due). No Benefit Plan has been terminated nor has any
filing been made with the PBGC for the termination of any Benefit Plan subject
to the provisions of Title IV of ERISA in a manner which has resulted or could
reasonably be expected to result in any material liability of the Company or any
Subsidiary of the Company to the PBGC. The PBGC has not taken any action
relating to the termination of or the appointment of a trustee to administer any
Benefit Plan nor do conditions currently exist which could give rise to a
termination proceeding brought by the PBGC with regard to any such Benefit Plan.
(e) The Company Disclosure Letter identifies each Benefit Plan that is a
multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA (a
"Multiemployer Plan"). In the case of each Multiemployer Plan, the Company
Disclosure Letter sets forth the contributions made to each such Multiemployer
Plan by the Company or the Subsidiaries for the twelve months ended on the last
day of the most recent fiscal year of each such Multiemployer Plan. With respect
to each Multiemployer Plan, to the knowledge of the Company: (A) each such
Multiemployer Plan that is intended to qualify under Section 401(a) of the Code
is so qualified in form and operation and has received a favorable determination
letter from the Internal Revenue Service that such Multiemployer Plan is
qualified under such section, its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code, and nothing has occurred since
the date of the most recent determination letter that has affected adversely or
could reasonably be expected to affect adversely such qualification or
exemption; (B) each such Multiemployer Plan is in compliance in all material
respects with its terms and all governing documents as well as with the
requirements prescribed by all applicable statutes, orders and governmental
rules and regulations, including without limitation, ERISA and the Code; (C)
there are no actions or proceedings (other than routine claims for benefits)
pending, threatened or anticipated; and (D) no such Multiemployer Plan is under
audit or investigation by either the Internal Revenue Service, U. S. Department
of Labor, PBGC or other Governmental Entity and no such completed audit, if any,
has resulted in the imposition of any tax, fine or penalty. The Company
Disclosure Letter also identifies each Multiemployer Plan which is subject to
Title IV of ERISA (a "Multiemployer Pension Plan"). With respect to each
Multiemployer Pension Plan: (A) none of the Company or any of its Subsidiaries
has received a notice that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax or that any such
plan is or may become "insolvent" (within the meaning of Section 4245 of ERISA);
(B) none of the Company or any of its Subsidiaries has withdrawn therefrom in a
complete withdrawal (within the meaning of Section 4203 of ERISA) or a partial
withdrawal (within the meaning of Section 4205 of ERISA) or received any notice
of any claim or demand in respect thereof; and (C) to the knowledge of the
Company, no withdrawal liability to any Multiemployer Pension Plan has been or
is expected to be incurred with respect to any Multiemployer Pension Plan.
(f) During the five-year period ending at the Effective Time, none of the
Company or any of its Subsidiaries has transferred a defined benefit plan (as
defined in Section 3(35) of ERISA) to a corporation that was (at the time of
transfer) a member of a different controlled group of corporations (within the
meaning of Section 4001(a)(14) of ERISA) than the transferor. Neither the
Company nor any Subsidiary of the Company has ever sponsored, maintained,
contributed to, or had any obligation to contribute to, a single-employer plan
which has two or more contributing sponsors at least two of whom are not under
common control.
(g) With respect to each Benefit Plan which is a "welfare plan" (as defined
in Section 3(1) of ERISA): (i) no such plan provides medical or death benefits
with respect to current or former employees of the Company or any Subsidiary of
the Company beyond their termination of employment (other than coverage mandated
by law), (ii) there are no reserves, assets, surplus or prepaid premiums under
any such plan reflected on the Company Balance Sheet, except for accrued
vacation pay, and (iii) to the knowledge of the Company, each such plan has, to
the extent applicable, been administered in substantial compliance with Sections
601-609 of ERISA and Section 4980B(f) of the Code. The Company Disclosure Letter
sets forth the aggregate liability of the Company and the Company Subsidiaries,
which has been estimated by the Company's actuary on a present value basis as at
A-11
<PAGE> 81
December 31, 1996 using the assumptions, including trends affecting future
medical care costs and interest rates, identified in the Company Disclosure
Letter, for post-retirement health and life insurance benefits to be provided to
their current and former employees, along with the components of the projected
annual costs for such benefits used in such calculation. The Company is not
aware of any factor which would cause the projected annual costs used in the
calculation of such present value to be inaccurate in any material respect. The
costs to the Company to provide such benefits for each year during the
three-year period ended December 31, 1996 are set forth in the Company
Disclosure Letter.
(h) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any individual to severance pay, (ii) increase the amount
or accelerate the time of payment or vesting of compensation due or of benefits
payable under any Benefit Plan with respect to, any individual, (iii) cause any
amount to be treated as an "excess parachute payment" under Section 280G of the
Code or (iv) result in any liability of the Company or any Subsidiary of the
Company under Title IV of ERISA or any multiemployer pension or welfare benefit
plan.
Section 3.20 Agreements, Contracts and Commitments. Neither the Company
nor any of its Subsidiaries has breached, nor received in writing any claim or
threat that it has breached, any of the terms or conditions of any agreement,
contract or commitment (or any series of similar agreements, contracts or
commitments) a breach of which, individually or in the aggregate, would
constitute a Material Adverse Effect with respect to the Company. Each such
agreement, contract and commitment that has not expired or been terminated is in
full force and effect and is not subject to any material default thereunder by
any party obligated thereunder of which the Company has knowledge.
Section 3.21 Information in Disclosure Documents. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by ATI under the Securities Act in connection with the issuance of shares of ATI
Common Stock in the Merger (including the Proxy Statement/Prospectus forming a
part thereof, the "Registration Statement") will, at the time the Registration
Statement is filed with the SEC and at the time it and any amendment thereto
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, at the time and in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement/Prospectus relating to the Company Shareholders Meeting (the "Proxy
Statement/Prospectus") will, at the date mailed to shareholders of the Company
and at the time of the Company Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 3.22 Restrictions on Business Activities. Except for this
Agreement, there is no agreement, judgment, injunction, order or decree binding
upon the Company or any of its Subsidiaries that has or could reasonably be
expected to have the effect of prohibiting or impairing any material business
practice of, the acquisition of any material property by, or the conduct of the
respective businesses (as currently conducted) of, the Company and its
Subsidiaries taken as a whole.
Section 3.23 Tax and Accounting Matters. Neither the Company nor any of
its Subsidiaries or affiliates has taken or agreed to take any action that would
prevent the Merger from being treated as a reorganization within the meaning of
Section 368(a) of the Code or would prevent ATI from accounting for the Merger
as a pooling of interests.
Section 3.24 Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby, except that the Company has retained
Salomon Brothers Inc as its financial advisor, the arrangements with which have
been disclosed in writing to ATI prior to the date hereof.
Section 3.25 No Existing Discussions. As of the execution and delivery
hereof, the Company is not engaged, directly or indirectly, in any discussions
or negotiations with any other party with respect to an Acquisition Proposal (as
defined in Section 6.1).
A-12
<PAGE> 82
Section 3.26 Opinion of Financial Advisor. The Company's financial
advisor, Salomon Brothers Inc, has delivered to the Company its opinion dated
the date of this Agreement to the effect that the Conversion Number is fair from
a financial point of view to the shareholders of the Company.
Section 3.27 Certain Provisions of the OBCA Not Applicable. The Board of
Directors of the Company has approved the execution and delivery of this
Agreement and the transactions contemplated hereby and by virtue of such
approval and the provisions of the Bylaws of the Company, Sections 60.801
through 60.816 and Sections 60.825 through 60.845 of the OBCA do not apply to,
or affect the benefits and obligations under, this Agreement.
Section 3.28 Company Rights Agreement. The Company Rights Agreement has
been duly amended only to effect the changes thereto contemplated by the form of
amendment attached hereto as Annex II, and, as a result thereof, the rights
provided thereunder are inapplicable to this Agreement and the Merger.
Section 3.29 Disclosure. None of this Agreement, the Company Disclosure
Letter, any Annex or certificate attached hereto or delivered in accordance with
the terms hereof or any document or statement in writing which has been supplied
to ATI or its representatives by or on behalf of the Company or any of its
Subsidiaries in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary in order to make the statements contained herein and/or therein not
misleading. There is no fact known to the Company which materially adversely
affects the financial condition, properties, business, results of operations or
prospects of the Company which has not been set forth in this Agreement, the
Company SEC Reports, the Company Disclosure Letter, any Annex or certificate
attached hereto or delivered in accordance with the terms hereof or any document
or statement in writing which has been supplied to ATI or its representatives by
or on behalf of the Company in connection with the transactions contemplated by
this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ATI
ATI represents and warrants to the Company that, except as specifically set
forth and described in the Disclosure Letter (the "ATI Disclosure Letter")
delivered by ATI to the Company prior to the execution and delivery of this
Agreement, the statements set forth below in this Article IV are true and
correct. The ATI Disclosure Letter shall be arranged in paragraphs corresponding
to the numbered and lettered Sections and paragraphs contained in this Article
IV.
Section 4.1 Organization of ATI. ATI and each Subsidiary of ATI is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified or be in good standing would have a Material
Adverse Effect on ATI.
Section 4.2 Capitalization of ATI. The authorized capital stock of ATI
consists of 600,000,000 shares of ATI Common Stock and 50,000,000 shares of
Preferred Stock, par value $.10 per share ("ATI Preferred Stock"). As of October
27, 1997, 174,359,192 shares of ATI Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable, 1,987,528 shares
of ATI Common Stock were held in the treasury of ATI or by Subsidiaries of ATI,
14,456,649 shares of ATI Common Stock were reserved for future issuance pursuant
to options or other rights outstanding to acquire ATI Common Stock, and
4,812,500 shares of ATI Common Stock were reserved for issuance under an
Employee Stock Purchase Plan (the "ESPP"). As of the date of this Agreement, no
shares of ATI Preferred Stock are issued and outstanding. All outstanding shares
of ATI Common Stock are and all shares of ATI Common Stock subject to issuance
as specified above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in this
Section 4.2 or as reserved for future grants of options under the ATI stock
option plans or the ESPP, there are no equity securities of any class of ATI or
any
A-13
<PAGE> 83
of its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding.
Section 4.3 Authority; No Conflict; Required Filings and Consents. (a) ATI
and Sub have all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of ATI and Sub. This Agreement has been
duly executed and delivered by ATI and Sub and constitutes the valid and binding
obligation of ATI and Sub, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by ATI does not, and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any provision of the
Restated Certificate of Incorporation or the Amended and Restated Bylaws of ATI
or the Articles of Incorporation or Bylaws of Sub, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which ATI or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to ATI or any of its Subsidiaries or any of its or their properties
or assets, except in the case of clauses (ii) and (iii) for any such conflicts,
violations, defaults, terminations, cancellations or accelerations which would
not constitute a Material Adverse Effect with respect to ATI.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to ATI or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) required filings under the HSR Act, (ii) the filing of
the Registration Statement with the SEC in accordance with the Securities Act,
(iii) the filing of the Articles of Merger with the Secretary of State of
Oregon, and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not constitute a Material
Adverse Effect with respect to ATI.
Section 4.4 SEC Filings; Financial Statements. (a) ATI has filed all
forms, reports and documents required to be filed by ATI with the SEC since
August 15, 1996 (collectively, the "ATI SEC Reports"). The ATI SEC Reports (i)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such ATI SEC Reports or necessary in order to make the
statements in such ATI SEC Reports, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the ATI SEC Reports complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly presented the consolidated financial position of ATI and its
Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated. The balance sheet of ATI as
of September 30, 1997 is referred to herein as the "ATI Balance Sheet."
Section 4.5 Absence of Undisclosed Liabilities. Except to the extent set
forth or provided for in the ATI Balance Sheet, as of September 30, 1997 neither
ATI nor any Subsidiary of ATI had any liabilities of any kind whatsoever,
whether absolute or contingent, direct or indirect, accrued or unaccrued,
matured or unmatured, liquidated or unliquidated, joint or several, which,
individually or in the aggregate, were material to the business, properties,
results of operations, financial condition or prospects of ATI. Since September
30, 1997, except for normal or recurring liabilities incurred in the ordinary
course of business of ATI consistent with past practice, neither ATI nor any of
the Subsidiaries of ATI has incurred any liabilities of any nature, whether
accrued,
A-14
<PAGE> 84
contingent or otherwise, which, individually or in the aggregate, are material
to the business, properties, results of operations, financial condition or
prospects of ATI.
Section 4.6 Absence of Certain Changes. Since September 30, 1997, (i) ATI
and its Subsidiaries have conducted their businesses in the ordinary course and
in a manner consistent with past practice and have made no acquisition of any
business not complementary to those conducted by ATI and its Subsidiaries as of
the date hereof and have effected no disposition of any business other than
those with characteristics that ATI has disclosed prior to the date hereof which
render it a candidate for disposition, (ii) no event or change has occurred
constituting a Material Adverse Effect with respect to ATI, and no fact or
condition exists or is contemplated or threatened which is reasonably likely to
constitute a Material Adverse Effect with respect to ATI in the future, and
(iii) there has been no change by ATI in its accounting methods, principles or
practices except as required by concurrent changes in generally accepted
accounting principles.
Section 4.7 Information in Disclosure Documents. None of the information
supplied or to be supplied by ATI for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the Registration Statement and
any amendment thereto becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, at the time
and in light of the circumstances under which they are made, not misleading, and
(ii) the Proxy Statement/Prospectus will, at the date first mailed to
shareholders of the Company and at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 4.8 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.9 Compliance with Law; Regulatory Compliance. (a) Except as
described in the ATI SEC Reports filed prior to the date hereof, to the
knowledge of ATI, neither ATI nor any Subsidiary of ATI (i) is or has been in
violation of any applicable federal, state, local or foreign law, statute,
regulation, ordinance or other requirement of any Governmental Entity relating
to it or to its securities, property, operations or business, except for
possible violations which, individually or in the aggregate, do not constitute a
Material Adverse Effect with respect to ATI; or (ii) has engaged in any activity
or omitted to take any action as a result of which it is in violation of any
applicable order, injunction or decree of any Governmental Entity affecting ATI
or any Subsidiary of ATI, except for such violations, individually or in the
aggregate, that do not constitute a Material Adverse Effect with respect to ATI.
Except as described in the ATI SEC Reports filed prior to the date hereof, as of
the date of this Agreement, there is no outstanding order, writ, judgment,
stipulation, injunction, decree, determination, award or other order of any
Governmental Entity affecting ATI or any Subsidiary of ATI in any material
respect.
(b) ATI and each Subsidiary of ATI possess, or has made timely application
for, all permits, licenses, approvals, authorizations of and registrations with
all Governmental Entities under all federal, state, local and foreign laws that
are or will be required for ATI or any of its Subsidiaries to carry on any
substantial part of their respective businesses as presently conducted ("ATI
Approvals"), the absence of which would not constitute a Material Adverse Effect
with respect to ATI. All material ATI Approvals are in full force and effect
and, to the knowledge of ATI, neither ATI nor any Subsidiary of ATI is in
violation of any ATI Approval or any other permit, license, approval,
authorization or registration applicable to it or to the operation of its
business which violations, individually or in the aggregate, constitute a
Material Adverse Effect with respect to ATI. ATI has no reason to believe that
any pending application for an ATI Approval will not be timely granted and no
proceeding is pending or, to the knowledge of ATI, threatened, to revoke,
suspend or materially modify any ATI Approval or deny any renewal thereof.
Section 4.10 Litigation. Except as disclosed in the ATI SEC Reports filed
prior to the date hereof, there are no suits, litigations, investigations,
actions or proceedings of any kind pending or, to the knowledge of ATI,
threatened, against ATI or any Subsidiary of ATI, nor to the knowledge of ATI is
any such matter pending or
A-15
<PAGE> 85
threatened against any other Person, which, if determined adversely to ATI,
would constitute a Material Adverse Effect with respect to ATI.
Section 4.11 Agreements, Contracts and Commitments. Neither ATI nor any of
its Subsidiaries has breached, nor received in writing any claim or threat that
it has breached, any of the terms or conditions of any agreement, contract or
commitment (or any series of similar agreements, contracts or commitments) a
breach of which, individually or in the aggregate, would constitute a Material
Adverse Effect with respect to ATI. Each such agreement, contract and commitment
that has not expired or been terminated is in full force and effect and is not
subject to any material default thereunder by any party obligated thereunder of
which ATI has knowledge.
Section 4.12 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon ATI or any of its
Subsidiaries that has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of, the acquisition of
any material property by, or the conduct of the respective businesses (as
currently conducted) of, ATI and its Subsidiaries taken as a whole.
Section 4.13 Disclosure. None of this Agreement, the ATI Disclosure
Letter, any Annex or certificate attached hereto or delivered in accordance with
the terms hereof or any document or statement in writing which has been supplied
to the Company or its representatives by or on behalf of ATI or any of its
Subsidiaries in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary in order to make the statements contained herein and/or therein not
misleading.
ARTICLE V
CONDUCT OF BUSINESS OF THE COMPANY
Section 5.1 Covenants of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees as to itself and its
Subsidiaries (except to the extent that ATI shall otherwise consent in writing)
and except to the extent provided in the Company Disclosure Letter, to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform other
obligations when due, and, to use all reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, to the end that its
goodwill and ongoing businesses be substantially unimpaired at the Effective
Time. The Company shall promptly notify ATI of any event or occurrence not in
the ordinary course of business of the Company. Except as expressly contemplated
by this Agreement and the Company Disclosure Letter, the Company shall not (and
shall not permit any of its Subsidiaries to), without the prior written consent
of ATI:
(a) Accelerate, amend or change the period of exercisability of outstanding
options or warrants to acquire Company Common Stock or authorize cash payments
in exchange for any such options except as required by the terms of a Benefit
Plan or any related agreements as in effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
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
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(c) Issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or securities convertible into
shares of its capital stock, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than shares of
Company Common Stock issuable pursuant to options granted under the Company
Option Plans that are outstanding on the date hereof or shares of Company Common
Stock issuable upon exercise of the Warrants or shares of Company Common Stock
issuable under the Stock Compensation Plans or the Excess Benefit Plan;
A-16
<PAGE> 86
(d) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division, or otherwise acquire or
agree to acquire any assets otherwise than in the ordinary course of business;
(e) Directly or indirectly sell, lease, license or otherwise dispose of any
of its properties or assets except in the ordinary course of business;
(f) (i) Increase or agree to increase the compensation payable or to become
payable to its officers or employees, except for routine increases in salary or
wages of employees of the Company in accordance with past practice, (ii)
increase or agree to increase the compensation payable or to become payable to
officers or grant any additional severance or termination pay to or enter into
or amend or modify any Employment Agreement with, any such officers, (iii) grant
any additional severance or termination pay to or enter into any Employment
Agreement with any employee, (iv) enter into any collective bargaining
agreement, or (v) establish, adopt, enter into or amend any bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees; provided, however, that the Company may take such action
as is required to comply with applicable laws;
(g) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business;
(h) Incur any indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities or guarantee any debt securities of
others, other than indebtedness incurred in the ordinary course of business in
such amounts and pursuant to such terms as are consistent with past practice;
(i) Amend or propose to amend its Restated Articles of Incorporation or its
Bylaws, each as amended;
(j) Authorize or make any capital expenditure otherwise than in the
ordinary course of business; and
(k) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (j) above, or any action which is reasonably
likely to make any of its representations or warranties contained in this
Agreement untrue or incorrect on the date made (to the extent so limited) or as
of the Effective Time.
Section 5.2 Consultation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, the Company shall confer on a regular
and frequent basis with one or more representatives of ATI to report upon
operational or financial matters and the general status of ongoing operations,
and shall continuously confer and consult with representatives of ATI with
respect to the matters referred to in Section 6.12(c). All information disclosed
in connection with this Section shall be considered confidential under the
Confidentiality Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Acquisition Proposals. From and after the date hereof until
the earlier of the termination of this Agreement or the Effective Time:
(a) The Company will, and will cause its directors, officers, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties that may be ongoing with respect to an Acquisition Proposal (as
defined below). The Company will not, nor will it permit any of its Subsidiaries
to, nor will it authorize or permit any of its directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
confidential information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding any Acquisition Proposal; provided, however, that if the
Board of Directors of the Company determines in good faith, after consultation
with and based upon the advice of outside counsel to the Company, that it is
necessary to do so in
A-17
<PAGE> 87
order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Company may, in response to an Acquisition Proposal that was
not solicited or initiated by the Company, and subject to compliance with
Section 6.1(c), (x) furnish information to any person pursuant to a
confidentiality agreement with terms no less favorable to the Company than the
Confidentiality Agreement, dated February 3, 1997, as supplemented on August 9,
1997, between the Company and ATI (as so supplemented, the "Confidentiality
Agreement") and (y) participate in discussions or negotiations regarding such
Acquisition Proposal. "Acquisition Proposal" means any proposal or offer (other
than the transactions contemplated by this Agreement) from any person with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of, all or substantially all of the assets or more
than 20% of the voting securities of the Company.
(b) Except as set forth in this Section 6.1, neither the Board of Directors
of the Company nor any committee thereof will (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to ATI, the approval or
recommendation by such Board of Directors or such committee of the Merger or
this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Acquisition
Proposal. Notwithstanding the foregoing, in the event that the Board of
Directors of the Company determines in good faith, after consultation with and
based upon the advice of outside counsel to the Company, that it is necessary to
do so in order to comply with its fiduciary duties to the Company's shareholders
under applicable law, the Board of Directors of the Company may (x) withdraw or
modify its approval or recommendation of the Merger and this Agreement or (y)
approve or recommend a Superior Proposal (as defined below) or (z) terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause the Company to enter into any Acquisition Agreement with respect
to any Superior Proposal), but in each case only at a time that is not less than
two business days following ATI's receipt of written notice advising ATI that
the Board of Directors of the Company has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. For purposes of this
Agreement, a "Superior Proposal" means any bona fide written Acquisition
Proposal made by a third party the terms of which the Board of Directors of the
Company determines in its good faith judgment (based on the advice of a
financial advisor to the Company of nationally recognized reputation) to be more
favorable to the Company's shareholders from a financial point of view than the
Merger and the other transactions contemplated hereby and for which any required
financing is committed or which, in the good faith judgment of the Board of
Directors of the Company (based on the advice of a financial advisor to the
Company of nationally recognized reputation), is reasonably capable of being
financed by such third party.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.1, the Company will promptly advise ATI orally and
in writing of any request for confidential information in connection with an
Acquisition Proposal or of any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal and the identity of the
person making such request or Acquisition Proposal.
(d) Nothing contained in this Section 6.1 will prohibit the Company from
making any disclosure to the Company's shareholders if, in the good faith
judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would violate applicable law, including
Rule 14e-2 promulgated under the Exchange Act; provided, however, neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by Section 6.1(b), withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to this Agreement or the Merger or approve
or recommend, or propose publicly to approve or recommend, an Acquisition
Proposal.
Section 6.2 Proxy Statement/Prospectus; Registration Statement. (a) As
promptly as practicable after the execution of this Agreement, ATI and the
Company shall prepare and file with the SEC the Proxy Statement/ Prospectus, and
ATI shall prepare and file with the SEC the Registration Statement, in which the
Proxy Statement/Prospectus will be included as a prospectus. ATI and the Company
shall use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practicable. Subject to Section 6.1, the
Proxy Statement/Prospectus shall include the recommendation of the Board of
Directors of the Company that Company shareholders vote in favor of approval and
adoption of this Agreement and the Merger.
A-18
<PAGE> 88
(b) ATI and the Company shall make all necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 6.3 Letter of the Company's Accountants. The Company shall cause
to be delivered to ATI a letter addressed to ATI of Coopers & Lybrand LLP, the
Company's independent auditors, dated a date within two business days before the
date on which the Registration Statement becomes effective, in form customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
Section 6.4 Access to Information. Upon reasonable notice, each of the
Company and ATI shall (and shall cause its Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the other
access during the period prior to the earlier of the termination of this
Agreement and the Effective Time to all its properties, books, contracts,
commitments, records, officers, employees, accountants, accountants' work
papers, correspondence and affairs, and cause its officers and employees to
furnish to the other and its authorized representatives any and all financial,
technical and operating data and other information pertaining to its businesses
and those of its Subsidiaries as such party shall from time to time reasonably
request. Each party will hold any such information which is non-public in
confidence in accordance with the Confidentiality Agreement. No information or
knowledge obtained in any investigation pursuant to this Section 6.4 shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.
Section 6.5 Company Shareholders Meeting. The Company shall call the
Company Shareholders Meeting to be held as promptly as practicable after the
date on which the Registration Statement is declared effective by the SEC for
the purpose of considering and voting upon a proposal to approve and adopt this
Agreement and the Merger. The Company shall use its best efforts to solicit from
its shareholders proxies to facilitate voting at the Company Shareholders
Meeting.
Section 6.6 Legal Conditions to the Merger. Each of ATI and the Company
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger (which
actions shall include, without limitation, furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger; provided that ATI shall
not be required to take any action to comply with any legal requirement or agree
to the imposition of any order of any Governmental Entity that would (i)
prohibit or restrict the ownership or operation by ATI of any portion of the
business or assets of ATI or the Company (or any of their respective
Subsidiaries), (ii) compel ATI or the Company (or any of their respective
Subsidiaries) to dispose of (other than those which were previously designated
as a candidate for disposition) or hold separate any portion of ATI's or the
Company's business or assets, or (iii) impose any limitation on the ability of
ATI or the Surviving Corporation or any of their respective affiliates or
Subsidiaries to own or operate the business and operations of the Company and
its Subsidiaries.
Section 6.7 Public Disclosure. Neither the Company nor ATI shall issue any
press release or other written public statement or publicly deliver any formally
prepared oral statement concerning the matters covered by this Agreement without
the approval of the other, except as required by law or applicable regulation,
and each shall in all events use its best efforts to permit the other with an
opportunity to review and comment upon any such release or statement prior to
dissemination.
Section 6.8 Tax-Free Transaction. ATI and the Company shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.
Section 6.9 Pooling Accounting. Each of ATI and the Company shall use its
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. The Company shall use its best
efforts to cause its Affiliates (as defined in Section 6.10) not to take any
action that would adversely affect the ability of ATI to account for the Merger
as a pooling of interests.
Section 6.10 Affiliate Agreements. Within two weeks following the date of
this Agreement, the Company will provide ATI with a list of those persons who
are, in the Company's reasonable judgment, "affiliates" of the
A-19
<PAGE> 89
Company within the meaning of Rule 145 promulgated under the Securities Act
("Rule 145") (each such person who is an "affiliate" of the Company within the
meaning of Rule 145 is hereafter referred to as an "Affiliate"). The Company
shall provide ATI with such information and documents as ATI shall reasonably
request for purposes of reviewing such list and the Company shall notify ATI in
writing regarding any change in the identity of its Affiliates prior to the
Closing Date. The Company shall use its best efforts to deliver or cause to be
delivered to ATI prior to the Effective Time from each of its Affiliates an
executed Affiliate Agreement in substantially the form attached hereto as Annex
III (each an "Affiliate Agreement"). ATI shall be entitled to place appropriate
legends on the certificates evidencing any ATI Common Stock to be received by
such Affiliates of the Company pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the ATI
Common Stock, consistent with the terms of the Affiliate Agreements.
Section 6.11 NYSE Listing. ATI shall use its best efforts to cause the
shares of ATI Common Stock to be issued in the Merger to be approved for listing
on the New York Stock Exchange.
Section 6.12 Company Stock Options and Rights. (a) Prior to the Effective
Time, the Company shall take such actions as may be necessary such that at the
Effective Time each option ("Option") to acquire Company Common Stock
outstanding after the Effective Time under the Company Option Plans and each
Warrant outstanding after the Effective Time under the Warrant Agreement,
whether or not then exercisable, shall be converted into and become a right with
respect to ATI Common Stock. From and after the Effective Time, (i) each Option
or Warrant assumed by ATI may be exercised solely for ATI Common Stock, (ii) the
number of shares of ATI Common Stock subject to each Option or Warrant shall be
equal to the product of (A) the number of shares of Company Common Stock
previously subject to such Option or Warrant and (B) the Conversion Number, and
(iii) the per share exercise price for each Option or Warrant shall be equal to
(y) the exercise price per share for the shares of Company Common Stock
previously purchasable or subject to such Option or Warrant divided by (z) the
Conversion Number, rounded to the nearest cent. At or prior to the Effective
Time, the Company shall make all necessary arrangements with respect to the
Company Option Plans and the Warrant Agreement and the Options and Warrants to
permit the assumption of unexercised Options and Warrants by ATI pursuant to
this Section 6.12; provided, however, that such arrangements shall not include
any change in the terms of the applicable plans if such change would, in the
opinion of the Company's or ATI's independent public accountants, have an
adverse effect on ATI's ability to account for the Merger as a pooling of
interests for financial reporting purposes.
(b) Prior to the Effective Time, the Company shall take such actions as are
satisfactory to ATI and as may be necessary such that at the Effective Time each
stock appreciation right ("SAR") outstanding after the Effective Time under the
Company's Long Term Incentive Compensation Stock Appreciation Rights Plan (the
"SAR Plan"), whether or not then exercisable, shall be converted into and become
a right with respect to ATI Common Stock, and each right to receive shares of
Company Common Stock under the Excess Benefit Plan will become a right with
respect to ATI Common Stock. From and after the Effective Time, each outstanding
Unit (as defined in the SAR Plan) shall become 1.296 Units, the Fair Market
Value of a Share (in each case as defined in the SAR Plan) upon exercise of a
Unit shall be determined by reference to the fair market value of a share of ATI
Common Stock, and the "Fair Market Value on the Grant Date" (as defined in the
SAR Plan) shall be equal to the Fair Market Value of the Company Common Stock on
the Grant Date divided by the Conversion Number, rounded to the nearest cent.
Each right to receive a share of Company Common Stock under the Excess Benefit
Plan shall be converted into the right to receive 1.296 shares of ATI Common
Stock.
(c) The Company shall as soon as practicable after the date hereof take
such actions as may be necessary to amend or clarify the Stock Compensation
Plans in a manner satisfactory to ATI such that at the Effective Time, all
rights ("Rights") thereunder to acquire Company Common Stock after the Effective
Time shall become rights with respect to ATI Common Stock; provided, however,
that such actions shall not include any change in the terms of the Stock
Compensation Plans if such change would, in the opinion of ATI's independent
public accountants, have an adverse effect on ATI's ability to account for the
Merger as a pooling of interests for financial reporting purposes.
(d) Effective as of the Effective Time, ATI shall assume each Option and
Warrant in accordance with the terms of the Company Option Plans, the Warrant
Agreement and any agreement by which they are evidenced, and
A-20
<PAGE> 90
shall assume the obligation to issue shares of ATI Common Stock under the Excess
Benefit Plan and the Stock Compensation Plans (as amended or clarified pursuant
to Section 6.12(c)). At or prior to the Effective Time, ATI shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of ATI Common Stock for delivery upon exercise of all Options and Warrants
assumed by it and for delivery under the Excess Benefit Plan and the Stock
Compensation Plans (as amended or clarified pursuant to Section 6.12(c)) in
accordance with this Section 6.12. As soon as practicable after the Effective
Time, ATI shall file one or more registration statements on Form S-8 or any
successor or other appropriate form with respect to the shares of ATI Common
Stock subject to the Options and the Warrants, the SARs and the shares of ATI
Common Stock issuable under the Excess Benefit Plan and the Stock Compensation
Plans (as amended or clarified pursuant to Section 6.12(c)). ATI shall use all
reasonable efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Options, Warrants or SARs remain outstanding or
shares of ATI Common Stock are issuable under the Excess Benefit Plan and the
Stock Compensation Plans (as amended or clarified under Section 6.12(c)).
Section 6.13 Indemnification. (a) The Company shall and, from and after
the Effective Time, the Surviving Corporation shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person who
is now, or has been at any time through the date of this Agreement or who
becomes prior to the Effective Time, an officer or director of the Company or
any of its Subsidiaries (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party of or in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of the Company or any of its Subsidiaries
or is or was a plan fiduciary serving at the request of the Company or any of
its Subsidiaries, whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities") to the full extent the
Company would have been permitted to do so under the Company's Restated Articles
of Incorporation, its Bylaws, any indemnity agreements with the Company and
under Oregon law (and the indemnifying party shall advance expenses prior to the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by Oregon law upon receipt of any undertaking required
by applicable Oregon law) or (ii) all liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby. Without limiting the foregoing, in the event
any such claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i) the
Company (or the Surviving Corporation after the Effective Time) may retain
counsel satisfactory to it and the Indemnified Parties, and shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties, and
(ii) the Company (or after the Effective Time, the Surviving Corporation) will
use all reasonable efforts to assist in the vigorous defense of any such matter,
provided that neither the Company nor the Surviving Corporation shall be liable
for any settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 6.13, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify the
Company or the Surviving Corporation (but the failure so to notify shall not
relieve the Company or the Surviving Corporation from any liability which it may
have under this Section 6.13(a) except to the extent such failure prejudices
such party), and shall deliver to the Company (or after the Effective Time the
Surviving Corporation) the affirmation and undertaking contemplated by Section
60.397 of the OBCA. The Indemnified Parties as a group shall only be entitled to
be represented by one law firm to represent them as a group with respect to each
such matter unless there is, under applicable standards of professional conduct,
a conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(b) For a period of at least five years after the Effective Time, ATI or
the Surviving Company shall cause to be maintained in effect standard policies
of directors' and officers' liability insurance of at least the same coverage
and containing terms that are no less advantageous with respect to matters
occurring at or prior to the Effective Time as such policies maintained by the
Company as of the date hereof; provided, that in no event shall ATI or the
Surviving Company be required to expend, in order to maintain or procure
insurance coverage pursuant to this Section 6.13(b), any amount per annum in
excess of 200 percent of the per annum amounts paid by the Company as of the
date hereof; provided, further, that if such insurance cannot be so maintained
or
A-21
<PAGE> 91
obtained at such cost, ATI or the Surviving Corporation shall maintain or obtain
a policy providing the best coverage available for such premium cost.
(c) The provisions of this Section 6.13 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
Section 6.14 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties 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 necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement; provided that ATI shall not be required to take any action to
comply with any legal requirement or agree to the imposition of any order of any
Governmental Entity that would (i) prohibit or restrict the ownership or
operation by ATI of any portion of the business or assets of ATI or the Company
(or any of their respective Subsidiaries), (ii) compel ATI or the Company (or
any of their respective Subsidiaries) to dispose of or hold separate any portion
of its or the Company's business or assets, or (iii) impose any limitation on
the ability of ATI or the Surviving Corporation or any of their respective
affiliates or Subsidiaries to own or operate the business and operations of the
Company and its Subsidiaries. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of the Company,
the proper officers and directors of each party to this Agreement shall take all
such necessary action to effectuate the same.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the Company.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Other Required Authorizations. All required authorizations necessary
for the consummation of the transactions contemplated by this Agreement shall
have been obtained and, other than the filing provided for by Section 1.1, all
other authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity, the failure to obtain which would have a Material Adverse Effect on ATI
or the Company, shall have been filed, occurred or been obtained.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger or limiting or restricting ATI's
conduct or operation of the business of the Company after the Merger shall have
been issued, nor shall there be any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.
(f) Listing. The shares of ATI Common Stock to be issued in the Merger
shall have been approved for listing on the New York Stock Exchange subject to
official notice of issuance.
(g) Consents. Each of the Company and ATI shall have obtained all consents
required to consummate the transactions contemplated by this Agreement,
including the Merger, and all other consents in connection with the Merger and
the other transactions contemplated hereby, the failure to obtain which would
have a Material Adverse Effect on ATI or the Company.
A-22
<PAGE> 92
Section 7.2 Additional Conditions to Obligations of ATI and Sub. The
obligations of ATI and Sub to effect the Merger are subject to the satisfaction
of each of the following conditions, any of which may be waived in writing
exclusively by ATI and Sub:
(a) Representations and Warranties of the Company. The representations and
warranties of the Company set forth in this Agreement (i) that are qualified as
to materiality or as to a Material Adverse Effect with respect to the Company
shall be true and correct and (ii) that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (except
(A) that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be determined as
of such date and (B) for changes contemplated by this Agreement) and ATI shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and ATI shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Tax Opinion. ATI shall have received a written opinion from Kirkpatrick
& Lockhart LLP, counsel to ATI, to the effect that the Merger will be treated
for federal income tax purposes as a tax-free reorganization within the meaning
of Section 368(a) of the Code. In rendering such opinion, such counsel may rely
upon representations and certificates of ATI, Sub and the Company.
(d) Company Rights Agreement. The Company Rights Agreement shall have been
amended or terminated immediately prior to the Effective Time and the holders of
Company Common Stock shall have no rights under the Company Rights Agreement as
a result of the consummation of the transactions contemplated by this Agreement
or otherwise.
(e) Letter of Accountants. ATI shall have received a letter of Coopers &
Lybrand LLP, the Company's independent auditors, dated the Closing Date,
updating the letter referred to in Section 6.3.
(f) Pooling Letters. ATI shall have received letters from Coopers & Lybrand
LLP, the Company's independent auditors, and Ernst & Young LLP, ATI's
independent auditors, each dated the date of the Proxy Statement/Prospectus,
which letters shall be confirmed in writing at the Effective Time, stating that
the business combination to be effected by the Merger will qualify as a pooling
of interests under generally accepted accounting principles.
(g) Affiliate Agreements. ATI shall have received from each of the
Company's Affiliates an executed copy of an Affiliate Agreement substantially in
the form of Annex III hereto.
(h) Resignation of Company Directors. All of the members of the Board of
Directors of the Company shall have submitted their written resignations as
directors of the Company effective as of the Effective Time.
(i) No Material Adverse Change. Since the date of this Agreement, there
shall have been no changes, occurrences or circumstances involving the business,
results of operations or financial condition or prospects of the Company and its
Subsidiaries that, individually or taken together, constitute a Material Adverse
Effect with respect to the Company.
Section 7.3 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties of ATI and Sub. The representations and
warranties of ATI and Sub set forth in this Agreement (i) that are qualified as
to materiality or as to a Material Adverse Effect with respect to ATI shall be
true and correct and (ii) that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except (A) that
the accuracy of representations and warranties that by their terms speak as of
the date of this Agreement or some other date will be determined as of such date
and (B) for changes contemplated by this
A-23
<PAGE> 93
Agreement) and the Company shall have received a certificate signed on behalf of
ATI by the chief executive officer and the chief financial officer of ATI to
such effect.
(b) Performance of Obligations of ATI and Sub. ATI and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of ATI by the chief executive
officer and the chief financial officer of ATI to such effect.
(c) Tax Opinion. The Company shall have received the opinion of Schwabe,
Williamson & Wyatt, P.C., counsel to the Company, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
such counsel may rely upon representations and certificates of ATI, Sub and the
Company.
(d) No Material Adverse Change. Since the date of this Agreement, there
shall have been no changes, occurrences or circumstances involving the business,
results of operations or financial condition or prospects of ATI and its
Subsidiaries that, individually or taken together, constitute a Material Adverse
Effect with respect to ATI.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time by written notice by the terminating party to the
other party under the circumstances set forth below:
(a) by mutual written consent of ATI and the Company; or
(b) by either ATI or the Company if the Merger shall not have been
consummated by March 31, 1998 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
failure to perform or fulfill any material obligation under this Agreement has
been a cause of, or has resulted in, the failure of the Merger to occur on or
before such date); or
(c) by either ATI or the Company if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order, decree
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either ATI or the Company, if, at the Company Shareholders Meeting
(including any adjournment or postponement thereof), the requisite vote of the
shareholders of the Company in favor of approval and adoption of this Agreement
and approval of the Merger shall not have been obtained; or
(e) by ATI, if the Board of Directors of the Company shall have exercised
any of its rights set forth in the second sentence of Section 6.1(b); or
(f) by ATI, if any of the covenants or agreements of the Company set forth
in Section 6.1 shall have been breached; or
(g) by ATI, if for any reason the Company fails to call and hold the
Company Shareholders Meeting by March 31, 1998, unless such failure is due to
the fact that (A) the Registration Statement was not declared effective
sufficiently in advance of such date to enable the Company to hold the Company
Shareholders Meeting by such date or (B) a court has enjoined or temporarily
restrained the Merger, and any such occurrence or omission has not resulted from
any breach of this Agreement by the Company; or
(h) by ATI or the Company, if (i) the other party has breached any
representation or warranty contained in this Agreement, and such breach shall
not have been cured prior to the Effective Time (except where such breach would
not have a Material Adverse Effect on the party having made such representation
or warranty and would not have a material adverse effect upon the transactions
contemplated by this Agreement), or (ii) if there has been a breach of a
covenant or agreement set forth in this Agreement on the part of the other party
(other than the covenants or agreements of the Company set forth in Section
6.1), which shall not have been cured within three days following receipt by the
breaching party of written notice of such breach from the other party; or
A-24
<PAGE> 94
(i) by the Company pursuant to Section 6.1(b).
Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of ATI, the
Company, Sub or their respective officers, directors, stockholders or Affiliates
except as set forth in the Confidentiality Agreement referred to in Section
6.1(a) and as set forth in Section 8.3 and further except to the extent that
such termination results from the willful breach by a party of any of its
representations, warranties or covenants set forth in this Agreement or as
provided for in the Confidentiality Agreement; provided that, the provisions of
Section 8.3 of this Agreement and the Confidentiality Agreement shall remain in
full force and effect and survive any termination of this Agreement.
Section 8.3 Fees and Expenses. (a) Except as set forth in this Section
8.3, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that ATI
and the Company shall share equally all fees and expenses, other than attorneys'
and accounting fees and expenses, incurred in relation to the printing and
filing of the Proxy Statement/Prospectus (including any related preliminary
materials) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto.
(b) The Company shall reimburse ATI for all reasonable out-of-pocket
expenses incurred by ATI relating to the transactions contemplated by this
Agreement prior to termination (including, but not limited to, reasonable fees
and expenses of ATI's outside counsel, accountants and financial advisors) in an
amount not to exceed $2.0 million (i) upon the termination of this Agreement by
ATI pursuant to Section 8.1(g), (ii) upon termination of this Agreement by ATI
pursuant to Section 8.1(h) as a result of a willful breach of any
representation, warranty, covenant or agreement of the Company contained herein,
or (iii) in the event a termination fee is payable in accordance with Section
8.3(c) or Section 8.3(d), and ATI shall reimburse the Company for reasonable
out-of-pocket expenses incurred by the Company relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, reasonable fees and expenses of the Company's outside counsel, accountants
and financial advisors), in an amount not to exceed $2.0 million upon the
termination of this Agreement by the Company pursuant to Section 8.1(h) as a
result of a willful breach of any representation, warranty, covenant or
agreement of ATI contained herein.
(c) The Company shall pay ATI a termination fee of $11.0 million (less the
amount of any expenses of ATI reimbursed by the Company pursuant to Section
8.3(b)) upon the termination of this Agreement by ATI or the Company pursuant to
Section 8.1(d), and if prior to such termination an Acquisition Proposal with
respect to the Company was commenced, publicly proposed or publicly disclosed
and, shall pay ATI an additional $11.0 million, if within 12 months after such
termination the Company shall have entered into an Acquisition Agreement
relating to an Acquisition Proposal or any Acquisition Proposal shall have been
consummated.
(d) The Company shall pay ATI a termination fee of $22.0 million (less the
amount of expenses of ATI reimbursed by the Company pursuant to Section 8.3(b))
upon the earliest to occur of the following events:
(i) the termination of this Agreement by ATI pursuant to Section
8.1(e) or Section 8.1(f); or
(ii) the termination of this Agreement by ATI pursuant to Section
8.1(h) as a result of a willful breach of any representation, warranty,
covenant or agreement of the Company contained herein; or
(iii) the termination of this Agreement by ATI pursuant to Section
8.1(g) if prior to such termination an Acquisition Proposal with respect to
the Company was commenced, publicly proposed or publicly disclosed or
communicated to the Board of Directors of the Company (or the willingness
of any person to make such an Acquisition Proposal was publicly disclosed
or was communicated to the Board of Directors of the Company) and within 12
months after such termination the Company shall have entered into an
Acquisition Agreement relating to an Acquisition Proposal or any
Acquisition Proposal shall have been consummated; or
(iv) the termination of this Agreement by the Company pursuant to
Section 8.1(i).
(e) The expenses and fee, if applicable, payable pursuant to Sections
8.3(b), 8.3(c) and 8.3(d) shall be paid (in same-day funds) within five business
days after the first to occur of any of the events described in
A-25
<PAGE> 95
Section 8.3(b), 8.3(c) or 8.3(d); provided, however, that in no event shall the
Company or ATI, as the case may be, be required to pay such expenses and fee to
the other if, immediately prior to the termination of this Agreement, the party
to receive such expenses and fee was in material breach of its obligations under
this Agreement.
Section 8.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of this Agreement and the Merger by the
shareholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such shareholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 2.1, 2.2, 2.3, 6.12, 6.13,
6.14, 8.2, 8.3, the last sentence of Section 8.4 and Article IX, and the
agreements of the Affiliates of the Company delivered pursuant to Section 6.10.
The Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
Section 9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to ATI or Sub, to:
Richard P. Simmons
Chairman of the Board, President
and Chief Executive Officer
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Facsimile: (412) 394-3010
with a copy to:
Jon D. Walton
Senior Vice President, General Counsel
and Secretary
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Facsimile: (412) 394-3010
A-26
<PAGE> 96
and to:
Ronald D. West
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Facsimile: (412) 355-6501
(b) if to the Company, to:
Carlos E. Aguirre
Chairman of the Board, President
and Chief Executive Officer
Oregon Metallurgical Corporation
530 Southwest 34th Avenue
P. O. Box 580
Albany, Oregon 97321-0177
Facsimile: (541) 917-0647
with a copy to:
Carmen M. Calzacorta
Schwabe Williamson & Wyatt P.C.
Pacwest Center, Suites 1600-1950
1211 Southwest Fifth Avenue
Portland, Oregon 97204-3795
Facsimile: (503) 796-2900
Section 9.3 Certain Definitions; Interpretation. As used in this
Agreement, (i) any reference to the Company refers to the Company and its
Subsidiaries taken as a whole, (ii) any reference to ATI refers to ATI and its
Subsidiaries taken as a whole, (ii) the term "Subsidiary" means, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (a) such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (b) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries taken as a
whole, and (iii) any reference to any state of facts, event, change or effect
having a "Material Adverse Effect" on or with respect to any entity (or group of
entities taken as a whole) means such state of facts, event, change or effect as
has had, or could reasonably be expected to have, a material adverse effect on
the business, assets, results of operations, financial condition or prospects of
such entity (or, if with respect thereto, of such group of entities taken as a
whole), on the ability of such entity (or group of entities) to conduct its (or
their) respective business or businesses after the Effective Time substantially
as such business or businesses are being conducted as of the date hereof or on
the ability of such entity (or group of entities) to consummate the transactions
contemplated hereby or to perform its obligations hereunder; provided, however,
as used in this Agreement, a Material Adverse Effect with respect to the Company
or ATI, as the case may be, shall be so construed as to mean the Company or ATI
and its respective Subsidiaries taken as a whole. When used herein, the term
"material" for all purposes of this Agreement means material to the party
referred to and its Subsidiaries taken as a whole. When a reference is made in
this Agreement to Sections, such reference shall be to 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 Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation." The phrases "the date
of this Agreement", "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to October 31, 1997.
A-27
<PAGE> 97
Section 9.4 Knowledge. All references in this Agreement or any certificate
to the knowledge of a party shall mean the knowledge of any officer or officers
of such party (but only the officer executing any such certificate, in the case
of a certificate) and shall reflect reasonable inquiry by such officer or
officers specifically with respect to the statement made subject to such
knowledge.
Section 9.5 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.
Section 9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the Confidentiality Agreement and the other documents and the
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and (b) except as
provided in Section 6.13, is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 9.7 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign its rights and
interests hereunder to ATI and ATI may assume the obligations hereunder of Sub.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 9.9 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
IN WITNESS WHEREOF, ATI, Sub and the Company have caused this Agreement to
be signed by their respective officers, thereunto duly authorized, as of the
date first set forth above.
ALLEGHENY TELEDYNE INCORPORATED
By: /s/ RICHARD P. SIMMONS
-----------------------------------------------------
Title: Chairman of the Board,
President and Chief Executive Officer
SEA MERGER, INC.
By: /s/ ARTHUR H. ARONSON
-----------------------------------------------------
Title: President
OREGON METALLURGICAL CORPORATION
By: /s/ CARLOS E. AGUIRRE
-----------------------------------------------------
Title: Chairman of the Board,
President and Chief Executive Officer
A-28
<PAGE> 98
ANNEX I
(a) Exchange Agent. As of the Effective Time, ATI shall make available, or
shall cause to be made available, to ChaseMellon Shareholder Services, LLC, or
such other exchange agent selected by ATI and reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with Article II, certificates
representing the shares of ATI Common Stock issuable pursuant to Article II. ATI
will provide to the Exchange Agent on a timely basis funds necessary to pay any
cash payable in lieu of fractional shares of ATI Common Stock pursuant to
paragraph (c) below and funds or other property necessary to pay or make any
dividend or distribution with respect to ATI Common Stock pursuant to paragraph
(d) below.
(b) Exchange Procedures. Promptly after the Effective Time, ATI shall
cause the Exchange Agent to mail to each person who was, at the Effective Time,
a holder of record of a certificate formerly representing shares of Company
Common Stock (a "Certificate") (i) a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to a Certificate
shall pass, upon (and only upon) delivery of that Certificate to the Exchange
Agent, and which shall be in such form and have such other provisions as ATI may
specify, and (ii) instructions for use in effecting the surrender of a
Certificate in exchange for a certificate or certificates representing shares of
ATI Common Stock. Upon surrender to the Exchange Agent of a Certificate together
with such a letter of transmittal, duly executed and completed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing the number of whole
shares of ATI Common Stock which such holder has the right to receive in respect
of such Certificate pursuant to the provisions of Article II, a check in the
amount of any cash which such holder has the right to receive (i) in lieu of
fractional shares of ATI Common Stock pursuant to paragraph (c) below and (ii)
with respect to any dividends or distribution with respect to ATI Common Stock
pursuant to paragraph (d) below, and the Certificate so surrendered shall
forthwith be canceled. No interest will accrue or be payable on any amount
payable upon surrender of a Certificate. Until so surrendered as contemplated
hereby each Certificate will be deemed at any time after the Effective Time to
represent only the right to receive, upon surrender of such Certificate, a
certificate representing ATI Common Stock, cash in lieu of fractional shares of
ATI Common Stock and any dividends or distribution with respect to shares of ATI
Common Stock as aforesaid. In the event of a transfer of ownership of Company
Common Stock that is not registered on the transfer records of the Company,
certificates representing the proper number of shares of ATI Common Stock and
any cash in lieu of fractional shares and any dividends or distributions as
aforesaid may be issued to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate is properly
endorsed or otherwise in proper form for transfer and the person requesting such
issuance pays any transfer or other taxes required by reason of the issuance of
shares of ATI Common Stock and any cash in lieu of fractional shares and any
dividends or distributions as aforesaid to a person other than the registered
holder of such Certificate or establish to the satisfaction of ATI that such tax
has been paid or is not applicable. Certificates surrendered for exchange by any
person designated as an Affiliate of the Company (as defined in Section 6.10)
shall not be exchanged until ATI has received a written Affiliate Agreement from
such person as provided in Section 6.10.
(c) Fractional Shares. Notwithstanding the foregoing or any other
provision of Article II, no fractional shares of ATI Common Stock will be issued
hereunder and any holder of Company Common Stock entitled hereunder to receive a
fraction of a share of ATI Common Stock but for this provision will be entitled
hereunder to receive a cash payment in lieu thereof, without interest, in an
amount, less the amount of any withholding taxes which may be required thereon,
equal to the product of (i) the fraction of a share to which such holder would
otherwise have been entitled multiplied by (ii) the average of the high and low
sales prices per share of ATI Common Stock as reported on the New York Stock
Exchange Composite Transactions Tape on the date of the Company Shareholders
Meeting if within 5 days of the Effective Time, otherwise the trading day
immediately preceding the date of the Effective Time. For purposes of paying
such cash in lieu of fractional shares, all Certificates representing shares of
Company Common Stock surrendered for exchange by a Company shareholder on the
same letter of transmittal shall be aggregated, and no such Company shareholder
will receive cash in lieu of fractional shares in an amount equal to or greater
than the value of one full share of ATI Common Stock with respect to such
Certificates surrendered.
A-29
<PAGE> 99
(d) Distributions with Respect to Unexchanged Shares; Voting Rights.
Notwithstanding any other provision of this Agreement, no dividends or other
distributions on shares of ATI Common Stock shall be paid to any person holding
an unexchanged Certificate representing the right to receive shares of ATI
Common Stock with respect to such shares of ATI Common Stock nor shall any such
shares of ATI Common Stock be deemed to be outstanding and represent the right
to vote or give or express consent for any purpose until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing shares of ATI Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such shares of ATI Common
Stock and not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such shares of ATI Common Stock, less the amount of any
withholding taxes which may be required thereon.
(e) Transfers. From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to ATI, they shall be canceled
and exchanged for certificates for shares of ATI Common Stock, cash in lieu of
fractional shares and dividends or distributions with respect to shares of ATI
Common Stock, if any, in accordance with the procedures set forth herein.
(f) Termination of Exchange Fund. Any portion of the certificate for
shares of ATI Common Stock issuable pursuant to Article II and cash or other
property deposited with the Exchange Agent that has not been claimed by the
former shareholders of the Company within six months following the Effective
Time shall be delivered to ATI at the end of such period. Any former shareholder
of the Company who has not complied with the foregoing provisions by the end of
such period shall thereafter look only to ATI for delivery of the shares of ATI
Common Stock and as a general creditor for payment of unpaid cash in lieu of
fractional shares or dividends and distributions on such shares of ATI Common
Stock pursuant to the provisions hereof deliverable in respect of each share of
Company Common Stock such shareholder previously held, as determined pursuant to
this Agreement, in each case without any interest thereon.
(g) No Liability. (i) Notwithstanding any other provision of this
Agreement, none of ATI, the Exchange Agent, the Company or any other person
shall be liable to any person for any amount properly delivered to a public
official upon such request pursuant to applicable abandoned property, escheat or
similar laws.
(ii) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and the posting by such person
of a bond in such amount as ATI may direct as indemnity against any claim that
may be made against it or the Exchange Agent with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate a certificate representing shares of ATI Common Stock, unpaid
dividends and distributions on those shares of ATI Common Stock and cash in lieu
of any fractional share of ATI Common Stock, all as deliverable in respect
thereof pursuant to this Agreement.
(h) Withholding Rights. ATI will be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Stock 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
provisions of state, local or foreign tax law. To the extent that amounts are so
withheld and paid over to the appropriate taxing authority, such withheld
amounts will be treated for all purposes of this Agreement as having been paid
to the holder of Company Common Stock in respect of which such deduction and
withholding was made.
A-30
<PAGE> 100
ANNEX II
AMENDMENT TO RIGHTS AGREEMENT
This Amendment to Rights Agreement (this "Amendment") is entered into as of
October 31, 1997 between OREGON METALLURGICAL CORPORATION, an Oregon corporation
(the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, LLC (the "Rights Agent").
WHEREAS, upon the terms and subject to the conditions of that certain
Rights Agreement dated as of December 12, 1996 and as amended as of July 24,
1997 (the "Rights Agreement"), between the Company and the Rights Agent, the
Board of Directors of the Company has authorized the issuance of Rights; and
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company and its shareholders to amend the Rights
Agreement as set forth herein immediately prior to and in connection with the
execution and delivery of that certain Agreement and Plan of Merger, dated as of
October 31, 1997, as the same may be from time to time amended, among Allegheny
Teledyne Incorporated, a Delaware corporation, Sea Merger Inc., an Oregon
corporation and a wholly-owned subsidiary of ATI, and the Company; and
WHEREAS, there has been delivered to the Rights Agent a certificate from a
duly authorized officer of the Company stating that this Amendment is in
compliance with the terms of Section 26 of the Rights Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Section 1(s) of the Rights Agreement is hereby amended to read in its
entirety as follows:
"(s) "Expiration Date" shall mean the earlier of (i) December 11, 2006
and (ii) the time immediately prior to the Effective Time (as defined in
the Agreement and Plan of Merger, dated as of October 31, 1997, as the
same may be from time to time amended (the "Merger Agreement"), among
Allegheny Teledyne Incorporated, a Delaware corporation ("ATI"), Sea
Merger, Inc., an Oregon corporation and a wholly-owned subsidiary of
ATI, and the Company)."
2. The Rights Agreement is hereby amended by adding Section 35 as follows:
"Section 35. ATI Transactions.
Notwithstanding anything contained in this Rights Agreement to the
contrary, no Distribution Date, Share Acquisition Date or Triggering
Event shall be deemed to have occurred, neither ATI nor any Affiliate or
Associate of ATI shall be deemed to have become an Adverse Person,
Acquiring Person or Interested Shareholder and no holder of Rights shall
be entitled to exercise such Rights under or be entitled to any rights
under this Rights Agreement, including pursuant to Section 7, 11 or 13
of this Rights Agreement, by reason of (x) the approval, execution,
delivery or effectiveness of the Merger Agreement or (y) the
consummation of any of the transactions contemplated by the Merger
Agreement in accordance with the terms thereof or the taking of any
action by any party thereto or any Affiliate or Associate thereof to
facilitate the consummation of any such transactions."
3. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Rights Agreement.
4. This Amendment shall be deemed effective as of October 31, 1997, as if
executed by both parties on such date. Except as amended hereby, the Rights
Agreement shall remain unchanged and shall remain in full force and effect.
5. This Amendment may be executed in two counterparts, each of which shall
be an original, but both of which together shall constitute one instrument.
6. All exhibits to the Rights Agreement have been amended to conform with
this Amendment to Rights Agreement.
A-31
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized representatives as of the date
first above written.
ATTEST:
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
OREGON METALLURGICAL CORPORATION
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
CHASEMELLON SHAREHOLDER SERVICES, LLC
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
A-32
<PAGE> 102
ANNEX III
, 199
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, PA 15222
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Oregon Metallurgical Corporation, an
Oregon corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant
to the terms of the Agreement and Plan of Merger, dated as of October 31, 1997
(the "Agreement"), among Allegheny Teledyne Incorporated, a Delaware corporation
("ATI"), Sea Merger Inc., an Oregon corporation and a wholly owned subsidiary of
ATI ("Sub"), and the Company at the Effective Time (as defined in the
Agreement), Sub will be merged with and into the Company (the "Merger"), and the
Company will become a wholly owned subsidiary of ATI.
As a result of the Merger, the undersigned may receive shares of Common
Stock, par value $.10 per share ("ATI Common Stock"), of ATI in exchange for
shares of Common Stock, par value $1.00 per share, of the Company owned by the
undersigned.
The undersigned hereby represents and warrants to, and covenants with, ATI
that in the event the undersigned receives any ATI Common Stock in the Merger:
(A) The undersigned shall not make any sale, transfer or other disposition
of the ATI Common Stock in violation of the Act or the Rules and
Regulations.
(B) The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's
ability to sell, transfer or otherwise dispose of the ATI Common Stock,
to the extent the undersigned has felt it necessary, with the
undersigned's counsel or counsel for the Company.
(C) The undersigned has been advised that the issuance of shares of ATI
Common Stock to the undersigned in the Merger has been registered under
the Act by a Registration Statement on Form S-4. However, the
undersigned has also been advised that because (i) at the time of
submission of the Agreement and the Merger for a vote of the
shareholders of the Company the undersigned may be deemed an affiliate
of the Company and (ii) the distribution by the undersigned of ATI
Common Stock has not been registered under the Act, the undersigned may
not sell, transfer or otherwise dispose of ATI Common Stock issued to
the undersigned in the Merger unless (a) such sale, transfer or other
disposition has been registered under the Act, (b) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations imposed by Rule 145 under the Act, or (c) in the opinion of
counsel reasonably acceptable to ATI, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
(D) The undersigned understands that ATI will be under no obligation to
register the sale, transfer or other disposition of the ATI Common
Stock by the undersigned or on the undersigned's behalf under the Act
or to take any other action necessary in order to make compliance with
an exemption from such registration available.
(E) The undersigned understands that stop transfer instructions will be
given to ATI's transfer agent with respect to the ATI Common Stock
owned by the undersigned and that there may be placed on the
certificates for the ATI Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933 applies.
The shares represented by this may only be transferred in accordance
the
A-33
<PAGE> 103
terms of a letter agreement dated , 199 , a copy of which
agreement is on file at the principal offices of Allegheny Teledyne
Incorporated."
(F) The undersigned also understands that unless the transfer by the
undersigned of the undersigned's ATI Common Stock has been registered
under the Act or is a sale made in conformity with the provisions of
Rule 145 under the Act, the Company reserves the right, in its sole
discretion, to place the following legend on the certificates issued to
any transferee of shares from the undersigned:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 under the
Securities Act of 1933 applies. The shares have been acquired by the
holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be offered, sold, pledged or otherwise transferred except
in accordance with an exemption from the registration requirements of
the Securities Act of 1933."
It is understood and agreed that the legend set forth in paragraph E or
F above shall be removed by delivery of substitute certificates without
such legend if the undersigned shall have delivered to ATI (i) a copy
of a letter from the staff of the Commission, or an opinion of counsel,
in form and substance reasonably satisfactory to ATI to the effect that
such legend is not required for purposes of the Act or (ii) reasonably
satisfactory evidence or representations that the shares represented by
such certificates are being or have been transferred in a transaction
made in conformity with the provisions of Rule 145.
The undersigned further represents and warrants to, and covenants with,
ATI that the undersigned did not, within the 30 days prior to the
Effective Time (as defined in the Agreement), sell, transfer or
otherwise dispose of any shares of Company Common Stock or ATI Common
Stock held by the undersigned, and that the undersigned will not sell,
transfer or otherwise dispose of the ATI Common Stock received by the
undersigned in the Merger until after such time as results covering at
least 30 days of combined operations of ATI and the Company have been
published by ATI within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies.
Very truly yours,
Acknowledged this day of , 199 .
ALLEGHENY TELEDYNE INCORPORATED
By:
- ----------------------------------------------------
Name:
- -------------------------------------------------
Title:
- --------------------------------------------------
A-34
<PAGE> 104
APPENDIX B
Salomon Brothers Logo
October 31, 1997
Board of Directors
Oregon Metallurgical Corporation
530 34th Avenue S.W.
Albany, Oregon 97231
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, par value $1.00 per share ("Company Common
Stock"), of Oregon Metallurgical Corporation (the "Company"), of the
consideration to be received by such holders in connection with the proposed
merger (the "Merger") of the Company and Sea Merger Inc. ("Allegheny Teledyne
Sub"), a newly-created and wholly owned subsidiary of Allegheny Teledyne
Incorporated ("Allegheny Teledyne"), pursuant to the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of October 31, 1997, by and among
Allegheny Teledyne, Allegheny Teledyne Sub and the Company. In the Merger, each
issued and outstanding share of Company Common Stock (other than Company Common
Stock held by the Company as treasury stock or owned by Allegheny Teledyne,
Allegheny Teledyne Sub or any other wholly owned subsidiary of Allegheny
Teledyne) will be converted into and become 1.296 fully paid and nonassessable
shares (the "Conversion Number") of common stock, par value $.10 per share, of
Allegheny Teledyne ("Allegheny Teledyne Common Stock"). In addition, immediately
prior to the Merger, each outstanding Right to acquire shares of Company Common
Stock issued pursuant to that certain Rights Agreement, dated as of December 12,
1996, and amended as of July 24, 1997, by and between the Company and
ChaseMellon Shareholder Services, LLC, will expire in accordance with the terms
of such Rights Agreement, as amended.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and Allegheny Teledyne and certain
other financial information concerning the Company and Allegheny Teledyne,
including financial forecasts, that were provided to us by the Company and
Allegheny Teledyne, respectively. We have discussed the past and current
business operations, financial condition and prospects of the Company and
Allegheny Teledyne with certain officers and employees of the Company and
Allegheny Teledyne, respectively. We have also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of the information reviewed by us for
the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of the Company and Allegheny Teledyne, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the Company and
Allegheny Teledyne, and we express no opinion with respect to such forecasts or
the assumptions on which they are based. We have also with your permission
assumed that the Merger will be effected on a basis that is tax-free to the
holders of Company Common Stock pursuant to the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and that such transaction will be
accounted for as a "pooling of interests" under generally accepted accounting
principles. We have not assumed any responsibility for any independent
evaluation or appraisal of any of the assets (including properties and
facilities) or liabilities of the Company or Allegheny Teledyne.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Allegheny Teledyne Common Stock
following the consummation of the Merger, which may vary depending upon, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the price
of securities. Our opinion does not address the Company's underlying business
decision to effect the Merger. Our opinion is directed only to the fairness,
from a financial point of view, of the
B-1
<PAGE> 105
Conversion Number to holders of Company Common Stock and does not constitute a
recommendation concerning how holders of Company Common Stock should vote with
respect to the Merger.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a portion of which is payable upon
execution of the Merger Agreement and the delivery of this opinion and the
unpaid remainder of which is contingent upon consummation of the Merger. In the
ordinary course of business, we may actively trade the securities of the Company
and Allegheny Teledyne for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities. In addition, we have previously rendered certain investment banking
and financial advisory, and other services to the Company for which we have
received customary compensation. We have also provided investment banking,
financial advisory and other services to Allegheny Teledyne and its predecessors
and affiliates.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Conversion Number is fair, from a financial point of view, to the
holders of Company Common Stock.
Very truly yours,
/s/ SALOMON BROTHERS INC.
Salomon Brothers Inc
B-2
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article SEVEN of the Restated
Certificate of Incorporation of Allegheny Teledyne Incorporated ("Allegheny
Teledyne") provides, among other things, that the personal liability of
directors of Allegheny Teledyne is so eliminated.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his or her being a director or officer of
the corporation if it is determined that he or she acted in accordance with the
applicable standard of conduct set forth in such statutory provision. Article
EIGHT of the Restated Certificate of Incorporation of Allegheny Teledyne
provides that Allegheny Teledyne will indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by reason of the fact that he or she is or was a
director or officer of the Company, or is or was serving at the request of
Allegheny Teledyne as a director, officer, employee or agent of another entity,
against certain liabilities, costs and expenses. Allegheny Teledyne is also
authorized to maintain insurance on behalf of any person who is or was a
director or officer of Allegheny Teledyne, or is or was serving at the request
of Allegheny Teledyne as a director, officer, employee or agent of another
entity against any liability asserted against such person and incurred by such
person in any such capacity or arising out of his or her status as such, whether
or not Allegheny Teledyne would have the power to indemnify such person against
such liability under the DGCL.
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 31, 1997, among Allegheny
Teledyne Incorporated, Sea Merger Inc. and Oregon Metallurgical Corporation
(Appears as Appendix A to the Proxy Statement/Prospectus forming part of this
registration statement)
2.2 Form of Amendment to Rights Agreement, dated as of October 31, 1997, between
Oregon Metallurgical Corporation and ChaseMellon Shareholders Services, LLC
(Appears as Annex II to Appendix A to the Proxy Statement/Prospectus forming
part of this registration statement)
5.1 Opinion of Jon D. Walton, Esquire as to the legality of the securities being
registered
8.1 Opinion of Kirkpatrick & Lockhart LLP regarding certain tax matters
8.2 Opinion of Schwabe Williamson & Wyatt, P.C. regarding certain tax matters
23.1 Consent of Jon D. Walton, Esquire (Included in opinion filed as Exhibit 5.1)
23.2 Consent of Kirkpatrick & Lockhart LLP (Included in opinion filed as Exhibit 8.1)
23.3 Consent of Schwabe Williamson & Wyatt, P.C. (Included in opinion filed as
Exhibit 8.2)
23.4 Consent of Ernst & Young LLP
23.5 Consent of Arthur Andersen LLP
23.6 Consent of Coopers & Lybrand L.L.P.
23.7 Consent of Salomon Brothers Inc
24.1 Power of Attorney (Appears as part of signature page)
99.1 Form of Proxy of Oregon Metallurgical Corporation
</TABLE>
II-1
<PAGE> 107
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on February 20, 1998.
ALLEGHENY TELEDYNE INCORPORATED
By: /s/ RICHARD P. SIMMONS
-----------------------------------
Richard P. Simmons
Chairman of the Board, President and
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James L. Murdy and Jon D. Walton and each
of them his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments to this
registration statement, including amendments thereto filed pursuant to Rule 462,
and to file the same with all exhibits thereto and other documentation in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------ ------------------------------------ -------------------
<C> <S> <C>
/s/ RICHARD P. SIMMONS Chairman of the Board, President and February 20, 1998
- ------------------------------------ Chief Executive Officer and
Richard P. Simmons a Director
/s/ ROBERT P. BOZZONE Vice Chairman of the Board and February 20, 1998
- ------------------------------------ a Director
Robert P. Bozzone
/s/ ARTHUR H. ARONSON Executive Vice President and February 20, 1998
- ------------------------------------ a Director
Arthur H. Aronson
/s/ JAMES L. MURDY Executive Vice President, Finance February 20, 1998
- ------------------------------------ and
James L. Murdy Administration and Chief Financial
Officer (Principal Financial
Officer)
/s/ DALE G. REID Vice President--Controller February 20, 1998
- ------------------------------------ (Principal Accounting Officer)
Dale G. Reid
/s/ PAUL S. BRENTLINGER Director February 20, 1998
- ------------------------------------
Paul S. Brentlinger
/s/ FRANK V. CAHOUET Director February 20, 1998
- ------------------------------------
Frank V. Cahouet
</TABLE>
II-3
<PAGE> 109
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------ ------------------------------------ -------------------
<C> <S> <C>
/s/ DIANE C. CREEL Director February 20, 1998
- ------------------------------------
Diane C. Creel
/s/ C. FRED FETTEROLF Director February 20, 1998
- ------------------------------------
C. Fred Fetterolf
/s/ W. CRAIG MCCLELLAND Director February 20, 1998
- ------------------------------------
W. Craig McClelland
/s/ ROBERT MEHRABIAN Director February 20, 1998
- ------------------------------------
Robert Mehrabian
/s/ WILLIAM G. OUCHI Director February 20, 1998
- ------------------------------------
William G. Ouchi
/s/ CHARLES J. QUEENAN, JR. Director February 20, 1998
- ------------------------------------
Charles J. Queenan, Jr.
/s/ GEORGE A. ROBERTS Director February 20, 1998
- ------------------------------------
George A. Roberts
/s/ JAMES E. ROHR Director February 20, 1998
- ------------------------------------
James E. Rohr
/s/ FAYEZ SAROFIM Director February 20, 1998
- ------------------------------------
Fayez Sarofim
</TABLE>
II-4
<PAGE> 110
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 31, 1997, among Allegheny
Teledyne Incorporated, Sea Merger Inc. and Oregon Metallurgical Corporation
(Appears as Appendix A to the Proxy Statement/Prospectus forming part of this
registration statement)
2.2 Form of Amendment to Rights Agreement, dated as of October 31, 1997, between
Oregon Metallurgical Corporation and ChaseMellon Shareholder Services, LLC
(Appears as Annex II to Appendix A to the Proxy Statement/Prospectus forming
part of this registration statement)
5.1 Opinion of Jon D. Walton, Esquire as to the legality of the securities being
registered
8.1 Opinion of Kirkpatrick & Lockhart LLP regarding certain tax matters
8.2 Opinion of Schwabe Williamson & Wyatt, P.C. regarding certain tax matters
23.1 Consent of Jon D. Walton, Esquire (Included in opinion filed as Exhibit 5.1)
23.2 Consent of Kirkpatrick & Lockhart LLP (Included in opinion filed as Exhibit 8.1)
23.3 Consent of Schwabe Williamson & Wyatt, P.C. (Included in opinion filed as
Exhibit 8.2)
23.4 Consent of Ernst & Young LLP
23.5 Consent of Arthur Andersen LLP
23.6 Consent of Coopers & Lybrand L.L.P.
23.7 Consent of Salomon Brothers Inc
24.1 Power of Attorney (Appears as part of signature page)
99.1 Form of Proxy of Oregon Metallurgical Corporation
</TABLE>
<PAGE> 1
Exhibit 5.1
ALLEGHENY TELEDYNE INCORPORATED
1000 Six PPG Plaza
Pittsburgh, PA 15222
Jon D. Walton
Senior Vice President, General
Counsel and Secretary
(412) 394-2836
February 20, 1998
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
RE: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and Secretary of
Allegheny Teledyne Incorporated, a Delaware corporation (the "Company"), and
have acted in such capacity in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended,
relating to the issuance by the Company of an aggregate of up to 21,645,214
shares (the "Shares") of the Common Stock, par value $.10 per share, of the
Company pursuant to the Agreement and Plan of Merger, dated as of October 31,
1997 (the "Merger Agreement"), among the Company, Sea Merger, Inc., an Oregon
corporation and wholly owned subsidiary of the Company, and Oregon Metallurgical
Corporation, an Oregon corporation.
I am familiar with the Registration Statement. I have reviewed
the Company's Restated Certificate of Incorporation, as amended, the Company's
Amended and Restated By-laws, and the Merger Agreement and related documents. I
have also examined such other public and corporate documents, certificates,
instruments and corporate records, and such questions of law, as I have deemed
necessary for purposes of expressing an opinion on the matters hereinafter set
forth. In all examinations of documents, instruments and other papers, I have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to me as conformed, photostatic or other copies.
On the basis of the foregoing, I am of the opinion that the
Shares, when issued in accordance with the Merger Agreement, will be validly
issued, and fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me in the Proxy
Statement/Prospectus forming a part thereof under the caption "Legal Matters."
Yours truly,
/s/JON D. WALTON
----------------
<PAGE> 1
Exhibit 8.1
____________________
KIRKPATRICK & LOCKHART LLP
____________________
1500 OLIVER BUILDING
Pittsburgh, Pennsylvania 15222-2312
Telephone (412) 355-6500
Facsimile (412) 355-6501
February 20, 1998
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, PA 15222-5479
Gentlemen:
We have acted as counsel to Allegheny Teledyne Incorporated, a Delaware
corporation ("ATI"), in connection with the proposed merger (the "Merger") of
Sea Merger, Inc., an Oregon corporation and a wholly owned subsidiary of ATI
("Merger Sub"), with and into Oregon Metallurgical Corporation, an Oregon
corporation ("OMC"). You have requested our opinion regarding the United States
federal income tax consequences of the Merger.
In rendering our opinion, we have reviewed the Agreement and Plan of
Merger, dated as of October 31, 1997, by and among ATI, Merger Sub and OMC,
relating to the Merger (the "Merger Agreement"), the Proxy Statement of OMC
relating to the meeting of shareholders of OMC to be held to consider approval
of the Merger Agreement and the Merger and related Prospectus of ATI relating to
the shares of common stock of ATI to be issued as a result of the Merger (the
"Proxy Statement/Prospectus"), and such other materials as we have deemed
necessary or appropriate as a basis for our opinion.
In rendering our opinion, we have assumed that the Merger will be
consummated in accordance with the Merger Agreement. In addition, as to any
facts material to this opinion which we did not independently establish or
verify, we have relied upon the statements and representations of officers and
other representatives of ATI, Merger Sub, OMC and others, which may in certain
instances derive from the best knowledge of such persons.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, rulings of the Internal Revenue
Service, and such other authorities as we have considered relevant.
<PAGE> 2
Based upon the foregoing, it is our opinion that, under present law,
for United States federal income tax purposes, the Merger, pursuant to which the
shares of common stock of OMC held by the shareholders of OMC will be converted
into shares of common stock of ATI, will be treated as a reorganization within
the meaning of Section 368(a) of the Code. We further confirm, based on the
foregoing, our opinion as set forth (subject to qualifications and limitations
also set forth) under the heading "Certain Federal Income Tax Consequences" in
the Proxy Statement/Prospectus. Other than as expressly set forth above, we
express no opinion as to the United States federal, state, local, foreign or
other tax consequences of the Merger.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement of ATI Form S-4 and to the reference to us under the
caption "The Merger - Certain Federal Income Tax Consequences" in the Proxy
Statement/Prospectus forming part thereof and any amendments thereto. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Yours truly,
/s/KIRKPATRICK & LOCKHART LLP
-----------------------------
Kirkpatrick & Lockhart LLP
2
<PAGE> 3
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
February 20, 1998
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222-2312
Ladies and Gentlemen:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger, dated as of October 31, 1997 (the "Merger
Agreement"), by and among Allegheny Teledyne Incorporated, a Delaware
corporation ("ATI"), Sea Merger Inc., an Oregon corporation and a wholly owned
subsidiary of ATI ("Merger Sub"), and Oregon Metallurgical Corporation, an
Oregon corporation ("OMC"), relating to the proposed merger (the "Merger") of
Merger Sub with and into OMC, and recognizing that you will rely on this letter
in rendering said opinion, the undersigned, duly authorized officers of ATI and
Merger Sub respectively, and acting as such, hereby certify to the following as
of the date hereof. We understand that you will reaffirm your opinion at the
Closing and that, in connection with such reaffirmation, you will require that
we reaffirm this certification as of that time.
Capitalized terms in this letter shall have the same meanings ascribed
to them in the Merger Agreement unless otherwise specified herein.
A. REPRESENTATIONS. ATI and Merger Sub each hereby certifies, warrants,
and represents that the following facts are now true and will continue to be
true as of the Closing Date and as of the Effective Time:
1. The Merger will be consummated in accordance with the
material terms of the Merger Agreement and none of the material conditions
therein have been waived or modified and ATI and Merger Sub have no plan or
intention to waive or modify any such material conditions.
2. The ratio for the exchange of shares of common stock of OMC
("OMC Common Stock") for common stock of ATI ("ATI Common Stock") in the Merger
was negotiated through arm's length bargaining.
<PAGE> 4
3. To the best of the knowledge of the management of ATI, there
is no plan or intention (a "Plan") on the part of the shareholders of OMC to
sell, exchange, or otherwise dispose of a number of shares of ATI stock received
in the Merger that would reduce OMC shareholders' ownership of ATI stock
received in the Merger to a number of shares having a value, as of the date of
the Merger, of less than fifty percent (50%) of the value of all of the formerly
outstanding shares of OMC stock as of the same date. For purposes of this
representation, shares of OMC stock exchanged for cash in lieu of fractional
shares of ATI stock will be treated as outstanding shares of OMC stock on the
date of the Merger. Moreover, shares of OMC stock and shares of ATI stock held
by the shareholders of OMC and otherwise sold, redeemed, or disposed of prior
or subsequent to the Merger will be considered in making this representation.
4. Immediately following the Merger, OMC will hold at least
ninety percent (90%) of the fair market value of its net assets and at least
seventy percent (70%) of the fair market value of its gross assets, and at least
ninety percent (90%) of the fair market value of Merger Sub's net assets and at
least seventy percent (70%) of the fair market value of Merger Sub's gross
assets held immediately prior to the Merger. For purposes of this
representation, amounts paid to shareholders of OMC who receive cash or other
property, amounts used by OMC or Merger Sub to pay reorganization expenses and
all redemptions and distributions (except for regular, normal dividends) made by
OMC will be included as assets of OMC or Merger Sub, respectively, immediately
prior to the Merger.
5. Prior to the Merger, ATI will be in control of Merger Sub
within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code") (control within the meaning of Section 368(c) of the Code
is hereinafter referred to as "Control").
6. ATI has no plan or intention to cause OMC to issue
additional shares of stock after the Merger that would result in ATI losing
Control of OMC.
7. ATI has no plan or intention to reacquire any of its stock
issued in the Merger.
8. ATI has no plan or intention to liquidate OMC; to merge OMC
with or into another corporation; to sell or otherwise dispose of the stock of
OMC except for transfers of stock to a corporation Controlled by ATI; or to
cause OMC to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Merger Sub, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation Controlled by OMC.
-2-
<PAGE> 5
9. The liabilities of Merger Sub, if any, assumed by OMC and
the liabilities, if any, to which the transferred assets of Merger Sub are
subject were incurred by Merger Sub in the ordinary course of its business.
10. Following the Merger, OMC will continue its historic
business or use a significant portion of its historic business assets in a
business.
11. ATI, Merger Sub, OMC, and the shareholders of OMC will pay
their respective expenses, if any, incurred in connection with the Merger.
12. There is no intercorporate indebtedness existing between ATI
and OMC or between Merger Sub and OMC that was issued, acquired, or will be
settled at a discount.
13. In the Merger, shares of OMC stock representing Control of
OMC will be exchanged solely for voting stock of ATI. For purposes of this
representation, shares of OMC stock exchanged for cash or other property
originating with ATI will be treated as outstanding OMC stock on the date of the
Merger.
14. ATI does not own, nor has it owned during the past five
years, any shares of the stock of OMC.
15. Neither ATI nor Merger Sub is an "investment company" as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
16. The payment of cash in lieu of fractional shares of ATI
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to ATI of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the transaction to shareholders of OMC instead of issuing fractional shares of
ATI Common Stock will not exceed one percent (1%) of the total consideration
that will be issued in the Merger to the shareholders of OMC in exchange for
their shares of OMC. The fractional share interests of each shareholder of OMC
will be aggregated, and no shareholder of OMC will receive cash in an amount
equal to or greater than the value of one (1) full share of ATI Common Stock.
17. None of the compensation received by any shareholder-
employee of OMC will be separate consideration for, or allocable to, any of
their shares of OMC stock; none of the shares of ATI stock received by any
shareholder-employees will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any shareholder-employees
-3-
<PAGE> 6
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar services.
B. RELIANCE BY YOU IN RENDERING OPINIONS; LIMITATIONS ON YOUR OPINIONS.
1. ATI and Merger Sub each recognizes that (i) your opinions will be
based on the representations set forth herein, and on the statements contained
in the Merger Agreement and the documents related thereto and (ii) your opinions
will be subject to certain limitations and qualifications including without
limitation that they may not be relied upon if any such representations are not
accurate.
2. ATI and Merger Sub each recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
Allegheny Teledyne Incorporated,
a Delaware corporation
By: /s/JAMES L. MURDY
----------------------------
Title: Executive Vice President, Finance and
-------------------------------------
Administration and Chief Financial Officer
------------------------------------------
Sea Merger Inc.,
an Oregon corporation
By: /s/ JAMES L. MURDY
-----------------------------
James L. Murdy
Title: Vice President and Treasurer
---------------------------
-4-
<PAGE> 7
Oregon Metallurgical Corporation
530 Southwest 34th Avenue - P.O. Box 580
Albany, Oregon 97321-0177
February 20, 1998
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222-2312
Ladies and Gentlemen:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger, dated as of October 31, 1997 (the "Merger
Agreement"), by and among Allegheny Teledyne Incorporated, a Delaware
corporation ("ATI"), Sea Merger Inc., an Oregon corporation and a wholly owned
subsidiary of ATI ("Merger Sub"), and Oregon Metallurgical Corporation, an
Oregon corporation ("OMC"), relating to the proposed merger (the "Merger") of
Merger Sub with and into OMC, and recognizing that you will rely on this letter
in rendering said opinion, the undersigned, duly authorized officer of OMC and
acting as such, hereby certifies to the following as of the date hereof. We
understand that you will reaffirm your opinion at the Closing and that, in
connection with such reaffirmation, you will require that we reaffirm this
certification as of that time.
Capitalized terms in this letter shall have the same meanings ascribed
to them in the Merger Agreement unless otherwise specified herein.
A. REPRESENTATIONS. OMC hereby certifies, warrants, and represents that
the following facts are now true and will continue to be true as of the Closing
Date and as of the Effective Time:
1. The Merger will be consummated in accordance with the material
terms of the Merger Agreement and none of the material conditions therein have
been waived or modified and OMC has no plan or intention to waive or modify any
such material conditions.
2. The ratio for the exchange of shares of common stock of OMC ("OMC
Common Stock") for common stock of ATI ("ATI Common Stock") in the Merger was
negotiated through arm's length bargaining.
<PAGE> 8
3. There is no plan or intention (a "Plan") on the part of the
shareholders of OMC who own five percent (5%) or more of shares of OMC stock,
and to the best of the knowledge of the management of OMC, there is no Plan on
the part of the remaining shareholders of OMC to sell, exchange, or otherwise
dispose of a number of shares of ATI stock received in the Merger that would
reduce OMC shareholders' ownership of ATI stock received in the Merger to a
number of shares having a value, as of the date of the Merger, of less than
fifty percent (50%) of the value of all of the formerly outstanding shares of
OMC stock as of the same date. For purposes of this representation, shares of
OMC stock exchanged for cash in lieu of fractional shares of ATI stock will be
treated as outstanding shares of OMC stock on the date of the Merger. Moreover,
shares of OMC stock and shares of ATI stock held by the shareholders of OMC
and otherwise sold, redeemed, or disposed of prior or subsequent to the Merger
will be considered in making this representation.
4. Immediately prior to the Merger, OMC will hold at least ninety
percent (90%) of the fair market value of its net assets and at least seventy
percent (70%) of the fair market value of its gross assets. For purposes of this
representation, amounts paid to shareholders of OMC who receive cash or other
property, amounts used by OMC to pay reorganization expenses and all redemptions
and distributions (except for regular, normal dividends) made by OMC will be
included as assets of OMC immediately prior to the Merger.
5. OMC has made no transfer of any of its assets in contemplation of
the Merger other than in the ordinary course of business.
6. OMC has no obligation, understanding, agreement, plan or
intention to issue additional shares of its stock that would result in ATI
losing control of OMC within the meaning of Section 368(c) of the Internal
Revenue Code of 1986, as amended, (the "Code") (control within the meaning of
Section 368(c) of the Code is hereinafter referred to as "Control").
7. ATI, Merger Sub, OMC, and the shareholders of OMC will pay their
respective expenses, if any, incurred in connection with the Merger.
8. There is no intercorporate indebtedness existing between ATI and
OMC or between Merger Sub and OMC that was issued, acquired, or will be settled
at a discount.
9. In the Merger, shares of OMC stock representing Control of OMC
will be exchanged solely for voting stock of ATI. For purposes of this
representation, shares of OMC
-2-
<PAGE> 9
stock exchanged for cash or other property originating with ATI will be treated
as outstanding OMC stock on the date of the Merger.
10. At the Effective Time, OMC will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in OMC that, if exercised or converted,
would affect ATI's acquisition or retention of Control of OMC.
11. ATI does not own, nor has it owned during the past five years,
any shares of the stock of OMC.
12. OMC is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
13. On the date of the Merger, the fair market value of the assets
of OMC will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
14. OMC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. The liabilities of OMC have been incurred by OMC in the ordinary
course of its business.
16. None of the compensation received by any shareholder-employee of
OMC will be separate consideration for, or allocable to, any of their shares of
OMC stock; none of the shares of ATI stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. RELIANCE BY YOU IN RENDERING OPINIONS; LIMITATIONS ON YOUR OPINIONS.
1. OMC recognizes that (i) your opinions will be based on the
representations set forth herein, and on the statements contained in the Merger
Agreement and the documents related thereto and (ii) your opinions will be
subject to certain limitations and qualifications including without limitation
that they may not be relied upon if any such representations are not accurate.
-3-
<PAGE> 10
2. OMC recognizes that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
Oregon Metallurgical Corporation,
an Oregon corporation
By: /s/DENNIS P. KELLY
-----------------------
Title: Vice President-Finance
-----------------------
Secretary and Treasurer
-----------------------
-4-
<PAGE> 1
Exhibit 8.2
SCHWABE
WILLIAMSON
& WYATT P.C.
ATTORNEYS AT LAW
PACWEST CENTER, SUITES 1600-1800
1211 SOUTHWEST FIFTH AVENUE * PORTLAND, OREGON 97204-3795
TELEPHONE: 503 222-9981 * FAX: 503 796-2900 * TELEX: 650-686-1360
February 20, 1998
Oregon Metallurgical Corporation
530 Southwest 34th Avenue - P.O. Box 580
Albany, Oregon 97321-0177
Ladies and Gentlemen:
We have acted as counsel to Oregon Metallurgical Corporation, an Oregon
corporation ("Oremet"), in connection with the proposed merger (the "Merger") of
Sea Merger Inc., an Oregon corporation ("Sub") and a wholly owned subsidiary of
Allegheny Teledyne Incorporated, a Delaware corporation ("Allegheny"), with and
into Oremet. You have requested our opinion regarding the U.S. federal income
tax consequences of the Merger.
In rendering our opinion, we have reviewed the Agreement and Plan of
Merger, dated as of October 31, 1997, by and among Allegheny, Sub, and Oremet,
relating to the Merger (the "Merger Agreement"), the Proxy Statement/Prospectus
to shareholders of Oremet (the "Proxy Statement/Prospectus"), and such other
materials as we have deemed necessary or appropriate as a basis for our opinion.
In rendering this opinion, we have assumed that the Merger will be
consummated in accordance with the Merger Agreement and that the Proxy
Statement/Prospectus accurately reflects the material facts of the Merger and
those surrounding Allegheny, Sub and Oremet. In addition, as to any facts
material to this opinion which we did not independently establish or verify, we
have relied upon the facts contained in the statements and representations of
officers and other representatives of Allegheny, Sub, Oremet and others, which
facts may in certain instances derive from the best knowledge of such persons
without duty of inquiry. Such representations of Oremet are attached hereto as
Exhibit A and such representations of Allegheny and Sub are attached hereto as
Exhibit B.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, rulings of the Internal Revenue
Service, and such other authorities as we have considered relevant.
Based upon the foregoing, it is our opinion that, under present law,
for U.S. federal income tax purposes the Merger pursuant to which the shares of
common stock of Oremet held by the shareholders of Oremet will be converted into
shares of the common stock of Allegheny will be treated as a reorganization
within the meaning of Section 368(a) of the Code. We further confirm, based on
the foregoing, our opinion as set forth (subject to the qualifications and
<PAGE> 2
limitations as also set forth) under the heading "Certain Federal Income Tax
Consequences" in the Proxy Statement/Prospectus. Other than as expressly set
forth above, we express no opinion as to the U.S. federal, state, local, foreign
or other tax consequences of the Merger to any particular shareholder of Oremet.
Any material changes in the facts from those set forth or assumed
herein or in the Proxy Statement/Prospectus may affect the conclusions stated
herein.
We hereby consent to the filing of this opinion as an exhibit to the
Form S-4 and to the reference to us under the caption "THE MERGER -- Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus forming part
of the Form S-4 and any amendments thereto. In giving such consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Sincerely,
/s/ SCHWABE, WILLIAMSON & WYATT, P.C.
-------------------------------------
Schwabe, Williamson & Wyatt, P.C.
2
<PAGE> 3
EXHIBIT A
OREGON METALLURGICAL CORPORATION
530 Southwest 34th Avenue - P.O. Box 580
Albany, Oregon 97321-0177
February 20, 1998
Schwabe, Williamson & Wyatt, P.C.
Suites 1600-1800
1211 S.W. Fifth Avenue
Portland, Oregon 97204
Ladies and Gentlemen:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger, dated as of October 31, 1997 (the "Merger
Agreement"), by and among Allegheny Teledyne Incorporated, Incorporated, a
Delaware corporation ("Allegheny"), Sea Merger, Inc., an Oregon corporation and
wholly owned subsidiary of Allegheny ("Sub"), and Oregon Metallurgical
Corporation, an Oregon corporation ("Oremet"), relating to the proposed merger
(the "Merger") of Sub with and into Oremet, and recognizing that you will rely
on this letter in rendering said opinion, the undersigned, a duly authorized
officer of Oremet and acting as such, certifies that to the best knowledge of
the undersigned after reasonable inquiry, the facts relating to the Merger as
described in the Merger Agreement and the Proxy Statement/Prospectus, dated
February 23, 1998, including attachments thereto, are true, correct and complete
in all material respects and certifies, to the best knowledge of the undersigned
after reasonable inquiry, to the following as of the date hereof. References
herein only to the "knowledge" of any person are to such person's (or
management's in the case of an entity) actual knowledge without duty of inquiry.
Insofar as such certification pertains to any person other than Oremet and any
of its subsidiaries, the voting stock of which Oremet owns at least eighty
percent (80%) (an "Affiliate"), such certification is only as to the knowledge
of the undersigned without specific inquiry. We understand that you will
reaffirm your opinion at the Closing and that, in connection with such
reaffirmation, you will require that we reaffirm this certification as of that
time.
Capitalized terms in this letter shall have the same meanings ascribed
to them in the Merger Agreement unless otherwise specified herein.
A. REPRESENTATIONS. Oremet certifies, warrants, and represents that the
following facts are now true and will continue to be true as of the Closing Date
and as of the Effective Time:
1. The Merger will be consummated in accordance with the
material terms of the Merger Agreement and none of the material
conditions therein have been waived or modified and Oremet has no plan
or intention to waive or modify any such material conditions.
<PAGE> 4
2. The ratio for the exchange of shares of common stock of
Oremet (the "Oremet Common Stock") for common stock of Allegheny (the
"Allegheny Common Stock") in the Merger was negotiated through arm's
length bargaining.
3. There is no present plan or intention (a "Plan") on the
part of the shareholders of Oremet who own five percent (5%) or more of
the Oremet stock, and to the best of the knowledge of the management of
Oremet, there is no Plan on the part of the remaining shareholders, to
engage in a sale, exchange, transfer, reduction of risk of ownership or
any other direct or indirect disposition (a "Sale") of (i) shares of
Allegheny Common Stock to be issued to them in the Merger, which shares
have an aggregate fair market value, as of the period ending at the
Effective Time, in excess of fifty percent (50%) of the aggregate fair
market value, immediately prior to the Merger, of the outstanding
shares of Oremet Common Stock held by shareholders immediately prior to
the Merger ("Outstanding Oremet Common Stock") (including shares of
Oremet Common Stock issued after the date hereof and prior to the
Effective Time pursuant to stock compensation plans of Oremet or the
exercise of warrants to acquire Oremet Common Stock issued prior to
October 31, 1997 to an officer and director of Oremet, or (ii) more
than fifty percent (50%) of the shares of Allegheny Common Stock
received by such shareholders in the Merger. For purposes of the
foregoing, a Sale of Allegheny Common Stock shall be considered to have
occurred pursuant to a Plan if such Sale occurs in a transaction that
is in contemplation of or related to the Merger (a "Related
Transaction"). In addition, shares of Oremet Common Stock (or the
portion thereof) (i) exchanged for cash in lieu of fractional shares of
Allegheny Common Stock or (ii) with respect to which a Sale occurred in
a Related Transaction prior to the Merger shall be considered to have
been Outstanding Oremet Common Stock that was exchanged for Allegheny
Common Stock in the Merger and then disposed of pursuant to a Plan.
4. Immediately following the Merger and all Related
Transactions, Oremet will hold at least 90 percent of the fair market
value of its net assets and at least 70 percent of the fair market
value of its gross assets, and to the knowledge of Oremet at least 90
percent of the fair market value of Sub's net assets and at least 70
percent of the fair market value of Sub's gross assets held immediately
prior to the Merger (or, if earlier, immediately prior to any Related
Transaction). For purposes of this representation, amounts paid by
Oremet or Sub to shareholders who receive cash or other property,
amounts used by Oremet or Sub to pay reorganization expenses and all
redemptions and distributions (except for regular, normal dividends)
made by Oremet will be included as assets of Oremet or Sub,
respectively, immediately prior to the Merger (or, if earlier,
immediately prior to any Related Transaction).
<PAGE> 5
5. Oremet has made no transfer of any of its assets in
contemplation of the Merger or during the pre-Merger period other than
in the ordinary course of business.
6. Oremet has no obligation, understanding, agreement, plan or
intention to issue additional shares of its stock that would result in
Allegheny losing control of Oremet within the meaning of Section 368(c)
of the Internal Revenue Code of 1986, as amended (the "Code") (control
within the meaning of Section 368(c) of the Code is hereinafter
referred to as "Control").
7. To the knowledge of Oremet, prior to the Merger, Allegheny
will be in Control of Sub.
8. To the knowledge of Oremet, Allegheny has no plan or
intention to reacquire any of its stock issued in the Merger.
9. To the knowledge of Oremet, Allegheny has no plan or
intention to liquidate Oremet; to merge Oremet with or into another
corporation; to sell or otherwise dispose of the stock of Oremet except
for transfers of stock to a corporation Controlled by Allegheny or to
cause Oremet to sell or otherwise dispose of any of its assets or of
any of the assets acquired from Sub, except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
Controlled by Oremet. To the knowledge of Oremet, the liabilities of
Sub assumed by Oremet and the liabilities to which the transferred
assets of Sub are subject were incurred by Sub in the ordinary course
of its business.
10. To the knowledge of Oremet, following the Merger and all
Related Transactions, Allegheny will cause Oremet to continue its
historic business or use a significant portion of its historic business
assets in a business.
11. Allegheny, Sub, Oremet, and the shareholders of Oremet
will each pay their respective expenses, if any, incurred in connection
with the Merger and all Related Transactions.
12. There is no intercorporate indebtedness existing between
Allegheny and Oremet or between Sub and Oremet that was issued,
acquired, or will be settled at a discount.
13. In the Merger, shares of Oremet stock representing Control
of Oremet will be exchanged solely for voting stock of Allegheny. For
purposes of this representation, shares of Oremet stock exchanged for
cash or other property originating with Allegheny will be treated as
outstanding Oremet stock on the date of the Merger. Moreover, for
purposes of this representation, in the case of Allegheny shares issued
in the Merger and reacquired in a Related Transaction, the Oremet
shares to which such Allegheny shares are attributable will be treated
as having been exchanged in the Merger for other than voting stock.
<PAGE> 6
14. At the Effective Time, Oremet will not have outstanding
any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Oremet that,
if exercised or converted, would effect Allegheny's acquisition or
retention of Control of Oremet.
15. Allegheny does not own, nor has it owned during the past
five years, any shares of the stock of Oremet.
16. Oremet is not, and to the knowledge of Oremet neither
Allegheny nor Sub is, an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
17. On the date of the Merger, the fair market value of the
assets of Oremet will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which such assets are subject.
18. Oremet is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
19. The liabilities of Oremet have been incurred by Oremet in
the ordinary course of its business.
20. The payment of cash in lieu of fractional shares of
Allegheny stock is solely for the purpose of avoiding the expense and
inconvenience to Allegheny of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to shareholders of
Oremet instead of issuing fractional shares of Allegheny stock will not
exceed one percent of the total consideration that will be issued in
the transaction to the shareholders of Oremet in exchange for their
shares of Oremet. The fractional share interests of each shareholder of
Oremet will be aggregated, and no shareholder of Oremet will receive
cash in an amount equal to or greater than the value of one full share
of Allegheny stock.
21. None of the compensation received by any
shareholder-employee of Oremet will be separate consideration for, or
allocable to, any of their shares of Oremet stock; none of the shares
of Allegheny stock received by any shareholder-employee will be
separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
B. RELIANCE BY YOU IN RENDERING OPINIONS; LIMITATIONS ON YOUR OPINIONS.
1. Oremet recognizes that (i) your opinions will be based on
the representations set forth herein, and on the statements contained
in the Merger Agreement and the documents related thereto and (ii) your
opinions will be subject to certain limitations and qualifications
including without limitation that they may not be relied upon if any
such representations are not accurate.
2. Oremet recognizes that your opinions will not address any
tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
Oregon Metallurgical Corporation,
an Oregon corporation
/s/DENNIS P. KELLY
---------------------------
Dennis P. Kelly, Vice President Finance,
Secretary and Treasurer
<PAGE> 7
EXHIBIT B
ALLEGHENY TELEDYNE INCORPORATED
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
February 20, 1998
Schwabe, Williamson & Wyatt, P.C.
Pacwest Center, Suites 1600-1800
1211 Southwest Fifth Avenue
Portland, OR 97204-3795
Ladies and Gentlemen:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger, dated as of October 31, 1997 (the "Merger
Agreement"), by and among Allegheny Teledyne Incorporated, a Delaware
corporation ("Allegheny"), Oregon Metallurgical Corporation, an Oregon
corporation ("Oremet"), and Sea Merger Inc., an Oregon corporation and wholly
owned subsidiary of Allegheny ("Sub"), relating to the proposed merger (the
"Merger") of Sub with and into Oremet, and recognizing that you will rely on
this letter in rendering said opinion, the undersigned, duly authorized officers
of Allegheny and Sub, respectively, acting as such, certify that to the
best knowledge of the undersigned after reasonable inquiry, the facts relating
to the Merger as described in the Merger Agreement and the Proxy
Statement/Prospectus, dated February 23, 1998, including attachments thereto,
are true, correct and complete in all material respects and certify, to the best
knowledge of the undersigned after reasonable inquiry, to the following as of
the date hereof. The undersigned also recognize that Oremet will rely on the
representations contained in this letter to the extent such representations
relate to Allegheny and Sub. References herein only to the
"knowledge" of any person are to such person's (or management's in the case of
an entity) actual knowledge without duty of inquiry. Insofar as such
certification pertains to any person other than Allegheny and any of its
subsidiaries, the voting stock of which owns at least eighty percent (80%) (an
"Affiliate"), such certification is only as to the knowledge of the undersigned
without specific inquiry. We understand that you will reaffirm your opinion at
the Closing and that, in connection with such reaffirmation, you will require
that we reaffirm this certification as of that time.
Capitalized terms in this letter shall have the same meanings ascribed
to them in the Merger Agreement unless otherwise specified herein.
A. REPRESENTATIONS. Allegheny and Sub each certifies, warrants, and
represents, with respect to itself, as applicable, that the following facts are
now true and will continue to be true as of the Closing Date and as of the
Effective Time:
1. The Merger will be consummated in accordance with the
material terms of the Merger Agreement and none of the material
conditions therein have been waived or modified and neither Allegheny
nor Sub has any plan or intention to waive or modify any such material
conditions.
<PAGE> 8
2. The ratio for the exchange of shares of common stock of
Oremet (the "Oremet Common Stock") for common stock of Allegheny (the
"Allegheny Common Stock") in the Merger was negotiated through arm's
length bargaining.
3. To the knowledge of Allegheny and Sub, there is no present
plan or intention (a "Plan") on the part of the shareholders of Oremet
to engage in a sale, exchange, transfer, reduction of risk of ownership
or any other direct or indirect disposition (a "Sale") of (i) shares of
Allegheny Common Stock to be issued to them in the Merger, which shares
have an aggregate fair market value, as of the period ending at the
Effective Time, in excess of fifty percent (50%) of the aggregate fair
market value, immediately prior to the Merger, of the outstanding
shares of Oremet Common Stock held by shareholders immediately prior to
the Merger ("Outstanding Oremet Common Stock") (including shares of
Oremet Common Stock issued after the date hereof and prior to the
Effective Time pursuant to stock compensation plans of Oremet or the
exercise of warrants to acquire Oremet Common Stock issued prior to
October 31, 1997 to an officer and director of Oremet, or (ii) more
than fifty percent (50%) of the shares of Allegheny Common Stock
received by such shareholders in the Merger. For purposes of the
foregoing, a Sale of Allegheny Common Stock shall be considered to have
occurred pursuant to a Plan if such Sale occurs in a transaction that
is in contemplation of or related to the Merger (a "Related
Transaction"). In addition, shares of Oremet Common Stock (or the
portion thereof) (i) exchanged for cash in lieu of fractional shares of
Allegheny Common Stock or (ii) with respect to which a Sale occurred in
a Related Transaction prior to the Merger shall be considered to have
been Outstanding Oremet Common Stock that was exchanged for Allegheny
Common Stock in the Merger and then disposed of pursuant to a Plan.
4. Prior to the Merger, Allegheny will be in control of Sub
within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code") (control within the meaning of Section
368(c) of the Code is hereinafter referred to as "Control").
5. Allegheny has no plan or intention to cause Oremet to issue
additional shares of stock after the Merger, or take any other action,
that would result in Allegheny losing Control of Oremet.
6. Immediately following the Merger and all Related
Transactions, Oremet will hold at least 90 percent of the fair market
value of Sub's net assets and at least 70% percent of the fair market
value of Sub's gross assets, and to the knowledge of Allegheny at least
90 percent of the fair market value of Oremet's net assets and at least
70 percent of the fair market value of Oremet's gross assets held
immediately prior to the Merger. For purposes of this representation,
amounts paid by Oremet or Sub to shareholders who receive cash or other
property, amounts used by Oremet or Sub to pay reorganization expenses
and all redemptions and distributions (except for regular, normal
dividends) made by Oremet will be included as assets of Oremet or Sub,
respectively, immediately prior to the Merger (or, if earlier,
immediately prior to any Related Transaction).
<PAGE> 9
7. Allegheny has no plan or intention to reacquire any of its
stock issued in the Merger.
8. Allegheny has no plan or intention to liquidate Oremet; to
merge Oremet with or into another corporation; to sell or otherwise
dispose of the stock of Oremet except for transfers of stock to a
corporation Controlled by Allegheny; or to cause Oremet to sell or
otherwise dispose of any of its assets or of any of the assets acquired
from Sub, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation Controlled by Oremet.
9. The liabilities of Sub, if any, assumed by Oremet and the
liabilities, if any, to which the transferred assets of Sub are subject
were incurred by Sub in the ordinary course of its business.
10. Following the Merger and all Related Transactions, Oremet
will continue its historic business or use a significant portion of its
historic business assets in a business.
11. Allegheny, Sub, Oremet, and the shareholders of Oremet
will each pay their respective expenses, if any, incurred in connection
with the Merger and all Related Transactions.
12. There is no intercorporate indebtedness existing between
Allegheny and Oremet or between Sub and Oremet that was issued,
acquired, or will be settled at a discount.
13. In the Merger, shares of Oremet stock representing Control
of Oremet will be exchanged solely for voting stock of Allegheny. For
purposes of this representation, in the case of Allegheny shares issued
in the Merger and reacquired in a Related Transaction, the Oremet
shares to which such Allegheny shares are attributable will be treated
as having been exchanged in the Merger for other than voting stock.
14. Allegheny does not own, nor has it owned during the past
five years, any shares of the stock of Oremet.
15. Neither Allegheny nor Sub is an "investment company" as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
16. To the knowledge of Allegheny and Sub, on the date of the
Merger, the fair market value of the assets of Oremet will exceed the
sum of its liabilities, plus the amount of liabilities, if any, to
which such assets are subject.
17. The payment of cash in lieu of fractional shares of
Allegheny stock is solely for the purpose of avoiding the expense and
inconvenience to Allegheny of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the transaction to shareholders of
Oremet instead of issuing fractional shares of Allegheny stock will not
exceed one percent of the total consideration that will be issued in
the transaction to the shareholders of Oremet in exchange for their
shares of Oremet. The fractional share interests of each shareholder of
Oremet will be aggregated, and no shareholder of Oremet will receive
cash in an amount equal to or greater than the value of one full share
of Allegheny stock.
<PAGE> 10
18. None of the compensation received by any
shareholder-employee of Oremet will be separate consideration for, or
allocable to, any of their shares of Oremet stock; none of the shares
of Allegheny stock received by any shareholder-employee will be
separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
B. RELIANCE BY YOU IN RENDERING OPINIONS; LIMITATIONS ON YOUR OPINIONS.
1. Allegheny and Sub each recognizes that (i) your opinions
will be based on the representations set forth herein, and on the
statements contained in the Merger Agreement and the documents related
thereto and (ii) your opinions will be subject to certain limitations
and qualifications including without limitation that they may not be
relied upon if any such representations are not accurate.
2. Allegheny and Sub each recognizes that your
opinions will not address any tax consequences of the Merger or any
action taken in connection therewith except as expressly set forth in
such opinions.
Very truly yours,
Allegheny Teledyne Incorporated,
a Delaware corporation
/s/JAMES L. MURDY
-----------------------------------
James L. Murdy
Executive Vice President, Finance and
Administration and Chief Financial Officer
Sea Merger Inc.,
an Oregon corporation
/s/ JAMES L. MURDY
-----------------------------------
James L. Murdy
Vice President and Treasurer
<PAGE> 1
Exhibit 23.4
Consent of Independent Public Accountants
We consent to the reference to our firm under the captions "THE MERGER -
Accounting Treatment," "THE MERGER AGREEMENT - Conditions," and "Experts" in
the Registration Statement on Form S-4 and related Proxy Statement of Oregon
Metallurgical Corporation and Prospectus of Allegheny Teledyne Incorporated and
to the incorporation by reference therein of our report dated January 22, 1997,
with respect to the consolidated financial statements of Allegheny Teledyne
Incorporated incorporated by reference in its Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, filed with the Securities and Exchange
Commission.
/s/ERNST & YOUNG LLP
--------------------
Ernst & Young LLP
Pittsburgh, Pennsylvania
February 20, 1998
<PAGE> 1
Exhibit 23.5
CONSENT
-------
As Independent public accountants, we hereby consent to the incorporation in
this Registration Statement on Form S-4 of our report dated January 13, 1996,
on the consolidated financial statements of Teledyne, Inc. for the year ended
December 31, 1995, which was previously incorporated by reference into
Allegheny Teledyne Incorporated's Form 10-K for the year ended December 31,
1996.
/s/ARTHUR ANDERSEN LLP
- ----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
February 19, 1998
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the proxy statement of Oregon
Metallurgical Corporation/prospectus of Allegheny Teledyne Incorporated on Form
S-4 (File No. 333- ) of our reports, dated February 4, 1997, on our audits of
the consolidated financial statements and financial statement schedule of Oregon
Metallurgical Corporation as of December 31, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996. We also consent to the
reference to our firm under the captions "Accounting Treatment," "Conditions"
and "Experts".
/s/COOPERS & LYBRAND L.L.P.
---------------------------
COOPERS & LYBRAND L.L.P.
Portland, Oregon
February 19, 1998
<PAGE> 1
Exhibit 23.7
CONSENT OF SALOMON BROTHERS INC
We hereby consent to the use of our name and to the description of our opinion
letter dated October 31, 1997 under the captions "Summary -- The Merger --
Opinion of Financial Advisor", "The Merger -- Opinion of Financial Advisor to
the Company", and to the inclusion of such opinion letter as Appendix B to, the
Proxy Statement of Oregon Metallurgical Corporation and Prospectus of Allegheny
Teledyne Incorporated. By giving such consent we do not thereby admit that we
are experts with respect to any part of such Proxy Statement/Prospectus within
the meaning of the term "expert" as used in, or that we come within the category
of persons whose consent is required under, the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
SALOMON BROTHERS INC
By: /s/WESLEY C. WALRAVEN
------------------------------
Managing Director
<PAGE> 1
Exhibit 99.1
OREGON METALLURGICAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS
MARCH 24, 1998
The undersigned appoints CARLOS E. AGUIRRE and DENNIS P. KELLY or either of
them, each with power of substitution and revocation, proxies or proxy to vote
all shares of Common Stock which the undersigned is entitled to vote with all
powers which the undersigned would possess if personally present, at the Special
Meeting of Shareholders of OREGON METALLURGICAL CORPORATION on March 24, 1998,
and any postponements or adjournments thereof, upon the matter set forth on the
reverse of this card, and, in their discretion, upon such other matters as may
properly come before such meeting.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THIS PROXY CARD AND TO
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED.
IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE VOTED "FOR" THE
PROPOSAL.
Please, vote, date and sign on the reverse side.
<PAGE> 2
REVERSE SIDE
[X] Please mark your votes as indicated in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEM:
Approval of the Agreement and Plan of Merger among Allegheny Teledyne
Incorporated, Sea Merger Inc. and Oregon Metallurgical Corporation and the
transactions contemplated thereby.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Signature ________________________ Signature if held jointly ___________________
Date: _________________, 1998
Please sign EXACTLY as your name appears at the left. When signing as a
fiduciary or representative, give full title. For joint accounts, please furnish
all signatures.
* FOLD AND DETACH HERE *
