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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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WHITTAKER CORPORATION
(NAME OF SUBJECT COMPANY)
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WHITTAKER CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
SERIES D PARTICIPATING CONVERTIBLE PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
966680-40-7
(CUSIP NUMBER OF CLASS OF SECURITIES)
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LYNNE M. O. BRICKNER
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
WHITTAKER CORPORATION
1955 NORTH SURVEYOR AVENUE
SIMI VALLEY, CA 93063-3386
(805) 526-5700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
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COPY TO:
CHRISTOPHER MAYER, ESQ.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 450-4000
________________________________________________________________________________
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ITEM 1 -- SECURITY AND SUBJECT COMPANY.
The name of the subject company is Whittaker Corporation, a Delaware
corporation (the 'Company'), and the address of the principal executive offices
of the Company is 1955 N. Surveyor Avenue, Simi Valley, California 93063. The
titles of the classes of equity securities to which this statement relates are
(i) the Company's common stock, par value $0.01 per share (the 'Common Shares')
and (ii) the Company's Series D participating convertible preferred stock, par
value $1.00 per share (the 'Preferred Shares').
ITEM 2 -- TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the 'Offer') disclosed in the
Tender Offer Statement on Schedule 14D-1 dated June 15, 1999 (the 'Schedule
14D-1'), filed by Meggitt Acquisition Inc. ('Purchaser'), a Delaware corporation
and an indirect wholly-owned subsidiary of Meggitt PLC, a public limited company
incorporated under the laws of England and Wales ('Parent'), to purchase (i) all
of the Company's outstanding Common Shares at a price of $28.00 per Common Share
(the 'Offer Price') and (ii) all of the Company's outstanding Preferred Shares
at a price of $9,142.87 per Preferred Share (the 'Preferred Share Price'), in
each case, net to the seller in cash, without interest thereon. The Common
Shares and the Preferred Shares are collectively referred to herein as the
'Shares'.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 9, 1999 (the 'Merger Agreement'), among the Company, Purchaser and
Parent. The Offer is conditioned upon, among other things, there being validly
tendered in accordance with the Offer and not properly withdrawn prior to the
expiration of the Offer, a number of Shares which, together with the number of
Shares beneficially held by Parent, constitutes at least a majority of the
outstanding Common Shares on a fully-diluted basis (the 'Minimum Condition').
The Merger Agreement also provides that, in accordance with the terms and
subject to the conditions thereof, following the consummation of the Offer,
Purchaser will be merged with the Company (the 'Merger') at the effective time
(the 'Effective Time'), and the Company will continue as the surviving
corporation (the 'Surviving Corporation') and become an indirect wholly-owned
subsidiary of Parent. A copy of the Merger Agreement is filed as Exhibit (c)(1)
to this Schedule 14D-9 and is incorporated by reference herein.
The Schedule 14D-1 indicates that the principal executive offices of
Purchaser and Parent are located at Farrs House, Cowgrove, Wimborne, Dorset BH21
4EL, United Kingdom.
ITEM 3 -- IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above. Unless the context otherwise requires,
references to the Company in this statement are to the Company and its
subsidiaries and predecessors, viewed as a single entity.
(b) Except as described or referred to in the attached Annex B or as set
forth in the description of the Merger Agreement under Stock Option Plans,
Employee Benefits and Indemnification and Insurance, to the knowledge of the
Company there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company, its executive officers, directors
or affiliates or (ii) Parent or Purchaser or any of their respective executive
officers, directors or affiliates.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement
and is qualified in its entirety by reference to the Merger Agreement, which is
incorporated herein by reference and a copy of which has been filed with the
Commission as an exhibit hereto.
General. The Merger Agreement provides for the commencement of the Offer,
upon the terms and subject to the conditions set forth therein, and further
provides for the consummation of the Merger following the satisfaction or
waiver, if permitted by applicable law, of the conditions set forth in the
Merger Agreement.
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In the Merger Agreement, the Company consented to the Offer and represented
that the Company Board has unanimously (i) determined that the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
are fair to and in the best interests of the Company's stockholders, (ii)
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, in accordance with the Delaware
General Corporation Law (the 'DGCL'), and (iii) resolved (subject to the
provision described in the second paragraph of 'Other Proposals' below) to
recommend that the Company's stockholders accept the Offer and approve and adopt
the Merger Agreement and the Merger.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the DGCL,
Purchaser will be merged with the Company at the Effective Time. Following the
Merger, the separate corporate existences of Purchaser and the Company will
cease and the Surviving Corporation will succeed to and assume all the rights
and obligations of Purchaser and the Company in accordance with the DGCL.
At the Effective Time, each Common Share and each Preferred Share
outstanding immediately prior to the Effective Time (other than those held by
the Company as treasury stock or owned by Parent or any of its subsidiaries
immediately prior to the Effective Time, all of which will be cancelled, and
dissenting Shares, if any) will, by virtue of the Merger, be converted into the
right to receive, in the case of a Common Share, the Offer Price, and, in the
case of a Preferred Share, the Preferred Share Price, in cash, without interest
and less any required withholding taxes (the 'Merger Consideration'), payable to
the holder thereof upon surrender of the certificates representing such Common
Shares or Preferred Shares.
Subject to the terms and conditions in the Merger Agreement, (a) if
approval of the stockholders of the Company is required under the DGCL, a
Certificate of Merger shall be duly filed with the Secretary of State of the
State of Delaware as soon as practicable after obtaining such stockholder
approval or (b) if such stockholder approval is not required to be obtained in
order to consummate the Merger, a Certificate of Ownership and Merger shall be
duly filed with the Secretary of State of the State of Delaware as soon as
practicable after the expiration of the Offer. If a stockholder vote is required
in connection with the Merger, Parent has agreed to cause all Shares owned by
Parent, Purchaser and their affiliates to be voted in favor of the Merger. If
Purchaser and/or Parent and its affiliates are the owners of at least 90% of the
outstanding Shares of each class following the Offer or otherwise, the Merger
will be consummated without a meeting or vote of stockholders in accordance with
the 'short-form' merger provisions of Section 253 of the DGCL.
Stock Option Plans. The Merger Agreement provides that at, or immediately
prior to the Effective Time, each employee and director stock option to purchase
Shares outstanding under any employee or director stock option or compensation
plan or arrangement of the Company, whether or not vested or exercisable, will
be canceled, and the Company shall pay each holder of any such option at or
promptly after the Effective Time for each such option, an amount in cash equal
to (i) the product of (A) the excess, if any, of the Offer Price over the
applicable exercise price of such option and (B) the number of Common Shares
each holder could have purchased (assuming full vesting of all options) had such
holder exercised such option in full immediately prior to the Effective Time
minus (ii) the amount of any applicable withholding tax.
Prior to the Effective Time, to the extent required to effect the
transactions contemplated by the Merger Agreement, the Company has agreed to
take any actions necessary with respect to its stock option or compensation
plans or arrangements, including if applicable making amendments to the terms of
such stock option or compensation plans or arrangements.
Employee Benefits. Following the Effective Time, Parent will, or will cause
the Surviving Corporation to (i) honor all obligations under the employment
agreements of the Company and (ii) pay all benefits (including any vacation,
personal or sick days) accrued through the Effective Time under employee benefit
plans, programs, policies and arrangements of the Company (including any rabbi
trust agreement) in accordance with the terms thereof. Parent has also agreed to
provide, or cause the Surviving Corporation to provide, employees of the Company
or any of its subsidiaries as of the Effective Time (the 'Continuing Employees')
for a period of not less than one year following the Effective Time with
compensation and benefits which, in the aggregate, are not less favorable than
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either the compensation and benefits provided to such employees immediately
prior to the Effective Time or the compensation and benefits provided to
similarly situated employees of Parent or any affiliate of Parent. Parent,
however, has the right to terminate the employment of any Continuing Employee
following the Effective Time, provided however that for a period of one year
following the Effective Time, Parent will, or will cause the Surviving
Corporation to, establish and maintain a plan to provide severance and
termination benefits to all Continuing Employees which are no less favorable
than the severance and termination benefits provided under the Company's plans
and arrangements in effect as of the date of the Merger Agreement as disclosed
to Parent in writing prior to the date hereof. With respect to medical benefits
provided to Continuing Employees after the Effective Time, Parent agrees that it
will, or it will cause the Surviving Corporation and its subsidiaries to, waive
waiting periods and pre-existing condition requirements (to the extent waived
under the Company's plans), and will give Continuing Employees credit for any
copayments and deductibles actually paid by such employees under the Company's
medical plans during the calendar year in which the Effective Time occurs. In
addition, service with the Company shall be recognized for purposes of
eligibility under the welfare plan in which Continuing Employees participate as
well as for purposes of the programs or policies for vacation pay and sick pay
in which Continuing Employees participate.
Board Representation; Amendments and Waivers. The Merger Agreement provides
that upon Purchaser's acceptance for payment pursuant to the Offer of a number
of Shares that satisfies the Minimum Condition, Parent shall be entitled,
subject to Section 14(f) of the Exchange Act, to designate the number of
directors, rounded up to the nearest whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors and (ii) the percentage that the number of Common
Shares beneficially owned by Parent bears to the total number of Common Shares
outstanding on a fully diluted basis, and the Company shall take all action
necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such time, the Company will also use its best efforts to cause
individuals designated by Parent to constitute the number of members, rounded up
to the nearest whole number, on (i) each committee of the Board of Directors of
the Company and (ii) each board of directors of each subsidiary of the Company
(and each committee thereof) that represents the same percentage as such
individuals represent on the Board of Directors of the Company. Notwithstanding
the foregoing, Parent and the Company will use their reasonable efforts to
ensure that at least two members of the Company's Board of Directors as of the
date of the Merger Agreement who are not employees of the Company ('Continuing
Directors') will remain members of the Company's Board of Directors until the
Effective Time.
Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and
signed, in the case of any amendment, by the Company and Parent or, in the case
of a waiver, by the party against whom the waiver is to be effective. However,
following the election or appointment of Parent's designees to the Company's
Board of Directors until the Effective Time, the approval of a majority of the
Continuing Directors shall be required to authorize any termination of the
Merger Agreement by the Company, any amendment of the Merger Agreement requiring
action by the Company's Board of Directors, any extension of time for
performance of any obligation or action under the Merger Agreement by Parent or
Purchaser and any waiver of compliance with any of the agreements or conditions
contained in the Merger Agreement for the Company's benefit (including, with
respect to the Offer, any waiver of the Minimum Condition, any change in the
form of or decrease in the consideration per Share, any decrease in the number
of Shares sought or the imposition of any additional conditions).
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including,
without limitation, (i) representations and warranties by the Company as to
corporate existence and power, authority relative to the Merger Agreement and
the transactions contemplated thereby, governmental consents and approvals,
non-contravention, the Company's capitalization, public filings, financial
statements, information supplied, absence of certain changes or undisclosed
material liabilities, litigation, taxes, employee benefit and labor matters,
compliance with applicable laws and antitakeover statutes, finders' fees,
environmental matters, the Rights Agreement, intellectual property, the Year
2000 issue, properties and
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defaults under contracts, and (ii) representations and warranties by Parent
(with respect to itself and Purchaser) as to corporate existence and power,
authority relative to the Merger Agreement and the transactions contemplated
thereby, governmental consents and approvals, non-contravention, information
supplied, finders' fees and financing agreements.
Conduct of Business Until the Merger. The Merger Agreement provides that,
the Company will, and will cause its subsidiaries to, carry on their respective
business in the ordinary course consistent with past practices and use all
reasonable best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
current officers and employees. The Merger Agreement further provides that,
without limiting the generality of the foregoing, (a) the Company will not adopt
or propose any change in its certificate of incorporation or any material change
in its bylaws; (b) the Company will not, and will not permit any of its
subsidiaries to, adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of the Company or any of its subsidiaries (other than a
liquidation or dissolution of any such subsidiary, a merger or consolidation
between wholly-owned subsidiaries of the Company or of any such wholly-owned
subsidiary into the Company); (c) the Company will not, and will not permit any
of its subsidiaries to, make any equity investment in or acquisition of any
business of any person or any material amount of assets, except (i) for any
capital expenditure permitted by the Merger Agreement, (ii) for equity
investment in any wholly-owned subsidiary of the Company or (iii) in the
ordinary course of business consistent with past practices; (d) the Company will
not, and will not permit any of its subsidiaries to, sell, lease, license or
otherwise dispose of any assets in an amount that would be material to the
Company and its subsidiaries, taken as a whole, except (i) pursuant to existing
contracts or commitments or (ii) in the ordinary course of business consistent
with past practices; (e) the Company will not, and will not permit any of its
subsidiaries to, declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock other than
(i) dividends or other distributions paid by any of its subsidiaries to the
Company or any other subsidiary of the Company and (ii) dividends payable in
accordance with the terms of the Preferred Shares; (f) the Company will not, and
will not permit any of its subsidiaries to, issue, sell, transfer, pledge or
dispose of any shares of, or securities convertible into or exchangeable for, or
options, warrants, calls commitments or rights of any kind to acquire, any
shares of capital stock of any class or series of the Company or its
subsidiaries other than (i) issuances pursuant to the exercise of options under
the Option Plans (as defined in the Merger Agreement), outstanding on the date
of the Merger Agreement, (ii) issuances pursuant to the conversion of the
Preferred Shares and the Convertible Notes (as defined in the Merger Agreement)
outstanding on the date of the Merger Agreement and (iii) issuances by any of
its subsidiaries to the Company or any other subsidiary of the Company; (g) the
Company will not, and will not permit any of its subsidiaries to, redeem,
purchase or otherwise acquire directly or indirectly any of the Company's
capital stock; (h) the Company will not, and will not permit any of its
subsidiaries to, make or commit to make any capital expenditure, except in the
ordinary course of business or pursuant to the 1999 budget made available to
Parent; (i) the Company will not, and will not permit any of its subsidiaries
to, (i) incur or assume any long-term or short-term debt or issue any debt
securities, except for borrowings under existing lines of credit in the ordinary
course of business consistent with past practice (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business consistent with past practice, and except for obligations of
the wholly-owned subsidiaries of the Company; (iii) make any loans, advances or
capital contributions to, or investment in, any other person, except in the
ordinary course of business consistent with past practice and except to wholly
owned subsidiaries of the Company or to the Company; (iv) pledge or otherwise
encumber shares of capital stock of the Company or its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
any material Lien (as defined in the Merger Agreement) thereupon, except in the
ordinary course of business consistent with past practice; (j) except as may be
required by law or as contemplated by the Merger Agreement or as required by
existing agreements or arrangements, the Company will not, and will not permit
any of its subsidiaries to, increase in any manner the compensation or benefits
under the Benefit Plans (as defined in the Merger Agreement) of any director,
officer or employee or pay any benefit not required by any plan and arrangement
as in effect as of the date of the Merger Agreement (including, without
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limitation, the granting of stock appreciation rights or performance units), in
each case other than in the ordinary course of business consistent with past
practice; (k) the Company will not, and will not permit any of its subsidiaries
to, enter into any material contract, agreement, commitment or transaction,
other than in the ordinary course of business consistent with past practice;
(l) except as may be required as a result of a change in law or in U.S. GAAP,
the Company will not, and will not permit its subsidiaries to, change materially
any of the accounting principles or practices used by it; (m) the Company will
not, and will not permit any of its subsidiaries to, revalue any material assets
(including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable) other than in the ordinary course of
business consistent with past practice or as required by U.S. GAAP; (n) the
Company will not, and will not permit any of its subsidiaries to, make or revoke
any tax election, or settle or compromise any tax liability, or change any
material aspect of its method of tax accounting, in each case other than in the
ordinary course of business consistent with past practice; (o) the Company will
not, and will not permit any of its subsidiaries to, pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary and usual
course of business consistent with past practice or waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company or any of its subsidiaries is a party; (p) the
Company will not, and will not permit any of its subsidiaries to, settle or
compromise any pending or threatened suit, action or claim relating the
transactions contemplated hereby; (q) the Company will not, and will not permit
any of its subsidiaries to, enter into any agreement that limits or otherwise
restricts the Company or any of its subsidiaries or any successor thereto or
that could, after the Effective Time, limit or restrict the Surviving
Corporation and its affiliates (including Parent) or any successor thereto, from
engaging or competing in any line of business or in any geographic areas; (r)
the company will not, and will not permit any of its subsidiaries to, agree or
commit to do any of the foregoing; and (s) the Company will not, and will not
permit any of its subsidiaries to, take any action that would make any
representation or warranty of the Company hereunder inaccurate in any material
respect at, or as of any time prior to, the Effective Time.
Other Proposals. The Merger Agreement provides that the Company will not,
nor will it permit any of its subsidiaries, affiliates or representatives, to
directly or indirectly, (1) take any action to solicit, initiate or encourage
any offer or proposal for a merger or other business combination transaction
involving the acquisition of all or a material portion of the equity interest
in, or all or a material portion of the assets of, the Company and its
subsidiaries, other than transactions contemplated by the Merger Agreement (an
'Acquisition Proposal'), or (2) furnish information to or participate in any
discussions or negotiations with any person that has made or indicated an
interest in making an Acquisition Proposal; provided, however, that nothing
prohibits the Board of Directors of the Company from furnishing information to,
or entering into discussions or negotiations with, any person that has made an
unsolicited bona fide written Acquisition Proposal if, and only to the extent
that (A) the acceptance for payment of Shares pursuant to the Offer shall not
have occurred, (B) the Board of Directors of the Company, based on advice of
outside legal counsel, determines in good faith that failure to take such action
would present a reasonable probability of violating its fiduciary duties under
applicable law, and (C) prior to taking such action, the Company (x) provides
reasonable notice to Parent to the effect that it intends to take such action
and (y) receives from such person an executed confidentiality agreement in
reasonably customary form and in any event containing terms at least as
stringent as those contained in the Confidentiality Agreement executed by
Parent. Prior to providing any information to or entering into discussions or
negotiations with any person in connection with an Acquisition Proposal by such
Person, the Company shall notify Parent of any such Acquisition Proposal
(including, without limitation, the material terms and conditions thereof and of
the identity of the person making it) as promptly as practicable (but in no case
later than one business day) after its receipt thereof, and shall thereafter
inform Parent on a prompt basis of the status of any discussion or negotiations
with such third party and any material changes to the terms and conditions of
such Acquisition Proposal, and shall promptly give Parent a copy of any
information delivered to such person which has not previously been reviewed by
Parent. The Merger Agreement further provides that the Company will, and will
cause its subsidiaries and the officers, directors, employees and other agents
and advisors of the Company and its subsidiaries to, immediately cease and cause
to be terminated all discussions and negotiations, if any, that have taken place
prior to the date of the Merger Agreement with any parties with respect to any
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Acquisition Proposal. In addition, the Merger Agreement provides that nothing
contained therein prevents the Board of Directors of the Company from complying
with Rule 14e-1 under the Exchange Act with respect to any Acquisition Proposal.
The Merger Agreement also provides that the Board of Directors of the
Company may not withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, its approval or recommendation of the Merger
Agreement, the Offer or the Merger unless the Board of Directors of the Company,
based on advice of its outside legal counsel, determines in good faith that
failure to do so would present a reasonable probability of violating its
fiduciary duties under applicable law; provided, however, the Board of Directors
of the Company may not approve or recommend (and in connection therewith,
withdraw or modify its approval or recommendation of the Merger Agreement, the
Offer or the Merger) an Acquisition Proposal unless (i) the Company has complied
with the provisions described in this and the preceding paragraph, including,
without limitation, the requirement that it notify Parent promptly after its
receipt of any Acquisition Proposal, (ii) the Acquisition Proposal is a Superior
Proposal and (iii) it determines in good faith (based on advice of its outside
legal counsel) that the failure to do so would present a reasonable probability
of violating its fiduciary duties under applicable law. For purposes of the
Merger Agreement, 'Superior Proposal' means any Acquisition Proposal (A)
involving the acquisition of the entire equity interest in, or all or
substantially all of the assets and liabilities of, the Company and its
subsidiaries and (B) with respect to which the Board of Directors of the Company
(x) determines in good faith that such proposal, if accepted, is reasonably
likely to be consummated, taking into account all legal, financial, regulatory
and other aspects of the proposal and the person making the proposal and (y)
believes in good faith, based on the advice of its financial advisors, that such
proposal would, if consummated, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the Offer and the
Merger.
Conditions of the Merger. The obligations of the Company, Parent and
Purchaser to consummate the Merger are subject to the satisfaction (or waiver by
the party for whose benefit the applicable condition exists) of the following
conditions: (a) if required by the DGCL, the Merger Agreement shall have been
approved and adopted by the stockholders of the Company in accordance with such
Law; (b) no provision of any applicable U.S. or U.K. law or regulation and no
judgment, injunction, order or decree of a U.S. or U.K. court of competent
jurisdiction shall prohibit or enjoin the consummation of the Merger; and (c)
Purchaser shall have purchased Shares pursuant to the Offer.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of the
Merger Agreement by the stockholders of the Company or Parent: (1) by mutual
written agreement of the Company and Parent; (2) by either the Company or
Parent, (a) if the Offer has not been consummated on or before the 60th U.S.
business day after commencement of the Offer (or, if the period of time for any
applicable review process under the Exon-Florio Act has not expired by such
date, then the date on which the Exon-Florio Act review process is completed),
provided that the right to terminate the Merger Agreement under this clause
shall not be available to any party whose breach of any provision of the Merger
Agreement results in the failure of the Offer to be consummated by such time; or
(b) if consummation of the Merger would violate or be prohibited by any U.S. or
U.K. law or regulation or if any injunction, judgment, order or decree of a U.S.
or U.K. court of competent jurisdiction enjoining the Company or Parent from
consummating the Merger is entered and such injunction, judgment, order or
decree shall become final and nonappealable; (3) by Parent, if prior to the
purchase of any Shares pursuant to the Offer, (a) the Board of Directors of the
Company shall have failed to recommend or withdrawn or materially modified in a
manner adverse to Parent its approval or recommendation of the Offer and the
Merger, or (b) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement with respect to any Superior
Proposal; or (4) by the Company, if, prior to purchase of any Shares pursuant to
the Offer, (a) the Company notifies Parent in writing that it intends to enter
into an agreement with respect to a Superior Proposal; (b) Parent does not make,
within one business day after receipt of the Company's notification pursuant to
clause (a), an offer that the Board of Directors of the Company determines, in
good faith based on the advice of its financial advisors, is at least as
favorable to the Company's stockholders as the Superior Proposal and (c) prior
to or simultaneously with such termination, the Company makes payment to Parent
of the amounts payable as described under 'Fees and Expenses' below.
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In the event the Merger Agreement is terminated by either the Company or
Parent, the Merger Agreement will become void and have no effect, and there will
be no liability or obligation on the part of Parent, Purchaser or the Company
except with respect to certain specified provisions (including the provisions
described below under 'Fees and Expenses' and in the Confidentiality Agreement
executed by Parent) and except to the extent that such termination results from
the willful breach by a party of the Merger Agreement.
Fees and Expenses. The Company has agreed to pay to Parent an amount equal
to (i) $6.5 million prior to or simultaneously with the termination of the
Merger Agreement as a result of the occurrence of any of the events described in
clauses 3(a), 3(b) and 4 of the First paragraph under 'Termination of the Merger
Agreement' above (the 'Specified Clauses'); and (ii) Parent's and Purchaser's
actual and reasonable out-of-pocket expenses incurred by Parent or Purchaser in
connection with the Merger Agreement and the transactions contemplated thereby,
promptly upon receipt of reasonable documentation of such expenses, in
connection with the termination of the Merger Agreement as a result of the
occurrence of any of the following events: (A) any of the events set forth in
the Specified Clauses (B) the Minimum Condition not having been met by the
expiration of the Offer, as extended pursuant to the Merger Agreement or (C) the
condition set forth in clause (c) set forth in Section 14 of the Offer to
Purchase not having been met as a result of a breach by the Company of its
representations and warranties described in the Merger Agreement; provided that
such breach existed as of the date of the Merger Agreement; Further provided
that in each of clause (B) and (C) above, all of the other conditions set forth
in Section 14 of the Offer to Purchase shall have been satisfied (but for those
conditions which are not satisfied in the case of clause (C) due to or resulting
form the facts constituting such breach) and Parent and Purchaser are not in
material breach of any of their representations and warranties or covenants set
forth in the Merger Agreement.
Except as provided in the preceding paragraph, the Merger Agreement
provides that each party will pay its own fees and expenses incurred in
connection with the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby, whether or not the Offer or the Merger is consummated.
Indemnification and Insurance. The Merger Agreement provides that Parent
will indemnify each person who is at the date of the Merger Agreement, or who
has previously been, a director, officer or manager of the Company or of any of
its subsidiaries, to the fullest extent permitted by law, with respect to
liabilities based on or arising out of any facts or circumstances occurring at
or prior to the Effective Time. In addition, the Merger Agreement provides that
Parent will cause the Surviving Corporation and any of its subsidiaries to
maintain in effect for a period of six years provisions in its certificate of
incorporation and by-laws with respect to indemnification and exculpation with
respect to facts or circumstances occurring at or prior to the Effective Time to
the extent set forth in the Company's certificate of incorporation and by-laws
on the date of the Merger Agreement (provided that the foregoing shall not in
any way restrict or preclude any sale, liquidation or dissolution of any
subsidiary of Parent at any time after the Effective Time).
The Merger Agreement further provides that Parent will, or will cause the
Surviving Corporation to, maintain for a period of six years from the Effective
Time the policies of directors' and officers' liability insurance maintained by
the Company and its subsidiaries on the date of the Merger Agreement (although
Parent may substitute therefor policies having terms no less advantageous to the
persons currently covered than the terms of such existing insurance coverage)
with respect to facts or circumstances occurring at or prior to the Effective
Time; provided, however, that in no event will Parent be required to expend in
any one year an amount in excess of 200% of the annual premiums paid by the
Company as of the date of the Merger Agreement for such insurance; and provided,
further that, if the annual premiums of such insurance coverage exceed such
amount, Parent will be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
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ITEM 4 -- THE SOLICITATION OR RECOMMENDATION.
(a) The Recommendation
On June 8, 1999, the Company Board held a telephonic Board meeting to
consider the proposed Merger Agreement with Parent and the transactions
comtemplated thereby and review their material terms. Davis Polk & Wardwell, the
Company's legal advisor ('Company Counsel'), summarized the material provisions
of the proposed Merger Agreement. Representatives of Credit Suisse First Boston
Corporation ('CSFB') and CIBC World Markets Corp. ('CIBC World Markets')
(collectively, the 'Company Financial Advisors') then presented their respective
analyses of the fairness of the proposed transaction and rendered oral opinions
(subsequently confirmed by delivery of written opinions dated June 9, 1999,
copies of which are attached as Annexes A-1 and A-2 to this Schedule 14D-9) to
the effect that, as of such date and subject to certain matters stated in such
opinions, the consideration to be paid in the Offer and the Merger was fair to
the holders of Shares from a financial point of view.
After a full discussion, the Company Board unanimously (i) determined that
the terms of the Offer and the Merger were fair to and in the best interests of
the Company's stockholders, (ii) approved the Merger Agreement and authorized
the execution and delivery thereof and (iii) resolved to recommend that the
stockholders of the Company tender their Shares pursuant to the Offer and
approve the Merger Agreement. The Company's recommendation is contained in its
letter to stockholders dated June 15, 1999. A copy of such letter, which will
accompany this Schedule 14D-9, is attached hereto as Exhibit (a)(1) and is
incorporated herein by reference.
The Company, Parent and Purchaser executed the Merger Agreement on June 9,
1999. Press releases announcing the proposed transaction were publicly issued in
both the United Kingdom and the United States on June 9, 1999.
(b) Background of the Offer; Reasons for Recommendation
Background of the Offer
In September, 1996, in an effort to improve the Company's performance, the
Company Board appointed its Chairman, Joseph F. Alibrandi, as Chief Executive
Officer, a position he had previously held until retiring in January, 1995. The
Company refocused its efforts on its aerospace businesses and the reduction of
the Company's outstanding debt. The Company decided to dispose of certain
non-core assets, including Whittaker Xyplex, Inc., Aviant Information, Inc. and
Whittaker Electronic Systems. These dispositions generated net proceeds of
approximately $56 million, all of which was applied toward retiring debt.
In the context of this restructuring process, the Company began to consider
strategic alternatives, including the possible sale of the Company. Since early
1997, the Company has received inquiries about possible transactions from
several parties and, in some instances, has permitted them to undertake certain
limited due diligence. No firm offers resulted, however, and all indications of
value received by the Company were significantly below the Offer Price.
On December 18, 1998, the Company received an unsolicited all-cash
acquisition proposal at $18.50, a premium over the then-current Common Share
price of $13.06. Because of various considerations, including the adequacy or
fairness of the price and the potential acquiror's ability to consummate the
transaction, the Company did not pursue the proposal.
On December 21, 1998, the Company publicly announced that it was continuing
to examine strategic alternatives for maximizing stockholder value. On January
6, 1999, the Company engaged the Company Financial Advisors to assist in
assessing its strategic options, including a possible sale of the Company. To
assist potential buyers in evaluating the Company, the Company Financial
Advisors, with the assistance of Company management, drafted a confidential
information memorandum describing the Company.
On February 22, 1999, the Company publicly announced its engagement of the
Company Financial Advisors and began contacting certain potential strategic and
financial buyers. Potential buyers were selected based upon their investment
history, existing businesses and financial capacity. Approximately 150 companies
were contacted, over 50 of which signed confidentiality agreements entitling
them to see
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the confidential memorandum prepared by the Company Financial Advisors. The
Company requested preliminary indications of interest from these parties by
March 25, 1999.
The Company received preliminary indications of interest from 15 parties
with price indications ranging from $21 to $27 per Common Share.
During the week of March 29, 1999, based on these preliminary indications
of interest, six companies were selected to enter the second round of bidding.
Subsequently, two of these bidders withdrew from the process and two additional
companies were invited to join the process after increasing their indications of
interest. During the second round, each of the selected bidders conducted
further due diligence, including participating in management presentations,
conducting site visits and having access to detailed information relating to the
Company. Each of the selected companies received a draft merger agreement and
was asked to submit a final bid, including evidence of committed financing and
any comments on the agreement by May 24, 1999.
On April 26, 1999, the Company Board held a meeting at which Company
Counsel reviewed the directors' fiduciary duties in connection with its review
of strategic alternatives and, if the Company Board determined to sell the
Company, in connection with the sale process. In addition, the Company Financial
Advisors updated the Company Board on the status of the solicitation process,
including a review of the preliminary indications of interest received, and an
overview of the mergers and acquisitions market and the aerospace industry
generally.
The Company received final bids from six parties -- four all-cash offers
(ranging from $23 to $27.50 per Common Share), one half-stock/half-cash offer
with an aggregate value of $26 per Common Share and one all-stock offer. The
all-stock offer was described by the bidder as representing $28.50 per Common
Share but, as discussed below, was subject to risks and uncertainties that were
deemed to have a negative impact on its potential value to the Company's
stockholders.
On May 25, 1999, the Company Board held a telephonic meeting to discuss the
six outstanding bids. The Board heard presentations from the Company's
management, Company Counsel and the Company Financial Advisors concerning each
of the bids. Based on these presentations and discussions among the directors
and their advisors, the Company Board directed the Company to continue
discussions with the bidders and to seek to clarify and firm up the bids. In
reviewing the all-stock offer, it was noted that while the then-current market
value of the bid was higher than the price offered by Parent, the ultimate value
was uncertain; As a result of the use of a particular collar structure proposed
by the bidder, the upside potential was capped, and the downside exposure was
significant. In addition, the transaction would have involved a merger of equals
with the Company's stockholders owning approximately 50% of the combined company
and significant uncertainty as to where the shares of the combined company would
trade. In addition, the all-stock proposal contained a requirement for
additional due diligence.
Following the meeting, the Company urged the remaining bidders to improve
their offers in order to differentiate themselves. Three bidders responded to
this request. On May 26, 1999, Parent increased its bid from $27.50 to $28.00
and agreed to waive its financing condition. Another all-cash bidder later
verbally expressed its willingness to increase its bid by reducing the amount of
cash and adding a stock component. The resulting bid, however, represented
aggregate consideration below the $28.00 price offered by Parent. The Company's
Financial Advisors nevertheless considered this bidder to have presented the
second most attractive or 'cover' bid. The all-stock bidder described above
offered an alternative all-cash price that was also below $28.00.
On May 27, 1999, representatives of Parent met with the Company Financial
Advisors and Company Counsel at Company Counsel's offices in New York to discuss
the revised draft of the Merger Agreement submitted by Parent. Although the
parties agreed on certain terms, they did not resolve all material open issues
concerning the draft Merger Agreement. In addition, Parent indicated that it
needed to resolve certain other issues before it was prepared to finalize the
Merger Agreement.
On May 28, 1999, the Company Board held a meeting during which Company
Counsel updated the members by telephone on discussions with Parent's
representatives, and the Company Financial Advisors advised the Company Board by
telephone as to the status of other outstanding bids.
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During the period from May 28, 1999 to June 3, 1999, the Company remained
in contact with other bidders and continued to encourage them to improve their
bids. During this period, the 'cover' bidder indicated its potential willingness
(subject to further business and financial due diligence) to further increase
its offer to a maximum aggregate value of $28 per share, including $6 per Common
Share in stock and $22 per Common Share in cash. When the Board ultimately
considered its alternatives, it considered that this potential offer remained
subject to uncertainty because of the due diligence condition and the fact that
the stock component would be inherently difficult to value.
Discussions between the Company and Parent resumed at Company Counsel's
offices on June 2, 1999, and on the morning of June 4, 1999, after the Company
and Parent had substantially negotiated the form of the Merger Agreement, the
Company entered into an exclusivity agreement with Parent that (i) required
Parent to use reasonable efforts to arrange meetings with certain institutional
shareholders, and to proceed with such meetings, to discuss the proposed
transaction, (ii) prohibited the Company from soliciting, providing information
to or continuing negotiations with or entering into agreements with other
bidders until 8:00 a.m. London time on June 9, 1999 and (iii) stated that the
Company had scheduled a Company Board meeting for June 8, 1999, to consider the
draft Merger Agreement in the event that Parent informed the Company that Parent
was prepared to execute the draft agreement.
On June 4, 1999, members of the Board were provided with the draft Merger
Agreement, a summary of the material terms thereof and other documents relating
to the proposed transaction for their review.
On June 8, 1999 Parent advised the Company that it was prepared to enter
into the Merger Agreement. Thereafter, the Company Board unanimously approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger.
On June 9, 1999 the Company, Parent and Purchaser executed the Merger
Agreement and issued press releases announcing the transaction.
Fairness of the Offer and the Merger
As discussed above, at its meeting held on June 8, 1999, the Company Board
unanimously (i) approved the Offer and the Merger, (ii) determined that the
terms of the Offer and the Merger were fair to, and in the best interests of,
the Company's stockholders and (iii) determined to recommend that the
stockholders of the Company accept the Offer and tender their Shares to
Purchaser pursuant to the Offer. In making its decision, the Company Board
considered the factors listed below, each of which, in the view of the Company
Board, supported such determinations. The following discussion of factors
considered by the Company Board is not intended to be exhaustive but summarizes
the material factors considered.
(i) The knowledge of the members of the Company Board of various risks
and uncertainties associated with a decision to continue to operate the
Company as an independent entity, including, but not limited to the fact
that recent consolidation in the aerospace industry has produced three
dominant prime contractors: Raytheon Company, The Boeing Company and
Lockheed Martin Corporation. The Company Board noted that these companies
now seek to maximize efficiency by reducing the number of their suppliers
and strengthening ties to those that can provide integrated systems, rather
than individual components. This trend has led to increasing consolidation
among component suppliers. The Company Board also considered potential
environmental and other currently unknown or unquantifiable liabilities
that could affect the Company in the future.
(ii) The fact that the Company and its advisors had undertaken an
extensive process over a three-month period to solicit proposals for
business combinations involving the Company including contacting 150
potential bidders, providing a confidential memorandum to over 50 entities,
receiving 15 indications of interest, conducting extensive due diligence
with a number of parties and ultimately receiving six final bids, which
were clarified and negotiated, and ultimately presented the Company Board
with the opportunity to consider alternative proposals from multiple
bidders and to make a determination as to what was in the best interests of
the Company's stockholders.
(iii) The fact that the Offer Price represents a premium of 4.2% over
the closing price of the Common Shares ($26.875) on the New York Stock
Exchange ('NYSE') on June 8, 1999 (the day
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prior to announcement of the Offer and the Merger). The Company Board
evaluated this premium in light of the extended auction process and the
considerable public speculation regarding the possible sale of the Company
over the months preceding the announcement of the Offer. In particular, the
Company Board noted that the Offer Price represented (a) a premium of
114.4% over the closing price of the Common Shares ($13.06) on December 17,
1998 (the day prior to the receipt of an unsolicited all-cash $18.50
acquisition proposal) and (b) a premium of 58.9% over the closing price of
the Common Shares ($17.625) on February 22, 1999 (the closing price
immediately prior to the Company's announcement that it had engaged the
Company Financial Advisors).
(iv) The Company Board's belief, based upon the process by which bids
were solicited and presentations by Company management and the Company
Financial Advisors, that the per Share price to be paid in the Offer and
the Merger was fair in light of the financial condition, results of
operations, business and prospects of the Company as a separate company.
(v) The written opinions of the Company Financial Advisors, dated June
9, 1999, that, as of the date of such opinions and based on and subject to
certain assumptions and qualifications stated in the opinions, the
consideration to be paid in the Offer and the Merger was fair to holders of
the Shares from a financial point of view, and the analyses presented to
the Company Board by the Company Financial Advisors with respect thereto.
See 'Opinions of Company Financial Advisors.'
(vi) The fact that the Offer Price is payable in cash, thereby
eliminating any uncertainties in valuing the consideration.
(vii) The fact that the Offer will not be consummated unless the
Shares tendered pursuant to the Offer, together with Shares beneficially
owned by Parent, represent at least a majority of the outstanding Common
Shares on a fully-diluted basis.
(viii) The terms and conditions of the Offer, the Merger and the
Merger Agreement, including provisions that no change may be made without
the prior written consent of the Company that (a) waives the Minimum
Condition, (b) changes the form of consideration to be paid, (c) decreases
the price per Share or the number of Shares sought in the Offer or (d) adds
conditions to the Offer.
(ix) The likelihood that the Offer and the Merger will be consummated
in light of (a) the fact that the Offer and the Merger are not subject to
any financing condition, (b) the scope of the other conditions to the Offer
and (c) the fact that Parent has entered into financing agreements to
obtain the funds necessary to consummate the Offer and Merger.
(x) The fact that, subject to certain conditions (see The Merger
Agreement; Non-Solicitation), the Merger Agreement does not preclude the
Company Board from withdrawing or modifying its recommendation to
stockholders if it determines in good faith, based on the advice of outside
counsel, that failure to do so would present a reasonable probability of
violating its fiduciary duties. This allows the Company Board flexibility
in considering other offers.
(xi) The provision of the Merger Agreement permitting the Company,
subject to certain conditions (see The Merger Agreement; Non-Solicitation),
to provide information to and negotiate with third parties that have made
an unsolicited bona fide written Acquisition Proposal if the Board
determines in good faith, based on advice of outside counsel, that failure
to do so would present a reasonable probability of violating its fidicuary
duties. This allows the Company Board flexibility in considering other
offers.
(xii) The fact that, subject to payment of Parent's expenses and a
break-up fee as provided in the Merger Agreement, the Company may accept an
unsolicited third party acquisition proposal that the Company Board in good
faith and based on the advice of outside advisors deems to be a Superior
Proposal.
The description set forth above of the factors considered by the Company
Board is not intended to be exhaustive, but summarizes the primary factors
considered. The members of the Company Board evaluated the Offer and the Merger
in light of their knowledge of the business, financial condition and prospects
of the Company, and based upon the advice of financial and legal advisors. In
light of the number and variety of factors that the Company Board considered in
connection with their evaluation of the Offer and the Merger, the Company Board
found it impracticable to assign relative or specific
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weights to the foregoing factors and, accordingly, did not attempt to do so.
Individual members of the Company Board may have given weight to different
factors and may have viewed certain factors more positively or negatively than
others.
Opinions of Company Financial Advisors
Opinion of CIBC World Markets Corp.
At the request of the Company, on June 8, 1999, CIBC World Markets
delivered an oral opinion to the Company Board, which was subsequently confirmed
by a written opinion delivered on June 9, 1999, that, based upon and subject to
the various considerations set forth therein, as of such date, the consideration
to be received by the stockholders of the Company in the Offer and the Merger is
fair to such holders from a financial point of view. No limitations were imposed
by the Company upon CIBC World Markets with respect to investigations made or
procedures followed by CIBC World Markets in rendering its opinion. The full
text of the written opinion of CIBC World Markets dated June 9, 1999, which sets
forth assumptions made, matters considered and limits on the review undertaken
by CIBC World Markets, is attached hereto as Annex A-1. The Company's
stockholders are urged to and should read the opinion in its entirety. The
summary set forth in this Schedule 14D-9 of the CIBC World Markets opinion is
qualified in its entirety by reference to the full text of the opinion attached
hereto as Annex A-1.
CIBC World Markets' opinion addresses only the fairness to the holders of
the Shares, from a financial point of view, of the consideration to be received
by the stockholders of the Company pursuant to the Offer and the Merger and does
not constitute a recommendation to any stockholder as to whether such
stockholder should tender Shares in the Offer or how such stockholder should
vote on any matters relating to the Merger.
In connection with rendering its opinion, CIBC World Markets: (i) reviewed
the Merger Agreement; (ii) reviewed the Company's audited financial statements
for the fiscal years ended October 31, 1996, October 31, 1997, and October 31,
1998; (iii) reviewed certain unaudited financial statements of the Company,
including financial statements for the six months ended April 30, 1999; (iv)
reviewed financial projections of the Company prepared by the Company's
management and held discussions with the senior management with respect to the
business and prospects for future growth of the Company; (v) reviewed public
information concerning the Company; (vi) reviewed the historical market prices
and trading volume for the Common Shares; (vii) reviewed and analyzed certain
publicly available financial data and historical trading price information for
certain public companies they deemed comparable to the Company; (viii) reviewed
and analyzed certain publicly available information for transactions that were
deemed comparable to the Offer and the Merger; and (ix) performed such analyses
and investigations and reviewed such other information as CIBC World Markets
deemed appropriate.
In the course of its review, CIBC World Markets relied upon and assumed,
without independent verification or investigation, the accuracy and completeness
of all of the financial and other information provided to it or discussed with
it by the Company and the Company's employees, representatives and affiliates.
With respect to forecasts of future financial condition and operating results of
the Company provided to CIBC World Markets or discussed with it, CIBC World
Markets assumed, at the direction of the Company's management, without
independent verification or investigation, that such forecasts were reasonably
prepared on bases reflecting the best available information, estimates and
judgments of the Company's management. CIBC World Markets neither made nor
obtained any independent evaluations or appraisals of the assets or liabilities
of the Company. CIBC World Markets' opinion was necessarily based upon the
information available to it and general economic, financial and stock market
conditions and circumstances as they existed on the date of its opinion.
The following is a summary of the analyses performed by CIBC World Markets
in connection with its presentation to the Company Board on June 8, 1999.
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Comparable Companies Analysis
Using publicly available information, CIBC World Markets compared financial
information for the Company with similar information for seven selected
comparable companies that operate in the commercial and military aerospace
markets and are similar in size to the Company. The companies evaluated were:
Curtiss-Wright Corporation, Ducommun Incorporated, Esterline Technologies
Corporation, Kollmorgen Corporation, Moog Incorporated, Triumph Group
Incorporated and Woodward Governor Company. For each of these companies, CIBC
World Markets calculated, among other things: (i) market value of the equity of
the comparable companies as a multiple of their estmated earnings per share
('EPS multiple') based on stock prices as of June 3, 1999, and estimated
earnings per share ('EPS') for calendar year 1999 and 2000 and (ii) firm value
(market value of equity plus net debt) as a multiple of the latest twelve months
('LTM') earnings before interest, taxes, depreciation and amortization
('EBITDA') subject to certain adjustments ('Adjusted EBITDA'). The results of
these calculations were then compared to the results of similar calculations
made with respect to the Company.
This analysis showed that, based upon the Offer Price, the Company's
estimated EPS multiples for calendar years 1999 and 2000 of 12.8x and 11.6x,
respectively, were both higher than the selected comparable companies range of
8.1x to 11.1x, and 7.5x to 8.9x, respectively. The multiple of the Company's
firm value (the value of the equity, based upon the Offer Price, plus net debt)
to LTM Adjusted EBITDA was higher than the selected comparable companies range
of 3.7x to 7.4x. Using the multiples of the selected comparable companies, this
analysis produced a range of per Common Share equity values between $16.18 and
$23.87.
Discounted Cash Flow Analysis
Using a discounted cash flow analysis based primarily on forecasts provided
by Company management, CIBC World Markets estimated the present value of the
future streams of after-tax cash flows that the Company could produce through
October 31, 2004. In this analysis, CIBC World Markets estimated the terminal
value multiple of 9.5 to 11.8 times the Company's estimated unlevered after-tax
income for the twelve months ended October 31, 2004. The after-tax cash flows
and terminal values were discounted to present values using a rate of 10.5%
(which was based on an analysis of the weighted average cost of capital of peer
companies). The range of terminal value multiples was based on an assumption
that cash flows after 2004 would equal the unlevered after-tax net income
growing at 0 to 2% per year and discounted at 10.5%. After deducting the net
debt from the present value of after-tax cash flows and terminal values, this
analysis produced a range of per Common Share equity values of between $25.21
and $29.91.
Comparable Precedent Transactions Analysis
CIBC World Markets compared the financial terms of the Offer and the Merger
to the financial terms, to the extent publicly available, of ten transactions
CIBC World Markets believed to be comparable.
The ten recent transactions occurred within the aerospace market over the
past two years and included the following: Wyman Gordon Company's acquisition by
Precision Castparts Corp.; Sundstrand Corp.'s acquisition by United Technologies
Corp.; Coltec Industries' acquisition by BF Goodrich; Kaynar Technologies Inc.'s
acquisition by The Fairchild Corporation; Aeroquip Vickers Inc.'s acquisition by
Eaton Corp.; TransDigm Inc.'s acquisition by Odyssey Investment Partners;
DeCrane Aircraft Holdings' acquisition by DLJ Merchant Banking Fund; SMR
Aerospace, Inc.'s acquisition by B/E Aerospace; Aircraft Modular Products,
Inc.'s acquisition by B/E Aerospace; and Rohr, Inc.'s acquisition by BF
Goodrich.
For each of these transactions, CIBC World Markets calculated the firm
value to LTM EBITDA and the aggregate purchase price of equity to LTM net income
for the comparable transactions and compared these to similar multiples
determined for the Company based on the Offer Price. The Company's firm value to
LTM Adjusted EBITDA multiple was within the comparable selected transaction
range of 7.3x to 9.9x (which excluded the high and the low multiples). The
analysis also
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showed that the Company's aggregate purchase price of equity to LTM net income
multiple of 17.6x was within the selected comparable transaction range of 11.8x
to 23.3x (which excluded the high and the low multiples). Using the multiples
for the selected precedent transactions, this analysis produced a range of per
Common Share equity values of between $21.92 to $35.66.
The foregoing is a summary of the financial analyses used by CIBC World
Markets in connection with rendering its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to a partial
analysis or summary description. CIBC World Markets believes that its analyses
must be considered as a whole and that selecting portions of its analyses,
without considering the analyses taken as a whole, would create an incomplete
view of the process underlying the analyses set forth in the opinion. In
addition, CIBC World Markets considered the results of all such analyses and did
not assign relative weights to any of the analyses, so that the ranges of
valuations resulting from any particular analysis described below should not be
taken to be CIBC World Markets' view of the Company or the combined entity. No
company used in the comparable company analyses summarized above is identical to
the Company and no transaction used in the comparable transaction analysis is
identical to the Offer and the Merger. Any analysis of the fairness of the Offer
and the Merger, from a financial point of view, to the stockholders of the
Company involves complex considerations and judgments concerning differences in
the potential financial and operating characteristics of the comparable
companies and transactions and other factors in relation to the trading and
acquisition values of comparable companies. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than those suggested by such
analyses. As described above, CIBC World Markets' opinion and the related
presentation to the Company Board on June 8, 1999 was one of many factors taken
into consideration by the Company Board in making its determination to approve
the Merger Agreement. The foregoing summary does not purport to be a complete
description of the analyses performed by CIBC World Markets.
CIBC World Markets was selected by the Company because of its familiarity
with the Company and its business and CIBC World Markets' qualifications and
expertise in the aerospace industry and in providing valuations of businesses
and securities in connection with acquisitions and mergers, underwritings,
secondary distributions of securities, private placements and valuations for
other purposes. In its ordinary course of business, CIBC World Markets and its
affiliates may actively trade securities of the Company and Parent for their own
accounts and for the accounts of their customers and, accordingly may at any
time hold long or short positions in such securities.
Opinion of Credit Suisse First Boston Corporation
On June 8, 1999, CSFB made a presentation to the Company Board in
connection with the delivery of its oral opinion as to the fairness, from a
financial point of view, of the Offer Price. This opinion was confirmed in
writing on June 9, 1999. Stockholders are strongly encouraged to read the full
text of the CSFB opinion, attached as Annex A-2 hereto, which sets forth the
procedures followed, assumptions and qualifications made, matters considered and
limitations on the review undertaken by CSFB.
The CSFB opinion was provided to the Company Board for its information in
connection with its consideration of the Offer and the Merger and does not
constitute a recommendation to any stockholder of the Company as to whether such
stockholder should tender shares pursuant to the Offer or how such stockholder
should vote with respect to the Merger. The summary of the CSFB opinion set
forth herein is qualified in its entirety by reference to the full text of the
CSFB opinion set forth as Annex A-2 hereto and is incorporated herein by
reference.
In preparing the CSFB opinion, CSFB performed a variety of financial and
comparative analyses, including those described below. The summary of CSFB's
analyses set forth below does not purport to be a complete description of the
analyses underlying the CSFB opinion or the presentation made by CSFB to the
Company Board.
The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances, and, therefore, such an opinion is not readily susceptible to
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partial analysis or summary description. In arriving at its opinion, CSFB did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, CSFB believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying the CSFB opinion.
In performing its analyses, CSFB made numerous assumptions with respect to
the Company, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
the Company. No company, transaction or business used in such analyses as a
comparison is identical to the Company or the proposed Offer and the Merger, nor
is an evaluation of the results of such analyses entirely mathematical; rather,
such analyses involve complex considerations and other factors that could affect
the acquisition, public trading or other values of the companies, business
segments or transactions being analyzed. Any estimates contained in the analyses
performed by CSFB are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Additionally, estimates of the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which such
businesses or securities might actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. In addition, the
CSFB opinion and CSFB's presentation to the Company Board were among several
factors taken into consideration by the Company Board in making its
determination to approve the Offer and the Merger Agreement. Consequently, the
CSFB analyses described below should not be viewed as, and were not,
determinative of the opinion of the Company Board or the Company's management
with respect to the Offer and the Merger Agreement.
In arriving at its opinion, CSFB reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. CSFB also reviewed certain other information, including
financial forecasts, provided to it or confirmed by the Company, and met with
the management of the Company to discuss the business and prospects of the
Company. CSFB also considered certain financial and stock market data of the
Company, compared that data with similar data for other publicly held companies
in businesses similar to those of the Company and considered the financial terms
of certain other business combinations and other transactions which have
recently been effected. In addition, CSFB considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria that it deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on such
information being complete and accurate in all material respects. With respect
to financial forecasts, CSFB assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
CSFB was not requested to make, and did not make, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company,
nor was it furnished with any such evaluations or appraisals. CSFB was requested
to, and did, solicit third party indications of interest in acquiring all or any
part of the Company. No other limitations were imposed on CSFB in connection
with its opinion. The CSFB opinion is necessarily based upon financial,
economic, market, exchange rate and other conditions as they existed and could
be evaluated on the date thereof.
CSFB set forth several different valuation analyses in its presentation to
the Company Board. Using the results of these analyses, as described below, CSFB
determined that the appropriate enterprise value range of the Company's ongoing
operations was $350 million to $400 million. CSFB then (i) added option proceeds
to this range, and (ii) subtracted from this range, the Company's net debt
(calculated by subtracting the Company's cash from the Company's total
outstanding debt, assuming all of the Convertible Notes have been converted to
equity, and adding to this amount the Company's estimated transactions costs).
This calculation resulted in a total equity value of the Company ranging from
approximately $336 million to $386 million, or approximately $25.15 to $28.89
per Share. The following is a summary of the analyses used to determine the
enterprise value and implied equity value per Common Share of the Company as set
forth in the presentation made by CSFB to the Company Board.
15
<PAGE>
Discounted Cash Flow Analysis
CSFB performed a discounted cash flow analysis for fiscal years 1999 to
2008 to estimate the present value of the unlevered free cash flows that the
Company's ongoing operations would generate if the Company were to achieve
management's forecasts.
The 10-year forecast used in CSFB's discounted cash flow analysis was
prepared using the management's five-year financial forecast for years 1999-2003
and estimates of future trends regarding expected growth rates and margins for
years 2004 to 2008 which were approved by the Company. The forecasts for
1999-2003 are consistent with the summary contained in the Offer to Purchase.
The EBITDA projections thereafter reflect a compound annual growth rate of 4%.
CSFB calculated terminal values for the Company by applying a range of
multiples of EBITDA to the estimated fiscal year 2008 EBITDA. These EBITDA
multiples were selected based on a blend of EBITDA multiple ranges derived from
the comparable companies analysis and the precedent transactions analysis
outlined below. The free cash flow streams and terminal values were then
discounted using a range of discount rates. The discount rate range was selected
based on an analysis of the weighted average costs of capital of peer companies.
Based on this analysis, the enterprise value of the Company's ongoing operations
ranged from $365 million to $420 million with implied equity values per Common
Share of approximately $26.27 to $30.38.
Comparable Companies Analysis
Using publicly available information, CSFB compared selected financial,
operating and stock market data for the Company to corresponding data of
selected companies in the commercial aviation sector, including the following:
Howmet International, Moog Inc., Woodward Governor, Triumph Group, Kollmorgen
Corp., Ducommun Inc. and Curtiss-Wright.
CSFB determined that the Common Shares were most compatible with and
therefore theoretically most likely to trade in line with Moog Inc., Woodward
Governor, Triumph Group and Ducommun (the 'Comparable Companies'). CSFB's
analysis of the Comparable Companies indicated the enterprise values for the
Company ranging from $300 million to $330 million which implied multiples of
estimated 1999 fiscal year end EBITDA of 5.9x to 6.5x. Based on this comparable
companies analysis, CSFB determined that the Company's theoretical public market
value should range between $21.40 to $23.65 per Common Share. However, the
Common Share price on June 4, 1999 was $26.81. CSFB determined that the Shares
were more highly valued by the public markets than the Company's peers and that
the Common Share price reflected continued speculation within the financial
markets regarding a possible sale of the Company.
Precedent Transactions Analysis
Using publicly available information, CSFB analyzed the purchase prices and
implied transaction multiples paid in the following selected transactions
(target/acquiror): Wyman-Gordon/Precision Castparts, Sundstrand/United
Technologies, Aeroquip-Vickers/Eaton, LucasVarity/TRW, Kaynar
Technologies/Fairchild Corp., TransDigm/Odyssey Investment Partners, Coltec/BF
Goodrich, SMR Aerospace/B/E Aerospace, DeCrane Aircraft/Donaldson Lufkin
Jenrette, Aircraft Modular Products/B/E Aerospace, MAG Aerospace Industries,
Inc./Zodiac SA, Rohr/B.F. Goodrich. Among these transactions, CSFB indicated
that TransDigm and Coltec were the most comparable acquisition targets to the
Company. Based on the enterprise value to EBITDA multiples paid in these
transactions and an evaluation of the prospects and condition of the Company's
business relative to the most comparable acquisition targets in particular, CSFB
then calculated an imputed enterprise value range for the Company's ongoing
operations of approximately $375 million to $425 million, which implied
estimated 1999 fiscal year end EBITDA multiples of 7.5x to 8.5x and equity
values per Common Share of $27.02 to $30.76.
16
<PAGE>
Leveraged Buyout Analysis
Using the Management Case projections, CSFB performed a leveraged buyout or
'stand alone' financial value analysis to determine, under current market
conditions, the maximum price per Common Share that a stand alone financial
purchaser could theoretically pay for the Company. In performing this analysis
CSFB assumed that acquisition financing could be obtained in the high yield and
bank finance market and that internal rates of return of approximately 20% to
25% on equity invested would be required by leveraged buyout investors within
five years. Using this analysis, CSFB calculated an imputed stand alone
enterprise value of $310 million to $330 million and equity values per Common
Share from $22.50 to $24.00 in a leveraged transaction.
ITEM 5 -- PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained CIBC World Markets Corp. and Credit Suisse First
Boston Corporation as its financial advisors in connection with the Merger and
related matters.
Pursuant to engagement letters dated January 6, 1999, and entered into
separately between the Company and each Financial Advisor (the 'Engagement
Letters'), the Company has agreed to pay each Financial Advisor for its
financial advisory services in connection with the transaction contemplated by
the Merger Agreement the following fees: (a) an engagement fee of $75,000,
payable in cash on the date of the engagement, plus (b) a transaction fee equal
to (i) 0.75% of the Transaction Value up to and including $304 million, plus
(ii) 1.875% of the Transaction Value in excess of $304 million, payable in cash
on the closing date of a Transaction if, during the term of this engagement or
within a certain period thereafter, a Transaction (as defined below) is
consummated or an agreement is entered into that subsequently results in a
Transaction. The Company also agreed to pay each Financial Advisor an opinion
fee of $450,000, payable in cash upon the earlier of the oral or written
delivery of the opinion. The engagement fees and the opinion fees, to the extent
previously paid, will be credited against the transaction fees.
The Company has agreed to reimburse the Financial Advisors for their
reasonable out-of-pocket expenses, including the fees and expenses of their
legal counsel, incurred in connection with the engagement; provided, however,
that neither Financial Advisor shall incur fees and expenses of its legal
counsel in excess of $50,000 without the approval of the Company. In addition,
the Company has agreed to indemnify the Financial Advisors against certain
liabilities, including certain liabilities under the federal securities laws,
relating to, or arising out of its engagement, or to contribute to payments
either Financial Advisor may be required to make in respect thereof.
For the purposes of the Engagement Letters, the following terms have the
following meanings:
'Transaction' means any sale or other transfer, directly or indirectly and
whether in one or a series of transactions, of all or a significant portion of
the assets or securities of the Company or any extraordinary corporate
transaction involving a change in control of the Company, regardless of the form
or structure of such transaction.
'Transaction Value' means the total value of all consideration (including
cash, securities or other property) paid or received or to be paid or received,
directly or indirectly, in connection with a Transaction in respect of the
assets of the Company or the outstanding securities of the Company, plus the
amount of any debt (including capitalized leases) of the Company outstanding or
assumed, refinanced or extinguished in connection with a Transaction, and
amounts payable in connection with a Transaction in excess of those amounts
payable in the ordinary course in respect of employment or consulting
agreements, agreements not to compete or similar agreements.
In May 1998, CIBC World Markets arranged and underwrote a credit facility
for the Company, which included an affiliate of CIBC World Markets as a lender.
The facility was successfully syndicated with a small group of lenders. In
connection with that facility, CIBC World Markets was paid fees for their
services.
In 1996, CSFB acted as financial advisor to the Company in its acquisition
of Xyplex, Inc. from Raytheon Company. In connection with that acquisition, CSFB
was paid fees for their services.
17
<PAGE>
Except as set forth above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations to security holders on its behalf concerning
the Offer or the Merger.
ITEM 6 -- RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Other than the gift by Joseph F. Alibrandi on June 3, 1999, of an
aggregate of 4,800 Common Shares to his six grandchildren, there have been no
transactions in Shares that were effected during the past 60 days by the Company
or, to the best knowledge of the Company, any executive officer, director,
affiliate or subsidiary of the Company.
(b) Joseph F. Alibrandi has agreed to tender all of his Shares pursuant to
the Offer. To the best of the Company's knowledge, all of the Company's other
executive officers and directors who own Shares currently intend to tender all
of their Shares pursuant to the Offer.
ITEM 7 -- CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer that relates
to or would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary thereof, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary thereof, (iii) a tender offer for or other acquisition of securities
by or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
(b) Except as described in this Schedule 14D-9, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in Item 7(a) above.
ITEM 8 -- ADDITIONAL INFORMATION TO BE FURNISHED.
Information provided pursuant to Rule 14f-1 under the Exchange Act. The
Information Statement attached as Annex B to this Statement is being furnished
to the Company's stockholders in connection with the designation by the
Purchaser of persons to the Company Board other than at a meeting of the
Company's stockholders, and such information is incorporated herein by
reference.
ITEM 9 -- MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Letter to Stockholders of the Company dated June 15, 1999
(a)(2) Press Release issued by the Company dated June 9, 1999
(a)(3) Opinions of CIBC World Markets Corp. and Credit Suisse First Boston Corporation dated June 9, 1999
(included as Annexes A-1 and A-2 respectively)
(b) None
(c)(1) Agreement and Plan of Merger dated as of June 9, 1999 between Parent and the Company
(c)(2) Letter Agreement dated June 4, 1999, from the Company to Parent
(c)(3) Letter dated June 9, 1999, from Joseph F. Alibrandi to Parent
</TABLE>
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 15, 1999
By: /s/ LYNNE M. O. BRICKNER
....................................
LYNNE M. O. BRICKNER
VICE PRESIDENT, SECRETARY AND GENERAL
COUNSEL
19
<PAGE>
ANNEX A-1
CIBC WORLD MARKETS CORP.
One World Financial Center
200 Liberty Street
New York, NY 10281
[LOGO] Tel: 212-667-7000
CIBC Fax: 800-999-6726
World Markets
The Board of Directors June 9, 1999
Whittaker Corporation
1955 North Surveyor Avenue
Simi Valley, CA 93063
Members of the Board:
You have asked CIBC World Markets Corp. (*CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness to the
holders of the common and preferred stock of Whittaker Corporation
("Whittaker"), from a financial point of view, of the consideration to be
received pursuant to the Merger Agreement, dated as of June 9, 1999 (the "Merger
Agreement"), by and among Meggitt PLC ("Meggitt"), a wholly owned subsidiary of
Meggitt ("Acquisition Sub"), and Whittaker. The Merger Agreement provides for,
among other things, the commencement by Acquisition Sub of a tender offer to
purchase all outstanding shares of common stock, par value $0.01 per share, of
Whittaker and all outstanding shares of preferred stock, par value $1.00 per
share, of Whittaker (collectively, the "Whittaker Stock" and, such tender offer,
the "Tender Offer"). The offer price provided in the Merger Agreement is $28.00
per share for each share of common stock and $9,142.87 for each share of
preferred stock (rep resenting 326.531 - the conversion basis for the preferred
stock - times $28.00), in each case, net to the seller in cash (the "Cash
Consideration"). Subsequent to the Tender Offer, Acquisition Sub will merge with
and into Whittaker. Pursuant to the merger each outstanding share of Whittaker
Stock not previously tendered will be converted into the right to receive the
applicable Cash Consideration (the "Transaction").
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed Whittaker's audited financial statements for the fiscal years
ended October 31, 1996, October 31, 1997, and October 31, 1998;
(c) reviewed certain unaudited financial statements of Whittaker, including
financial statements for the six months ended April 30, 1999;
(d) reviewed financial projections of Whittaker prepared by Whittaker's
management and held discussions with the senior management with respect to
the business and prospects for future growth of Whittaker;
(e) reviewed public information concerning Whittaker;
(f) reviewed the historical market prices and trading volume for Whittaker
common stock;
(g) reviewed and analyzed certain publicly available financial data and
historical trading price information for certain public companies we
deemed comparable to Whittaker;
(h) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Transaction; and
(i) performed such analyses and investigations and reviewed such other
information as we deemed appropriate.
<PAGE>
The Board of Directors
Whittaker Corporation CIBC WORLD MARKETS CORP.
June 9, 1999
Page 2
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by Whittaker
and its employees, representatives and affiliates. With respect to forecasts of
future financial condition and operating results of Whittaker provided to or
discussed with us, we assumed, at the direction of Whittaker's management,
without independent verification or investigation, that such forecasts were
reasonably prepared on bases reflecting the best available information,
estimates and judgments of Whittaker's management. We have neither made nor
obtained any independent evaluations or appraisals of the assets or the
liabilities of Whittaker. The Opinion rendered herein does not constitute a
recommendation of the Transaction over any other alternative transaction which
may be available to the Company. We are not expressing any opinion as to the
underlying valuation, future performance or long-term viability of Whittaker,
or the price at which Whittaker Stock will trade subsequent to announcement of
the Transaction. Our Opinion is necessarily based on the information available
to us and general economic, financial and stock market conditions and
circumstances as they exist and can be evaluated by us on the date hereof. It
should be understood that, although subsequent developments may affect this
Opinion, we do not have any obligation to update, revise or reaffirm the
Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as co-financial advisor to Whittaker in connection with the
Transaction and to the Board of Directors of Whittaker in rendering this Opinion
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Transaction. We also will receive a fee upon
the delivery of this Opinion. In the ordinary course of business, CIBC World
Markets and its affiliates may actively trade securities of Whittaker and
Meggitt for their 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 arranged and underwritten a credit facility for Whittaker,
which included an affiliate of ours as a lender. In connection with that
facility, we were paid fees for our services.
Based upon and subject to the foregoing, and such other factors as we deemed
relevant, it is our opinion that, as of the date hereof, the Cash Consideration
to be received by the holders of Whittaker Stock in the Transaction is fair to
such holders from a financial point of view. This Opinion is for the use of the
Board of Directors of Whittaker and does not constitute a recommendation to any
stockholder as to whether or not such stockholder should tender shares of
Whittaker Stock in the Tender Offer or how such stockholder should vote on any
matters relating to the Merger.
Neither this Opinion nor the services provided by CIBC World Markets in
connection herewith may be publicly disclosed or referred to in any manner by
Whittaker without the prior written approval of CIBC World Markets, except that
this Opinion may be included in its entirety and references to this Opinion may
be included in any prospectus, proxy statement or solicitation/recommendation
statement required to be distributed to the Company's shareholders in connection
with the Transaction so long as such inclusion or reference is in form and
substance acceptable to CIBC World Markets and our counsel.
Very truly yours,
/s/ CIBC World Markets Corp.
CIBC WORLD MARKETS CORP.
<PAGE>
ANNEX A-2
[LOGO] CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
Board of Directors
Whittaker Corporation
1955 N. Surveyor Avenue
Simi Valley, CA 93063-3386
June 9, 1999
Dear Sirs:
You have asked us to advise you with respect to the fairness to the stockholders
of Whittaker Corporation (the "Company") from a financial point of view of the
consideration to be received by such stockholders pursuant to the terms of the
Acquisition Agreement, dated as of June 9, 1999 (the "Acquisition Agreement"),
among the Company, Meggitt PLC ("Meggitt") and Meggitt Acquisition Inc. (the
"Sub"), a wholly owned subsidiary of Meggitt. The Acquisition Agreement
provides, among other things, that the Sub will commence, as soon as
practicable, a cash tender offer for all outstanding shares of common stock, par
value $0.01 per share (the "Common Shares") including associated preferred stock
purchase rights at a price of $28.00 per Common Share, net to the seller (the
"Offer"); promptly following the consummation of the Offer, the merger (the
"Merger") of the Sub with and into the Company pursuant to which the Company
will become a wholly owned subsidiary of Meggitt and each outstanding Common
Share of the Company will be converted into the right to receive $28.00 in cash.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company, as well as the Acquisition
Agreement. We have also reviewed certain other information, including financial
forecasts, provided to us or confirmed by the Company and have met with the
Company's management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
<PAGE>
[LOGO]
Page 2
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
it being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached third parties to solicit
indications of interest in a possible acquisition of the Company and held
preliminary discussions prior to the date hereof with certain of these parties
who entered into a Confidentiality Agreement with the Company.
We have acted as financial advisor to the Board of Directors in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. We will also receive
a fee for rendering this opinion. In the past, we have performed certain
investment banking services for the Company and have received customary fees for
such services.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and Meggitt for our and such
affiliates' own accounts and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Offer and the Merger, does
not constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed Merger, or whether or not such stockholder should
tender shares pursuant to the Offer and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes, without our
prior written consent.
<PAGE>
[LOGO]
Page 3
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the stockholders of the Company in
the Offer and the Merger is fair to such stockholders from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Craig Oxman
----------------------------------------
Craig Oxman
Managing Director
<PAGE>
ANNEX B
WHITTAKER CORPORATION
1955 N. SURVEYOR AVENUE,
SIMI VALLEY, CALIFORNIA 93063
INFORMATION STATEMENT PROVIDED PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
GENERAL
This information statement (the 'Information Statement') is being mailed on
or about June 15, 1999 as part of the Solicitation/Recommendation Statement on
Schedule 14D-9 (the 'Schedule 14D-9') to holders of record of shares of common
stock, par value $0.01 per share (the 'Common Shares'), and Series D
Participating Convertible Preferred Stock, par value $1.00 per share (the
'Preferred Shares'), of Whittaker Corporation (the 'Company'). The Common Shares
and the Preferred Shares are collectively referred to herein as the 'Shares.'
You are receiving this Information Statement in connection with the possible
election of persons designated by Meggitt PLC ('Parent') to the Board of
Directors of the Company (the 'Company Board') other than at a meeting of the
stockholders of the Company. Such election would occur pursuant to the Agreement
and Plan of Merger (the 'Merger Agreement'), dated as of June 9, 1999, among
Parent, Meggitt Acquisition Inc. ('Purchaser'), and the Company. The Merger
Agreement is more fully described under Item 3 of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, of which this Annex B
is a part. Capitalized terms used and not defined in this Annex B have the
meanings assigned to them in the Schedule 14D-9.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and Rule 14f-1
promulgated thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
June 15, 1999. The Offer currently is scheduled to expire at 12:00 midnight, New
York City time, on July 13, 1999, at which time, if the Offer is not extended
and all conditions to the Offer have been satisfied or waived, the Purchaser is
obligated to purchase all Shares validly tendered pursuant to the Offer and not
withdrawn.
If the Merger Agreement is terminated or if Purchaser does not accept the
Shares tendered for payment, then Purchaser will not have any right to designate
directors for election to the Company Board.
THE PARENT DESIGNEES
Promptly upon the acceptance for payment pursuant to the Offer of a number
of Shares that satisfies the Minimum Condition as defined in the Merger
Agreement, Parent shall be entitled to designate the number of directors,
rounded up to the nearest whole number, on the Company Board that equals the
product of (i) the total number of directors on the Company Board and (ii) the
percentage that the number of Common Shares beneficially owned by Parent bears
to the total number
of Common Shares outstanding on a fully diluted basis, and the Company shall
take all action necessary to cause Parent's designees to be elected or appointed
to the Company Board, including, without limitation, increasing the number of
directors, and seeking and accepting resignations of incumbent directors. At
such time, the Company will also use its best efforts to cause individuals
designated by Parent to constitute the number of members, rounded up to the
nearest whole number, on (i) each committee of the Company Board and (ii) each
board of directors of each subsidiary of the Company (and each committee
thereof) that represents the same percentage as such individuals represent on
the Company Board. Notwithstanding the foregoing, the Parent and the Company
shall use their reasonable efforts to ensure that at least two members of the
Company Board as of the date hereof who are not employees of the Company (the
'Continuing Directors') shall remain members of the Company Board until the
Effective Time.
<PAGE>
The Company's obligations to appoint Parent's designees to the Company
Board shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors, as Section 14(f) and Rule 14f-1 require in order to
fulfill its obligations under this Section. Parent shall supply to the Company
in writing and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
Following the election or appointment of Parent's designees pursuant to
Section 1.03(a) of the Merger Agreement and until the Effective Time, the
approval of a majority of the Continuing Directors shall be required to
authorize (and such authorization shall constitute the authorization of the
Company Board and no other action on the part of the Company, including any
action by any other director of the Company, shall be required to authorize) any
termination of the Merger Agreement by the Company, any amendment of the Merger
Agreement requiring action by the Company Board, any extension of time for
performance of any obligation or action under the Merger Agreement by Parent or
Purchaser and any waiver of compliance with any of the agreements or conditions
contained in the Merger Agreement for the benefit of the Company.
Pursuant to the provisions of the Merger Agreement described in the
Schedule 14D-9, Parent may designate from among the persons identified below the
persons to be elected to the Company Board (the 'Parent Designees'). It is
expected that the Parent Designees will assume office promptly upon the
acceptance for payment pursuant to the Offer of a number of Shares that
satisfies the Minimum Condition, which the Company expects will be immediately
thereafter, and that they will thereafter constitute at least a majority of the
Company Board. Parent has informed the Company that each of the Parent Designees
has consented to act as a director, if so designated.
None of the executive officers and directors of Parent or the Purchaser
currently is a director of, or holds any position with, the Company. The Company
has been advised that, to the best knowledge of Parent and the Purchaser, none
of Parent's or the Purchaser's directors, executive officers, affiliates or
associates beneficially owns any equity securities, or rights to acquire any
equity securities, of the Company and none has been involved in any transactions
with the Company or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the 'Commission') other
than those described herein.
Set forth in the table below are the name, age and present principal
occupation or employment for each of the persons who may be designated by Parent
as the Parent Designees. Unless otherwise indicated, the business address for
each individual listed below is Farrs House, Cowgrove, Wimborne, Dorset BH2I
4EL, United Kingdom. Each of such persons is a citizen of the United Kingdom
other than Bennett Moore, who is a citizen of the United States. 'Parent
Designees' shall mean all of the individuals set forth below.
<TABLE>
<CAPTION>
NAME OF PARENT DESIGNEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ----------------------------------------- ---- ----------------------------------------------------------------
<S> <C> <C>
Douglas B. Gemmell ...................... 62 Executive Director, Meggitt PLC. He is also Managing Director of
Meggitt Avionics. Joined Meggitt PLC in August 1992.
Philip E. Green ......................... 42 Group Corporate Affairs Director, Meggitt PLC. He is also
Company Secretary. He is an executive officer but is not on the
Board. Joined Meggitt PLC in July 1994. Previously employed by
British Aerospace PLC.
Eric J. Lewis ........................... 51 Executive Director, Meggitt PLC. He is also Managing Director,
Meggitt Aerospace Components. Joined Meggitt PLC in June 1991.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME OF PARENT DESIGNEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ----------------------------------------- ---- ----------------------------------------------------------------
<S> <C> <C>
Bennett F. Moore ........................ 47 President of Meggitt-USA. Mr. Moore has been employed by
Meggitt-USA Inc. Meggitt-USA since 1986.
540 N. Commercial St.
Manchester, NH 03101-1146
Michael A. Stacey ....................... 60 Chief Executive, Meggitt PLC. Joined Meggitt PLC in 1990.
Terence Twigger ......................... 49 Group Finance Director, Meggitt PLC. Joined Meggitt PLC in July
1993.
</TABLE>
Any other officer or director of Parent or Purchaser listed in Schedule I to the
Offer to Purchase dated June 15, 1999, filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 of Parent and Purchaser may also be designated by
Purchaser as a Parent Designee. The information with respect to the Parent
Designees has been supplied by Purchaser for inclusion herein.
CERTAIN INFORMATION CONCERNING THE COMPANY
The authorized capital stock of the Company consists of 40,000,000 shares
of common stock, par value $.01 per share, and 5,000,000 shares of preferred
stock, par value $1.00 per share, of which 10,000 are designated as Series D
Participating Convertible Preferred Stock and 150,000 are designated as Series E
Participating Convertible Preferred Stock. As of the close of business on June
4, 1999, (i) 11,440,452 Common Shares were issued and outstanding, stock options
to purchase an aggregate of 851,152 Common Shares under the Company's Long-Term
Stock Incentive Plan (1989) and 1992 Stock Option Plan for Non-Employee
Directors (collectively, the 'Option Plans') were outstanding, 883,912 Common
Shares were reserved for issuance upon conversion of the 7% convertible
subordinated notes due May 1, 2005 of the Company, and 188,467 Common Shares
were reserved for issuance upon conversion of the Series D Participating
Convertible Preferred Stock, and (ii) 577.18 shares of Series D Participating
Convertible Preferred Stock were issued and outstanding, and 150,000 shares of
Series E Participating Cumulative Preferred Stock were reserved for issuance
upon exercise of the Rights associated with the Common Shares.
CURRENT MEMBERS OF THE COMPANY BOARD
To the extent that the Company Board will consist of persons who are not
among the Parent Designees, the Company Board is expected to consist of persons
who are currently directors of the Company who have not resigned.
The Company Board is a classified board presently consisting of seven
directors. Directors are divided into three classes, each consisting, as nearly
as possible, of one-third of the total number of directors. Class I, Class II
and Class III directors hold office for 'staggered' terms which expire,
respectively, in 2002, 2000 and 2001, in each case until their respective
successors are elected at the annual meeting of stockholders to be held in each
such year. Persons elected as directors are elected for a term of three years.
3
<PAGE>
The following table sets forth as to each director, his age, year first
elected a director and business experience. This information was provided to the
Company by the respective director.
<TABLE>
<CAPTION>
DIRECTOR CLASS OF BUSINESS EXPERIENCE
DIRECTORS AGE SINCE DIRECTOR AND CURRENT DIRECTORSHIPS
- --------------------------------- ---- --------- --------- -------------------------------------------------
<S> <C> <C> <C> <C>
Joseph F. Alibrandi.............. 70 1970 I Mr. Alibrandi was elected Chairman of the Board
in 1985 and was Chief Executive Officer from 1974
until December 31, 1994. From 1970 until his
election as Chairman of the Board of Whittaker,
he served as President of the Company. He was
elected President again in 1991 and served in
such capacity until 1993. He became Chief
Executive Officer and President of the Company
again in September 1996. From 1991 to 1997, he
also was Chairman of the Board of BioWhittaker,
Inc. He was BioWhittaker's Chief Executive
Officer from 1991 to 1992.
George H. Benter, Jr............. 57 1989 III Since 1992, Mr. Benter has been President and
Chief Operating Officer of City National Bank.
From 1991 until 1992, he was Vice Chairman and
Chief Credit Officer of Security Pacific
Corporation (which merged in 1992 with
BankAmerica Corporation). From 1987 until 1991,
he was Vice Chairman of Security Pacific National
Bank (which merged in 1992 with Bank of America
N.T.&S.A.), and held numerous other positions
with Security Pacific prior to 1987.(1), (2)
George Deukmejian................ 71 1996 III Since 1991, Mr. Deukmejian has been a partner of
Sidley & Austin, Los Angeles, California. From
1983 to 1991 he served as the Governor of the
State of California.(2), (3)
Jack L. Hancock.................. 69 1993 II Mr. Hancock was an Executive Vice President of
Pacific Bell from 1987 until his retirement in
1993. From 1982 to 1987, he was with Wells Fargo
Bank as an Executive Vice President. He was
Senior Vice President at Chemical Bank (now Chase
Manhattan Bank, N.A.) from 1978 to 1982. He
retired from the U.S. Army as a Major General in
1978.(1), (2)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR CLASS OF BUSINESS EXPERIENCE
DIRECTORS AGE SINCE DIRECTOR AND CURRENT DIRECTORSHIPS
- --------------------------------- ---- --------- --------- -------------------------------------------------
<S> <C> <C> <C> <C>
Edward R. Muller................. 47 1993 II Since 1993, Mr. Muller has been President and
Chief Executive Officer of Edison Mission Energy.
From 1992 until 1993, he was the Company's Chief
Financial Officer. He served as the Company's
Chief Administrative Officer from 1988 until
1992. Mr. Muller was appointed General Counsel
and elected Vice President and Secretary of the
Company in 1985, and served in such capacities
until 1993. From 1991 until 1993, Mr. Muller was
also Vice President, General Counsel and
Secretary of BioWhittaker, Inc. (1), (3)
Gregory T. Parkos................ 69 1984 III Mr. Parkos joined the Company in 1979 and was
elected a Vice President in 1980. He was named an
Executive Vice President and elected to the Board
of Directors in 1984. He was President and Chief
Operating Officer of the Company from 1985 until
his retirement as an officer in 1991. Mr. Parkos
was elected Vice Chairman of the Company in May
1997.(3)
Ronald B. Woodard................ 56 1998 I Mr. Woodard retired in February 1999 from The
Boeing Company where he served as Senior Vice
President of The Boeing Company and President of
Boeing Commercial Airplane Group from December
1993 to September 1998. He was Executive Vice
President, Boeing Commercial Airplane Group, from
March 1993 to December 1993, and from 1991 to
March 1993, was Vice President and General
Manager of the Renton Division, Boeing Commercial
Airplane Group.(2), (3)
</TABLE>
- ------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation and Stock Option Committee of the Board of
Directors.
(3) Member of the Nominating and Governance Committee of the Board of Directors.
The directors serve on the boards of directors of other publicly held
companies as follows: Mr. Alibrandi -- Burlington Northern Santa Fe Corporation,
Catellus Development Corporation and Jacobs Engineering Group Inc.; Mr.
Benter -- City National Bank and The Wet Seal, Inc.; Mr. Deukmejian --
Burlington Northern Santa Fe Corporation and Foundation Health Systems, Inc.;
Mr. Hancock -- MGC Corporation and Union Bank of California; Mr.
Muller -- Global Marine, Inc.; Mr. Parkos -- Cookson PLC; and Mr.
Woodard -- Burlington Northern Santa Fe Corporation.
5
<PAGE>
MANAGEMENT
The following table sets forth the names, ages and positions of the current
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---------------------------------- ---- ------------------------------------------------------------------------
<S> <C> <C>
Joseph F. Alibrandi............... 70 President and Chief Executive Officer
Lynne M. O. Brickner.............. 46 Vice President, Secretary and General Counsel
John K. Otto...................... 45 Vice President, Chief Financial Officer and Treasurer
Roland G. Patitz.................. 63 President, Whittaker Controls, Inc.
John J. Stobie.................... 45 President, Safety Systems Division
</TABLE>
Mr. Alibrandi joined Whittaker in July 1970 as President and Director and
served as Chief Executive Officer from November 1974 through January 1995. He
became Chairman of the Board in December 1985 and has continuously served in
such capacity since then. He was re-appointed President and Chief Executive
Officer on September 30, 1996.
Ms. Brickner joined Whittaker in September 1995 as Assistant General
Counsel and Assistant Vice President. She was named Secretary and General
Counsel in September 1996 and Vice President in October 1996. Prior to joining
Whittaker, Ms. Brickner was a practicing attorney with Kaye, Scholer, Fierman,
Hays & Handler since 1990.
Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and
Cash. He was named Asssitant Treasurer in 1986 and Treasurer in 1988. He was
appointed Vice President of the Company in December 1996 and Chief Financial
Officer in 1997.
Mr. Patitz joined Whittaker in 1976 as Vice President of Operations of
Whittaker Controls, Inc. He was named President of Whittaker Controls, Inc. on
December 1, 1997.
Mr. Stobie joined Whittaker Controls in 1977 where he served as Materials
Manager, Manufacturing Manager and Manufacturing Engineering Manager prior to
his appointment in 1995 as Director of Operations of the Company's Safety
Systems Division. In 1996 he was appointed Executive Vice President of
Operations of the Company's Safety Systems Division, and on December 1, 1997, he
was named President of the Safety Systems Division.
Each executive officer of the Company serves at the pleasure of the Company
Board. Compliance with Section 16(a) of the Exchange Act Section 16(a) of the
Securities Exchange Act requires the Company's officers and directors, and
persons who own more than 10 percent of the Company's Common Shares, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission and the New York Stock Exchange. Officers,
directors and greater than 10 percent beneficial owners are required to furnish
the Company with copies of all Forms 3, 4 and 5 which they file.
Based solely on the Company's review of copies of such forms it has
received, the Company believes that all of its officers, directors and greater
than 10 percent beneficial owners have complied with all filing requirements
applicable to them during fiscal 1998, except for (i) one new officer who did
not timely report on Form 4 a transaction in which he elected to transfer
certain Partnership Plan funds into the Whittaker Stock Fund and who filed a
timely amendment on Form 5, and (ii) one new officer who did not timely report
on Form 3 his holdings at the time of election as an executive officer and who
filed a late amendment on Form 5.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables and footnotes thereto set forth information regarding
the beneficial ownership of Common Shares as of June 4, 1999 (the 'Stock Ledger
Date') by (a) each person known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Shares, (b) each of the Company's
directors, (c) each Named Executive Officer (as defined in 'Summary Compensation
Table') and (d) all directors and executive officers of the Company as a group.
Unless otherwise noted in the footnotes, the persons named in the table have
sole voting and investment power with respect to all Common Shares indicated as
beneficially owned by them.
6
<PAGE>
Based on information available to it, the Company believes that the
following persons held beneficial ownership of more than 5% of the outstanding
Common Shares as of the Stock Ledger Date:
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF OWNERSHIP PERCENT OF CLASS(1)
- ------------------------------------------------------------------------ ------------------- -------------------
<S> <C> <C>
Canyon Capital Advisors LLC ............................................ 2,074,550(2) 18.13%
9665 Wilshire Boulevard
Suite 200
Beverly Hills, CA 90212
Blavin & Company, Inc. ................................................. 969,376(3) 8.47%
29621 Northwestern Highway
Southfield, MI 48034
Joseph F. Alibrandi .................................................... 842,783(4) 7.21%
c/o Whittaker Corporation
1955 N. Surveyor Avenue
Simi Valley, CA 93063
Dimensional Fund Advisors Inc. ......................................... 808,700(5) 7.07%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Waveland Partners, L.P. ................................................ 796,732(6) 6.96%
333 West Wacker Drive
Suite 1600
Chicago, IL 60606
</TABLE>
- ------------
(1) At the Stock Ledger Date, 11,440,452 shares were issued and outstanding.
(2) The holder discloses that it holds sole voting power and sole dispositive
power as to the shares reported.
(3) The holder discloses that it holds sole voting power and sole dispositive
power as to the shares reported.
(4) Includes 251,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date. Such shares have been
added to the Common Shares outstanding as of the Stock Ledger Date for the
purpose of computing the percentage of outstanding shares owned by Mr.
Alibrandi but not for any other stockholder listed in this table.
(5) The holder discloses that it holds sole voting power and sole dispositive
power as to the shares reported. The holder has advised the Company that it
disclaims beneficial ownership of such shares.
(6) The holder discloses that it and its affiliated entities have shared voting
power and shared dispositive power as to the shares reported.
7
<PAGE>
The following table sets forth, as of the Stock Ledger Date except where
another date is indicated below, certain information with respect to the
beneficial ownership of the Company's equity securities for each of the
Company's directors, executive officers, and directors and executive officers as
a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
- ---------------------------- ----------------------------------------------- -------------------- -----------
<S> <C> <C> <C>
COMMON STOCK DIRECTORS
Joseph F. Alibrandi 842,783 (2) 7.21%
George H. Benter, Jr. 16,955 (3) (4)
George Deukmejian 12,155 (5) (4)
Jack L. Hancock 15,955 (6) (4)
Edward R. Muller 147,340 (7) 1.29%
Gregory T. Parkos 21,955 (8) (4)
Ronald B. Woodard -- (9) (4)
EXECUTIVE OFFICERS
Joseph F. Alibrandi (set forth above)
Lynne M. O. Brickner 54,304 (10) (4)
John K. Otto 172,749 (11) 1.49%
Roland G. Patitz 47,327 (12) (4)
John J. Stobie 46,053 (13) (4)
All Directors and Executive Officers 1,186,531 (14) 10.00%
as a Group (11 persons)
SERIES D PARTICIPATING
CONVERTIBLE PREFERRED
STOCK (15)
Joseph F. Alibrandi 577.18 100%
All Directors and Executive Officers 577.18 100%
as a Group (11 persons)
</TABLE>
(1) At the Stock Ledger Date, 11,440,452 shares were issued and outstanding.
The number of shares issuable under all outstanding stock options
exercisable within 60 days of the Stock Ledger Date have been added to the
Common Shares actually outstanding as of the Stock Ledger Date for the
purpose of computing the percentage of outstanding shares owned by such
person or such group of persons but not any other stockholder.
(2) Includes 251,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date.
(3) Includes 15,955 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,000 shares issuable upon exercise of outstanding stock options on or
after September 26, 1999, and 1,956 shares issuable upon exercise of
outstanding stock options on or after March 26, 2000.
(4) The number of shares shown as beneficially owned represents less than 1% of
the outstanding shares.
(5) Includes 10,955 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,000 shares issuable upon exercise of outstanding stock options on or
after September 26, 1999, and 1,956 shares issuable upon exercise of
outstanding stock options on or after March 26, 2000.
(6) Includes 13,955 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,000 shares issuable upon exercise of outstanding stock options on or
after September 26, 1999, and 1,956 shares issuable upon exercise of
outstanding stock options on or after March 26, 2000.
(7) Includes 13,955 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,000 shares issuable upon exercise of
(footnotes continued on next page)
8
<PAGE>
(footnotes from previous page)
outstanding stock options on or after September 26, 1999, and 1,956 shares
issuable upon exercise of outstanding stock options on or after March 26,
2000. Mr. Muller shares voting power and investment power with respect to
133,385 shares of Common Stock.
(8) Includes 11,955 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,000 shares issuable upon exercise of outstanding stock options on or
after September 26, 1999, and 1,956 shares issuable upon exercise of
outstanding stock options on or after March 26, 2000.
(9) Does not include 1,000 shares issuable upon exercise of outstanding stock
options on or after September 26, 1999, and 1,956 shares issuable upon
exercise of outstanding stock options on or after March 26, 2000.
(10) Includes 53,334 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include
1,666 shares issuable upon exercise of outstanding unvested stock options
which will not vest until the average closing price of the Common Shares
over a five-day period equals or exceeds $26.64. Also includes 970 shares
allocated to Ms. Brickner's account under the Company's Partnership Plan.
(11) Includes 166,747 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date. Also includes 3,002
shares allocated to Mr. Otto's account under the Company's Partnership
Plan.
(12) Includes 44,500 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include a
total of 1,833 shares issuable upon exercise of outstanding unvested stock
options, of which (a) 500 shares will not vest until March 24, 2000 and
(b) 1,333 shares will not vest until the earlier of (i) Whittaker Controls
achieves defined levels of operating profit and return on assets or (ii)
February 28, 2002. Also includes 1,827 shares allocated to Mr. Patitz's
account under the Company's Partnership Plan.
(13) Includes 39,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of the Stock Ledger Date, but does not include a
total of 2,500 shares issuable upon exercise of outstanding unvested stock
options, of which (a) 500 shares will not vest until March 24, 2000, (b)
667 shares will not vest until February 23, 2001, and (c) 1,333 shares will
not vest until the earlier of (i) Whittaker Safety Systems achieves defined
levels of operating profit and return on assets or (ii) February 28, 2002.
Also includes 7,053 shares allocated to Mr. Stobie's account under the
Company's Partnership Plan.
(14) Includes an aggregate of 430,311 shares issuable upon exercise of
outstanding stock options exercisable within 60 days of the Stock Ledger
Date, but does not include as aggregate of 231,691 shares of which (a)
225,692 shares are issuable upon exercise of all vested (but not yet
exercisable) outstanding stock options, and (b) 5,999 shares are issuable
upon exercise of all unvested outstanding stock options. Also includes an
aggregate of 12,852 shares allocated to the accounts of executive officers
who participate in the Company's Partnership Plan. Directors of the Company
do not participate in such plan.
(15) Each share of Series D Participating Convertible Preferred Stock, in
connection with a qualifying transfer, will be automatically converted into
326.531 Common Shares. A qualifying transfer occurs upon, among other
things, any transfer of Series D Participating Convertible Preferred Stock
to any third party who is not an affiliate or employee of the Company (both
before and immediately after giving effect to such transfer) or pursuant to
a transaction available to all holders of Common Shares, including any
tender or exchange offer to purchase Common Shares or open market
transaction.
The Company has no reason to believe that the officers and directors of the
Company did not have sole voting power and sole investment power with respect to
the foregoing securities, except (i) with respect to Common Shares beneficially
owned under the Company's Partnership Plan, pursuant to which the trustee has
the power to vote shares but seeks each participant's direction on voting; and
(ii)
9
<PAGE>
as to which beneficial ownership, voting power or investment power is disclaimed
or shared as described in the footnotes set forth above.
COMPANY BOARD AND COMMITTEE MEETINGS
The Company Board held 15 meetings during fiscal 1998. Attendance by the
Company's directors at all Board meetings was 100% except as follows: at two
special meetings, two directors were unable to attend these meetings; at two
special meetings (held within four days of each other), one director was unable
to attend because of illness; and at one special meeting, one director was
unable to attend. Attendance of the Company's directors at all committee
meetings during the year was 100%, with each director attending all of the
meetings of the Company Board and committees on which he served. Directors are
reimbursed for travel and other expenses related to attendance at Company Board
and committee meetings.
The Audit Committee, which met four times during fiscal 1998, reviews and
acts or reports to the Company Board with respect to various auditing and
accounting matters, including the selection of the Company's independent
auditor, the scope of audit procedures, the nature of services to be performed
for the Company by, and the fees to be paid to, the independent auditor, the
performance of the Company's independent and internal auditors, and the
accounting practices of the Company.
The Compensation and Stock Option Committee, which met once during fiscal
1998, has been delegated the functions of the Company Board with respect to the
compensation of executive officers and the administration of the Company's
stock-based plans, including the granting of stock options and restricted stock.
The Nominating and Governance Committee, which met twice during fiscal
1998, recommends nominees for election as directors at annual meetings of
stockholders and to fill vacancies which may occur between annual meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
There are currently no employee directors serving on the Compensation
Committee of the Company Board. The following non-employee directors currently
serve on the Compensation Committee: George H. Benter, Jr., George Deukmejian,
Jack L. Hancock, and Ronald B. Woodard.
COMPENSATION OF DIRECTORS
Directors who are executive officers receive no compensation for Company
Board and committee services. Other directors (excluding Mr. Alibrandi) receive
annual fees of $20,000 for serving on the Company Board, annual fees of $2,500
per committee for serving on various committees, and an additional fee of $750
per day for participation in meetings of the Company Board and its committees,
except for telephonic meetings having a duration of less than 30 minutes. Prior
to October 1, 1996, Mr. Alibrandi received an annual fee of $30,000 for serving
as Chairman of the Company Board, no annual fee for service on committees, and
an additional fee of $1,500 per day for participation in meetings of the Company
Board and its committees, except for telephonic meetings having a duration of
less than 30 minutes. For his service as Chairman of the Company Board, Mr.
Alibrandi was paid $1,500 for each day that he devoted a substantial portion of
his time to the business and affairs of the Company. Such fees could not exceed
$200,000 per fiscal year. Mr. Alibrandi also was entitled as Chairman to
reimbursement for certain expenses. Effective October 1, 1996 and following Mr.
Alibrandi's election as an executive officer of the Company, none of these fees
was accrued or paid to Mr. Alibrandi. Mr. Parkos, for his service as Vice
Chairman of the Company Board, receives a fee determined by the Company Board of
$1,250 per day of service. Mr. Parkos received $95,000 in fees during fiscal
1998 for his service as Vice Chairman.
DIRECTORS' RETIREMENT PLAN
Each director who is not an employee of the Company is paid upon the
director's retirement from the Company Board, for the number of years equaling
the director's years of service as a director, an
10
<PAGE>
annual payment in quarterly installments in an amount equal to the lesser of
(i) one and one-half times the basic annual fee (currently $20,000) payable
during the last year of the director's service, or (ii) the total fees actually
paid during the last twelve months of the director's service. No payments are
paid after the death of a director except to a director's surviving spouse.
Death while serving as a director is treated as retirement for purposes of the
Directors' Retirement Plan. The Director's Retirement Plan was 'frozen' and no
further benefits are to be accrued for service by directors after April 4, 1997.
WHITTAKER CORPORATION 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The purposes of the Whittaker Corporation 1992 Stock Option Plan for
Non-Employee Directors (the 'Directors Plan') are to attract and retain highly
qualified individuals to serve as directors of the Company, to encourage such
directors to acquire an equity interest in the Company in order to align more
closely the interests of such directors with those of the Company's
stockholders, and to compensate such directors for their contributions to the
Company's growth and profitability.
Each director of the Company who is not an employee of the Company or any
of the Company's affiliates is an eligible director under the Directors Plan.
There are currently six eligible directors: Messrs. Benter, Deukmejian, Hancock,
Muller, Parkos and Woodard.
In April 1997, the stockholders ratified amendments to the Directors Plan
and to the Directors' Retirement Plan which were designed to align the interests
of the directors more directly with those of the Company's stockholders by the
issuance of stock options to directors and the termination of the Directors'
Retirement Plan.
Under the Amended and Restated Directors Plan, on the date of each annual
meeting of the Company's stockholders, each eligible director who is a member of
the Company Board on such date is granted an option (the 'Fixed Option') to
acquire 1,000 Common Shares and an option (the 'Formula Option') to acquire a
number of Common Shares based upon the following formula: 150% of the director's
base compensation as a member of the Company Board during the prior 12 month
period, divided by the product of the fair market value of the Common Shares and
a percentage based on the Black-Scholes option pricing model as applied to the
Common Shares. The provisions of the Directors Plan relating to Formula Options
were added to replace future accruals of retirement benefits by the eligible
directors under the Company's Directors' Retirement Plan, which was terminated
and all accruals for retirement benefits were 'frozen' effective as of April 4,
1997, the date of approval by the stockholders of the amendments to the
Directors Plan.
The per share exercise price for each option granted under the Amended and
Restated Directors Plan is equal to the fair market value of a Common Share on
the date of grant and each option has a ten-year term, subject to earlier
expiration one year after the date upon which a Director's status as an eligible
director under the Directors Plan terminates for any reason, including death.
Fixed Options granted under the Amended and Restated Directors Plan are not
exercisable until six months after the date of grant and Formula Options are not
exercisable until one year after the date of grant, except that in the event of
a director's death, all of the director's outstanding options are then
immediately exercisable. Options granted under the Amended and Restated
Directors Plan may be exercised by payment in cash, cash equivalents or in
shares of Common Stock, based upon the fair market value of any such non-cash
consideration on the date of exercise.
A total of 150,000 shares of the Company's Common Stock may be subject to
options granted under the Amended and Restated Directors Plan.
On March 26, 1999, each director who was then an eligible director received
options under the Amended and Restated Directors Plan consisting of a Fixed
Option of 1,000 shares and a Formula Option of 1,956 shares, all exercisable at
the fair market price of $22.875 per share.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long-term compensation for services rendered in all capacities to the
Company by each of the named executive officers for the fiscal years ended
October 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------------------
-------------------------------------------------
OTHER AWARDS
ANNUAL ----------------------------------------
BONUS COMPEN- RESTRICTED STOCK SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) ($)(2) SATION($) AWARD(S)($) OPTIONS(#)
- --------------------------------- ---- ------------ ----------- ------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph F. Alibrandi ............. 1998 418,000 600,000 -- -- 75,000
Chairman, Chief Executive 1997 450,154 -- -- -- 100,000
Officer and President 1996 40,192(7) -- -- -- 1,000(8)
Lynne M.O. Brickner ............. 1998 187,000 50,000 -- -- 35,000
Vice President and Secretary 1997 192,528 -- -- -- 10,000
1996 152,895 -- -- -- --
John K. Otto .................... 1998 187,000 250,000 -- -- 35,000
Vice President, Chief 1997 124,485 -- -- -- 57,500
Financial Officer and 1996 117,462 -- -- -- 6,000
Treasurer (9)
Roland G. Patitz ................ 1998 174,431 688,320 -- -- 35,000
President, Whittaker 1997 131,574 371,900 -- -- 2,000
Controls, Inc. (10) 1996 124,663 -- -- -- 3,000
John J. Stobie .................. 1998 125,405 466,853 -- -- 35,000
President, Whittaker 1997 88,000 102,875 -- -- 2,000
Safety Systems (11) 1996 81,585 -- -- -- 2,000
<CAPTION>
PAYOUTS
-------
LTIP
PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION ($) COMPENSATION($)(3)
- --------------------------------- ------- ------------------
<S> <C> <C>
Joseph F. Alibrandi ............. -- 11,116(4)(5)
Chairman, Chief Executive -- 13,515(5)(6)
Officer and President -- 1,154(5)
Lynne M.O. Brickner ............. -- 4,433
Vice President and Secretary -- 5,370
-- 166
John K. Otto .................... -- 5,250
Vice President, Chief -- 3,243
Financial Officer and -- 4,509
Treasurer (9)
Roland G. Patitz ................ -- 5,000
President, Whittaker -- 7,720
Controls, Inc. (10) -- 4,584
John J. Stobie .................. -- 2,524
President, Whittaker -- 352
Safety Systems (11) -- 2,444
</TABLE>
- ------------
(1) Amounts represent cash compensation earned and received by executive
officers.
(2) Amounts represent cash bonuses which were accrued during the fiscal year
shown but paid subsequent to the end of such fiscal year.
(3) Unless otherwise noted, the amounts shown in this column constitute
contributions by the Company under the Company's Partnership Plan, a
defined contribution plan, for the benefit of the named executive officers.
(4) Includes $5,145 paid in 1998 on behalf of Mr. Alibrandi for premiums under
the Company's split-dollar life insurance policy.
(5) In addition, Mr. Alibrandi continues to receive retirement benefits under
the Whittaker Corporation Employee Pension Plan, the Supplemental Benefit
Plan and the Excess Benefit Plan.
(6) Includes $6,077 paid in 1997 on behalf of Mr. Alibrandi for premiums under
the Company's split-dollar life insurance policy.
(7) Mr. Alibrandi became Chief Executive Officer and President of the Company
in September 1996.
(8) Mr. Alibrandi retired as Chief Executive Officer of the Company in January
1995. On December 29, 1995, Mr. Alibrandi was granted options to purchase
1,000 shares under the 1992 Stock Option Plan for Non-Employee Directors.
(9) Mr. Otto became Chief Financial Officer in October 1997.
(10) Mr. Patitz became President of Whittaker Controls, Inc. in December 1997.
(11) Mr. Stobie became President of Whittaker Safety Systems in December 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
options to purchase Common Shares made by the Company to the named executive
officers during fiscal 1998:
12
<PAGE>
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SHARE)(2) DATE VALUE(3)(4)(5)
- ---------------------------------- --------------- --------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
Joseph F. Alibrandi............... 75,000(4) 19.9 $7.21875 12/12/2007 $159,742
Lynne M. O. Brickner.............. 35,000(4) 9.3 $7.21875 12/12/2007 $ 74,546
John K. Otto...................... 35,000(4) 9.3 $7.21875 12/12/2007 $ 74,546
Roland G. Patitz.................. 35,000(4) 9.3 $7.21875 12/12/2007 $ 74,546
John J. Stobie.................... 35,000(4) 9.3 $7.21875 12/12/2007 $ 74,546
</TABLE>
- ------------
(1) The option price of each stock option which has been granted is not less
than 100% of the market value of the Common Shares on the date of grant, and
the term of each such option is 10 years, subject to earlier termination in
certain events related to death, retirement or other termination of
employment. Options become exercisable upon the earliest to occur of (i) the
attainment of designated average closing prices of the Company's Common
Shares over five consecutive trading days; (ii) the expiration of five years
following the date of grant; or (iii) certain changes in control of the
Company.
(2) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares and/or by offset of the
underlying shares, subject to certain conditions.
(3) The listed amounts do not reflect the value of the options after giving
effect to the Merger Agreement, under which option holders will receive
payment of the 'spread' between the Merger Consideration of $28 per share
and the exercise price of their options.
(4) Based upon the Black-Scholes option valuation model. (See footnote 3 above.)
Assumptions under the Black-Scholes model are: expected volatility of 33.3%;
risk-free rate of return of 4.36%; dividend yield of 0%; and time of
exercise at 3.3 years. No adjustments have been made for non-transferability
or risk of forfeiture.
(5) At October 31, 1998, all of such options were currently exercisable.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED OCTOBER 31, 1998 AND
OCTOBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE ($) OF
SECURITIES UNDERLYING UNEXCERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE OCTOBER 31, 1998 (#) OCTOBER 31, 1998 (1)(2)
NAME ON EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joseph F. Alibrandi.................... -- -- 109,334/66,666 457,813/0
Lynne M. O. Brickner................... -- -- 41,668/8,332 212,500/0
John K. Otto........................... -- -- 78,413/38,334 303,190/0
Roland G. Patitz....................... 1,000 $7,406 41,833/4,500 218,110/0
John J. Stobie......................... -- -- 37,667/3,833 218,110/0
</TABLE>
- ------------
(1) Based on the difference between the average of the high and low market price
of the Company's Common Stock on October 31, 1998 and the exercise price.
(2) The listed amounts do not reflect the value of the options after giving
effect to the Merger Agreement, under which option holders will receive
payment of the 'spread' between the Merger Consideration of $28 per share
and the exercise price of their options.
EMPLOYEES' PENSION PLAN
The Company maintains the Employees' Pension Plan for the benefit of all
eligible employees, including executive officers. Directors of the Company who
are not also employees do not participate in the Employees' Pension Plan. The
Employees' Pension Plan is a tax-qualified, Company funded plan subject to the
provisions of the Employee Retirement Income Security Act of 1974. Company
13
<PAGE>
contributions to the Employees' Pension Plan are actuarially determined, and
benefits are computed based upon years of service and remuneration. As a result
of an amendment to the Employee's Pension Plan, effective October 31, 1994
benefits were 'frozen' for all participants in the plan: adjustments for changes
in credited years of service ceased on October 31, 1994, and adjustments for
changes in remuneration ceased on December 31, 1994.
The Internal Revenue Code (the 'Code') limits the annual benefits which may
be paid from a tax-qualified retirement plan. The Company has adopted various
supplemental plans for the benefit of executive officers which authorize the
payment of benefits in excess of the limits imposed by the Code. Under such
plans, aggregate pension benefits for executive officers are equal to the excess
of (i) the annual benefits which would be payable pursuant to the Employees'
Pension Plan without regard to the limitations under the Code or to a formula
change under the Employees' Pension Plan which took effect on January 1, 1989;
over (ii) the amounts actually payable under the Employees' Pension Plan. These
supplemental plans were 'frozen' as described in the preceding paragraph, and
are hereinafter referred to as the frozen supplemental plans.
The Company adopted a separate supplemental plan in 1996 which provides a
targeted level of replacement income at retirement for selected executive
officers of the Company. The target is 60% of compensation. The targeted benefit
is offset by 50% of the Social Security benefit and all company provided
qualified retirement plan benefits. The benefit is payable at age 65 in the form
of a life annuity, and is reduced for less than 15 years of credited service. To
the extent that the offsets exceed the targeted retirement income, the fixed
components (Social Security and the company provided qualified retirement plan
benefits) are still payable.
The following table shows, for Messrs. Otto, Stobie and Patitz and Ms.
Brickner, the estimated annual benefits payable under the supplemental plan, the
Employees' Pension Plan, employer provided benefits under all other qualified
retirement plans, and 50% of the Social Security retirement benefit. These
amounts are payable at age 65, including the effect of the freeze in benefits
described above.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------
FINAL AVERAGE COMPENSATION 5 10 15 20
- --------------------------------------------------------- ------- ------- -------- --------
<S> <C> <C> <C> <C>
$ 50,000................................................. $ 0 $10,000 $ 30,000 $ 30,000
75,000................................................. 0 15,000 45,000 45,000
100,000................................................. 0 20,000 60,000 60,000
125,000................................................. 0 25,000 75,000 75,000
150,000................................................. 0 30,000 90,000 90,000
175,000................................................. 0 35,000 105,000 105,000
200,000................................................. 0 40,000 120,000 120,000
225,000................................................. 0 45,000 135,000 135,000
250,000................................................. 0 50,000 150,000 150,000
300,000................................................. 0 60,000 180,000 180,000
350,000................................................. 0 70,000 210,000 210,000
400,000................................................. 0 80,000 240,000 240,000
</TABLE>
The compensation upon which annual benefits are based for active
participants in the supplemental plan is the average of the highest annual
compensation paid during any three consecutive years of employment with the
Company. For this purpose, compensation includes base compensation plus up to
$100,000 annual bonus for division managers, and base compensation plus annual
bonus for participants other than division managers. Compensation for
determining benefits under the frozen supplemental plans was based on the
provisions of the plans at the time the plans were frozen.
The compensation upon which annual benefits are based for all participants
in the Employees' Pension Plan is the average of the highest annual cash
compensation paid during five consecutive years within the final ten years of
employment. For this purpose cash compensation includes salary and bonus but
does not include the auto allowance component of salary or any compensation
earned after December 31, 1994.
Messrs. Otto, Patitz and Stobie and Ms. Brickner have approximately 16, 23,
21 and 3 years of service with the Company, respectively. Mr. Patitz and Mr.
Stobie are division presidents. Retirement benefits are computed on a
straight-life annuity basis. The benefits listed in the tables set forth above
14
<PAGE>
include retirement income from the supplemental retirement plan, the frozen
Employees' Pension Plan, employer provided benefits under all other qualified
retirement plans, and 50% of the Social Security retirement benefit. Messrs.
Otto, Patitz and Stobie and Ms. Brickner have estimated annual accrued frozen
benefits in the Employees' Pension Plan of $24,176, $18,720, $34,932 and $0,
respectively, payable at age 65.
Mr. Alibrandi retired from the Company on December 31, 1994 with
approximately 25 years of service under the Employees' Pension Plan, and
receives a retirement benefit under the Employees' Pension Plan and the frozen
supplemental plans equal to $27,897 per month. Mr. Alibrandi returned to active
service with the Company in September 1996 and his retirement benefits are not
affected by his return.
SEVERANCE POLICY
The Severance Policy provides up to 12 months' base salary to a participant
if specified events, such as the termination of the participant's employment,
occur after certain changes in control of the Company. Executive employees
designated by the Compensation and Stock Option Committee are entitled to the
benefits of the policy if they elect to accept the benefits and agree to provide
consulting services during the period for which the benefits are to be paid. The
Severance Policy is administered by the Compensation and Stock Option Committee
of the Company Board. Mr. Otto and Ms. Brickner have been designated as
participants by the Compensation and Stock Option Committee. Mr. Otto and Ms.
Brickner have thus far elected to accept the benefits of the policy.
CERTAIN BONUS ARRANGEMENTS
The Company entered into certain bonus agreements (the 'Bonus Agreements')
with Mr. Otto and Ms. Brickner on April 5, 1999 (the 'Bonus Agreement Date').
Pursuant to these Bonus Agreements, Mr. Otto and Ms. Brickner would each receive
a $100,000 bonus (the 'Bonus') upon the earlier of: (a) the effective time of a
Change of Control Transaction or (b) the first anniversary of the Bonus
Agreement Date if no Change of Control Transaction occurs (each of the
foregoing, a 'Triggering Event'). The Bonus is payable immediately upon the
Triggering Event in a cash lump sum. For the purposes of the Bonus Agreements,
the following terms have the following meanings: (1) 'Change of Control' means
the (a) acquisition by any person or group of more than fifty percent (50%) of
the outstanding voting stock of the Company or (b) the change within any
12-month period of more than fifty percent (50%) of the directors of the
Company; and (2) 'Change of Control Transaction' means a transaction which
results in a Change of Control.
15
<PAGE>
CORPORATE PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company, the S&P 500 Composite Index, and Dow Jones Aerospace
and Defense Index. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG WHITTAKER CORPORATION, THE S&P 500 INDEX
AND THE DOW JONES AEROSPACE & DEFENSE INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Whittaker Corp. S&P 500 Dow Jones Aerospace & Defense
<S> <C> <C> <C>
10/93 100 100 100
10/94 141 104 120
10/95 151 131 183
10/96 108 163 260
10/97 80 215 293
10/98 101 263 280
</TABLE>
- ------------
* Assumes that the value of the investment in the Company's Common Stock and
each index was $100 on October 31, 1993 and that all dividends were
reinvested.
The Company has historically used the Dow Jones Aerospace and Defense Index for
performance comparison purposes.
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
(a)(1) Letter to Stockholders of the Company dated June 15, 1999
(a)(2) Press Release issued by the Company dated June 9, 1999
(a)(3) Opinions of CIBC World Markets Corp. and Credit Suisse First Boston Corporation dated June 9, 1999
(included as Annexes A-1 and A-2 respectively)
(b) None
(c)(1) Agreement and Plan of Merger dated as of June 9, 1999, between Parent and the Company
(c)(2) Letter Agreement dated June 4, 1999, from the Company to Parent
(c)(3) Letter dated June 9, 1999, from Joseph F. Alibrandi to Parent
</TABLE>
<PAGE>
[Logo] WHITTAKER CORPORATION
1955 N. Surveyor Avenue
Simi Valley, California 93063-3386
Telephone: (805) 526-5700
Facsimile: (805) 526-4369
June 15, 1999
Dear Stockholder:
Your Board of Directors is pleased to inform you that on June 9, 1999,
Whittaker Corporation ('Whittaker') entered into an Agreement and Plan of Merger
(the 'Merger Agreement') with Meggitt PLC ('Meggitt') and Meggitt Acquisition
Inc. (the 'Purchaser'), an indirect wholly-owned subsidiary of Meggitt, pursuant
to which the Purchaser has commenced on June 15, 1999, a cash tender offer (the
'Offer') to purchase all outstanding shares of Whittaker common stock at a price
of $28.00 per share of common stock in cash and all outstanding shares of
Series D Participating Convertible Preferred Stock at a price of $9,142.87 per
share in cash (the 'Offer Price'). Following the completion of the Offer, upon
the terms and subject to the conditions of the Merger Agreement, the Purchaser
will be merged into Whittaker (the 'Merger') and each of the Whittaker shares
not owned by Meggitt or its affiliates or by dissenting stockholders will be
converted into the right to receive in cash the Offer Price.
Your Board of Directors has unanimously determined that the Offer and the
Merger are fair and in the best interests of the stockholders, and it recommends
that stockholders accept the Offer and tender all of their shares pursuant to
the Offer.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed with the Securities and Exchange Commission. Among other
things, your Board considered the opinions of CIBC World Markets Corp. and
Credit Suisse First Boston Corporation, to the effect that the consideration to
be received pursuant to the Offer and the Merger is fair, from a financial point
of view, to the stockholders of Whittaker. The enclosed Schedule 14D-9 describes
the Board's decision and contains other important information relating to that
decision. We urge you to read it carefully.
Accompanying this letter, in addition to the Schedule 14D-9, is the Offer
to Purchase, together with related materials including a Letter of Transmittal
for use in tendering shares. These documents set forth the terms and conditions
of the Offer and provide instructions as to how you can tender your shares. I
urge you to read the enclosed materials carefully and consider all the factors
set forth therein before making your decision with respect to the Offer.
Your Board of Directors, management and employees thank you most sincerely
for your loyal support.
Sincerely,
Joseph F. Alibrandi
Chairman of the Board
<PAGE>
Whittaker NEWS RELEASE
Whittaker Corporation
1955 N. Surveyor Avenue, Simi Valley, California 93063
805/526-5700
Release: June 9, 1999
Contact: John K. Otto
Chief Financial Officer
(805) 526-5700, ext. 662
WHITTAKER CORPORATION TO BE ACQUIRED BY MEGGITT PLC FOR
$28 PER SHARE IN CASH
Simi Valley, CA, June 9, 1999--Whittaker Corporation (NYSE: WKR) announced
today the execution of a definitive merger agreement pursuant to which it will
be acquired by Meggitt PLC. The merger agreement has been approved by the boards
of directors of Whittaker and Meggitt.
Pursuant to this agreement, Meggitt will commence a cash tender offer for
all outstanding shares of Whittaker common stock at a price of $28 per share in
cash. Upon consummation of the tender offer, any remaining shares of Whittaker
will be acquired in a cash merger at the same price. The value of the
transaction, including the refinancing of Whittaker's debt, is approximately
$380 million.
The tender offer is subject to various conditions including the tender of a
majority of the outstanding shares of common stock on a fully diluted basis,
expiration of review periods under the Hart-Scott-Rodino Antitrust Improvements
Act and the Exon-Florio Amendment and approval of Meggitt's shareholders. The
transaction is not conditioned on financing.
Joseph F. Alibrandi, Chairman and Chief Executive Officer of Whittaker,
said, "We believe that this combination is in the best interests of Whittaker's
stockholders and creates an excellent opportunity to leverage the significant
aerospace strengths of both companies."
Meggitt PLC is engaged in the design and manufacture of high integrity
products in the aerospace, electronics and industrial controls markets
worldwide. Meggitt has a market capitalization of $670 million with 1998 sales
of $470 million and a 1998 operating profit of $62 million.
Second Quarter and Six Months ended April 30, 1999 Results
Whittaker also today announced the results of its operations for the second
quarter and six months ended April 30, 1999.
<PAGE>
Sales from continuing operations for the current quarter were $40,332,000,
compared to $33,043,000 for the second quarter of fiscal year 1998. Operating
profit from continuing operations for the second quarter of 1999 was $15,311,000
compared to $10,171,000 for the second quarter of 1998. Income from continuing
operations for the current quarter was $8,940,000, or $0.78 per share compared
to $6,817,000, or $0.61 per share, for the second quarter of 1998. Income from
continuing operations for the second quarter of 1999 included federal and state
tax benefits from prior year losses of $886,000, recognition of which increased
earnings per share from continuing operations by $0.07.
For the first six months of 1999, sales were $70,935,000 compared to
$62,023,000 for the first six months of 1998. Operating profit for the first six
months of 1999 was $24,243,000 compared to $16,207,000 for the first six months
of 1998. Income from continuing operations for the first six months of 1999 was
$15,974,000, or $1.40 per share, compared to $7,672,000, or $0.68 per share, for
the first six months of 1998. Income from continuing operations for the first
six months of 1999 included federal and state tax benefits from prior year
losses of $3,569,000, recognition of which increased earnings per share from
continuing operations by $0.29.
***
Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Litigation Reform Act of
1995. Actual results could differ from these forward looking statements for many
reasons, including failure to obtain necessary approvals for the consummation
of the transaction or to complete the proposed merger, failure to retain
customers or to attract new customers, development of competing products, delays
in developing new products and markets, and the cyclical nature of the aerospace
industry.
Whittaker Corporation develops innovative fluid control and fire safety
systems for aerospace and industrial applications. For additional information on
Whittaker, contact the Internet Home Page at http://www.whittaker.com.
###
<PAGE>
WHITTAKER CORPORATION
Consolidated Statements of Income
($ in 000)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended April 30 Ended April 30
1999 1998 1999 1998
--------- ---------- ---------- ----------
(restated) (restated)
<S> <C> <C> <C> <C>
Sales............................................. $ 40,332 $ 33,043 $ 70,935 $ 62,023
Costs and expenses
Cost of sales................................... 16,836 17,060 31,856 33,971
Selling, general and administrative............. 8,185 5,812 14,836 11,845
-------- -------- -------- --------
Operating Profit.................................. 15,311 10,171 24,243 16,207
Interest expense................................ 989 3,237 2,314 8,143
Interest income................................. (86) (762) (450) (980)
Other expense................................... 1,095 769 1,703 1,251
-------- -------- -------- --------
Income from continuing operations before
provision for taxes............................. 13,313 6,927 20,676 7,793
Provision for taxes............................... 4,373 110 4,702 121
-------- -------- -------- --------
Income from continuing operations................. 8,940 6,817 15,974 7,672
Discontinued operations
Loss from discontinued operations............... -- (954) -- (1,487)
Gain on disposal of discontinued
operations................................... -- -- -- 10,085
-------- -------- -------- --------
Net income........................................ $ 8,940 $ 5,863 $ 15,974 $ 16,270
======== ======== ======== ========
Average common shares outstanding (000)........... 11,439 11,205 11,410 11,205
======== ======== ======== ========
Basic income (loss) per share
Continuing operations........................... $ 0.78 $ 0.61 $ 1.40 $ 0.68
Discontinued operations
Loss from discontinued operations............ -- (0.09) -- (0.13)
Gain on disposal of discontinued
operations............................... -- -- -- 0.90
-------- -------- -------- --------
Net income per share.............................. $ 0.78 $ 0.52 $ 1.40 $ 1.45
======== ======== ======== ========
Diluted income (loss) per share
Continuing operations........................... $ 0.71 $ 0.57 $ 1.29 $ 0.67
Discontinued operations
Loss from discontinued operations......... -- (0.08) -- (0.13)
Gain on disposal of discontinued
operations............................. -- -- -- 0.87
-------- -------- -------- --------
Net income per share.............................. $ 0.71 $ 0.49 $ 1.29 $ 1.41
======== ======== ======== ========
</TABLE>
<PAGE>
WHITTAKER CORPORATION
Consolidated Balance Sheets
($ in 000)
<TABLE>
<CAPTION>
At April 30, At October 31,
1999 1998
---------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash.............................................. $ 230 $ --
Receivables....................................... 20,952 19,415
Inventories....................................... 43,968 42,060
Other current assets.............................. 1,997 2,578
Income taxes recoverable.......................... -- 195
Deferred income taxes............................. 16,064 21,800
-------- --------
Total Current Assets.............................. 83,211 86,048
-------- --------
Property and equipment, at cost................... 29,078 30,462
Less accumulated depreciation and amortization.... (19,375) (20,623)
-------- --------
Net Property and Equipment........................ 9,703 9,839
-------- --------
Other Assets
Goodwill, net of amortization..................... 13,499 13,677
Other intangible assets, net of amortization...... 817 922
Notes ard other noncurrent receivables............ 8,036 3,152
Other noncurrent assets........................... 8,044 7,726
Net assets held for sale.......................... -- 15,214
-------- --------
Total Other Assets................................ 30,396 40,691
-------- --------
Total Assets...................................... $123,310 $136,578
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt.............. $ 25 $ 1,043
Accounts payable.................................. 8,256 6,457
Accrued liabilities............................... 22,128 30,039
-------- --------
Total Current Liabilities......................... 30,409 37,539
-------- --------
Other Liabilities
Long-term debt.................................... 39,000 60,368
Other noncurrent liabilities...................... 13,518 13,933
Deferred income taxes............................. -- 1,260
-------- --------
Total Other Liabilities........................... 52,518 75,561
-------- --------
Stockholders' Equity
Capital stock
Preferred stock................................. 1 1
Common Stock.................................... 114 113
Additional paid-in capital........................ 78,634 77,703
Retained deficit.................................. (38,366) (54,339)
-------- --------
Total Stcckholders' Equity........................ 40,383 23,478
-------- --------
Total Liabilities and Stockholders' Equity........ $123,310 $136,578
======== ========
</TABLE>
<PAGE>
[CONFORMED]
AGREEMENT AND PLAN OF MERGER
dated as of
June 9, 1999
among
WHITTAKER CORPORATION,
MEGGITT PLC
and
MEGGITT ACQUISITION INC.
<PAGE>
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
THE OFFER
SECTION 1.01. The Offer........................................................................1
SECTION 1.02. Company Action...................................................................2
SECTION 1.03. Directors........................................................................4
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger.......................................................................5
SECTION 2.02. Conversion of Shares.............................................................5
SECTION 2.03. Surrender and Payment............................................................6
SECTION 2.04. Dissenting Shares................................................................7
SECTION 2.05. Stock Options....................................................................8
SECTION 2.06. Lost Certificates................................................................8
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation.....................................................9
SECTION 3.02. Bylaws...........................................................................9
SECTION 3.03. Directors and Officers...........................................................9
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power....................................................9
SECTION 4.02. Corporate Authorization.........................................................10
SECTION 4.03. Governmental Authorization......................................................10
SECTION 4.04. Non-Contravention...............................................................10
SECTION 4.05. Capitalization of the Company...................................................11
SECTION 4.06. Capitalization of Subsidiaries..................................................12
SECTION 4.07. SEC Filings.....................................................................12
SECTION 4.08. Financial Statements............................................................12
SECTION 4.09. Disclosure Documents............................................................13
SECTION 4.10. Absence of Certain Changes......................................................13
SECTION 4.11. No Undisclosed Material Liabilities.............................................15
SECTION 4.12. Litigation......................................................................15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.13. Taxes...........................................................................16
SECTION 4.14. Employee Benefit Plans; ERISA; Labor............................................18
SECTION 4.15. Compliance with Laws and Court Orders...........................................20
SECTION 4.16. Finders' Fees...................................................................20
SECTION 4.17. Environmental Matters...........................................................20
SECTION 4.18. Antitakeover Statutes and Rights Agreement......................................21
SECTION 4.19. Intellectual Property...........................................................21
SECTION 4.20. Year 2000.......................................................................22
SECTION 4.21. Properties......................................................................23
SECTION 4.22. No Default......................................................................23
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01. Corporate Existence and Power...................................................24
SECTION 5.02. Corporate Authorization.........................................................24
SECTION 5.03. Governmental Authorization......................................................24
SECTION 5.04. Non-Contravention...............................................................24
SECTION 5.05. Disclosure Documents............................................................25
SECTION 5.06. Finders' Fees...................................................................25
SECTION 5.07. Parent Financing Agreements.....................................................25
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company..........................................................26
SECTION 6.02. Stockholder Meetings; Proxy Materials...........................................29
SECTION 6.03. Access to Information...........................................................30
SECTION 6.04. Other Offers, etc...............................................................30
ARTICLE 7
COVENANTS OF PARENT
SECTION 7.01. Obligations of Merger Subsidiary................................................32
SECTION 7.02. Voting of Shares................................................................32
SECTION 7.03. Director and Officer Liability..................................................32
SECTION 7.04. Employee Benefits...............................................................33
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ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
SECTION 8.01. Notices of Certain Events.......................................................34
SECTION 8.02. Reasonable Best Efforts.........................................................35
SECTION 8.03. Cooperation.....................................................................35
SECTION 8.04. Public Announcements............................................................36
SECTION 8.05. Further Assurances..............................................................36
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party.....................................36
ARTICLE 10
TERMINATION
SECTION 10.01. Termination....................................................................37
SECTION 10.02. Effect of Termination..........................................................38
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices........................................................................38
SECTION 11.02. Entire Agreement; Non-Survival of Representations and
Warranties; Third Party Beneficiaries.................................................39
SECTION 11.03. Amendments; No Waivers.........................................................40
SECTION 11.04. Expenses.......................................................................40
SECTION 11.05. Successors and Assigns.........................................................41
SECTION 11.06. Governing Law..................................................................41
SECTION 11.07. Jurisdiction...................................................................41
SECTION 11.08. WAIVER OF JURY TRIAL...........................................................42
SECTION 11.09. Counterparts; Effectiveness....................................................42
SECTION 11.10. Captions.......................................................................42
SECTION 11.11. Specific Performance...........................................................42
SECTION 11.12. Joint and Several Liability....................................................42
SECTION 11.13. Definitions and Usage..........................................................42
Annex I
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 9, 1999 among WHITTAKER
CORPORATION, a Delaware corporation (the "COMPANY"), MEGGITT PLC, a U.K. public
limited company ("PARENT"), and MEGGITT ACQUISITION INC., a Delaware corporation
and a wholly-owned subsidiary of Parent ("MERGER SUBSIDIARY").
The parties hereto agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.01. The Offer. (a) Provided that nothing shall have occurred
that would result in a failure to satisfy any of the conditions set forth in
Annex I hereto, as promptly as practicable after the date hereof, but in no
event later than five U.S. business days following the public announcement of
the execution of this Agreement, Merger Subsidiary shall commence an offer (the
"OFFER") to purchase (i) all of the Common Shares at a price of $28.00 per
Common Share ("COMMON SHARE PRICE") and (ii) all of the Preferred Shares at a
price equal to the Common Share Price times 326.531 per Preferred Share, in each
case, net to the seller in cash. The Offer shall be subject to the condition
that there shall be validly tendered in accordance with the terms of the Offer,
prior to the expiration date of the Offer and not withdrawn, a number of Shares
that, together with the Shares then beneficially owned by Parent, represents at
least a majority of the Common Shares outstanding on a fully-diluted basis (the
"MINIMUM CONDITION") and to the other conditions set forth in Annex I hereto.
Merger Subsidiary expressly reserves the right to waive any of the conditions to
the Offer and to make any change in the terms or conditions of the Offer,
provided that no change may be made that, without the prior written consent of
the Company, waives the Minimum Condition, changes the form of consideration to
be paid, decreases the price per Share or the number of Shares sought in the
Offer or imposes conditions to the Offer in addition to those set forth in Annex
I. If all of the conditions to the Offer are not satisfied or waived on any
scheduled expiration date of the Offer, Merger Subsidiary shall extend the Offer
from time to time until such conditions are satisfied or waived, provided that
Merger Subsidiary shall not be required to extend the Offer beyond the date
referred to in Section 10.01(b)(i). Subject to the foregoing and to the terms
and conditions of the Offer, Merger Subsidiary shall, and Parent shall cause it
to, accept for payment and pay for, as
<PAGE>
promptly as practicable after the expiration of the Offer, all Shares properly
tendered and not withdrawn pursuant to the Offer. "SHARES" means the Common
Shares and the Preferred Shares. "COMMON SHARES" means the outstanding shares of
common stock, par value $0.01 per share, of the Company, including the
associated rights (the "RIGHTS") issued pursuant to the rights agreement between
the Company and Mellon Bank N.A., dated as of November 12, 1998 (the "RIGHTS
AGREEMENT"). "PREFERRED SHARES" means the outstanding shares of Series D
participating convertible preferred stock, par value $1.00 per share, of the
Company.
(b) As soon as practicable on the date of commencement of the Offer, Merger
Subsidiary shall file with the Securities and Exchange Commission ("SEC") a
Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE 14D-1") with respect to
the Offer, which will contain the offer to purchase and form of the related
letter of transmittal and summary advertisement (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "OFFER DOCUMENTS"). Parent and
the Company each agrees promptly to correct any information provided by it for
use in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect. Merger Subsidiary agrees to
take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed
with the SEC and the Offer Documents as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Offer Documents prior to their being
filed with the SEC or disseminated to the holders of Shares. Parent and Merger
Subsidiary shall provide the Company and its counsel with copies of any written
comments that Parent, Merger Subsidiary or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after receipt of
such comments.
SECTION 1.02. Company Action. (a) The Company hereby consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held
has unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair to and in the
best interests of the Company's stockholders, (ii) approved and adopted this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the requirements of the General Corporation Law of
the State of Delaware (the "DELAWARE LAW") and (iii) resolved (subject to
Section 6.04(b)) to recommend acceptance of the Offer and approval and adoption
of this Agreement and the Merger by its stockholders. The Company further
represents that Credit Suisse First Boston Corporation and CIBC World Markets
Corp. (the "COMPANY FINANCIAL ADVISORS") have delivered to the Company's Board
of
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Directors their respective opinions that the consideration to be paid in the
Offer and the Merger is fair to the holders of Shares from a financial point of
view. The Company also represents that it has been authorized by the Company
Financial Advisors to permit the inclusion of such opinions in their entirety in
the Schedule 14D-9 and the Proxy Statement, so long as such inclusion is in form
and substance reasonably satisfactory to the Company Financial Advisors and
their counsel. The Company has been advised by each of its directors and by each
executive officer who as of the date hereof is actually aware (to the knowledge
of the Company) of the transactions contemplated by this Agreement that each
such person intends to tender pursuant to the Offer all Shares owned by such
person. The Company will promptly furnish Parent with a list of its
stockholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of Shares and lists of
securities positions of Shares held in stock depositories, in each case true and
correct as of the most recent practicable date, and will provide to Parent such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent or its agents may reasonably request in connection with the
Offer. Subject to the requirements of applicable law, and except for such steps
as are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Parent and Merger Subsidiary and each of
their affiliates, associates, employees, agents and advisors shall hold in
confidence the information contained in any such lists, labels, listings or
files, shall use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated and if the Company so
requests, shall deliver, and shall use their reasonable efforts to cause their
affiliates, associates, employees, agents and advisors to deliver, to the
Company all copies and any extracts or summaries from such information then in
their possession or control.
(b) As soon as practicable after the time that the Offer is commenced, the
Company shall file with the SEC and disseminate to holders of Shares, in each
case as and to the extent required by applicable federal securities laws, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "SCHEDULE 14D-9") that shall reflect the
recommendations of the Company's Board of Directors referred to above. The
Company and Parent each agree promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect. The Company agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 prior to its filing with the SEC or dissemination to holders of Shares.
The
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<PAGE>
Company shall provide Parent and its counsel with copies of any written comments
that the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after receipt of such comments.
SECTION 1.03. Directors. (a) Effective upon the acceptance for payment
pursuant to the Offer of a number of Shares that satisfies the Minimum
Condition, Parent shall be entitled to designate the number of directors,
rounded up to the nearest whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors and (ii) the percentage that the number of Common Shares
beneficially owned by Parent bears to the total number of Common Shares
outstanding on a fully diluted basis, and the Company shall take all action
necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such time, the Company will also use its best efforts to cause
individuals designated by Parent to constitute the number of members, rounded up
to the nearest whole number, on (i) each committee of the Board of Directors of
the Company and (ii) each board of directors of each subsidiary of the Company
(and each committee thereof) that represents the same percentage as such
individuals represent on the Board of Directors of the Company. Notwithstanding
the foregoing, the Parent and the Company shall use their reasonable efforts to
ensure that at least two members of the Company's Board of Directors as of the
date hereof who are not employees of the Company (the "CONTINUING DIRECTORS")
shall remain members of the Company's Board of Directors until the Effective
Time.
(b) The Company's obligations to appoint Parent's designees to the
Company's Board of Directors shall be subject to Section 14(f) of the 1934 Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions, and shall include in the Schedule 14D-9 such information with respect
to the Company and its officers and directors, as Section 14(f) and Rule 14f-1
require in order to fulfill its obligations under this Section. Parent shall
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Parent's designees pursuant to
Section 1.03(a) and until the Effective Time, the approval of a majority of the
Continuing Directors shall be required to authorize (and such authorization
shall constitute the authorization of the Company's Board of Directors and no
other action on the part of the Company, including any action by any other
director of the Company, shall be required to authorize) any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the
4
<PAGE>
Company's Board of Directors, any extension of time for performance of any
obligation or action hereunder by Parent or Merger Subsidiary and any waiver of
compliance with any of the agreements or conditions contained herein for the
benefit of the Company.
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time, Merger Subsidiary shall be
merged (the "MERGER") with and into the Company in accordance with the Delaware
Law, whereupon the separate existence of Merger Subsidiary shall cease, and the
Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth herein, the Company
and Merger Subsidiary will file a certificate of merger with the Secretary of
State of the State of Delaware and make all other filings or recordings required
by Delaware Law in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is agreed by Parent and
the Company and specified in the certificate of merger (the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Delaware Law.
SECTION 2.02. Conversion of Shares. At the Effective Time:
(a) each share of common stock of Merger Subsidiary outstanding immediately
prior to the Effective Time shall be converted into and become one share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation;
(b) each Share held by the Company as treasury stock or owned by Parent or
any of its subsidiaries immediately prior to the Effective Time shall be
canceled, and no payments shall be made with respect thereto;
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<PAGE>
(c) except as otherwise provided in Section 2.02(b) or Section 2.04, each
Common Share outstanding immediately prior to the Effective Time shall be
converted into the right to receive $28.00 in cash or any higher price paid for
each Common Share in the Offer, without interest (the "COMMON SHARE
CONSIDERATION"); and
(d) each Preferred Share outstanding immediately prior to the Effective
Time shall be converted into the right to receive an amount equal to the Common
Share Consideration times 326.531, without interest (the "PREFERRED SHARE
CONSIDERATION" and, together with the Common Share Consideration, the "MERGER
CONSIDERATION").
SECTION 2.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent reasonably acceptable to the Company (the
"EXCHANGE AGENT") for the purpose of exchanging certificates representing Shares
(the "CERTIFICATES") for the Merger Consideration. Immediately following the
Effective Time, Parent shall deposit with the Exchange Agent, for the benefit of
the holders of Shares, the Merger Consideration to be paid pursuant to Section
2.02 in exchange for outstanding Shares. For purposes of determining the Merger
Consideration to be made available, Parent shall assume that no holder of Shares
will perfect his right to appraisal of his Shares. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each holder
of Shares at the Effective Time a letter of transmittal for use in such exchange
(which shall specify that delivery of the Merger Consideration shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent).
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a Certificate,
together with a properly completed letter of transmittal if applicable, will be
entitled to receive the Merger Consideration payable for each Share represented
by such Certificate. Until so surrendered, each such Certificate shall, after
the Effective Time, represent for all purposes only the right to receive such
Merger Consideration, without interest thereon.
(c) If any portion of the Merger Consideration is to be paid to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered
6
<PAGE>
holder of such Certificate or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of Shares. From
and after the Effective Time, the holders of Certificates evidencing ownership
of the Shares outstanding immediately prior to the Effective Time shall cease to
have rights with respect to such Shares, except as otherwise provided for herein
or by applicable law. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Article 2.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.03(a) that remains unclaimed by the holders of
Shares six months after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged them for the Merger
Consideration in accordance with this Section 2.03 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of such Shares. Notwithstanding the foregoing, Parent shall not be
liable to any holder of Shares for any amount paid to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(f) Parent and Merger Subsidiary shall be entitled to deduct and withhold,
or cause the Exchange Agent to deduct and withhold, from the Merger
Consideration payable to a holder of Shares pursuant to the Merger any
withholding taxes as are required under the Internal Revenue Code of 1986 (the
"CODE"), or any applicable provision of state, local or foreign tax law. Parent
shall take appropriate steps to minimize such taxes. To the extent that amounts
are so withheld by Parent or Merger Subsidiary, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by Parent
or Merger Subsidiary.
(g) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.03(a) to pay for Shares for which appraisal rights
have been perfected shall be returned to Parent, upon demand.
SECTION 2.04. Dissenting Shares. (a) Notwithstanding Section 2.02, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Delaware Law shall not be
converted into a right to receive the Merger Consideration, unless such
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<PAGE>
holder fails to perfect, withdraws or otherwise loses its right to appraisal. If
after the Effective Time such holder fails to perfect, withdraws or loses his
right to appraisal, such Shares shall be treated as if they had been converted
as of the Effective Time into a right to receive the Merger Consideration
without any interest thereon. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Shares, attempted withdrawals
of such demands and any other instruments served pursuant to Delaware Law and
received by the Company relating to stockholders' rights of appraisal, and
Parent shall have the right to participate in and, following consummation of the
Offer, direct all negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
SECTION 2.05. Stock Options. (a) At or immediately prior to the Effective
Time, each employee and director stock option (collectively, the "STOCK
OPTIONS") to purchase Shares outstanding under any employee or director stock
option or compensation plan or arrangement of the Company, whether or not vested
or exercisable, shall be canceled, and the Company shall pay each holder of any
such option at or promptly after the Effective Time for each such option, an
amount in cash equal to (i) the product of (A) the excess, if any, of the Common
Share Consideration over the applicable exercise price of such option and (B)
the number of Common Shares such holder could have purchased (assuming full
vesting of all options) had such holder exercised such option in full
immediately prior to the Effective Time minus (ii) the amount of any applicable
withholding tax.
(b) Prior to the Effective Time, to the extent required to effect the
transactions contemplated hereby, the Company shall take any actions necessary
with respect to its stock option or compensation plans or arrangements,
including if applicable making amendments to the terms of such stock option or
compensation plans or arrangements.
SECTION 2.06. Lost Certificates. If 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, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article 2.
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ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law, provided that, at the Effective Time, Article I
of such certificate of incorporation shall be amended to read as follows: "The
name of the corporation is Whittaker Corporation."
SECTION 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
the Delaware Law and the certificate of incorporation and bylaws of the
Surviving Corporation, (a) the directors of Merger Subsidiary at the Effective
Time shall be the directors of the Surviving Corporation, and (b) the officers
of the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that except as otherwise
disclosed in the Disclosure Schedule:
SECTION 4.01. Corporate Existence and Power. Each of the Company and its
subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the requisite corporate or other power
and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now conducted, except for such
matters as would not have a material adverse effect on the Company. Each of the
Company and its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for such matters as would not have a material
adverse effect on the Company. The Company has heretofore delivered or made
available to Parent true and complete copies of the Company's certificate of
incorporation and bylaws as currently in effect.
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SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except as set forth in the next succeeding sentence of this Section
4.02, have been duly authorized by all necessary corporate action. The
affirmative vote of a majority of the outstanding Common Shares is the only vote
of any class or series of the Company's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated by this Agreement.
Subject to the receipt of the approval described in the immediately preceding
sentence, this Agreement constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
(i) the filing of a certificate of merger with respect to the Merger with the
Delaware Secretary of State; (ii) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"); (iii)
compliance with any applicable requirements of the Securities Act of 1933 (the
"1933 ACT"); (iv) compliance with any applicable requirements of the Securities
Exchange Act of 1934 (the "1934 ACT"); (v) compliance with any other applicable
securities or takeover laws, whether state or foreign; (vi) any actions or
filings which, if not taken or made, would not have a material adverse effect on
the Company or the transactions contemplated hereby; and (vii) any filings or
notices not required to be made or given until after the Effective Time.
SECTION 4.04. Non-Contravention. The execution, delivery and performance by
the Company of this Agreement do not, and the consummation by the Company of the
transactions contemplated hereby will not (a) assuming receipt of the approval
of stockholders referred to in Section 4.02, contravene or conflict with the
certificate of incorporation, bylaws or similar organizational documents of the
Company, (b) assuming compliance with the matters referred to in Section 4.03,
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, (c) constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company or any of
its subsidiaries or to a loss of any benefit to which the Company or any of its
subsidiaries is entitled under any provision of any agreement or other
instrument binding upon the Company or any of its subsidiaries or any license,
franchise, permit or other similar authorization held by the Company or any of
its subsidiaries, or (d) result in the creation or imposition of any Lien on any
asset of
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the Company or any of its subsidiaries, except in the case of clause (b), (c) or
(d), for such matters as that would not have a material adverse effect on the
Company or the transaction contemplated hereby. For purposes of this Agreement,
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance in respect of such asset.
SECTION 4.05. Capitalization of the Company. The authorized capital stock
of the Company consists of 40,000,000 shares of common stock, par value $.01 per
share ("COMMON STOCK"), and 5,000,000 shares of preferred stock, par value $1.00
per share ("PREFERRED STOCK"), of which 10,000 are designated as Series D
Participating Convertible Preferred Stock and 150,000 are designated as Series E
Participating Convertible Preferred Stock. As of the close of business on June
4, 1999, (i) 11,440,452 shares of Common Stock were issued and outstanding,
stock options to purchase an aggregate of 851,152 shares of Common Stock under
the Company's Long-Term Stock Incentive Plan (1989) and 1992 Stock Option Plan
for Non-Employee Directors (collectively, the "OPTION PLANS") were outstanding,
883,912 shares of Common Stock were reserved for issuance upon conversion of the
7% convertible subordinated notes due May 1, 2005 of the Company (the
"CONVERTIBLE NOTES"), and 188,467 shares of Common Stock were reserved for
issuance upon conversion of the Series D Participating Convertible Preferred
Stock, and (ii) 577.18 shares of Series D Participating Convertible Preferred
Stock were issued and outstanding, and 150,000 shares of Series E Participating
Cumulative Preferred Stock were reserved for issuance upon exercise of the
Rights associated with the Common Stock. All the outstanding shares of the
Company's capital stock are, and all shares which may be issued in connection
with the Option Plans, the Convertible Notes or the Preferred Shares will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in this
Section 4.05 and for changes since June 4, 1999 resulting from the exercise of
employee and director stock options or the conversion of the Preferred Shares
and the Convertible Notes outstanding on such date, there are no outstanding (x)
shares of capital stock or other voting securities of the Company, (y)
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company or (z) options, warrants or other
rights to acquire from the Company, or other obligation of the Company to issue,
transfer or sell, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company.
Except with respect to the Convertible Notes, neither the Company nor any of its
subsidiaries has any contractual obligation to repurchase, redeem or otherwise
acquire any of the securities referred to above. There are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company or any of its subsidiaries is a party or to which it is bound relating
to the voting of any shares of capital stock of the Company. Upon the Company
taking the actions referred
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to in Section 2.05(a), following the Effective Time, no holder of Stock Options
will have any right to receive shares of common stock of the Surviving
Corporation upon exercise of the Stock Options. Upon execution by the Company of
the supplemental instrument contemplated by Section 4.5(b) of the Convertible
Notes, no holder of Convertible Notes will have any right to receive shares of
common stock of the Surviving Corporation upon conversion of the Convertible
Notes.
SECTION 4.06. Capitalization of Subsidiaries. All of the outstanding shares
of capital stock of, or other ownership interests in, each subsidiary of the
Company is owned by the Company, directly or indirectly, free and clear of any
consensual Lien (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). There are
no outstanding (i) securities of the Company or any of its subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any subsidiary of the Company, or (ii)
options or other rights to acquire from the Company or any of its subsidiaries,
or other obligation of the Company or any of its subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any subsidiary of the Company.
SECTION 4.07. SEC Filings. (a) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since October 31,
1997 (the "SEC DOCUMENTS").
(b) Each SEC Document filed pursuant to the 1934 Act did not, as of its
filing date, and each SEC Document filed pursuant to the 1933 Act did not, as of
its effective date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent that such statements have been
modified or superseded by a later filed SEC Document.
SECTION 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company's Annual Report on Form 10-K for the fiscal
years ended October 31, 1997 and 1998 and its quarterly report on Form 10-Q for
its fiscal quarter ended January 31, 1999 (the "10-Q") have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
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as of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject to normal year-end adjustments in the
case of any unaudited interim financial statements). For purposes of this
Agreement, "BALANCE SHEET" means the consolidated balance sheet of the Company
as of January 31, 1999 set forth in the 10-Q and "BALANCE SHEET DATE" means
January 31, 1999.
SECTION 4.09. Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC or required to be distributed or otherwise
disseminated to the Company's stockholders in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, the Schedule 14D-9 and the proxy or information statement of
the Company (the "COMPANY PROXY STATEMENT"), if any, to be filed with the SEC in
connection with the Merger, and any amendments or supplements thereto, when
filed, distributed or disseminated, as applicable, will comply as to form in all
material respects with the applicable requirements of the 1934 Act.
(b) (i) The Company Proxy Statement, as supplemented or amended, if
applicable, at the time such Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement, and (ii) any Company
Disclosure Document (other than the Company Proxy Statement), at the time of the
filing of such Company Disclosure Document or any supplement or amendment
thereto and at the time of any distribution or dissemination thereof, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 4.09(b) will not apply to statements or
omissions included in the Company Disclosure Documents based upon information
furnished to the Company in writing by Parent specifically for use therein.
(c) The information with respect to the Company or any of its subsidiaries
that the Company furnishes to Parent in writing specifically for use in the
Offer Documents, at the time of the filing thereof, at the time of any
distribution or dissemination thereof and at the time of the consummation of the
Offer, will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 4.10. Absence of Certain Changes. Except as disclosed in the SEC
Documents filed prior to the date of this Agreement and except as permitted by
Section 6.01, since the Balance Sheet Date, the business of the Company and
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its subsidiaries has been conducted in the ordinary course consistent with past
practices and there has not been:
(a) any event, occurrence or development which has had or is reasonably
likely to have a material adverse effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, the Company or any of its
subsidiaries;
(c) any amendment of any term of any outstanding security of the Company or
any of its subsidiaries that would materially increase the obligations of the
Company or such subsidiary under such security;
(d) any incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business consistent with past practices;
(e) any creation or assumption by the Company or any of its subsidiaries of
any Lien on any material asset of the Company or any subsidiary other than in
the ordinary course of business consistent with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any person by the Company or any of its subsidiaries other than
(i) in connection with any acquisition or capital expenditure permitted by
Section 6.01, (ii) loans, advances or capital contributions to or investments in
wholly-owned subsidiaries of the Company, (iii) loans or advances to the Company
by any of its subsidiaries or (iv) loans or advances to employees of the Company
or any of its subsidiaries made in the ordinary course of business consistent
with past practices;
(g) (i) any contract or agreement entered into by the Company or any of its
subsidiaries relating to any material acquisition or disposition of any assets
or business other than in the ordinary course of business consistent with past
practices and those contemplated by this Agreement or (ii) any modification,
amendment, assignment, termination or relinquishment by the Company or any of
its subsidiaries of any contract, license or other right that would have a
material adverse effect on the Company;
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(h) any material change in any method of accounting or accounting practice
by the Company or any of its subsidiaries, except for any such change required
by reason of a change in GAAP;
(i) any (i) employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer or employee of
the Company (or any amendment to any such existing agreement), (ii) grant of any
severance or termination pay to any director, officer or employee of the
Company, or (iii) change in benefits payable to any director, officer or
employee of the Company pursuant to any severance or retirement plans or
policies thereof, in each case other than in the ordinary course of business
consistent with past practices; or
(j) any agreement or commitment to take any action referred to in Section
4.10(a) through 4.10(i).
SECTION 4.11. No Undisclosed Material Liabilities. There are no liabilities
of the Company or any of its subsidiaries required to be disclosed on a balance
sheet prepared in accordance with GAAP, other than:
(a) liabilities provided for in the Balance Sheet or disclosed in the notes
thereto or in the SEC Documents filed prior to the date hereof;
(b) liabilities disclosed in, related to or arising under any agreements,
instruments or other matters disclosed in this Agreement;
(c) liabilities incurred in the ordinary course of business since the
Balance Sheet Date; or
(d) other undisclosed liabilities which, individually or in the aggregate,
would not have a material adverse effect on the Company.
SECTION 4.12. Litigation. Except as disclosed in the SEC Documents filed
prior to the date hereof, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its subsidiaries or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which (a) would reasonably be expected to have a material adverse
effect on the Company or (b) as of the date hereof, questions the validity of
this Agreement or any action to be taken by the Company in connection with the
consummation of the transactions contemplated hereby or could otherwise prevent
or delay the consummation of the transactions contemplated by this Agreement.
Except as and to the extent publicly disclosed by the Company in the SEC
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Documents, none of the Company or its subsidiaries is subject to any outstanding
order, writ, injunction or decree which does or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Company.
SECTION 4.13. Taxes. (a) Except for such matters as would not have a
material adverse effect on the Company:
(i) each of the Company and its subsidiaries has timely filed (or has
had timely filed on its behalf), all Federal income and all other material
Tax Returns required by applicable law to be filed by it prior to or as of
the date hereof, and all such Tax Returns are true, accurate and complete
in all material respects.
(ii) each of the Company and its subsidiaries has paid (or has had
paid on its behalf) or, where payment is not yet due, has established (or
has had established on its behalf and for its sole benefit and recourse) in
accordance with GAAP on or before the date hereof an adequate accrual for
the payment of, all material Taxes due with respect to any monthly
accounting period ending prior to or as of the date hereof. No material
deficiency with respect to Taxes has been proposed in writing or assessed
against the Company or any of its subsidiaries. No material liens for Taxes
exist with respect to any asset of the Company or any of its subsidiaries,
except for statutory liens for Taxes not yet due.
(iii) the Federal income Tax Returns and material state income and
franchise and foreign Tax Returns of the Company and each of its
subsidiaries have been examined by and settled with the appropriate Taxing
Authority or the applicable statute of limitations has expired for all
years through 1994. All material assessments for Taxes due with respect to
such completed and settled examinations or any concluded litigation have
been fully paid.
(iv) except for customary indemnities included within leases, neither
the Company nor any of its subsidiaries has any obligation under any
agreement (either with any person or any taxing authority) with respect to
Taxes.
(v) no claim has been made by a Taxing Authority in a jurisdiction
where neither the Company nor any of its subsidiaries files Tax Returns
that the Company or any of its subsidiaries is or may be subject to income
or franchise taxation in that jurisdiction.
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(vi) no issue has been raised in writing by any Taxing Authority in
any presently pending tax audit that could have a material adverse effect
on the Company for any period after the Effective Time.
(vii) neither the Company nor any of its subsidiaries is a party to
any contract, agreement or other arrangement which provides for the payment
of any amount which would not be deductible by reason of Section 162(m) or
Section 280G of the Code.
(b) Within the past ten years, neither the Company nor any of its
subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation"(within the meaning of Section 355(a)(1)(A) of the Code)
in a distribution of stock qualifying for tax-free treatment under Section 355
of the Code.
(c) Neither the Company nor within the past six years, any of its current
subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group of corporations, other than any such group of which the Company
has been the common parent.
(d) The Company has made available to Parent true and complete copies of
(A) all Federal and material state and foreign income and franchise Tax Returns
of the Company and its subsidiaries for the preceding three Taxable years ending
in 1997 and (B) any audit report issued within the last three years (or
otherwise with respect to any audit or proceeding in progress) relating to
material Taxes of the Company or any of its subsidiaries.
(e) No subsidiary of the Company owns any Shares.
(f) "TAXES" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, license, value added, capital, net worth,
payroll, profits, franchise, transfer and recording taxes, fees and charges, and
any other taxes, assessment or similar charges imposed by the Internal Revenue
Service or any taxing authority (whether domestic or foreign including any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)) (a "TAXING AUTHORITY"), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "TAX RETURN" shall mean
any report, return, document, declaration or other information or filing
required to be
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supplied to any Taxing Authority, including information returns, any documents
with respect to or accompanying payments of estimated Taxes, or with respect to
or accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
SECTION 4.14. Employee Benefit Plans; ERISA; Labor. (a) The Company has
provided Parent with a list identifying each material employee benefit plan
(including any plans for the benefit of directors or former directors),
arrangement, contract or agreement (including employment agreements and
severance agreements, incentive compensation, bonus, stock option, stock
appreciation rights and stock purchase plans) of any type (including plans
described in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")), (i) which is maintained by the Company, any of its subsidiaries or
any trade or business, whether or not incorporated, which is or has been under
common control, or which is or has ever been treated as a single employer, with
the Company under Sections 414(b), (c), (m) or (o) of the Code (an "ERISA
AFFILIATE"), or would be deemed a "controlled group" within the meaning of
Section 4001(a)(14) of ERISA and (ii) which covers any current or former
employee of the Company or any of its subsidiaries and with respect to which the
Company or any of its subsidiaries has a current liability or is reasonably
likely to have a future liability (the "BENEFIT PLANS").
(b) True, correct and complete copies of the following documents, with
respect to each of the Benefit Plans, if applicable, have been made available or
delivered to Parent by the Company: (i) any plans and related trust documents,
and amendments thereto; (ii) the most recent Forms 5500 and schedules thereto;
(iii) the most recent IRS determination letter; (iv) the most recent financial
statements and actuarial valuations; (v) summary plan descriptions; and (vi) all
material written communications to employees regarding the Benefit Plans that
have the effect of amending or modifying such plans.
(c) With respect to each Benefit Plan, except as would not, individually or
in the aggregate, have a material adverse effect on the Company: (i) if intended
to qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
prohibited transaction within the meaning of Section 406 of ERISA and Section
4975 of the Code has occurred; (v) as of the date of this Agreement, no lien
imposed under the Code or ERISA exists; and (vi) all contributions and premiums
(including PBGC premiums) due (including any extensions for such contributions
and premiums) and payments required to be made by the Company or its
subsidiaries have been made in full; and (vii) there are no material actions,
suits, arbitrations or claims
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(other than routine claims for benefits) pending or, to the knowledge of the
Company, threatened with respect to any Benefit Plan.
(d) None of the Benefit Plans has incurred any "accumulated funding
deficiency", as such term is defined in Section 412 of the Code, whether or not
waived, except as would not result in a current material liability to the
Company.
(e) Except as would not, individually or in the aggregate, have a material
adverse effect on the Company, neither the Company nor any ERISA Affiliate nor
any organization to which the Company is a successor or parent corporation,
within the meaning of Section 4069(b) of ERISA, has engaged in any transaction,
within the meaning of Section 4069 of ERISA, and except as would not result in a
material liability to the Company, neither the Company nor any ERISA Affiliate
has terminated any Benefit Plan, or incurred any outstanding liability under
Section 4062 of ERISA to the Pension Benefit Guaranty Corporation, or to a
trustee appointed under Section 4042 of ERISA since January 1, 1995.
(f) With respect to each Benefit Plan that is a "welfare plan" (as defined
in Section 3(1) of ERISA), no such plan provides medical or death benefits with
respect to current or former employees of the Company or any of its subsidiaries
beyond their termination of employment, other than on an employee-pay-all basis,
except as would not, individually or in the aggregate, have a material adverse
effect on the Company. With respect to each such Benefit Plan that is "group
health plan" within the meaning of Section 5000(b)(I) of the Code, such plans
have complied with the notice and continuation requirements of Section 4980B of
the Code ("COBRA"), Part 6 of Title I of ERISA, and the regulations thereunder
except as would not have a material adverse effect on the Company.
(g) There is no Benefit Plan that is a "multiemployer plan", as such term
is defined in Section 3(37) of ERISA, or which is covered by Section 4063 or
4064 of ERISA.
(h) Neither the Company nor any of its subsidiaries is a party to or
subject to any collective bargaining agreement and there are no collective
bargaining agreements which pertain to employees of the Company or any of its
subsidiaries. Except as would not have a material adverse effect on the Company,
no labor organization or group of employees of the Company or any of its
subsidiaries has made a pending demand for recognition or certification, and, to
the Company's knowledge, there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or threatened in writing to be bought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority. Except as would not
have
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a material adverse effect on the Company, there has been no "mass layoff" or
"plant closing" as defined by WARN with respect to the Company within six months
of the date of this Agreement. "WARN" means the Worker Adjustment and Retraining
Notification Act and any similar state or local "plant closing" law.
(i) Except as would not have a material adverse effect on the Company,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) increase any benefits otherwise
payable under any Benefit Plan or (ii) result in the acceleration of the time of
payment or vesting of any such benefits.
(j) According to the actuarial assumptions used in the Aon Consulting
letter to the Company dated May 17, 1999, the present value of the benefits of
the Company's Employees' Pension Plan as of May 1, 1999 exceeded the market
value of the assets of such plan as of April 30, 1999 by $22,547,875.
SECTION 4.15. Compliance with Laws and Court Orders. Except as set forth in
the SEC Documents filed prior to the date hereof, and except for such matters as
would not have a material adverse effect on the Company, (i) the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all governmental entities necessary for the lawful conduct of their
respective businesses and (ii) neither the Company nor any of its subsidiaries
is in violation of any applicable law, rule, regulation, judgment, injunction,
order or decree.
SECTION 4.16. Finders' Fees. Except for Credit Suisse First Boston
Corporation and CIBC World Markets Corp., no investment banker, broker, finder
or other intermediary is entitled to any fee or commission from the Company or
any of its subsidiaries upon consummation of the transactions contemplated by
this Agreement.
SECTION 4.17. Environmental Matters. Except as set forth in the SEC
Documents filed prior to the date hereof, and except for such matters as would
not have a material adverse effect on the Company:
(i) no written notice, request for information, order, complaint or
penalty has been received by the Company relating to any Environmental Law,
and there are no judicial, administrative or other actions, suits or
proceedings pending, nor to the knowledge of the Company, threatened which
allege a violation of any Environmental Law;
(ii) (A) the Company and each of its subsidiaries have all
environmental permits necessary for their operations to comply with all
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applicable Environmental Laws and are in compliance with the terms of such
permits and (B) there are no legal proceedings pending, nor to the
knowledge of the Company, threatened to revoke such environmental permits;
and
(iii) there has been no written environmental audit conducted within
the past five years by the Company or any of its subsidiaries of any
property currently owned or leased by the Company or any of its
subsidiaries which has not been delivered or made available to Parent prior
to the date hereof.
"ENVIRONMENTAL LAW" means any federal, state or local (including common
law), statute, code, ordinance, rule or regulation, relating to the environment,
natural resources, or the effect of the environment on public or employee health
and safety and includes, but is not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 'SS' 9601 et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. 'SS' 1801 et. seq.,
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 'SS' 6901 et
seq., the Clean Water Act, 33 U.S.C. 'SS' 1251 et seq., the Clean Air Act, 33
U.S.C. 'SS' 2601 et seq., the Toxic Substances Control Act, 15 U.S.C. 'SS' 2601
et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. 'SS'
136 et seq., the Oil Pollution Act of 1990, 33 U.S.C. 'SS' 2701 et seq., as such
laws have been amended or supplemented on or prior to the Effective Time, and
the regulations promulgated pursuant thereto on or prior to the Effective Time,
and all analogous state or local statutes.
SECTION 4.18. Antitakeover Statutes and Rights Agreement. (a) The Board of
Directors of the Company has approved the Merger and this Agreement, and such
approval is sufficient to render inapplicable to the Merger, this Agreement and
the transactions contemplated hereby the provisions of Section 203 of the
Delaware Law or any antitakeover provision in the Company's certificate of
incorporation and bylaws.
(b) The Company has taken all action necessary to render the Rights issued
pursuant to the Rights Agreement inapplicable to the Offer, the Merger, this
Agreement and the transactions contemplated hereby.
SECTION 4.19. Intellectual Property. (a) As of the date of this Agreement,
all Taxes, royalties, fees and other payments due and payable and necessary to
maintain the ownership or license to use, as the case may be, any registered
Intellectual Property shall have been made (except as would not reasonably be
expected to have a material adverse effect on the Company and except with
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respect to those registrations and applications that the Company has determined
to allow to lapse in the ordinary course of their business).
(b) There are no restrictions that would materially affect the use of the
Intellectual Property in the business of the Company or any of its subsidiaries
as currently conducted and the Intellectual Property as currently used by the
Company and its subsidiaries does not infringe upon or otherwise violate the
rights of any other person except as would not reasonably be expected to have a
material adverse effect on the Company.
(c) There are no actions or proceedings pending or, to the knowledge of the
Company, threatened challenging the Intellectual Property, and, to the knowledge
of the Company, no person is infringing or otherwise violating, the Intellectual
Property, except for challenges, infringements or violations which, individually
or in the aggregate, would not reasonably be expected to have a material adverse
effect on the Company.
"INTELLECTUAL PROPERTY" means all material intellectual property (and the
right associated therewith) used in connection with the business of the Company
and its subsidiaries, including the following: material trademarks, service
marks, brand names, certification marks, trade dress, assumed names, trade names
and other indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing; material patents, applications for patents (including,
without limitation, divisions, continuations, continuations-in-part and renewal
applications); material non-public information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; and material copyrighted works and registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof.
SECTION 4.20. Year 2000. Except as disclosed in the SEC Documents filed
prior to the date hereof, (i) the Company and its subsidiaries have reviewed the
areas within their business and operations which could reasonably be expected to
have an "Year 2000 Problem" (that is, the risk that computer applications used
by the Company and its subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999) that would have a material adverse effect on the
Company and have developed a program to address on a timely basis any such
problem, and (ii) based on such review and program, the "Year 2000 Problem" will
not, or is not reasonably likely to, have a material adverse effect on the
Company.
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SECTION 4.21. Properties. The Company and its subsidiaries have good title
to, or in the case of leased property have valid leasehold interests in, all
real property reflected on the Balance Sheet or acquired after the Balance Sheet
Date, except for properties sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices or where the failure to have
such good title or valid leasehold interests would not have a material adverse
effect on the Company. None of such property is subject to any Lien, except:
(a) Liens disclosed on the Balance Sheet or notes thereto or securing
liabilities reflected on the Balance Sheet or notes thereto;
(b) Liens for taxes, assessments and similar charges that are not yet due
or are being contested in good faith;
(c) mechanic's, materialman's, carrier's, repairer's and other similar
Liens arising or incurred in the ordinary course of business or that are not yet
due and payable or are being contested in good faith;
(d) Liens incurred in the ordinary course of business since the Balance
Sheet Date; or
(e) other Liens which would not have a material adverse effect on the
Company.
SECTION 4.22. No Default. There is no default or claimed default under any
contract or agreement to which the Company or any of its subsidiaries is a
party, either by the Company or any of its subsidiaries or, to the Company's
knowledge, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder by the Company or any of its subsidiaries or, to the Company's
knowledge, any other party, in any such case in which such default or event does
or would reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
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SECTION 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the requisite corporate or other power
and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now conducted, except for such
matters as would not have a material adverse effect on Parent or the
transactions contemplated hereby. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or as
contemplated by this Agreement.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and,
subject to the approval of Parent's ordinary shareholders, have been duly
authorized by all necessary corporate action. This Agreement constitutes a valid
and binding agreement of each of Parent and Merger Subsidiary, enforceable
against Parent or Merger Subsidiary, as the case may be, in accordance with its
terms except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority other than (i) the filing of a certificate
of merger with respect to the Merger with the Delaware Secretary of State; (ii)
compliance with any applicable requirements of the HSR Act; (iii) compliance
with any applicable requirements of the 1933 Act; (iv) compliance with any
applicable requirements of the 1934 Act; (v) compliance with any other
applicable securities laws; (vi) compliance with any applicable requirements of
Section 721 of the Defense Production Act of 1950 (the "EXON-FLORIO PROVISION");
(vii) any actions or filings which, if not taken or made, would not have a
material adverse effect on Parent or the transactions contemplated hereby; and
(viii) any filings or notices not required to be made or given until after the
Effective Time.
SECTION 5.04. Non-Contravention. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement do not, and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby will not
(i) contravene or conflict with the certificate of incorporation, bylaws or
similar organizational documents of Parent or Merger Subsidiary, (ii) assuming
compliance with the matters referred to in Section 5.03, violate any
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applicable law, rule, regulation, judgment, injunction, order or decree, or
(iii) constitute a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Parent or Merger
Subsidiary or to a loss of any benefit to which Parent or Merger Subsidiary is
entitled under any provision of any agreement or other instrument binding upon
Parent or Merger Subsidiary or any license, franchise, permit or other similar
authorization held by Parent or Merger Subsidiary, except in the case of clause
(ii) or (iii), for such matters as would not have a material adverse effect on
Parent or the transaction contemplated hereby.
SECTION 5.05. Disclosure Documents. (a) The information with respect to
Parent and any of its subsidiaries that Parent furnishes to the Company in
writing specifically for use in any Company Disclosure Document will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (i) in the case of the
Company Proxy Statement, as supplemented or amended, if applicable, at the time
such Company Proxy Statement or any amendment or supplement thereto is first
mailed to stockholders of the Company and at the time such stockholders vote on
adoption of this Agreement, and (ii) in the case of any Company Disclosure
Document other than the Company Proxy Statement, at the time of the filing of
such Company Disclosure Document or any supplement or amendment thereto and at
the time of any distribution or dissemination thereof.
(b) The Offer Documents, when filed, distributed or disseminated, as
applicable, will comply as to form in all material respects with the applicable
requirements of the 1934 Act and, at the time of the filing thereof, at the time
of any distribution or dissemination thereof and at the time of consummation of
the Offer, will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, provided
that this representation and warranty will not apply to statements or omissions
included in the Offer Documents based upon information furnished to Parent or
Merger Subsidiary in writing by the Company specifically for use therein.
SECTION 5.06. Finders' Fees. Except for Rothschild Inc., whose fees will be
paid by Parent, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Parent who might be entitled to any fee or commission upon consummation of the
transactions contemplated by this Agreement.
SECTION 5.07. Parent Financing Agreements. Parent has delivered to the
Company true and correct copies of the executed underwriting agreement between
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Parent, a subsidiary of Parent and NM Rothschild & Sons Limited, dated as of
June 9, 1999 (the "PARENT UNDERWRITING AGREEMENT"), the circular referred to
therein in substantially the form to be sent to Parent's shareholders (the
"CIRCULAR") and the executed loan agreement between Parent, certain subsidiaries
of Parent, Barclays Capital and HSBC Investment Bank plc, as arrangers, and the
banks listed therein, dated as of June 9, 1999 (the "PARENT LOAN AGREEMENT" and
together with the Parent Underwriting Agreement, the "FINANCING AGREEMENTS").
The financing to be provided under the Financing Agreements is referred to
herein as the "FINANCING." The aggregate proceeds of the Financing will be in an
amount sufficient to acquire all the Shares in the Offer and the Merger, and to
pay all related fees and expenses. As of the date hereof, Parent knows of no
facts or circumstances that are reasonably likely to result in any of the
conditions set forth in the Financing Agreements not being satisfied.
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company. The Company covenants and agrees
that, from the date hereof until the Effective Time, except as expressly
provided otherwise in this Agreement (or except as disclosed in writing to
Parent prior to the date hereof), or as reasonably necessary for the Company to
fulfill its obligations hereunder, the Company and its subsidiaries shall
conduct their business in the ordinary course consistent with past practices and
shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, and except as otherwise contemplated hereby, from
the date hereof until the Effective Time:
(a) the Company will not adopt or propose any change in its certificate of
incorporation or any material change in its bylaws;
(b) the Company will not, and will not permit any of its subsidiaries to,
adopt a plan or agreement of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of the Company or any of its subsidiaries (other than a
liquidation or dissolution of any such subsidiary, a merger or consolidation
between wholly-owned subsidiaries of the Company or of any such wholly-owned
subsidiary into the Company);
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(c) the Company will not, and will not permit any of its subsidiaries to,
make any equity investment in or acquisition of any business of any person or
any material amount of assets, except (i) for any capital expenditure permitted
by Section 6.01(h), (ii) for equity investment in any wholly-owned subsidiary of
the Company or (iii) in the ordinary course of business consistent with past
practices;
(d) the Company will not, and will not permit any of its subsidiaries to,
sell, lease, license or otherwise dispose of any assets in an amount that would
be material to the Company and its subsidiaries, taken as a whole, except (i)
pursuant to existing contracts or commitments or (ii) in the ordinary course of
business consistent with past practices;
(e) the Company will not, and will not permit any of its subsidiaries to,
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock other than (i) dividends or
other distributions paid by any of its subsidiaries to the Company or any other
subsidiary of the Company and (ii) dividends payable in accordance with the
terms of the Preferred Shares;
(f) the Company will not, and will not permit any of its subsidiaries to,
issue, sell, transfer, pledge or dispose of any shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class or
series of the Company or its subsidiaries, other than (i) issuances pursuant to
the exercise of options under the Option Plans described in Section 4.05,
outstanding on the date hereof, (ii) issuances pursuant to the conversion of the
Preferred Shares and the Convertible Notes outstanding on the date hereof and
(iii) issuances by any of its subsidiaries to the Company or any other
subsidiary of the Company;
(g) the Company will not, and will not permit any of its subsidiaries to,
redeem, purchase or otherwise acquire directly or indirectly any of the
Company's capital stock;
(h) the Company will not, and will not permit any of its subsidiaries to,
make or commit to make any capital expenditure, except in the ordinary course of
business or pursuant to the 1999 budget made available to Parent;
(i) the Company will not, and will not permit any of its subsidiaries to,
(i) incur or assume any long-term or short-term debt or issue any debt
securities, except for borrowings under existing lines of credit in the ordinary
course of business consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of
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business consistent with past practice, and except for obligations of the wholly
owned subsidiaries of the Company; (iii) make any loans, advances or capital
contributions to, or investment in, any other person, except in the ordinary
course of business consistent with past practice and except to wholly owned
subsidiaries of the Company or to the Company; (iv) pledge or otherwise encumber
shares of capital stock of the Company or its subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create any
material Lien thereupon, except in the ordinary course of business consistent
with past practice;
(j) except as may be required by law or as contemplated by this Agreement
or as required by existing agreements or arrangements, the Company will not, and
will not permit any of its subsidiaries to, increase in any manner the
compensation or benefits under the Benefit Plans of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting of
stock appreciation rights or performance units), in each case other than in the
ordinary course of business consistent with past practice;
(k) the Company will not, and will not permit any of its subsidiaries to,
enter into any material contract, agreement, commitment or transaction, other
than in the ordinary course of business consistent with past practice;
(l) except as may be required as a result of a change in law or in GAAP,
the Company will not, and will not permit any of its subsidiaries to, change
materially any of the accounting principles or practices used by it;
(m) the Company will not, and will not permit any of its subsidiaries to,
revalue any material assets (including, without limitation, writing down the
value of inventory or writing-off notes or accounts receivable) other than in
the ordinary course of business consistent with past practice or as required by
GAAP;
(n) the Company will not, and will not permit any of its subsidiaries to,
make or revoke any tax election, or settle or compromise any tax liability, or
change (or make a request to any taxing authority to change) any material aspect
of its method of accounting for tax purposes, in each case other than in the
ordinary course of business consistent with past practice;
(o) the Company will not, and will not permit any of its subsidiaries to,
pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than in the
ordinary and usual course of business consistent with past practice or waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsidiaries is a party;
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(p) the Company will not, and will not permit any of its subsidiaries to,
settle or compromise any pending or threatened suit, action or claim relating to
the transactions contemplated hereby;
(q) the Company will not, and will not permit any of its subsidiaries to,
enter into any agreement that limits or otherwise restricts the Company or any
of its subsidiaries or any successor thereto or that could, after the Effective
Time, limit or restrict the Surviving Corporation and its affiliates (including
Parent) or any successor thereto, from engaging or competing in any line of
business or in any geographic area;
(r) the Company will not, and will not permit any of its subsidiaries to,
agree or commit to do any of the foregoing; and
(s) the Company will not, and will not permit any of its subsidiaries to
take any action that would make any representation and warranty of the Company
hereunder inaccurate in any material respect at, or as of any time prior to, the
Effective Time.
SECTION 6.02. Stockholder Meetings; Proxy Materials. (a) Unless Delaware
Law does not require a vote of stockholders of the Company for consummation of
the Merger, the Company shall cause a meeting of its stockholders (the
"STOCKHOLDER MEETING") to be duly called and held as soon as reasonably
practicable after consummation of the Offer for the purpose of voting on the
approval and adoption of this Agreement and the Merger (the "STOCKHOLDER
APPROVAL"). Subject to Section 6.04(b), the Board of Directors of the Company
shall recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with the Stockholder Meeting, the Company
(x) will promptly prepare and file with the SEC, will use its reasonable best
efforts to have cleared by the SEC and will thereafter mail to its stockholders
as promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, (y) will use its reasonable best efforts to obtain
the Stockholder Approval and (z) will otherwise comply with all legal
requirements applicable to such meeting, in each case except if the Board of
Directors of the Company withdraws or modifies its approval or recommendation of
this Agreement and the Merger pursuant to Section 6.04(b). If after consummation
of the Offer, Parent, Merger Subsidiary or any other subsidiary of Parent shall
beneficially own at least 90% of the outstanding Shares of each class, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger (or, at Parent's option, a merger on the same terms as the Merger except
that the Merger Subsidiary will be the Surviving Corporation) to be effective as
soon as practicable after the acceptance for payment and purchase of Shares
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pursuant to the Offer without a meeting of stockholders of the Company in
accordance with Delaware Law.
(b) Parent shall, as soon as practicable following the execution and
delivery of this Agreement, duly call, give notice of, convene and hold an
extraordinary general meeting of its shareholders for the purpose of approving
this Agreement and the transactions contemplated by this Agreement. Each
document filed by Parent with the London Stock Exchange and/or sent to the
shareholders of Parent in connection with such extraordinary general meeting
including, without limitation, the Circular and any amendments or supplements
thereto (the "PARENT PROXY MATERIALS") will, when so filed or dispatched, comply
as to form and content in all material respects with the requirements of
applicable law and the rules of the London Stock Exchange. Prior to filing any
Parent Proxy Material with the London Stock Exchange or sending the same to the
shareholders of Parent, Parent shall have given the Company a reasonable
opportunity to review and give comments on such material. No information
relating to the Company shall be included in the Parent Proxy Materials without
the prior consent of the Company, such consent not to be unreasonably withheld
or delayed. The Company agrees to provide such information relating to the
Company as is reasonably necessary to include in the Parent Proxy Materials.
SECTION 6.03. Access to Information. To the extent permitted by applicable
law, from the date hereof until the Effective Time, the Company will give
Parent, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices,
properties, books and records of the Company and its subsidiaries, will furnish
to Parent, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request and will instruct the Company's employees,
counsel and financial advisors to cooperate with Parent in its investigation of
the business of the Company and its subsidiaries. The foregoing information
shall be held in confidence to the extent required by, and in accordance with,
the provisions of the letter agreement dated March 10, 1999 between Parent and
CIBC Oppenheimer Corp. as the Company's representative (the "CONFIDENTIALITY
AGREEMENT") which shall continue in effect.
SECTION 6.04. Other Offers, etc. (a) From the date hereof until the
termination hereof, the Company will not and will cause its subsidiaries and the
officers, directors, employees and other agents and advisors of the Company and
its subsidiaries not to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal or (ii) furnish information to or
participate in any discussions or negotiations with any person that has made or
indicated an interest in making an Acquisition Proposal; provided, however, that
nothing
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contained in this Section 6.04(a) shall prohibit the Board of Directors of the
Company from furnishing information to, or entering into discussions or
negotiations with, any person that has made an unsolicited bona fide written
Acquisition Proposal if, and only to the extent that (A) the acceptance for
payment of Shares pursuant to the Offer shall not have occurred, (B) the Board
of Directors of the Company, based on advice of outside legal counsel,
determines in good faith that failure to take such action would present a
reasonable probability of violating its fiduciary duties under applicable law,
and (C) prior to taking such action, the Company (x) provides reasonable notice
to Parent to the effect that it intends to take such action and (y) receives
from such person an executed confidentiality agreement in reasonably customary
form and in any event containing terms at least as stringent as those contained
in the Confidentiality Agreement between Parent and the Company. Prior to
providing any information to or entering into discussions or negotiations with
any person in connection with an Acquisition Proposal by such person, the
Company shall notify Parent of any such Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it) as promptly as practicable (but in no case later than one
business day) after its receipt thereof, and shall thereafter inform Parent on a
prompt basis of the status of any discussion or negotiations with such third
party and any material changes to the terms and conditions of such Acquisition
Proposal, and shall promptly give Parent a copy of any information delivered to
such person which has not previously been reviewed by Parent. The Company will,
and will cause its subsidiaries and the officers, directors, employees and other
agents and advisors of the Company and its subsidiaries to, immediately cease
and cause to be terminated all discussions and negotiations, if any, that have
taken place prior to the date hereof with any parties with respect to any
Acquisition Proposal. Nothing contained in this Agreement shall prevent the
Board of Directors of the Company from complying with Rule 14e-2 under the 1934
Act with respect to any Acquisition Proposal. For purposes of this Agreement,
"ACQUISITION PROPOSAL" means any offer or proposal for a merger or other
business combination transaction involving the acquisition of all or a material
portion of the equity interest in, or all or a material portion of the assets
of, the Company and its subsidiaries, other than the transactions contemplated
by this Agreement.
(b) The Board of Directors of the Company may not withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent, its approval or
recommendation of this Agreement, the Offer or the Merger unless the Board of
Directors of the Company, based on advice of its outside legal counsel,
determines in good faith that failure to do so would present a reasonable
probability of violating its fiduciary duties under applicable law; provided,
however, the Board of Directors of the Company may not approve or recommend (and
in connection therewith, withdraw or modify its approval or recommendation
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of this Agreement, the Offer or the Merger) an Acquisition Proposal unless (i)
the Company has complied with the terms of this Section 6.04, including, without
limitation, the requirement in Section 6.04(a) that it notify Parent promptly
after its receipt of any Acquisition Proposal, (ii) the Acquisition Proposal is
a Superior Proposal and (iii) it determines in good faith (based on advice of
its outside legal counsel) that the failure to do so would present a reasonable
probability of violating its fiduciary duties under applicable law. For purposes
of this Agreement, "SUPERIOR PROPOSAL" means any Acquisition Proposal (A)
involving the acquisition of the entire equity interest in, or all or
substantially all of the assets and liabilities of, the Company and its
subsidiaries and (B) with respect to which the Board of Directors of the Company
(x) determines in good faith that such proposal, if accepted, is reasonably
likely to be consummated, taking into account all legal, financial, regulatory
and other aspects of the proposal and the person making the proposal and (y)
believes in good faith, based on the advice of its financial advisors, that such
proposal would, if consummated, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the Offer and the
Merger.
ARTICLE 7
COVENANTS OF PARENT
SECTION 7.01. Obligations of Merger Subsidiary. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Offer and the Merger on the terms and conditions
set forth in this Agreement.
SECTION 7.02. Voting of Shares. Parent agrees to vote all Shares
beneficially owned by it in favor of adoption of this Agreement at the
Stockholder Meeting (if any).
SECTION 7.03. Director and Officer Liability. Parent agrees that at all
times after the Effective Time, it shall indemnify each person who is now, or
has been at any time prior to the date hereof, a director, officer or manager of
the Company or of any of its subsidiaries (individually an "INDEMNIFIED PARTY"
and collectively the "INDEMNIFIED PARTIES"), to the fullest extent permitted by
law, with respect to any claim, liability, loss, damage, judgment, fine,
penalty, amount paid in settlement or compromise, cost or expense (including
reasonable fees and expenses of legal counsel), whenever asserted or claimed,
based in whole or in part on, or arising in whole or in part out of, any facts
or circumstances occurring at or prior to the Effective Time whether commenced,
asserted or claimed before
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or after the Effective Time, including liability arising under the 1933 Act, the
1934 Act or state law. Parent shall, or shall cause the Surviving Corporation
to, maintain in effect for not less than six years after the Effective Time the
current policies of directors' and officers' liability insurance maintained by
the Company and its subsidiaries on the date hereof (provided that Parent may
substitute therefor policies with reputable and financially sound carriers
having at least the same coverage and amounts thereof and containing terms and
conditions which are no less advantageous to the persons currently covered by
such policies as the insured) with respect to facts or circumstances occurring
at or prior to the Effective Time to the extent that such liability insurance
can be maintained annually at a cost to Parent not greater than 200 percent of
the current annual premium for the current Company directors' and officers'
liability insurance; provided that if such insurance cannot be so maintained or
obtained at such costs, Parent shall maintain or obtain as much of such
insurance as can be so maintained or obtained at a cost equal to 200 percent of
the current annual premium of the Company for such insurance. Parent agrees to
pay all expenses (including fees and expenses of counsel) that may be incurred
by any Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section 7.03. The rights under this Section 7.03 are in
addition to rights that an Indemnified Party may have under the certificate of
incorporation, bylaws, or other similar organizational documents of the Company
or any of its subsidiaries or the Delaware Law. The rights under this Section
7.03 shall survive consummation of the Merger and are expressly intended to
benefit each Indemnified Party. Parent agrees to cause the Surviving Corporation
and any of its subsidiaries (or their successors) to maintain in effect for a
period of six years provisions in its certificate of incorporation or bylaws or
similar organizational documents providing for indemnification and exculpation
of Indemnified Parties, with respect to facts or circumstances occurring at or
prior to the Effective Time, to the extent set forth in the Company's
certificate of incorporation and bylaws as of the date hereof; provided that the
foregoing shall not in any way restrict or preclude any sale, liquidation or
dissolution of any subsidiary of Parent at any time after the Effective Time.
SECTION 7.04. Employee Benefits. Subject to Section 2.05(a), following the
Effective Time, Parent shall, or shall cause the Surviving Corporation to (i)
honor all obligations under employment agreements of the Company and (ii) pay
all benefits (including any vacation, personal and sick days) accrued through
the Effective Time under employee benefit plans, programs, policies and
arrangements of the Company (including any rabbi trust agreement) in accordance
with the terms thereof. Parent also agrees to provide, or cause the Surviving
Corporation to provide, employees of the Company and its subsidiaries who
continue to be employed by the Company or any of its subsidiaries as of the
Effective Time ("CONTINUING EMPLOYEES") for a period of not less than one year
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following the Effective Time with compensation and benefits which, in the
aggregate, are no less favorable than either the compensation and benefits
provided to such employees immediately prior to the Effective Time or the
compensation and benefits provided to similarly situated employees of Parent or
any affiliate of Parent. Notwithstanding the foregoing, nothing herein shall
prevent Parent from terminating the employment of any Continuing Employee
following the Effective Time, provided however that for a period of one year
following the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, establish and maintain a plan to provide severance and
termination benefits to all Continuing Employees which are no less favorable
than the severance and termination benefits provided under the Company's plans
and arrangements in effect as of the date of this Agreement as disclosed to
Parent in writing prior to the date hereof. With respect to medical benefits
provided to Continuing Employees after the Effective Time, Parent agrees that it
will, or it will cause the Surviving Corporation and its subsidiaries to, waive
waiting periods and pre-existing condition requirements (to the extent waived
under the Company's plans), and will give Continuing Employees credit for any
copayments and deductibles actually paid by such employees under the Company's
medical plans during the calendar year in which the Effective Time occurs. In
addition, service with the Company shall be recognized for purposes of
eligibility under the welfare plans in which Continuing Employees participate as
well as for purposes of the programs or policies for vacation pay and sick pay
in which Continuing Employees participate.
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
SECTION 8.01. Notices of Certain Events. (a) The Company and Parent shall
promptly notify each other of:
(i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement.
(b) The Company shall promptly notify Parent of:
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(i) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting the Company or any of its subsidiaries which relate
to the consummation of the transactions contemplated by this Agreement; and
(ii) the occurrence of any event or condition that becomes known to an
executive officer of the Company and causes such officer to believe that
the condition set forth in paragraph (c) of Annex I hereto will not be met.
(c) Parent shall promptly notify the Company of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Parent or any of its
subsidiaries which relate to the consummation of the transactions contemplated
by this Agreement.
SECTION 8.02. Reasonable Best Efforts. Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement.
In furtherance and not in limitation of the foregoing, each party hereto agrees
to (i) make an appropriate filing of a Notification and Report Form pursuant to
the HSR Act and (ii) complete its portion of, and jointly file, a Notification
under the Exon-Florio Provision with respect to the transactions contemplated
hereby as promptly as practicable and in any event within five business days
after the date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and the Exon-Florio Provision, as the case may be, and to take all other
actions necessary to cause the expiration or termination of the applicable
waiting periods as soon as practicable.
SECTION 8.03. Cooperation. Without limiting the generality of Section 8.02,
Parent and the Company shall cooperate (i) in connection with the preparation of
the Company Disclosure Documents, the Offer Documents and the Circular, (ii) in
determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement, and (iii) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Company Disclosure Documents, the Offer
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Documents or the Circular and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 8.04. Public Announcements. So long as this Agreement is in effect,
Parent and the Company will consult with each other before issuing any press
release or other public statement with respect to this Agreement or the
transactions contemplated hereby and, except as may be required by applicable
law, court process or any listing agreement with or rule of any national
securities exchange or the London Stock Exchange, will not issue any such press
release or other public statement prior to such consultation and providing the
other party with a reasonable opportunity to comment thereon.
SECTION 8.05. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction (or waiver by the party for whose benefit the
applicable condition exists) of the following conditions:
(a) if required by Delaware Law, this Agreement shall have been approved
and adopted by the stockholders of the Company in accordance with such Law;
(b) no provision of any applicable U.S. or U.K. law or regulation and no
judgment, injunction, order or decree of a U.S. or U.K. court of competent
jurisdiction shall prohibit or enjoin the consummation of the Merger; and
(c) Merger Subsidiary shall have purchased Shares pursuant to the Offer.
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ARTICLE 10
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company or Parent):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent,
(i) if the Offer has not been consummated on or before the 60th
U.S. business day after commencement of the Offer (or if the period of
time for any applicable review process under the Exon-Florio Provision
has not expired by such date, then the date on which the Exon-Florio
review process is completed), provided that the right to terminate
this Agreement pursuant to this Section 10.01(b)(i) shall not be
available to any party whose breach of any provision of this Agreement
results in the failure of the Offer to be consummated by such time; or
(ii) if consummation of the Merger would violate or be prohibited
by any U.S. or U.K. law or regulation or if any injunction, judgment,
order or decree of a U.S. or U.K. court of competent jurisdiction
enjoining the Company or Parent from consummating the Merger is
entered and such injunction, judgment, order or decree shall become
final and nonappealable;
(c) by Parent, if prior to the purchase of any Shares pursuant to the
Offer,
(i) the Board of Directors of the Company shall have failed to
recommend or withdrawn or materially modified in a manner adverse to
Parent its approval or recommendation of the Offer and the Merger, or
(ii) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement with respect to
any Superior Proposal; or
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(iii) due to the occurrence and continuation of any event that if
occurring after the commencement of the Offer would result in a
failure to satisfy any of the conditions set forth in Annex I hereto,
Parent, Merger Subsidiary or any of their affiliates shall have failed
to commence the Offer on or prior to five U.S. business days following
the date of the initial public announcement of the Offer.
(d) by the Company, if, prior to purchase of any Shares pursuant to the
Offer, (A) the Company notifies Parent in writing that it intends to enter into
an agreement with respect to a Superior Proposal in accordance with Section
6.04, provided the Company has complied in all material respects with the
provisions thereof, including the notice provision therein; (B) Parent does not
make, within one business day after receipt of the Company's notification
pursuant to clause (A), an offer that the Board of Directors of the Company
determines, in good faith based on the advice of its financial advisors, is at
least as favorable to the Company's stockholders as the Superior Proposal and
(C) prior to or simultaneously with such termination, the Company makes payment
to Parent of the amounts payable pursuant to Section 11.04(b).
The party desiring to terminate this Agreement pursuant to clauses (b), (c) or
(d) shall give written notice of such termination to the other party in
accordance with Section 11.01.
SECTION 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party hereto, except that (a) the
agreements contained in this Section 10.02 and in Section 11.04 and in the
Confidentiality Agreement shall survive the termination hereof and (b) no such
termination shall relieve any party of any liability or damages resulting from
any willful breach by that party of this Agreement.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given:
38
<PAGE>
if to Parent or Merger Subsidiary, to:
Meggitt PLC
Farrs House
Cowgrove
Wimborne Dorset BH21 4EL
United Kingdom
Fax: 44-1-202-847-819
Attention: Philip E. Green
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10157
Fax: 212-310-8007
Attention: Ellen J. Odoner
if to the Company, to:
Whittaker Corporation
1955 North Surveyor Avenue
Simi Valley, CA 93063-3386
Fax: 805-584-4182
Attention: Lynne M.O. Brickner
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attention: Christopher Mayer
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests or other communications shall be deemed received on the date of receipt
by the recipient thereof if received prior to 5 p.m. on any business day in the
place of receipt. Otherwise, any such notice, request or other communication
shall be deemed not to have been received until the next succeeding business day
in the place of receipt.
39
<PAGE>
SECTION 11.02. Entire Agreement; Non-Survival of Representations and
Warranties; Third Party Beneficiaries. (a) This Agreement and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, among the
parties with respect to such subject matter. None of this Agreement, the
Confidentiality Agreement or any other agreement contemplated hereby or thereby
(or any provision hereof or thereof) is intended to confer on any person other
than the parties hereto or thereto any rights or remedies (except that Section
7.03 is intended to confer rights and remedies on the persons specified
therein).
(b) The representations and warranties contained herein or in any schedule,
instrument or other writing delivered pursuant hereto shall not survive the
Effective Time.
SECTION 11.03. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company and Parent or, in the case of a waiver, by the party against whom
the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.04. Expenses. (a) Except as otherwise specified in this Section
11.04 or agreed in writing by the parties, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such cost or expense.
(b) The Company agrees to pay to Parent (by wire transfer of immediately
available funds) an amount equal to
(i) $6.5 million prior to or simultaneously with the termination of
this Agreement as a result of the occurrence of any of the events set forth
in Section 10.01(c)(i), 10.01(c)(ii) or 10.01(d); and
(ii) Parent's and Merger Subsidiary's actual and reasonable
out-of-pocket expenses incurred by Parent or Merger Subsidiary in
connection with this Agreement and the transactions contemplated hereby,
promptly upon receipt of reasonable documentation of such expenses, in
connection
40
<PAGE>
with the termination of this Agreement as a result of the occurrence of any
of the following events:
(A) any of the events set forth in Section 10.01(c)(i),
10.01(c)(ii) or 10.01(d) above;
(B) the Minimum Condition not having been met by the expiration
of the Offer as extended pursuant to Section 1.01(a); or
(C) the condition set forth in paragraph (c) of Annex I hereto
not having been met as a result of a breach by the Company of its
representations and warranties set forth in this Agreement; provided
that such breach existed as of the date hereof;
provided that in each of clause (B) and (C), all of the other conditions
set forth in Annex I shall have been satisfied (but for those conditions
which are not satisfied in the case of clause (C) due to or resulting from
the facts constituting such breach) and Parent and Merger Subsidiary are
not in material breach of any of their representations and warranties or
covenants set forth in this Agreement.
Acceptance by Parent of any amounts payable pursuant to Section 11.04(b) shall
constitute conclusive evidence that this Agreement has been validly terminated.
SECTION 11.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the written consent of the other parties hereto.
SECTION 11.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the conflict of laws rules of such state.
SECTION 11.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought
against any of the parties in any federal court located in the State of Delaware
or any Delaware state court, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court
41
<PAGE>
or that any such suit, action or proceeding which is brought in any such court
has been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the generality of
the foregoing, each party hereto agrees that service of process upon such party
as provided in Section 11.01 shall be deemed effective service of process upon
such party.
SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 11.09. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 11.10. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 11.11. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and the posting of any bond in connection therewith and (b) shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement or to enforce specifically the terms and provisions of this Agreement
in any federal court located in the State of Delaware or any Delaware state
court, in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 11.12. Joint and Several Liability. Parent and Merger Subsidiary
hereby agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.
SECTION 11.13. Definitions and Usage. (a) For purposes of this Agreement:
42
<PAGE>
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such person.
"BUSINESS DAY" means a day on which banks are open for business in both
London and New York.
"MATERIAL ADVERSE EFFECT" means, with respect to any person, a material
adverse effect on the business, assets, financial condition or results of
operations of such person and its subsidiaries, taken as a whole, except any
such effect resulting from or arising in connection with (i) this Agreement or
the transactions contemplated hereby, (ii) changes or conditions affecting the
commercial or military aerospace industries generally or (iii) changes in
economic, regulatory or political conditions generally.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"SUBSIDIARY" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such person.
"U.S. BUSINESS DAY" shall have the meaning ascribed to it in Schedule 14D
under the 1934 Act.
(b) A reference in this Agreement to any statute shall be to such statute
as amended from time to time, and to the rules and regulations promulgated
thereunder.
(c) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
1933 Act.................................................................. 4.03
1934 Act.................................................................. 4.03
Acquisition Proposal...................................................... 6.04
Balance Sheet............................................................. 4.08
Balance Sheet Date........................................................ 4.08
Certificates.............................................................. 2.03
Circular.................................................................. 5.07
Code...................................................................... 2.03
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Common Share Price........................................................ 1.01
Common Shares............................................................. 1.01
Common Stock.............................................................. 4.05
Company................................................................... preamble
Company Disclosure Documents.............................................. 4.09
Company Financial Advisors................................................ 1.02
Company Proxy Statement................................................... 4.09
Confidentiality Agreement................................................. 6.03
Continuing Directors...................................................... 1.03
Delaware Law.............................................................. 1.02
Effective Time............................................................ 2.01
Exchange Agent............................................................ 2.03
Exon-Florio Provision..................................................... 5.03
GAAP...................................................................... 4.08
HSR Act................................................................... 4.03
Lien...................................................................... 4.04
Merger.................................................................... 2.01
Merger Consideration...................................................... 2.02
Merger Subsidiary......................................................... preamble
Minimum Condition......................................................... 1.01
Offer..................................................................... 1.01
Offer Documents........................................................... 1.01
Option Plans.............................................................. 4.05
Parent.................................................................... preamble
Preferred Shares.......................................................... 1.01
Rights.................................................................... 1.01
Rights Agreement.......................................................... 1.01
Schedule 14D-1............................................................ 1.01
Schedule 14D-9............................................................ 1.02
SEC....................................................................... 1.01
SEC Documents............................................................. 4.07
Shares.................................................................... 1.01
Stockholder Approval...................................................... 6.02
Stockholder Meeting....................................................... 6.02
Stock Options ............................................................ 2.05
Superior Proposal......................................................... 6.04
Surviving Corporation..................................................... 2.01
Taxes..................................................................... 4.12
</TABLE>
44
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
WHITTAKER CORPORATION
By: /s/ Joseph F. Alibrandi
--------------------------
Joseph F. Alibrandi
President and Chief Executive Officer
MEGGITT PLC
By: /s/ Michael A. Stacey
--------------------------
Michael A. Stacey
Chief Executive Officer
MEGGITT ACQUISITION INC.
By: /s/ Michael A. Stacey
--------------------------
Michael A. Stacey
President
45
<PAGE>
ANNEX I
Notwithstanding any other provision of the Offer, Merger Subsidiary shall not be
required to accept for payment or pay for any Shares, and may, subject to the
terms of this Agreement, terminate the Offer, if (i) at the expiration of the
Offer, (A) the Minimum Condition has not been satisfied, (B) the applicable
waiting periods under the HSR Act shall not have expired or been terminated, (C)
the period of time for any applicable review process under the Exon-Florio
Provision shall not have expired or the President of the United States shall
have made a determination to block or prevent the consummation of the Offer or
the Merger or (D) the Merger Agreement and the transactions contemplated by the
Merger Agreement shall not have been approved by the holders of the ordinary
shares of Parent, or (ii) at any time on or after June 9, 1999 and prior to the
acceptance for payment of Shares, any of the following conditions exist:
(a) there shall be (i) pending any suit, action or proceeding before a U.S.
or U.K. court of competent jurisdiction, or (ii) threatened any suit, action or
proceeding by any U.S. or U.K. governmental agency, in each case, that is
reasonably likely to have a material adverse effect on the Company or, as a
result of the transactions contemplated by the Merger Agreement, on Parent; or
(b) there shall be any U.S. or U.K. statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act and the review process
under the Exon-Florio Provision, that is reasonably likely to have a material
adverse effect on the Company or, as a result of the transactions contemplated
by the Merger Agreement, on Parent; or
(c) (i) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
as of the date of consummation of the Offer as though made on or as of such date
(except for those representations and warranties that address matters only as of
a particular date or only with respect to a specific period of time which need
only be true and accurate as of such date or with respect to such period) or
(ii) the Company shall have failed to perform or comply with any of its
obligations, agreements or covenants required by the Merger Agreement, except
where the failure of such representations and warranties to be true and accurate
or the failure to perform or comply with such covenants, individually or in the
aggregate, do not have and are not reasonably likely to have a material adverse
effect on the Company; or
<PAGE>
(d) there shall have occurred (i) any general suspension of trading in, or
limitation of prices for, securities on the New York Stock Exchange or the
London Stock Exchange, for a period in excess of three days (excluding
suspensions or limitations resulting solely from physical damage or
interferences with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States or the United Kingdom (whether or not mandatory), or
(iii) any decline in either the Dow Jones Industrial Average, the Standard &
Poor's Index of 500 Industrial Companies or Financial Times Stock Exchange 100
by an amount in excess of 30% measured from the close of business on the date of
this Agreement; or
(e) this Agreement shall have been terminated in accordance with its terms.
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may, subject to the terms of this Agreement, be waived by Parent
and Merger Subsidiary in whole or in part at any time and from time to time in
their discretion. The failure by Parent or Merger Subsidiary at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
Annex I - 2
<PAGE>
EXHIBIT (c)(2)
WHITTAKER CORPORATION
1955 NORTH SURVEYOR AVENUE
SIMI VALLEY, CALIFORNIA
June 4, 1999
Meggitt PLC
Farrs House
Cowgrove
Wimborne Dorset BH21 4EL
United Kingdom
Gentlemen:
Reference is made to the draft Agreement and Plan of Merger and
Disclosure Schedule appended to this letter (the "Draft Merger Agreement").
Whittaker Corporation ("Whittaker") recognizes that the proposal of
Meggitt PLC ("Meggitt") to acquire Whittaker reflected in the Draft Merger
Agreement (the "Acquisition") will be financed, in part, by an underwritten
equity rights offering and is subject to the approval of Meggitt's shareholders.
Whittaker also recognizes that U.K. market practice requires Meggitt, Merrill
Lynch, Meggitt's stockbroker, and NM Rothschild, its investment banker and
proposed underwriter, to meet with Meggitt's principal institutional
shareholders to assess their reaction to the proposed Acquisition prior to
Meggitt making a final determination to launch the rights offering and proceed
with the Acquisition.
As an inducement to Whittaker to enter into this letter agreement,
Meggitt agrees to use reasonable efforts beginning on Friday, June 4, 1999 to
arrange meetings with approximately 12 of its principal institutional
shareholders to discuss the proposed Acquisition, such meetings to be scheduled
for Monday, June 7, 1999 and Tuesday, June 8, 1999. Meggitt agrees to proceed
with any such meetings that are arranged. Meggitt will advise Whittaker on its
general perception of shareholder reaction.
As an inducement to Meggitt to enter into the agreement above,
Whittaker represents, warrants and agrees as follows:
<PAGE>
1. As of the date hereof, Whittaker's President, Chief Executive
Officer and Chairman of the Board is not aware of any facts or circumstances
that cause him to believe that Whittaker's Board of Directors will not approve
the Draft Merger Agreement (and the transactions contemplated thereby) at the
meeting referred to in paragraph 4.
2. Prior to 8:00 a.m., London time, on June 9, 1999, Whittaker will not
and will cause its subsidiaries and the officers, directors, employees and other
agents and advisors (including CIBC World Markets Corp. and Credit Suisse First
Boston) of Whittaker and its subsidiaries not to, directly or indirectly (a)
take any action to solicit, initiate or encourage any Acquisition Proposal, (b)
furnish information to or participate in any discussions or negotiations with
any person that has made or indicated an interest in making an Acquisition
Proposal or (c) enter into any preliminary or definitive agreement relating to
any Acquisition Proposal. "Acquisition Proposal" means any indication of
interest, offer or proposal for a merger or other business combination
transaction involving Whittaker or any of its subsidiaries or the acquisition of
all or a material portion of the equity interest in, or all or a material
portion of the assets of, Whittaker, other than the Acquisition.
3. Whittaker agrees to notify Meggitt promptly of its receipt of an
Acquisition Proposal, such notice to include the identity of the person making
the proposal and the material terms of the proposal.
4. Whittaker has scheduled a meeting of its Board of Directors to be
held at noon, California time, on Tuesday, June 8, 1999 to consider the Draft
Merger Agreement in the event Meggitt advises Whittaker that it is prepared to
execute the Draft Merger Agreement.
In the event of Whittaker's breach of the representation set forth in
paragraph 1 or the agreement set forth in paragraph 2, Whittaker agrees to pay
Meggitt, as liquidated damages and not as a penalty, the amount of actual and
reasonable out-of-pocket expenses (up to an aggregate of $4,000,000) incurred by
Meggitt on or before 8:00 a.m., London time, on June 9, 1999. Such payment,
which shall be made promptly following Whittaker's receipt of reasonable
documentation, shall be Meggitt's exclusive remedy for Whittaker's breach of
these provisions. Meggitt agrees that it shall not have any remedy for
Whittaker's breach of the provisions of paragraphs 3 and 4.
This letter agreement shall be construed in accordance with and
governed by the laws of the State of Delaware, without regard to the conflict of
laws rules of such state.
2
<PAGE>
If the foregoing correctly sets forth our agreement, kindly so indicate
by signing below.
Very truly yours,
WHITTAKER CORPORATION
By: /s/ John K. Otto
---------------------------------
John K. Otto
Vice President
Accepted and Agreed:
MEGGITT PLC
By: /s/ Philip E. Green
------------------------------
Philip E. Green
Company Secretary
3
<PAGE>
Exhibit (c)(3)
June 9, 1999
Meggitt PLC
Farrs House
Cowgrove
Wimborne Dorset BH21 4EL
United Kingdom
Dear Sirs:
In consideration of your entering into the Agreement and Plan of Merger
dated as of June 9, 1999 among Whittaker Corporation, Merger Subsidiary and you
(the 'Merger Agreement'), I hereby agree that (i) I will tender, pursuant to the
terms of the Offer, all of the Shares held by me as of the commencement of the
Offer, (ii) during the term of this letter agreement I will not sell transfer or
otherwise dispose of any Shares held by me, except pursuant to the terms of the
Offer and (iii) I will not exercise any rights of appraisal under Delaware Law
for the Shares held by me. This letter agreement shall terminate in the event of
any termination of the Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Merger Agreement.
Yours truly,
JOSEPH F. ALIBRANDI
-----------------------
JOSEPH F. ALIBRANDI
