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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
WYMAN-GORDON COMPANY
(Name of Subject Company)
WYMAN-GORDON COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
983085 10 1
(CUSIP Number of Class of Securities)
DAVID P. GRUBER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
WYMAN-GORDON COMPANY
244 WORCESTER STREET
P.O. BOX 8001
NORTH GRAFTON, MASSACHUSETTS 01536-8001
(508) 839-4441
(Name and Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
WITH COPIES TO:
DAVID F. DIETZ, P.C.
JOSEPH L. JOHNSON III, P.C.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
(617) 570-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Wyman-Gordon Company, a Massachusetts
corporation (the "Company"), and the address of the principal executive offices
of the Company is 244 Worcester Street, P.O. Box 8001, North Grafton,
Massachusetts 01536-8001. The title of the class of equity securities to which
this statement relates is the common stock, par value $1.00 per share, of the
Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Solicitation/Recommendation Statement relates to the tender offer by
WGC Acquisition Corp., a Massachusetts corporation (the "Purchaser") and a
wholly-owned subsidiary of Precision Castparts Corp., an Oregon corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated May
21, 1999 (the "Schedule 14D-1"), to purchase all of the outstanding Shares at a
purchase price of $20.00 per Share, net to the seller in cash, without interest
thereon, less applicable withholding taxes (the "Offer Price"), if any, and upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated May 21, 1999 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 17, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and the satisfaction or waiver
of certain conditions, the Purchaser will be merged with and into the Company
(the "Merger"), with the Company as the surviving corporation (the "Surviving
Corporation"). Certain terms of the Merger Agreement are described below in Item
3(b)(2).
Parent has formed the Purchaser in connection with the Offer and the Merger
Agreement. The principal executive offices of each of Parent and the Purchaser
are located at 4650 S.W. Macadam Avenue, Suite 440, Portland, Oregon 97201.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b)(1) The following describes material contracts, agreements, arrangements
and understandings and any actual or potential conflicts of interest between the
Company or its affiliates and the Company, its executive officers, directors or
affiliates:
EXECUTIVE SEVERANCE AGREEMENTS WITH OFFICERS
The Company has entered into executive severance agreements with the
following officers of the Company: David P. Gruber, J. Douglas Whelan, Sanjay N.
Shah, J. Stewart Smith, Colin Stead, Wallace F. Whitney, Jr., Frank J. Zugel,
David J. Sulzbach and William T. McGovern. Each severance agreement provides
that in the event of the qualifying termination (as defined in the agreement) of
the officer's employment within three years following a change in control (as
defined in the agreement) of the Company, the officer is entitled to the
following severance benefits: (i) a payment equal to a maximum of 250% of the
officer's total annual compensation (as defined in the agreement), (ii)
continuation of medical, accident, disability, life and any other insurance
coverages for up to 24 months following termination , (iii) accelerated vesting
of existing options and stock appreciation rights and (iv) two years of
additional accrual under the Company's Supplemental Retirement Plan for Senior
Executives. No benefits are payable under the severance agreements in the event
of the officer's termination for cause, in the event of retirement, disability
or death or in cases of voluntary termination in circumstances other than those
specified in the agreements that would entitle an officer to benefits. The
consummation of the transactions contemplated by the Merger Agreement will
constitute a change in control under each officer's severance agreement. The
following events, among others, are deemed "Qualifying Terminations" under each
officer's severance agreement that would entitle him to receive severance
benefits: (i) a change in the officer's status or position with the Company
that, in the officer's reasonable judgment, represents an
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adverse change from his status or position in effect immediately before the
change of control; (ii) the assignment to the officer of any duties or
responsibilities that, in his reasonable judgment, are inconsistent with his
status or position in effect immediately before the change of control; (iii) the
layoff or involuntary termination of the officer's employment, except in
connection with the termination of the officer's employment for cause (as
defined in the agreement) or as a result of his death, retirement or disability
(as defined in the agreement); (iv) a reduction by the Company in the officer's
total compensation as in effect at the time of the change of control or as the
same may be increased from time to time; (v) the failure by the Company to
continue in effect any Plan (as defined in the agreement) in which the officer
is participating at the time of the change of control; (vi) any action or
inaction by the Company that would adversely affect the officer's continued
participation in any Plan (as defined in the agreement) on at least as favorable
a basis as was the case at the time of the change of control, or that would
materially reduce the officer's benefits in the future under the Plan (as
defined in the agreement) or deprive him of any material benefits that he
enjoyed at the time of the change of control, except to the extent that such
action or inaction by the Company is required by the terms of the Plan (as
defined in the agreement) as in effect immediately before the change of control,
or is necessary to comply with applicable law or to preserve the qualification
of the Plan under section 401(a) of the Internal Revenue Code, and except to the
extent that the Company provides the officer with substantially equivalent
benefits; (vii) the Company's failure to obtain the express assumption of the
agreement by any successor to the Company as provided in the agreement; (viii)
any material violation by the Company of any agreement between it and the
officer; and (ix) the failure by the Company, without the officer's consent, to
pay him any portion of his current compensation, or to pay him any portion of
any deferred compensation, within 30 days of the date the officer notifies the
Company that such compensation is due. The severance agreements also provide
that in the event the receipt of the severance payments causes the officer to
become subject to the 20 percent excise tax imposed by Section 280G of the
Internal Revenue Code, the severance payments will be reduced to a level at
which no excise tax will be imposed only if the officer's net after-tax benefit
is greater with the reduction. The officer's severance payments will not be
reduced if the officer's net after-tax benefit is greater without the reduction.
In this case, the Company's tax deductions with respect to the officer's
severance benefit will be limited to an amount that does not exceed the
officer's average taxable compensation in the last five years.
As a result of the consummation of the transactions contemplated by the
Merger, the performance shares and options set forth in the following table held
by the officers will become fully vested.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF OPTION SHARES
NAME PERFORMANCE SHARES OPTION SHARES EXERCISE PRICE($)
- --------------------------------------------------------- ----------------------- ------------- -----------------
<S> <C> <C> <C>
David P. Gruber.......................................... 5,700 29,250 16.625
J. Douglas Whelan........................................ 3,800 19,750 16.625
William T. McGovern...................................... -- 15,000 9.875
Sanjay N. Shah........................................... 2,800 14,625 16.625
J. Stewart Smith......................................... 1,820 11,539 16.75
Colin Stead.............................................. 1,820 11,539 16.75
David J. Sulzbach........................................ 1,820 11,539 16.75
Wallace F. Whitney, Jr................................... 2,800 14,625 16.625
Frank J. Zugel........................................... 3,800 19,750 16.625
</TABLE>
A copy of the form of severance agreement entered into with each officer is
attached hereto as Exhibit 4 and a copy of the form of amendment to each
officer's severance agreement is attached hereto as Exhibit 5. Both the form of
severance agreement and the form of amendment thereto are incorporated herein by
reference.
(b)(2) The following describes material contracts, agreements, arrangements
and understandings and any actual or potential conflicts of interest between the
Company or its affiliates and the Purchaser and Parent and their respective
executive officers, directors or affiliates.
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THE MERGER AGREEMENT
In connection with the Offer, the Company has entered into the Merger
Agreement with the Purchaser and Parent. A summary of the Merger Agreement is
set forth below. A copy of the Merger Agreement is attached hereto as Exhibit 3,
and the following summary is qualified in its entirety by reference to the text
of the Merger Agreement, which is incorporated herein by reference.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
by the Purchaser as soon as practicable after the date of the Merger Agreement,
but in any event not later than five business days following the public
announcement of the Offer. The obligation of the Purchaser to accept for payment
and pay for any Shares tendered pursuant to the Offer is subject to the
satisfaction of certain conditions, which are described below in "--Conditions
to the Offer." Subject to the prior satisfaction or waiver of the conditions to
the Offer, the Purchaser shall accept for payment and pay for Shares validly
tendered and not withdrawn pursuant to the Offer as soon as legally permissible
under the Merger Agreement and applicable law. Unless it is extended on the
terms described below, the Offer will expire at 12:00 midnight, New York City
time, on June 18, 1999. The Merger Agreement provides that Parent will not,
without the prior written consent of the Company, amend, or permit to be
amended, the Offer to (i) decrease the Offer Price, (ii) change the
consideration into a form other than cash, (iii) add any conditions to the
obligation of Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer, (iv) amend (other than to waive) the Minimum Condition
(as hereinafter defined) or certain other conditions, which are described below
in "--Conditions to the Offer," or (v) reduce the maximum number of Shares to be
purchased in the Offer. In addition, if (i) on the initial scheduled expiration
date of the Offer (the "Initial Expiration Date"), which shall be 20 business
days after the date the Offer is commenced, all conditions to the Offer shall
not have been satisfied or waived, Purchaser may, from time to time, in its sole
discretion, extend the expiration date of the Offer (the "Expiration Date");
provided, however, that, the Expiration Date, as extended, shall be no later
than the date that is 60 business days immediately following the Initial
Expiration Date (the "Final Expiration Date"); and provided further that if on
the Initial Expiration Date, all conditions to the Offer shall have been
satisfied or waived other than the Minimum Condition, Purchaser shall be
required to extend the Expiration Date to the date that is ten business days
immediately following the Initial Expiration Date and (ii) on the Initial
Expiration Date, the applicable waiting period (and any extension thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") in
respect of the Offer shall not have expired or been terminated and all other
conditions to the Offer shall have been satisfied or waived other than the
Minimum Condition and certain other conditions as set forth in the Merger
Agreement as they relate to compliance with the HSR Act or other applicable
antitrust laws, Purchaser shall be required to extend the Expiration Date for
such additional periods as may be necessary to permit the parties to seek to
obtain termination of the waiting period under the HSR Act up to the date that
is nine months after the date upon which Parent files a pre-merger notification
and report form under the HSR Act (the "HSR Expiration Date"); provided,
however, that if the applicable waiting period (and any extension thereof) under
the HSR Act in respect of the Offer expires or is terminated prior to the date
that is ten business days prior to the HSR Expiration Date, the Expiration Date
shall be the date which is ten business days immediately following public
disclosure of the expiration or termination of the waiting period under the HSR
Act.
THE MERGER. The Merger Agreement provides that, as promptly as practicable
following the Offer and the satisfaction or waiver of the conditions described
below in "--Conditions to the Merger," the Purchaser will be merged with and
into the Company, with the Company being the Surviving Corporation, and each
then outstanding Share (other than issued and outstanding Shares owned by
Parent, the Purchaser or any other direct or indirect subsidiary of Parent,
Shares held by the Company or any direct or indirect subsidiary of the Company
(including treasury shares) and Shares held by holders who perfect any appraisal
rights that they may have under the Massachusetts General Laws, as amended (the
"MGL")) will, by virtue of the Merger and without any further action on the part
of the holder thereof, be converted automatically into the right to receive
$20.00 in cash or such higher price, if any, as may be offered and
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paid in the Offer (the "Merger Consideration"). All Shares owned by the Company
or any direct or indirect subsidiary of the Company (including treasury shares)
and all Shares owned by Parent, the Purchaser or any other direct or indirect
subsidiary of Parent will be canceled and retired and cease to exist without the
payment of any consideration. In addition, the Merger Agreement provides that,
as promptly as practicable after all of the conditions to the Merger as set
forth in the Merger Agreement shall have been satisfied or, if permissible,
waived by the party entitled to the benefit of the same, the Company shall duly
execute and file articles of merger (the "Articles of Merger") with the
Secretary of State of the Commonwealth of Massachusetts in accordance with the
MGL. The Merger shall become effective at such time as the Articles of Merger,
accompanied by payment of the filing fee (as provided in Chapter 156B of the
MGL), have been examined by and received the endorsed approval of the Secretary
of State of the Commonwealth of Massachusetts (the "Effective Time").
CONDITIONS TO THE OFFER. The Merger Agreement provides that, subject to any
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission") (including Rule 14e-1(c) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), and in addition to the conditions that
(A) at least two-thirds of the Shares on a fully diluted basis are validly
tendered and not withdrawn immediately prior to the expiration date of the Offer
(the "Minimum Condition") and (B) any applicable waiting period and any
extension thereof under the HSR Act shall have expired or been terminated,
Parent and the Purchaser shall not be required to accept for payment or pay for
any Shares and may delay the acceptance for payment of and payment for any
Shares, if at any time on or after the date of the Merger Agreement, and prior
to the time of the expiration of the offer, any of the following conditions
exist or shall occur or remain in effect:
(i) any state or federal government or governmental authority or any United
States or state court of competent jurisdiction (collectively, a "Governmental
Entity") shall have issued an order, decree or ruling or taken any other action,
including instituting any legal proceeding, (which order, decree, ruling or
other action the parties agree to use their commercially reasonable best efforts
to lift), which seeks to restrain, enjoin or otherwise prohibit or significantly
delay the Merger Agreement and the transactions contemplated thereby, including
without limitation the Merger and the Offer (collectively, the "Transactions");
(ii) (A) any of the representations and warranties of the Company set forth
in the Merger Agreement which are qualified by materiality or a material adverse
effect on the Company or words of similar effect shall not have been, or cease
to be, true and correct (except to the extent such representations and
warranties expressly relate to a specific date, in which case such
representations and warranties shall not have been true and correct as of such
date) or (B) any of the representations and warranties of the Company set forth
in the Merger Agreement which are not so qualified shall not have been, or cease
to be, true and correct in all material respects (except to the extent such
representations and warranties expressly relate to a specific date, in which
case such representations and warranties shall not have been true and correct in
all material respects as of such date);
(iii) the Company shall not have performed all obligations required to be
performed by it under the Merger Agreement, including, without limitation,
certain covenants contained therein, except where any failure to perform would,
individually or in the aggregate, not reasonably be expected to have a material
adverse effect on the Company or materially impair or significantly delay the
ability of Purchaser to consummate the Offer;
(iv) there shall have occurred after the date of the Merger Agreement any
change or effect concerning the Company or a subsidiary of the Company which has
had or would reasonably be expected to have a material adverse effect on the
business, operations or condition (financial or otherwise) of the Company and
the subsidiaries of the Company taken as a whole (other than any changes that
are related to or result from the announcement or pendency of the Offer and/or
the Merger, including disruptions to the Company's business or the businesses of
subsidiaries of the Company, and their respective employees, customers and
suppliers);
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(v) the Merger Agreement shall have been terminated in accordance with its
terms;
(vi) any consent, authorization, order or approval of (or filing or
registration with) any Governmental Entity or other third party required to be
made or obtained by the Company or any subsidiary of the Company or affiliates
in connection with the execution, delivery and performance of the Merger
Agreement and the consummation of the Transactions shall not have been obtained
or made, except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration, would not have a
material adverse affect on the Company or would not reasonably be expected to
materially impair or significantly delay the ability of Purchaser to consummate
the offer; or
(vii) there shall have occurred (A) any general suspension of trading in, or
limitation on prices for securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq Stock Market for a period in excess of 24 hours
(excluding suspension or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (B) a
declaration of a general banking moratorium or any general suspension of
payments in respect of banks in the United States (whether or not mandatory), or
(C) in the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof.
Parent may, in its sole discretion, waive any of the foregoing conditions in
whole or in part, at any time and from time to time. If the Offer is terminated
due to the occurrence of any of the foregoing events, all tendered Shares not
theretofore accepted for payment shall promptly be returned to the tendering
stockholders.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
obligations of the Company, Parent and the Purchaser to effect the Merger are
subject to the fulfillment or waiver, at or prior to the closing of the Merger
(the "Closing Date"), of each of the following conditions: (i) if required by
applicable law, the Merger Agreement and the Transactions shall have been
approved and adopted by the affirmative vote of the stockholders of the Company
to the extent required by the MGL and the Articles of Organization of the
Company, (ii) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, (iii) all necessary approvals, authorizations and consents of any
governmental or regulatory entity required to consummate the Merger shall have
been obtained and remain in full force and effect, and all waiting periods
relating to such approvals, authorizations and consents shall have expired or
been terminated, except where such failure would not have a material adverse
effect on either the Company or Parent, as the case may be, or would not be
reasonably likely to affect adversely the ability of the Company or Purchaser,
as the case may be, to consummate the Merger, (iv) no preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission nor any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority shall be in effect which would (A) make
the consummation of the Merger illegal, or (B) otherwise restrict, prevent or
prohibit the consummation of any of the Transactions, including the Merger and
(v) Parent, Purchaser or their affiliates shall have purchased Shares pursuant
to the Offer.
TREATMENT OF STOCK OPTIONS. The Merger Agreement provides that each stock
option and stock appreciation right under any of the Company's Executive
Long-Term Incentive Plan; 1991 Long-Term Incentive Plan, the 1995 Long-Term
Incentive Plan; the 1997 Long-Term Incentive Plan; or the Non-Employee Director
Stock Option Plan (collectively, the "Stock Option Plans"), which is outstanding
immediately prior to the date on which Purchaser accepts for payment Shares
pursuant to the Offer whether or not then exercisable, which has not been
exercised or canceled prior thereto shall be entitled to receive a cash payment
from Parent equal to the product of (x) the excess, if any, of the Offer Price
over the per Share exercise price of such stock option and (y) the number of
Shares subject to such stock option, which cash payment shall be treated as
compensation and shall be net of any applicable federal or state withholding
tax. In addition, the Company has agreed to take all actions necessary to ensure
that (i) all options and stock appreciation rights, to the extent not exercised
prior to the Acceptance Date (as defined
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in the Merger Agreement), shall terminate and be canceled as of the Acceptance
Date and thereafter be of no further force or effect, (ii) no options or stock
appreciation rights are granted after the date of the Merger Agreement, and
(iii) as of the Acceptance Date, the Company Stock Option Plans and all options
and stock appreciation rights issued thereunder shall terminate.
TERMINATION OF EMPLOYEE STOCK PURCHASE PLAN. The Merger Agreement provides
that (i) the current offering period under the Company's Employee Stock Purchase
Plan (the "Stock Purchase Plan") was terminated as of May 17, 1999, (ii) each
participant in the Stock Purchase Plan on May 17, 1999 was deemed to have
exercised his or her Option (as defined in the Stock Purchase Plan) on such date
and acquired from the Company (A) such number of whole Shares as his or her
accumulated payroll deductions on such date could purchase at the Option Price
(as defined in the Stock Purchase Plan) (treating May 14, 1999 as the "Exercise
Date" for all purposes of the Stock Purchase Plan) and (B) cash in the amount of
any remaining balance in such participant's account, and (iii) the Stock
Purchase Plan was terminated as of May 17, 1999.
STOCKHOLDER APPROVAL OF THE MERGER. The Company, acting through its Board
of Directors and in accordance with applicable law, has agreed, if required by
applicable law in order to consummate the Merger, to duly call, give notice of,
convene and hold a special meeting of its stockholders as promptly as
practicable following the acceptance for payment and purchase of shares by
Purchaser pursuant to the Offer for the purpose of considering and taking action
upon the approval of the Merger and adoption of the Merger Agreement. Pursuant
to the Merger Agreement, the Board of Directors of the Company will recommend
that the Company's stockholders approve the Merger if such stockholder approval
is required.
PROHIBITION OF SOLICITATIONS. The Merger Agreement provides that the
Company will immediately cease any discussions or negotiations with any parties
that may be ongoing with respect to an Acquisition Proposal (as defined below in
"--Certain Definitions"). In addition, the Company has agreed that it shall not,
and shall not authorize or permit any of its officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other
representative, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing non-public information), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes an Acquisition Proposal, or (ii) participate in any discussions or
negotiations regarding an Acquisition Proposal; provided, however, that if the
Company's Board of Directors determines in good faith, after consultation with
counsel, that such action is necessary to comply with its fiduciary duties to
the Company's stockholders under applicable law, the Company, in response to an
Acquisition Proposal and subject to certain other conditions as set forth in the
Merger Agreement, may (A) furnish non-public information with respect to the
Company to the person who made such Acquisition Proposal pursuant to a
confidentiality agreement on terms no more favorable to such person than the
Confidentiality Agreement (as defined in Merger Agreement); provided that such
confidentiality agreement need not include the same standstill provisions as
those contained in the Confidentiality Agreement, it being understood that if
there are no standstill provisions in such confidentiality agreement or if such
provisions are more favorable to the person who made such Acquisition Proposal
than those in the Confidentiality Agreement, the Confidentiality Agreement shall
be deemed amended to exclude the existing standstill provision or include such
more favorable provisions, as the case may be, and (B) participate in
negotiations regarding such Acquisition Proposal. In addition, the Company has
agreed that its Board of Directors shall not (i) withdraw or modify in a manner
adverse to Parent or Purchaser its approval or recommendation of the Merger
Agreement, the Offer or the Merger, (ii) approve or recommend an Acquisition
Proposal to its stockholders or (iii) cause the Company to enter into any
definitive acquisition agreement with respect to an Acquisition Proposal, unless
the Company's Board of Directors (A) shall have determined in good faith, after
consultation with counsel, that the Acquisition Proposal is a Superior Proposal
(as defined below in "--Certain Definitions") and such action is necessary to
comply with its fiduciary duties to the Company's stockholders under applicable
law and (B) in the case of clause (iii) above, complies with certain other
provisions of the Merger Agreement. In the event that before the Acceptance Date
the Company's Board of Directors determines in good faith, after consultation
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with counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Company
may enter into an agreement with respect to a Superior Proposal, but only
forty-eight hours after Parent's receipt of written notice (i) advising Parent
that the Company Board has received a Superior Proposal and that the Company has
elected to terminate this Agreement pursuant to the applicable provisions of the
Merger Agreement and (ii) setting forth such other information required to be
included therein as provided the Merger Agreement; provided that nothing
contained in the Merger Agreement prohibits the Company from at any time
disclosing information to its stockholders as required by Rule 14e-2 promulgated
under the Exchange Act. The Merger Agreement further provides that the Company
will within 24 hours notify Parent of its receipt of an Acquisition Proposal;
provided that, subject to certain conditions as set forth in the Merger
Agreement, the Company has no duty to notify or update Parent or Purchaser on
the status of discussions or negotiations (including the status of such
Acquisition Proposal or any amendments or proposed amendments thereto) between
the Company and the person making the Acquisition Proposal.
INTERIM OPERATIONS OF THE COMPANY. The Merger Agreement provides that,
except as otherwise contemplated by the Merger Agreement, during the period from
the date of the Merger Agreement to the Effective Time, the Company shall use
its commercially reasonable best efforts to, and shall cause each of its
subsidiaries to use its reasonable best efforts to, carry on their respective
businesses in the usual, regular and ordinary course, consistent with the
requirements of law and past practice, and use their commercially reasonable
best efforts to preserve intact their present business organizations, keep
available the services of their present advisors, managers, officers and
employees and preserve their relationships with customers, suppliers, licensors
and others having business dealings with them and continue existing contracts as
in effect on the date of the Merger Agreement (for the term provided in such
contracts). The Merger Agreement further provides that neither the Company nor
any subsidiary of the Company will (except as expressly permitted by the Merger
Agreement or as contemplated by the Offer or the Transactions contemplated
thereby or to the extent that Parent shall otherwise consent in writing): (i)
(A) declare, set aside or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of any of its
capital stock (other than dividends or other distributions declared, set aside
or paid by any wholly-owned Company Subsidiary consistent with past practice),
(B) split, combine or reclassify any of its capital stock or (C) repurchase,
redeem or otherwise acquire any of its securities, except, for the acquisition
of Shares from holders of Options in full or partial payment of the exercise
price payable by such holders upon exercise of Options outstanding on the date
of the Merger Agreement; (ii) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (including
indebtedness having the right to vote) or equity equivalents (including, without
limitation, stock appreciation rights) (other than the issuance of Shares upon
the exercise of Options outstanding on the date of this Agreement in accordance
with their present terms); (iii) acquire, sell, lease, encumber, transfer or
dispose of any assets outside the ordinary course of business which are material
to the Company or any subsidiary of the Company (whether by asset acquisition,
stock acquisition or otherwise), except pursuant to obligations in effect on the
date of the Merger Agreement; (iv) (A) incur any amount of indebtedness for
borrowed money, guarantee any indebtedness, guarantee (or become liable for) any
debt of others, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any material
lien thereupon other than in the ordinary course of business consistent with
prior practice, (B) incur any short-term indebtedness for borrowed money or (C)
issue or sell debt securities or warrants or rights to acquire any debt
securities, except, in the case of clause (A) and (B) above, pursuant to credit
facilities in existence on the date of the Merger Agreement in accordance with
the current terms of such credit facilities; (v) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than any payment, discharge or satisfaction (A)
in the ordinary course of business consistent with past practice, or (B) as
contemplated by the Transactions; (vi) change any of the accounting principles
or practices used by it (except as required by generally accepted
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accounting principles, in which case written notice shall be provided to Parent
and Purchaser prior to any such change); (vii) except as required by law, (A)
enter into, adopt, amend or terminate any Company Benefit Plan (as defined in
the Merger Agreement), (B) enter into, adopt, amend or terminate any agreement,
arrangement, plan or policy between the Company or any of the subsidiaries of
the Company and one or more of their directors or officers, or (C) except for
normal increases in the ordinary course of business consistent with past
practice, increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any Company
Benefit Plan or arrangement as in effect as of the date of the Merger Agreement;
(viii) adopt any amendments to the Company's articles of organization, bylaws or
the Rights Agreement (as defined in the Merger Agreement), except as expressly
provided by the terms of the Merger Agreement; (ix) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization (other than plans of complete or partial
liquidation or dissolution of inactive subsidiaries of the Company); (x) settle
or compromise any litigation (whether or not commenced prior to the date of the
Merger Agreement) other than settlements or compromises of litigation where the
amount paid (after giving effect to insurance proceeds actually received) in
settlement or compromise does not exceed $250,000; or (xi) enter into an
agreement to take any of the foregoing actions.
DIRECTORS. The Merger Agreement provides that, promptly upon the purchase
of Shares pursuant to the Offer, Parent shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Company's Board
of Directors as is equal to the product of (a) the total number of directors on
the Company's Board of Directors (after giving effect to the directors
designated by Parent pursuant to this sentence) and (b) the percentage that the
total votes represented by such number of Shares in the election of directors of
the Company so purchased bears to the total votes represented by the number of
Shares outstanding. In furtherance thereof, the Company has agreed, upon request
by Parent, to promptly increase the size of the Company's Board of Directors
and/or exercise its commercially reasonable best efforts to secure the
resignations of such number of its directors as is necessary to enable Parent's
designees to be elected to the Company's Board of Directors and shall take all
actions to cause Parent's designees to be so elected to the Company's Board of
Directors. At such time, the Company has also agreed to cause persons designated
by Parent to constitute at least the same percentage (rounded up to the next
whole number) as is on the Company's Board of Directors of (i) each committee of
the Company's Board of Directors, (ii) each board of directors (or similar body)
of each subsidiary of the Company and (iii) each committee (or similar body) of
each such board. The Company shall take, at its expense, all action required
pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill
its obligations under the Merger Agreement and shall include in the Schedule
14D-9 to its stockholders such information with respect to the Company and its
officers and directors as is required by such Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under the Merger Agreement. Parent has agreed
to 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 such Section 14(f) and Rule 14f-1. The foregoing
provisions are in addition to and shall not limit any rights which Purchaser,
Parent or any of their affiliates may have as a holder or beneficial owner of
Shares as a matter of law with respect to the election of directors or
otherwise. In the event that Parent's designees are elected to the Company's
Board of Directors, until the Effective Time, the Company's Board of Directors
shall have at least two directors who are directors on the date of the Merger
Agreement (the "Independent Directors"); provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director shall be entitled to designate
the person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of the Merger Agreement or, if no Independent Director
then remains, the other directors shall designate two persons to fill such
vacancies who shall not be stockholders, affiliates or associates of Parent or
Purchaser and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement. In the event that Parent's designees are
elected to the Company Board, after the acceptance for payment of Shares
pursuant to the Offer and prior
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to the Effective Time, the affirmative vote of a majority of the Independent
Directors shall be required in addition to any other applicable requirement to
(a) amend the Merger Agreement in any material respect in a manner adverse to
any stockholder of the Company or any intended third-party beneficiary of the
Merger Agreement, (b) terminate the Merger Agreement by the Company, (c)
exercise or waive any of the Company's material rights, benefits or remedies
under the Merger Agreement, or (d) extend the time for performance of Parent's
or Purchaser's respective obligations under the Merger Agreement.
INDEMNIFICATION. The Merger Agreement provides that (i) in the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, criminal or administrative, including, without limitation, any such
claim, action, suit, proceeding or investigation in which any person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer, employee, fiduciary or agent of the Company
or any of the Company's subsidiaries (the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or arising in whole
or in part out of, or pertaining to (A) the fact that he is or was a director,
officer, employee, fiduciary or agent of the Company or any of the Company's
subsidiaries, or is or was serving at the request of the Company or any of the
Company's subsidiaries as a director, officer, employee, fiduciary or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(B) the negotiation, execution or performance of the Merger Agreement or any of
the transactions contemplated thereby, whether in any case asserted or arising
before or after the Effective Time, the Company, Parent and Purchaser agree to
cooperate and use their commercially reasonable best efforts to defend against
and respond thereto. In addition, the Company agreed that it shall indemnify and
hold harmless, and after the Effective Time the Surviving Corporation (as
defined in the Merger Agreement) and Parent shall indemnify and hold harmless,
as and to the full extent permitted by applicable law, each Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), (1) the Company, and the Surviving
Corporation and Parent after the Effective Time, shall promptly pay reasonable
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by law, (2)
the Indemnified Parties may retain counsel satisfactory to them, and the
Company, and the Surviving Corporation and Parent after the Effective Time,
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties within 30 days after statements therefor are received, and (3) the
Company, the Surviving Corporation and Parent will use their respective
commercially reasonable best efforts to assist in the vigorous defense of any
such matter; provided that none of the Company, the Surviving Corporation or
Parent shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); and provided further
that the Surviving Corporation and Parent shall have no obligation under the
Merger Agreement to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of such Indemnified Party
in the manner contemplated by the Merger Agreement is prohibited by applicable
law (whereupon any advances received shall be repaid to Parent or the Surviving
Corporation); (ii) Parent and Purchaser agree that all rights to indemnification
existing in favor of, and all limitations on the personal liability of, the
directors, officers, employees and agents of the Company and the Company's
subsidiaries provided for in the articles of organization or bylaws of the
Company as in effect as of the date of the Merger Agreement with respect to
matters occurring prior to the Effective Time, and including the Offer and the
Merger, shall continue in full force and effect for a period of not less then
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claims (each a "Claim") asserted or made
within such period shall continue until the disposition of such Claim. Prior to
the Effective Time, the Company has agreed to purchase an extended reporting
period endorsement under the Company's existing directors' and officers'
liability insurance coverage for the Company's directors and officers in a form
acceptable to the Company which shall provide such directors and officers with
coverage for six years following the Effective Time of
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not less than the existing coverage under, and have other terms not materially
less favorable to, the insured persons than the directors' and officers'
liability insurance coverage presently maintained by the Company; and (iii) in
the event that the Surviving Corporation or any of its successors or assigns (A)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(B) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then, and in each such case, proper provision shall be
made so that the successors and assigns of the Surviving Corporation assume the
obligations related to indemnification in the Merger Agreement.
CERTAIN EMPLOYEE BENEFITS. The Merger Agreement provides that (i) after the
Closing, Parent shall cause the Surviving Corporation to honor all obligations
under (A) the existing terms of the employment and severance agreements to which
the Company or any subsidiary of the Company is presently a party, except as may
otherwise be agreed to by the parties thereto, and (B) the Company's and any
Company subsidiary's general severance policy. In addition, for a period of six
months following the Effective Time (the "Transition Period"), employees of the
Surviving Corporation will continue to participate in the Company benefit plans
(other than deferred compensation plans, stock option plans or employee stock
purchase plans or other employer stock match or other employer stock related
provisions) on substantially similar terms to those currently in effect and for
a period of 18 months following the expiration of the Transition Period, the
Surviving Corporation's employees will be entitled to participate in employee
benefit plans, the terms of which will be similar in material respects in the
aggregate to the Company benefit plans as in effect on the date of the Merger
Agreement (other than deferred compensation plans, stock option plans or
employee stock purchase plans or other employer stock match or other employer
stock related provisions); (ii) after the closing of the Merger, Parent shall
cause the Surviving Corporation to honor all obligations which accrued prior to
the Effective Time under the Company's deferred compensation plans. Except as is
otherwise required by the existing terms of employment and severance agreements
to which the Company is presently a party (A) future accruals may be (but are
not required to be) provided for under any such plan(s) or under any similar
plan(s) of the Surviving Corporation or Parent; (B) if future accruals are not
provided for with respect to any current employee participant in such plan as of
the Effective Time, and such person remains an employee of the Company or the
Surviving Corporation or Parent, the person's continuing employment in such
capacity shall be counted for purposes of vesting (but not for purposes of
benefit accrual) under such plan; and (C) transfer of employment from the
Company to the Surviving Corporation or to the Parent or to an affiliate of the
Parent shall not constitute a termination of employment for purposes of payment
of benefits under any such plan; and (iii) if any employee of the Company or any
subsidiary of the Company becomes a participant in any employee benefit plan,
practice or policy of Parent, any of its affiliates or the Surviving
Corporation, such employee shall be given credit under such plan for all service
prior to the Effective Time with the Company and the Company's subsidiaries and
prior to the time such employee becomes such a participant, for purposes of
eligibility (including, without limitation, waiting periods) and vesting but not
for any other purposes for which such service is either taken into account or
recognized (including, without limitation, benefit accrual); provided, however,
that such employees will be given credit for such service for purposes of any
vacation policy. In addition, if any employees of the Company or any subsidiary
of the Company employed as of the Closing Date become covered by a medical plan
of Parent, any of its affiliates or the Surviving Corporation, such medical plan
shall not impose any exclusion on coverage for preexisting medical conditions
with respect to these employees.
AMENDMENT AND TERMINATION OF RIGHTS AGREEMENT. The Board of Directors of
the Company has amended the Company's Rights Agreement (as defined in the Merger
Agreement) prior to the execution of the Merger Agreement (i) so that neither
the execution nor the delivery of the Merger Agreement will trigger or otherwise
affect any rights or obligations under the Rights Agreement, including causing
the occurrence of a "Distribution Date" or a "Stock Acquisition Date," (both as
defined in the Rights Agreement) and (ii) to terminate the Rights Plan (as
defined in the Merger Agreement) immediately upon the Effective Time.
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TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time, whether before or after stockholder
approval thereof: (i) by the mutual written consent of Parent or Purchaser and
the Company; (ii) by either of the Company or Parent or Purchaser (A) if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties hereto
shall use their best efforts to lift), which permanently restrains, enjoins or
otherwise prohibits the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger; or (B) if, without any material breach by
the terminating party of its obligations under the Merger Agreement, Parent or
Purchaser shall not have purchased Shares pursuant to the Offer on or prior to
the later of (i) the Final Expiration Date; or (ii) the HSR Expiration Date (if
applicable); (iii) by the Company (A) if Parent or Purchaser shall have failed
to commence the Offer on or prior to five business days following the date of
the initial public announcement of the Offer; or (B) in connection with entering
into a definitive agreement to effect a Superior Proposal in accordance with the
provisions of the Merger Agreement; or (C) subject to certain conditions Parent
or Purchaser shall have breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in the
Merger Agreement; and (iv) by Parent or Purchaser if, prior to the purchase of
Shares pursuant to the Offer (A) the Company shall have breached any
representation or warranty or failed to have performed any covenant or other
agreement contained in the Merger Agreement which breach or failure to perform
(1) would give rise to the failure of a condition described in "--Conditions to
the Offer", and (2) cannot be or has not been cured within 15 days after the
giving of written notice to the Company; or (B) (1) the Company Board shall
withdraw, modify or change its recommendation or approval in respect of the
Merger Agreement or the Offer in a manner adverse to Parent, (2) the Company
Board shall recommend any proposal other than by Parent and Purchaser in respect
of an Acquisition Proposal or (3) the Company shall have exercised a right with
respect to an Acquisition Proposal and shall, directly or through its
representatives, continue discussions with any third party concerning such
Acquisition Proposal for more than 20 business days after the date of receipt of
such Acquisition Proposal. The Merger Agreement further provides that (i) in the
event of the termination of the Merger Agreement, the Merger Agreement shall
forthwith become null and void and have no effect, without any liability on the
part of any party hereto or its affiliates, trustees, directors, officers or
stockholders and all rights and obligations of Parent, Purchaser or the Company,
shall cease except for certain agreements as set forth in the Merger Agreement;
provided, however, that nothing in the Merger Agreement shall relieve any party
from liability for any fraud or willful breach of the Merger Agreement; (ii) if
the Company terminates the Merger Agreement under certain conditions, then the
Company shall concurrently pay to Parent an amount in cash equal to $25,000,000
(the "Liquidated Amount").
CERTAIN DEFINITIONS. For purposes of the preceding paragraphs, the Merger
Agreement provides the following definitions of the indicated terms:
"Acquisition Proposal" means any proposed or actual (i) acquisition,
merger, consolidation or similar transaction involving the Company, (ii)
sale, lease or other disposition, directly or indirectly, by merger,
consolidation, share exchange or otherwise, of any assets of the Company or
the Company's subsidiaries representing 15% or more of the consolidated
assets of the Company and the Company's subsidiaries, (iii) issue, sale or
other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the votes associated with the outstanding
securities of the Company, (iv) transaction in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership, or any
"group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 15% or more of the outstanding Shares, (v) recapitalization,
restructuring, liquidation, dissolution, or other similar type of
transaction with respect to the Company or (vi) transaction which is similar
in form, substance or purpose to any of the foregoing transactions;
provided, however, that the term "Acquisition Proposal" shall not include
the Offer, the Merger and the Transactions.
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"Superior Proposal" means a bona fide Acquisition Proposal to acquire
two thirds or more of the Shares then outstanding or all or substantially
all of the assets of the Company and the Company Subsidiaries on terms which
the Company's Board of Directors determines in its good faith judgement
(after consultation with Goldman, Sachs & Co. or another financial advisor
of nationally recognized reputation) to be more favorable to the Company's
stockholders than the Offer and the Merger.
MISCELLANEOUS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company may
have certain rights under Massachusetts law to demand appraisal of, and seek the
payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value required to be paid in cash to such dissenting holders for
their Shares. Any such judicial determination of the fair value of Shares could
be based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares. The value so determined could be more
or less than the purchase price per Share pursuant to the Offer or the
consideration per Share to be paid in the Merger. The foregoing summary of the
rights of dissenting stockholders does not purport to be a complete statement of
the procedures to be followed by stockholders desiring to exercise their
dissenters' rights. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of Massachusetts
law. A more complete description of appraisal rights under Massachusetts law
will be sent to stockholders if a proxy solicitation is required to effect the
Merger.
The Merger will have to comply with any federal law applicable at the time.
In the event that the Merger is consummated more than one year after termination
of the Offer and the Purchaser has become an affiliate of the Company as a
result of the Offer, or the Merger provides for the payment of consideration
less than that paid pursuant to the Offer, and in certain other circumstances,
the Purchaser may be required to comply with Rule 13e-3 under the Exchange Act.
If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of such transaction and the consideration offered to minority
stockholders be filed with the Commission and distributed to minority
stockholders prior to the consummation of such transaction. The Purchaser does
not believe that Rule 13e-3 will be applicable to the Merger.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting of the
Company's Board of Directors held on May 15, 1999, the Company's Board of
Directors, by a unanimous vote, determined that the Offer and the Merger were
fair to and in the best interests of the Company and its stockholders,
unanimously approved and declared the advisability of the Merger Agreement and
the transactions contemplated thereby and voted to recommend that all holders of
Shares tender their Shares pursuant to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION. The Company's stock price
has recently been adversely affected by several factors. In the fiscal year
ended May 31, 1998 ("Fiscal 1998"), the Company's 29,000-ton press was taken out
of service for six months to repair structural cracking. The impact of this
downtime was to reduce net income by $11.1 million in Fiscal 1998 and the
negative impact continued into the fiscal year ending May 31, 1999. In late
1998, the Boeing Company, a major customer of the Company, announced it would
reduce its projected aircraft build rate on account of softening demand for its
products. These announcements had a negative impact on most aerospace stocks
including the Company's. As a result of the foregoing and an announcement in
February 1999 that the Company was taking an $11 million restructuring charge,
on February 17, 1999 the Company's stock price closed at $7 3/8, a four-year
low, down from a high of $30.00 on September 18, 1997.
In addition to the weakness of its stock price, the Company has been
concerned about the evolving competitive dynamics of the aerospace markets it
serves. In recent years there has been a continuing consolidation of both the
company's customers and its suppliers. This consolidation will put increasing
pressure on the Company's operating margins, particularly as the commercial
aerospace industry enters the down phase of its cycle.
In light of these factors, the Company has, from time to time, considered
various strategic transactions with a view to enhancing shareholder value. In
this regard, the Company entered into preliminary discussions with another
company ("Company X") in March 1998 concerning a potential business combination,
which were eventually abandoned. In connection with these negotiations, the
Company engaged Goldman, Sachs & Co. ("Goldman Sachs") to act as its financial
advisor. In January 1999 the Company began to consider more actively its
strategic alternatives, including a potential sale of the Company.
On January 13, 1999, PCC's financial advisor, Schroder & Co. Inc., met with
representatives of the Company to express PCC's interest in discussing the
possibility of a business combination with the Company and to request a
face-to-face meeting between PCC's and the Company's executives. On January 29,
1999, William C. McCormick, Chairman and Chief Executive Officer of PCC and
William D. Larsson, Chief Financial Officer of PCC, met with David P. Gruber,
the Chairman and Chief Executive Officer of the Company, and Edward J. Davis,
the Chief Financial Officer of the Company at that time, and discussed the
possibility of a business combination between the two companies. PCC did not
receive non-public information with respect to the Company at that time, and no
specific terms were discussed at this meeting.
On February 4, 1999, PCC sent a letter to the Company indicating PCC's
continued interest in pursuing a possible business combination with the Company.
In this letter, PCC proposed acquiring the Company at a price per share within
the range of $16.00 to $18.00 in cash, subject to due diligence and a number of
other conditions. PCC also proposed entering into a 45 day exclusivity/due
diligence period during which the parties could negotiate the definitive terms
of a transaction.
Following the receipt of this letter from PCC, the Company accelerated its
review of its various strategic alternatives. In connection with the foregoing,
the Company requested that Goldman Sachs make a presentation concerning these
alternatives at the Company's next Board Meeting which was scheduled for March
17, 1999. At the March 17, 1999 meeting, the Board considered several potential
strategic alternatives, including: (i) maintaining its existing business
strategy, either alone or in conjunction with a
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large stock repurchase program, (ii) a leveraged buy-out or a leveraged
recapitalization transaction, (iii) pursuing a large acquisition which would,
among other things, reduce the Company's reliance on the aerospace industry and
increase its presence in Europe, and (iv) a sale of the Company in either a
stock or cash transaction. Goldman Sachs' presentation described the advantages
of each of these alternatives and the issues which the Board should consider in
connection with these transactions. Following this discussion, the Board
concluded that, given the current environment in the commercial aerospace
industry, the Company would have difficulty in enhancing shareholder value if it
maintained its STATUS QUO operations, even if this strategy was combined with a
large stock repurchase program. Therefore, the Board authorized management to
pursue two alternatives: (i) a potential acquisition of a company ("Target")
with whom the Company had engaged in acquisition discussions during the past
year and (ii) a potential sale of the Company.
With respect to the potential sale of the Company, the Board authorized
Goldman Sachs to solicit potential bids to acquire the Company. Following the
Board meeting, Goldman Sachs contacted six potential bidders, including PCC and
Company X. Of these six parties, four (including PCC and Company X) entered into
confidentiality agreements with the Company. During April 1999, these companies
conducted due diligence and attended presentations by the Company's management
concerning its business and operations. On April 28, 1999, on behalf of the
Company, Goldman Sachs invited three of the bidders to submit final binding
proposals to acquire the Company. These proposals were required to include all
material terms including all proposed revisions to the form of merger agreement
prepared by the Company's counsel.
On May 10, 1999, the Company received responses from two bidders. In its
bid, PCC proposed to acquire all of the outstanding Shares at a price of $18.75
per share in cash subject to a number of conditions. The other bid indicated an
interest in acquiring all of the outstanding Shares at a price per share in cash
below PCC's bid. This bid did not identify the source of financing for the
transaction and was viewed by the Company as preliminary in nature. Following
receipt of the bids, the Company's and PCC's legal and financial advisors
engaged in negotiations which focused on, among other things, the scope of the
representations, warranties and covenants contained in the Merger Agreement,
issues relating to PCC's financing arrangements, the obligations of the parties
with respect to obtaining antitrust approval, the conditions under which PCC
would be obligated to close the tender offer, the ability of the Company to
terminate the Merger Agreement and to enter into an agreement with a party who
made a Superior Proposal, and the amount of the termination fee to be paid to
PCC in such circumstances. As a result of these negotiations, PCC agreed to
increase its proposed purchase price to $20.00 per share in cash.
As regards the potential acquisition, following the March 17, 1999 Board
Meeting, the Company's management, together with another financial advisor,
intensified negotiations with Target and its management and financial advisor
concerning a potential transaction between the parties. After extensive
negotiations, the parties agreed on the basic parameters of a transaction
between the two parties. The parties agreed that they would continue
negotiations with a view to entering into a definitive agreement during the
second calendar quarter of 1999.
On May 13, 1999 the Company's Board of Directors held a meeting to consider
the Company's two potential alternatives. At that meeting, Goldman Sachs
provided the Board with a financial analysis of the proposed transaction with
PCC. The other financial advisor provided the Board with a financial analysis of
the potential transaction with Target, including the potential benefits of the
transaction to the Company and its stockholders. The Board then engaged in
extensive discussions concerning the potential benefits of these two
transactions to the Company and its stockholders. After these discussions, for
the reasons described below, the Board decided to pursue the potential
transaction with PCC provided that the outstanding issues concerning the Merger
Agreement could be resolved in a manner satisfactory to the Board. Following the
Board meeting, the legal and financial advisors for the two parties engaged in
extensive negotiations concerning the unresolved issues in the Merger Agreement.
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On May 15, 1999, the Company's Board met to approve the Merger Agreement and
the transactions contemplated thereby. At that meeting, Goldman Sachs indicated
that, if requested, it was prepared to render an opinion on the fairness of the
transaction. The Company's Board of Directors then determined that the Offer and
the Merger were fair to and in the best interests of the Company and its
stockholders, unanimously approved and declared the advisability of the Merger
Agreement and the transactions contemplated thereby, and unanimously voted to
recommend that all holders of shares tender their Shares pursuant to the Offer.
On May 17, 1999, PCC, the Purchaser and the Company then executed the Merger
Agreement, pursuant to which the Purchaser agreed to make the Offer. On that
date, Goldman Sachs delivered its written opinion to the effect that the
consideration to be received by the Company's stockholders in the Offer and the
Merger was fair from a financial point of view to the Company's stockholders.
The parties then publicly announced the transaction.
In reaching its determination regarding the transaction, the Company's Board
of Directors considered a number of factors, including, without limitation, the
following:
(i) The Company's business, assets, management, strategic objectives,
competitive position and prospects.
(ii) The Company's historical financial information and projected
financial results, including those set forth in the strategic plans
developed annually by the Company and management's most recent projections.
(iii) Historical market prices and trading information with respect to
the Shares and a comparison of these market prices and trading information
with those of selected publicly-held companies of similar sizes operating in
industries similar to that of the Company and the various price to earning
multiples at which the Shares and the securities of these other companies
trade.
(iv) A financial analysis of the valuation of the Company under various
methodologies, including a discounted cash flow analysis, a leveraged buy
out analysis, and pro forma merger analysis.
(v) The current ownership of the Shares.
(vi) The prices and forms of consideration paid in selected recent
comparable acquisition transactions, and the fact that the price to be paid
under the Merger Agreement to holders of the Shares compares favorably to
the prices paid in other recent acquisition transactions of sizes comparable
to those of the Merger.
(vii) The fact that the $20.00 per Share price to be paid in the Offer
and the Merger represents (A) a premium of 50.9% over $13.25, the closing
price of the Shares on the New York Stock Exchange on May 14, 1999, (B) a
premium of 102.6% over $9.875, the sixty day average of the closing price of
the Shares as of May 14, 1999, and (C) a premium of 127.0% over $8.8125, the
closing price of the Shares on March 16, 1999, the date prior to the meeting
of the Board of Directors at which pursuit of strategic alternatives was
authorized, and the fact that these premiums compare favorably to premiums
paid in other recent acquisition transactions of sizes comparable to those
of the Merger.
(viii) The terms and conditions of the Merger Agreement, including the
"all cash" nature of the transaction and the facts that (A) the Offer and
Merger are not subject to a financing condition, (B) Parent and the
Purchaser have agreed that Shares not purchased in the Offer will receive
pursuant to the Merger the same form and amount of consideration as the
Shares purchased in the Offer, and (C) the Company, under certain
circumstances and subject to certain conditions (including the payment of
the Liquidated Amount) may terminate the Merger Agreement in order to
execute an agreement with a third party providing for the acquisition of the
Company on terms more favorable to the Company's stockholders than the Offer
and the Merger.
(ix) The strategic alternatives to the Merger and the Offer that might
be available to the Company including (i) maintaining its existing business
strategy, either alone or in conjunction with a
15
<PAGE>
large stock repurchase program, (ii) a leveraged buy-out or a leveraged
recapitalization transaction and (iii) pursuing a large acquisition which
would, among other things, reduce the Company's reliance on the aerospace
industry and increase its presence in Europe.
(x) The opinion of Goldman Sachs, delivered to the Company's Board of
Directors on May 17, 1999, that as of such date, and based upon and subject
to various considerations set forth therein, the consideration to be
received by the Company's stockholders in the Offer and the Merger was fair
from a financial point of view to such stockholders (a copy of such opinion
is attached hereto as Exhibit 6 and is incorporated herein by reference).
In view of the wide variety of factors considered by the Company's Board of
Directors, the Board did not find it practicable to, and did not assign relative
weights to the factors set forth above. Rather, the Company's Board of Directors
reached its determination based on the totality of the circumstances and the
advice presented to it by its financial and legal advisors.
In analyzing the Offer and the Merger, the Company's management and Board of
Directors were assisted and advised by representatives of Goldman Sachs and the
Company's counsel, who reviewed various financial, legal and other
considerations in addition to the terms of the Merger Agreement. The full text
of the written opinion of Goldman Sachs, setting forth the procedures followed,
the matters considered, the scope of the review undertaken and the assumptions
made by Goldman Sachs in arriving at its opinion, is attached hereto as Exhibit
6 and is incorporated herein by reference. Stockholders are urged to, and
should, read such opinion carefully and in its entirety. The opinion was
provided for the information and assistance of the Company's Board of Directors
in connection with its consideration of the Offer and the Merger. Such opinion
addresses only the fairness from a financial point of view of the consideration
to be received by the stockholders of the Company in the Offer and the Merger
and does not constitute a recommendation to any stockholder as to whether to
tender shares in the Offer or to vote in favor of the Merger.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Goldman Sachs is acting as the Company's financial advisor in connection
with the Offer and the Merger. The Company entered into an engagement letter
with Goldman Sachs, dated May 15, 1998, as amended from time to time by the
Company and Goldman Sachs (collectively, the "Engagement Letter"), pursuant to
which the Company engaged Goldman Sachs as a financial advisor in connection
with the possible sale of all or a portion of the Company. Pursuant to the terms
of the Engagement Letter, the Company paid Goldman Sachs a retainer fee of
$150,000 and will pay Goldman Sachs a fee equal to approximately $8.75 million
upon completion of the Offer. In addition, the Company has agreed to reimburse
Goldman Sachs for its reasonable expenses incurred during its engagement and to
indemnify Goldman Sachs against certain liabilities incurred in connection with
its engagement, including liabilities under federal securities laws.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. In the ordinary course
of business Goldman Sachs and its affiliates may actively trade or hold the
securities of the Company and Parent for their own account or for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf with respect
to the Offer.
16
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transaction in the Shares has been effected during the past sixty
(60) days by the Company, or to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each executive officer,
director, affiliate and subsidiary of the Company currently intends to tender
all Shares which he or she owns beneficially or of record to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3(b) and 4 above, the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in Items 3(b) and 4 above, there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer which 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.
(a) STATE TAKEOVER LAWS. Massachusetts has enacted three takeover laws,
Chapters 110C, 110D and 110F of the MGL. Chapter 110D of the MGL (the "Control
Share Act") regulates "control share acquisitions," defined as the acquisition
of stock in certain "issuing public corporations" organized in Massachusetts
which increases the voting power of the acquiror above certain specified levels
(i.e., 20%, 33 1/3% and 50%). The Control Share Act disqualifies the voting
rights of Shares acquired in a "control share acquisition" unless, among other
things, such acquisition is pursuant to a merger agreement to which the issuing
public corporation is a party. In accordance with the provisions of Chapter
110D, on May 15, 1999, the Board of Directors of the Company consented to and
approved the Merger Agreement, the Offer, and the Merger and the Purchaser's and
Parent's acquisition of Shares pursuant to the offer and the Merger, and
accordingly, the Control Share Act is inapplicable to the offer and the Merger.
Chapter 110C of the MGL (the "Take-Over Bid Statute") imposes procedural
requirements in connection with certain take-over bids. A take-over bid
("Take-Over Bid") is the acquisition or offer to acquire stock which would
result in the acquiror possessing more than 10% of the voting power of any class
of an issuer's stock. A Take-Over Bid does not include, among other things, any
offer which the board of directors of the issuer has consented to and approved
and has recommended its stockholders accept, if the terms of such bid, including
any inducements to officers or directors which are not made available to all
stockholders, have been furnished to the stockholders. In accordance with the
provisions of Chapter 110C, on May 15, 1999, the Board of Directors of the
Company consented to and approved the Merger Agreement, the Offer and the Merger
and the Purchaser's and Parent's acquisition of Shares pursuant to the Offer and
the Merger and complied with all applicable disclosure requirements, therefore,
the Take-Over Bid Statute is inapplicable to the Offer and the Merger.
Chapter 110F of the MGL (the "Business Combination Statute") limits the
ability of a Massachusetts corporation to engage in business combinations with
"interested stockholders" (defined as any beneficial owner of 5% or more of the
outstanding voting stock of the corporation) unless, among other things, the
corporation's board of directors has given its prior approval to either the
business combination or the transaction which resulted in the stockholder
becoming an "interested stockholder". On May 15, 1999 Board of Directors of the
Company consented to and approved the Merger Agreement, the Offer and the
17
<PAGE>
Merger and the Purchaser's and Parent's acquisition of Shares pursuant to the
Offer and the Merger and, therefore, the Business Combination Statute is
inapplicable to the Offer and the Merger.
(b) ANTITRUST. The Offer and Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Federal Trade Commission ("FTC")
and the Antitrust Division of the Department of Justice ("Antitrust Division")
and certain waiting period requirements have been satisfied. Each of Parent and
the Company intends to file a Notification and Report Form under the HSR Act
with respect to the Offer as soon as practicable.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer. At any time before or after the Purchaser's acceptance
for payment of Shares, the FTC or the Antitrust Division could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise or seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of Purchaser or its subsidiaries. Private
parties and state attorney generals may also bring legal action under the
antitrust laws under certain circumstances. Based upon the Purchaser's
discussions with the Company and its examination of publicly available
information with respect to the Company, Purchaser believes that the acquisition
by Purchaser of the Shares will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer on antitrust grounds
will not be made, or, if such a challenge is made, of the result.
(c) INFORMATION STATEMENT. The Information Statement attached as Schedule
I hereto is being furnished in connection with the possible designation by the
Purchaser and Parent pursuant to the Merger Agreement, of certain persons to be
appointed to the Company's Board of Directors other than at a meeting of the
Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1* Letter to Stockholders of Wyman-Gordon Company, dated May 21, 1999, from David
P. Gruber, Chairman and Chief Executive Officer of Wyman-Gordon Company*
Exhibit 2 Joint Press Release issued by Wyman-Gordon Company and Precision Castparts
Corp., dated May 17, 1999
Exhibit 3 Agreement and Plan of Merger dated May 17, 1999 among Precision Castparts
Corp., WGC Acquisition Corp. and Wyman-Gordon Company
Exhibit 4 Form of Executive Severance Agreement. Wyman-Gordon Company has entered into
such agreements with the following of its officers: David P. Gruber, J. Douglas
Whelan, Sanjay N. Shah, J. Stewart Smith, Colin Stead, Wallace F. Whitney, Jr.,
Frank J. Zugel, William T. McGovern and David J. Sulzbach
Exhibit 5 Form of Amendment to Severance Agreement. Wyman-Gordon Company has entered into
such amendments with the following of its officers: David P. Gruber, J. Douglas
Whelan, Sanjay N. Shah, J. Stewart Smith, Colin Stead, Wallace F. Whitney, Jr.,
Frank J. Zugel and William T. McGovern
Exhibit 6* Opinion dated May 17, 1999 of Goldman, Sachs & Co.*
</TABLE>
- ------------------------
* Included in copies mailed to stockholders by Wyman-Gordon Company and
Precision Castparts Corp.
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.
Dated: May 21, 1999 WYMAN-GORDON COMPANY
BY: /S/ DAVID P. GRUBER
-----------------------------------------
David P. Gruber
Chairman and Chief Executive Officer
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<PAGE>
SCHEDULE I
WYMAN-GORDON COMPANY
244 WORCESTER STREET, P.O. BOX 8001
NORTH GRAFTON, MASSACHUSETTS 01536-8001
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about May 21, 1999 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Wyman-Gordon Company, a Massachusetts corporation (the "Company"), to
the holders of shares of common stock, par value $1.00 per share, of the Company
(the "Shares"). You are receiving this Information Statement in connection with
the possible election of the Purchaser Designees (as hereinafter defined) to
seats on the Board of Directors of the Company (the "Company Board").
The Company, Precision Castparts Corp., an Oregon corporation ("Parent"),
and WGC Acquisition Corp., a Massachusetts corporation and a wholly-owned
subsidiary of Parent ("Purchaser"), entered into an Agreement and Plan of Merger
dated as of May 17, 1999 (the "Merger Agreement"), pursuant to which (i) Parent
has caused the Purchaser to commence a tender offer (the "Offer") for all
outstanding Shares at a price of $20.00 per Share, net to the seller in cash,
without interest, and (ii) the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Offer and the Merger, the Company
will become a wholly-owned subsidiary of Parent.
The Merger Agreement requires the Company to take action to cause the
Purchaser Designees to be elected to the Company Board under the circumstances
described therein. See "Right to Designate Directors; Purchaser Designees"
below.
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 May
21, 1999. The Offer is scheduled to expire at 12:00 midnight, New York City
time, on June 18, 1999. In certain circumstances, the Offer may be extended.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as is equal
to the product of (a) the total number of directors on the Company Board (after
giving effect to the directors designated by Parent pursuant to this sentence)
and (b) the percentage that the total votes represented by such number of Shares
in the election of directors of the Company so purchased bears to the total
votes represented by the number of Shares outstanding. In order to effect the
foregoing, the Company has agreed that it shall, upon request by Parent,
promptly increase the size of the Company Board and/or exercise its commercially
reasonable best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees (the "Purchaser
Designees") to be elected to the Company Board and shall take all actions to
cause Purchaser Designees to be so elected to the Company Board. In the event
that Purchaser Designees are elected to the Company Board, until the effective
time of the Merger (the "Effective Time"), the Company Board shall have at least
two directors who are directors on the date of the Merger Agreement (the
"Independent Directors"); provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever,
<PAGE>
the remaining Independent Director shall be entitled to designate the person to
fill such vacancy who shall be deemed to be an Independent Director for purposes
of the Merger Agreement or, if no Independent Director then remains, the other
directors shall designate two persons to fill such vacancies who shall not be
stockholders, affiliates or associates of Parent or Purchaser and such persons
shall be deemed to be Independent Directors for purposes of the Merger
Agreement. In addition, in the event that Purchaser Designees are elected to the
Company Board, after the acceptance for payment of Shares pursuant to the Offer
and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required in addition to any other applicable
requirement to (a) amend this Agreement in any material respect in a manner
adverse to any stockholder of the Company or any intended third-party
beneficiary of the Merger Agreement, (b) terminate the Merger Agreement by the
Company, (c) exercise or waive any of the Company's material rights, benefits or
remedies hereunder, or (d) extend the time for performance of Parent's or
Purchaser's respective obligations under the Merger Agreement.
As of the date of this Information Statement, Parent has not determined the
identity of the Purchaser Designees. However, the Purchaser Designees are
expected to be selected from among the directors and executive officers of
Parent. Certain information regarding the directors and executive officers of
Parent is contained in Annex I hereto. The Company also has not yet determined
the identity of the Independent Directors, although the Independent Directors
will be selected from among the current directors of the Company. Certain
information regarding the Company's directors is set forth below in "Information
Regarding Directors and Executive Officers of the Company."
None of the Purchaser Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any directors
or executive officers of the Company or (iii) to the best knowledge of Parent,
beneficially owns any securities (or rights to acquire securities) of the
Company. The Company has been advised by Parent that, to the best of Parent's
knowledge, none of the Purchaser Designees has been involved in any transactions
with the Company or any of its directors, executive officers or affiliates which
are required to be disclosed pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"), except as may be
disclosed herein or in the Schedule 14D-9.
It is expected that the Purchaser Designees may assume office promptly
following the purchase by the Purchaser of such number of shares which satisfies
the Minimum Condition (as defined in the Merger Agreement) and the satisfaction
or waiver of certain other conditions set forth in the Merger Agreement, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least two-thirds of the Company Board.
SHARE INFORMATION
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote on each matter properly brought
before an annual or special meeting of stockholders of the Company. As of May
17, 1999, there were 35,538,733 Shares outstanding.
INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
BOARD OF DIRECTORS OF THE COMPANY AND COMMITTEES THEREOF
The Company Board currently consists of ten members who serve for staggered
three-year terms. The Company Board is composed of Messrs. David P. Gruber, J.
Douglas Whelan, E. Paul Casey, Warner S. Fletcher, Robert G. Foster, Charles W.
Grigg, M Howard Jacobson, Robert L. Leibensperger, Andrew E. Lietz, and David A.
White, Jr. Three individuals who served as directors during the fiscal year
ended May 31, 1998 ("Fiscal 1998") discontinued their affiliation with the
Company Board after the Company's last annual meeting held on October 21, 1998
(the "Annual Meeting"). Russell E. Fuller, had been a Director of the Company
since 1988. His term expired at the Annual Meeting and since Mr. Fuller had
reached the Company's mandatory retirement age for Directors, he did not stand
for re-election. H. John
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<PAGE>
Riley, Jr., who had been a Director since 1994 and whose term expired at the
Annual Meeting, decided not to stand for re-election. Judith S. King who had
been a Director since 1990, decided to retire from the Company Board.
During Fiscal 1998, the Company Board met 5 times. During Fiscal 1998,
except for Mr. Foster (who attended five out of seven meetings) and Mr.
Leibensperger (who served as a director for only a portion of Fiscal 1998 and
attended one out of two meetings) each director attended at least 75% of the
aggregate of (i) the total number of meetings of the Company Board (held during
the period for which such director served on the Company Board) and (ii) the
total number of meetings of all committees of the Company Board on which such
director served (during the periods for which such director served on such
committee or committees).
FINANCE AND AUDIT COMMITTEE. The Company Board has established a Finance
and Audit Committee currently consisting of Mr. Fletcher (Chairman), Mr.
Jacobson, Mr. Foster and Mr. White (the "Finance and Audit Committee"). The
principal functions of this committee are to monitor the overall financial
condition of the Company, to provide oversight of pension and employee savings
plan investments, to review the systems of internal control, to recommend the
engaging or discharging of independent auditors, to consider the scope of the
annual audit, and to review the audit. The Finance and Audit Committee and its
predecessor Audit Committee each met once during Fiscal 1998.
COMPENSATION COMMITTEE. The Company Board also has a Compensation Committee
currently consisting of Messrs. Casey (Chairman), Lietz and Grigg. Its principal
functions are to review and determine remuneration arrangements for senior
management and to administer awards under the Company's long-term incentive
programs. This committee held four meetings during the Fiscal 1998.
DIRECTORS COMMITTEE. The members of the Directors Committee are Mr.
Jacobson (Chairman), Mr. Casey, Mr. Gruber and Mr. Leibensperger. Its principal
functions are to assist in the identification of nominees for positions on the
Company Board and to advise on the structure and operation of the Company Board.
This committee met once during the Fiscal 1998.
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS
The following biographical descriptions set forth certain information with
respect to the members of the Company Board, based on information furnished to
the Company by each director.
DAVID P. GRUBER, age 57, was elected Chairman and Chief Executive Officer of
the Company on October 15, 1997, having previously served as President and Chief
Executive Officer since May 1994 and as President and Chief Operating Officer
since he joined the Company in October 1991. Prior to joining the Company, Mr.
Gruber served as Vice President, Advanced Ceramics, of Compagnie de Saint Gobain
(which acquired Norton Company in 1990), a position he held with Norton Company
since 1987. Mr. Gruber previously held various executive and technical positions
with Norton Company since 1978. He is a Director of State Street Corporation, a
Trustee of the Manufacturers' Alliance for Productivity and Innovation, and a
member of the Mechanical Engineering Advisory Committee of Worcester Polytechnic
Institute.
J. DOUGLAS WHELAN, age 60, was elected President and Chief Operating Officer
of the Company on October 15, 1997, having previously served as President,
Forgings since he joined the Company in March 1994. He joined the Company's
Board of Directors in 1998. Prior to joining the Company, he had served for a
short time as the President of Latish Co., Inc., a forging company in Cudahy,
Wisconsin, and prior thereto, had been Vice President, Operations of Cameron,
with which company and its predecessors he had been employed since 1965 in
various executive capacities. Mr. Whelan is a Director of Sifco Industries, Inc.
and a member of the President's Council of the Manufacturers' Alliance for
Productivity and Innovation.
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<PAGE>
E. PAUL CASEY, age 69, Chairman and General Partner, Metapoint Partners,
Peabody, Massachusetts (an investment partnership which he established in 1988),
has been a Director of the Company since 1993. He served as Vice Chairman of
Textron, Inc. from 1986 to 1987 and as Chief Executive Officer and President of
Ex-Cell-O Corporation during 1978 to 1986. Mr. Casey is a Director of Comerica,
Inc. and Hood Enterprises, Inc., a Trustee of Henry Ford Health Care System and
President of the Hobe Sound, Florida Community Chest.
WARNER S. FLETCHER, age 54, Attorney and Director of the law firm of
Fletcher, Tilton & Whipple, P.C., Worcester, Massachusetts, has been a Director
of the Company since 1987. Mr. Fletcher is an Advisory Director of Bank of
Boston, Worcester. He is also Chairman of The Stoddard Charitable Trust, a
Trustee of The Fletcher Foundation, the George I. Alden Trust, Worcester
Polytechnic Institute, Worcester Foundation for Experimental Biology, Bancroft
School and the Worcester Art Museum.
ROBERT G. FOSTER, age 60, President, Chief Executive Officer and Chairman of
the Board of Commonwealth BioVentures, Inc., Portland, Maine (a venture capital
company engaged in biotechnology) since 1987. Director of the Company since
1989. Term expires in 2000. Mr. Foster is also a founding partner of Masthead
Venture Partners LLC, a venture capital company focused on early stage
technology companies. He is a director of Epic Pharmaceuticals, Phytera, Inc.,
Intellicare America, Capricorn, Meridan Medical Technologies and the Small
Enterprise Growth Fund for the State of Maine.
CHARLES W. GRIGG, age 59, Chairman and Chief Executive Officer of SPS
Technologies, Inc. (a manufacturer of high technology products in the field of
fastening, precision components and materials handling), was elected a Director
in 1996. Prior to joining SPS Technologies in 1993, Mr. Grigg spent ten years at
Watts Industries, Inc. (a Massachusetts manufacturer of valves for industrial
applications), the last nine of which as President and Chief Operating Officer.
M HOWARD JACOBSON, age 66, Senior Advisor, Bankers Trust, New York, has been
a Director of the Company since 1993. Mr. Jacobson was for many years President
and Treasurer and a Director of Idle Wild Foods, Inc. until that company was
sold in 1986. Mr. Jacobson is a Director of Allmerica Financial Corporation, and
Stonyfield Farm, Inc. He is a Trustee of WGBH Public Broadcasting, the Worcester
Foundation for Biomedical Research, the Worcester Polytechnic Institute, and the
University of Massachusetts Memorial Healthcare and a member of the Harvard
University Overseers' Committee on University Resources. He is also a member of
the Commonwealth of Massachusetts Board of Higher Education.
ROBERT L. LEIBENSPERGER, age 61, Executive Vice President, Chief Operating
Officer and President -- Bearings of The Timken Company, Canton, Ohio (a
manufacturer of precision bearings.) Mr. Leibensperger joined the Company's
Board of Directors in January 1998. Mr. Leibensperger has been employed by The
Timken Company since 1960, where he held various research, engineering, sales
and marketing, and executive positions. Mr. Leibensperger is a member of the
American Bearing Manufacturers Association Executive Committee, the Council on
Competitiveness Global R&D Committee, the Stark County (Ohio) Capital Campaigns
Committee, the Cultural Center for the Arts (Canton, Ohio) House & Grounds
Committee and the Goodwill Industries (Canton, Ohio) Transportation Services
Committee.
ANDREW E. LIETZ, age 60, President and Chief Executive Officer and Director
of HADCO Corporation, Salem, New Hampshire. (Manufacturer of electronic
interconnect products.) Mr. Lietz joined the Company's Board of Directors in
January 1998. Mr. Lietz has held various executive positions with HADCO
Corporation since 1984. He is director of EnergyNorth, Inc., Business and
Industry Association and National Electronics Manufacturing Initiative, as well
as a member of the advisory Board of New Hampshire Whittemore School of Business
and the Executive Committee of New Hampshire Industrial Research Center.
DAVID A. WHITE, JR., age 57, Senior Vice President of Strategic Planning for
Cooper, was elected a Director in 1996. Since joining Cooper as a Planning
Analyst in 1971, Mr. White has served in various planning and finance
capacities. In 1980, he was named Vice President and General Manager of the
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Cooper Power Tools Division and in 1988 he became Vice President, Corporate
Planning and Development. He assumed his present position in 1996. Mr. White
serves as Vice Chairman of the Strategic Planning and Development Council of the
Manufacturers' Alliance for Productivity and Innovation.
BIOGRAPHICAL INFORMATION REGARDING EXECUTIVE OFFICERS OF THE COMPANY
The following biographical descriptions set forth certain information with
respect to the executive officers of the Company, based on information furnished
to the Company by each executive officer.
DAVID P. GRUBER is the Company's Chairman and Chief Executive Officer. For
biographical information regarding Mr. Gruber, see "--Biographical Information
Regarding Directors" above.
J. DOUGLAS WHELAN is the Company's President and Chief Operating Officer.
For biographical information regarding Mr. Whelan, see "--Biographical
Information Regarding Directors" above.
SANJAY N. SHAH , age 49, was elected Vice President, Corporate Strategy
Planning and Business Development in May 1994, having previously served as Vice
President and Assistant General Manager of the Company's Aerospace Forgings
Division. He has held a number of executive, research, engineering and
manufacturing positions at the Company since joining the Company in 1975.
J. STEWART SMITH , age 56, was elected President, Manufacturing of the
Company on October 15, 1997, having previously served as Vice President,
Manufacturing and Engineering of the Forgings Division since 1994. Prior to that
time, Mr. Smith had held various technical and manufacturing positions with
Cameron and its predecessors since 1978.
COLIN STEAD, age 59, was elected Senior Vice President, Quality and
Technology of the Company on October 15, 1997, having previously served as Vice
President, Quality and Metallurgy of the Forgings Division since 1994. Prior
thereto, he had served in various technical and quality positions with Cameron
and its predecessors since 1984.
WALLACE F. WHITNEY, JR., age 56, joined the Company in 1991. Prior to that
time, he had been Vice President, General Counsel and Secretary of Norton
Company since 1988, where he had been employed in various legal capacities since
1973.
FRANK J. ZUGEL , age 53, was elected President, Marketing of the Company on
October 15, 1997, having previously served as President, Investment Castings,
since he joined the Company in 1993. Prior to that time, he had served as
President of Stainless Steel Products, Inc., a metal fabricator for aerospace
applications, since 1992.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS. Directors of the Company who are also employees receive no
additional compensation for their services as a director. Non-employee directors
are entitled to receive $15,000 per year for their services as a director plus a
fee of $1,000 for each Board and Committee meeting attended. Committee chairmen
receive an additional annual retainer of $2,000. Non-employee directors also
receive an additional annual retainer of $5,000 paid in shares of restricted
stock valued as of the date of each Annual Meeting of the Stockholders of the
Company. All directors of the Company are reimbursed for travel expenses
incurred in attending meetings of the Company Board and its committees.
EXECUTIVE OFFICERS. The following table sets forth the remuneration of the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers at May 31, 1998 for services rendered to the Company during
its fiscal year then ended and the Company's prior two fiscal years ended May
31, 1997 and 1996.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
AWARDS
ANNUAL ------------------------
FISCAL COMPENSATION PERFORMANCE NUMBER
YEAR ---------------------- SHARE OF ALL OTHER
NAME AND PRINCIPAL POSITION ENDED SALARY BONUS AWARDS OPTIONS COMPENSATION (1)
- -------------------------------------- ----------- ---------- ---------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David P. Gruber (4)................... 1998 $ 458,340 $ 85,000 -- -- $ 24,738
Chairman and Chief Executive Officer 1997 400,004 286,875 -- -- 16,001
1996 333,336 262,500 28,500(2) 165,000 10,577
J. Douglas Whelan (4)................. 1998 295,833 45,000 -- -- 18,144
President and Chief Operating 1997 242,333 123,750 -- -- 14,677
Officer 1996 204,000 428,400 19,000(2) 104,500 6,916
Edward J. Davis (3)................... 1998 64,169 30,000 -- 75,000 880
Vice President, Chief Financial 1997 -- -- -- -- --
Officer 1996 -- -- -- -- --
Wallace F. Whitney, Jr. (4)........... 1998 184,168 20,460 -- -- 9,744
Vice President, General Counsel and 1997 173,340 78,000 -- -- 6,872
Clerk 1996 161,500 82,500 14,000(2) 78,000 6,222
Frank J. Zugel(4)..................... 1998 215,004 28,600 -- -- 13,110
President, Marketing 1997 198,335 76,200 -- -- 9,569
1996 184,015 30,400 19,000(2) 104,500 6,886
</TABLE>
- ------------------------
(1) Consists of group term life insurance premiums, the value of the Shares
allocated to the executive's account under the Company's Savings/Investment
Plan and Deferred Compensation Plan as a matching contribution, in the case
of Mr. Whelan and moving expense reimbursement and related income tax
gross-up in 1998, and in the case of Mr. Zugel, automobile allowance.
(2) These Shares were issued to Messrs. Gruber, Whelan, Whitney, and Zugel
pursuant to the Company's Long-term Incentive Plan. Such Shares are subject
to restrictions and risk of forfeiture. At May 31, 1998 these Shares issued
to Messrs. Gruber, Whelan, Whitney, and Zugel had market values of $565,013,
$376,675, $277,550, and $376,675, respectively. The holders of such Shares
are entitled to receive dividends, if any, paid by the Company with respect
to such Shares.
(3) Mr. Davis joined the Company in February 1998 and accordingly, the
information presented in the Summary Compensation Table reflects
compensation from February through the May 31 fiscal year end. Upon joining
the Company in February 1998, Mr. Davis received options to purchase 75,000
Shares. Effective March 26, 1999, Mr. Davis resigned from his positions with
the Company.
(4) During the Company's fiscal year ended May 31, 1998 Messrs. Gruber, Whelan,
Whitney and Zugel were not granted any stock options because such officers
participate in the Company's Executive Long-Term Incentive Plan.
S-6
<PAGE>
OPTION EXERCISES AND YEAR-END HOLDINGS. The following table sets forth the
aggregate number of options and stock appreciation rights ("SAR's") exercised in
Fiscal 1998 and the value of options/SAR's held at the end of Fiscal 1998 by the
Company's Chief Executive Officer and each of the four (4) other most highly
compensated executive officers of the Company. Options granted prior to 1992 had
SAR's attached. No SAR's are attached to the options granted since 1991.
AGGREGATE OPTION/SAR EXERCISES IN THE COMPANY'S 1998 FISCAL YEAR
AND MAY 31, 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SAR'S AT OPTIONS/SAR'S
FISCAL AT FISCAL
SHARES YEAR-END(#) YEAR-END($)
ACQUIRED ON VALUE EXERCISABLE EXERCISABLE
NAME EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------ --------------------- -------------------
<S> <C> <C> <C> <C>
David P. Gruber.......................... 94,000 $ 2,125,747 134,167/43,833 641,750/175,789
J. Douglas Whelan........................ 38,750 427,501 46,417/27,333 262,523/102,164
Edward J. Davis.......................... -- -- 0/75,000 0/0
Wallace F. Whitney, Jr................... 14,000 299,250 121,583/20,417 1,175,476/77,023
Frank J. Zugel........................... 22,873 247,281 74,126/27,333 417,001/102,164
</TABLE>
- ------------------------
(1) The value of an SAR attached to an option granted prior to 1992 is equal to
80% of the excess of the fair market value of Shares of the Company's common
stock on the date of exercise over the exercise price of such option.
AGREEMENTS WITH MANAGEMENT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
At the time of his election as President and Chief Executive Officer in
1994, Mr. Gruber and the Company entered into an agreement that provides for a
two year rolling term of employment and for continuation of employee benefits in
the event of termination of his employment under specified conditions. Mr.
Gruber and the Company have also entered into a severance agreement, a
performance share agreement and irrevocable trust arrangement, as well as the
agreements pursuant to the LTIP (as defined below). In addition, when Mr. Gruber
became Chief Executive Officer the Compensation Committee of the Company Board
granted him 150,000 Shares under a performance share agreement at which time the
Company's stock price was $5.125 per Share. The Shares granted to Mr. Gruber
pursuant to this agreement are subject to restrictions. Under the performance
share agreement, the Shares vested in Mr. Gruber only if he remained in the
employ of the Company for a period of five years and if the Company's stock
reached target price levels of at least $10 per Share with full vesting at $12
per Share. The $12 target has been achieved, and consequently the Compensation
Committee of the Company Board has approved an arrangement whereby the 150,000
Shares were transferred to an irrevocable trust that will hold the Shares until
May 24, 1999 when they will be distributed to Mr. Gruber or his estate. Mr.
Gruber now beneficially owns 193,530 Shares, including the 150,000 Shares issued
to him in accordance with his performance share agreement and the 28,500 Shares
granted to him under the LTIP (as defined below). In addition, Mr. Gruber has
been granted options to purchase a total of 178,000 Shares.
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with each of its executive
officers, that would provide such officers with specified benefits in the event
of termination of employment within three years following a change of control of
the Company when both employment termination and such change in control occur
under conditions defined in the agreements. Such benefits include a payment
equal to a maximum of 250% of the executive officer's annual compensation,
continuation of insurance coverages for up to twenty-four months following
termination and accelerated vesting of existing options and stock
S-7
<PAGE>
appreciation rights and certain benefits under the Company's deferred
compensation plan. No benefits are payable under the severance agreements in the
event of an executive officer's termination for cause, in the event of
retirement, disability or death or in cases of voluntary termination in
circumstances other than those specified in the agreements that would entitle an
executive officer to benefits.
EXECUTIVE LONG-TERM INCENTIVE PLAN
In 1996 the Committee developed an Executive Long-Term Incentive Plan
("LTIP") which results in significant payouts to the participants if significant
price appreciation in the Company's stock is achieved. Under the LTIP the
Company's executive officers (including Messrs. Gruber, Whelan, Whitney and
Zugel) and other key executives will not participate in the annual grant of
stock options for the five year term of the LTIP. The LTIP provides for a
one-time grant of stock options which are the normal options under the Company's
stock option plan except that they vest in equal installments over four years
rather than three. The second element of the plan consists of performance stock
options that are ten year options that vest upon the achievement of certain
stock prices. For example, 10% of the performance stock options vest if the
stock reaches $21.00 per Share, and at $30.00 per Share the performance stock
options become fully vested. In any event, the options vest seven years after
the date of grant. The third element of the LTIP consists of performance shares
which are subject to risk of loss and forfeiture if the price of the Shares does
not achieve certain price levels. The price levels are the same as under the
performance stock options, and if the stock reaches a price of $21.00 per Share,
10% of the performance shares vest and are not subject to forfeiture. Similarly
if the price reaches $30.00 per Share, the performance shares vest in their
entirety. If the stock fails to reach the target levels during the five year
term of the LTIP, then the performance shares are forfeited to the extent the
target levels have not been attained. At the time of the grants to executive
officers under the LTIP on April 17, 1996, the price of the Company's stock was
$16 5/8 per Share. As of September 15, 1997 the price of the Company's stock had
reached the $27 per Share level and therefore 80% of the performance stock
options have vested and restrictions on 80% of the performance shares have
lapsed. Under the terms of the LTIP, the Committee has granted 202,125 stock
options, 928,375 performance stock options, and 226,800 performance shares,
including the grant to Mr. Gruber of 25,000 stock options, 115,000 performance
stock options and 28,500 performance shares. In the event of a change of control
of the Company, any remaining stock options, performance stock options and
performance shares immediately vest and any and all restrictions lapse.
TOTAL STOCKHOLDER RETURN
The graph presented below compares the yearly percentage change in the
Company's cumulative total stockholder return, assuming dividend reinvestment,
with the cumulative total return of the Dow Jones Equity Market Index, a broad
market index, and the Dow Jones Aerospace & Defense Sector index, which includes
several of the Company's most significant customers and other aerospace industry
companies, for the five-year period ending May 31, 1998.
The Stock Performance Graph assumes an investment of $100 in each of the
Company and the two indices, and the reinvestment of any dividends. The
historical information set forth below is not necessarily indicative of future
performance.
S-8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AEROSPACE & DEFENSE EQUITY MKT. INDEX WYMAN-GORDON CO.
<S> <C> <C> <C>
5/28/93 $100.00 $100.00 $100.00
5/27/94 $125.50 $104.20 $125.10
6/2/95 $175.10 $124.40 $219.90
5/31/96 $259.80 $160.20 $342.60
5/30/97 $314.10 $206.10 $446.60
5/29/98 $334.70 $270.50 $390.20
</TABLE>
<TABLE>
<CAPTION>
5/28/93 5/27/94 6/2/95 5/31/96 5/30/97
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Aerospace & Defense......................................... 100 125.5 175.1 259.8 314.1
Equity Mkt. Index........................................... 100 104.2 124.4 160.2 206.1
Wyman-Gordon Co............................................. 100 125.1 219.9 342.6 446.6
<CAPTION>
5/29/98
-----------
<S> <C>
Aerospace & Defense......................................... 334.7
Equity Mkt. Index........................................... 270.5
Wyman-Gordon Co............................................. 390.2
</TABLE>
COMPENSATION COMMITTEE REPORT
OVERALL POLICY
The Compensation Committee (the "Committee") of the Board of Directors is
composed entirely of non-employee directors. The Committee is responsible for
setting and administering the policies that govern the Company's executive
compensation and stock ownership programs.
The Company's executive compensation program is designed to be closely
linked to corporate performance and return to stockholders. To this end, the
Company maintains an overall compensation policy and specific compensation plans
that tie a significant portion of executive compensation to the Company's
success in meeting specified annual performance goals and to appreciation in the
Company's stock price. The overall objectives of this strategy are to attract
and retain talented executives, to motivate these executives to achieve the
goals inherent in the Company's business strategy, to link executive and
stockholder interests through equity based incentive plans and finally to
provide a compensation package that recognizes individual contributions as well
as overall business results.
The Committee approves the compensation of David P. Gruber, Chairman and
Chief Executive Officer, and other corporate executives, including Messrs.
Davis, Whelan, Whitney and Zugel. The Committee also sets policies in order to
ensure consistency throughout the executive compensation program. In reviewing
the individual performance of the executives whose compensation is determined by
the Committee (other than Mr. Gruber), the Committee takes into account Mr.
Gruber's evaluation of their performance.
There are three principal elements of the Company's executive compensation
program: base salary, annual bonus and long-term stock-based incentives
consisting of stock options and performance share grants. The Committee's
policies with respect to each of these elements, including the bases for the
compensation awarded to Mr. Gruber, are discussed below. In addition, while the
elements of compensation described below are considered separately, the
Committee takes into account the full compensation package provided by the
Company to the individual, including pension benefits, supplemental retirement
S-9
<PAGE>
benefits, savings plans, severance plans, insurance and other benefits, as well
as the programs described below. In carrying out its responsibilities the
Committee has in recent years obtained advice from William M. Mercer & Co. and
Towers Perrin, compensation consulting firms.
BASE SALARIES
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace, including a
comparison to base salaries for comparable positions at other companies.
Annual salary adjustments are determined by evaluating the performance of
the Company and of each executive officer, and also take into account changed
responsibilities. The Committee also uses industry surveys to assist in ensuring
that executive salaries are consistent with industry practice.
Mr. Gruber serves as Chairman and Chief Executive Officer of the Company
pursuant to a May 16, 1994 Employment Agreement. Mr. Gruber's Employment
Agreement calls for the payment of an annual base salary of $300,000 during his
service as the Company's Chief Executive Officer or such higher amount as the
Board may determine. The Committee and the Board have set Mr. Gruber's annual
salary at $475,000 and have voted to increase such annual salary to $510,000
effective October 1998.
ANNUAL BONUS
The Company maintains a Management Incentive Plan ("MIP") under which
executive officers are eligible for an annual cash bonus. The Committee approves
individual employee's participation in, and awards under, the MIP based on
recommendations of Mr. Gruber. The Committee established goals for earnings per
share and return on investment as the basis of MIP payouts for Fiscal Year 1998.
In addition, the Committee retained a 20% discretionary factor in determining
annual incentive compensation. Under the MIP, Mr. Gruber can receive an
incentive payment up to 90% of his base salary. For other participants in the
MIP, the maximum bonus opportunities range from 55% to 75% of base salary. Due
in large measure to the unexpected problems with the Company's 29,000 ton press
in Houston, the Company did not meet its goals for earnings per share and return
on investment for Fiscal Year 1998. Recognizing, however, the efforts by
management in overcoming the problems created by the press outage, the Committee
authorized bonus payments equal to the 20% discretionary factor. As a result,
Mr. Gruber earned a bonus of $85,500 for Fiscal Year 1998 while other executive
officers earned bonuses ranging from 11% to 15% of base salary.
STOCK BASED COMPENSATION
Under the Company's 1997 Long-Term Incentive Plan, which was approved by
stockholders at the 1997 Annual Meeting of Stockholders, and under predecessor
plans, options with respect to the Company's common stock may be granted to the
Company's key employees. In addition, the Committee may grant other stock-based
awards such as restricted shares, performance shares, phantom shares,
performance units and bonus awards. The Committee sets guidelines for the size
of awards based on similar factors, including industry surveys, as those used to
determine base salaries and annual bonus.
Stock-based compensation is designed to align the interests of executives
with those of the stockholders. The approach is designed to provide an incentive
for the creation of stockholder value since the benefit of the compensation
package cannot be realized unless stock price appreciates. In the past the
Committee has made annual grants of stock options, and during the Company's 1998
Fiscal Year the Committee granted options to a total of 124 key employees. The
Committee believes that broad dissemination of options within the Company
enhances the benefits to the Company of stock-based incentives. The Committee
also believes that significant equity interests in the Company held by the
Company's management align the interests of stockholders and management and
foster an emphasis on the creation of stockholder value.
In order to focus on the creation of long-term stockholder value, and with
the advice of Towers Perrin, in 1996 the Committee developed an Executive
Long-Term Incentive Plan ("LTIP") which results in
S-10
<PAGE>
significant payouts to the participants if significant price appreciation in the
Company's stock is achieved. Under the LTIP the Company's executive officers
(including Messrs. Gruber, Whelan, Whitney and Zugel) and other key executives
will not participate in the annual grant of stock options for the five year term
of the LTIP. The LTIP provides for a one-time grant of stock options which are
the normal options under the Company's stock option plan except that they vest
in equal installments over four years rather than three. The second element of
the plan consists of performance stock options that are ten year options that
vest upon the achievement of certain stock prices. For example, 10% of the
performance stock options vest if the stock reaches $21.00 per Share, and at
$30.00 per Share the performance stock options become fully vested. In any
event, the options vest seven years after the date of grant. The third element
of the LTIP consists of performance shares which are subject to risk of loss and
forfeiture if the price of the Shares does not achieve certain price levels. The
price levels are the same as under the performance stock options, and if the
stock reaches a price of $21.00 per Share, 10% of the performance shares vest
and are not subject to forfeiture. Similarly if the price reaches $30.00 per
Share, the performance shares vest in their entirety. If the stock fails to
reach the target levels during the five year term of the LTIP, then the
performance shares are forfeited to the extent the target levels have not been
attained. At the time of the grants to executive officers under the LTIP on
April 17, 1996, the price of the Company's stock was $16 5/8 per Share. As of
September 15, 1997 the price of the Company's stock had reached the $27 per
Share level and therefore 80% of the performance stock options have vested and
restrictions on 80% of the performance shares have lapsed. Under the terms of
the LTIP, the Committee has granted 202,125 stock options, 928,375 performance
stock options, and 226,800 performance shares, including the grant to Mr. Gruber
of 25,000 stock options, 115,000 performance stock options and 28,500
performance shares.
When Mr. Gruber became Chief Executive Officer on May 24, 1994 the Committee
granted him 150,000 Shares under a Performance Share Agreement at which time the
Company's stock price was $5.125 per Share. The Shares granted to Mr. Gruber
pursuant to this Agreement are subject to restrictions. Under the Performance
Share Agreement, the Shares vested in Mr. Gruber only if he remained in the
employ of the Company for a period of five years and if the Company's stock
reached target price levels of at least $10 per Share with full vesting at $12
per Share. The $12 target has been achieved, and consequently the Committee has
approved an arrangement whereby the 150,000 Shares were transferred to an
irrevocable trust that will hold the Shares until May 24, 1999 when they will be
distributed to Mr. Gruber or his estate. Mr. Gruber now beneficially owns
185,852 Shares, including the 150,000 Shares issued to him in accordance with
the Performance Share Agreement and the 28,500 Shares granted to him under the
LTIP. In addition, Mr. Gruber has been granted options to purchase a total of
372,000 Shares.
TAX MATTERS
The Omnibus Budget Reconciliation Act of 1993 imposes a limit, with certain
exceptions, on the amount that a publicly held corporation may deduct in any
year for the compensation paid or accrued with respect to its five most highly
compensated officers. The Committee intends to try to preserve the tax
deductibility of all executive compensation while maintaining the Company's
compensation program as described in this report. Towards this end the Company's
1997 Long-Term Incentive Plan approved by the shareholders at the 1997 Annual
Meeting of Shareholders has been designed in such a manner so that awards
thereunder to the Company's executive officers, including LTIP awards, will
qualify as performance-based compensation and, therefore, deductible by the
Company.
CONCLUSION
Through the incentive and stock-based option programs described above, a
significant portion of the Company's executive compensation is linked directly
to individual and corporate performance and stock price appreciation. The
Committee intends to continue the policy of linking executive compensation to
corporate performance and return to stockholders.
E. PAUL CASEY, CHAIRMAN
CHARLES W. GRIGG
JUDITH S. KING
H. JOHN RILEY, JR.
S-11
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of May 17, 1999 (except as otherwise
indicated) certain information regarding the beneficial ownership of the Shares
of the Company's common stock by (i) each person or "group" (as that term is
defined in Section 13(d)(3) of the Exchange Act) known by the Company to be the
beneficial owner of 5% or more of the outstanding Shares, (ii) each of the
Company's directors, nominees for director and executive officers and (iii) all
directors and executive officers as a group. Except as otherwise indicated, each
person listed below has sole voting and investment power over the shares of
Common Stock shown as beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTIONS
BENEFICIALLY OWNED EXCERCISABLE PERCENT OF
NAME (1) WITHIN 60 DAYS CLASS (2)
- ----------------------------------------------------------- -------------------- ------------------ -------------
<S> <C> <C> <C>
ICM Asset Management, Inc. (3)............................. 3,649,523 10.3%
601 W. Main Ave., Suite 600
Spokane, WA 99201
Scudder Kemper Investments, Inc.(4)........................ 2,130,500 6.0%
345 Park Ave.
New York, NY 10154
Directors and Officers:
E. Paul Casey............................................ 25,372 3,999
Warner S. Fletcher (5)(6)................................ 2,684,349 3,999 7.6%
Robert G. Foster......................................... 1,072 3,999
Charles W. Grigg......................................... 3,372 1,666
David P. Gruber.......................................... 193,530 148,750
M Howard Jacobson........................................ 1,372 3,999
Robert L. Leibensperger.................................. 1,372 666
Andrew E. Lietz.......................................... 5,372 666
William T. McGovern...................................... -- --
Sanjay N. Shah........................................... 14,247 151,340
J. Stewart Smith......................................... 10,010 9,395
Colin Stead.............................................. 15,040 25,792
J. Douglas Whelan........................................ 24,491 54,000
David A. White, Jr....................................... 1,500 1,666
Wallace F. Whitney, Jr................................... 12,507 122,375
Frank J. Zugel........................................... 24,463 75,709
All directors and executive officers as a
group (5)(6)........................................... 815,456 608,021 4.0%
</TABLE>
- ------------------------
(1) The address of all directors and executive officers is Wyman-Gordon Company,
244 Worcester Street, North Grafton, MA 01536
(2) Unless otherwise indicated, less than one percent. Includes exercisable
options.
(3) Based on information contained in a Schedule 13G filed by ICM Asset
Management, Inc. with the Securities and Exchange Commission on March 10,
1999.
(4) Based on information contained in a Schedule 13G filed by Scudder Kemper
Investments, Inc. with the Securities and Exchange Commission on February
16, 1999.
(5) Warner S. Fletcher is one of the five trustees of The Stoddard Charitable
Trust (the "Stoddard Trust"), a charitable trust which owns 1,458,000
Shares. The Shares owned by the Stoddard Trust are
S-12
<PAGE>
therefore reported in the above table. Mr. Fletcher disclaims any beneficial
interest in the Shares owned by the Stoddard Trust.
(6) Mr. Fletcher is a trustee of the Fletcher Foundation, which holds 311,000
Shares and of other trusts that hold 119,880 Shares for the benefit of
Judith S. King, a former director of the Company, and her sister, who are
his cousins, and 313,733 Shares for the benefit of his sister. Although the
Shares owned by the Fletcher Foundation and by such trusts are therefore
reported in the above table, Mr. Fletcher disclaims beneficial ownership of
such Shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and the New
York Stock Exchange. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on a review of
the copies of such reports and amendments thereto furnished to the Company and
written representations that no other reports were required during, or with
respect to, Fiscal 1998, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
satisfied except for the Securities and Exchange Commission filings on Form 4
for a former director of the Company which were not timely filed. Such filings
have been subsequently corrected.
S-13
<PAGE>
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND PARENT
Set forth in the table below are the names and present principal occupations
or employments, and the material occupations, positions, offices, and
employments during the past five years, for the directors and corporate officers
of WGC Acquisition Corp. and Precision Castparts Corp., and the name, principal
business and address for any corporation or other organization in which such
employment is carried on. Each person listed below is of United States
citizenship (except for Mr. Waite, who is a British citizen) and, unless
otherwise indicated, positions have been held for the past five years. Directors
are identified by an asterisk (*) and the year in which such person became a
director is indicated in parentheses.
PRECISION CASTPARTS CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
William C. McCormick* (1986)......... Chairman of PCC since October 1994; Chief Executive Officer of PCC since
Precision Castparts Corp. August 1991
4650 SW Macadam, Suite 440
Portland, OR 97201
Vernon E. Oechsle* (1996)............ President and Chief Executive Officer of Quanex Corporation, a
Precision Castparts Corp.+ manufacturer of steel bars, aluminum shapes and steel tubes and pipes,
since 1995; formerly Chief Operating Officer of Quanex Corporation
Peter R. Bridenbaugh* (1995)......... Retired; through December 1997, Executive Vice President -- Automotive,
Precision Castparts Corp.+ Aluminum Co. of America, an integrated producer of aluminum and other
products for the packaging, aerospace, automotive, building and
construction, and commercial and industrial markets; from 1994-1996,
Executive Vice President and Chief Technical Officer, Aluminum Co. of
America
Steven G. Rothmeier* (1994).......... Chairman and Chief Executive Officer of Great Northern Capital, a private
Precision Castparts Corp.+ investment and merchant banking firm
Dean T. DuCray* (1996)............... Retired; until April 1998, Vice President and Chief Financial Officer of
Precision Castparts Corp.+ York International Corporation, a manufacturer of heating, air
conditioning, ventilation and refrigeration equipment
Don R. Graber* (1995)................ President and Chief Executive Officer of Huffy Corporation, a manufacturer
Precision Castparts Corp.+ of outdoor leisure equipment and provider of retail services, since
December 1997; from 1996 to 1997, President and Chief Operating Officer of
Huffy Corporation; previously, President of Worldwide Household Products
Group, The Black & Decker Corporation; from 1992 to 1994, President of
Black & Decker International Group
Roy M. Marvin* (1967)................ Retired; Through May 1996, Vice President-Administration and Secretary of
Precision Castparts Corp.+ PCC
William D. Larsson................... Vice President and Chief Financial Officer of PCC
Precision Castparts Corp.+
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Peter G. Waite....................... Executive Vice President of PCC and President of PCC Airfoils, Inc.
Precision Castparts Corp.+
Mark Donegan......................... Executive Vice President of PCC and President of PCC Structurals, Inc.
Precision Castparts Corp.+
David W. Norris...................... Executive Vice President of PCC and President of PCC Flow Technologies,
Precision Castparts Corp.+ Inc. since 1996; from 1991-1996, President of Keystone Controls (North
America) Division of Keystone International, Inc.
Gregory M. Delaney................... Executive Vice President of PCC and President of PCC Specialty Products,
Precision Castparts Corp.+ Inc. since 1998; from 1997-1998, President of Wygand Industrial Division
of Emerson Electric Company; from 1996-1997, Executive Vice President of
Sales, Marketing and Engineering, Wygand Industrial Division of Emerson
Electric Company; from 1995-1996, Vice President of Marketing,
Refrigerator Division of Copeland Corporation, a subsidiary of Emerson
Electric Company
James A. Johnson..................... Treasurer of PCC
Precision Castparts Corp.+
Shawn R. Hagel....................... Corporate Controller of PCC since 1997; from 1995-1997, Manager of
Precision Castparts Corp.+ Financial Reporting of PCC; from 1993-1995, Manager, Deloitte & Touche LLP
Mark R. Roskopf...................... Director of Taxes of PCC since 1999; from 1997-1999, Director of
Precision Castparts Corp.+ International Tax, Case Corporation; from 1993-1997, Manager of Tax
Reporting, Case Corporation
</TABLE>
WGC ACQUISITION CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
William C. McCormick*................ Chairman of PCC since October 1994; Chief Executive Officer of PCC since
WGC Acquisition Corp.+ August 1991; Chief Executive Officer of the Purchaser
4650 SW Macadam, Suite 440
Portland, OR 97201
William D. Larsson*.................. Vice President and Chief Financial Officer of PCC; Vice President of the
WGC Acquisition Corp.+ Purchser
</TABLE>
- ------------------------
+ The principal business address of the corporation or other organization for
which the listed individual's principal occupation is conducted is set forth
at the first place at which the name of such corporation or other
organization appears in this Annex I.
S-15
<PAGE>
Exhibit 1
WYMAN-GORDON COMPANY
244 WORCESTER STREET
P.O. BOX 8001
NORTH GRAFTON, MASSACHUSETTS 01536-8001
(508) 839-4441
May 21, 1999
Dear Stockholder:
I am pleased to inform you that, on May 17, 1999, Wyman-Gordon Company (the
"Company") and Precision Castparts Corp. ("PCC") entered into a Merger
Agreement. Pursuant to the terms of the Merger Agreement, WGC Acquisition Corp.,
a wholly owned subsidiary of PCC, is commencing a cash tender offer for all of
the outstanding shares of common stock of the Company at a price of $20.00 per
share. Promptly following the completion of the tender offer, WGC Acquisition
Corp. will be merged into the Company, and all outstanding shares of the
Company's common stock (other than those owned by the Company or PCC or any of
their respective affiliates, and other than those owned by dissenting
stockholders) will be converted into the right to receive $20.00 in cash. Your
Board of Directors has unanimously approved the tender offer and the merger and
declared each of them advisable and unanimously recommends that the Company's
stockholders tender their shares of common stock in the tender offer. In
arriving at this decision, the Board gave careful consideration to a number of
factors described in the attached Schedule 14D-9 that is being filed today with
the Securities and Exchange Commission. Among other factors, the Board
considered the opinion dated May 17, 1999 of Goldman, Sachs & Co., the Company's
financial advisor, which provides that as of such date, and based upon and
subject to the matters set forth therein, the cash consideration to be received
by the stockholders of the Company pursuant to the tender offer and the merger
was fair from a financial point of view to such stockholders.
Accompanying this letter, in addition to the attached 14D-9 relating to the
tender offer, is PCC's Offer to Purchase, dated May 21, 1999, together with
related materials, including a Letter of Transmittal to be used for tendering
your shares. These documents set forth the terms and conditions of the tender
offer and the merger and provide instructions regarding how to tender your
shares. I urge you to read the enclosed materials carefully.
Your Board of Directors believes that the proposed acquisition of the
Company by PCC is fair to and in the best interests of the Company's
stockholders.
Sincerely,
/s/ David P. Gruber
David P. Gruber
Chairman and Chief Executive Officer
<PAGE>
Exhibit 2
PRECISION CASTPARTS CORP. AND WYMAN-GORDON REACH AGREEMENT ON
THE SALE OF WYMAN-GORDON TO PRECISION CASTPARTS FOR $20 PER SHARE
PORTLAND, Ore. and GRAFTON, Mass., May 17 /PRNewswire/ -- Precision
Castparts Corp. (NYSE: PCP) and Wyman-Gordon Company (NYSE: WYG) today
announced that Precision Castparts Corp. has agreed to acquire 100 percent of
the outstanding shares of Wyman-Gordon in a cash transaction valued at
approximately $825 million, including the assumption of $104 million of net
debt.
Through a wholly owned subsidiary, Precision Castparts Corp. (PCC) will
commence a cash tender offer on or before May 21, 1999, to purchase all
outstanding shares of Wyman-Gordon common stock for $20 per share. Following
completion of the tender offer, Wyman-Gordon will become a wholly owned
subsidiary of PCC through a cash merger at the same price. The tender offer will
be conditioned upon the tender of at least two-thirds of the outstanding shares
of Wyman-Gordon and certain other conditions, including compliance with the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
PCC is the market leader in manufacturing both large, complex structural
investment castings and airfoil castings used in jet aircraft engines, and has
gained market share both in industrial gas turbine (IGT) and structural airframe
castings in recent years. Wyman-Gordon is a market leader in high-quality,
technologically advanced forgings and castings for the aerospace, energy, and
industrial markets. PCC's acquisition of Wyman-Gordon, headquartered in Grafton,
Massachusetts, creates a company that will be a key supplier of both castings
and forgings for aircraft engine components. In addition, the acquisition will
strengthen PCC's position in structural airframe, IGT, energy, and other
industrial markets.
PCC reported record sales of $1,471.9 million for the fiscal year ended
March 28, 1999, with record net income of $103.3 million, or $4.22 per share
(diluted). Wyman-Gordon's sales for fiscal 1998 were a record $752.9 million,
with net income of $33.9 million, or $0.91 per share (diluted).
"This strategic acquisition builds on PCC's traditional strengths in the
aerospace industry," said William C. McCormick, chairman and chief executive
officer of Precision Castparts Corp. "In addition, over the past five years, PCC
has been growing through non-aerospace acquisitions in fluid management,
industrial metalworking tools, and machines, pulp and paper, advanced
metalforming technologies, tungsten carbide, and other metal products markets,
as well as through the development of our core capabilities for the IGT and
airframe markets. The acquisition of Wyman-Gordon will accelerate our expansion
into these markets and enable us to heighten our reputation as a high-quality,
cost-effective supplier.
<PAGE>
"In addition to generating increased sales and establishing an even better
aftermarket position, we expect to realize significant synergies over time,"
McCormick continued. "The transaction should be slightly dilutive to PCC's
earnings in the first year, with generous opportunities for accretion in
subsequent years, as the company realizes the full effect of the synergies."
David P. Gruber, chairman and chief executive officer of Wyman-Gordon,
stated, "The board of directors of Wyman-Gordon believes that PCC's offer
represents an excellent opportunity for our shareholders. The board and
management have sought to produce superior returns for our shareholders, and,
with this agreement, we believe that we have achieved our goal. We are excited
about joining forces with PCC, as the combination of our respective businesses
should result in a stronger entity that will be able to capitalize on
opportunities that we could not realize on our own. The combination of PCC and
Wyman-Gordon will create the world's premier, high-technology, metals
application company."
The boards of both companies have approved the merger agreement and the
tender offer. In addition, PCC plans to tender for the 8.0 percent senior notes
of Wyman-Gordon. The entire transaction will be financed at closing by a fully
underwritten credit facility.
The Wyman-Gordon businesses will initially be operated as a separate PCC
business and will report to William McCormick. PCC will continue to use the
Wyman-Gordon name in connection with the forging business.
Schroder & Co. Inc. is serving as financial advisor to Precision Castparts
Corp., and Goldman, Sachs & Co. is serving as financial advisor to
Wyman-Gordon.
Precision Castparts Corp. is a worldwide manufacturer of complex metal
components and products. Wyman-Gordon Company is a leader in forgings,
investment castings, and composite structures.
Part of this news release contains forward-looking statements that involve
risks and uncertainties; actual results could differ materially from those
projected in the forward-looking statements. The risks and uncertainties are
detailed from time to time in the Precision Castparts Corp. and Wyman-Gordon
Company reports filed with the Securities and Exchange Commission, including but
not limited to both companies' 1998 annual reports and Form 10-Ks.
This press release is available at no charge through PR Newswire's Company
On-Call fax service. To retrieve it, call (800) 758-5804, extension 714025.
Information is also available on the Internet at the PRN Web
site--http://www.prnewswire.com.
<PAGE>
Exhibit 3
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
PRECISION CASTPARTS CORP.,
WGC ACQUISITION CORP.
AND
WYMAN-GORDON COMPANY
Dated as of May 17, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I THE OFFER.......................................................................................1
1.1 The Offer.......................................................................................1
1.2 Company Actions.................................................................................3
1.3 Board Representation............................................................................4
1.4 Company Stock Options and Related Matters.......................................................5
1.5 Employee Stock Purchase Plan....................................................................6
ARTICLE II THE MERGER......................................................................................6
2.1 The Merger......................................................................................6
2.2 Effective Time..................................................................................6
2.3 Closing.........................................................................................7
2.4 Directors and Officers..........................................................................7
2.5 Stockholders' Meeting...........................................................................7
2.6 Merger Without Meeting of Stockholders..........................................................8
2.7 Conversion of Securities........................................................................8
2.8 Taking of Necessary Action; Further Action......................................................8
ARTICLE III PAYMENT FOR SHARES; DISSENTING SHARES...........................................................9
3.1 Payment for Shares of Company Common Stock......................................................9
3.2 Appraisal Rights...............................................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION SUB................................................................................11
4.1 Organization...................................................................................11
4.2 Authorization; Validity of Agreement; Necessary Action.........................................12
4.3 Consents and Approvals; No Violations..........................................................12
4.4 Information in Proxy Statement.................................................................12
4.5 Required Financing.............................................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................13
5.1 Existence; Good Standing; Authority; Compliance With Law.......................................13
5.2 Authorization, Validity and Effect of Agreements...............................................14
5.3 Capitalization.................................................................................15
5.4 Subsidiaries...................................................................................16
5.5 Other Interests................................................................................16
5.6 No Violation; Consents.........................................................................16
5.7 SEC Documents..................................................................................17
5.8 Litigation.....................................................................................18
5.9 Absence of Certain Changes.....................................................................18
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
5.10 Taxes..........................................................................................18
5.11 Books and Records..............................................................................19
5.12 Properties.....................................................................................19
5.13 Intellectual Property..........................................................................21
5.14 Environmental Matters..........................................................................21
5.15 Employee Benefit Plans.........................................................................22
5.16 Labor Matters..................................................................................24
5.17 No Brokers.....................................................................................24
5.18 Opinion of Financial Advisor...................................................................25
5.19 Year 2000. ...................................................................................25
5.20 Insurance......................................................................................25
5.21 Key Customers..................................................................................25
5.22 Product Quality................................................................................26
5.23 Material Contracts and Agreements..............................................................26
5.24 Definition of the Company's Knowledge..........................................................26
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER........................................................ 26
6.1 Conduct of Business by the Company.............................................................26
ARTICLE VII ADDITIONAL AGREEMENTS..........................................................................28
7.1 Other Filings..................................................................................28
7.2 Additional Agreements..........................................................................28
7.3 Fees and Expenses..............................................................................29
7.4 No Solicitations...............................................................................29
7.5 Officers' and Directors' Indemnification.......................................................31
7.6 Access to Information; Confidentiality.........................................................32
7.7 Financial and Other Statements.................................................................33
7.8 Public Announcements...........................................................................33
7.9 Employee Benefit Arrangements..................................................................33
7.10 Rights Agreement...............................................................................34
7.11 Status of Financing............................................................................35
ARTICLE VIII CONDITIONS TO THE MERGER.......................................................................35
8.1 Conditions to the Obligations of Each Party to Effect the Merger...............................35
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..............................................................36
9.1 Termination....................................................................................36
9.2 Effect of Termination..........................................................................37
9.3 Amendment......................................................................................38
9.4 Extension; Waiver..............................................................................38
ARTICLE X GENERAL PROVISIONS.............................................................................39
10.1 Notices........................................................................................39
10.2 Interpretation.................................................................................40
10.3 Non-Survival of Representations, Warranties, Covenants and Agreements..........................40
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.4 Miscellaneous..................................................................................40
10.5 Assignment.....................................................................................41
10.6 Severability...................................................................................41
10.7 Choice of Law/Consent to Jurisdiction..........................................................41
10.8 No Agreement Until Executed....................................................................41
</TABLE>
(iii)
<PAGE>
PAGE
----
(iv)
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ANNEX A......................................................................A-1
</TABLE>
(v)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of May 17,
1999, by and among Precision Castparts Corp., an Oregon corporation ("PARENT"),
WGC Acquisition Corp., a Massachusetts corporation and a wholly-owned subsidiary
of Parent ("ACQUISITION SUB"), and Wyman-Gordon Company, a Massachusetts
corporation (the "COMPANY").
RECITALS
WHEREAS, the Board of Directors of each of Parent, Acquisition Sub and
the Company has approved, and deems it advisable and in the best interests of
its respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, Parent, Acquisition Sub and the Company hereby agree as
follows:
ARTICLE I
THE OFFER
1.1 THE OFFER.
<PAGE>
(a) Provided that this Agreement shall not have been
terminated in accordance with its terms and none of the events or conditions
specified in ANNEX A hereto shall have occurred or shall exist, Acquisition Sub
shall, as soon as practicable after the date hereof, (but in no event later than
the fifth business day following the public announcement of the Offer (treating
the business day on which such public announcement occurs as the first business
day)), commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE
ACT")) an offer to purchase (as such offer to purchase may be amended in
accordance with the terms of this Agreement, the "OFFER") all of the issued and
outstanding shares ("SHARES") of common stock, par value $1.00 per share, of the
Company (the "COMPANY COMMON STOCK") at a price of not less than $20.00 per
Share, net to the seller in cash (less applicable withholding taxes, if any)
(such price, or such other price per Share as may be paid in the Offer, being
referred to herein as the "OFFER PRICE"). After the commencement of the Offer,
the Offer and the obligation of Acquisition Sub to accept for payment and pay
for Shares tendered pursuant to the Offer shall be subject only to the
conditions set forth in ANNEX A hereto and the condition (the "MINIMUM
CONDITION") that there be validly tendered and not withdrawn prior to the
expiration of the Offer at least two-thirds of the Shares on a fully diluted
basis (the "MINIMUM PERCENTAGE"). Parent and Acquisition Sub expressly reserve
the right to waive any condition set forth in ANNEX A, to change the form or
amount payable per Share in the Offer (including the Offer Price) and to make
any other changes in the terms and conditions of the Offer;
provided, however, that without the prior written consent of the Company, Parent
shall not amend, or permit to be amended, the Offer to (i) decrease the Offer
Price, (ii) change the consideration into a form other than cash, (iii) add any
conditions to the obligation of Acquisition Sub to accept for payment and pay
for Shares tendered pursuant to the Offer, (iv) amend (other than to waive) the
Minimum Condition or the other conditions set forth in ANNEX A, or (v) reduce
the maximum number of Shares to be purchased in the Offer. If on the initial
scheduled expiration date of the Offer (the "INITIAL EXPIRATION DATE"), which
shall be 20 business days after the date the Offer is commenced, all conditions
to the Offer shall not have been satisfied or waived, Acquisition Sub may, from
time to time, in its sole discretion, extend the expiration date of the Offer
(the "EXPIRATION DATE"); provided, however, that, except as set forth below, the
Expiration Date, as extended, shall be no later than the date that is 60
business days immediately following the Initial Expiration Date (the "FINAL
EXPIRATION DATE"); and provided further that if on the Initial Expiration Date,
all conditions to the Offer shall have been satisfied or waived other than the
Minimum Condition, Acquisition Sub shall be required to extend the Expiration
Date to the date that is ten business days immediately following the Initial
Expiration Date. Notwithstanding the foregoing, if on the Initial Expiration
Date, the applicable waiting period (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") in respect
of the Offer shall not have expired or been terminated and all other conditions
to the Offer shall have been satisfied or waived other than the Minimum
Condition and clause (a) of ANNEX A as it relates to compliance with the HSR Act
or other applicable antitrust laws, Acquisition Sub shall be required to extend
the Expiration Date for such additional periods as may be necessary to permit
the parties to seek to obtain termination of the waiting period under the HSR
Act in accordance with Section 7.1 below up to the date that is nine months
after the date upon which
2
<PAGE>
Parent files a pre-merger notification and report form under the HSR Act (the
"HSR EXPIRATION DATE"); provided, however, that if the applicable waiting period
(and any extension thereof) under the HSR Act in respect of the Offer expires or
is terminated prior to the date that is ten business days prior to the HSR
Expiration Date, the Expiration Date shall be the date which is ten business
days immediately following public disclosure of the expiration or termination of
the waiting period under the HSR Act. Acquisition Sub shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as it is legally
permitted to do so under this Agreement and applicable law. The Offer shall be
made by means of an offer to purchase (the "OFFER TO PURCHASE") containing the
terms set forth in this Agreement, the Minimum Percentage and the conditions set
forth in ANNEX A hereto.
(b) As soon as practicable after the date the Offer is
commenced, Parent and Acquisition Sub shall file or cause to be filed with the
Securities and Exchange Commission (the "COMMISSION") a Tender Offer Statement
on Schedule 14D-1 (together with all amendments or supplements thereto, the
"SCHEDULE 14D-1"), which shall include as an exhibit or incorporate by
reference, the Offer to Purchase (or portions thereof) and forms of the related
letter of transmittal and summary advertisement (such Schedule 14D-1, the Offer
to Purchase and related documents, together with all amendments or supplements
thereto, are collectively referred to herein as the "OFFER DOCUMENTS"). The
Offer Documents shall comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the Commission
and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by Parent or
Acquisition Sub with respect to information furnished by the Company for
inclusion in the Offer Documents. The information supplied in writing by the
Company for inclusion in the Offer Documents and by Parent or Acquisition Sub
for inclusion in the Schedule 14D-9 (as hereinafter defined) shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Acquisition Sub and the Company each agrees promptly to
amend or supplement 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 or as otherwise required by applicable
federal securities laws, and Parent and Acquisition Sub each further agrees to
take all steps necessary to cause the Offer Documents, as so amended or
supplemented, to be filed with the Commission and disseminated to the 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 upon the Offer Documents and all amendments
and supplements thereto prior to the filing thereof with the Commission or the
dissemination thereof to the holders of Shares.
3
<PAGE>
1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer
and represents and warrants that the Board of Directors of the Company (the
"COMPANY BOARD"), 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 (as hereinafter defined) taken together, are
fair to and in the best interests of the Company and its stockholders, (ii)
approved this Agreement and the transactions contemplated hereby, including,
without limitation, the Merger and the Offer (collectively, the "TRANSACTIONS"),
and such approval constitutes approval of the Transactions for purposes of
Chapter 110F of the Massachusetts General Laws, as amended (the "MGL"), and
Article 6(c)2 of the Restated Articles of Organization of the Company (the
"ARTICLES OF ORGANIZATION") and (iii) voted to recommend that the stockholders
of the Company accept the Offer, tender their Shares thereunder to Acquisition
Sub and, if required by applicable law, approve and adopt this Agreement and the
Merger, subject to the Company's rights under Section 7.4 hereof.
(b) Concurrently with the commencement of the Offer and the
filing by or on behalf of Parent and Acquisition Sub of the Schedule 14D-1, the
Company shall file with the Commission and disseminate to the holders of Shares
a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments or supplements thereto, the "SCHEDULE 14D-9"), containing (among
other things) the recommendation referred to in clause (iii) of Section 1.2(a)
hereof, subject to the Company's rights under Section 7.4 hereof. The Schedule
14D-9 shall comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the Commission and on the
date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information furnished by Parent or Acquisition Sub for inclusion in the Schedule
14D-9. The Company, Parent and Acquisition Sub each agrees promptly to correct,
amend or supplement any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect or as otherwise required by applicable federal
securities laws, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9, as so amended or supplemented, to be filed with the
Commission and disseminated to the holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent, Acquisition Sub
and their counsel shall be given a reasonable opportunity to review and comment
upon the Schedule 14D-9 and all amendments and supplements thereto prior to the
filing thereof with the Commission or the dissemination thereof to the holders
of Shares.
(c) In connection with the Offer, the Company shall promptly
furnish Parent and Acquisition Sub with a list of the names and addresses of all
record holders of Shares and security position listings of Shares, each as of a
recent date, and shall promptly furnish Parent and Acquisition Sub with such
additional information, including updated lists of the
4
<PAGE>
stockholders of the Company, lists of the holders of the Company's outstanding
stock options, mailing labels, security position listings and such other
assistance and information as Parent or Acquisition Sub or their agents may
reasonably request. 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 Offer, each of Parent and Acquisition Sub
shall use the information described in the preceding sentence only in connection
with the Offer, and if this Agreement is terminated in accordance with its
terms, each of them shall, upon the Company's request, deliver to the Company
all such information and any copies or extracts thereof then in its possession
or under its control.
1.3 BOARD REPRESENTATION. Promptly upon the purchase of Shares pursuant
to the Offer, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of (a) the total number of directors on the Company Board (after giving
effect to the directors designated by Parent pursuant to this sentence) and (b)
the percentage that the total votes represented by such number of Shares in the
election of directors of the Company so purchased bears to the total votes
represented by the number of Shares outstanding. In furtherance thereof, the
Company shall, upon request by Parent, promptly increase the size of the Company
Board and/or exercise its commercially reasonable best efforts to secure the
resignations of such number of its directors as is necessary to enable Parent's
designees to be elected to the Company Board and shall take all actions to cause
Parent's designees to be so elected to the Company Board. At such time, the
Company shall also cause persons designated by Parent to constitute at least the
same percentage (rounded up to the next whole number) as is on the Company Board
of (i) each committee of the Company Board, (ii) each board of directors (or
similar body) of each Subsidiary (as defined in Section 10.2 hereof) of the
Company (each, a "COMPANY SUBSIDIARY") and (iii) each committee (or similar
body) of each such board. The Company shall take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in
order to fulfill its obligations under this Section 1.3 and shall include in
the Schedule 14D-9 to its stockholders such information with respect to the
Company and its officers and directors as is required by such Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this Section 1.3.
Parent will 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 such Section 14(f) and Rule 14f-1. The provisions
of this Section 1.3 are in addition to and shall not limit any rights which
Acquisition Sub, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise. In the event that Parent's designees are elected to
the Company Board, until the Effective Time (as hereinafter defined), the
Company Board shall have at least two directors who are directors on the date
hereof (the "INDEPENDENT DIRECTORS"); provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director shall be entitled to designate
the person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no Independent Director then
remains, the other directors shall designate two persons to fill such
vacancies who shall not be stockholders, affiliates or associates of Parent
or Acquisition Sub and such persons shall be deemed to be
5
<PAGE>
Independent Directors for purposes of this Agreement. Notwithstanding
anything in this Agreement to the contrary, in the event that Parent's
designees are elected to the Company Board, after the acceptance for payment
of Shares pursuant to the Offer and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors shall be required
in addition to any other applicable requirement to (a) amend this Agreement
in any material respect in a manner adverse to any stockholder of the Company
or any intended third-party beneficiary of this Agreement, (b) terminate this
Agreement by the Company, (c) exercise or waive any of the Company's material
rights, benefits or remedies hereunder, or (d) extend the time for
performance of Parent's or Acquisition Sub's respective obligations hereunder.
1.4 COMPANY STOCK OPTIONS AND RELATED MATTERS.
(a) Each option and stock appreciation right (collectively,
the "OPTIONS") granted under the Company Stock Option Plans (as hereinafter
defined), which is outstanding (whether or not currently exercisable) as of
immediately prior to the date on which Acquisition Sub accepts for payment
Shares pursuant to the Offer (the "ACCEPTANCE DATE") and which has not been
exercised or canceled prior thereto shall, on the Acceptance Date, be canceled
and upon the surrender and cancellation of the option agreement representing
such Option, Acquisition Sub shall pay to the holder thereof cash in an amount
equal to the product of (i) the number of Shares provided for in such Option and
(ii) the excess, if any, of the Offer Price over the exercise price per Share
provided for in such Option, which cash payment shall be treated as compensation
and shall be net of any applicable federal or state withholding tax. The Company
shall take all actions necessary to ensure that (i) all Options, to the extent
not exercised prior to the Acceptance Date, shall terminate and be canceled as
of the Acceptance Date and thereafter be of no further force or effect, (ii) no
Options are granted after the date of this Agreement, and (iii) as of the
Acceptance Date, the Company Stock Option Plans and all Options issued
thereunder shall terminate.
(b) Except as set forth in Section 1.5 or as may be otherwise
agreed to by Parent or Acquisition Sub and the Company, the Company Stock Option
Plans shall terminate as of the Acceptance Date and the provisions in any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of the Company
Subsidiaries shall be of no further force and effect and shall be deemed to be
deleted as of the Acceptance Date and no holder of an Option or any participant
in any Company Stock Option Plan or any other plans, programs or arrangements
shall have any right thereunder to acquire any equity securities of the Company,
the Surviving Corporation (as hereinafter defined) or any Subsidiary thereof.
1.5 EMPLOYEE STOCK PURCHASE PLAN. The Company has taken appropriate
action to provide that (i) the current offering period under the Company's
Employee Stock Purchase Plan (the "STOCK PURCHASE PLAN") shall be terminated as
of the date hereof, (ii) each participant in the Stock Purchase Plan on the date
hereof shall be deemed to have exercised his or her Option (as defined in the
Stock Purchase Plan) on such date and shall acquire from the Company (A) such
number of whole shares of Company Common Stock as his or her
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accumulated payroll deductions on such date will purchase at the Option Price
(as defined in the Stock Purchase Plan) (treating the last business day prior to
the date hereof as the "Exercise Date" for all purposes of the Stock Purchase
Plan) and (B) cash in the amount of any remaining balance in such participant's
account, and (iii) the Stock Purchase Plan shall be terminated effective as of
the date hereof.
ARTICLE II
THE MERGER
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Company and Acquisition Sub shall consummate a merger
(the "MERGER") pursuant to which (a) Acquisition Sub shall be merged with and
into the Company and the separate corporate existence of Acquisition Sub shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger (sometimes referred to herein as the "SURVIVING CORPORATION") and
shall continue to be governed by the laws of the Commonwealth of Massachusetts,
and (c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The Articles of Organization, as in effect immediately prior to the
Effective Time, shall be the Articles of Organization of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Organization, and Bylaws of the Company (the "BYLAWS"), as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law, by such Articles of Organization or
by such Bylaws. The Merger shall have the effects specified in the MGL.
2.2 EFFECTIVE TIME. As promptly as practicable after all of the
conditions set forth in Article VIII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same, the
Company shall duly execute and file articles of merger (the "ARTICLES
OF MERGER") with the Secretary of State of the Commonwealth of Massachusetts in
accordance with the MGL. The Merger shall become effective at such time as the
Articles of Merger, accompanied by payment of the filing fee (as provided in
Chapter 156B, Section 114 of the MGL), have been examined by and received the
endorsed approval of the Secretary of State of the Commonwealth of Massachusetts
(the "EFFECTIVE TIME").
2.3 CLOSING. The closing of the Merger (the "CLOSING") shall take place
at such time and on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of all of the
conditions set forth in Article VIII hereof (the "CLOSING DATE"), at the offices
of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109,
unless another date or place is agreed to by the parties hereto.
2.4 DIRECTORS AND OFFICERS. The directors and officers of Acquisition
Sub immediately prior to the Effective Time shall, immediately after the
Effective Time, be the
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directors and officers of the Surviving Corporation, each to hold office in
accordance with the Articles of Organization and Bylaws of the Surviving
Corporation.
2.5 STOCKHOLDERS' MEETING. If required by applicable law in order to
consummate the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable law:
(a) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "SPECIAL MEETING") as promptly as practicable
following the acceptance for payment and purchase of Shares by Acquisition Sub
pursuant to the Offer for the purpose of considering and taking action upon the
approval of the Merger and the adoption of this Agreement;
(b) prepare as promptly as practicable following the execution
of this Agreement, and file with the Commission as promptly as practicable
following the Expiration Date, a preliminary proxy or information statement
relating to the Merger and this Agreement and use its commercially reasonable
best efforts to obtain and furnish the information required to be included by
the Commission in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any amendment or
supplement thereto (the "PROXY STATEMENT"), to be mailed to its stockholders,
provided that no amendment or supplement to the Proxy Statement will be made by
the Company without the consultation and approval of Parent and its counsel
(which shall not be unreasonably withheld), and to obtain the necessary
approvals of the Merger and this Agreement by its stockholders; and
(c) include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the approval of
the Merger and the adoption of this Agreement.
2.6 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding any
provision in this Agreement to the contrary, in the event that Acquisition Sub
shall acquire at least 90% of the outstanding shares of each class of capital
stock of the Company, pursuant to the Offer or otherwise, the parties hereto
shall, at the request of Parent and subject to Article VIII hereof, take all
necessary and appropriate action to cause the merger of the Company with and
into Acquisition Sub to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Chapter 156B, Section 82 of the MGL.
2.7 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Acquisition Sub,
the Company or the holders of any Shares:
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(a) Each issued and outstanding Share held by the Company as a
treasury Share or held by any direct or indirect Company Subsidiary and each
issued and outstanding Share owned by Parent, Acquisition Sub or any other
direct or indirect Subsidiary of Parent (a "PARENT SUBSIDIARY") immediately
prior to the Effective Time, shall be canceled and retired and cease to exist
without any conversion thereof and no payment or distribution shall be made with
respect thereto;
(b) Each Share issued and outstanding immediately prior to the
Effective Time, other than (i) those Shares referred to in Section 2.7(a) and
(ii) Dissenting Shares (as hereinafter defined), shall be canceled and shall be
converted automatically into and represent the right to receive the kind and
amount of consideration (without interest) equal to the kind and amount of
consideration paid per Share pursuant to the Offer (the "MERGER CONSIDERATION"),
payable (without interest) to the holder of such Share upon surrender, in the
manner provided in Section 3.1, of the Certificate (as hereinafter defined) that
formerly evidenced such Share. All of the Certificates evidencing Shares, by
virtue of the Merger and without any action on the part of the stockholders of
the Company or the Company, shall be deemed to be no longer outstanding, shall
not be transferable on the books of the Surviving Corporation, and shall
represent solely the right to receive the amount set forth in this Section
2.7(b); and
(c) Each share of common stock, par value $.01 per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and non-assessable share
of common stock, par value $1.00 per share, of the Surviving Corporation,
certificates for which shall be issued to the stockholders of Acquisition Sub on
a pro rata basis in accordance with their respective shares of Acquisition Sub
upon surrender to the Surviving Corporation of such stockholders' certificates
formerly representing such shares of Acquisition Sub.
2.8 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Acquisition Sub and the Company shall use its commercially reasonable best
efforts to take all such action as may be necessary or appropriate in order to
effectuate the Merger under the MGL as promptly as practicable following the
purchase of shares pursuant to the Offer. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
both of the Company and Acquisition Sub, the officers of such corporations are
fully authorized in the name of their corporation or otherwise to take, and
shall take, all such lawful and necessary action.
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ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
3.1 PAYMENT FOR SHARES OF COMPANY COMMON STOCK.
(a) Prior to the Effective Time, Parent shall designate a bank
or trust company to act as agent for the holders of the Shares in connection
with the Merger (the "PAYING AGENT") for purposes of effecting the exchange of
certificates for the Merger Consideration which, prior to the Effective Time,
represented Shares entitled to receive the Merger Consideration pursuant to
Section 2.7(b).
(b) From time to time before or after the Effective Time, as
necessary, Parent or Acquisition Sub shall deposit in trust with the Paying
Agent cash in an aggregate amount equal to the product of (i) the number of
Shares issued and outstanding immediately prior to the Effective Time (other
than shares owned by, or issuable upon conversion of other securities to, the
Company, Parent, Acquisition Sub or any direct or indirect Parent Subsidiary or
Company Subsidiary and Shares known immediately prior to the Effective Time to
be Dissenting Shares) (as hereinafter defined) and (ii) the Merger Consideration
(such aggregate amount being hereinafter referred to as the "PAYMENT FUND"). The
Paying Agent shall, pursuant to irrevocable instructions, make the payments
referred to in Section 2.7(b) out of the Payment Fund.
(c) Promptly after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each person who was a record
holder of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "CERTIFICATES"), whose Shares were
converted pursuant to Section 2.7(b) into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected and risk of loss and title to Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Parent and the Surviving Corporation may
reasonably specify) and instructions for its use in surrendering Certificates in
exchange for payment of the Merger Consideration. Upon the surrender to the
Paying Agent of such a Certificate, together with such duly executed letter of
transmittal and any other required documents, the holder thereof shall be paid,
without interest thereon, the Merger Consideration to which such holder is
entitled hereunder, and such Certificate shall forthwith be canceled. Until so
surrendered, each such Certificate shall, after the Effective Time, represent
solely the right to receive the Merger Consideration into which the Shares such
Certificate theretofore represented shall have been converted pursuant to
Section 2.7(b), and the holder thereof shall not be entitled to be paid any cash
to which such holder otherwise would be entitled. In case any payment pursuant
to this Section 3.1 is to be made to a holder other than the registered holder
of a surrendered Certificate, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment of
such cash to
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a person other than the registered holder of the Certificate surrendered, or
that such person shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(d) Promptly following the date which is twelve months after
the Effective Time, the Paying Agent shall return to the Surviving Corporation
all cash, certificates and other instruments in its possession that constitute
any portion of the Payment Fund (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and the Paying Agent's duties shall terminate. Thereafter, each holder
of a Certificate shall be entitled to look to the Surviving Corporation (subject
to applicable abandoned property, escheat and similar laws) only as a general
creditor thereof with respect to any Merger Consideration, without interest,
that may be payable upon due surrender of the Certificate or Certificates held
by them. Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of Certificates that prior to the Effective
Time evidenced Shares for any Merger Consideration delivered pursuant hereto to
a public official pursuant to applicable abandoned property, escheat or other
similar laws.
(e) At the Effective Time, the Company Common Stock transfer
books shall be closed and no transfer of Shares shall be made thereafter. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent, they shall be canceled and exchanged for the
Merger Consideration as provided in Section 2.7(b), subject to applicable law in
the case of Dissenting Shares.
(f) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Surviving Corporation, upon the posting by such person of a bond
in such amount as Parent or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate, the cash representing the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
3.2 APPRAISAL RIGHTS.
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(a) Notwithstanding anything in this Agreement to the
contrary, any Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders of the Company who have filed
with the Company, before the taking of the vote of the stockholders of the
Company to approve this Agreement, written objections to such approval stating
their intention to demand payment for such Shares, and who have not voted such
Shares in favor of the adoption of this Agreement ("DISSENTING SHARES") will not
be converted as described in Section 2.7 hereof, but will thereafter constitute
only the right to receive payment of the fair value of such Shares in accordance
with the applicable provisions of Chapter 156B of the MGL (the "APPRAISAL RIGHTS
PROVISIONS"); provided, however, that all Shares held by stockholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Shares under the Appraisal Rights Provisions shall
thereupon be deemed to have been canceled and retired and to have been
converted, as of the Effective Time, into the right to receive the Merger
Consideration, without interest, in the manner provided in Section 2.7. Persons
who have perfected statutory rights with respect to Dissenting Shares as
aforesaid will not be paid by the Surviving Corporation as provided in this
Agreement and will have only such rights as are provided by the Appraisal Rights
Provisions with respect to such Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, if Acquisition Sub abandons or is finally
enjoined or prevented from carrying out, or the stockholders rescind their
adoption of, this Agreement, the right of each holder of Dissenting Shares to
receive the fair value of such Dissenting Shares in accordance with the
Appraisal Rights Provisions will terminate, effective as of the time of such
abandonment, injunction, prevention or rescission.
(b) Each dissenting stockholder who becomes entitled under the
MGL to payment for Dissenting Shares shall receive payment therefor after the
Effective Time from the Surviving Corporation (but only after the amount thereof
shall have been agreed upon or finally determined pursuant to the MGL) and such
Dissenting Shares shall thereupon be canceled.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Parent and Acquisition Sub jointly and severally hereby represent and
warrant to the Company as follows:
4.1 ORGANIZATION. Except as set forth in Section 4.1 of the schedule
attached to this Agreement setting forth exceptions to Parent's and Acquisition
Sub's representations and warranties set forth herein, each of Parent and
Acquisition Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and corporate authority necessary to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not reasonably be expected to have a Parent
Material Adverse Effect (as defined below). "PARENT MATERIAL ADVERSE EFFECT"
means any change or effect that has or would reasonably be expected to have a
material adverse effect on the business, results of operations or financial
condition of Parent and its Subsidiaries (the "PARENT SUBSIDIARIES") taken as a
whole.
4.2 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Except as
set forth in Section 4.2 of the schedule attached to this Agreement setting
forth exceptions to Parent's and Acquisition Sub's representations and
warranties set forth herein, (i) each of Parent and Acquisition Sub has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Transactions; (ii) the execution, delivery and performance by
Parent and Acquisition Sub of this Agreement and the consummation of the
Transactions have been duly authorized by the Board of Directors of Parent (the
"PARENT BOARD") and the Board of Directors of Acquisition Sub (the "ACQUISITION
SUB BOARD") and by Parent as the sole stockholder of Acquisition Sub, and no
other corporate action on the part of Parent and Acquisition Sub is necessary to
authorize the execution and delivery by Parent and Acquisition Sub of this
Agreement and the consummation of the Transactions; and (iii) this Agreement has
been duly executed and delivered by Parent and Acquisition Sub and, assuming due
and valid authorization, execution and delivery hereof by the Company, is a
valid and binding obligation of each of Parent and Acquisition Sub, as the case
may be, enforceable against each of them in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in
Section 4.3 of the schedule attached to this Agreement setting forth exceptions
to Parent's and Acquisition Sub's representations and warranties set forth
herein and except for filings, permits, authorizations, consents and approvals
as may be required under, and other applicable requirements of, the Exchange
Act, the HSR Act, and state securities or state "Blue Sky" laws, none of the
execution, delivery or performance of this Agreement by Parent or Acquisition
Sub, the consummation by Parent or Acquisition Sub of the Transactions or
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compliance by Parent or Acquisition Sub with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the respective
articles of incorporation or organization or bylaws of Parent or Acquisition
Sub, (ii) require any filing with, or permit, authorization, consent or approval
of, any state, federal or foreign government or governmental authority or by any
United States, state or foreign court of competent jurisdiction (a "GOVERNMENTAL
ENTITY"), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or any of
the Parent Subsidiaries listed in Section 4.3 of the Schedule attached to this
Agreement (the "MATERIAL PARENT SUBSIDIARIES") is a party or by which any of
them or any of their respective properties or assets may be bound, or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of the Material Parent Subsidiaries or any of their
properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv)
such violations, breaches or defaults which would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
4.4 INFORMATION IN PROXY STATEMENT. None of the information supplied by
Parent or Acquisition Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will, as of the date mailed to the Company's
stockholders and except as supplemented by Parent to reflect changes in
information so supplied at the time of any meeting of the Company's stockholders
to be held in connection with the Merger, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.5 REQUIRED FINANCING. Parent has a commitment for credit facilities
in place which, if funded, either alone or with cash presently on hand, (i) will
provide sufficient funds to enable Acquisition Sub to purchase and pay for the
Shares pursuant to the Offer and the Merger in accordance with the terms of this
Agreement and to consummate the Transactions and (ii) will cause Parent or
Acquisition Sub to have on the Initial Expiration Date and the Expiration Date,
and at the Effective Time, sufficient funds to purchase and pay for the Shares
pursuant to the Offer and the Merger, respectively, in accordance with the terms
of this Agreement. Neither Parent nor Acquisition Sub has any reason to believe
that any condition to such commitment cannot or will not be satisfied prior to
the Initial Expiration Date. Parent has provided to the Company a true, complete
and correct copy of the commitment letter, including any exhibits, schedules or
amendments thereto (collectively, the "Commitment Letter"), relating to the
financing for the purchase of the Shares pursuant to the Offer and the Merger.
Parent's and Acquisition Sub's commitment for credit facilities permits, subject
to the conditions specified therein, Parent and Acquisition Sub to borrow money
under such facilities and use such funds to purchase and pay for the Shares
pursuant to the Offer and the Merger in accordance with the terms of this
Agreement and to consummate the Transactions.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered at or prior
to the execution hereof to Parent and Acquisition Sub, which shall refer to the
relevant Sections of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the
Company represents and warrants to Parent and Acquisition Sub as follows:
5.1 EXISTENCE; GOOD STANDING; AUTHORITY; COMPLIANCE WITH LAW.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts. Except as set forth in Section 5.1 of the Company Disclosure
Schedule, the Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so licensed or qualified would not
have a Company Material Adverse Effect (as defined below). "COMPANY MATERIAL
ADVERSE EFFECT" means any change or effect that has or would reasonably be
expected to have a material adverse effect on the business, results of
operations or financial condition of the Company and the Company Subsidiaries
taken as a whole. The Company has all requisite corporate power and authority to
own, operate, lease and encumber its properties and carry on its business as now
conducted.
(b) Each of the Company Subsidiaries listed in Section 5.1 of
the Company Disclosure Schedule (the "MATERIAL COMPANY SUBSIDIARIES") is a
corporation, partnership or limited liability company (or similar entity or
association in the case of those Material Company Subsidiaries organized and
existing other than under the laws of a state of the United States) duly
incorporated or organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate or other
power and authority to own its properties and to carry on its business as it is
now being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not have a
Company Material Adverse Effect.
(c) Neither the Company nor any of the Material Company
Subsidiaries is in violation of any order of any Governmental Entity or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which or by which the Company or any Material Company Subsidiary
or any of their respective properties or assets is subject or bound, where such
violation would have a Company Material Adverse Effect. The Company and the
Material Company Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in
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connection with their businesses as now conducted, where the failure to obtain
any such license, permit or authorization or to take any such action would
reasonably be expected to have a Company Material Adverse Effect.
(d) Copies of the Articles of Organization and Bylaws, as
currently in effect, and the other charter documents, bylaws, organizational
documents and partnership, limited liability company and joint venture
agreements, as currently in effect, of the Company and each of the Company
Subsidiaries are listed in, and with respect to the Company and the Material
Company Subsidiaries, are attached to, Section 5.1 of the Company Disclosure
Schedule.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has
the requisite power and authority to enter into and consummate the Transactions
and to execute, deliver and perform this Agreement. The Company Board has
approved this Agreement and the Transactions. In connection with the foregoing,
the Company Board has taken such actions and votes as are necessary on its part
to render the provisions of Chapter 110F of the MGL and all other applicable
takeover statutes inapplicable to this Agreement and the Transactions and to
comply with the director approval requirements of Article 6(c)2 of the Articles
of Organization. Subject only to the approval of this Agreement by the holders
of the Company Common Stock, if required, the execution and delivery by the
Company of this Agreement and consummation of the Transactions have been duly
authorized by all requisite corporate action on the part of the Company. This
Agreement, assuming due and valid authorization, execution and delivery thereof
by Parent and Acquisition Sub, constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
5.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 70,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, no par value per share, of the Company (the "COMPANY PREFERRED
STOCK"). As of the date of this Agreement, (i) 35,538,733 shares of Company
Common Stock were issued and outstanding, (ii) 1,129,229 shares of Company
Common Stock have been authorized and reserved for issuance and are available
for grant pursuant to the Company's stock option plans listed in Section 5.3 of
the Company Disclosure Schedule (the "COMPANY STOCK OPTION PLANS"), subject to
adjustment on the terms set forth in the Company Stock Option Plans, (iii)
2,599,653 Options were outstanding under the Company Stock Option Plans, (iv)
250,000 shares of Company Common Stock have been authorized and reserved for
issuance pursuant to the Stock Purchase Plan, (v) no shares of Company Preferred
Stock were issued and outstanding, (vi) 100,000 shares of Company Preferred
Stock have been designated as "Series B Junior Participating Cumulative
Preferred Stock" and reserved for issuance upon exercise of the rights (the
"RIGHTS") issued pursuant to the Shareholder Rights Agreement, dated as of
October 21, 1998, by and between the Company and State Street Bank and Trust
Company (the "RIGHTS AGREEMENT"), and (vii) 1,513,987 shares of Company Common
Stock and no shares of Company Preferred Stock were held in the treasury of the
Company. As of the date
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of this Agreement, the Company had no shares of Company Common Stock issued and
outstanding or reserved for issuance other than as described above. All such
issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. The Company has no outstanding bonds, debentures, notes or other
agreements or obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter. Except for the Options (all
of which have been issued under the Company Stock Option Plans) and the Stock
Purchase Plan, there are not at the date of this Agreement any existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company to issue, transfer or sell
any shares of capital stock of the Company. Section 5.3 of the Company
Disclosure Schedule sets forth a full list of the Options, including the name of
the person to whom such Options have been granted, the number of shares subject
to each Option, the per share exercise price for each Option and the vesting
schedule for each Option. As of the Acceptance Date, pursuant to the Company
Stock Option Plans, the Options will be fully vested and immediately
exercisable. Except as set forth in Section 5.3 of the Company Disclosure
Schedule, there are no agreements or understandings to which the Company or any
Material Company Subsidiary is a party with respect to the voting of any shares
of capital stock of the Company or which restrict the transfer of any such
shares, nor does the Company have knowledge of any third party agreements or
understandings with respect to the voting of any such shares or which restrict
the transfer of any such shares. Except as set forth in Section 5.3 of the
Company Disclosure Schedule, there are no outstanding contractual obligations of
the Company or any Material Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock, partnership interests or any
other securities of the Company or any Material Company Subsidiary. Except as
set forth in Section 5.3 of the Company Disclosure Schedule, neither the Company
nor any Material Company Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement to register the offer and sale or resale
of any of their securities under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "SECURITIES ACT").
5.4 SUBSIDIARIES. No Company Subsidiary that is not a Material Company
Subsidiary (i) is actively engaged in the conduct of any material business, (ii)
owns any material assets or interests or investments in any corporation,
partnership, limited liability company, joint venture, business trust or other
entity, or (iii) is subject to any material claims of third parties. Except as
set forth in Section 5.4 of the Company Disclosure Schedule, the Company owns
directly or indirectly each of the outstanding shares of capital stock or other
equity interest of each of the Material Company Subsidiaries. Each of the
outstanding shares of capital stock of each of the Material Company Subsidiaries
having corporate form is duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 5.4 of the Company Disclosure
Schedule, each of the outstanding shares of capital stock or other equity
interest of each of the Material Company Subsidiaries is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
Company Subsidiary is correctly set forth in Section 5.4 of the Company
Disclosure Schedule: (i) its name and jurisdiction of
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incorporation or organization; (ii) its authorized capital stock, share capital
or other equity interest, to the extent applicable; and (iii) the name of each
stockholder or equity interest holder and the number of issued and outstanding
shares of capital stock, share capital or other equity interest held by it.
5.5 OTHER INTERESTS. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Material Company Subsidiary
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, limited liability company, joint venture,
business, trust or other entity (other than investments in short-term investment
securities). Except as set forth in Section 5.5 of the Company Disclosure
Schedule, to the Company's knowledge, there is no material dispute among the
equity holders of any entity of which the Company and/or any Company Subsidiary
owns more than five percent, but less than all of the voting interests or voting
securities therein.
5.6 NO VIOLATION; CONSENTS. Except as set forth in Section 5.6 of the
Company Disclosure Schedule, neither the execution and delivery by the Company
of this Agreement nor consummation by the Company of the Transactions in
accordance with the terms hereof, will conflict with or result in a breach of
any provisions of the Articles of Organization or the Bylaws. Except as set
forth in Section 5.6 of the Company Disclosure Schedule, the execution and
delivery by the Company of this Agreement and consummation by the Company of the
Transactions in accordance with the terms hereof will not violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties of the
Company or the Material Company Subsidiaries under, or result in being declared
void, voidable or without further binding effect, any of the terms, conditions
or provisions of (x) any note, bond, mortgage, indenture or deed of trust or (y)
any license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which the Company or any of the Material Company
Subsidiaries is a party, or by which the Company or any of the Material Company
Subsidiaries or any of their properties is bound, except as otherwise would not
have a Company Material Adverse Effect. Other than the filings provided for in
Article II of this Agreement, the HSR Act, the Exchange Act or applicable state
securities and "Blue Sky" laws (collectively, the "REGULATORY FILINGS"), the
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company and consummation of the
Transactions does not, require any consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Entity or regulatory
authority, except where the failure to obtain any such consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Entity or regulatory authority would not have a Company Material Adverse Effect
or significantly delay any of the Transactions. Except as set forth in Section
5.6 of the Company Disclosure Schedule, there are no material agreements to
which the Company or any Material Company Subsidiary is a party or to which
their respective assets may be bound that would result in a
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material change in the rights or obligations of the parties thereto as a result
of a change in control of the Company as contemplated by this Agreement.
5.7 SEC DOCUMENTS. The Company has timely filed all required forms,
reports and documents with the Commission since May 31, 1995 (collectively, the
"COMPANY SEC REPORTS"), all of which were prepared in accordance with the
applicable requirements of the Exchange Act, the Securities Act and the rules
and regulations promulgated thereunder (the "SECURITIES LAWS"). All required
Company SEC Reports have been timely filed with the Commission and constitute
all forms, reports and documents required to be filed by the Company under the
Securities Laws since May 31, 1995. As of their respective dates, the Company
SEC Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Laws and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or incorporated by
reference into the Company SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of the Company
and the Company Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by reference into the Company SEC Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and the Company
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which were or will
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d) of the
Exchange Act.
5.8 LITIGATION. Except as set forth in Section 5.8 of the Company
Disclosure Schedule, there is no litigation, suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
the Company Subsidiaries, which, if adversely determined, individually or in the
aggregate with all such other litigation, suits, actions or proceedings, would
(i) have a Company Material Adverse Effect, (ii) materially and adversely affect
the Company's ability to perform its obligations under this Agreement or (iii)
prevent or significantly delay the consummation of any of the Transactions.
Except as set forth in Section 5.8 of the Company Disclosure Schedule, there is
no writ, order, injunction, ordinance, judgment or decree in effect or, to the
knowledge of the Company, threatened that would materially and adversely affect
the Company's ability to perform its obligations under this Agreement or prevent
or significantly delay the consummation of any of the Transactions.
5.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 5.9 of
the Company Disclosure Schedule or in the Company SEC Reports filed with the
Commission prior to the date of this Agreement, since May 31, 1998, the Company
and the Material Company Subsidiaries have conducted their businesses only in
the ordinary course of business and there has not been: (i) as of the date
hereof, any declaration, setting aside or payment of
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any dividend or other distribution with respect to the Company Common Stock;
(ii) any material commitment, contractual obligation (including, without
limitation, any management or franchise agreement, any lease (capital or
otherwise) or any letter of intent), borrowing, liability, guaranty, capital
expenditure or transaction (each, a "COMMITMENT") entered into by the Company or
any of the Material Company Subsidiaries outside the ordinary course of business
except for Commitments for expenses of attorneys, accountants and investment
bankers incurred in connection with the Transactions; or (iii) any material
change in the Company's accounting principles, practices or methods. Between
February 28, 1999 and the date of this Agreement, there has not occurred any
change or effect concerning the Company or the Company Subsidiaries which has
had or would reasonably be expected to have a material adverse effect on the
business, operations or condition (financial or otherwise) of the Company and
the Company Subsidiaries taken as a whole.
5.10 TAXES.
(a) Except as set forth in Section 5.10 of the Company
Disclosure Schedule, each of the Company and the Material Company Subsidiaries
(i) has timely filed all Tax Returns (as defined below) which it was required to
file (after giving effect to any filing extension granted by a Governmental
Entity) and all such Tax Returns are accurate and complete in all material
respects, and (ii) has paid all Taxes (as defined below) shown on such Tax
Returns as required to be paid by it, except, in each case, where the failure to
file (or timely file) such Tax Returns or pay such Taxes would not have a
Company Material Adverse Effect. The most recent audited financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1998 reflect, to the knowledge of the Company, an adequate reserve for
all material Taxes payable by the Company and the Material Company Subsidiaries
for all taxable periods and portions thereof through the date of such financial
statements. To the knowledge of the Company, and except as set forth in Section
5.10 of the Company Disclosure Schedule, no deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of the Material
Company Subsidiaries, and no requests for waivers of the time to assess any such
Taxes are pending. The Company has previously furnished to Parent (a) correct
and complete copies of all federal and material state or foreign Tax Returns by
the Company or any Material Company Subsidiary for taxable periods ending on or
after June 1, 1996, and (b) copies of all agreements that, to the knowledge of
the Company, under certain circumstances could obligate the Company to make any
payments that will not be deductible under Code Section 280G. Section 5.10 of
the Company Disclosure Schedule lists all (A) Tax sharing agreements, (B) all
Tax Returns currently under audit (the "AUDITS") and (C) agreements for
extensions with Governmental Entities to which the Company or any of the
Material Company Subsidiaries is a party. Section 5.10 of the Company Disclosure
Schedule discusses all material issues which have been raised to date in the
Audits.
(b) For purposes of this Agreement, "TAXES" means all federal,
state, local and foreign income, property, sales, use, franchise, employment,
withholding, excise and
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other taxes, tariffs or governmental charges of any nature whatsoever, together
with any interest, penalties or additions to Tax with respect thereto.
(c) For purposes of this Agreement, "TAX RETURNS" means all
reports, returns, declarations, statements, schedules, attachments or other
information required to be supplied to a taxing authority in connection with
Taxes.
5.11 BOOKS AND RECORDS.
(a) The books of account and other financial records of the
Company and each of the Material Company Subsidiaries are true, complete and
correct in all material respects, have been maintained in accordance with good
business practices, and are accurately reflected in all material respects in the
financial statements included in the Company SEC Reports.
(b) The minute books and other records of the Company and each
of the Material Company Subsidiaries have been made available to Parent and
Acquisition Sub, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action of the stockholders and directors and any committees of the Company Board
and the boards of directors of each of the Material Company Subsidiaries and all
actions of the directors, partners or managers of each of the Material Company
Subsidiaries, as applicable.
5.12 PROPERTIES.
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(a) All of the real estate properties owned or leased by the
Company or any of the Material Company Subsidiaries are set forth in Section
5.12 of the Company Disclosure Schedule. The Company has no ownership interest
in any real property other than the properties owned by the Company or the
Material Company Subsidiaries and set forth in Section 5.12 of the Company
Disclosure Schedule. Except as set forth in Section 5.12 of the Company
Disclosure Schedule, the Company or such Material Company Subsidiary owns fee
simple title to each of the real properties identified in Section 5.12 of the
Company Disclosure Schedule (the "COMPANY PROPERTIES"), free and clear of any
liens, mortgages or deeds of trust, claims against title, charges which are
liens, security interests or other encumbrances on title (collectively,
"ENCUMBRANCES"), and the Company Properties are not subject to any easements,
rights of way, covenants, conditions, restrictions or other written agreements,
laws, ordinances and regulations materially affecting building use or occupancy,
or reservations of an interest in title (collectively, "PROPERTY RESTRICTIONS"),
except for (i) Encumbrances, Property Restrictions and other matters set forth
in Section 5.12 of the Company Disclosure Schedule, (ii) Property Restrictions
imposed or promulgated by law or any governmental body or authority with respect
to real property, including zoning regulations, that do not materially and
adversely affect the current or currently contemplated use of the property,
materially detract from the value of or materially interfere with the present or
currently contemplated use of the property, (iii) Encumbrances and Property
Restrictions disclosed on existing title policies or reports or current surveys,
and (iv) mechanics', carriers', suppliers', workmen's or repairmen's liens and
other Encumbrances, Property Restrictions and other limitations of any kind, if
any, which, individually or in the aggregate, are not material in amount, do not
materially detract from the value of or materially interfere with the present
use of any of the Company Properties subject thereto or affected thereby, and do
not otherwise materially impair business operations conducted by the Company and
the Material Company Subsidiaries and which have arisen or been incurred only in
the ordinary course of business. Except as set forth in Section 5.12 of the
Company Disclosure Schedule, (A) no written notice of any material violation of
any federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the Company Properties has been issued to the
Company by any governmental authority; (B) to the Company's knowledge, there are
no material structural defects relating to any of the Company Properties; (C) to
the Company's knowledge, there is no Company Property whose building systems are
not in working order in any material respect; and (D) to the Company's
knowledge, there is no physical damage for which the Company is responsible to
any Company Property in excess of $250,000 for which there is no insurance in
effect covering the full cost of the restoration.
(b) Except as set forth in Section 5.12 of the Company
Disclosure Schedule, the Company and the Company Subsidiaries own good and
marketable title, free and clear of all Encumbrances, to all of the personal
property and assets shown on the Company's balance sheet at February 28, 1999 as
reflected in the Company SEC Reports (the "BALANCE SHEET") or acquired after
February 28, 1999, except for (A) assets which have been disposed of to
nonaffiliated third parties since May 31, 1998 in the ordinary course of
business, (B) Encumbrances reflected in the Balance Sheet, (C) Encumbrances or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and
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which do not materially detract from the value or materially interfere with the
present or presently contemplated use of the assets subject thereto or affected
thereby, and (D) Encumbrances for current Taxes not yet due and payable. All of
the machinery, equipment and other tangible personal property and assets owned
or used by the Company and the Material Company Subsidiaries are, to the
Company's knowledge, (i) in good condition and repair, except for ordinary wear
and tear not caused by neglect and (ii) useable in the ordinary course of
business of the Company or the Material Company Subsidiaries.
5.13 INTELLECTUAL PROPERTY. To the knowledge of the Company, the
Company or the Material Company Subsidiaries is the owner of, or a licensee
under a valid license for, all items of intangible property which are material
to the business of the Company and the Material Company Subsidiaries as
currently conducted or contemplated, including, without limitation, trade names,
unregistered trademarks and service marks, brand names, domain names, software,
patents and copyrights. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or Section 5.13 of the Company Disclosure
Schedule, there are no claims pending or, to the Company's knowledge,
threatened, that the Company or any Material Company Subsidiary is in violation
of any material intellectual property right of any third party which would have
a Company Material Adverse Effect, and, to the knowledge of the Company, no
third party is in violation of any intellectual property rights of the Company
or any Material Company Subsidiary which would have a Company Material Adverse
Effect. Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement or Section 5.13 of the Company Disclosure Schedule, neither
the Company nor any Material Company Subsidiary is violating or has violated the
intellectual property rights of any third party.
5.14 ENVIRONMENTAL MATTERS. The Company and the Material Company
Subsidiaries are in compliance with all Environmental Laws (as defined below),
except for any noncompliance that, either singly or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. As used in
this Agreement, "ENVIRONMENTAL LAWS" shall mean all federal, state, provincial,
territorial, international and local laws, rules, regulations, ordinances and
orders that purport to regulate the release of hazardous substances or other
materials into the environment, or impose requirements relating to environmental
protection or human health. As used in this Agreement, "HAZARDOUS MATERIALS"
means any hazardous, toxic, noxious, radioactive or infectious substance
material, pollutant or waste as defined, listed or regulated under any
Environmental Law, and includes, without limitation, petroleum oil and its
fractions. Except as set forth in Section 5.14 of the Company Disclosure
Schedule, there is no administrative or judicial enforcement proceeding or, to
the knowledge of the Company, investigation pending, or threatened, against the
Company or any Material Company Subsidiary under any Environmental Law. Except
as set forth in Section 5.14 of the Company Disclosure Schedule, neither the
Company nor any Material Company Subsidiary or, to the knowledge of the Company,
any legal predecessor of the Company or any Material Company Subsidiary, has
received any written notice that it is actually or potentially responsible under
any Environmental Law for investigation, removal, remedial or other response
costs or natural resource damages or other damages from the release of a
Hazardous
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Material into the environment at any location. Except as set forth in Section
5.14 of the Company Disclosure Schedule, neither the Company nor any Material
Company Subsidiary has transported or disposed of, or allowed or arranged for
any third party to transport or dispose of, any Hazardous Materials at any
location included on the National Priorities List, as defined under the
Comprehensive Environmental Response, Compensation, and Liability Act, or any
location proposed for inclusion on that list or at any location proposed for
inclusion on any analogous state list. Except as set forth in Section 5.14 of
the Company Disclosure Schedule, (i) the Company has no knowledge of any release
on the real property currently or previously owned or leased by the Company or
any Material Company Subsidiary or predecessor entity of Hazardous Materials in
a manner that could result in an order to perform a response action or in
material liability under the Environmental Laws, and (ii) to the Company's
knowledge, there is no hazardous waste treatment, storage or disposal facility,
underground storage tank, landfill, surface impoundment, underground injection
well, friable asbestos or PCB's, as those terms are defined under the
Environmental Laws, located at any of the real property currently or previously
owned or leased by the Company or any Material Company Subsidiary or predecessor
entity or facilities utilized by the Company or the Material Company
Subsidiaries, except which are either permitted uses or have been adequately
reserved for in the Company's financial statements. Except as set forth in
Section 5.14 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary has compromised or released any insurance policies that may
provide coverage for liabilities under Environmental Laws or liabilities or
damages otherwise arising out of the release of Hazardous Materials into the
environment. Except as set forth in Section 5.14 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has agreed to assume
the liability of any other person or entity for, nor has the Company or any
Company subsidiary agreed to indemnify any other person or entity against,
claims arising out of the release of Hazardous Materials into the environment or
other claims under Environmental Laws.
5.15 EMPLOYEE BENEFIT PLANS.
(a) Section 5.15 of the Company Disclosure Schedule sets forth
a list of every Company Benefit Plan (as hereinafter defined) that is maintained
by the Company or an Affiliate (as hereinafter defined) on the date hereof.
(b) Each Company Benefit Plan which has been intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "CODE"), has received a favorable determination or approval letter from the
Internal Revenue Service ("IRS") regarding its qualification covering all
legally required updates and any other plan amendments for which the remedial
amendment period has expired under such section and no such Company Benefit Plan
has been maintained in a manner that would preclude qualified status, including,
without limitation, any failure to adopt a legally required amendment or comply
with a legally required administrative procedure within the time required. Each
Company Benefit Plan which has been intended to qualify under Code Sections 79,
105, 106, 125 or 127 is documented and has been maintained in a manner that
meets the applicable qualification
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requirements in all material respects. No event has occurred relating to any
Company Benefit Plan that has caused (or to the knowledge of the Company or any
Affiliate, is likely to cause) any excise or penalty tax liability under the
Code for the Company or any Affiliate that would have a Company Material Adverse
Effect.
(c) With respect to any Company Benefit Plan, there has been
no (i) "prohibited transaction," as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Code Section
4975, for which an exemption is not available or (ii) material failure to comply
with any provision of ERISA, other applicable law, or any agreement, which, in
either case, would subject the Company or any Affiliate to liability (including,
without limitation, through any obligation of indemnification or contribution)
for any damages, penalties, or taxes, or any other material loss or expense that
would have a Company Material Adverse Effect. No litigation or governmental
administrative proceeding or investigation or other proceeding is pending or, to
the Company's knowledge, threatened with respect to any such Company Benefit
Plan.
(d) Neither the Company nor any Affiliate has incurred any
liability under Title IV of ERISA which has not been paid in full as of the date
of this Agreement. There has been no "accumulated funding deficiency" (whether
or not waived) with respect to any employee pension benefit plan maintained by
the Company or any Affiliate and subject to Code Section 412 or ERISA Section
302. With respect to any Company Benefit Plan maintained by the Company or any
Affiliate and subject to Title IV of ERISA, there has been no (other than as a
result of the transactions contemplated by this Agreement) (i) "reportable
event," within the meaning of ERISA Section 4043 or the regulations thereunder,
for which the notice requirement is not waived by the regulations thereunder,
and (ii) event or condition which presents a material risk of a plan termination
or any other event that may cause the Company or any Affiliate to incur
liability or have a lien imposed on its assets under Title IV of ERISA. Except
as set forth in Section 5.15 of the Company Disclosure Schedule, neither the
Company nor any Affiliate has ever maintained a Multiemployer Plan (as
hereinafter defined) or a Multiple Employer Plan (as hereinafter defined).
(e) With respect to each Company Benefit Plan, complete and
correct copies of the following documents (if applicable to such Company Benefit
Plan) have previously been delivered to Parent: (i) all documents embodying or
governing such Company Benefit Plan, and any funding medium for such Company
Benefit Plan (including, without limitation, trust agreements) as they may have
been amended to the date hereof; (ii) the most recent IRS determination or
approval letter with respect to such Company Benefit Plan under Code Section
401(a), and any applications for determination or approval subsequently filed
with the IRS; (iii) the most recently filed IRS Form 5500, with all applicable
schedules and accountants' opinions attached thereto; and (iv) the current
summary plan description for such Company Benefit Plan (or other descriptions of
such Company Benefit Plan provided to employees) and all modifications thereto.
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(f) For purposes of this Section:
(i) "COMPANY BENEFIT PLAN" means (A) all employee
benefit plans within the meaning of ERISA Section 3(3)
maintained by the Company or any Affiliate, (B) all stock
option plans and stock purchase plans and (C) all executive
severance arrangements that have payments or other benefits
triggered by a change of control;
(ii) An entity "MAINTAINS" a Company Benefit Plan if
such entity sponsors, contributes to, or provides benefits
under or through such Company Benefit Plan, or has any
obligation (by agreement or under applicable law) to
contribute to or provide benefits under or through such
Company Benefit Plan, or if such Company Benefit Plan provides
benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) An entity is an "AFFILIATE" of the Company for
purposes of this Section 5.15 if it would have ever been
considered a single employer with the Company under ERISA
Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C); and
(iv) "MULTIEMPLOYER PLAN" means an employee pension
or welfare benefit plan to which more than one unaffiliated
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
(v) "MULTIPLE EMPLOYER PLAN" means an employee
pension or welfare plan to which more than one unaffiliated
employer contributes and which is not a Multiemployer Plan.
5.16 LABOR MATTERS. Except as set forth in Section 5.16 of the Company
Disclosure Schedule, neither the Company nor any Material Company Subsidiary is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization. There
is no unfair labor practice or labor arbitration proceeding or grievance pending
or, to the knowledge of the Company, threatened against the Company or any of
the Material Company Subsidiaries relating to their business, except for any
such proceeding which would have a Company Material Adverse Effect. To the
Company's knowledge, there is no labor strike, dispute, request for
representation, slowdown or stoppage pending or threatened against the Company
or any Material Company Subsidiary. To the Company's knowledge, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or
any of the Material Company Subsidiaries. The Company and each Material Company
Subsidiary has complied in all material respects with all labor and employment
laws, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes, except
as otherwise would not reasonably be expected to have a Company Material Adverse
Effect.
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5.17 NO BROKERS. Neither the Company nor any of the Company
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of such entity or Parent
or Acquisition Sub to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or consummation of the Transactions, except that the Company has
retained Goldman, Sachs & Co. ("GOLDMAN SACHS") as its financial advisor in
connection with the Transactions. Other than the foregoing arrangements and
Parent's arrangements with Schroder & Co., Inc., the Company is not aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or consummation of the Transactions.
5.18 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Goldman Sachs to the effect that, as of the date hereof, the Offer Price and
the Merger Consideration are fair to the holders of the Company Common Stock
from a financial point of view and such opinion has not been subsequently
modified or withdrawn.
5.19 YEAR 2000. To the Company's knowledge, there are no impediments to
the Company being year 2000 compliant by December 31, 1999 (i.e., that products,
hardware, software and other date-sensitive equipment and systems manufactured,
sold, owned, licensed or used by the Company will be capable of correctly
processing date data (including, but not limited to, calculating, comparing and
sequencing) accurately prior to, during and after the calendar year 2000 when
used, assuming that all third party products, hardware, software and other
date-sensitive equipment and systems used in combination therewith are capable
of properly exchanging date data).
5.20 INSURANCE. The Company and the Material Company Subsidiaries are
covered by insurance in scope and amount customary and reasonable for the
businesses in which they are engaged. Except as disclosed in Section 5.20 of the
Company Disclosure Schedule, each insurance policy to which the Company or any
of the Material Company Subsidiaries is a party is in full force and effect and
will not require any consent as a result of the consummation of the
Transactions. Neither the Company nor any of the Material Company Subsidiaries
is in material breach or default (including with respect to the payment of
premiums or the giving of notices) under any insurance policy to which it is a
party, and no event has occurred which, with notice or the lapse of time, would
constitute such a material breach or default by the Company or any of the
Material Company Subsidiaries or would permit termination, modification or
acceleration, under such policies; and the Company has not received any notice
from the insurer disclaiming coverage or reserving rights with respect to any
material claim or any such policy in general. Section 5.20 of the Company
Disclosure Schedule contains a list of all material insurance policies (i)
insuring the business or properties of the Company or the Company Subsidiaries
or (ii) which provides insurance for any director, officer, employee, fiduciary
or agent of the Company or any of the Company Subsidiaries, that is paid for or
maintained by the Company or any Company Subsidiary.
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5.21 KEY CUSTOMERS. Schedule 5.21 of the Company Disclosure Schedule
sets forth a list of each customer that accounted for five percent or more of
the consolidated revenues of the Company and the Company Subsidiaries in the
year ended May 31, 1998. Except as set forth in Section 5.21 of the Company
Disclosure Schedule, the Company and the Material Company Subsidiaries have no
material pending disputes with any customers or notice of any intent of a
customer to terminate its business relationship with the Company or any of the
Material Company Subsidiaries which in the aggregate would have a Company
Material Adverse Effect.
5.22 PRODUCT QUALITY. The products sold by the Company and the Material
Company Subsidiaries prior to the date of this Agreement are not subject to any
general recall notice or Federal Aviation Administration airworthiness directive
which in the aggregate would have a Company Material Adverse Effect.
5.23 MATERIAL CONTRACTS AND AGREEMENTS. Neither the Company nor any
Material Company Subsidiary is in material default under any material contract
or agreement (and to the knowledge of the Company, no other party to a material
contract or agreement with the Company or any Material Company Subsidiary is in
material default or breach) which defaults, in the aggregate, would have a
Company Material Adverse Effect.
5.24 DEFINITION OF THE COMPANY'S KNOWLEDGE. As used in this Agreement,
the phrase "TO THE KNOWLEDGE OF THE COMPANY" or any similar phrase means the
actual (and not the constructive or imputed) knowledge of those individuals
identified in Section 5.24 of the Company Disclosure Schedule.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date
of this Agreement to the Effective Time, except as otherwise contemplated by
this Agreement, the Company shall use its commercially reasonable best efforts
to, and shall cause each of the Company Subsidiaries to use its commercially
reasonable best efforts to, carry on their respective businesses in the usual,
regular and ordinary course, consistent with the requirements of law and past
practice, and use their commercially reasonable best efforts to preserve intact
their present business organizations, keep available the services of their
present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date
hereof (for the term provided in such contracts). Without limiting the
generality of the foregoing, neither the Company nor any of the Company
Subsidiaries will (except as expressly permitted by this Agreement or as
contemplated by the Offer or the Transactions contemplated hereby or to the
extent that Parent shall otherwise consent in writing):
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(a) (i) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any combination thereof) in
respect of any of its capital stock (other than dividends or other distributions
declared, set aside or paid by any wholly-owned Company Subsidiary consistent
with past practice), (ii) split, combine or reclassify any of its capital stock
or (iii) repurchase, redeem or otherwise acquire any of its securities, except,
in the case of clause (iii), for the acquisition of Shares from holders of
Options in full or partial payment of the exercise price payable by such holders
upon exercise of Options outstanding on the date of this Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (including indebtedness having
the right to vote) or equity equivalents (including, without limitation, stock
appreciation rights) (other than the issuance of Shares upon the exercise of
Options outstanding on the date of this Agreement in accordance with their
present terms);
(c) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business which are material to the Company
or any of the Company Subsidiaries (whether by asset acquisition, stock
acquisition or otherwise), except pursuant to obligations in effect on the date
hereof or as set forth in Section 6.1 of the Company Disclosure Schedule;
(d) (i) incur any amount of indebtedness for borrowed money,
guarantee any indebtedness, guarantee (or become liable for) any debt of others,
make any loans, advances or capital contributions, mortgage, pledge or otherwise
encumber any material assets, create or suffer any material lien thereupon other
than in the ordinary course of business consistent with prior practice, (ii)
incur any short-term indebtedness for borrowed money or (iii) issue or sell debt
securities or warrants or rights to acquire any debt securities, except, in the
case of clause (i) or (ii) above, pursuant to credit facilities in existence on
the date hereof in accordance with the current terms of such credit facilities;
(e) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment, discharge or satisfaction (i) in the
ordinary course of business consistent with past practice, or (ii) as
contemplated by the Transactions;
(f) change any of the accounting principles or practices used
by it (except as required by generally accepted accounting principles, in which
case written notice shall be provided to Parent and Acquisition Sub prior to any
such change);
(g) except as required by law, (i) enter into, adopt, amend or
terminate any Company Benefit Plan, (ii) enter into, adopt, amend or terminate
any agreement, arrangement, plan or policy between the Company or any of the
Company Subsidiaries and one or more of
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their directors or officers, or (iii) except for normal increases in the
ordinary course of business consistent with past practice, increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any Company Benefit Plan or arrangement as in
effect as of the date hereof;
(h) adopt any amendments to the Articles of Organization, the
Bylaws or the Rights Agreement, except as expressly provided by the terms of
this Agreement;
(i) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization (other
than plans of complete or partial liquidation or dissolution of inactive Company
Subsidiaries);
(j) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements or
compromises of litigation where the amount paid (after giving effect to
insurance proceeds actually received) in settlement or compromise does not
exceed $250,000; or
(k) enter into an agreement to take any of the foregoing
actions.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 OTHER FILINGS. As promptly as practicable, the Company, Parent and
Acquisition Sub each shall properly prepare and file any other filings required
under the Exchange Act or any other federal, state or foreign law relating to
the Merger and the Transactions (including filings, if any, required under the
HSR Act) (collectively, "OTHER FILINGS"). Each of Parent and the Company shall
promptly notify the other of the receipt of any comments on, or any request for
amendments or supplements to, any Other Filings by the Commission or any other
Governmental Entity or official, and each of the Company and Parent shall supply
the other with copies of all correspondence between it and each of its
Subsidiaries and representatives, on the one hand, and the Commission or the
members of its staff or any other appropriate Governmental Entity or official,
on the other hand, with respect to any Other Filings. The Company, Parent and
Acquisition Sub each shall use its respective commercially reasonable best
efforts to obtain and furnish the information required to be included in any
Other Filings. Parent and Acquisition Sub hereby covenant and agree to use their
respective commercially reasonable best efforts to secure termination of any
waiting periods under the HSR Act and obtain the approval of the Federal Trade
Commission (the "FTC") or any other Governmental Entity for the Transactions,
including, without limitation, promptly entering into good faith negotiations
with the FTC or other Governmental Entity to enter into a consent decree or
other arrangement as may be necessary to secure termination of such waiting
periods or obtain such other approval. Nothing in this Section 7.1 shall
prevent, or be construed to prevent, Parent or Acquisition Sub from agreeing to
extend the waiting period under the HSR Act in connection with good faith
settlement negotiations with any Governmental Entity. Notwithstanding anything
to the contrary in this Agreement, Parent and Acquisition Sub shall use their
commercially reasonable best efforts to have any non-final Injunction (as
defined in Section 8.1(d)) stayed or reversed.
7.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially 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 to consummate and make
effective as promptly as practicable the Transactions contemplated by this
Agreement and to cooperate with each other in connection with the foregoing,
including the taking of such actions as are reasonably necessary to obtain any
necessary consents, approvals, orders, exemptions and authorizations by or from
any public or private third party, including, without limitation, any that are
required to be obtained under any federal, state, local or foreign law or
regulation or any contract, agreement or instrument to which the Company or any
Company Subsidiary is a party or by which any of their respective properties or
assets are bound, to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the Transactions, to cause to be lifted or
rescinded any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the Transactions, and to effect all
necessary registrations and Other Filings, including, but not limited to,
filings under the HSR Act, if any, and submissions of
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information requested by Governmental Entities. For purposes of the foregoing
sentence, the obligations of the Company, Parent and Acquisition Sub to use
their "commercially reasonable best efforts" to obtain waivers, consents and
approvals to loan agreements, leases and other contracts shall not include any
obligation to agree to an adverse modification of the terms of such documents or
to prepay or incur additional obligations to such other parties.
7.3 FEES AND EXPENSES. Whether or not any of the Transactions are
consummated, all fees, costs and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such fees,
costs or expenses.
7.4 NO SOLICITATIONS.
(a) The Company will immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to an Acquisition
Proposal (as defined below). Except as explicitly permitted hereunder, the
Company shall not, and shall not authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative, directly or indirectly, to, (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes an Acquisition Proposal, or (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal; provided,
however, that if the Company Board determines in good faith, after consultation
with counsel, that such action is necessary to comply with its fiduciary duties
to the Company's stockholders under applicable law, the Company, in response to
an Acquisition Proposal and in compliance with Section 7.4(e), may (i) furnish
non-public information with respect to the Company to the person who made such
Acquisition Proposal pursuant to a confidentiality agreement on terms no more
favorable to such person than the Confidentiality Agreement (as defined in
Section 7.6); provided that such confidentiality agreement need not include the
same standstill provisions as those contained in the Confidentiality Agreement,
it being understood that if there are no standstill provisions in such
confidentiality agreement or if such provisions are more favorable to the person
who made such Acquisition Proposal than those in the Confidentiality Agreement,
the Confidentiality Agreement shall be deemed amended to exclude the existing
standstill provision or include such more favorable provisions, as the case may
be, and (ii) may participate in negotiations regarding such Acquisition
Proposal.
(b) The Company Board shall not (i) withdraw or modify in a
manner adverse to Parent or Acquisition Sub its approval or recommendation of
this Agreement, the Offer or the Merger, (ii) approve or recommend an
Acquisition Proposal to its stockholders or (iii) cause the Company to enter
into any definitive acquisition agreement with respect to an Acquisition
Proposal, unless the Company Board (A) shall have determined in good faith,
after consultation with counsel, that the Acquisition Proposal is a Superior
Proposal (as defined below) and such action is necessary to comply with its
fiduciary duties to the Company's stockholders under applicable law and (B) in
the case of clause (iii) above, complies with Section 9.1(c)(ii) hereof. In the
event that before the Acceptance Date the Company Board
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determines in good faith, after consultation with counsel, that it is necessary
to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company may enter into an agreement with
respect to a Superior Proposal, but only forty-eight hours after Parent's
receipt of written notice (i) advising Parent that the Company Board has
received a Superior Proposal and that the Company has elected to terminate this
Agreement pursuant to Section 9.1(c)(ii) of this Agreement and (ii) setting
forth such other information required to be included therein as provided in
Section 9.1(c)(ii) of this Agreement. If the Company enters into an agreement
with respect to a Superior Proposal, it shall have paid, to Parent the
Liquidated Amount (as defined below) in accordance with Section 9.2(b) of this
Agreement. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means a bona
fide Acquisition Proposal to acquire two thirds or more of the Shares then
outstanding or all or substantially all of the assets of the Company and the
Company Subsidiaries on terms which the Company Board determines in its good
faith judgement (after consultation with Goldman Sachs or another financial
advisor of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Offer and the Merger.
(c) Nothing contained in this Section 7.4 shall prohibit the
Company from at any time disclosing information to its stockholders as required
by Rule 14e-2 promulgated under the Exchange Act.
(d) As used in this Agreement, the term "ACQUISITION PROPOSAL"
shall mean any proposed or actual (i) acquisition, merger, consolidation or
similar transaction involving the Company, (ii) sale, lease or other
disposition, directly or indirectly, by merger, consolidation, share exchange or
otherwise, of any assets of the Company or the Company Subsidiaries representing
15% or more of the consolidated assets of the Company and the Company
Subsidiaries, (iii) issue, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 15% or more of the votes associated with the
outstanding securities of the Company, (iv) transaction in which any person
shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or (vi) transaction which is similar in form, substance or purpose
to any of the foregoing transactions; provided, however, that the term
"Acquisition Proposal" shall not include the Offer, the Merger and the
Transactions.
(e) The Company will within 24 hours notify Parent of its
receipt of an Acquisition Proposal and the material terms and conditions of such
Acquisition Proposal. Notwithstanding anything to the contrary in this
Agreement, except as provided in Sections 9.1(c)(ii) and 7.4(b), the Company
shall have no duty to notify or update Parent or Acquisition Sub on the status
of discussions or negotiations (including the status of such Acquisition
Proposal or any amendments or proposed amendments thereto) between the Company
and the
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person making the Acquisition Proposal.
7.5 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of the Company or any of the Company
Subsidiaries (the "INDEMNIFIED PARTIES") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or,
pertaining to (i) the fact that he is or was a director, officer, employee,
fiduciary or agent of the Company or any of the Company Subsidiaries, or is or
was serving at the request of the Company or any of the Company Subsidiaries as
a director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) the negotiation,
execution or performance of this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their commercially
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that the Company shall indemnify and hold harmless, and after the
Effective Time the Surviving Corporation and Parent shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time), (A) the Company, and
the Surviving Corporation and Parent after the Effective Time, shall promptly
pay reasonable expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the full extent
permitted by law, (B) the Indemnified Parties may retain counsel satisfactory to
them, and the Company, and the Surviving Corporation and Parent after the
Effective Time, shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties within 30 days after statements therefor are received,
and (C) the Company, the Surviving Corporation and Parent will use their
respective commercially reasonable best efforts to assist in the vigorous
defense of any such matter; provided that none of the Company, the Surviving
Corporation or Parent shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld); and
provided further that the Surviving Corporation and Parent shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law (whereupon any
advances received shall be repaid to the Parent or the Surviving Corporation).
Any Indemnified Party wishing to claim indemnification under this Section 7.5,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify the Company and, after the Effective Time, the Surviving
Corporation and Parent, thereof; provided that the failure to so notify shall
not
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affect the obligations of the Company, the Surviving Corporation and Parent
except to the extent such failure to notify materially prejudices such party.
(b) Parent and Acquisition Sub agree that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of, the directors, officers, employees and agents of the Company and
the Company Subsidiaries provided for in the Articles of Organization or Bylaws
as in effect as of the date hereof with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger, shall continue in
full force and effect for a period of not less than six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
claims (each a "CLAIM") asserted or made within such period shall continue until
the disposition of such Claim. Prior to the Effective Time, the Company shall
purchase an extended reporting period endorsement under the Company's existing
directors' and officers' liability insurance coverage for the Company's
directors and officers in a form acceptable to the Company which shall provide
such directors and officers with coverage for six years following the Effective
Time of not less than the existing coverage under, and have other terms not
materially less favorable to, the insured persons than the directors' and
officers' liability insurance coverage presently maintained by the Company.
(c) This Section 7.5 is intended for the irrevocable benefit
of, and to grant third party rights to, the Indemnified Parties and shall be
binding on all successors and assigns of Parent, the Company and the Surviving
Corporation. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 7.5.
(d) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person or entity, then, and in each such
case, proper provision shall be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this Section 7.5.
7.6 ACCESS TO INFORMATION; CONFIDENTIALITY. From the date hereof until
the Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and Company Subsidiaries' officers,
employees and agents to, afford to Parent and to the officers, employees and
agents of Parent complete access at all reasonable times to such officers,
employees, agents, properties, books, records and contracts, and shall furnish
Parent such financial, operating and other data and information as Parent may
reasonably request. Prior to the Effective Time, Parent and Acquisition Sub
shall hold in confidence all such information on the terms and subject to the
conditions contained in that certain confidentiality agreement between Parent
and the Company dated March 26, 1999 (the "CONFIDENTIALITY AGREEMENT"). The
Company hereby waives the provisions of the Confidentiality Agreement as and to
the extent necessary to permit the making and consummation of the Transactions.
At the Effective Time, such Confidentiality Agreement shall terminate.
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7.7 FINANCIAL AND OTHER STATEMENTS. Notwithstanding anything contained
in Section 7.6, during the term of this Agreement, the Company shall also
provide to Parent the following documents and information:
(a) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter ending after the date of this
Agreement, the Company will deliver to Parent its Quarterly Report on Form 10-Q
as filed under the Exchange Act. As soon as reasonably available, but in no
event more than 90 days after the end of each fiscal year ending after the date
of this Agreement, the Company will deliver to Parent its Annual Report on Form
10-K as filed under the Exchange Act. The Company will also deliver to Parent,
contemporaneously with its being filed with the Commission, a copy of each
Current Report on Form 8-K.
(b) Promptly upon receipt thereof, the Company will furnish to
Parent copies of all internal control reports submitted to the Company or any
Company Subsidiary by independent accountants in connection with each annual,
interim or special audit of the books of the Company or any such Company
Subsidiary made by such accountants.
(c) As soon as practicable, the Company will furnish to Parent
copies of all such financial statements and reports as it or any Company
Subsidiary shall send to its stockholders, the Commission or any other
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential and except as legally prohibited
thereby.
7.8 PUBLIC ANNOUNCEMENTS. The Company and Parent shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any of the Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may be
required by law or the applicable rules of any stock exchange if it has used its
commercially reasonable best efforts to consult with the other party and to
obtain such party's consent but has been unable to do so in a timely manner.
7.9 EMPLOYEE BENEFIT ARRANGEMENTS.
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(a) After the Closing, Parent shall cause the Surviving
Corporation to honor all obligations under (i) the existing terms of the
employment and severance agreements to which the Company or any Company
Subsidiary is presently a party, except as may otherwise be agreed to by the
parties thereto, and (ii) the Company's and any Company Subsidiary's general
severance policy as set forth in Section 7.9 of the Company Disclosure Schedule.
For a period of six months following the Effective Time (the "TRANSITION
PERIOD"), employees of the Surviving Corporation will continue to participate in
the Company Benefit Plans (other than deferred compensation plans, stock option
plans or employee stock purchase plans or other employer stock match or other
employer stock related provisions) on substantially similar terms to those
currently in effect. For a period of 18 months following the expiration of the
Transition Period, the Surviving Corporation's employees will be entitled to
participate in employee benefit plans, the terms of which will be similar in
material respects in the aggregate to the Company Benefit Plans as in effect on
the date hereof (other than deferred compensation plans, stock option plans or
employee stock purchase plans or other employer stock match or other employer
stock related provisions).
(b) After the Closing, Parent shall cause the Surviving
Corporation to honor all obligations which accrued prior to the Effective Time
under the Company's deferred compensation plans. Except as is otherwise required
by the existing terms of employment and severance agreements to which the
Company is presently a party, future accruals may be (but are not required to
be) provided for under any such plan(s) or under any similar plan(s) of the
Surviving Corporation or Parent. Except as is otherwise required by the existing
terms of employment and severance agreements to which the Company is a presently
party, if future accruals are not provided for with respect to any current
employee participant in such plan as of the Effective Time, and such person
remains an employee of the Company or the Surviving Corporation or Parent, the
person's continuing employment in such capacity shall be counted for purposes of
vesting (but not for purposes of benefit accrual) under such plan. Except as is
otherwise required by the existing terms of employment and severance agreements
to which the Company is a party, transfer of employment from the Company to the
Surviving Corporation or to the Parent or to an affiliate of the Parent shall
not constitute a termination of employment for purposes of payment of benefits
under any such plan.
(c) If any employee of the Company or any of the Company
Subsidiaries becomes a participant in any employee benefit plan, practice or
policy of Parent, any of its affiliates or the Surviving Corporation, such
employee shall be given credit under such plan for all service prior to the
Effective Time with the Company and the Company Subsidiaries and prior to the
time such employee becomes such a participant, for purposes of eligibility
(including, without limitation, waiting periods) and vesting but not for any
other purposes for which such service is either taken into account or recognized
(including, without limitation, benefit accrual); provided, however, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employees of the Company or any of the Company
Subsidiaries employed as of the Closing Date become covered by a medical plan of
Parent, any of its affiliates or the Surviving Corporation, such medical plan
shall not impose any exclusion on coverage for preexisting medical conditions
with respect to these
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employees.
7.10 RIGHTS AGREEMENT. The Company Board has amended the Rights
Agreement prior to the execution of this Agreement (i) so that neither the
execution nor the delivery of this Agreement will trigger or otherwise affect
any rights or obligations under the Rights Agreement, including causing the
occurrence of a "Distribution Date" or a "Stock Acquisition Date," as defined in
the Rights Agreement, and (ii) to terminate the Rights Plan immediately upon the
Effective Time.
7.11 STATUS OF FINANCING. Parent and Acquisition Sub shall keep the
Company informed of the status of their financing arrangements for the
Transactions, including providing written notice to the Company as promptly as
possible (but in any event within 24 hours after obtaining knowledge thereof)
with respect to (i) any facts of circumstances which reasonable indicate that
the Lenders (as defined in the Commitment Letter) may be unable to provide the
financing contemplated by the Commitment Letter, (ii) the prospective inability
of Parent or Acquisition Sub to satisfy any of the conditions set forth in the
Commitment Letter, and (iii) any material adverse developments relating to the
availability of the financing contemplated by the Commitment Letter.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, where permissible, at or prior to the Closing
Date, of each of the following conditions:
(a) STOCKHOLDER APPROVAL. If required by applicable law, this
Agreement and the Transactions, including the Merger, shall have been approved
and adopted by the affirmative vote of the stockholders of the Company to the
extent required by the MGL and the Articles of Organization.
(b) HART-SCOTT-RODINO ACT. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
(c) OTHER REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of any governmental or regulatory entity required to
consummate the Merger shall have been obtained and remain in full force and
effect, and all waiting periods relating to such approvals, authorizations and
consents shall have expired or been terminated, except where such failure would
not have a Company Material Adverse Effect or a Parent Material Adverse Effect,
as the case may be, or would not be reasonably likely to affect adversely the
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ability of the Company or Acquisition Sub, as the case may be, to consummate the
Merger.
(d) NO INJUNCTIONS, ORDERS OR RESTRAINTS; ILLEGALITY. No
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission (an "INJUNCTION") nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (i) make the consummation of the Merger
illegal, or (ii) otherwise restrict, prevent or prohibit the consummation of any
of the Transactions, including the Merger.
(e) PURCHASE OF SHARES IN OFFER. Parent, Acquisition Sub or
their affiliates shall have purchased Shares pursuant to the Offer.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after stockholder approval thereof:
(a) by the mutual written consent of Parent or Acquisition Sub
and the Company.
(b) by either of the Company or Parent or Acquisition Sub:
(i) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their commercially
reasonable best efforts to lift), which permanently restrains, enjoins
or otherwise prohibits the acceptance for payment of, or payment for,
Shares pursuant to the Offer or the Merger; or
(ii) if, without any material breach by the
terminating party of its obligations under this Agreement, Parent or
Acquisition Sub shall not have purchased Shares pursuant to the Offer
on or prior to the later of (i) the Final Expiration Date or (ii) the
HSR Expiration Date (if applicable).
(c) by the Company:
(i) if Parent or Acquisition Sub shall have failed to
commence the Offer on or prior to five business days following the date
of the initial public announcement of the Offer; or
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(ii) in connection with entering into a definitive
agreement to effect a Superior Proposal in accordance with Section
7.4(b) hereof; provided, however, that prior to terminating this
Agreement pursuant to this Section 9.1(c)(ii), (A) the Company shall
have paid the Liquidated Amount, as set forth in Section 9.2(b), and
(B) the Company shall have provided Acquisition Sub with 48 hours prior
written notice of the Company's decision to so terminate. Such notice
shall indicate in reasonable detail the material terms and conditions
of such Superior Proposal, including, without limitation, the amount
and form of the proposed consideration and whether such Superior
Proposal is subject to any material conditions; or
(iii) if Parent or Acquisition Sub shall have
breached in any material respect any of their respective
representations, warranties, covenants or other agreements contained in
this Agreement, which breach cannot be or has not been cured within 15
days after the giving of written notice to Parent or Acquisition Sub
except, in any case, for such breaches which are not reasonably likely
to affect adversely Parent's or Acquisition Sub's ability to consummate
the Offer or the Merger; provided, however, that no cure period shall
be applicable under any circumstances to the matters set forth in
Section 9.1(c)(i).
(d) by Parent or Acquisition Sub if, prior to the purchase of
Shares pursuant to the Offer:
(i) the Company shall have breached any
representation or warranty or failed to have performed any
covenant or other agreement contained in this Agreement which
breach or failure to perform (A) would give rise to the
failure of a condition set forth in ANNEX A hereto, and (B)
cannot be or has not been cured within 15 days after the
giving of written notice to the Company; or
(ii) (A) the Company Board shall withdraw, modify or
change its recommendation or approval in respect of this
Agreement or the Offer in a manner adverse to Parent, (B) the
Company Board shall recommend any proposal other than by
Parent and Acquisition Sub in respect of an Acquisition
Proposal or (C) the Company shall have exercised a right with
respect to an Acquisition Proposal and shall, directly or
through its representatives, continue discussions with any
third party concerning such Acquisition Proposal for more than
20 business days after the date of receipt of such Acquisition
Proposal.
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9.2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement pursuant
to Section 9.1 hereof, this Agreement shall forthwith become null and void and
have no effect, without any liability on the part of any party hereto or its
affiliates, trustees, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease except for the agreements contained
in Sections 7.3 and 7.6, this Section 9.2 and Article X; provided, however, that
nothing contained in this Section 9.2 shall relieve any party from liability for
any fraud or willful breach of this Agreement.
(b) If the Company terminates this Agreement in accordance
with Section 9.1(c)(ii), then the Company shall concurrently pay to Parent an
amount in cash equal to $25,000,000 (the "LIQUIDATED AMOUNT"). If any of the
circumstances described in Section 9.1(d)(i) (if such breach or failure relates
to the Company's obligations under Section 7.4 of this Agreement) or Section
9.1(d)(ii) hereof shall have occurred and within 9 months thereafter the Company
shall have entered into a definitive agreement to consummate an acquisition
pursuant to an Acquisition Proposal, then the Company shall pay to Parent
concurrently with the consummation of the acquisition contemplated by the
Acquisition Proposal, the Liquidated Amount.
(c) Any payment required by this Section 9.2 shall be payable
by the Company to Parent by wire transfer of immediately available funds to an
account designated by Parent.
(d) Notwithstanding anything to the contrary in this
Agreement, Parent and Acquisition Sub hereto expressly acknowledge and agree
that, with respect to any termination of this Agreement pursuant to Section
9.1(c)(ii) hereof, the payment of the Liquidated Amount shall constitute
liquidated damages with respect to any claim for damages or any other claim
which Parent or Acquisition Sub would otherwise be entitled to assert against
the Company or any of the Company Subsidiaries or any of their respective
assets, or against any of their respective directors, officers, employees,
partners, managers, members or shareholders, with respect to this Agreement and
the Transactions and shall constitute the sole and exclusive remedy available to
Parent and Acquisition Sub. The parties hereto expressly acknowledge and agree
that, in light of the difficulty of accurately determining actual damages with
respect to the foregoing upon any termination of this Agreement pursuant to
Section 9.1(c)(ii) hereof, the rights to payment under Section 9.2(b): (i)
constitute a reasonable estimate of the damages that will be suffered by reason
of any such proposed or actual termination of this Agreement pursuant to Section
9.1(c)(ii) hereof and (ii) shall be in full and complete satisfaction of any and
all damages arising as a result of the foregoing. Except for nonpayment of the
amounts set forth in Section 9.2(b), Parent and Acquisition Sub hereby agree
that, upon any termination of this Agreement pursuant to Section 9.1(c)(ii)
hereof, in no event shall Parent or Acquisition Sub be entitled to seek or to
obtain any recovery or judgment against the Company or any of the Company
Subsidiaries or any of their respective assets, or against any of their
respective directors, officers, employees, partners, managers, members or
shareholders, and in no event
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shall Parent or Acquisition Sub be entitled to seek or obtain any other damages
of any kind, including, without limitation, consequential, indirect or punitive
damages.
9.3 AMENDMENT. This Agreement may be amended by the parties hereto by
an instrument in writing signed on behalf of each of the parties hereto at any
time before or after any approval hereof by the stockholders of the Company and
Acquisition Sub, but in any event following authorization by the Acquisition Sub
Board and the Company Board; provided, however, that after any such stockholder
approval, no amendment shall be made which by law requires further approval by
stockholders without obtaining such approval.
9.4 EXTENSION; WAIVER. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or sent if delivered personally or sent by
telecopier (which is confirmed) or sent by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice) (provided that with respect to any
notice required to be given within 48 hours or less notice shall be deemed given
when actually received):
(a) if to Parent or Acquisition Sub:
Precision Castparts Corp.
4650 SW Macadum Avenue
Suite 440
Portland, OR 97201-4254
Attn: William D. Larsson
Telecopy No.: (503) 417-4817
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with a copy to:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, OR 97204-1268
Attn: Ruth A. Beyer
Telecopy No.: (503) 220-2480
(b) if to the Company:
Wyman-Gordon Company
244 Worcester Street
Box 8001
North Grafton, MA 01536-8001
Attn: Wallace F. Whitney, Jr., Esq.
Telecopy No.: (508) 839-7564
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: David F. Dietz, P.C.
Joseph L. Johnson III, P.C.
Telecopy No.: (617) 523-1231
10.2 INTERPRETATION. When a reference is made in this Agreement to
subsidiaries of Parent, Acquisition Sub or the Company, the word "SUBSIDIARY"
means any corporation more than 50% of whose outstanding voting securities, or
any partnership, joint venture or other entity more than 50% of whose total
equity interest, is directly or indirectly owned by Parent, Acquisition Sub or
the Company, as the case may be. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Except for Sections 3.1, 7.3, 7.5 and 7.9, the last sentence of
Section 2.8 and Article X, none of the representations, warranties, covenants
and agreements contained in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, and thereafter
there shall be no liability on the part of either Parent, Acquisition Sub or the
Company or any of their respective officers, directors or stockholders in
respect thereof. Except as expressly set forth in this Agreement, there are no
representations or warranties of any party hereto, express or implied.
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10.4 MISCELLANEOUS. This Agreement (i) constitutes, together with the
exhibits hereto, the Confidentiality Agreement, ANNEX A hereto, the Company
Disclosure Schedule and the schedule referred to in Article IV hereof, the
entire agreement and supersedes all of the prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof, (ii) shall be binding upon and inure to the benefits of
the parties hereto and their respective permitted successors and assigns and is
not intended to confer upon any other person (except as set forth below) any
rights or remedies hereunder and (iii) may be executed in two or more
counterparts which together shall constitute a single agreement. Section 7.5 and
Section 7.9 are intended to be for the benefit of those persons described
therein and the covenants contained therein may be enforced by such persons. The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
the Delaware Courts (as hereinafter defined), this being in addition to any
other remedy to which they are entitled at law or in equity.
10.5 ASSIGNMENT. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any of the parties hereto without the prior written consent
of the other parties.
10.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
10.7 CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement, or the Transactions shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to its rules of conflict of laws. Each of the Company, Parent and
Acquisition Sub hereby irrevocably and unconditionally consents to submit to the
sole and exclusive jurisdiction of the courts of the State of Delaware and of
the United States District Court for the District of Delaware (the "DELAWARE
COURTS") for any litigation arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement, or the Transactions (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the
Delaware Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in any inconvenient forum. Each of
the parties hereto agrees, (a) to the extent such party is not otherwise subject
to service of process in the State of Delaware, to appoint and maintain an agent
in the State of Delaware as such party's agent for acceptance of legal process,
and (b) that service of process may also be made on such party by prepaid
certified mail with a proof of mailing receipt validated by the United States
Postal Service constituting evidence of valid service. Service made pursuant to
(a) or (b) above shall have the same legal force and effect as if served upon
such party
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personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, each such party does hereby appoint CT Corporation,
Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, as such
agent.
10.8 NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations among
the parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Chapter 110F of the MGL
and any applicable provision of the Articles of Organization, the terms of this
Agreement, and (ii) this Agreement is executed by the parties hereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
PRECISION CASTPARTS CORP.
By: /s/ William D. Larsson
-------------------------------
Name: William D. Larsson
Title: Chief Financial Officer
WGC ACQUISITION CORP.
By: /s/ William C. McCormick
-------------------------------
Name: William C. McCormick
Title: President
By: /s/ William D. Larsson
-------------------------------
Name: William D. Larsson
Title: Treasurer
WYMAN-GORDON COMPANY
By: /s/ J. Douglas Whelan
-------------------------------
Name: J. Douglas Whelan
Title: President and Treasurer
46
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ANNEX A
OFFER CONDITIONS
The capitalized terms used in this ANNEX A have the meanings set forth
in the attached Agreement, except that the term "Agreement" shall be deemed to
refer to the attached Agreement together with this ANNEX A.
Notwithstanding any other provision of the Offer or the Agreement and
subject to Rule 14e-1(c) under the Exchange Act, Acquisition Sub shall not be
required to accept for payment or pay for any Shares and may delay the
acceptance for payment of and payment for any Shares, (A) until any applicable
waiting period (and any extension thereof) under the HSR Act in respect of the
Offer shall have expired or been terminated, (B) if there shall not have been
validly tendered to Acquisition Sub pursuant to the Offer and not withdrawn
immediately prior to the Expiration Date, at least that number of Shares that,
when taken as a whole with all other Shares owned or acquired by Acquisition Sub
(whether pursuant to the Offer or otherwise), constitutes at least the Minimum
Condition, or (C) at any time on or after the date of the Agreement, and prior
to the Expiration Date, any of the following conditions exist or shall occur or
remain in effect:
(a) Any Governmental Entity shall have issued an order, decree
or ruling or taken any other action, including instituting any legal proceeding,
(which, order, decree, ruling or other action the parties hereto shall use their
commercially reasonable best efforts to lift), which seeks to restrain, enjoin
or otherwise prohibit or significantly delay any of the Transactions;
(b) (i) Any of the representations and warranties of the
Company set forth in the Agreement which are qualified by materiality or a
Company Material Adverse Effect or words of similar effect shall not have been,
or cease to be, true and correct (except to the extent such representations and
warranties expressly relate to a specific date, in which case such
representations and warranties shall not have been true and correct as of such
date) or (ii) any of the representations and warranties of the Company set forth
in the Agreement which are not so qualified shall not have been, or cease to be,
true and correct in all material respects (except to the extent such
representations and warranties expressly relate to a specific date, in which
case such representations and warranties shall not have been true and correct in
all material respects as of such date);
(c) The Company shall not have performed all obligations
required to be performed by it under the Agreement, including, without
limitation, the covenants contained in Article VI or VII thereof, except where
any failure to perform would, individually or in the aggregate, not reasonably
be expected to have a Company Material Adverse Effect or materially impair or
significantly delay the ability of Acquisition Sub to consummate the Offer;
A-1
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(d) There shall have occurred after the date of this Agreement
any change or effect concerning the Company or the Company Subsidiaries which
has had or would reasonably be expected to have a material adverse effect on the
business, operations or condition (financial or otherwise) of the Company and
the Company Subsidiaries taken as a whole (other than any changes that are
related to or result from the announcement or pendency of the Offer and/or the
Merger, including disruptions to the Company's business or the Company
Subsidiaries' businesses, and their respective employees, customers and
suppliers);
(e) The Agreement shall have been terminated in accordance
with its terms;
(f) Any consent, authorization, order or approval of (or
filing or registration with) any Governmental Entity or other third party
required to be made or obtained by the Company or any of the Company
Subsidiaries or affiliates in connection with the execution, delivery and
performance of the Agreement and the consummation of the Transactions shall not
have been obtained or made, except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or registration, would
not have a Company Material Adverse Effect or would not reasonably be expected
to materially impair or significantly delay the ability of Acquisition Sub to
consummate the Offer; or
(g) There shall have occurred (i) any general suspension of
trading in, or limitation on prices for securities on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq Stock Market for a period in
excess of 24 hours (excluding suspension or limitations resulting solely from
physical damage or interference with such exchanges not related to market
conditions), (ii) a declaration of a general banking moratorium or any general
suspension of payments in respect of banks in the United States (whether or not
mandatory), or (iii) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof;
The foregoing conditions (i) may be asserted by Parent or Acquisition
Sub regardless of the circumstances (including any action or inaction by Parent
or Acquisition Sub or any of their affiliates other than a material breach of
the Agreement), and (ii) are for the sole benefit of Parent, Acquisition Sub and
their respective affiliates. The foregoing conditions may be waived by Parent,
in whole or in part, at any time and from time to time, in the sole discretion
of Parent. The foregoing conditions are material to the Offer. The failure by
Parent or Acquisition Sub at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
Should the Offer be terminated due to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall promptly be returned
to the tendering stockholders.
A-2
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Exhibit 4
FORM OF
EXECUTIVE SEVERANCE AGREEMENT
This AGREEMENT ("Agreement") dated ______________ by and between
Wyman-Gordon Company, a Massachusetts corporation (the "Company"), and
________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to have the services of the Executive as
its _________________________; and
WHEREAS, the Executive is willing to serve the Company as its
_________________________, but desires assurance that he will not be materially
disadvantaged by a change in control of the Company;
NOW, THEREFORE, in consideration of the Executive's service to the
Company and the mutual agreements herein contained, the Company and the
Executive hereby agree, as follows:
<PAGE>
ARTICLE I
ELIGIBILITY FOR BENEFITS
SECTION 1.1. QUALIFYING TERMINATION. The Company shall not be required
to provide any benefits to the Executive pursuant to this Agreement unless a
Qualifying Termination occurs before the Agreement expires in accordance with
Section 6.1 hereof. For purposes of this Agreement, a Qualifying Termination
shall occur only if
(a) a Change in Control occurs, and
(b) within three years after the Change in Control,
(i) the Company terminates the Executive's employment
other than for Cause; or
(ii) the Executive terminates his employment with the
Company for Good Reason;
provided, that a Qualifying Termination shall not occur if the Executive's
employment with the Company terminates by reason of the Executive's Disability,
death, or retirement. For the purposes hereof "retirement" shall mean any
termination of employment which occurs at or after age 65.
SECTION 1.2. CHANGE IN CONTROL. Except as provided below, a Change in
Control shall be deemed to occur when and only when the first of the following
events occurs:
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(a) the acquisition (including by purchase, exchange, merger
or other business combination, or any combination of the
foregoing) by any individuals, firms, corporations or
other entities, acting in concert ("Person"), together
with all Affiliates and Associates of such Person, of
beneficial ownership of securities of the Company
representing 20 percent or more of the combined voting
power of the Company's then outstanding voting
securities, or
(b) members of the Incumbent Board cease to constitute a
majority of the Board of Directors.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to paragraph (a), above, (i) solely because 20 percent or more of the
combined voting power of the Company's outstanding securities is acquired by one
or more employee benefit plans maintained by the Company, or (ii) if the
Executive is included among the individuals, firms, corporations or other
entities that, acting in concert, acquire the Company's securities. For purposes
of this Section 1.2, the terms "Affiliates" and "Associates" shall have the
meanings set forth in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"); the
terms "beneficial ownership" and "beneficially owned" shall have the meaning set
forth in section 13(d) of the Exchange Act,
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as amended, and in Rule 13d-3 promulgated thereunder, the term "Board of
Directors" shall mean the Board of Directors of the Company and the term
"Incumbent Board" shall mean (i) the members of the Board of Directors on the
date hereof, to the extent that they continue to serve as members of the Board
of Directors, and (ii) any individual who becomes a member of the Board of
Directors after the date hereof, if his election or nomination for election as a
director was approved by a vote of at least three quarters of the then Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board of
Directors.
SECTION 1.3. TERMINATION FOR CAUSE. The Company shall have Cause to
terminate the Executive's employment with the Company for purposes of Section
1.1 hereof only if the Executive (a) engages in unlawful acts intended to result
in the substantial personal enrichment of the Executive at the Company's
expense, or (b) engages (except (i) by reason of incapacity due to illness or
injury or (ii) in connection with an actual or anticipated termination of
employment by the Executive for Good Reason) in a
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material violation of his responsibilities to the Company that results in a
material injury to the Company.
SECTION 1.4. TERMINATION FOR GOOD REASON. The Executive shall have a
Good Reason for terminating employment with the Company only if one or more of
the following occurs after a Change in Control:
(a) a change in the Executive's status or position
(including for this purpose a change in the principal
place of the Executive's employment on a basis that does
not conform with the Company's present policies for
executive relocation, but excluding required travel on
the Company's business to an extent substantially
consistent with the Executive's present business travel
obligations) with the Company that, in the Executive's
reasonable judgment, represents an adverse change from
the Executive's status or position in effect immediately
before the Change in Control;
(b) the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable
judgment, are inconsistent with the Executive's status
or position in effect immediately before the Change in
Control;
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(c) layoff or involuntary termination of the Executive's
employment, except in connection with the termination of
the Executive's employment for Cause or as a result of
the Executive's Disability, death or retirement;
(d) a reduction by the Company in the Executive's total
compensation as in effect at the time of the Change in
Control (which shall be deemed, for this purpose, to be
equal to his base salary plus the most recent award that
he has earned under the Company's Management Incentive
Plan, as amended from time to time, or any successor
thereto (the "MIP")) or as the same may be increased
from time to time;
(e) the failure by the Company to continue in effect any
Plan in which the Executive is participating at the time
of the Change in Control (or plans or arrangements
providing the Executive with substantially equivalent
benefits) other than as a result of the normal
expiration of any such Plan in accordance with its terms
as in effect at the time of the Change in Control;
(f) any action or inaction by the Company that would
adversely affect the Executive's continued participation
in any Plan on at least as favorable
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a basis as was the case at the time of the Change in
Control, or that would materially reduce the Executive's
benefits in the future under the Plan or deprive him if
any material benefits that he enjoyed at the time of the
Change in Control, except to the extent that such action
or inaction by the Company is required by the terms of
the Plan as in effect immediately before the Change in
Control, or is necessary to comply with applicable law
or to preserve the qualification of the Plan under
section 401(a) of the Internal Revenue Code (the
"Code"), and except to the extent that the Company
provides the Executive with substantially equivalent
benefits;
(g) the Company's failure to obtain the express assumption
of this Agreement by any successor to the Company as
provided by Section 6.3 hereof;
(h) any material violation by the Company of any agreement
(including this Agreement) between it and the Executive;
or
(i) the failure by the Company, without the Executive's
consent, to pay to him any portion of his current
compensation, or to pay to the Executive any portion of
any deferred compensation, within 30 days of the date
the
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Executive notifies the Company that any such
compensation payment is past due.
Notwithstanding the foregoing, no action by the Company shall give rise to a
Good Reason if it results from the Executive's termination for Cause, death or
retirement, and no action by the Company specified in paragraphs (a) through (d)
of the preceding sentence shall give rise to a Good Reason if it results from
the Executive's Disability. A Good Reason shall not be deemed to be waived by
reason of the Executive's continued employment as long as the termination of the
Executive's employment occurs within the time prescribed by Section 1.1(b)
hereof. For purposes of this Section 1.4, "Plan" means any compensation plan,
such as an incentive or stock option plan, or any employee benefit plan, such as
a thrift, pension, profit-sharing, stock bonus, long-term performance award,
medical, disability, accident, or life insurance plan, or any other plan,
program or policy of the Company that is intended to benefit employees.
SECTION 1.5. DISABILITY. For purposes of this Agreement, "Disability"
shall mean illness or injury that prevents the Executive from performing his
duties (as they existed immediately before the illness or injury) on a full-time
basis for six consecutive months.
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SECTION 1.6. NOTICE. If a Change in Control occurs, the Company shall
notify the Executive of the occurrence of the Change in Control within two weeks
after the Change in Control.
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ARTICLE II
BENEFITS AFTER A QUALIFYING TERMINATION
SECTION 2.1. BASIC SEVERANCE PAYMENT. If the Executive incurs a
Qualifying Termination following a Change in Control that occurs on or before
termination of this Agreement as provided in Section 6.1 hereof, the Company
shall pay within 30 days after the date of the Qualifying Termination to the
Executive a single lump sum cash amount equal to his Total Annual Compensation
multiplied by the lesser of (a) 2.50 or (b) .0833 multiplied by the number of
full months remaining between termination and his attaining age 65. "Total
Annual Compensation" shall mean the sum of annual base salary in effect
immediately preceding termination or the Change of Control, whichever is higher,
and annual incentive compensation earned under the "MIP" (annualized in the case
of less than a full year's service) in the last full fiscal year immediately
preceding termination or the Change in Control, whichever is higher.
SECTION 2.2. INSURANCE. If the Executive incurs a Qualifying
Termination following a Change in Control that occurs on or before termination
of this Agreement as provided in Section 6.1 hereof, the Company shall provide
the Executive, at the
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Company's expense, for a period beginning on the date of the Qualifying
Termination, the same medical, accident, disability, life and any other
insurance coverage as was provided to him by the Company immediately before the
Change in Control (or, if greater, as in effect immediately before the
Qualifying Termination occurs); such coverage shall end upon the earlier of (a)
the expiration of 24 months after the Qualifying Termination or (b) with respect
to each coverage, the date on which the Executive first becomes eligible for
insurance coverage of a similar nature provided by a firm that employs him
following the Qualifying Termination.
SECTION 2.3. EXECUTIVE LONG-TERM INCENTIVE PROGRAM. If the Executive
incurs a Qualifying Termination following a Change in Control that occurs on or
before termination of this Agreement as provided in Section 6.1 hereof, all of
the options to purchase common stock of the Company (and the alternative common
stock appreciation rights) granted to the Executive prior to termination of this
Agreement as provided in Section 6.1 hereof, under the Executive Long-Term
Incentive Program shall become exercisable in accordance with the terms set
forth in the applicable Agreement.
SECTION 2.4. NONDUPLICATION. Nothing in this Agreement shall require
the Company to make any payment or to provide any benefit or service credit that
the Company is otherwise required
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to provide under any other contract, agreement, policy, plan or arrangement.
ARTICLE III
EFFECT ON SEVERANCE POLICY
SECTION 3.1. EFFECT ON SEVERANCE POLICY. If the Executive becomes entitled to
receive benefits hereunder, the Executive shall not be entitled to any benefits
under any other Company severance policy.
ARTICLE IV
TAX MATTERS
SECTION 4.1. WITHHOLDING. The Company may withhold from any amount
payable to the Executive hereunder all federal, state or other taxes that the
Company may reasonably determine are required to be withheld pursuant to any
applicable law or regulation.
SECTION 4.2 SPECIAL LIMITATION.
(a) If part or all of the payments or benefits payable to the
Executive, when added to other payments payable to the Executive
as a result of a Change in Control, constitute Parachute Payments,
the following limitation shall apply. If the Parachute Payments,
net of the sum
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of the Excise Tax and the Federal income and employment taxes,
state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, are greater than the
Threshold Amount, the Executive shall be entitled to the full
payments and benefits payable under this Agreement. If the
Threshold Amount is greater than the Parachute Payments, net of
the sum of the Excise Tax, and the Federal income and employment
taxes, state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, then the payments and
benefits under this Agreement shall be reduced to the extent
necessary so that the maximum Parachute Payments shall not exceed
the Threshold Amount. In the event a reduction is required, it
shall be the Executive's choice as to which payments or benefits
shall be so reduced. The Company shall select a firm of
independent certified public accountants to determine which of the
foregoing alternative provisions shall apply. For purposes of
determining the amount of the Federal income and employment taxes,
and state and local income taxes on the amount of the Parachute
Payments in excess of the Threshold Amount, the Executive shall be
deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation
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applicable to individuals for the calendar year in which the
payments and benefits under this Agreement are payable and state
and local income taxes at the highest marginal rates of individual
taxation in the state and locality of the Executive's residence
for the calendar year in which the payments and benefits under
this Agreement are payable, net of the maximum reduction in
Federal income taxes which could be obtained from deduction of
such state and local taxes.
(b) ADDITIONAL DEFINITIONS
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"PARACHUTE PAYMENTS" shall mean any payment or provision by
the Employer of any amount or benefit to and for the benefit of
the Executive, whether paid or payable or provided or to be
provided under the terms of this Agreement or otherwise, that
would be considered "parachute payments" within the meaning of
Section 280G(B)(2)(A) of the Code and the regulations promulgated
thereunder.
"THRESHOLD AMOUNT" shall mean three times the Executive's
"base amount" within the meaning of Section 280G(b)(3) of the Code
and the regulations promulgated thereunder, less one dollar.
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"EXCISE TAX" shall mean the excise tax imposed by Section
4999 of the Code.
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ARTICLE V
COLLATERAL MATTERS
SECTION 5.1. NATURE OF PAYMENTS. All payments to the Executive under
this Agreement shall be considered either payments in consideration of his
continued service to the Company or severance payments in consideration of his
past services thereto.
SECTION 5.2. LEGAL EXPENSES. The Company shall pay all legal fees and
expenses that the Executive may incur as a result of the Company's contesting
the validity, the enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
SECTION 5.3. MITIGATION. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement either by
seeking other employment or otherwise. The amount of any payment provided for
herein shall not be reduced by an remuneration that the Executive may earn from
employment with another employer or otherwise following his Qualifying
Termination.
SECTION 5.4. AUTHORITY. The execution of this Agreement has been
authorized by the Board of Directors of the Company.
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ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1. TERM OF AGREEMENT. This Agreement shall become effective
on the date hereof and shall continue in effect until the earliest of (a)
October 31, 2000, if no Change in Control has occurred before that date;
provided, however, that commencing on November 1, 2000 and each November 1
thereafter, the term of this Agreement shall automatically be extended for an
additional year unless, not later than January 30 of the same year, the Company
shall have given notice that it does not wish to extend this Agreement; (b) the
termination of the Executive's employment with the Company for any reason prior
to a Change in Control; (c) the Company's termination of the Executive's
employment for Cause, or the Executive's resignation for other than Good Reason,
following a Change in Control and the Company's and the Executive's fulfillment
of all of their obligations hereunder; and (d) the expiration following a Change
in Control of three years and the fulfillment by the Company and the Executive
of all of their obligations hereunder. Furthermore, nothing in this Article VI
shall cause this Agreement to terminate before both the Company and the
Executive have fulfilled all of their obligations hereunder.
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SECTION 6.2. GOVERNING LAW. Except as otherwise expressly provided
herein, this Agreement and the rights and obligations hereunder shall be
construed and enforced in accordance with the laws of The Commonwealth of
Massachusetts.
SECTION 6.3. SUCCESSOR TO THE COMPANY. This Agreement shall inure to
the benefit of and shall be binding upon and enforceable by the Company and any
successor thereto, including, without limitation, any corporation or
corporations acquiring directly or indirectly all or substantially all of the
business or assets of the Company, whether by merger, consolidation, sale or
otherwise, but shall not otherwise be assignable by the Company. Without
limitation of the foregoing sentence, the Company shall require any successor
(whether direct or indirect, by merger, consolidation, sale or otherwise) to all
of substantially all of the business or assets of the Company, by agreement in
form satisfactory to the Executive, expressly, absolutely and unconditionally to
assume and to agree to perform this Agreement in the same manner and to the same
extent as the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as heretofore defined and any successor to all or substantially all of
its business or assets that executes and delivers the agreement provided for in
this Section 6.3 or
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that becomes bound by this Agreement either pursuant to this Agreement or by
operation of law.
SECTION 6.4. SUCCESSOR TO THE EXECUTIVE. This Agreement shall inure to
the benefit of and shall be binding upon and enforceable by the Executive and
his personal and legal representatives, executors, administrators, heirs,
distributees, legatees and, subject to the Section 6.5 hereof, his designees
("Successors"). If the Executive should die while amounts are or may be payable
to him under this Agreement, references hereunder to the "Executive" shall,
where appropriate, be deemed to refer to his Successors; provided that nothing
in this Section 6.5 shall supersede the terms of any plan or arrangement (other
than this Agreement) that is affected by this Agreement.
SECTION 6.5. NONALIENABILITY. No right of or amount payable to the
Executive under this Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, hypothecation, encumbrance,
charge, execution, attachment, levy or similar process or to setoff against any
obligations or to assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the immediately preceding
sentence shall be void. However, this Section 6.5 shall not prohibit the
Executive from designating one or more persons, on a form satisfactory to the
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Company, to receive amounts payable to him under this Agreement in the event
that he should die before receiving them.
SECTION 6.6. NOTICES. All notices provided for in this Agreement shall
be in writing. Notices to the Company shall be deemed given when personally
delivered or sent by certified or registered mail or overnight delivery service
to Wyman-Gordon Company, 244 Worcester Street, North Grafton, Massachusetts
01536, Attention: Vice President, General Counsel and Clerk. Notices to the
Executive shall be deemed given when personally delivered or sent by certified
or registered mail or overnight delivery service to the last address for the
Executive shown on the records of the Company. Either the Company or the
Executive may, by notice to the other, designate an address other than the
foregoing for the receipt of subsequent notices.
SECTION 6.7. AMENDMENT. No amendment to this Agreement shall be
effective unless in writing and signed by both the Company and the Executive.
SECTION 6.8. WAIVERS. No waiver of any provision of this Agreement
shall be valid unless approved in writing by the party giving such waiver. No
waiver of a breach under any provision of this Agreement shall be deemed to be a
waiver of such provision or any other provision of this Agreement or any
subsequent breach. No failure on the part of either the Company or the Executive
to exercise, and no delay in exercising, any right
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or remedy conferred by law or this Agreement shall operate as waiver of such
right or remedy, and no exercise or waiver, in whole or in part, or any right
or remedy conferred by law or herein shall operate as a waiver of any other
right or remedy.
SECTION 6.9. SEVERABILITY. If any provision of this Agreement shall be
held invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.
SECTION 6.10. CAPTIONS. The captions to this respective articles and
section of this Agreement are intended for convenience of reference only and
have no substantive significance.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in a number
of counterparts, each of which shall be deemed to be an original but all of
which together shall constitute a single instrument.
SECTION 6.12. ENTIRE AGREEMENT. This Agreement contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings with respect thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ATTEST: WYMAN-GORDON COMPANY
By:
- ------------------------------ --------------------------------------
David P. Gruber, Chairman
Chief Executive Officer
ATTEST:
- ------------------------------ --------------------------------------
Executive
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FORM OF
AMENDMENT TO
EXECUTIVE SEVERANCE AGREEMENT
A. The Executive Severance Agreement dated _________________, 199__, by and
between Wyman-Gordon Company, a Massachusetts corporation (the "Company") and
___________________________ (the "Executive") is hereby amended by adding the
following Section 2.5 at the end of Article II:
"Section 2.5. SUPPLEMENTAL RETIREMENT PLAN FOR SENIOR
EXECUTIVES. If the Executive incurs a Qualifying Termination following
a Change in Control that occurs on or before termination of this
Agreement as provided in Section 6.1 hereof, the Executive's benefit
under the Supplemental Retirement Plan for Senior Executives (the
'SERP') shall be calculated as if Executive had worked two (2)
additional 'Years of Service' (as defined in the SERP) with 'Earnings'
(as defined in the SERP) in the same amount that Executive received in
the 12 consecutive months immediately prior to the Qualifying
Termination (or the amount received in the 12 consecutive months
immediately prior to the Change in Control, if greater)."
B. Except as amended herein, the Executive Severance Agreement is confirmed in
all other respects.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
ATTEST: WYMAN-GORDON COMPANY
By:
- ----------------------------------- -----------------------------------
Title
ATTEST:
- ----------------------------------- -----------------------------------
1
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EXHIBIT 6
[Letterhead]
PERSONAL AND CONFIDENTIAL
May 17, 1999
Board of Directors
Wyman-Gordan Company
244 Worcester Street
North Grafton, MA 01536-8001
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value
$1.00 per share (the "Shares"), of Wyman-Gordon Company (the "Company") of
the $20.00 per Share in cash proposed to be paid by Precision Castparts
Corporation ("Buyer") in the Tender Offer and the Merger (as defined
below) pursuant to the Agreement and Plan of Merger, dated as of May 17,
1999, among Buyer, WGC Acquisition Corp., a wholly-owned subsidiary of Buyer
("Acquisition Sub"), and the Company (the "Agreement"). The Agreement
provides for a tender offer for all of the Shares (the "Tender Offer")
pursuant to which Acquisition Sub will pay $20.00 per Share in cash for each
Share accepted. The Agreement further provides that following completion of
the Tender Offer, Acquisition Sub will be merged into the Company (the
"Merger") and each outstanding Share (other than Shares already owned by
Acquisition Sub) will be converted into the right to receive $20.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We also have provided certain
investment banking services to Buyer from time to time, including having
acted as managing underwriter of a public offering of $150,000,000 aggregate
principal amount of 6 1/8% Senior Notes of Buyer due December 15, 2007 in
December 1997, and may provide investment banking services to Buyer and its
subsidiaries in the future. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or Buyer for its
own account and for the accounts of customers.
<PAGE>
Wyman-Gordon Company
May 17, 1999
Page Two
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five fiscal years ended May 31, 1998; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and
certain internal financial analyses and forecasts for the Company prepared by
its management. We also have held discussions with members of the senior
management of the Company regarding its past and current business operations,
financial condition and future prospects. In addition, we have reviewed the
reported price and trading activity for the Shares, compared certain
financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations
in the aerospace components industry specifically and in other industries
generally and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of
the Company or any of its subsidiaries and we have not been furnished with
any such evaluation or appraisal. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board
of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not
constitute a recommendation as to whether or not any holder of Shares should
tender such Shares in connection with such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
$20.00 per Share in cash to be received by the holders of Shares in the
Tender Offer and the Merger is fair from a financial point of view to such
holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
- --------------------------------
(GOLDMAN, SACHS & CO.)
