<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
PACIFIC RESEARCH & ENGINEERING
CORPORATION
(NAME OF SUBJECT COMPANY)
------------------------
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
(BIDDERS)
------------------------
COMMON STOCK, NO PAR VALUE
SHAREHOLDER WARRANTS TO PURCHASE SHARES OF COMMON STOCK
REPRESENTATIVE WARRANTS TO PURCHASE SHARES OF COMMON STOCK AND SHAREHOLDER
WARRANTS
THE EXECUTIVE WARRANT TO PURCHASE SHARES OF COMMON STOCK
(TITLE OF CLASSES OF SECURITIES)
------------------------
$2.35 NET PER SHARE OF COMMON STOCK
$0.15 NET PER SHAREHOLDER WARRANT
$0.15 NET PER REPRESENTATIVE WARRANT AND EXECUTIVE WARRANT
(FOR EACH SHARE UNDERLYING SUCH WARRANTS)
------------------------
SHARES OF COMMON STOCK: 694932104 REPRESENTATIVE WARRANT: N/A
SHAREHOLDER WARRANTS: 694932112 EXECUTIVE WARRANT: N/A
(CUSIP NUMBER OF CLASSES OF SECURITIES)
------------------------
SCOTT T. MIKUEN, ASSISTANT SECRETARY
HARRIS CORPORATION
1025 W. NASA BOULEVARD
MELBOURNE, FLORIDA 32919
(407) 727-9100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
ATTENTION: JIM L. KAPUT
AUGUST 2, 1999
(DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D)
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$5,525,190 $1,105.04
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</TABLE>
* For the purpose of calculating the fee only, this amount assumes the purchase
of 2,305,500 shares of Common Stock, no par value ("Shares"), of Pacific
Research & Engineering Corporation, 515,000 Shareholder Warrants to purchase
Shares ("Shareholder Warrants"), six Representative Warrants to purchase
Shares and Shareholder Warrants and one Executive Warrant to purchase Shares
at a price of (i) $2.35 per share, (ii) $0.15 per Shareholder Warrant and
(iii) $0.15 per Representative Warrant and Executive Warrant for each Share
underlying such warrants (100,000 Shares underlay the Representative Warrants
and 100,100 Shares underlay the Executive Warrant).
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
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AMOUNT PREVIOUSLY PAID: FILING PARTY:
FORM OR REGISTRATION NO.: DATE FILED:
</TABLE>
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<PAGE> 2
SCHEDULES 14D-1 AND 13D
CUSIP NO. 694932104
CUSIP NO. 694932112 PAGE 2 OF 8 PAGES
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON:
SPACE COAST MERGER CORP.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
59-3589716
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) [X] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS: AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f): [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: CALIFORNIA
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 461,099 SHARES
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES: [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 19.9% OF
THE SHARES ISSUED AND OUTSTANDING AS OF AUGUST 2, 1999,
ASSUMING EXERCISE OF THE OPTION TO PURCHASE SHARES GRANTED
UNDER THE OPTION AGREEMENT DESCRIBED IN THIS STATEMENT.*
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10 TYPE OF REPORTING PERSON: CO
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</TABLE>
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* SEE THIRD PARAGRAPH ON PAGE 4.
2
<PAGE> 3
SCHEDULES 14D-1 AND 13D
CUSIP NO. 694932104
CUSIP NO. 694932112 PAGE 3 OF 8 PAGES
<TABLE>
<S> <C> <C>
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1 NAME OF REPORTING PERSON:
HARRIS CORPORATION
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
34-0276860
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) [X] (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS: WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f): [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 461,099 SHARES
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES: [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 19.9% OF
THE SHARES ISSUED AND OUTSTANDING AS OF AUGUST 2, 1999,
ASSUMING EXERCISE OF THE OPTION TO PURCHASE SHARES GRANTED
UNDER THE OPTION AGREEMENT DESCRIBED IN THIS STATEMENT.*
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10 TYPE OF REPORTING PERSON: CO
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</TABLE>
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* SEE THIRD PARAGRAPH ON PAGE 4.
3
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PAGE 4 OF 8 PAGES
This Statement relates to a tender offer by Space Coast Merger Corporation,
a California corporation (the "Offeror") and a wholly owned subsidiary of Harris
Corporation, a Delaware corporation ("Harris"), to purchase (i) all outstanding
shares of Common Stock, no par value (the "Shares") of Pacific Research &
Engineering Corporation, a California corporation (the "Company"), at a purchase
price of $2.35 per Share (the "Share Offer Price"), (ii) any and all issued and
outstanding warrants issued by the Company pursuant to the Warrant Agreement,
dated as of May 28, 1996, by and between the Company and Wells Fargo Bank N.A.
as Warrant Agent (the "Shareholder Warrants") of the Company, at a purchase
price of $0.15 per Shareholder Warrant, (iii) any and all issued and outstanding
warrants issued to representatives of Nutmeg Securities, Ltd. pursuant to the
Representative's Warrant to Purchase Units of Common Stock and Redeemable
Warrants, each dated as of May 31, 1996, by and between the Company and each of
John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy Mayberry
and Stephen Marchese (the "Representative Warrants"), at a purchase price of
$0.15 per each Share underlying such Representative Warrant and (iv) the issued
and outstanding warrant issued to John W. Barrett pursuant to the Warrant to
Purchase Common Stock of the Company, by and between John W. Barrett and the
Company (the "Executive Warrant" and, collectively with the Shareholder Warrants
and the Representative Warrants, the "Warrants") at a purchase price of $0.15
per each Share underlying the Executive Warrant, in each case, net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated August 9, 1999 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
filed as Exhibits (a)(1) and (a)(2) hereto, respectively, and which are
incorporated herein by reference. The cover page above and item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
The Offeror and Harris entered into Stockholder Agreements, each dated as
of August 2, 1999 (the "Shareholder Agreements"), with each of the following
officers and directors of the Company: Jack Williams, Herbert McCord, David
Pollard, Donald Naab, John Lane and John Robbins, as well as the Williams Family
Trust, the principal shareholder of the Company (collectively, the "Tendering
Shareholders"), pursuant to which the Tendering Shareholders have agreed to
tender the 1,299,480 Shares (the "Committed Shares") owned of record by the
Tendering Shareholders, the Representative Warrant held by John Lane (with
respect to which 41,200 Shares and 20,500 Shareholder Warrants underlay such
Representative Warrant) (the "Committed Warrants") and any other Shares or
Warrants that the Tendering Shareholders may acquire upon the exercise of
options or warrants to purchase Shares held by such Tendering Shareholders,
other than Donald Naab, who has agreed to tender the 124,980 Shares owned by him
on or after September 30, 1999 if the Offer has not expired or been withdrawn by
the Offeror. Pursuant to the Shareholder Agreements, the Tendering Shareholders
have also agreed that, among other things, until the termination of the
Agreement and Plan of Merger, dated as of August 2, 1999, among Harris, the
Offeror and the Company (the "Merger Agreement"), and, in certain cases, for a
period of 60 days thereafter, to vote the Committed Shares in favor of the
merger of the Offeror with and into the Company and against certain competing
transactions. The Committed Shares represent approximately 56.4% of the Shares
that, as of August 2, 1999, were issued and outstanding (and approximately 50.9%
of the Shares not considering the 124,980 Shares held by Donald Naab).
In addition to the Shareholder Agreements, Harris and the Company entered
into the Stock Option Agreement dated as of August 2, 1999 (the "Option
Agreement"), pursuant to which the Company has granted Harris an irrevocable
option to purchase (the "Option") from time to time up to 461,099 authorized and
unissued Shares, or such other number of Shares as equals 19.9% of the Company's
issued and outstanding Shares at the time of the exercise of the Option (the
"Company Option Shares"), at a price of $2.35 per Share. Additional information
about the Shareholder Agreements and the Option Agreement is contained in
Section 13 (the "Merger Agreement; the Shareholder Agreements; and the Option
Agreement") of the Offer to Purchase.
4
<PAGE> 5
PAGE 5 OF 8 PAGES
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Pacific Research & Engineering
Corporation. The address of the principal executive offices of the Company is
set forth in Section 8 ("Certain Information Concerning the Company") of the
Offer to Purchase and is incorporated herein by reference.
(b) This Statement relates to (i) the shares of Common Stock, no par value
(the "Shares") of Company, (ii) the warrants issued by the Company pursuant to
the Warrant Agreement, dated as of May 28, 1996, by and between the Company and
Wells Fargo Bank N.A. as Warrant Agent (the "Shareholder Warrants"), (iii) the
warrants issued to representatives of Nutmeg Securities, Ltd. pursuant to the
Representative's Warrant to Purchase Units of Common Stock and Redeemable
Warrants, each dated as of May 31, 1996, by and between the Company and each of
John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy Mayberry
and Stephen Marchese (the "Representative Warrants") and (iv) the warrant issued
to John W. Barrett pursuant to the Warrant to Purchase Common Stock of the
Company, by and between John W. Barrett and the Company (the "Executive Warrant"
and, collectively with the Shareholder Warrants and the Representative Warrants,
the "Warrants"). As used herein, "Offer Securities" shall mean the Shares and
the Warrants. The information set forth in the Introduction to the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares and
Shareholder Warrants; Dividends") of the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g): The information set forth in the Introduction and
Section 9 ("Certain Information Concerning the Offeror and Harris") of the Offer
to Purchase, and in Annex I thereto, is incorporated herein by reference.
(e) and (f): None of the Offeror, Harris nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction and Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b): The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e): The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company; Dissenters Rights") and Section 13 ("The Merger Agreement; the
Shareholder Agreements; and the Option Agreement") of the Offer to Purchase is
incorporated herein by reference.
5
<PAGE> 6
PAGE 6 OF 8 PAGES
(f) and (g): The information set forth in Section 7 ("Certain Effects of
the Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b): The information set forth in the Introduction, Section 9
("Certain Information Concerning the Offeror and Harris") and Section 13 ("The
Merger Agreement; the Shareholder Agreements; and the Option Agreement") of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("The Merger Agreement; the Shareholder Agreements; and the Option
Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Offeror and Harris") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 13 ("The Merger Agreement; the
Shareholder Agreements; and the Option Agreement") of the Offer to Purchase is
incorporated by reference.
(b) and (c) The information set forth in Section 16 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
6
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PAGE 7 OF 8 PAGES
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase, dated August 9, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Summary Announcement, dated August 9, 1999.
(a)(8) Press Release issued by Harris and the Company on August 3,
1999.
(a)(9) Press Release issued by Harris on August 9, 1999.
(c)(1) Agreement and Plan of Merger, dated as of August 2, 1999,
among Harris, the Offeror and the Company.
(c)(2) Stock Option Agreement, dated as of August 2, 1999, among
Harris and the Company.
(c)(3) Stockholder Agreement, dated as of August 2, 1999, among
Jack Williams, the Offeror and Harris.
(c)(4) Stockholder Agreement, dated as of August 2, 1999, among The
Williams Family Trust, the Offeror and Harris.
(c)(5) Stockholder Agreement, dated as of August 2, 1999, among
Donald Naab, Eileen Naab, the Offeror and Harris.
(c)(6) Stockholder Agreement, dated as of August 2, 1999, among
David Pollard, the Offeror and Harris.
(c)(7) Stockholder Agreement, dated as of August 2, 1999, among
John Lane, the Offeror and Harris.
(c)(8) Stockholder Agreement, dated as of August 2, 1999, among The
Robbins Family Trust, John Robbins, the Offeror and Harris.
(c)(9) Stockholder Agreement, dated as of August 2, 1999, among
Herbert McCord, the Offeror and Harris.
(c)(10) Exhibit 1 to Schedule 13D
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
7
<PAGE> 8
PAGE 8 OF 8 PAGES
SIGNATURE
AFTER DUE 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: August 9, 1999
HARRIS CORPORATION
By: /s/ RICHARD L. BALLANTYNE
------------------------------------
Name: Richard L. Ballantyne
Title: Vice President --
General Counsel and Corporate
Secretary
SPACE COAST MERGER CORP.
By: /s/ RICHARD L. BALLANTYNE
------------------------------------
Name: Richard L. Ballantyne
Title: Vice President and Secretary
8
<PAGE> 1
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ALL OUTSTANDING WARRANTS TO PURCHASE
SHARES OF COMMON STOCK
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
AT
$2.35 NET PER SHARE OF COMMON STOCK
AND
$0.15 NET PER SHAREHOLDER WARRANT
AND
$0.15 NET PER REPRESENTATIVE WARRANT AND EXECUTIVE WARRANT
(FOR EACH SHARE UNDERLYING SUCH WARRANTS)
BY
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999,
UNLESS THE OFFER IS EXTENDED.
THE OFFER (THE "OFFER") IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND
PLAN OF MERGER, DATED AS OF AUGUST 2, 1999 (THE "MERGER AGREEMENT"), AMONG
HARRIS CORPORATION ("HARRIS"), SPACE COAST MERGER CORP. (THE "OFFEROR") AND
PACIFIC RESEARCH & ENGINEERING CORPORATION (THE "COMPANY"). THE BOARD OF
DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OPTION AGREEMENT (AS DEFINED HEREIN), THE OFFER AND THE MERGER (AS DEFINED
HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE COMPANY'S SECURITY HOLDERS AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF THE SHARES (AS DEFINED HEREIN) AND THE WARRANTS (AS
DEFINED HEREIN) ACCEPT THE OFFER AND TENDER THEIR SHARES AND WARRANTS PURSUANT
TO THE OFFER.
IN CONNECTION WITH THE MERGER AGREEMENT, HARRIS AND THE OFFEROR ENTERED
INTO STOCKHOLDER AGREEMENTS DATED AUGUST 2, 1999 (THE "SHAREHOLDER AGREEMENTS")
WITH EACH OF THE DIRECTORS OF THE COMPANY THAT HOLDS SHARES AND CERTAIN OTHER
SHAREHOLDERS WHO TOGETHER BENEFICIALLY OWN APPROXIMATELY 56.4% OF THE SHARES
THAT ARE OUTSTANDING. PURSUANT TO THE SHAREHOLDER AGREEMENTS, SUCH SHAREHOLDERS
HAVE AGREED TO TENDER ALL OF THEIR SHARES (WITH ONE SHAREHOLDER AGREEING TO
TENDER ONLY ON OR AFTER SEPTEMBER 30, 1999 IF THIS OFFER IS OPEN ON OR AFTER
THAT DATE) AND WARRANTS PURSUANT TO THE OFFER. HARRIS AND THE COMPANY HAVE ALSO
ENTERED INTO A STOCK OPTION AGREEMENT DATED AUGUST 2, 1999 (THE "OPTION
AGREEMENT") PURSUANT TO WHICH THE COMPANY HAS GRANTED HARRIS
<PAGE> 2
AN IRREVOCABLE OPTION TO PURCHASE (THE "OPTION") UP TO 461,099 AUTHORIZED AND
UNISSUED SHARES, OR SUCH OTHER NUMBER OF SHARES AS EQUALS 19.9% OF THE COMPANY'S
ISSUED AND OUTSTANDING SHARES AT THE TIME OF THE EXERCISE OF THE OPTION, AT A
PURCHASE PRICE OF $2.35 PER SHARE, EXERCISABLE UPON THE OCCURRENCE OF CERTAIN
EVENTS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SHARES
CONSTITUTING AT LEAST 90% OF THE THEN OUTSTANDING SHARES AND (ii) THE
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15.
------------------------
IMPORTANT
Any shareholder or warrantholder desiring to tender Shares or Warrants, as
the case may be, should either (i) complete and sign the Letter of Transmittal
or a facsimile thereof in accordance with the instructions in the Letter of
Transmittal and deliver the Letter of Transmittal with the Shares or Warrants
and all other required documents to the Depositary (as defined herein) or, with
respect to Shares and Shareholder Warrants (as defined herein), follow the
procedure for book-entry transfer set forth in Section 3 or (ii) request such
shareholder's or warrantholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for the shareholder or warrantholder.
Shareholders or warrantholders having Shares or Warrants registered in the name
of a broker, dealer, commercial bank, trust company or other nominee must
contact such person if they desire to tender their Shares or Warrants. Any
shareholder or warrantholder who desires to tender Shares or Warrants, as the
case may be, and whose certificates representing such Shares or Warrants, or
agreement representing a Representative Warrant or the Executive Warrant, are
not immediately available or who cannot comply with the procedures for
book-entry transfer on a timely basis or who cannot deliver all required
documents to the Depositary, in each case prior to the expiration of the Offer,
must tender such Shares or Warrants pursuant to the guaranteed delivery
procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase or the Letter of Transmittal may be directed to the Information Agent
at its address and telephone number set forth on the back cover of this Offer to
Purchase.
The Dealer Manager for the Offer is:
[GEORGESON SECURITIES CORPORATION LOGO]
August 9, 1999
<PAGE> 3
TABLE OF CONTENTS
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INTRODUCTION................................................ 1
1. Terms of the Offer...................................... 4
2. Acceptance for Payment and Payment for Offer
Securities............................................... 7
3. Procedure for Tendering Offer Securities................ 8
4. Withdrawal Rights....................................... 11
5. Certain United States Federal Income Tax Consequences... 12
6. Price Range of Shares and Shareholder Warrants;
Dividends................................................ 13
7. Certain Effects of the Transaction...................... 14
8. Certain Information Concerning the Company.............. 15
9. Certain Information Concerning the Offeror and Harris... 18
10. Source and Amount of Funds.............................. 19
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company........................... 19
12. Purpose of the Offer and the Merger; Plans for the
Company; Dissenters Rights.............................. 21
13. The Merger Agreement; the Shareholder Agreements; and
the Option Agreement.................................... 23
14. Dividends and Distributions............................. 33
15. Certain Conditions to the Offeror's Obligations......... 33
16. Certain Legal Matters................................... 35
17. Fees and Expenses....................................... 36
18. Miscellaneous........................................... 36
ANNEX I: Certain Information Concerning the Directors and
Executive Officers of Harris and the Offeror....... A-1
</TABLE>
i
<PAGE> 4
To the holders of Common Stock and Warrants
of Pacific Research & Engineering Corporation:
INTRODUCTION
Space Coast Merger Corp., a California corporation (the "Offeror") and a
wholly owned subsidiary of Harris Corporation, a Delaware corporation
("Harris"), hereby offers to purchase (i) all outstanding shares of Common
Stock, no par value (the "Shares") of Pacific Research & Engineering
Corporation, a California corporation (the "Company"), at a purchase price of
$2.35 per Share (the "Share Offer Price"), (ii) any and all issued and
outstanding warrants issued by the Company pursuant to the Warrant Agreement
(the "Shareholder Warrant Agreement"), dated as of May 28, 1996, by and between
the Company and Wells Fargo Bank N.A. as Warrant Agent (the "Shareholder
Warrants") of the Company, at a purchase price of $0.15 per Shareholder Warrant
(the "Shareholder Warrant Offer Price"), (iii) any and all issued and
outstanding warrants issued to representatives of Nutmeg Securities, Ltd.
pursuant to the Representative's Warrant to Purchase Units of Common Stock and
Redeemable Warrants (the "Representative Warrant Agreement"), each dated as of
May 31, 1996, by and between the Company and each of John Lane, Daniel
Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy Mayberry and Stephen
Marchese (the "Representative Warrants"), at a purchase price of $0.15 per each
Share underlying each such Representative Warrant (the "Representative Warrant
Offer Price") and (iv) the issued and outstanding warrant issued to John W.
Barrett pursuant to the Warrant to Purchase Common Stock of the Company (the
"Executive Warrant Agreement"), by and between John W. Barrett and the Company
(the "Executive Warrant" and, collectively with the Shareholder Warrants and the
Representative Warrants, the "Warrants") at a purchase price of $0.15 per each
Share underlying the Executive Warrant (the "Executive Warrant Offer Price" and,
collectively with the Share Offer Price, the Shareholder Warrant Offer Price and
the Representative Warrant Offer Price, the "Offer Price"), in each case, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). As used herein, "Offer
Securities" shall mean the Shares and the Warrants. Tendering holders of Offer
Securities will not be obligated to pay brokerage fees or commissions or, except
as set forth in the Letter of Transmittal, stock transfer taxes on the purchase
of Offer Securities by the Offeror pursuant to the Offer. The Offeror will pay
all charges and expenses of Georgeson Securities Corporation, which is acting as
the Dealer Manager ("Dealer Manager"), ChaseMellon Shareholder Services, L.L.C.,
which is acting as the Depositary (the "Depositary"), and Georgeson Shareholder
Communications Inc. which is acting as the Information Agent (the "Information
Agent") in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OPTION AGREEMENT (AS DEFINED HEREIN), THE OFFER AND THE MERGER
(AS DEFINED HEREIN), HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF OFFER SECURITIES AND
UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF OFFER SECURITIES ACCEPT THE OFFER AND
TENDER THEIR OFFER SECURITIES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SHARES
CONSTITUTING AT LEAST 90% OF THE THEN OUTSTANDING SHARES (THE "MINIMUM
CONDITION") AND (ii) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of August 2, 1999 (the "Merger Agreement"), among Harris, the Offeror and the
Company. The Merger Agreement provides that after the purchase of the Offer
Securities pursuant to the Offer and the satisfaction of the other conditions
set forth in the Merger Agreement and in accordance with the relevant provisions
of the California General Corporation Law, as amended (the "CGCL"), the Offeror
will be merged with and into the Company (the "Merger"). Following consummation
of the Merger, the Company will continue as the surviving corporation
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(the "Surviving Corporation") and will be a wholly owned subsidiary of Harris.
At the effective time of the Merger (the "Effective Time"), each Share that is
issued and outstanding (other than Shares owned by the Company, any wholly owned
subsidiary of the Company, Harris, the Offeror or any wholly owned subsidiary of
Harris and other than Shares held by shareholders who perfect their appraisal
rights under the CGCL ("Dissenting Shares")) will be converted into the right to
receive from the Surviving Corporation the Share Offer Price (or any higher
price that may be paid for each Share pursuant to the Offer) in cash, without
interest thereon.
IN ACCORDANCE WITH SECTIONS 9.8 AND 18 OF THE SHAREHOLDER WARRANT
AGREEMENT, THIS OFFER TO PURCHASE HEREBY SERVES AS NOTICE TO THE REGISTERED
HOLDERS OF SHAREHOLDER WARRANTS OF THE MERGER (UPON SATISFACTION OF THE
CONDITIONS SET FORTH IN THE MERGER AGREEMENT). Each Shareholder Warrant that is
issued and outstanding immediately prior to the Effective Time (other than any
Shareholder Warrants owned by the Company, any wholly owned subsidiary of the
Company, Harris, the Offeror or any other wholly owned subsidiary of Harris)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, no longer be exercisable into the right to receive Shares, but shall
become exercisable, in accordance with Section 9.4 of the Shareholder Warrant
Agreement, into the right to receive an amount in cash equal to the Share Offer
Price (or any higher price that may be paid for each Share pursuant to the
Offer), without interest, upon exercise of the Shareholder Warrant and payment
by the holder of the $8.00 per Share exercise price provided in the Shareholder
Warrant Agreement. IF THE MERGER IS COMPLETED, THE $8.00 PER SHARE EXERCISE
PRICE OF A SHAREHOLDER WARRANT WILL EXCEED THE $2.35 PER SHARE PAYABLE UPON
EXERCISE OF EACH SHAREHOLDER WARRANT. AS A RESULT, HOLDERS OF SHAREHOLDER
WARRANTS SHOULD CONSIDER TENDERING THEIR SHAREHOLDER WARRANTS FOR THE
SHAREHOLDER WARRANT OFFER PRICE.
IN ACCORDANCE WITH SECTION (F) OF THE REPRESENTATIVE WARRANT AGREEMENT,
THIS OFFER TO PURCHASE HEREBY SERVES AS NOTICE TO THE HOLDERS OF REPRESENTATIVE
WARRANTS OF THE MERGER (UPON SATISFACTION OF THE CONDITIONS SET FORTH IN THE
MERGER AGREEMENT). Each Representative Warrant that is issued and outstanding
immediately prior to the Effective Time (other than any Representative Warrants
owned by the Company, any wholly owned subsidiary of the Company, Harris, the
Offeror or any other wholly owned subsidiary of Harris) shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
exercisable into the right to receive Shares or Shareholder Warrants, but shall
become exercisable, in accordance with Section (g)(B) of the Representative
Warrant Agreement, into the right to receive (i) for each Share underlying the
Representative Warrant, an amount in cash equal to the Share Offer Price (or any
higher price that may be paid for each Share pursuant to the Offer), without
interest, upon exercise of the Representative Warrant and payment by the holder
of the $8.52 per Share exercise price for each Share provided in the
Representative Warrant Agreement and (ii) for each Shareholder Warrant
underlying the Representative Warrant, an amount in cash equal to the
Shareholder Warrant Offer Price (or any higher price that may be paid for each
Shareholder Warrant pursuant to the Offer), without interest, upon exercise of
the Representative Warrant and payment by the holder of the $0.155 per
Shareholder Warrant exercise price for each Shareholder Warrant provided in the
Representative Warrant Agreement. IF THE MERGER IS COMPLETED, THE $8.52 PER
SHARE AND $0.155 PER SHAREHOLDER WARRANT EXERCISE PRICES OF A REPRESENTATIVE
WARRANT WILL EXCEED THE $2.35 PER SHARE PAYABLE UPON EXERCISE OF THE
REPRESENTATIVE WARRANT AND THE $0.15 PER SHAREHOLDER WARRANT PAYABLE UPON
EXERCISE OF THE REPRESENTATIVE WARRANT. AS A RESULT, HOLDERS OF REPRESENTATIVE
WARRANTS SHOULD CONSIDER TENDERING THEIR REPRESENTATIVE WARRANTS FOR THE
REPRESENTATIVE WARRANT OFFER PRICE.
IN ACCORDANCE WITH SECTIONS 11 AND 13.1(b) OF THE EXECUTIVE WARRANT
AGREEMENT, THIS OFFER TO PURCHASE HEREBY SERVES AS NOTICE TO THE HOLDER OF THE
EXECUTIVE WARRANT OF THE MERGER (UPON SATISFACTION OF THE CONDITIONS SET FORTH
IN THE MERGER AGREEMENT). If issued and outstanding immediately prior to the
Effective Time, the Executive Warrant shall, by virtue of the Merger and without
any action on the part of the holder thereof, no longer be exercisable into the
right to receive Shares, but shall become exercisable, in accordance with
Section 13.1(a) of the Executive Warrant Agreement, into the right to receive
for each Share
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underlying the Executive Warrant, an amount in cash equal to the Share Offer
Price (or any higher price that may be paid for each Share pursuant to the
Offer), without interest, upon exercise of the Executive Warrant and payment of
the $4.68 per Share exercise price for each Share provided in the Executive
Warrant Agreement. IF THE MERGER IS COMPLETED, THE $4.68 PER SHARE EXERCISE
PRICE OF THE EXECUTIVE WARRANT WILL EXCEED THE $2.35 PER SHARE PAYABLE UPON
EXERCISE OF THE EXECUTIVE WARRANT. AS A RESULT, THE HOLDER OF THE EXECUTIVE
WARRANT SHOULD CONSIDER TENDERING THE EXECUTIVE WARRANT FOR THE EXECUTIVE
WARRANT OFFER PRICE.
See Section 5 for a description of certain United States federal income tax
consequences of the Offer and the Merger.
In connection with the Merger Agreement, the Offeror and Harris entered
into a Stockholder Agreement dated as of August 2, 1999 (the "Shareholder
Agreements"), with each of the following officers and directors of the Company:
Jack Williams, Herbert McCord, David Pollard, Donald Naab, John Lane and John
Robbins, as well as the Williams Family Trust, the principal shareholder of the
Company (collectively, the "Tendering Shareholders"), pursuant to which the
Tendering Shareholders have agreed to tender the 1,299,480 Shares (the
"Committed Shares") owned of record by the Tendering Shareholders, the
Representative Warrant held by John Lane (with respect to which 41,200 Shares
and 20,500 Shareholder Warrants underlay such Representative Warrant) (the
"Committed Warrants") and any other Shares or Warrants that the Tendering
Shareholders may acquire upon the exercise of options or warrants to purchase
Shares held by such Tendering Shareholders, other than Donald Naab, who has
agreed to tender the 124,980 Shares owned by him on or after September 30, 1999
if the Offer has not expired or been withdrawn by the Offeror. Pursuant to the
Shareholder Agreements, the Tendering Shareholders have also agreed that, among
other things, until the Shareholder Agreement Termination Date (as defined
herein), such Tendering Shareholders will not transfer the Committed Shares or
Committed Warrants and will vote the Committed Shares in favor of the Merger and
against certain competing transactions. The Committed Shares represent
approximately 56.4% of the Shares that, as of August 2, 1999, were issued and
outstanding (and approximately 50.9% of the Shares not considering the 124,980
Shares held by Donald Naab).
In addition to the Shareholder Agreements, Harris and the Company entered
into the Stock Option Agreement dated as of August 2, 1999 (the "Option
Agreement"), pursuant to which the Company has granted Harris an irrevocable
option to purchase (the "Option") from time to time up to 461,099 authorized and
unissued Shares, or such other number of Shares as equals 19.9% of the Company's
issued and outstanding Shares at the time of the exercise of the Option (the
"Company Option Shares"), at a price of $2.35 per Share.
The Merger Agreement, the Shareholder Agreements and the Option Agreement
are more fully described in Section 13.
The Merger Agreement provides that, promptly after the Offeror acquires the
Offer Securities pursuant to the Offer, the Offeror will be entitled to
designate such number of directors on the Board of Directors of the Company,
subject to compliance with Section 14(f) of the Securities Exchange Act of 1934
(the "Exchange Act"), as will make the percentage of the Company's directors
designated by the Offeror equal to the percentage of the aggregate voting power
of the Shares then outstanding held by Harris or any of its subsidiaries, and if
Harris and its subsidiaries hold at least 90% of the aggregate voting power of
the Shares, the Offeror shall be entitled to designate all of the members of the
Board of Directors of the Company. The Company shall take all action to cause
the Offeror's designees to be so elected. However, until the Effective Time, the
Board of Directors of the Company will have at least three directors who were
directors on the date of the Merger Agreement and who are not officers of the
Company. The Company has agreed, subject to the applicable provisions of the
Company's Articles of Incorporation and Bylaws either to increase the size of
the Board of Directors of the Company and/or obtain the resignation of such
number of directors as is necessary to enable the Offeror's designees to be
elected or appointed to the Board.
If the Minimum Condition has not been satisfied by 12:00 Midnight, New York
City time, on September 3, 1999 (or any other time then set as the Expiration
Date), the Offeror may, subject to the terms of the Merger Agreement as
described below, elect to (i) subject to the right of the Company to request
that Offeror extend the Offer until September 30, 1999, withdraw the Offer or
allow it to expire and not accept for
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<PAGE> 7
payment any Offer Securities and return all tendered Offer Securities to
tendering holders of Offer Securities, (ii) extend the Offer and, subject to
applicable withdrawal rights, retain all tendered Offer Securities until the
expiration of the Offer, as extended, (iii) withdraw the Offer and, at the
request of the Offeror, the Company, acting through its Board of Directors,
will, in accordance with applicable law, duly call, give notice of, convene and
hold a special meeting of the shareholders of the Company (the "Special
Shareholders Meeting") for the purpose of considering and taking action upon the
Merger and the Merger Agreement, or (iv) subject to complying with applicable
rules and regulations of the Commission, amend the Offer to provide that in the
event (A) the Minimum Condition is not satisfied at the next scheduled
expiration date of the Offer and (B) the number of Shares validly tendered
pursuant to the Offer and not withdrawn as of such next scheduled expiration
date is more than 50% of the then outstanding Shares, the Offeror will waive the
Minimum Condition and amend the Offer to reduce the number of Shares subject to
the Offer to a number of Shares that, when added to the Shares then owned by the
Offeror, will equal 49.99% of the Shares then outstanding (the "Revised Minimum
Number") and, if a greater number of Shares is tendered into the Offer and not
withdrawn, the Offeror may elect to purchase, on a pro rata basis, the Revised
Minimum Number of Shares. The Offeror reserves the right, in its sole
discretion, to terminate the Offer if, at any time prior to accepting Offer
Securities for payment pursuant to the Offer, any of the conditions set forth in
Section 15 have not been satisfied.
If the Minimum Condition and the other conditions to the Offer are
satisfied and the Offer is consummated, the Offeror will own a sufficient number
of Shares to ensure that the Merger will be approved. Under the CGCL, if, after
consummation of the Offer, the Offeror owns at least 90% of the Shares then
outstanding, then the Offeror will be able to cause the Merger to occur without
a vote of the Company's shareholders.
If, however, Harris or the Offeror own, directly or indirectly, more than
50% but less than 90% of the then outstanding Shares as a result of the Offer or
otherwise, the CGCL provides that the Merger may not be consummated unless
either (1) all the shareholders of the Company consent or (2) the Commissioner
of Corporations of the State of California approves, after a hearing, the terms
and conditions of the Merger and the fairness thereof. In the event that the
Offeror does not acquire at least 90% of the then outstanding Shares as of any
scheduled expiration date of the Offer as a result of the Offer, the Option
Agreement or otherwise, and the Offeror instead withdraws the Offer for the
purpose of calling a Special Shareholders Meeting or waives the Minimum
Condition and amends the Offer and this Offer to Purchase for the purpose of
purchasing the Revised Minimum Number and calling a Special Shareholders
Meeting, in each case pursuant to the Merger Agreement and subject to the
conditions set forth in Section 15 (other than the Minimum Condition), then the
approval of the Merger and the Merger Agreement by a vote of the shareholders of
the Company would thereafter be solicited. Under those circumstances, a
significantly longer period of time will be required to effect the Merger.
The Company has advised the Offeror that as of August 2, 1999, there were
2,305,500 Shares issued and outstanding. Accordingly, the Minimum Condition will
be satisfied if at least 2,074,950 Shares, or 90% of the outstanding Shares as
of August 2, 1999, are validly tendered and not withdrawn prior to the
Expiration Date. In the event that any additional Shares are issued after August
2, 1999, the number of Shares that would constitute the Minimum Condition will
be adjusted so that, after such issuance, the Minimum Condition equals at least
90% of the number of Shares then issued and outstanding.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and thereby purchase all Offer
Securities validly tendered prior to the Expiration Date and not withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Friday,
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<PAGE> 8
September 3, 1999, unless the Offeror has extended the period of time for which
the Offer is open, in which event the term "Expiration Date" will mean the
latest time and date at which the Offer, as so extended by the Offeror, will
expire.
If the Offeror decides, in its sole discretion, to increase the
consideration offered in the Offer to holders of Offer Securities and if, at the
time that notice of such increase is first published, sent or given to holders
of Offer Securities in the manner specified below, the Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that such notice is first so
published, sent or given, then the Offer will be extended until the expiration
of such period of ten business days. For purposes of the Offer, a "business day"
means any day other than a Saturday, Sunday or a federal holiday and consists of
the time period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION AND
CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15. THE MERGER AGREEMENT AND THE
OFFER MAY BE TERMINATED BY THE OFFEROR AND HARRIS IF CERTAIN EVENTS OCCUR. The
Offeror reserves the right (but is not obligated), in accordance with applicable
rules and regulations of the United States Securities and Exchange Commission
(the "Commission"), subject to the limitations set forth in the Merger Agreement
and described below, to waive the Minimum Condition or any other condition to
the Offer. If the Minimum Condition has not been satisfied by 12:00 Midnight,
New York City time, on September 3, 1999 (or any other time then set as the
Expiration Date), the Offeror may, subject to the terms of the Merger Agreement
as described below, elect to (i) subject to the right of the Company to request
that Offeror extend the Offer until September 30, 1999, withdraw the Offer or
allow it to expire and not accept for payment any Offer Securities and return
all tendered Offer Securities to tendering holders of Offer Securities (ii)
extend the Offer and, subject to applicable withdrawal rights, retain all
tendered Offer Securities until the expiration of the Offer, as extended, (iii)
withdraw the Offer and, at the request of the Offeror, the Company, acting
through its Board of Directors, will, in accordance with applicable law, duly
call, give notice of, convene and hold a Special Shareholders Meeting for the
purpose of considering and taking action upon the Merger and the Merger
Agreement, or (iv) subject to complying with applicable rules and regulations of
the Commission, amend the Offer to provide that in the event (A) the Minimum
Condition is not satisfied at the next scheduled expiration date of the Offer
and (B) the number of Shares validly tendered pursuant to the Offer and not
withdrawn as of such next scheduled expiration date is more than 50% of the then
outstanding Shares, the Offeror will waive the Minimum Condition and amend the
Offer to reduce the number of Shares subject to the Offer to the Revised Minimum
Number and, if a greater number of Shares is tendered into the Offer and not
withdrawn, the Offeror may elect to purchase, on a pro rata basis, the Revised
Minimum Number of Shares.
Under the terms of the Merger Agreement, the Offeror may not, without the
consent of the Company, decrease the Offer Price, change the form of
consideration to be paid in the Offer, reduce the number of Offer Securities to
be purchased in the Offer, impose additional conditions to the Offer, modify the
conditions of the Offer or extend the Offer (except as described in the next
sentence). Notwithstanding the foregoing, the Offeror may, without the consent
of the Company and so long as the Merger Agreement has not been terminated, (i)
extend the Offer, if at the scheduled or extended expiration date of the Offer
any of the conditions shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
or the Commission staff applicable to the Offer, (iii) extend the Offer for any
reason on one or more occasions for an aggregate period of not more than 15
business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence, or (iv) if the number of
Shares validly tendered is less than 90% of the then outstanding Shares, (A)
withdraw the Offer and request that the Company, acting through the Company's
Board of Directors, duly call, give notice, convene and hold a Special
Shareholders Meeting; (B) waive the Minimum Condition and amend the Offer and
this Offer to Purchase for the purpose of purchasing the Revised Minimum Number
and calling a Special Shareholders Meeting; or (C) withdraw the Offer or allow
it to expire, subject to the right of the Company to request the Offeror to
extend the Offer from time to time (but no later than September 30, 1999). The
Offeror's right to extend the Offer is in each case subject to the right of
Harris, the Offeror or the Company to terminate the Merger Agreement pursuant to
the terms thereof.
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<PAGE> 9
Subject to the limitations set forth in this Offer and the Merger
Agreement, the Offeror reserves the right (but will not be obligated), at any
time or from time to time in its sole discretion, to extend the period during
which the Offer is open by giving oral or written notice of such extension to
the Depositary and by making a public announcement of such extension. There can
be no assurance that the Offeror will exercise its right to extend the Offer.
During any extension, all Offer Securities previously tendered and not withdrawn
will remain subject to the Offer and subject to the right of a tendering holder
of Offer Securities to withdraw such holder's Offer Securities. See Section 4.
Under no circumstances will the Offeror pay interest on the purchase price for
tendered Offer Securities, whether or not it extends the Offer.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Offer Securities regardless of whether
such Offer Securities were theretofore accepted for payment, or to terminate the
Offer and not to accept for payment or pay for any Offer Securities not
theretofore accepted for payment or paid for, upon the occurrence of any of the
conditions set forth in Section 15, by giving oral or written notice of such
delay or termination to the Depositary, and (ii) at any time or from time to
time, to amend the Offer in any respect. The Offeror's right to delay payment
for any Offer Securities or not to pay for any Offer Securities theretofore
accepted for payment is subject to the applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act, relating to the
Offeror's obligation to pay for or return tendered Offer Securities promptly
after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c) and 14e-1(d) under the Exchange Act. Without limiting the obligation of
the Offeror under such rule or the manner in which the Offeror may choose to
make any public announcement, the Offeror currently intends to make
announcements by issuing a press release to the Dow Jones News Service and
making any appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (including a waiver of
the Minimum Condition), the Offeror will disseminate additional tender offer
materials and extend the Offer if and to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum period
during which a tender offer must remain open following material changes in the
terms of the Offer or the information concerning the Offer, other than a change
in price or a change in percentage of securities sought, will depend upon the
facts and circumstances, including the materiality of the changes. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
shareholders, and, if material changes are made with respect to information not
materially less significant than the Offer Price and the percentage of
securities sought, a minimum ten business day period may be required to allow
for adequate dissemination to shareholders and investor response. With respect
to a change in price or a change in percentage of securities sought, a minimum
ten business day period is generally required to allow for adequate
dissemination to shareholders and investor response.
If proration is required as a result of any reduction in the number of
Shares subject to the Offer to a number equal to the Revised Minimum Number,
then, because of the difficulty of determining precisely the number of Shares
validly tendered and not withdrawn, the Offeror would not expect to announce the
final results of proration until approximately seven business days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of Shares
may obtain the preliminary results from the Depositary and may also be able to
obtain the preliminary results from their brokers. The Offeror, however, will
not pay for any Shares accepted for payment pursuant to the Offer until the
final proration results are known.
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The Company and the Company's transfer agent have provided the Offeror with
the Company's list of holders of Offer Securities and security position listings
for the purpose of disseminating the Offer to holders of Offer Securities. This
Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Offer Securities and will be
furnished by the Offeror to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Offer Securities.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR OFFER SECURITIES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will purchase, by accepting for payment, and will pay
for, all Offer Securities validly tendered and not withdrawn in accordance with
Section 4 prior to the Expiration Date promptly after the later to occur of (a)
the Expiration Date and (b) the satisfaction or waiver of the conditions set
forth in Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange
Act, the Offeror expressly reserves the right, in its sole discretion, to delay
acceptance of, or payment for, Offer Securities in order to comply in whole or
in part with any applicable law. See Sections 1 and 16. Payment for Shares or
Shareholder Warrants purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of (i) certificates for such Shares or
Shareholder Warrants or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares or Shareholder Warrants into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility"),
pursuant to the procedures set forth in Section 3, (ii) a properly completed and
executed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees or, in the case of a book-entry transfer of Shares or
Shareholder Warrants, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. Payment for the Representative
Warrants or the Executive Warrant purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the agreements for such
Representative Warrants or the Executive Warrant, (ii) a properly completed and
executed Letter of Transmittal (or a facsimile thereof) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted through electronic
means by the Book-Entry Transfer Facility, in accordance with the normal
procedures of such Book-Entry Transfer Facility and the Depositary, to and
received by the Depositary and forming a part of a Book-Entry Confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares and Shareholder Warrants that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Offer Securities validly tendered and not
withdrawn as, if and when the Offeror gives oral or written notice to the
Depositary of the Offeror's acceptance of such Offer Securities for payment
pursuant to the Offer. In all cases, payment for Offer Securities purchased
pursuant to the Offer will be made by deposit of the purchase price with the
Depositary, which will act as agent for tendering holders of Offer Securities
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering holders of Offer Securities. If, for any reason whatsoever,
acceptance for payment of any Offer Securities tendered pursuant to the Offer is
delayed, or the Offeror is unable to accept for payment Offer Securities
tendered pursuant to the Offer, then, without prejudice to the Offeror's rights
under Section 1, the Depositary may, nevertheless, on behalf of the Offeror,
retain tendered Offer Securities, and such Offer Securities may not be
withdrawn, except to the extent that the tendering holders are entitled to
withdrawal rights as described in Section 4 below and as otherwise required by
Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON
THE OFFER PRICE BE PAID BY THE OFFEROR.
If any tendered Offer Securities are not purchased pursuant to the Offer
for any reason, or if certificates are submitted representing more Offer
Securities than are tendered, certificates or agreements representing
unpurchased Offer Securities will be returned, without expense to the tendering
holder of Offer Securities (or,
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<PAGE> 11
in the case of Shares or Shareholder Warrants delivered by book-entry transfer
to the Book-Entry Transfer Facility, such Shares or Shareholder Warrants will be
credited to an account maintained within such Book-Entry Transfer Facility), as
promptly as practicable after the expiration, termination or withdrawal of the
Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE OFFEROR INCREASES THE PRICE BEING
PAID PER ANY OFFER SECURITY ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, SUCH
INCREASED CONSIDERATION WILL BE PAID TO ALL HOLDERS OF SUCH OFFER SECURITIES
PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH OFFER SECURITIES WERE
TENDERED PRIOR TO SUCH INCREASE IN CONSIDERATION.
The Offeror reserves the right, subject to the provisions of the Merger
Agreement, to transfer or assign, in whole or from time to time in part, to one
or more of its wholly owned subsidiaries, the right to purchase all or any
portion of the Offer Securities tendered pursuant to the Offer, but no such
transfer or assignment will relieve the Offeror of its obligations under the
Offer or prejudice the rights of tendering holders of Offer Securities to
receive payment for Offer Securities validly tendered and accepted for payment.
3. PROCEDURE FOR TENDERING OFFER SECURITIES.
Valid Tenders of Offer Securities. Except as set forth below, for Offer
Securities to be validly tendered pursuant to the Offer, a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof), together with
any required signature guarantees for Shares or Shareholder Warrants, or, in the
case of a book-entry transfer or Shares or Shareholder Warrants, an Agent's
Message, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date or the tendering holder
of Offer Securities must comply with the guaranteed delivery procedure set forth
below. In addition, either (i) certificates representing tendered Shares or
Shareholder Warrants or agreements representing Representative Warrants or the
Executive Warrant must be received by the Depositary along with the Letter of
Transmittal or Shares or Shareholder Warrants must be tendered pursuant to the
procedure for book-entry transfer set forth below, and a Book-Entry Confirmation
must be received by the Depositary, in each case prior to the Expiration Date,
or (ii) the guaranteed delivery procedures set forth below must be complied
with. No alternative, conditional or contingent tenders will be accepted.
Representative Warrants and the Executive Warrant may be tendered only upon
physical delivery to the Depositary of the Letter of Transmittal and the
agreement representing such securities. THE METHOD OF DELIVERY OF CERTIFICATES,
AGREEMENTS, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND SOLE RISK OF THE TENDERING HOLDER OF OFFER SECURITIES, AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN
THE CASE OF A BOOK-ENTRY TRANSFER OF SHARES OR SHAREHOLDER WARRANTS, BY
BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer of Shares and Shareholder Warrants. The Depositary
will establish an account with respect to the Shares and Shareholder Warrants at
the Book-Entry Transfer Facility for purposes of the Offer. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares and Shareholder Warrants by causing such
Book-Entry Transfer Facility to transfer such securities into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares and Shareholder Warrants may be effected through book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with. DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantee for Shares and Shareholder Warrants. Signatures on the
Letter of Transmittal must be guaranteed by a bank, broker, dealer, credit
union, savings association or other entity which is a
8
<PAGE> 12
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 under the Exchange Act (each of the foregoing constituting an
"Eligible Institution"), unless the Shares or Shareholder Warrants tendered
thereby are tendered (i) by a registered holder of Shares or Shareholder
Warrants who has not completed either the box labeled "Special Delivery
Instructions" or the box labeled "Special Payment Instructions" on the Letter of
Transmittal or (ii) for the account of any Eligible Institution. If the
certificates are registered in the name of a person or persons other than the
signer of the Letter of Transmittal, or if payment is to be made, or delivered
to, or certificates for unpurchased Shares or Shareholder Warrants are to be
issued or returned to, a person other than the registered holder, then the
tendered certificates must be endorsed or accompanied by duly executed stock or
warrant powers, in either case signed exactly as the name or names of the
registered holder or holders appear on the certificates, with the signatures on
the certificates or stock or warrant powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
to the Letter of Transmittal.
If the certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) must
accompany each such delivery.
Guaranteed Delivery of Offer Securities. If a holder of Offer Securities
desires to tender Offer Securities pursuant to the Offer and such holder's
certificates representing Shares or Shareholder Warrants or agreement
representing Representative Warrants or the Executive Warrant are not
immediately available or time will not permit all required documents to reach
the Depositary prior to the Expiration Date or the procedure for book-entry
transfer of Shares or Shareholder Warrants cannot be completed on a timely
basis, such Offer Securities may nevertheless be tendered if all of the
following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) (A) in the case of Shares or Shareholder Warrants, the
certificates (or a Book-Entry Confirmation) representing all tendered
Shares or Shareholder Warrants, in proper form for transfer together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), and any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, (B) in the case of Representative
Warrants and the Executive Warrant, the agreements representing all such
tendered Warrants, in proper form for transfer, together with a duly
executed Letter of Transmittal (or a facsimile thereof) and (C) any other
documents required by the Letter of Transmittal are received by the
Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery. The term "trading day" is any day on which
the American Stock Exchange ("Amex") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery and a representation that the shareholder or warrantholder on whose
behalf the tender is being made is deemed to own the Offer Securities being
tendered within the meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision hereof, payment for Offer Securities
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of (i) certificates for, or a Book-Entry
Confirmation with respect to, Shares or Shareholder Warrants or agreements
representing Representative Warrants or the Executive Warrant (unless the
Offeror elects, in its sole discretion, to make payment for the Representative
Warrants or the Executive Warrant pending receipt of the agreements representing
such Warrants or other documentation that the Offeror deems adequate), (ii) a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), with all required signature guarantees or, in the case of a book-entry
transfer of Shares or Shareholder Warrants, an Agent's Message,
9
<PAGE> 13
and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering holders of Offer Securities may be paid at different
times depending upon when certificates or agreements are received by the
Depository or Book-Entry Confirmations with respect to Shares or Shareholder
Warrants are received into the Depositary's account at the Book-Entry Transfer
Facility. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE
PAID BY THE OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING ANY PAYMENT.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT 31% "BACKUP" FEDERAL
INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE OFFER PRICE PURCHASED
PURSUANT TO THE OFFER, EACH HOLDER OF OFFER SECURITIES MUST, SUBJECT TO CERTAIN
EXCEPTIONS, PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH HOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST GENERALLY SUBMIT A
COMPLETED FORM W-8 TO AVOID BACKUP WITHHOLDING. THIS FORM MAY BE OBTAINED FROM
THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET FORTH IN THE LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Offer Securities will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Offer
Securities that are determined by it not to be in proper form or the acceptance
of or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to applicable law and the limitations set forth in the Merger
Agreement, or any defect or irregularity in the tender of any Offer Securities
whether or not similar defects or irregularities are waived in the case of other
security holders. The Offeror's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and the Instructions to the
Letter of Transmittal) will be final and binding on all parties. No tender of
Offer Securities will be deemed to have been validly made until all defects and
irregularities have been cured or waived. Neither the Offeror nor Harris, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message with respect to Shares
or Shareholder Warrants), a tendering holder of Offer Securities irrevocably
appoints designees of the Offeror as such holder's agent, attorneys in fact and
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to exercise all voting and other rights of the holder of
Offer Securities as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Offer Securities tendered
by such holder and accepted for payment by the Offeror (and any and all other
Offer Securities or other securities issued or issuable in respect of such Offer
Securities on or after the date of this Offer to Purchase). All such powers of
attorney and proxies will be considered irrevocable and coupled with an interest
in the tendered Offer Securities. This appointment is effective when, and only
to the extent that, the Offeror accepts for payment the Offer Securities in
accordance with the terms of the Offer. Upon acceptance for payment, all prior
powers of attorney, proxies and written consents granted by the holder of Offer
Securities at any time with respect to such Offer Securities or other securities
or rights issued or issuable in respect of such Offer Securities will, without
further action, be revoked and no subsequent powers of attorney or proxies may
be given or written consent executed by such holder of Offer Securities (and, if
given or executed, will not be deemed effective). The designees of the Offeror
will, with respect to the Offer Securities and other securities or rights, be
empowered to exercise all voting and other rights of such holder of Offer
Securities as they in their sole judgment deem proper in respect of any annual
or special meeting of the Company's shareholders, or any adjournment or
postponement thereof, any actions by written consent in lieu of any such meeting
or otherwise. In order for Offer Securities to be deemed validly tendered,
immediately upon the Offeror's payment for such Offer Securities, the Offeror
must be able to exercise full voting and other rights with respect to such Offer
Securities and the other securities or rights issued or issuable in respect of
such Offer Securities, including voting at any meeting of shareholders (whether
annual or special or whether or not adjourned).
10
<PAGE> 14
A tender of Offer Securities pursuant to any one of the procedures
described above will constitute the tendering Offer Security holder's acceptance
of the terms and conditions of the Offer, as well as the tendering holder's
representation and warranty that (i) such holder of Offer Securities has the
full power and authority to tender, sell, assign and transfer the tendered Offer
Securities (and any and all Offer Securities or other securities issued or
issuable in respect of such Offer Securities), and (ii) when the same are
accepted for payment by the Offeror, the Offeror will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. A tender of Offer
Securities pursuant to any of the procedures described above will constitute the
tendering holder's acceptance of the terms and conditions of the Offer, as well
as the tendering holder's representation and warranty to the Offeror that (a)
such holder of Offer Securities has a net long position in such Offer Securities
being tendered within the meaning of Rule 14e-4 under the Exchange Act and (b)
the tender of such Offer Securities complies with Rule 14e-4 under the Exchange
Act. It is a violation of Rule 14e-4 under the Exchange Act for a person,
directly or indirectly, to tender Offer Securities for such person's own account
unless, at the time of tender, the person so tendering (i) has a net long
position equal to or greater than the amount of (x) Offer Securities tendered or
(y) other securities immediately convertible into or exchangeable or exercisable
for the Offer Securities tendered and such person will acquire such Offer
Securities for tender by conversion, exchange or exercise and (ii) will cause
such Offer Securities to be delivered in accordance with the terms of the Offer.
Rule 14e-4 provides a similar restriction applicable to the tender or guarantee
of a tender on behalf of another person. The Offeror's acceptance for payment of
Offer Securities tendered pursuant to the Offer will constitute a binding
agreement between the tendering holder of Offer Securities and the Offeror upon
the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Offer Securities
made pursuant to the Offer are irrevocable. Offer Securities tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment pursuant to the Offer, may also be
withdrawn at any time after October 8, 1999. If acceptance of any Offer
Securities tendered is delayed for any reason or if the Offeror is unable to
accept for payment or pay for Offer Securities tendered pursuant to the Offer,
then, without prejudice to the Offeror's rights under the Offer, the Depositary
may, on behalf of the Offeror, retain tendered Offer Securities, and such Offer
Securities may not be withdrawn except to the extent that tendering holders of
Offer Securities are entitled to and duly exercise withdrawal rights as set
forth in this Section 4.
For a withdrawal of Offer Securities tendered pursuant to the Offer to be
effective, a written or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase. Any notice of withdrawal must specify the name
of the person who tendered the Offer Securities to be withdrawn, the number of
Offer Securities to be withdrawn and (if certificates representing Shares or
Shareholder Warrants or agreements representing Representative Warrants or the
Executive Warrant have been tendered) the name in which the certificates or
agreements are registered, if different from the name of the person who tendered
the Offer Securities. If certificates representing Shares or Shareholder
Warrants have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and, unless such Shares or
Shareholder Warrants have been tendered for the account of an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares or Shareholder Warrants have been tendered
pursuant to the procedures for book-entry transfer set forth in Section 3, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares or
Shareholder Warrants and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including time
of receipt) of a notice of withdrawal will be determined by the Offeror, in its
sole discretion, and its determination will be final and binding on all parties.
Neither the Offeror or Harris, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
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<PAGE> 15
Any Offer Securities properly withdrawn will be deemed not validly tendered
for purposes of the Offer, but may be tendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial owners of Offer
Securities whose Offer Securities are purchased pursuant to the Offer or whose
Shares are converted to cash in the Merger. The discussion is for general
information only and does not purport to consider all aspects of United States
federal income taxation that might be relevant to beneficial owners of Offer
Securities. The discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and final
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change possibly on a
retroactive basis. The discussion applies only to beneficial owners of Offer
Securities in whose hands Offer Securities are capital assets within the meaning
of Section 1221 of the Code, and may not apply to Offer Securities received
pursuant to the exercise of employee stock options or otherwise as compensation,
or to certain types of beneficial owners of Offer Securities (such as insurance
companies, tax-exempt organizations, mutual funds and broker-dealers) who might
be subject to special rules. This discussion does not discuss the United States
federal income tax consequences to a beneficial owner of Offer Securities who,
for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, nor does it consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF OFFER
SECURITIES SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE
THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Offer Securities pursuant to the Offer or the
receipt of cash for Shares pursuant to the Merger will be a taxable transaction
for United States federal income tax purposes. In general, for United States
federal income tax purposes, a beneficial owner of Offer Securities will
recognize gain or loss equal to the difference (if any) between the beneficial
owner's adjusted tax basis in the Offer Securities sold pursuant to the Offer or
Shares converted to cash in the Merger (or Warrants adjusted pursuant to the
Merger) and the amount of consideration received therefor. In general, such gain
or loss will be capital gain or loss and will be long-term capital gain or loss
if the beneficial owner held the Offer Securities for more than one year as of
the date of sale (in the case of the Offer) or held the Shares for more than one
year as of the Effective Time (in the case of the Merger). The excess of net
long-term capital gains over net short-term capital losses is currently taxed at
a maximum rate of 20% for noncorporate taxpayers.
Payments in connection with the Offer or the Merger might be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of Offer
Securities (a) is a corporation or comes within certain exempt categories and,
when required, demonstrates this fact or (b) provides a correct TIN to the
payor, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
A beneficial owner who does not provide a correct TIN may be subject to
penalties imposed by the Internal Revenue Service. Any amount paid as backup
withholding does not constitute an additional tax and will be creditable against
the beneficial owner's United States federal income tax liability. Each
beneficial owner of Offer Securities should consult with his or her own tax
advisor as to his or her qualification for exemption from backup withholding and
the procedure for obtaining such exemption. Those tendering their Offer
Securities in the Offer may prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. See Section 3.
Similarly, those who convert their Shares into cash in the Merger may prevent
backup withholding by completing the Substitute Form W-9 provided by the paying
agent for the Merger.
In general, cash received in respect of Dissenting Shares will result in
the recognition of capital gain or loss to the beneficial owner of such Shares.
Any such beneficial owner should consult such owner's tax advisor in that
regard.
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<PAGE> 16
Harris and the Offeror will be entitled to deduct and withhold from the
consideration otherwise payable in connection with the Offer or the Merger to
any holder of Offer Securities such amounts as Harris or the Offeror is required
to deduct and withhold with respect to the making of such payment. To the extent
that amounts are so withheld by Harris or the Offeror, such withheld amounts
shall be treated for all purposes of the Merger Agreement as having been paid to
the holder of the Offer Securities in respect of which such deduction and
withholding was made by Harris or the Offeror.
6. PRICE RANGE OF SHARES AND SHAREHOLDER WARRANTS; DIVIDENDS.
According to the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998, the Shares are traded on the Amex under the symbol
"PXE" and the Shareholder Warrants are traded on the Amex under the symbol
"PXEW". The following table sets forth for the periods indicated the reported
high and low sales prices for the Shares for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1997:
First Quarter............................................. $2.63 $2.00
Second Quarter............................................ $3.63 $2.00
Third Quarter............................................. $3.50 $2.69
Fourth Quarter............................................ $4.75 $2.63
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter............................................. $5.00 $3.00
Second Quarter............................................ $5.88 $3.75
Third Quarter............................................. $4.31 $2.00
Fourth Quarter............................................ $2.38 $1.25
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ending December 31, 1999:
First Quarter............................................. $2.06 $0.50
Second Quarter............................................ $1.75 $0.69
Third Quarter (through August 6, 1999).................... $2.44 $1.13
</TABLE>
The following table sets forth for the periods indicated the reported high
and low sales prices for the Shareholder Warrants for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1997:
First Quarter............................................. $0.44 $0.19
Second Quarter............................................ $0.50 $0.25
Third Quarter............................................. $0.63 $0.25
Fourth Quarter............................................ $0.81 $0.31
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter............................................. $0.75 $0.25
Second Quarter............................................ $0.81 $0.38
Third Quarter............................................. $0.88 $0.19
Fourth Quarter............................................ $0.19 $0.06
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ending December 31, 1999
First Quarter............................................. $0.13 $0.06
Second Quarter............................................ $0.06 $0.06
Third Quarter (through August 6, 1999).................... $0.13 $0.06
</TABLE>
On August 2, 1999, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, according to publicly
available sources, the reported closing price per Share on the Amex was $1.1875
and the reported closing price per Shareholder Warrant on the Amex was $0.0625.
On August 6, 1999, the last full day of trading prior to the commencement of the
Offer, according to publicly available sources, the reported closing price per
Share on the Amex was $2.25 and the reported closing price per Shareholder
Warrant was $0.125. HOLDERS OF SHARES AND SHAREHOLDER WARRANTS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES AND SHAREHOLDER WARRANTS.
The Company has not declared or paid any cash dividends on the Shares. The
Shareholder Warrants are not entitled to dividends.
The Representative Warrants are held by six holders and are not entitled to
dividends. No price quotations are available for the Representative Warrants. If
the Merger is completed, the $8.52 per Share and $0.155 per Shareholder Warrant
exercise prices of a Representative Warrant will exceed the $2.35 per Share
payable upon exercise of the Representative Warrant and the $0.15 per
Shareholder Warrant payable upon exercise of the Representative Warrant. As a
result, holders of Representative Warrants should consider tendering their
Representative Warrants for the Representative Warrant Offer Price.
The Executive Warrant is held by a single holder and is not entitled to
dividends. No price quotations are available for the Executive Warrant. The
Executive Warrant is not entitled to dividends. If the Merger is completed, the
$4.68 per Share exercise price of the Executive Warrant will exceed the $2.35
per Share payable upon exercise of the Executive Warrant. As a result, the
holder of the Executive Warrant should consider tendering the Executive Warrant
for the Executive Warrant Offer Price.
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Offer Securities by the Offeror pursuant to the Offer
will reduce the number of Shares and Shareholder Warrants that might otherwise
trade publicly and will reduce the number of holders of Shares and Shareholder
Warrants, and could adversely affect the liquidity and market value of the
remaining Shares and Shareholder Warrants held by the public. The Company has
advised the Offeror that, as of August 2, 1999, there were approximately 18
holders of record and approximately 400 beneficial owners of the Shares and
approximately 9 holders of record and approximately 300 beneficial owners of the
Shareholder Warrants. The Offeror cannot predict whether the reduction in the
number of Shares and Shareholder Warrants that might otherwise trade publicly
would have an adverse or beneficial effect on the market price for or
marketability of the Shares and Shareholder Warrants or whether it would cause
future market prices to be greater or less than the Offer Price therefor.
Amex Quotation. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the standards for continued inclusion
on the Amex. The Amex will normally consider suspending dealings in, or removing
from the list, the common stock of a company that: (i) has fewer than 200,000
publicly held Shares, (ii) has an aggregate market value of publicly held Shares
of less than $1 million, and (iii) has fewer than 300 holders of Shares. Shares
held, directly or indirectly, by an officer or director of the Company, or by
any beneficial owner of more than 10% of the Shares, ordinarily will not be
considered as being publicly held for this purpose.
Depending upon the number of Shareholder Warrants and Shares purchased
pursuant to the Offer, the Shareholder Warrants may no longer meet the standards
for continued inclusion on the Amex. The Amex generally will not consider
listing the warrant issue of a company unless the common stock underlying the
warrants is listed either on the Amex or the New York Stock Exchange. If, as a
result of the purchase of the
14
<PAGE> 18
Shares, pursuant to the Offer or otherwise, the Shareholder Warrants no longer
meet the standards for the continued inclusion on the Amex, the market for the
Shareholder Warrants could be adversely affected.
If the Shares or Shareholder Warrants are no longer eligible for Amex
quotation, quotations might still be available from other sources. The extent of
the public market for the Shares or Shareholder Warrants and the availability of
such quotations would, however, depend upon the number of holders of such Shares
or Shareholder Warrants remaining at such time, the interest in maintaining a
market in such Shares or Shareholder Warrants on the part of securities firms,
the possible termination of registration of such Shares or Shareholder Warrants
under the Exchange Act as described below and other factors.
Exchange Act Registration. The Shares and Shareholder Warrants are
currently registered under the Exchange Act. Such registration may be terminated
upon application by the Company to the Commission if the Shares or Shareholder
Warrants are neither listed on a national securities exchange nor held by 300 or
more holders of record. It is the intention of the Offeror to seek to cause an
application for such termination to be made as soon after consummation of the
Offer as the requirements for termination of registration of the Shares and
Shareholder Warrants are met. If such registration were terminated, the Company
would no longer legally be required to disclose publicly in proxy materials
distributed to shareholders the information which it now must provide under the
Exchange Act or to make public disclosure of financial and other information in
annual, quarterly and other reports required to be filed with the Commission
under the Exchange Act; the Company would no longer be subject to Rule 13e-3
under the Exchange Act relating to "going private" transactions; and the
officers, directors and 10% shareholders of the Company would no longer be
subject to the "short-swing" insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities under Rule
144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired, or, with respect to certain persons,
eliminated.
If registration of the Shares and Shareholder Warrants is not terminated
prior to the Merger, then the Shares and Shareholder Warrants will no longer be
eligible for Amex quotation and the registration of the Shares and Shareholder
Warrants under the Exchange Act will be terminated following the consummation of
the Merger.
Margin Regulations. The Shares and Shareholder Warrants are currently
"margin securities" under the regulations of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), which has the effect,
among other things, of allowing brokers to extend credit on the collateral of
such Shares and Shareholder Warrants for the purpose of buying, carrying or
trading in securities ("Purpose Loans"). Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares and Shareholder Warrants would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
Purpose Loans made by brokers. If registration of Shares and Shareholder
Warrants under the Exchange Act were terminated, such Shares and Shareholder
Warrants would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither the Offeror nor Harris has any knowledge that would
indicate that statements contained herein based upon such documents are untrue,
neither the Offeror nor Harris assumes any responsibility for the accuracy or
completeness of the information concerning the Company or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to the
Offeror or Harris.
15
<PAGE> 19
The Company is a California corporation with its principal executive
offices located at 2070 Las Palmas Drive, Carlsbad, California 92009. The
Company produces audio products and studio design services for the radio and
television broadcasting industry.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998 and the Company's Quarterly Report on Form 10-QSB for the quarterly period
ended March 31, 1999. More comprehensive financial information is included in
such report and other documents filed by the Company with the Commission, and
the following summary is qualified in its entirety by reference to such report
and such other documents and all the financial information (including any
related notes) contained therein. Such report and other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth below.
PACIFIC RESEARCH & ENGINEERING CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1998 1997 (AS RESTATED) 1996 (AS RESTATED)
----------- ------------------ ------------------
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales............................. $14,051,981 $12,287,973 $7,696,160
Cost of sales......................... 10,599,745 7,013,069 4,547,132
Gross profit.......................... 3,452,236 5,274,904 3,149,028
General and administrative............ 2,976,780 1,763,602 1,331,438
Selling and marketing................. 2,533,433 1,840,711 1,079,137
Engineering and development........... 1,278,178 1,693,443 1,228,209
Depreciation and amortization......... 488,751 295,828 187,588
Total operating expenses.............. 7,277,142 5,593,584 3,826,372
Loss from operations.................. $(3,824,906) $ (318,680) $ (677,344)
Other income (expenses)............... (160,678) 62,524 47,896
Loss before income taxes.............. (3,985,584) (256,156) (629,448)
Income tax expense.................... (800) (19,500) (800)
Net loss.............................. (3,986,384) (275,656) (630,248)
Net loss per share.................... (1.73) (0.12) (0.33)
Weighted average basic shares
outstanding......................... 2,305,500 2,305,500 1,888,833
BALANCE SHEET DATA:
Working capital....................... $(2,438,000) $ 1,355,139 $2,797,384
Total assets.......................... 6,134,319 7,286,852 5,783,324
Total long-term debt.................. 0 18,968 37,156
Total shareholders' equity
(deficit)........................... (281,320) 3,721,177 4,052,030
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------
MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
-------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales....................................... $4,232,654 $3,987,781
Cost of sales................................... 2,507,587 2,843,603
Gross profit.................................... 1,725,067 1,144,178
General and administrative...................... 573,798 422,997
Selling and marketing........................... 570,449 650,235
Research and development........................ 306,398 297,779
Depreciation and amortization................... 106,947 98,864
Total operating expenses........................ 1,557,592 1,469,875
Operating income (loss)......................... $ 167,475 $ (325,697)
Interest expense................................ (76,413) (28,420)
Other expense, net.............................. (813) (26,327)
Income (loss) before income tax expense......... 90,249 (380,444)
Income tax expense.............................. -- (800)
Net income (loss)............................... $ 90,249 $ (381,244)
Net income (loss) per common share:
Basic and Diluted............................. $ 0.04 $ (0.16)
Weighted average common shares:
Basic and Diluted............................. 2,305,500 2,305,500
</TABLE>
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interests of such
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Delaware 60661. Copies of such material may
also be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports and other information regarding registrants that file
electronically with the Commission.
In the course of the discussions between representatives of Harris and
Company (see Section 11), the Company provided to Harris certain information
about the Company and its financial performance which is not publicly available.
The information provided included projected financial information for the fiscal
years ending December 1999, 2000 and 2001 (the "Projections"). The Projections
were prepared by the Company's management for internal planning and budgeting
purposes only and not with a view to public disclosure. The projections included
estimates of (i) net sales of $16.5 million, $20.2 million and $26.6 million for
the Company's fiscal years ending December 1999, 2000 and 2001, respectively,
and (ii) net income of $160,000, $950,000 and $1.7 million for the Company's
fiscal years ending December 1999, 2000 and 2001, respectively. None of the
assumptions underlying the Projections give effect to the Offer or the Merger,
but the Projections are based on the assumption that a $5 million cash infusion
will be made in the Company.
The Projections were not prepared with a view to public disclosure or
compliance with published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants regarding
projections, and are included in this Offer to Purchase only because they were
provided to Harris. None of Harris, the Offeror, the Company or any party to
whom the Projections were provided assumes any responsibility for the validity,
reasonableness, accuracy or completeness of such information.
17
<PAGE> 21
While presented with numerical specificity, the Projections are based upon a
variety of assumptions relating to commercial acceptance of the Company's
products and technology, industry performance, general business and economic
conditions, the business of the Company and other matters which may not be
realized and are subject to significant uncertainties and contingencies, many of
which are beyond the control of the Company. There can be no assurance that the
Projections will be realized, and actual results may vary materially from those
shown. The Projections have not been examined or compiled by the Company's
independent public accountants. The inclusion of such Projections herein should
not be regarded as an indication that Harris, the Offeror, the Company or any
other party who received such information considers it an accurate prediction of
future events. Harris performed an independent assessment of the Company's value
and did not rely to any material degree upon the Projections. None of the
Company, Harris, the Offeror or any other party intends to publicly update or
otherwise publicly revise the Projections set forth above even if experience or
future changes make it clear that the projections will not be realized.
9. CERTAIN INFORMATION CONCERNING THE OFFEROR AND HARRIS.
The Offeror is a newly incorporated California corporation. To date, the
Offeror has not conducted any business other than that incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Accordingly, no meaningful financial information with
respect to the Offeror is available. The Offeror is a wholly owned subsidiary of
Harris. The principal executive office of the Offeror is located at 1025 West
NASA Boulevard, Melbourne, Florida 32919.
Harris, a Delaware corporation, has its principal executive office at 1025
West NASA Boulevard, Melbourne, Florida 32919. It is an international
communications equipment company focused on providing product, system, and
service solutions. Harris provides a wide range of products and services for
commercial and government communications markets such as wireless, broadcast,
government and network support. Harris has sales and service facilities in
nearly 90 countries.
Comprehensive financial information is included in Harris's Annual Report
on Amendment No. 1 to Form 10-K/A for the fiscal year ended July 3, 1998;
Amendment No. 1 to Form 10-Q/A for the fiscal quarter ended October 2, 1998;
Amendment No. 1 to Form 10-Q/A for the fiscal quarter ended January 1, 1999; and
Form 10-Q for the fiscal quarter ended April 2, 1999; and Current Reports on
Form 8-K and other documents filed by Harris with the Commission.
Harris is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports and other information with the
Commission relating to its business, financial condition and other matters. Such
reports and other information are available for inspection and copying at the
offices of the Commission in the same manner as set forth with respect to the
Company in Section 8.
During the past five years, Harris has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), nor has it
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors and
executive officers of Harris and the Offeror are set forth in Annex I to this
Offer to Purchase. Each such executive officer and director is a citizen of the
United States of America. During the past five years, none of the executive
officers or directors has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Except as described in this Offer to Purchase, neither the Offeror nor
Harris, or to the best knowledge of the Offeror or Harris, any of the persons
listed in Annex I hereto, owns or has any right to acquire any Offer Securities
and none of them has effected any transaction in the Offer Securities during the
past 60 days.
18
<PAGE> 22
Except as set forth in this Offer to Purchase, neither the Offeror nor
Harris or, to the best knowledge of the Offeror or Harris, any of the persons
listed in Annex I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, there have been no contacts, negotiations or
transactions between the Offeror, or Harris, or, to the best of their knowledge,
any of the persons listed in Annex I hereto, on the one hand, and the Company or
its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets. Except as
described in this Offer to Purchase, neither the Offeror nor Harris or, to the
best knowledge of Harris or the Offeror, any of the persons listed in Annex I
hereto, has had any transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS.
The Offeror estimates that the total amount of funds required to (i)
purchase the Shares and the Warrants pursuant to the Offer and (ii) pay fees and
expenses related to the Offer and the Merger will be approximately $6.5 million.
The Offeror will obtain the funds from Harris. Harris currently anticipates
obtaining the necessary funds from cash on hand.
While the foregoing represents the current intention of Harris and the
Offeror with respect to the financial arrangements for such funds, such
financial arrangements may change depending upon such factors as Harris and the
Offeror may deem appropriate.
The Offer is not subject to a financing condition.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
On November 11, 1998, Jack Williams, Chairman of the Board and Chief
Executive Officer of the Company, Donald Naab, President and Chief Operating
Officer of the Company met with Roy Ridge, an independent consultant for Harris.
At this meeting, the Company indicated that it would be willing to explore an
alliance with Harris, which might include an equity investment by Harris in the
Company. The representatives of the Company indicated to Mr. Ridge that the
Company was not interested in an acquisition by Harris at this time. Mr. Ridge
indicated that although Harris was interested in exploring a relationship with
the Company, an equity investment for a minority holding in the Company was not
acceptable to Harris. Mr. Ridge communicated the results of this meeting to
James Woods, vice president of the radio systems business unit of Harris
Broadcast Communications Division.
On March 18, 1999, Mr. Naab, Mr. Williams and Herbert McCord, a member of
the Company's Board of Directors, met with Mr. Woods and Mr. Ridge to discuss
further the possibility of some form of business relationship. At this meeting,
the Company disclosed its plan to restate its previous financial statements and
presented a business plan to become more profitable in fiscal year 1999. Mr.
McCord suggested that a business combination could be structured as an
acquisition of the Company, as opposed to an alliance calling for an equity
investment by Harris. The Company indicated that a price for the Company, based
on a one times projected revenue stream for 1999 would be acceptable. Mr. Woods
requested that Harris be allowed to perform due diligence on the Company in
April.
During the week of April 7, Mr. Ridge met with representatives of the
Company in Carlsbad to further discuss an acquisition of the Company.
Subsequently, Mr. Ridge received a letter dated April 14, 1999, from Mr.
Williams indicating the Company's interest in an acquisition in which the
holders of the Company's stock would receive $6.94 per Share. Mr. Woods
communicated to Mr. Williams and Mr. Naab that such price was higher than a
price that Harris might be willing to pay, but indicated that he would put
together a business case for the management of Harris. No further action was
taken by Harris during the remainder of April and the early part of May.
19
<PAGE> 23
On May 21, 1999, Mr. Ridge received a letter from Mr. Naab indicating that
the Company was interested in pursuing an acquisition of the Company by Harris.
A series of telephone conversations between the Company and Mr. Woods resulted
in a meeting on June 14, 1999 at the Cincinnati offices of Harris, attended by
Mr. Williams, Ellyn Williams, the wife of Mr. Williams, Mr. Naab, Mr. Ridge, Mr.
Woods and Gary McArthur, director of corporate development of Harris, in which
the parties discussed proposed structures for a potential transaction and a plan
of action for further due diligence of the Company by Harris.
On June 15, 1999, the Company and Harris executed a confidentiality
agreement.
On June 17, 1999, Mr. Naab, Mr. Williams, Blake Clark, Chief Financial
Officer of the Company, Mr. McArthur, Mr. Woods and Dean Pomeroy, Vice President
and Controller of the Harris Broadcast Communications Division, met in
Minneapolis to discuss the proposed acquisition. The Company delivered a
preliminary due diligence book concerning the Company at this meeting.
On June 21, 1999, Mr. McArthur, Mr. Pomeroy and Mr. Woods indicated to Mr.
Naab and Mr. Williams that a transaction with the Company would likely value the
Company at approximately $2.75 per Share, assuming that the Company had a debt
level of $2.8 million. The Company communicated to Harris that a purchase price
of $2.75 would be acceptable if extended by Harris.
On June 25, 1999, the Board of Directors of Harris approved the transaction
and all further actions related thereto and authorized and approved certain
officers of Harris to negotiate and execute any documents or other instruments
required to complete the transaction.
During the week of June 28, 1999, Harris commenced a broader due diligence
of the Company. On July 2, 1999, Harris and the Company signed a letter
confirming the previously signed confidentiality agreement among the parties and
also confirming that the Company would work with Harris on an exclusive basis
through July 14, 1999 for the purpose of negotiating a definitive agreement.
During the week of July 12, 1999, the parties began the negotiation of a
definitive agreement. On July 16, 1999, the letter to work with Harris on an
exclusive basis was extended to July 23, 1999.
During the week of July 19, 1999, Harris continued its due diligence of the
Company and continued to negotiate the terms of the definitive agreement. During
the week of July 26, 1999, based upon the results of its due diligence and
related concerns Harris indicated to the Company that Harris would be willing to
commence a tender offer at a price of $2.35 per Share and $0.15 per warrant.
While the negotiation of a definitive agreement was underway, Harris and certain
directors and shareholders of the Company negotiated the terms of proposed
shareholders agreements relating to the proposed transaction. Harris and the
Company also negotiated the terms of a proposed stock option agreement relating
to the proposed transaction.
During the negotiations, counsel for the Company and Harris held a series
of telephone conferences in which the terms of the Merger Agreement, the
Shareholder Agreements and the Option Agreement continued to be negotiated by
the parties. On July 30, 1999, the Board of Directors of the Company at a
telephone meeting with all members present unanimously (i) determined that the
Merger Agreement was fair to and in the best interests of the shareholders of
the Company, (ii) declared the Merger Agreement and the transactions
contemplated thereby to be advisable and in the best interests of the holders of
the Offer Securities, (iii) approved the Merger Agreement, the Option Agreement,
the Offer and the Merger and the transactions contemplated thereby, (iv)
recommended that the holders of Offer Securities accept the Offer, tender their
Offer Securities pursuant to the Offer and (v) that the holders of Shares
approve and adopt the Merger Agreement and the transactions contemplated
thereby. The Board of Directors of the Company authorized and approved certain
officers of the Company to negotiate and execute any documents or other
instruments required to complete the transaction and extended the letter to work
with Harris on an exclusive basis to August 2, 1999.
From July 30, 1999 through August 2, 1999, the final terms of the Merger
Agreement, the Shareholder Agreements and the Option Agreement were negotiated
to the mutual satisfaction of the parties. At the end of the business day on
August 2, 1999, the Merger Agreement, the Shareholder Agreements and the Option
Agreement were signed and delivered by the respective parties.
20
<PAGE> 24
On August 3, 1999, prior to the opening of stock trading, Harris and the
Company issued a press release announcing the transaction. On August 9, 1999,
the Offeror commenced the Offer.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; DISSENTERS
RIGHTS.
The purpose of the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby, is to enable Harris to acquire control of,
and the entire equity interest in, the Company.
Pursuant to the CGCL and the Articles of Incorporation of the Company, the
approval of the Board of Directors of the Company and the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve the
Merger Agreement. The Board of Directors of the Company has unanimously approved
the Merger Agreement, the terms of the Offer and the Merger, and, unless the
Merger is consummated pursuant to the short form merger provisions under the
CGCL as described below (in which case no action by the shareholders of the
Company will be required to consummate the Merger), the only remaining required
corporate action of the Company is the approval of the Merger Agreement by the
affirmative vote of the holders of a majority of the outstanding Shares. If the
Minimum Condition were satisfied and the Offeror were to purchase Offer
Securities tendered pursuant to the Offer, it would have sufficient voting power
to effect the Merger without the vote of any other shareholder of the Company.
If all conditions of the Offer other than the Minimum Condition have been
satisfied or waived, the Offeror may withdraw the Offer and, at the request of
the Offeror, the Company, as soon as practicable following the withdrawal of the
Offer, will duly call, give notice of, convene and hold a Special Shareholders
Meeting for the purpose of considering and taking action upon the Merger and the
Merger Agreement. Alternatively, the Offeror may amend the Offer for the purpose
of purchasing the Revised Minimum Number and call a Special Shareholders Meeting
for the purpose of considering and taking action upon the Merger and the Merger
Agreement. Harris has agreed that all Shares owned by the Offeror or any other
subsidiary of Harris will be voted in favor of approval of the Merger Agreement.
The Tendering Shareholders have agreed to tender their Offer Securities pursuant
to the Offer or vote their Shares in favor of approval of the Merger Agreement.
Approval of the Merger Agreement, therefore, can be obtained without the
affirmative vote of any shareholder of the Company other than the Tendering
Shareholders.
Short-Form Merger. Section 1110 of the CGCL provides that, if a parent
corporation owns at least 90% of the outstanding shares of each class of a
subsidiary corporation, the merger of the parent corporation with the subsidiary
corporation may be effected by having the board of directors of the parent
corporation approve and adopt a resolution or plan of merger and by making the
appropriate filings with the California Secretary of State, without any action
or vote on the part of the shareholders of the subsidiary corporation. Under the
CGCL, if the Offeror acquires, pursuant to the Offer or otherwise, at least 90%
of the outstanding Shares, the Offeror will be able to effect the Merger without
a vote of the shareholders of the Company. If the Minimum Condition were
satisfied, Harris, the Offeror and the Company have agreed in the Merger
Agreement to take, subject to the satisfaction or (to the extent permitted under
the Merger Agreement) waiver of the conditions set forth in the Merger
Agreement, all necessary and appropriate action to cause the Merger to be
effective as soon as practicable after the acceptance for payment and purchase
of the Offer Securities pursuant to the Offer without a meeting of the
shareholders of the Company.
Under the CGCL, the Merger consideration paid to the Company's Shareholders
may not be cash if the Offeror or Harris owns, directly or indirectly, more than
50% but less than 90% of the then outstanding Shares unless either all the
shareholders consent or the Commissioner of Corporations of the State of
California approves, after a hearing, the terms and conditions of the Merger and
the fairness thereof. If such shareholder consent or Commissioner of
Corporations approval is not obtained, the CGCL requires that the consideration
received in the Merger consist only of non-redeemable common stock of Harris.
The purpose of the Offer is to obtain 90% or more of the Shares and thus to
enable Harris and the Offeror to acquire all the equity of the Company for
consideration consisting solely of cash.
Dissenters Rights. Neither shareholders nor warrantholders have dissenters
rights as a result of the Offer. However, if the Merger is consummated, holders
of Shares at the Effective Time, but not the holders of Warrants, by complying
with the provisions of Chapter 13 of the CGCL, may have certain rights to
dissent
21
<PAGE> 25
and to require the Company to purchase their Shares for cash at "fair market
value." In general, holders of Shares will be entitled to exercise dissenters
rights under the CGCL only if the holders of five percent or more of the
outstanding Shares properly file demands for payment or if the Shares held by
such holders are subject to any restriction on transfer imposed by the Company
or by any law or regulation ("Restricted Shares"). Accordingly, if any holder of
Restricted Shares or the holders of five percent or more of the Shares properly
file demands for payment, all other holders who fully comply with all other
applicable provisions of Chapter 13 of the CGCL will be entitled to require the
Company to purchase their Shares for cash at their fair market value if the
Merger is consummated. In addition, if immediately prior to the Effective Time,
the Shares are not listed on a national securities exchange certified by the
California Commissioner of Corporations or on the list of over-the-counter
margin stocks issued by the Federal Reserve Board, holders of Shares may
exercise dissenters rights as to any or all of their Shares entitled to such
rights.
If the statutory procedures under the CGCL relating to dissenters rights
are complied with, such rights could lead to a judicial determination of the
fair market value of the Shares. The "fair market value" would be determined as
of the day before the first announcement of the terms of the Merger, excluding
any appreciation or depreciation as a result of the proposed action. The value
so determined could be more or less than the Share Offer Price.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS RIGHTS AND IS
QUALIFIED IN IS ENTIRETY BY REFERENCE TO THE CGCL. THE PRESERVATION AND EXERCISE
OF DISSENTERS RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF
THE CGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may, under
certain circumstances, be applicable to the Merger or another business
combination in which the Offeror seeks to acquire the remaining Shares or
Shareholder Warrants not held by it following the purchase of Shares or
Shareholder Warrants pursuant to the Offer. The Offeror believes, however, that
Rule 13e-3 will not be applicable to the Merger if the Merger is consummated
within one year after the termination of the Offer at the Share Offer Price. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction be filed with the Commission and disclosed to
shareholders prior to consummation of the transaction.
Plans for the Company. Harris will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. Harris intends to seek additional
information about the Company during this period. Thereafter, Harris intends to
review such information as part of a comprehensive review of the Company's
business, operations, capitalization and management with a view to optimizing
the Company's potential contribution to Harris's business.
Except as indicated in this Offer to Purchase, Harris does not have any
current plans or proposals which relate to or would result in any of the
following: an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries;
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries; any change in the present Board of Directors or management of the
Company; any material change in the Company's dividend policy; or any other
material change in the Company's corporate structure or business.
Notwithstanding the foregoing, promptly after the Offeror acquires the Offer
Securities pursuant to the Offer, the Offeror will be entitled to designate such
number of directors on the Board of Directors of the Company, subject to
compliance with Section 14(f) of the Exchange Act, as will make the percentage
of the Company's directors designated by the Offeror equal to the percentage of
the aggregate voting power of the Shares then outstanding held by Harris or any
of its subsidiaries, and if Harris and its subsidiaries hold at least 90% of the
aggregate voting power of the Shares, the Offeror shall be entitled to designate
all of the members of the Board of Directors of the Company. The Company shall
take all action to cause the Offeror's designees to be so elected. However,
until the Effective Time, the Board of Directors of the Company shall have at
least three directors who were directors on the date of the Merger Agreement and
who are not officers of the Company. In addition, assuming the designation of
22
<PAGE> 26
directors as aforesaid and so long as there are holders of Shares other than
Harris or any of its subsidiaries, Harris expects that the Board of Directors
would not declare dividends on the Shares.
13. THE MERGER AGREEMENT; THE SHAREHOLDER AGREEMENTS; AND THE OPTION AGREEMENT.
The following summary of certain provisions of the Merger Agreement, the
Shareholder Agreements and the Option Agreement, copies of which are filed as
exhibits to the Schedule 14D-1, is qualified in its entirety by reference to the
text of such agreements.
The Merger Agreement
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Each of the Company, Harris and the Offeror have agreed to
use its commercially reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements that may be
imposed on itself with respect to the Offer and the Merger and shall cooperate
with each other in connection with any such requirements imposed upon any of
them in connection with the Offer and the Merger. Each of the Company, Harris
and the Offeror shall, and shall cause its subsidiaries to, use its commercially
reasonable efforts to take all reasonable actions necessary to obtain (and shall
cooperate with each other in obtaining) any consent, approval of, or any waiver
from, any governmental entity or other public or private third party required to
be obtained or made by Harris, the Offeror or the Company or any of their
subsidiaries in connection with the Offer and the Merger or the taking of any
action contemplated thereby or by the Merger Agreement.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the CGCL, the
Offeror shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Offeror shall
cease and the Company shall continue its corporate existence under the laws of
the State of California as the Surviving Corporation and shall succeed to and
assume all the rights and obligations of the Offeror and the Company in
accordance with the CGCL. At the Effective Time, the charter and the bylaws of
the Offeror shall be the charter and the bylaws of the Surviving Corporation,
and the directors and officers of the Offeror shall become the directors and
officers of the Surviving Corporation. The Merger Agreement further provides
that upon the terms and subject to the conditions of the Merger Agreement, if
the Offeror acquires at least 90% of the outstanding Shares, the parties to the
Merger Agreement will take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after acceptance and payment
for the Shares by the Offeror pursuant to the Offer without a meeting of the
shareholders of the Company, in accordance with Section 1110 of the CGCL.
Conversion of Securities. As of the Effective Time, by virtue of the
Merger and without any action on the part of the Offeror, the Company or the
holders of any securities of the Offeror or the Company, each Share (other than
Shares owned by the Company, any wholly owned subsidiary of the Company, Harris,
the Offeror, any other wholly-owned subsidiary of Harris or shares held by
shareholders who perfect their appraisal rights under the CGCL) shall be
converted into the right to receive from the Surviving Corporation, in cash,
without interest, the Share Offer Price (or any higher price that may be paid
for each Share pursuant to the Offer). Each share of stock of the Offeror issued
and outstanding immediately prior to the Effective Time shall, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of stock of the Offeror, be converted into and become one fully
paid and nonassessable share of common stock, no par value, of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. As a result, the Surviving Corporation will be a
wholly owned subsidiary of Harris. Each Shareholder Warrant that is issued and
outstanding immediately prior to the Effective Time (other than any Shareholder
Warrants owned by the Company, any wholly owned subsidiary of the Company,
Harris, the Offeror or any other wholly owned subsidiary of Harris) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
no longer be exercisable into the right to receive Shares, but shall become
exercisable, in accordance with Section 9.4 of the Shareholder Warrant
Agreement, into the right to receive an amount in cash equal to the Share Offer
Price (or any higher price that may be paid for each Share pursuant to the
Offer), without interest, upon exercise of the Shareholder Warrant
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and payment by the holder of the exercise price as provided in the Shareholder
Warrant Agreement. Each Representative Warrant that is issued and outstanding
immediately prior to the Effective Time (other than any Representative Warrants
owned by the Company, any wholly owned subsidiary of the Company, Harris, the
Offeror or any other wholly owned subsidiary of Harris) shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
exercisable into the right to receive Shares or Shareholder Warrants, but shall
become exercisable, in accordance with Section (g)(B) of the Representative
Warrant Agreement, into the right to receive (i) for each Share underlying the
Representative Warrant, an amount in cash equal to the Share Offer Price (or any
higher price that may be paid for each Share pursuant to the Offer), without
interest, upon exercise of the Representative Warrant and payment by the holder
of the exercise price for each Share as provided in the Representative Warrant
Agreement and (ii) for each Shareholder Warrant underlying the Representative
Warrant, an amount in cash equal to the Shareholder Warrant Offer Price (or any
higher price that may be paid for each Shareholder Warrant pursuant to the
Offer), without interest, upon exercise of the Representative Warrant and
payment by the holder of the exercise price for each Shareholder Warrant as
provided in the Representative Warrant Agreement. If issued and outstanding
immediately prior to the Effective Time, the Executive Warrant shall, by virtue
of the Merger and without any action on the part of the holder thereof, no
longer be exercisable into the right to receive Shares, but shall become
exercisable, in accordance with Section 13.1(a) of the Executive Warrant
Agreement, into the right to receive for each Share underlying the Executive
Warrant, an amount in cash equal to the Share Offer Price (or any higher price
that may be paid for each Share pursuant to the Offer), without interest, upon
exercise of the Executive Warrant and payment of the exercise price for each
Share as provided in the Executive Warrant Agreement.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Harris and the Offeror. The
representations and warranties of the Company relate, among other things, to its
organization, good standing and corporate power; capital structure; authority to
enter into the Merger Agreement and the Option Agreement and to consummate the
transactions contemplated thereby; required consents and approvals and no
violations; filings made by the Company with the Commission under the Securities
Act and the Exchange Act (including financial statements included in the
documents filed by the Company under these acts); information supplied by the
Company; the absence of certain events since December 31, 1998; permits and
compliance with laws; tax matters; actions and proceedings; certain agreements;
benefit plans and employees, employment practices and change of control
agreements; compliance with worker safety laws; liabilities; products; certain
labor matters; intellectual property matters and Year 2000 compliance; title to
assets; state takeover laws; required votes; accounts receivable; inventories;
environmental matters; suppliers and customers; insurance; accuracy of certain
information; transactions with affiliates; brokers and contracts.
The Offeror and Harris have also made customary representations and
warranties to the Company. Representations and warranties of the Offeror and
Harris relate, among other things, to: their organization and authority to enter
into the Merger Agreement, the Option Agreement and the Shareholder Agreements
and to consummate the transactions contemplated thereby; required consents and
approvals and no violations; information supplied; operations of the Offeror;
and brokers.
Covenants Relating to the Conduct of Business. During the period from the
date of the Merger Agreement through the Effective Time, the Company has agreed
that, except as otherwise expressly contemplated by the Merger Agreement or
without the prior written consent of Harris:
(a) the Company shall in all material respects carry on its business
in the ordinary course of its business as currently conducted and, to the
extent consistent therewith, use its commercially reasonable efforts to
preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it;
(b) the Company shall not (i) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to its
shareholders in their capacity as such, (ii) split, combine or reclassify
any of its capital
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stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(c) the Company shall not issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or any
rights, warrants or options (including options under the Company stock
option plans) to acquire any such shares, voting securities, equity
equivalent or convertible securities, other than (i) the issuance of Shares
upon the exercise of Company stock options outstanding on the date of the
Merger Agreement in accordance with their current terms, (ii) the issuance
of Shares upon exercise of the Warrants, or (iii) the issuance of Shares
pursuant to the Option Agreement.
(d) the Company shall not amend its charter or bylaws;
(e) the Company shall not acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of
or equity in, or by any other manner, any business or any corporation,
limited liability company, partnership, association or other business
organization or division thereof;
(f) the Company shall not, sell, lease or otherwise dispose of, or
agree to sell, lease or otherwise dispose of, any of its assets, other than
sales of inventory that are in the ordinary course of business consistent
with past practice;
(g) the Company shall not incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances or capital
contributions to, or other investments in, any other person, other than in
the ordinary course of business consistent with past practice;
(h) the Company shall not alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the corporate
structure or ownership of the Company;
(i) the Company shall not enter into or adopt any, or amend any
existing, severance plan, agreement or arrangement or enter into or amend
any employee benefit plan or employment or consulting agreement;
(j) the Company shall not increase the compensation payable or to
become payable to its directors, officers or employees (except for
increases in the ordinary course of business consistent with past practice
in salaries or wages of employees of the Company who are not officers of
the Company) or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director or officer of the
Company or establish, adopt, enter into, or, except as may be required to
comply with applicable law, amend in any material respect or take action to
enhance in any material respect or accelerate any rights or benefits under,
any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee;
(k) the Company shall not knowingly violate or knowingly fail to
perform any obligation or duty imposed upon it by any applicable material
federal, state or local law, rule, regulation, guideline or ordinance;
(l) the Company shall not make any change to accounting policies or
procedures (other than actions required to be taken by generally accepted
accounting principles);
(m) the Company shall not prepare or file any tax return inconsistent
with past practice or, on any such tax return, take any position, make any
election, or adopt any method that is inconsistent with positions taken,
elections made or methods used in preparing or filing similar tax returns
in prior periods;
(n) the Company shall not settle or compromise any federal, state,
local or foreign income tax dispute;
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(o) the Company shall not settle or compromise any claims or
litigation or commence any litigation or proceedings;
(p) the Company shall not enter into or amend any agreement or
contract (i) having a term in excess of 12 months and which is not
terminable by the Company without penalty or premium by notice of 30 days
or less, (ii) which involves or is expected to involve future payments of
$100,000 or more during the term thereof; or (iii) any other agreement or
contract material to the Company; or purchase any real property, or make or
agree to make any new capital expenditure or expenditures (other than the
purchase of real property) which in the aggregate are in excess of
$100,000;
(q) the Company shall not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
of any such claims, liabilities or obligations, in the ordinary course of
business consistent with past practice or in accordance with their terms;
(r) the Company shall not purchase or exercise the option to purchase
the aircraft pursuant to the Aircraft Purchase and Sale Agreement between
the Company and VisionAire Corporation dated December 18, 1996; and
(s) the Company shall not authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
No Solicitation. The Company shall not, nor shall it permit any affiliate
to, nor shall it authorize or permit any officer, director or employee of or any
financial advisor, attorney or other advisor or representative of, the Company
or any of its affiliates to, (i) solicit, initiate or encourage the submission
of, any Takeover Proposal (as defined below), (ii) enter into any agreement with
respect to or approve or recommend any Takeover Proposal or (iii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to the Company or any affiliate in connection with, or
take any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Takeover
Proposal; provided, however, that prior to the acceptance for payment of Offer
Securities pursuant to the Offer, if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior Proposal
(as defined below), then, to the extent required by the fiduciary obligations of
the Board of Directors of the Company, as determined in good faith by a majority
thereof after consultation with independent counsel, the Company and its
representatives may, in response to an unsolicited request therefor, and subject
to compliance with the Merger Agreement, furnish information with respect to the
Company and its affiliates to any person pursuant to a customary confidentiality
statement (as determined by the Company's independent counsel) and participate
in discussions or negotiations with such person. For purposes of the Merger
Agreement, "Takeover Proposal" means any proposal for a merger or other business
combination involving the Company or any of its affiliates or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in,
any voting securities of, or a substantial portion of the assets of the Company
or any of its affiliates, other than the transactions contemplated by the Merger
Agreement, the Option Agreement and certain financing or investment solely by
the Company's officers and directors after termination of the Merger Agreement,
if applicable, and "Superior Proposal" means a bona fide proposal made by a
third party to acquire the Company pursuant to a tender or exchange offer, a
merger, a sale of all or substantially all its assets or otherwise on terms
which a majority of the disinterested members of the Board of Directors of the
Company determines, at a duly constituted meeting of the Board of Directors or
by unanimous written consent, in its reasonable good faith judgment to be more
favorable to the Company's shareholders than the Merger (after consultation with
the Company's independent financial advisor) and for which financing, to the
extent required, is then committed or which, in the reasonable good faith
judgment of a majority of such disinterested members, as expressed in a
resolution adopted at a duly constituted meeting of such members (after
consultation with the Company's independent financial advisor), is reasonably
capable of being obtained by such third party.
The Merger Agreement provides further that, the Company must advise Harris
orally and in writing of (i) any Takeover Proposal or any inquiry with respect
to or which could lead to any Takeover Proposal
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received by any officer or director of the Company or, to the knowledge of the
Company, any financial advisor, attorney or other advisor or representative of
the Company, (ii) the material terms of such Takeover Proposal (including a copy
of any written proposal), and (iii) the identity of the person making any such
Takeover Proposal or inquiry no later than 24 hours following receipt of such
Takeover Proposal or inquiry. If the Company intends to furnish any person with
any information with respect to any Takeover Proposal, the Company is required
to advise Harris orally and in writing of such intention not less than one full
business day in advance of providing such information. The Company is further
required to keep Harris fully informed of the status and details of any such
Takeover Proposal or inquiry.
Third Party Standstill Agreements. During the period from the date of the
Merger Agreement through the Effective Time, the Company has agreed not to
terminate, amend, modify or waive any provision of any Confidentiality or
standstill agreement to which the Company is a party (other than any involving
Harris). The Company has also agreed to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements, including, but not
limited to, obtaining injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any court of the
United States or any state thereof having jurisdiction.
Stock Based Compensation. Prior to the consummation of the Offer or the
Effective Time, whichever is earlier, the Board of Directors of the Company (or,
if appropriate, any committee thereof) shall adopt appropriate resolutions and
take all other actions necessary or appropriate to (i) cause each option to
purchase Shares that was outstanding as of the date of the Merger Agreement to
vest and to be exercisable immediately prior to the consummation of the Offer or
the Effective Time, whichever is earlier, and (ii) cause each option to purchase
Shares that is outstanding upon the consummation of the Offer or the Effective
Time, whichever is earlier, to be canceled as of the consummation of the Offer
or the Effective Time, whichever is earlier. In consideration of such
cancellation, each holder of such canceled option shall be entitled to receive
from the Company an amount equal to (A) the product of (1) the number of Shares
subject to such option and (2) the excess, if any, of the Share Offer Price over
the exercise price per share for the purchase of Shares subject to such option,
minus (B) all applicable federal, state and local taxes required to be withheld
in respect of such payment. The amounts payable pursuant to the Merger Agreement
will be paid as soon as reasonably practicable following the acceptance for
payment by the Offeror pursuant to the Offer or the Effective Time, whichever is
earlier. The amount payable to any option holder will be reduced to the extent
necessary to prevent such payment, together with any other amounts payable to
such option holder by the Company, from constituting a "parachute payment,"
within the meaning of section 280G of the Code.
The Company has also agreed to take all actions necessary to provide that,
effective as of acceptance for payment by the Offeror of Offer Securities
pursuant to the Offer or the Effective Time, whichever is earlier, each of the
Company's stock option plans and any similar plan or agreement of the Company
will be terminated, any rights under any other plan, program, agreement or
arrangement to the issuance or grant of any other interest in respect of the
capital stock of the Company or any of its subsidiaries will be terminated, and
no holder of an option to purchase Shares will have any right to receive any
shares of capital stock of the Company or, if applicable, the Surviving
Corporation, upon exercise of any stock option.
Indemnification. Pursuant to the Merger Agreement, Harris and the Offeror
agreed that from and after the Effective Time, Harris will cause the Surviving
Corporation to indemnify and hold harmless all past and present officers and
directors of the Company to the same extent and in the same manner and subject
to the same limits as such persons are indemnified as of the date of the Merger
Agreement by the Company pursuant to the CGCL, the Company's charter or bylaws
for acts or omissions occurring at or prior to the Effective Time.
Harris has also agreed to cause the Surviving Corporation to provide, for a
period of not less than three years from the Effective Time, the Company's
current directors and officers an insurance and indemnification policy that
provides coverage for events occurring prior to the Effective Time that is
substantially similar to the Company's existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Corporation will not be required to pay an
annual premium for
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the director's and officer's insurance in excess of the last annual premium paid
prior to the date of the Merger Agreement but in such case will purchase as much
coverage as possible for such amount.
Effective at the Effective Time, Harris will guarantee the obligations of
the Surviving Corporation under the immediately preceding two paragraphs.
Board Representation. The Merger Agreement provides that promptly after
such time as the Offeror acquires Offer Securities pursuant to the Offer, the
Offeror will be entitled to designate at its option up to that number of
directors of the Company's Board of Directors, subject to compliance with
Section 14(f) of the Exchange Act, as will make the percentage of the Company's
directors designated by the Offeror equal to the percentage of the aggregate
voting power of the Shares held by Harris or any of its subsidiaries and the
Company shall, at such time cause the Offeror's designees to be so elected by
its existing Board of Directors; provided, however, that if Harris and its
subsidiaries shall hold at least 90% of the aggregate voting power of the
Shares, the Offeror shall be entitled to designate all of the members of the
Company's Board of Directors provided, further, that if the Offeror shall have
purchased the Revised Minimum Number of Shares in the Offer, such number of
directors shall be rounded up to the greatest whole number plus one to give the
Offeror at least a majority of the members of the Company's Board of Directors.
However, in the event that the Offeror's designees are elected to the Board of
Directors of the Company, until the Effective Time, such Board of Directors
shall have at least three directors who are directors on the date of the Merger
Agreement and who are not officers of the Company (the "Independent Directors").
If the number of Independent Directors shall be reduced below three for any
reason whatsoever, the remaining Independent Directors shall designate a person
or persons to fill such vacancy each of whom shall be deemed to be an
Independent Director for purposes of the Merger Agreement or, if no Independent
Directors then remain, the other directors of the Company shall designate three
persons to fill such vacancies who shall not be officers or affiliates of the
Company, or officers or affiliates of Harris or any of its subsidiaries, and
such persons shall be deemed to be Independent Directors for purposes of the
Merger Agreement. In connection with the foregoing, the Company will promptly,
at the option of Harris, either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its current directors
as is necessary to enable the Offeror's designees to be elected or appointed to
the Company's Board of Directors as provided above.
Obligations of Harris. Subject to obtaining the consent from Imperial Bank
to an assignment and assumption of the Line of Credit Facility and Note Payable
between the Company and Imperial Bank, dated October 5, 1998, Harris shall
assume and pay, or shall cause a subsidiary of Harris to assume and pay, the
indebtedness for borrowed money under such Facility in the principal amount of
$2,705,812 plus accrued interest within five days of the purchase of Shares
constituting the Minimum Condition by the Offeror pursuant to the Offer or the
Effective Time, whichever is earlier.
Harris shall assume, or shall cause a subsidiary of Harris to assume, the
promissory notes payable by the Company to the Williams Family Trust dated June
11, 1999, June 17, 1999, July 8, 1999 and July 9, 1999 in the aggregate amount
of $240,000 and shall pay the principal amount and any accrued interest in
respect of such notes within five days of the purchase of the Shares
constituting the Minimum Condition by the Offeror pursuant to the Offer or the
Effective Time, whichever is earlier, upon delivery and cancellation of such
notes.
Harris has agreed that, after the Effective Time, it shall use commercially
reasonable efforts to terminate the guarantee obligations of Jack and Ellyn
Williams related to those certain lease agreements with the Levine Family Trust
and Carlsbad Las Palmas, LLC, respectively. Harris and its affiliates shall not
be obligated to pay any fee in connection with such efforts.
Conditions Precedent. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction (or waiver by each party) prior
to the Effective Time of the following conditions: (i) if required by applicable
law, the shareholders of the Company shall have approved the Merger Agreement;
(ii) no court or other Governmental Entity (as defined in the Merger Agreement)
having jurisdiction over the Company or Harris or any of their respective
subsidiaries shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger illegal; and (iii) the Offeror shall have
previously accepted for payment and paid for Offer Securities pursuant to the
Offer, or, if
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<PAGE> 32
the Minimum Condition is not satisfied, the Offeror shall have exercised its
right to call the Special Shareholders Meeting pursuant to the Merger Agreement.
The obligations of Harris and the Offeror to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions: (i) the Company shall have performed in all material
respects each of its agreements contained in the Merger Agreement required to be
performed on or prior to the Effective Time, and the representations and
warranties of the Company contained in the Merger Agreement shall be true and
correct on and as of the Effective Time as if made on and as of such date, and
Harris shall have received a certificate signed on behalf of the Company by its
Chief Executive Officer and its Chief Financial Officer to such effect, (ii) the
Company shall have obtained the consent or approval of each person or
Governmental Entity whose consent or approval shall be required in connection
with the transactions contemplated by the Merger Agreement under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except as to which the failure to obtain such consents and approvals
would not, in the reasonable opinion of Harris, individually or in the
aggregate, have a Material Adverse Effect (as defined in the Merger Agreement)
on the Company or Harris or upon the consummation of the transactions
contemplated in the Merger Agreement, the Option Agreement or the Shareholder
Agreements, (iii) in obtaining any approval or consent required to consummate
any of the transactions contemplated in the Merger Agreement, in the Option
Agreement or the Shareholder Agreements, no Governmental Entity shall have
imposed or shall have sought to impose any condition, penalty or requirement
which, in the reasonable opinion of Harris, individually or in aggregate would
have a Material Adverse Effect (as defined in the Merger Agreement) on the
Company or Harris, and (iv) since the date of the Merger Agreement, there shall
have been no Material Adverse Change (as defined in the Merger Agreement) with
respect to the Company, and Harris shall have received a certificate signed on
behalf of the Company by its Chief Executive Officer and Chief Financial Officer
to such effect.
Termination. The Merger Agreement provides that it may be terminated at
any time prior to the Effective Time, whether before or after the approval of
the terms of the Merger Agreement by the shareholders of the Company: (a) by
mutual written consent of Harris and the Company; (b) by either Harris or the
Company: (i) if (x) as a result of the failure of any of the conditions to the
Offer as set forth in this Offer to Purchase (see Section 15) shall have
terminated or expired in accordance with its terms without the Offeror having
accepted for payment any Offer Securities pursuant to the Offer or (y) the
Offeror shall not have accepted for payment any Offer Securities pursuant to the
Offer prior to and the Offeror shall not have exercised its right to request the
Company to call the Special Shareholders Meeting pursuant to the Merger
Agreement on or prior to September 30, 1999 (provided that the right to
terminate the Merger Agreement pursuant to this clause (b)(i) shall not be
available to any party whose failure to perform any of its obligations under the
Merger Agreement results in the failure of any such condition or if the failure
of such condition results from facts or circumstances that constitute a breach
of any representation or warranty under the Merger Agreement by such party) or
(ii) if any Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Offer Securities
pursuant to the Offer and such order, decree or ruling or other action shall
have become final and nonappealable; (c) by Harris or the Offeror prior to the
purchase of Offer Securities pursuant to the Offer in the event of a breach by
the Company of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which (i) would give rise to the failure of
condition (e) or (f) described below in Section 15 and (ii) cannot be or has not
been cured within 30 days after the giving of written notice to the Company; (d)
by Harris or the Offeror if either Harris or the Offeror is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraph (d) described below in Section 15; (e) by the Company if the Board of
Directors of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal and a majority of the Board of Directors of the
Company determines in its reasonable good faith judgment, after consultation
with independent counsel, that failing to terminate the Merger Agreement would
constitute a breach of its fiduciary duties under applicable law; provided, that
the Company has complied with the no solicitation, notice and other provisions
of the Merger Agreement and it complies with requirements of the Merger
Agreement relating to payment of Expenses and the Termination Fee (each as
defined below under "Fees and Expenses"); and provided further that the Company
may not terminate the Merger Agreement pursuant to this clause (e) unless and
until one
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<PAGE> 33
full business day has elapsed following the delivery to Harris of a written
notice of such determination by the Board of Directors of the Company; or (f) by
the Company, if (i) any of the representations or warranties of Harris or the
Offeror set forth in the Merger Agreement shall not be true and correct in any
material respect or (ii) Harris or the Offeror shall have failed to perform in
any material respect any material obligation or to comply in any material
respect with any material agreement or covenant of Harris or the Offeror to be
performed or complied with by it under the Merger Agreement and such untruth,
incorrectness or failure cannot be or has not been cured within 30 days after
the giving of written notice to Harris or the Offeror, as applicable. In the
event of a termination of the Merger Agreement by either the Company or Harris,
the Merger Agreement shall become void (except for certain specified provisions,
including those pertaining to the payment of certain expenses and fees and
except for certain confidentiality obligations of the parties) and there shall
be no liability or obligation on the part of Harris, the Offeror or the Company
or their respective officers or directors, other than for liability for any
willful breach of a representation or warranty contained in the Merger Agreement
or the breach of any covenant contained in the Merger Agreement.
Fees and Expenses. Except as provided in the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with the Offer, the Merger and the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such costs and
expenses.
The Merger Agreement provides that the Company will pay, or cause to be
paid, in same day funds to Harris the following amounts under the circumstances
and at the times set forth as follows: (i) if Harris or the Offeror terminates
the Merger Agreement in accordance with the provisions described in clause (d)
under "Termination" above, the Company shall pay the Expenses (as defined below)
of Harris and a $750,000 termination fee (the "Termination Fee") upon demand;
(ii) if the Company terminates the Merger Agreement in accordance with the
provision described in clause (e) under "Termination" above, the Company shall
pay the Termination Fee within one business day following such termination and
the Expenses of Harris upon demand; and (iii) if Harris or the Offeror
terminates the Merger Agreement under clause (c) under "Termination" above and,
at the time of such termination, a Takeover Proposal shall have been made, the
Company shall pay the Expenses of Harris, upon demand; in addition, if
concurrently therewith or within nine months after such termination, (A) the
Company enters into a merger agreement, acquisition agreement or similar
agreement (including a letter of intent) with respect to a Takeover Proposal or
a Takeover Proposal is consummated, involving any party (1) with whom the
Company had any discussions with respect to a Takeover Proposal, (2) to whom the
Company furnished information with respect to or with a view to a Takeover
Proposal or (3) who had submitted a proposal or expressed any interest publicly
in a Takeover Proposal, in the case of each of clauses (1), (2) and (3), prior
to such termination, or (B) the Company enters into a merger agreement,
acquisition agreement or similar agreement (including a letter of intent) with
respect to a Superior Proposal, or a Superior Proposal is consummated, then, in
the case of either (A) or (B) above, the Company shall pay the Termination Fee
upon the earlier of the execution of such agreement or upon consummation of such
Takeover Proposal or Superior Proposal. The Merger Agreement provides that
Harris will pay, or cause to be paid, in same day funds to the Company, the
Expenses of the Company if the Company terminates the Merger Agreement in
accordance with the provisions described in clause (f) under "Termination"
above.
For purposes of the Merger Agreement, "Expenses" means with respect to
Harris or the Company, as the case may be, documented out-of-pocket fees and
expenses incurred or paid by or on behalf of Harris or the Company, as the case
may be, in connection with the Offer, the Merger or the consummation of any of
the transactions contemplated by the Merger Agreement, including all fees and
expenses of law firms, commercial banks, investment banking firms, accountants,
experts and consultants to Harris or the Company, as the case may be; provided
that the Expenses of Harris or the Company shall not exceed $250,000.
Pursuant to the Merger Agreement, the aggregate amount of the Termination
Fee and Expenses payable to Harris shall be reduced to an amount not less than
zero by subtracting from the aggregate amount otherwise payable to Harris the
amount realized or anticipated to be realizable (based on the facts as they
exist on the date such aggregate amount shall become due) by Harris under the
Option Agreement; provided, that if such aggregate amount shall be so reduced by
an amount realizable by Harris and thereafter the Option Agreement
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<PAGE> 34
shall terminate without receipt by Harris of such amount, then, to the extent
Harris is entitled to receive such aggregate amount, an additional payment shall
be made to Harris in such amount promptly following such termination.
The Shareholder Agreements
Pursuant to the Shareholder Agreements, each Tendering Shareholder has
agreed that, (a) such Tendering Shareholder shall vote the Shares held by such
Tendering Shareholder in favor of the Merger and the Merger Agreement; (b) such
Tendering Shareholder shall vote his Shares against (i) any other merger
agreement or merger, consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company or any other Takeover Proposal or (ii) any amendment of the
Company's charter or bylaws or other proposal or transaction involving the
Company or any of its subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the
Merger, the Merger Agreement or any of the other transactions contemplated by
the Merger Agreement; (c) such Tendering Shareholder shall not (i) sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option or other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition of, their
Shares to any person (except for any sale or transfer of options or warrants to
the Company) other than the Offeror or the Offeror's designee or (ii) enter into
any voting arrangement, whether by proxy, voting agreement or otherwise, in
connection, directly or indirectly, with any Takeover Proposal; (d) such
Tendering Shareholder shall not, and shall not permit any investment banker,
attorney or other adviser or representative of such Tendering Shareholder to,
(i) directly or indirectly solicit, initiate or encourage the submission of, any
Takeover Proposal, (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal or (iii) enter into any agreement with respect to or approve
or recommend any Takeover Proposal; and (e) so long as the Merger Agreement has
not been terminated, the Tendering Shareholder shall tender pursuant to the
Offer and not withdraw the Shares and Warrants owned by such Tendering
Shareholders; provided, however, that Donald Naab shall not be obligated to
tender his Shares pursuant to the Offer until September 30, 1999 or any time
thereafter (so long as the Offer has not expired or been withdrawn by the
Offeror) .
The Shareholder Agreements terminate upon the earliest of (i) the Effective
Time, (ii) the termination of the Merger Agreement in accordance with its terms;
provided, however, that the Shareholder Agreements will not terminate until 60
days after termination pursuant to clause (ii) immediately above if (A) the
Merger Agreement is terminated by Harris or the Offeror pursuant to clause (d)
of "Termination" above because of the withdrawal or modification in the
recommendation by the Board of Directors of the Company of the Offer, the Merger
and the Merger Agreement or because the Board of Directors has adopted a
resolution to that effect, if prior to the time of such withdrawal or
modification or the adoption of such resolution, a Takeover Proposal shall have
been made, (B) the Merger Agreement has been terminated by Harris or the Offeror
pursuant to clause (d) of "Termination" above because of the Board of Director's
recommendation of a Takeover Proposal, or because the Board of Directors has
adopted a resolution to effect such recommendation, or (C) the Merger Agreement
is terminated by the Company pursuant to clause (e) under "Termination" above or
(iii) the Merger Agreement is amended in a manner adverse to the Tendering
Shareholder without the Tendering Shareholder's consent, which consent shall not
be unreasonably withheld or delayed (the "Shareholder Agreement Termination
Date").
Option Agreement
Pursuant to the Option Agreement, the Company has granted Harris an
irrevocable option (the "Option") to purchase from time to time the Company
Option Shares at a price of $2.35 per share, which may be exercised, in whole or
from time to time in part, at any time after the date of the Option Agreement
and prior to the termination of the Option. Harris may exercise the Option if
neither Harris nor the Offeror shall have breached any of its material
obligations under the Merger Agreement and no preliminary or permanent
injunction or other order issued by any federal or state court of competent
jurisdiction in the
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<PAGE> 35
United States invalidating the grant or prohibiting the exercise of the Option
shall be in effect and if one or more of the following events shall have
occurred on or after the date of the Option Agreement: (i) any individual,
corporation, partnership, limited liability company or other entity or group
(such person, corporation, partnership, limited liability company or other
entity or group being referred to hereinafter, singularly or collectively, as a
"Person"), acquires or becomes the beneficial owner of 20% or more of the
outstanding Shares (other than a person who, as of the date hereof, is the
beneficial owner of 20% or more of the outstanding Shares (a "20% Holder"));
(ii) any 20% Holder increases his beneficial ownership of Shares by more than 1%
(other than Jack or Ellyn Williams or the Williams Family Trust pursuant to a
Post-Termination Company Financing (as defined in the Merger Agreement); (iii)
any group (other than a group which includes or may reasonably be deemed to
include Harris or any of its affiliates) is formed which beneficially owns 20%
or more of the outstanding Shares; (iv) any Person (other than Harris or its
affiliates) shall have commenced a tender or exchange offer for 20% or more of
the then outstanding Shares or publicly proposed any bona fide merger,
consolidation or acquisition of all or substantially all the assets of the
Company, or other similar business combination involving the Company; (v) the
Company enters into, or announces that it proposes to enter into, an agreement,
including, without limitation, an agreement in principle, providing for a merger
or other business combination involving the Company or a "significant
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as promulgated by the
Commission) of the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the Company or a
significant subsidiary of the Company (other than the transactions contemplated
by the Merger Agreement); (vi) any Person (other than Harris or its affiliates
or Jack or Ellyn Williams or the Williams Family Trust pursuant to a
Post-Termination Company Financing (as defined in the Merger Agreement) is
granted any option or right, conditional or otherwise, to acquire or otherwise
become the beneficial owner of Shares which, together with all Shares
beneficially owned by such Person, results or would result in such Person being
the beneficial owner of 20% or more of the outstanding Shares; or (vii) there is
a public announcement with respect to a plan or intention by the Company, other
than Harris or its affiliates, to effect any of the foregoing transactions. For
purposes of the Option Agreement, the terms "group" and "beneficial owner" are
defined by reference to Section 13(d) of the Exchange Act.
Harris's obligation to purchase the Company Option Shares following the
exercise of the Option, and the Company's obligation to deliver the Company
Option Shares, are subject to the conditions that (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States prohibiting the delivery of the
Company Option Shares shall be in effect, (ii) the purchase of the Company
Option Shares will not violate Rule 10b-13 promulgated under the Exchange Act;
and (iii) any applicable waiting periods under the HSR Act, shall have expired
or been terminated.
Prior to the termination of the Option in accordance with the Option
Agreement, if a Put Event (as defined below) has occurred, Harris shall have the
right, upon three business days' prior written notice to the Company, to require
the Company to purchase the Option from Harris (the "Put Right") at a cash
purchase price (the "Put Price") equal to the product determined by multiplying
(i) the number of Company Option Shares as to which the Option has not yet been
exercised by (ii) the Spread (as defined below). As used in the Option
Agreement, the term "Put Event" means the occurrence on or after the date hereof
of any of the following: (i) any Person (other than Harris or its affiliates or
Jack or Ellyn Williams or the Williams Family Trust pursuant to a
Post-Termination Company Financing (as defined in the Merger Agreement) acquires
or becomes the beneficial owner of 50% or more of the outstanding Shares or (ii)
the Company consummates a merger or other business combination involving the
Company or a significant subsidiary of the Company or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, the Company or a significant subsidiary of the Company (other
than the transactions contemplated by the Merger Agreement) and the term
"Spread" means the excess, if any, of (i) the greater of (x) the highest price
(in cash or fair market value of securities or other property) per Share paid or
to be paid within 12 months preceding the date of exercise of the Put Right for
any Shares beneficially owned by any Person who shall have acquired or become
the beneficial owner of 20% or more of the outstanding Shares after the date of
the Option Agreement or (y) the average of the last reported sales prices quoted
on the Amex of the Shares during the five trading days immediately preceding the
written notice of exercise of the Put Right over (ii) $2.35.
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At any time after the termination of the Option and for a period of 90 days
thereafter, the Company shall have the right, upon three business days' prior
written notice, to repurchase from Harris (the "Repurchase Right"), all (but not
less than all) of the Company Option Shares acquired by Harris pursuant to the
Option Agreement and with respect to which Harris then has beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) at a price per share equal to
the greater of (i) the average of the last reported sales price quoted on the
Amex of Shares during the five trading days immediately preceding the written
notice of exercise of the Repurchase Right and (ii) $2.35, plus interest at a
rate per annum equal to the costs of funds to Harris at the time of exercise of
the Repurchase Right.
In addition, the Option Agreement provides that Harris will have certain
registration rights with respect to any Company Option Shares purchased by
Harris pursuant to the Option Agreement.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, from the date of the Merger Agreement
through the Effective Time, (x) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions in respect of any of
its capital stock, or otherwise make any payments to its shareholders in their
capacity as such (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (z) purchase, redeem
or otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities.
15. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS.
Notwithstanding any other term of the Offer or this Agreement, the Offeror
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-1(c) under the Exchange
Act (relating to the Offeror's obligation to pay for or return tendered Offer
Securities after the termination or withdrawal of the Offer), to pay for any
Offer Securities tendered pursuant to the Offer unless there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer such
number of Shares that would constitute at least the Minimum Condition. In the
event that any additional shares are issued after August 2, 1999, the number of
shares that would constitute the Minimum Condition shall be adjusted so that,
after such issuance, the Minimum Condition equals at least 90% of the number of
shares then issued and outstanding. Furthermore, notwithstanding any other term
of the Offer or the Merger Agreement, the Offeror shall not be required to
accept for payment or, subject as aforesaid, to pay for any Offer Securities not
theretofore accepted for payment or paid for, and may terminate the Offer if, at
any time on or after the date of the Merger Agreement and before the acceptance
of such Offer Securities for payment or the payment therefor, any of the
following conditions exists (other than as a result of any action or inaction of
Harris or any of its subsidiaries that constitutes a breach of the Merger
Agreement):
(a) there shall be threatened or pending by any Governmental Entity
any suit, action or proceeding (i) challenging the acquisition by Harris or
the Offeror of any Offer Securities under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement or the Shareholder Agreements (including the voting provisions
thereunder), or seeking to obtain from the Company, Harris or the Offeror
any damages that would have a Material Adverse Effect on the Company, (ii)
seeking to prohibit or materially limit the ownership or operation by the
Company or Harris or its subsidiaries of a material portion of the business
or assets of the Company or Harris and its subsidiaries, taken as a whole,
or to compel the Company or Harris to dispose of or hold separate any
material portion of the business or assets of the Company or Harris and its
subsidiaries, taken as a whole, as a result of the Offer or any of the
other transactions contemplated by the Merger Agreement or the Shareholder
Agreements, (iii) seeking to impose material limitations on the ability of
Harris or the Offeror to acquire or hold, or exercise full rights of
ownership of, any Offer Securities to be accepted for payment pursuant to
the Offer, including the right to vote the Shares on all matters properly
presented to the shareholders of the Company, (iv) seeking to prohibit
Harris or any of its subsidiaries from effectively controlling in any
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<PAGE> 37
material respect any material portion of the business or operations of the
Company or (v) which otherwise is reasonably likely to have a Material
Adverse Effect on the Company; or there shall be pending by any other
person any suit, action or proceeding which is reasonably likely to have a
Material Adverse Effect on the Company.
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any Governmental Entity any
statute, rule, regulation, judgment, order or injunction, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any Material Adverse Change with respect
to the Company or prior to the expiration of the Offer or the withdrawal of
the Offer in which the Offeror calls a Special Shareholders Meeting,
whichever is earlier, the Company shall not have obtained the consent of
Imperial Bank, the Levine Family Trust and Carlsbad Las Palmas, LLC to
enter into the Merger Agreement and the Option Agreement;
(d) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Harris or the
Offeror its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Takeover Proposal or (ii)
the Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement (other than certain representations relating to
capital structure, corporate authority, brokers and vote of shareholders)
shall not be true and correct, in each case at the date of the Merger
Agreement and at the scheduled or extended expiration of the Offer, except
where the failure of such representations, individually or in the
aggregate, to be so true and correct would not have a Material Adverse
Effect on the Company, and any of the representations and warranties of the
Company excluded from the foregoing shall not be true and correct in any
material respect in each case at the date of this Agreement and at the
scheduled or extended expiration of the Offer;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or covenant of the Company to be performed or complied
with by it under the Merger Agreement;
(g) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index), (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States, (iii)
any limitation (whether or not mandatory) by any Governmental Entity on, or
other event that materially adversely affects, the extension of credit by
banks or other lending institutions, (iv) a commencement of war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which in any case is reasonably
expected to have a Material Adverse Effect on the Company or to materially
adversely affect Harris's or the Offeror's ability to complete the Offer
and/or the Merger or materially delay the consummation of the Offer and/or
the Merger, or (v) from the date of the Merger Agreement through the date
of termination or expiration, a decline of at least 25% in either the Dow
Jones Industrial Average or the Standard & Poor's 500 Index;
(h) (i) the Shareholder Agreements shall not be in full force and
effect or any Shareholder (as defined therein) that is a party thereto
shall be in material breach thereof or have indicated such Shareholder's
intention not to perform such Shareholder's obligations thereunder or (ii)
an employment and noncompetition agreement between the Company and Jack
Williams, acceptable to Harris, shall not have been entered into between
Mr. Williams and the Company;
(i) any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Harris, the Offeror, or their affiliates or any
group of which any of them is a member, shall have acquired or announced
its intention to acquire beneficial ownership (as determined pursuant to
Rule 13d-3
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promulgated under the Exchange Act) of 20% or more of the Shares, or any
beneficial owner of 20% or more of the Shares or any of its affiliates or
any group of which any of them is a member shall have increased or
announced its intention to increase its beneficial ownership of Shares by
more than 1%; or
(j) the Merger Agreement shall have been terminated in accordance with
its terms.
which, in the judgment of Harris in any such case, and regardless of the
circumstances (including any action or omission by Harris or the Offeror) giving
rise to any such condition, makes it inadvisable to proceed with such acceptance
of such Offer Securities for payment or the payment therefor.
The foregoing conditions are for the sole benefit of Harris and the Offeror
and may, subject to the terms of the Merger Agreement, be waived by the Offeror
in whole or in part at any time and from time to time in its sole discretion.
The failure by the Offeror at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Offer Securities by the
Offeror as contemplated herein. Should any such approval or other action be
required, it will be sought, but the Offeror has no current intention to delay
the purchase of Offer Securities tendered pursuant to the Offer pending the
outcome of any such matter, subject, however, to the Offeror's right to decline
to purchase Offer Securities if any of the conditions specified in Section 15
shall have occurred. There can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions, or that adverse consequences might not result to the Company's
business or that certain parts of the Company's business might not have to be
disposed of if any such approvals were not obtained or other action taken.
U.S. Antitrust. The Offeror is not aware of any approval or other action
by any governmental or administrative agency which would be required for the
acquisition or ownership of Offer Securities by the Offeror as contemplated
herein under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
Section 1203 of CGCL. The Company is incorporated under the laws of the
State of California. Section 1203 of the CGCL provides that if a tender offer is
made to some or all of a corporation's shareholders by an "interested party," an
affirmative opinion in writing as to the fairness of the consideration to the
shareholders of the corporation must be delivered to the shareholders at the
time that the tender offer is first made in writing to the shareholders. If,
however, the tender offer is commenced by publication and tender offer materials
are subsequently mailed or otherwise distributed to the shareholders, the
opinion may be omitted in the publication if the opinion is included in the
materials distributed to the shareholders. For purposes of Section 1203, the
term "interested party" includes, among others, a person who is a party to the
transaction and (1) directly or indirectly controls the corporation that is the
subject of the tender offer, (2) is, or is directly or indirectly controlled by,
an officer or director of the subject corporation, or (3) is an entity in which
a material financial interest (as defined in the CGCL) is held by any director
or executive officer of the subject corporation. None of the Company, Harris or
the Offeror believes that the Offer constitutes a transaction which falls within
the provisions of Section 1203.
State Takeover Laws. Under the CGCL, the Merger may not be consummated for
cash paid to the shareholders of the Company if Harris or the Offeror owns,
directly or indirectly, more than 50% but less than 90% of the then outstanding
Shares unless either (1) all the shareholders of the Company consent or (2) the
Commissioner of Corporations of the State of California approves, after a
hearing, the terms and conditions of the Merger and the fairness thereof.
In the event that less than 90% of the then outstanding Shares are validly
tendered and not withdrawn on any scheduled expiration date of the Offer, and
provided that certain other conditions have been met, the
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Offeror may, among other options, waive the Minimum Condition and amend the
Offer to reduce the number of Shares subject to the Offer to the Revised Minimum
Number. If a greater number of Shares is tendered into the Offer and not
withdrawn, the Offeror may elect to purchase, on a pro rata basis, the Revised
Minimum Number of Shares.
The Company conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. The Offeror does not know
whether any of these laws will, by their terms, apply to the Offer or the Merger
and has not complied with any such laws. Should any person seek to apply any
state takeover law, the Offeror will take such action as then appears desirable,
which may include challenging the validity or applicability of any such statute
in appropriate court proceedings. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer, the Offeror might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, the Offeror might be unable to accept for payment any Offer Securities
tendered pursuant to the Offer, or be delayed in continuing or consummating the
Offer and the Merger. In such event, the Offeror may not be obligated to accept
for payment any Offer Securities tendered. See Section 15.
17. FEES AND EXPENSES.
Neither the Offeror nor Harris, nor any officer, director, shareholder,
agent or other representative of the Offeror or Harris will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Dealer Manager) for soliciting tenders of Offer Securities
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by the Offeror for
customary mailing and handling expenses incurred by them in forwarding materials
to their customers.
Georgeson Securities Corporation ("Georgeson Securities") is acting as
Dealer Manager in connection with the Offer. Parent has agreed to pay Georgeson
Securities reasonable compensation for such services. In addition, Parent has
agreed to reimburse Georgeson Securities for its out-of-pocket expenses related
to its engagement and has agreed to indemnify Georgeson Securities against
certain liabilities in connection with the Offer.
The Offeror has retained Georgeson Shareholder Communications Inc. as
Information Agent and ChaseMellon Shareholder Services, L.L.C. as Depositary in
connection with the Offer. The Information Agent and the Depositary will receive
reasonable and customary compensation for their services hereunder and
reimbursement for their reasonable out-of-pocket expenses. The Information Agent
and the Depositary will also be indemnified by the Offeror against certain
liabilities in connection with the Offer. The Information Agent may contact
holders of Offer Securities by mail, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee holders of Offer Securities
to forward materials relating to the Offer to beneficial owners of Offer
Securities.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Offer Securities residing in any jurisdiction in which the
making or acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the Offeror
by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror or Harris.
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The Offeror and Harris have filed with the Commission the Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. The
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
SPACE COAST MERGER CORP.
August 9, 1999
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ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF HARRIS AND THE OFFEROR
Directors and Executive Officers of Harris. Set forth below are the name,
current business address, present principal occupation or employment history
(covering a period of not less than five years) of each executive officer and
director of Harris. Unless otherwise indicated, each such person's business
address is 1025 West NASA Boulevard, Melbourne, Florida, 32919. All persons
listed below are citizens of the United States of America.
DIRECTORS (INCLUDING EXECUTIVE OFFICERS WHO ARE DIRECTORS)
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ---------------- ----------------------------------------------
<S> <C> <C>
Phillip W. Farmer Chairman of the Board and Chief Executive
Officer of Harris since July, 1995. Chief
Operating Officer of Harris, 1993 to 1995.
President of Harris, April 1993 to July 1999.
He serves on the Board of Governors of both
the Aerospace Industries Association and the
Manufacturers Alliance.
Lester E. Coleman The Lubrizol Corporation Chief Executive Officer of Lubrizol Corpora-
14849 Trappers Trail tion from 1978 to 1996 and Chairman of the
Novelty, Ohio 44072 Board from 1982 to 1996. Director of Lubrizol
Corporation, Norfolk Southern Corporation and
S.C. Johnson & Son, Inc.
Robert Cizik 600 Travis Chief Executive Officer of Cooper Industries,
Suite 3628 Inc. from 1975 to 1996 and Chairman of the
Houston, TX 77019 Board from 1983 to 1996. Director of Air
Products and Chemicals, Inc., Temple-Inland,
Inc. and Stanadyne Automotive where he also
serves as non-executive Chairman of the Board.
Alfred C. DeCrane, Jr. Two Greenwich Plaza Chairman of the Board of Texaco Inc. from 1987
Suite 300 to July, 1996 and Chief Executive Officer from
Greenwich, CT 06836 1993 to July, 1996. Director of Bestfoods,
Birmingham Steel Corporation, CIGNA Cor-
poration, Corn Products International, Inc.
and U.S. Global Leaders Growth Fund, Ltd. and
is a member of the Morgan Stanley
International Advisory Board.
Ralph D. DeNunzio Harbor Point Associates President of Harbor Point Associates, Inc., a
375 Park Avenue private investment and consulting firm in New
Suite 2602 York City, since 1987. Director of FDX
New York, NY 10152 Corporation and Nike, Inc.
</TABLE>
A-1
<PAGE> 42
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ---------------- ----------------------------------------------
<S> <C> <C>
Joseph L. Dionne The McGraw-Hill Companies President and Chief Executive Officer of The
1221 Avenue of the Americas McGraw-Hill Companies, Inc. from 1983 to
New York, NY 10020 April, 1998 and Chairman of the Board since
1988. Director of The Equitable Companies
Incorporated, The Equitable Life Assurance
Society of the United States, and Ryder Sys-
tem, Inc.
John T. Hartley President and Chief Operating Officer of Har-
ris from 1982, Chief Executive Officer from
1986 and Chairman of the Board from 1987, each
until July 1, 1995, when he retired from
Harris. Director of The Equitable Companies
Incorporated, The Equitable Life Assurance
Society of the United States and The Mc-
Graw-Hill Companies, Inc. He is also a direc-
tor of the National Association of
Manufacturers.
Karen Katen Pfizer, Inc. President of Pfizer U.S. Pharmaceuticals Group
235 E. 42nd Street (the principal operating division of Pfizer,
New York, NY 10017 Inc.), executive vice president of the global
Pfizer Pharmaceuticals Group, corporate vice
president and a member of the Corporate
Management Committee of Pfizer. Director of
General Motors and the International Council
of J.P. Morgan & Co.
Alexander B. Trowbridge Trowbridge Partners President of Trowbridge Partners, Inc., a man-
1317 F Street N.W. agement consulting firm. Director of ICOS
Suite 500 Corporation, IRI International, New England
Washington, D.C. 20004 Life Insurance Company, The Gillette Com-
pany, The Rouse Company, Sunoco, Inc. and E.M.
Warburg Pincos Counsellors Funds.
</TABLE>
EXECUTIVE OFFICERS (WHO ARE NOT DIRECTORS)
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ---------------- ----------------------------------------------
<S> <C> <C>
E. Van Cullens President and Chief Operating Officer since
July, 1999. President Communications Sector
June, 1997 to July, 1999. Formerly Senior Vice
President and Head of Internet Business Unit
of Siemens Public Communication Networks
Group, Siemens Stromberg-Carlson, 1996 to
June, 1997. Senior Vice President of Market-
ing and Business Development of Siemens
Stromberg-Carlson from 1991 to 1996.
Bryan R. Roub Senior Vice President -- Chief Financial Of-
ficer since October, 1993. Senior Vice Presi-
dent -- Finance July, 1984 to October, 1993.
</TABLE>
A-2
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ---------------- ----------------------------------------------
<S> <C> <C>
Richard L. Ballantyne Vice President -- General Counsel and Corpo-
rate Secretary since November, 1989.
Wesley E. Cantrell President and Chief Executive Officer, Lanier
Worldwide, Inc. since March, 1987. Senior Vice
President -- Sector Executive, Lanier Business
Products Sector, 1985 to 1987. President,
Lanier Business Products, 1977 to 1987.
Nick E. Heldreth Vice President -- Human Resources and Cor-
porate Relations since July, 1996. Vice Presi-
dent -- Human Resources since June, 1986.
David S. Wasserman Vice President -- Treasurer since January,
1993. Vice President -- Taxes, 1987 to 1993.
Greg L. Williams President Semiconductor Sector since October
1, 1998. Vice President -- General Man-
ager -- Power Products Business, Semiconductor
Sector from January, 1998 to October, 1998.
Formerly with Motorola, Inc. (July 1984 to
January 1998) in various positions including
Vice President -- Assistant General Manager,
Semiconductor Components Group, Vice President
and General Manager, Power Products Division
and Vice President -- Director, Automotive
World Marketing.
Robert K. Henry President of Harris Government Communica-
tions Systems Division since July 1, 1999.
Vice President -- General Manager of the
Communications Systems Division of Electronic
Systems Sector from April, 1997 to July 1,
1999. Vice President of engineering for
Sanders from May 1997 to November 1997. Vice
President -- General Manager, Information Sys-
tems for Sanders from June 1995 to April 1997.
</TABLE>
Directors and Executive Officers of Offeror. Set forth below are the name,
current business address, present principal occupation or employment history
(covering a period of not less than five years) of each executive officer and
director of the Offeror. Each such person's business address is 1025 West NASA
Boulevard, Melbourne, Florida, 32919. All persons listed below are citizens of
the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ----------------------------------------------
<S> <C> <C>
Phillip W. Farmer Chairman of the Board of Offeror. Chairman of
the Board and Chief Executive Officer of
Harris.
</TABLE>
A-3
<PAGE> 44
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ----------------------------------------------
<S> <C> <C>
E. Van Cullens Director and President of Offeror. President
and Chief Operating Officer of Harris since
July, 1999. President Communications Sector of
Harris June, 1997 to July, 1999. Formerly
Senior Vice President and Head of Internet
Business Unit of Siemens Public Communica-
tion Networks Group, Siemens Stromberg-
Carlson, 1996 to June, 1997. Senior Vice
President of Marketing and Business
Development of Siemens Stromberg-Carlson from
1991 to 1996.
Bryan R. Roub Director and Senior Vice President -- Chief
Financial Officer of Offeror. Senior Vice
President -- Chief Financial Officer of Harris
since October, 1993. Senior Vice President --
Finance of Harris July, 1984 to October, 1993.
Richard L. Ballantyne Vice President and Secretary of Offeror. Vice
President -- General Counsel and Corporate
Secretary of Harris since November, 1989.
David S. Wasserman Vice President -- Treasurer of Offeror. Vice
President -- Treasurer of Harris since
January, 1993. Vice President -- Taxes of
Harris, 1987 to 1993.
</TABLE>
A-4
<PAGE> 45
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares or Shareholder Warrants or agreements
representing the Representative Warrants or the Executive Warrant and any other
required documents should be sent or delivered by each holder of Offer
Securities of the Company or his broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
Post Office Box 3301 (Eligible Institutions Only) 120 Broadway, 13th Floor
South Hackensack, NJ 07606 (201) 296-4293 New York, New York 10271
(Attention: Reorganization Confirm by Telephone: (Attention: Reorganization
Department) Department)
(201) 296-4860 By Overnight Delivery:
85 Challenger Road --
Mail Drop -- Reorg
Ridgefield Park, NJ 07660
(Attention: Reorganization
Department)
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. Holders of Offer Securities may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
[GEORGESON SECURITIES CORPORATION LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9084
All Others Call Toll Free: (800) 445-1790
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
AND/OR
WARRANTS TO PURCHASE SHARES OF COMMON STOCK OR SHAREHOLDER WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 9, 1999
BY
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
---------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999,
UNLESS THE OFFER IS EXTENDED.
---------------------------------------------------------------------
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand
Post Office Box 3301 (Eligible Institutions Only) 120 Broadway, 13th Floor
South Hackensack, NJ 07606 (201) 296-4293 New York, NY 10271
(Attention: Reorganization Confirm by Telephone: (Attention: Reorganization
Department) (201) 296-4860 Department)
By Overnight Delivery:
85 Challenger Road-Mail Drop-Reorg
Ridgefield Park, NJ 07660
(Attention: Reorganization
Department)
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE, TO A NUMBER OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by the holders of Offer
Securities (as defined below) of Pacific Research & Engineering Corporation, a
California corporation (the "Company"), if certificates for Shares or
Shareholder Warrants or agreements representing Representative Warrants or the
Executive Warrant are to be forwarded herewith or, unless an Agent's Message (as
defined in the Offer to Purchase dated August 9, 1999 (the "Offer to Purchase"))
is utilized, if delivery of Shares or Shareholder Warrants is to be made by
book-entry transfer to an account maintained by ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") at The Depositary Trust Company ("DTC") (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Holders whose certificates for Shares or Shareholder Warrants or agreement
representing Representative Warrants or the Executive Warrant are not
immediately available or who cannot deliver their Offer Securities and all other
documents required hereby to the Depositary prior to the Expiration Date (as
defined in the Offer to Purchase), or who cannot comply with the book-entry
transfer procedures on a timely basis, must tender their Offer Securities
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. See Instruction 2.
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES OR SHAREHOLDER WARRANTS TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OFFER SECURITIES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
SHARE OR OR SHAREHOLDER NUMBER OF SHARES
SHAREHOLDER WARRANTS OR SHAREHOLDER
WARRANT CERTIFICATE REPRESENTED BY WARRANTS
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Offer
Securities
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by holders of Shares or Shareholder Warrants tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares or Shareholder Warrants represented by any
certificates delivered to the Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF REPRESENTATIVE WARRANTS OR THE EXECUTIVE WARRANT TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) REPRESENTATIVE WARRANTS OR THE EXECUTIVE WARRANT TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
DATE OF AGREEMENT
REPRESENTING
REPRESENTATIVE NUMBER OF SHARES
WARRANTS OR THE UNDERLYING THE NUMBER OF SHARES
EXECUTIVE WARRANT REPRESENTATIVE UNDERLYING THE
TENDERED WARRANTS EXECUTIVE WARRANT
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES OR SHAREHOLDER WARRANTS ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution________________________________________________
Name of Book-Entry Transfer Facility ________________________________________
Account No.__________________________________________________________________
Transaction Code No._________________________________________________________
[ ] CHECK HERE IF TENDERED OFFER SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Tendering Holder(s) of Offer Securities__________________________
____________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________________
Window Ticket Number (if any) ______________________________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery of Shares or Shareholder Warrants is by book-entry transfer:
Name of Tendering Institution____________________________________________
____________________________________________
Name of Book-Entry Transfer Facility_____________________________________
_________________________________________________________________________
Account No.______________________________________________________________
Transaction Code No._________________________________________________________
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Space Coast Merger Corp. (the "Offeror"),
a California corporation and a wholly owned subsidiary of Harris Corporation, a
Delaware corporation ("Harris"), the above-described shares of common stock, no
par value (the "Shares"), of Pacific Research & Engineering Corporation, a
California corporation (the "Company"), and/or the above-described warrants
issued by the Company pursuant to the Warrant Agreement, dated as of May 28,
1996, by and between the Company and Wells Fargo Bank N.A. as Warrant Agent (the
"Shareholder Warrants") of the Company, and/or the above-described warrants
issued to representatives of Nutmeg Securities, Ltd. pursuant to the
Representative's Warrant to purchase Units of Common Stock and Redeemable
Warrants, each dated as of May 31, 1996, by and between the Company and each of
John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy Mayberry
and Stephen Marchese (the "Representative Warrants") and/or the above-described
warrant issued to John W. Barrett pursuant to the Warrant to Purchase Common
Stock of the Company, by and between John W. Barrett and the Company (the
"Executive Warrant" and, collectively with the Shareholder Warrants and the
Representative Warrants, the "Warrants"), pursuant to the Offeror's offer to
purchase (i) all of the outstanding Shares at a purchase price of $2.35 per
Share, (ii) all of the outstanding Shareholder Warrants at a purchase price of
$0.15 per Shareholder Warrant and (iii) all of the outstanding Representative
Warrants and the Executive Warrant at a purchase price of $0.15 for each Share
underlying such Representative Warrants or the Executive Warrant, in each case,
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase, and any amendments or supplements hereto or thereto, collectively
constitute the "Offer"). The Offer is being made in connection with the
Agreement and Plan of Merger, dated as of August 2, 1999 (the "Merger
Agreement"), among Harris, the Offeror, and the Company. As used herein, "Offer
Securities" shall mean the Shares and the Warrants.
Subject to and effective upon acceptance for payment of and payment for the
Offer Securities tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Offeror all right, title and interest in
and to all the Offer Securities that are being tendered hereby (and any and all
other Offer Securities or other securities issued or issuable in respect
thereof) and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Offer Securities (and
all such other Offer Securities or securities), with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates for such Shares or Shareholder Warrants
or the agreement representing Representative Warrants or the Executive Warrant
(and all such other Offer Securities or securities), or transfer ownership of
such Shares or Shareholder Warrants (and all such other Shares, Shareholder
Warrants or securities) on the account books maintained by the Book-Entry
Transfer Facility, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of the Offeror, (b) present
such Offer Securities (and all such other Offer Securities or securities) for
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Offer Securities (and all
such other Offer Securities or securities), all in accordance with the terms of
the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the agent, attorney-in-fact and proxy of the undersigned, each with full power
of substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Offer Securities tendered
hereby which have been accepted for payment by the Offeror prior to the time of
any vote or other action (and any and all other Offer Securities or other
securities or rights issued or issuable in respect of such Offer Securities) at
any meeting of shareholders of the Company (whether annual or special and
whether or not an adjourned meeting), any actions by written consent in lieu of
any such meeting or otherwise. This proxy is irrevocable, is coupled with an
interest in the Offer Securities and is granted in consideration of, and is
effective upon, the acceptance for payment of such Offer Securities by the
Offeror in accordance with the terms of the Offer. Such acceptance for payment
shall revoke any other power of attorney, proxy or written consent granted by
the undersigned at any time with respect to such Offer Securities (and all such
other Offer Securities or other securities or rights), and no subsequent powers
of attorney or proxies will be given or written consents will be executed by the
undersigned (and if given or executed, will not be deemed effective). The
undersigned understands that in order for Offer Securities to be deemed validly
tendered, immediately upon the acceptance for payment of such Offer Securities,
the Offeror or its designee must be able to exercise full voting rights with
respect to such Offer Securities and other securities, including voting at any
meeting of shareholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Offer
Securities tendered hereby (and any and all other Offer Securities or other
securities or rights issued or issuable in respect of such Offer Securities) and
that when the same are accepted for payment by the Offeror, the Offeror will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Offeror to be necessary or desirable to complete
the sale, assignment and transfer of the Offer Securities tendered hereby (and
all such other Offer Securities or other securities or rights).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Offer Securities pursuant to
any one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute an agreement between the undersigned and
the Offeror upon the terms and subject to the conditions of the Offer.
<PAGE> 4
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Offer Securities accepted for
payment, and return any Offer Securities not tendered or not accepted for
payment, in the name(s) of the undersigned. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the check for the
purchase price of any Offer Securities accepted for payment and return any
certificates for Shares or Shareholder Warrants or agreement representing
Representative Warrants or the Executive Warrant not tendered or not accepted
for payment (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the purchase price of any Offer Securities
purchased and return any Shares or Shareholder Warrants not tendered or not
purchased in the name(s) of, and deliver said check and any certificates to, the
person(s) so indicated. Holders of Shares or Shareholder Warrants tendering
Shares or Shareholder Warrants by book-entry transfer may request that any
Shares or Shareholder Warrants not accepted for payment be returned by crediting
such account maintained at such Book-Entry Transfer Facility as such holder of
Shares or Shareholder Warrants may designate by making an appropriate entry
under "Special Payment Instructions." The undersigned recognizes that the
Offeror has no obligation, pursuant to the "Special Payment Instructions," to
transfer any Shares or Shareholder Warrants from the name of the registered
holder(s) thereof if the Offeror does not accept for payment any of the Shares
or Shareholder Warrants so tendered.
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for purchase price of Offer
Securities purchased or certificates for Shares or Shareholder Warrants
not tendered or not purchased are to be issued in the name of someone
other than the undersigned or if Shares or Shareholder Warrants tendered
hereby and delivered by book-entry transfer which are not accepted for
payment are to be returned by credit to an account at the Book-Entry
Transfer Facility other than designated above.
Issue: [ ] Check [ ] Certificate to:
Name______________________________________________________________
(Please Print)
Address___________________________________________________________
__________________________________________________________________
(Zip Code)
__________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9)
[ ] Credit Shares or Shareholder Warrants delivered by book-entry transfer
and not purchased to the account set forth below:
Name of Book-Entry Transfer Facility________________
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for purchase price of Offer
Securities purchased or certificates for Shares or Shareholder Warrants
not tendered or not purchased are to be mailed to someone other than the
undersigned or to the undersigned at an address other than that shown
below the undersigned's signature(s).
Mail check and/or certificates to:
Name_____________________________________________________________
(Please Print)
Address__________________________________________________________
_________________________________________________________________
(Zip Code)
_________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9)
------------------------------------------------------------
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES FOR SHARES AND SHAREHOLDER WARRANTS. Except as
otherwise provided below, signatures on all Letters of Transmittal for Shares or
Shareholder Warrants must be guaranteed by a firm that is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of the Securities Transfer Agents Medallion Program or by any
other bank, broker, dealer, credit union, savings association or other entity
which is an "eligible guarantor institution," as such term is defined in Rule
17Ad-15 under the Securities Exchange Act of 1934 (each of the foregoing
constituting an "Eligible Institution"), unless the Shares or Shareholder
Warrants tendered thereby are tendered (i) by a registered holder of Shares or
Shareholder Warrants who has not completed either the box labeled "Special
Payment Instructions" or the box labeled "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 5. If the certificates for Shares or Shareholder Warrants are
registered in the name of a person or persons other than the signer of this
Letter of Transmittal, or if payment is to be made or delivered to, or
certificates for unpurchased Shares or Shareholder Warrants are to be issued or
returned to, a person other than the registered owner or owners, then the
tendered certificates must be endorsed or accompanied by duly executed stock or
warrant powers, in either case signed exactly as the name or names of the
registered owner or owners appear on the certificates or stock or warrant
powers, with the signatures on the certificates or stock or warrant powers
guaranteed by an Eligible Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OFFER SECURITIES. This Letter of
Transmittal is to be used either if certificates for Shares or Shareholder
Warrants or agreements representing Representative Warrants or the Executive
Warrant are to be forwarded herewith or, unless an Agent's Message (as defined
in the Offer to Purchase) is utilized, if the delivery of Shares or Shareholder
Warrants is to be made by book-entry transfer pursuant to the procedures set
forth in Section 3 of the Offer to Purchase. Certificates for all physically
delivered Shares or Shareholder Warrants or agreements representing
Representative Warrants or the Executive Warrant, or a confirmation of a
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility of all Shares or Shareholder Warrants delivered electronically, as well
as a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and any other documents required by this Letter of Transmittal, or an
Agent's Message in the case of a book-entry delivery, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter of
Transmittal prior to the Expiration Date. Security holders who cannot deliver
their Offer Securities and all other required documents to the Depositary prior
to the Expiration Date must tender their Offer Securities pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedures: (a) such tender must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Offeror, must be
received by the Depositary prior to the Expiration Date; and (c) the
certificates for all tendered Shares or Shareholder Warrants or agreement
representing Representative Warrants or the Executive Warrant, in proper form
for tender, or a confirmation of a book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility of all Shares or Shareholder
Warrants delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The
term "trading day" is any day on which the American Stock Exchange is open for
business.
THE METHOD OF DELIVERY OF OFFER SECURITIES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER OF OFFER
SECURITIES. OFFER SECURITIES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY
RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY
A CONFIRMATION OF A BOOK-ENTRY TRANSFER). IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Offer Securities will be purchased. By executing this Letter of
Transmittal (or a facsimile thereof), the tendering holder of Offer Securities
waives any right to receive any notice of the acceptance for payment of the
Offer Securities.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers, the number of Shares or Shareholder Warrants and/or the
number of Shares underlying the Representative Warrants or the Executive Warrant
and any other required information should be listed on a separate schedule
attached hereto and separately signed on each page thereof in the same manner as
this Letter of Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF REPRESENTATIVE WARRANTS
OR THE EXECUTIVE WARRANT OR HOLDERS OF SHARES OR SHAREHOLDER WARRANTS WHO TENDER
BY BOOK-ENTRY TRANSFER). If fewer than all the Shares or Shareholder Warrants
represented by any certificate delivered to the Depositary are to be tendered,
fill in the number of Shares or Shareholder Warrants which are to be tendered in
the box entitled "Number of Shares or Shareholder Warrants Tendered." In such
case, a new certificate for the remainder of the Offer Securities represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal unless otherwise provided in the appropriate box marked "Special
Payment Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal, as promptly as practicable following the Expiration Date. All
Shares or Shareholder Warrants represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
<PAGE> 6
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Offer
Securities tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates or agreement without alteration,
enlargement or any change whatsoever.
If any of the Offer Securities tendered hereby are held of record by two or
more persons, all such persons must sign this Letter of Transmittal.
If any of the Shares or Shareholder Warrants tendered hereby are registered
in different names on different certificates, it will be necessary to complete,
sign and submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares or Shareholder Warrants tendered hereby, no endorsements of certificates
or separate stock or warrant powers are required unless payment of the purchase
price is to be made, or Shares or Shareholder Warrants not tendered or not
purchased are to be returned, in the name of any person other than the
registered holder(s), in which case the certificate(s) for such Shares or
Shareholder Warrants tendered hereby must be endorsed, or accompanied by,
appropriate stock or warrant powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on the certificate for such Shares
or Shareholder Warrants. Signatures on any such certificates or stock or warrant
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares or Shareholder Warrants tendered hereby, the
certificate must be endorsed or accompanied by appropriate stock or warrant
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the certificates for such Shares or Shareholder Warrants.
Signature(s) on any such certificates or stock or warrant powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock or warrant power
is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. The Offeror will pay or cause to be paid any
stock transfer taxes with respect to the sale and transfer of any Shares or
Shareholder Warrants to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or Shares or Shareholder
Warrants not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If the check for the
purchase price of any Offer Securities purchased is to be issued, or any Shares
or Shareholder Warrants not tendered or not purchased are to be returned, in the
name of a person other than the person(s) signing this Letter of Transmittal or
if the check or any certificates for Shares or Shareholder Warrants not tendered
or not purchased are to be mailed to someone other than the person(s) signing
this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal at an address other than that shown above, the appropriate boxes on
this Letter of Transmittal should be completed. Holders of Shares or Shareholder
Warrants tendering Shares or Shareholder Warrants by book-entry transfer may
request that Shares or Shareholder Warrants not purchased be credited to such
account at the Book-Entry Transfer Facility as such holder of Shares or
Shareholder Warrants may designate under "Special Payment Instructions." If no
such instructions are given, any such Shares or Shareholder Warrants not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facility designated above.
8. SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a tendering
holder of Offer Securities whose Offer Securities are accepted for payment is
required to provide the Depositary with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9, which is provided below,
unless an exemption applies. Failure to provide the information on the
Substitute Form W-9 may subject the tendering holder of Offer Securities to a
$50 penalty and to 31% federal income tax backup withholding on the payment of
the purchase price for the Offer Securities.
9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent at its address or telephone number set
forth below.
11. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
the Offeror (subject to certain limitations in the Merger Agreement), in whole
or in part, at any time or from time to time, in the Offeror's sole discretion.
<PAGE> 7
12. LOST, DESTROYED, MUTILATED, OR STOLEN CERTIFICATES. If any
certificate(s) representing Shares or Shareholder Warrants or agreement
representing Representative Warrants or the Executive Warrant has been lost,
destroyed, mutilated, or stolen, the holder of such Offer Securities should
promptly notify the Depositary. The holder of Offer Securities will then be
instructed as to the steps to be taken in order to replace the certificate(s) or
agreement(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed, mutilated or
stolen certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY HEREOF (TOGETHER
WITH CERTIFICATES OR AGREEMENTS OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder of Offer Securities whose tendered
Offer Securities are accepted for payment is required to provide the Depositary
with such holder's correct TIN on the Substitute Form W-9. If such holder of
Offer Securities is an individual, the TIN is such holder's Social Security
Number. If the Depositary is not provided with the correct TIN, the holder of
Offer Securities may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such holder of Offer Securities
with respect to Offer Securities purchased pursuant to the Offer may be subject
to backup withholding.
Certain holders of Offer Securities (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, that holder of Offer Securities must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements may be obtained from the Depositary. All exempt
recipients (including foreign persons wishing to qualify as exempt recipients)
should see the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the holder of Offer Securities. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a holder of Offer Securities with respect to Offer Securities purchased
pursuant to the Offer, the holder is required to notify the Depositary of such
holder's correct TIN by completing the form certifying that the TIN provided on
the Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The holder of Offer Securities is required to give the Depositary the
Social Security Number or Employer Identification Number of the record owner of
the Offer Securities. If the Offer Securities are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidelines on which number to report.
<PAGE> 8
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Owner(s)
Name(s) ________________________________________________________________________
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
Taxpayer Identification or Social Security Number_______________________________
(See Substitute Form W-9)
Dated:__________________________________________________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Shares or Shareholder Warrants or agreements representing
Representative Warrants or the Executive Warrant or on a security position
listing or by the person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth full title and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s)_________________________________________________________
Name ___________________________________________________________________________
Name of Firm____________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
Dated:__________________________________________________________________________
<PAGE> 9
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: [ ]
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
FORMW-9 CERTIFY BY SIGNING AND DATING BELOW
TIN: -----------------------
Social Security
Number or Employer
Identification Number
---------------------------------------------------------------------------------------------
Department of the
Treasury, Internal PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines for
Revenue Service Certification of Taxpayer Identification Number on Substitute Form W-9 and complete
PAYER'S REQUEST FOR as instructed therein.
TAXPAYER IDENTIFICATION -------------------------------------------------------------------------------------------
NUMBER ("TIN") AND Certification -- Under penalties of perjury, I certify that:
CERTIFICATION
(1) The number shown on this form is my correct TIN (or I am waiting for a number
to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding
or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject
to backup withholding as a result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding.
-------------------------------------------------------------------------------------------
SIGNATURE: _____________________________________________ DATE: ________________
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see the instructions in the
enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have
mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social
Security Administration Officer or (2) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments
pursuant to the Offer made to me thereafter will be withheld until I provide a number.
Signature: __________________________________________________________ Date: ________________
- --------------------------------------------------------------------------------------------------
</TABLE>
The Information Agent for the Offer is:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
[GEORGESON SECURITIES CORPORATION LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9084
All Others Call Toll Free: (800) 445-1790
<PAGE> 1
GEORGESON SECURITIES CORPORATION LOGO Exhibit (a)(3)
Wall Street Plaza
New York, NY 10005
(212) 440-9084 (voice)
(212) 440-9013 (fax)
or Call Toll-free: (800)
445-1790
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ALL OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON STOCK OR SHAREHOLDER
WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
AT
$2.35 NET PER SHARE OF COMMON STOCK
AND
$0.15 NET PER SHAREHOLDER WARRANT
AND
$0.15 NET PER REPRESENTATIVE WARRANT AND EXECUTIVE WARRANT
(FOR EACH SHARE UNDERLYING SUCH WARRANTS)
BY
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999,
UNLESS THE OFFER IS EXTENDED.
August 9, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Space Coast Merger Corp., a California
corporation (the "Offeror") and a wholly owned subsidiary of Harris Corporation,
a Delaware corporation ("Harris"), to act as Dealer Manager in connection with
the Offeror's offer to purchase (i) all outstanding shares of Common Stock, no
par value (the "Shares"), of Pacific Research & Engineering Corporation, a
California corporation (the "Company"), at a purchase price of $2.35 per Share,
(ii) any and all issued and outstanding warrants issued by the Company pursuant
to the Warrant Agreement, dated as of May 28, 1996, by and between the Company
and Wells Fargo Bank N.A. as Warrant Agent (the "Shareholder Warrants") of the
Company, at a purchase price of $0.15 per Shareholder Warrant, (iii) any and all
issued and outstanding warrants issued to representatives of Nutmeg Securities,
Ltd. pursuant to the Representative's Warrant to purchase Units of Common Stock
and Redeemable Warrants, each dated as of May 31, 1996, by and between the
Company and each of John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle
Aufderhide, Cathy Mayberry and Stephen Marchese (the "Representative Warrants"),
at a purchase price of $0.15 per each Share underlying each such Representative
Warrant and (iv) the issued and outstanding warrant issued to John W. Barrett
pursuant to the Warrant to Purchase Common Stock of the Company, by and between
John W. Barrett and the Company (the "Executive Warrant" and, collectively with
the Shareholder Warrants and the Representative Warrants, the "Warrants") at a
purchase price of $0.15 per each Share underlying the Executive Warrant, in each
case, net to the seller in cash, without interest, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated August 9, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the
<PAGE> 2
Agreement and Plan of Merger, dated as of August 2, 1999, among Harris, the
Offeror and the Company (the "Merger Agreement"). As used herein, "Offer
Securities" shall mean the Shares and the Warrants.
Holders of Shares or Shareholder Warrants whose certificates for such
Shares or Shareholder Warrants (the "Certificates") and all other required
documents are not immediately available or who cannot deliver their Certificates
and all other required documents to ChaseMellon Shareholder Services, L.L.C.
(the "Depositary") or complete the procedures for book-entry transfer prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase) must
tender their Shares or Shareholder Warrants according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares or Shareholder Warrants in your name or in
the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated August 9, 1999.
2. The Letter of Transmittal to tender Shares or Shareholder Warrants
(or other Offer Securities) is for your use and for the information of your
clients. Facsimile copies of the Letter of Transmittal may be used to
tender Shares or Shareholder Warrants.
3. A letter to holders of Offer Securities of the Company from Jack
Williams, the Chairman of the Board and Chief Executive Officer of the
Company, together with a Solicitation/Recommendation Statement on Schedule
14D-9 filed with the Securities and Exchange Commission by the Company and
mailed to the holders of Offer Securities.
4. The Notice of Guaranteed Delivery for Shares or Shareholder
Warrants to be used to accept the Offer if Certificates and all other
required documents are not immediately available or cannot be delivered to
the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase) or if the procedure for book-entry transfer cannot be completed
prior to the Expiration Date. The Notice of Guaranteed Delivery may also be
used by holders of the Representative Warrants and the Executive Warrant if
the agreements representing such Warrants and all other required documents
are not immediately available or cannot be delivered to the Depositary
prior to the Expiration Date.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares or Shareholder Warrants registered in your
name, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999,
UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $2.35 per Share, $0.15 per Shareholder Warrant
and $0.15 per Representative Warrant and the Executive Warrant (for each
Share underlying such Representative Warrants and the Executive Warrant),
in each case, net to the seller in cash without interest.
2. The Board of Directors of the Company unanimously has determined
that the Offer and the Merger (as defined in the Offer to Purchase) are
fair to, and in the best interests of, the Company's holders of Offer
Securities, has approved the Offer, the Merger, the Merger Agreement and
the Option Agreement (as defined
2
<PAGE> 3
in the Offer to Purchase) and unanimously recommends that the holders of
Offer Securities accept the Offer and tender their Offer Securities
pursuant to the Offer.
3. The Offer is being made for all of the outstanding Offer
Securities.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, September 3, 1999, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer
Shares constituting at least 90% of the then outstanding Shares (the
"Minimum Condition"). If the Minimum Condition is not satisfied by 12:00
Midnight, New York City time, on September 3, 1999 (or any other time then
set as the Expiration Date), the Offeror may, subject to the terms of the
Merger Agreement, elect to (i) subject to the right of the Company to
request that the Offeror extend the Offer until September 30, 1999,
withdraw the Offer or allow it to expire and not accept for payment any
Offer Securities and return all tendered Offer Securities to tendering
holders of Offer Securities, (ii) extend the Offer and, subject to
applicable withdrawal rights, retain all tendered Offer Securities until
the expiration of the Offer, as extended, (iii) withdraw the Offer and, at
the request of the Offeror, the Company, acting through its Board of
Directors, will, in accordance with applicable law, duly call, give notice
of, convene and hold a special meeting of the shareholders of the Company
for the purpose of considering and taking action upon the Merger and the
Merger Agreement, or (iv) subject to complying with applicable rules and
regulations of the Commission, amend the Offer to provide that in the event
(A) the Minimum Condition is not satisfied at the next scheduled expiration
date of the Offer and (B) the number of Shares tendered pursuant to the
Offer and not withdrawn as of such next scheduled expiration date is more
than 50% of the then outstanding Shares, the Offeror will waive the Minimum
Condition and amend the Offer to reduce the number of Shares subject to the
Offer to a number of Shares that, when added to the Shares then owned by
the Offeror, will equal 49.99% of the Shares then outstanding (the "Revised
Minimum Number") and, if a greater number of Shares is tendered into the
Offer and not withdrawn, the Offeror may elect to purchase, on a pro rata
basis, the Revised Minimum Number of Shares.
6. Tendering holders of Offer Securities will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, stock transfer taxes on the transfer of Shares
or Shareholder Warrants pursuant to the Offer.
In order for holders of Shares or Shareholder Warrants to accept the Offer,
(i) a duly executed and properly completed Letter of Transmittal (or facsimile
thereof) and any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) or other
required documents should be sent to the Depositary and (ii) Certificates
representing the tendered Shares or Shareholder Warrants or a timely Book-Entry
Confirmation (as defined in the Offer to Purchase) should be delivered to the
Depositary in accordance with the instructions set forth in the Offer.
If holders of Shares or Shareholder Warrants wish to tender, but it is
impracticable for them to forward their Certificates or other required documents
or complete the procedures for book-entry transfer prior to the Expiration Date,
a tender must be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Neither the Offeror, Harris nor any officer, director, shareholder, agent
or other representative of the Offeror will pay any fees or commissions to any
broker, dealer or other person (other than the Dealer Manager and the
Information Agent as described in the Offer to Purchase) for soliciting tenders
of Offer Securities pursuant to the Offer. The Offeror will, however, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Offeror
will pay or cause to be paid any transfer taxes payable on the transfer of Offer
Securities to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson Shareholder Communications Inc., the Information Agent for the Offer,
Wall Street Plaza, New York, New York 10005 (212-440-9800) or Georgeson
Securities Corporation, Wall Street Plaza, New York, New York 10005 (212-440-
9084).
3
<PAGE> 4
Requests for copies of the enclosed materials may be directed to the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth above.
Very truly yours,
GEORGESON SECURITIES CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF HARRIS, THE OFFEROR, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
4
<PAGE> 1
Exhibit (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ALL OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON STOCK OR SHAREHOLDER
WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
AT
$2.35 NET PER SHARE OF COMMON STOCK
AND
$0.15 NET PER SHAREHOLDER WARRANT
AND
$0.15 NET PER REPRESENTATIVE WARRANT AND EXECUTIVE WARRANT
(FOR EACH SHARE UNDERLYING SUCH WARRANTS)
BY
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999,
UNLESS THE OFFER IS EXTENDED.
August 9, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 9,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to an offer by Space Coast Merger Corp., a California
corporation (the "Offeror") and a wholly owned subsidiary of Harris Corporation,
a Delaware corporation ("Harris"), to purchase (i) all outstanding shares of
Common Stock, no par value (the "Shares"), of Pacific Research & Engineering
Corporation, a California corporation (the "Company"), at a purchase price of
$2.35 per Share, (ii) any and all issued and outstanding warrants issued by the
Company pursuant to the Warrant Agreement, dated as of May 28, 1996, by and
between the Company and Wells Fargo Bank N.A. as Warrant Agent (the "Shareholder
Warrants") of the Company, at a purchase price of $0.15 per Shareholder Warrant,
(iii) any and all issued and outstanding warrants issued to representatives of
Nutmeg Securities, Ltd. pursuant to the Representative's Warrant to purchase
Units of Common Stock and Redeemable Warrants, each dated as of May 31, 1996, by
and between the Company and each of John Lane, Daniel Guilfoile, Matthew
Rochlin, Gayle Aufderhide, Cathy Mayberry and Stephen Marchese (the
"Representative Warrants"), at a purchase price of $0.15 per each Share
underlying each such Representative Warrant and (iv) the issued and outstanding
warrant issued to John W. Barrett pursuant to the Warrant to Purchase Common
Stock of the Company, by and between John W. Barrett and the Company (the
"Executive Warrant" and, collectively with the Shareholder Warrants and the
Representative Warrants, the "Warrants") at a purchase price of $0.15 per each
Share underlying the Executive Warrant, in each case, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer. Also enclosed is a letter to holders of Offer Securities of the Company
from Jack Williams, the Chairman of the Board and Chief Executive Officer of the
Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company and mailed to
the holders of Offer Securities. The Offer is being made in connection with the
Agreement and Plan of Merger, dated as of August 2, 1999, among Harris, the
Offeror and the Company (the "Merger Agreement"). As used herein, "Offer
Securities" shall mean the Shares and the Warrants. This material is being
forwarded to you as the beneficial owner of Shares or Shareholder Warrants
carried by us in your account but not registered in your name.
WE ARE THE HOLDER OF RECORD OF SHARES OR SHAREHOLDER WARRANTS HELD BY US
FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES OR SHAREHOLDER WARRANTS CAN BE MADE
ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER
OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED
BY YOU TO TENDER SHARES OR SHAREHOLDER WARRANTS HELD BY US FOR YOUR ACCOUNT.
If a holder desires to tender Shares or Shareholder Warrants pursuant to
the Offer and such holder's certificates for Shares or Shareholder Warrants are
not immediately available or time will not permit all required documents to
reach the Depositary (as defined in the Offer to Purchase) prior to the
Expiration Date (as defined in the Offer to Purchase) or the
<PAGE> 2
procedure for book-entry transfer of Shares or Shareholder Warrants cannot be
completed on a timely basis, such Shares or Shareholder Warrants may
nevertheless be tendered according to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase. See Instruction 2 of the Letter of
Transmittal. Delivery of documents to the Book-Entry Transfer Facility (as
defined in the Offer to Purchase) in accordance with the Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares or Shareholder Warrants held by us for your account, upon
the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $2.35 per Share, $0.15 per Shareholder Warrant
and $0.15 per Representative Warrant and the Executive Warrant (for each
Share underlying such Representative Warrants and the Executive Warrant),
in each case, net to the seller in cash without interest.
2. The Board of Directors of the Company unanimously has determined
that the Offer and the Merger (as defined in the Offer to Purchase) are
fair to, and in the best interests of, the Company's holders of Offer
Securities, has approved the Offer, the Merger, the Merger Agreement and
the Option Agreement (as defined in the Offer to Purchase) and unanimously
recommends that the holders of Offer Securities accept the Offer and tender
their Offer Securities pursuant to the Offer.
3. The Offer is being made for all of the outstanding Offer
Securities.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, September 3, 1999, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer
Shares constituting at least 90% of the then outstanding Shares (the
"Minimum Condition"). If the Minimum Condition is not satisfied by 12:00
Midnight, New York City time, on September 3, 1999 (or any other time then
set as the Expiration Date), the Offeror may, subject to the terms of the
Merger Agreement, elect to (i) subject to the right of the Company to
request that the Offeror extend the Offer until September 30, 1999,
withdraw the Offer or allow it to expire and not accept for payment any
Offer Securities and return all tendered Offer Securities to tendering
holders of Offer Securities, (ii) extend the Offer and, subject to
applicable withdrawal rights, retain all tendered Offer Securities until
the expiration of the Offer, as extended, (iii) withdraw the Offer and, at
the request of the Offeror, the Company, acting through its Board of
Directors, will, in accordance with applicable law, duly call, give notice
of, convene and hold a special meeting of the shareholders of the Company
for the purpose of considering and taking action upon the Merger and the
Merger Agreement, or (iv) subject to complying with applicable rules and
regulations of the Commission, amend the Offer to provide that in the event
(A) the Minimum Condition is not satisfied at the next scheduled expiration
date of the Offer and (B) the number of Shares tendered pursuant to the
Offer and not withdrawn as of such next scheduled expiration date is more
than 50% of the then outstanding Shares, the Offeror will waive the Minimum
Condition and amend the Offer to reduce the number of Shares subject to the
Offer to a number of Shares that, when added to the Shares then owned by
the Offeror, will equal 49.99% of the Shares then outstanding (the "Revised
Minimum Number") and, if a greater number of Shares is tendered into the
Offer and not withdrawn, the Offeror may elect to purchase, on a pro rata
basis, the Revised Minimum Number of Shares.
6. Tendering holders of Offer Securities will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, stock transfer taxes on the transfer of Shares
or Shareholder Warrants pursuant to the Offer.
If you wish to have us tender any or all of the Shares or Shareholder
Warrants, please so instruct us by completing, executing, detaching and
returning to us the instruction form contained in this letter. An envelope to
return your instruction to us is enclosed. If you authorize tender of your
Shares or Shareholder Warrants, all such Shares or Shareholder Warrants will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES OR SHAREHOLDER WARRANTS ON YOUR BEHALF PRIOR TO THE EXPIRATION OF
THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Offer
Securities residing in any jurisdiction in which the making of the Offer or
acceptance thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Offeror by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ALL OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON
STOCK OR SHAREHOLDER WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
BY
SPACE COAST MERGER CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 9, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer") in connection with the
offer by Space Coast Merger Corp., a California corporation (the "Offeror") and
a wholly owned subsidiary of Harris Corporation, a Delaware corporation, to
purchase (i) all outstanding shares of Common Stock, no par value (the
"Shares"), of Pacific Research & Engineering Corporation, a California
corporation (the "Company"), (ii) any and all issued and outstanding warrants
issued by the Company pursuant to the Warrant Agreement, dated as of May 28,
1996, by and between the Company and Wells Fargo Bank N.A. as Warrant Agent (the
"Shareholder Warrants") of the Company, (iii) any and all issued and outstanding
warrants issued to representatives of Nutmeg Securities, Ltd. pursuant to the
Representative's Warrant to purchase Units of Common Stock and Redeemable
Warrants, each dated as of May 31, 1996, by and between the Company and each of
John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy Mayberry
and Stephen Marchese (the "Representative Warrants") and (iv) the issued and
outstanding warrant issued to John W. Barrett pursuant to the Warrant to
Purchase Common Stock of the Company, by and between John W. Barrett and the
Company (the "Executive Warrant").
This will instruct you to tender to the Offeror the number of Shares and
Shareholder Warrants indicated below (or if no number is indicated below, all
Shares and Shareholder Warrants) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Shares to be Tendered:*
----------------------------
- ------------------------------------------------------------
Number of Shareholder Warrants
to be Tendered:*
---------------------------------------------
<TABLE>
<S> <C>
SIGN HERE
--------------------------------------------------------------
--------------------------------------------------------------
Signature(s)
Account Number: --------------------------------------------------------------
------------------------------------------
Date: --------------------------------------------------------------
--------------------------------------------------- (Print Name(s))
--------------------------------------------------------------
--------------------------------------------------------------
(Print Address(es))
--------------------------------------------------------------
(Area Code and Telephone Number(s))
--------------------------------------------------------------
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares and Shareholder
Warrants held by us for your account are to be tendered.
3
<PAGE> 1
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
AND/OR
TENDER OF WARRANTS TO PURCHASE SHARES OF COMMON STOCK OR SHAREHOLDER WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 3, 1999
UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined in the Offer to Purchase) if (i) certificates for shares
of common stock, no par value (the "Shares"), of Pacific Research & Engineering
Corporation, a California corporation (the "Company"), (ii) certificates for
warrants issued by the Company pursuant to the Warrant Agreement, dated as of
May 28, 1996, by and between the Company and Wells Fargo Bank N.A. as Warrant
Agent (the "Shareholder Warrants") of the Company, (iii) an agreement
representing warrants issued to representatives of Nutmeg Securities, Ltd.
pursuant to the Representative's Warrant to purchase Units of Common Stock and
Redeemable Warrants, each dated as of May 31, 1996, by and between the Company
and each of John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide,
Cathy Mayberry and Stephen Marchese (the "Representative Warrants") or (iv) an
agreement representing the warrant issued to John W. Barrett pursuant to the
Warrant to Purchase Common Stock of the Company, by and between John W. Barrett
and the Company (the "Executive Warrants"), in each case, are not immediately
available or if the procedure for book-entry transfer of Shares or Shareholder
Warrants cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary prior to the Expiration Date (as
defined in the Offer to Purchase). Such form may be delivered by hand, facsimile
transmission or mail to the Depositary. See Section 3 of the Offer to Purchase,
dated August 9, 1999 (the "Offer to Purchase").
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail:
Post Office Box 3301
South Hackensack, NJ 07606
(Attention: Reorganization Department)
By Facsimile Transmission:
(Eligible Institutions Only)
(201) 296-4293
Confirm by Telephone:
(201) 296-4860
By Hand:
120 Broadway, 13th Floor
New York, NY 10271
(Attention: Reorganization Department)
By Overnight Delivery:
85 Challenger Road-Mail Drop-Reorg
Ridgefield Park, NJ 07660
(Attention: Reorganization Department)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" (as defined in the Offer to Purchase)
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares or Shareholder Warrants or
agreements representing Representative Warrants or the Executive Warrant to the
Depositary within the time period shown herein. Failure to do so could result in
a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Space Coast Merger Corp., a California
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, and the related Letter of Transmittal, receipt of which are hereby
acknowledged, the number of Offer Securities of the Company indicated below,
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase.
NUMBER OF OFFER SECURITIES
Number of Shares:
--------------------------------------------
Number of Shareholder Warrants:
-----------------------------
Number of Shares Underlying Representative Warrants:
--------
Number of Shares Underlying the Executive Warrant
-----------
Certificate No(s) (if available):
Shares:
-----------------------------------------------------
Shareholder Warrants:
---------------------------------------
If Shares or Shareholder Warrants will be tendered by
book-entry transfer:
----------------------------------------
Name of Tendering Institution:
- ------------------------------------------------------------
Name of Book Entry Transfer Facility:
- ------------------------------------------------------------
Account No.: at
----------------------------------------------
- ------------------------------------------------------------
Dated:
SIGN HERE
Name(s) of Record Holder(s):
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
(Please Print)
Address(es):
------------------------------------------------
- ------------------------------------------------------------
(Zip Code)
Area Code and Telephone No(s):
- -----------------------------------------------------------
Signature(s):
----------------------------------------------
- -----------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees the delivery to the Depositary of the Offer Securities tendered
hereby, together with a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile(s) thereof) and any other required
documents, or an Agent's Message (as defined in the Offer to Purchase) in the
case of a book-entry delivery of Shares or Shareholder Warrants, all within
three trading days of the date hereof. A "trading day" is any day on which the
American Stock Exchange is open for business.
Name of Firm:
-----------------------------------------------
- ------------------------------------------------------------
(Authorized Signature)
Address:
----------------------------------------------------
- ------------------------------------------------------------
(Zip Code)
Title:
------------------------------------------------------
Name:
-------------------------------------------------------
(Please Print or Type)
Area Code and Telephone No.:
--------------------------------
Dated:
------------------------------------------------------
DO NOT SEND CERTIFICATES FOR SHARES OR SHAREHOLDER WARRANTS OR AGREEMENTS
REPRESENTING REPRESENTATIVE WARRANTS OR THE EXECUTIVE WARRANT WITH THIS FORM --
CERTIFICATES OR AGREEMENTS SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL
2
<PAGE> 1
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
<C> <S> <C>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, the first
individual on the
account(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult, or if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. A revocable savings trust The grantor-trustee(1)
account (in which grantor is
also trustee)
b. Any "trust" account that is The actual owner(1)
not a legal or valid trust
under State law
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
- -----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local governmental, school
district or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
2
<PAGE> 1
Exhibit (a)(7)
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell these securities. The Offer is made only by the Offer to
Purchase dated August 9, 1999 and the related Letter of Transmittal and any
amendments or supplements thereto and is not being made to (nor will tenders be
accepted from or on behalf of) holders of Offer Securities in any jurisdiction
in which the Offer or the acceptance thereof would not be in compliance with the
securities laws of such jurisdiction. In those jurisdictions where securities
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of the Offeror by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
AND
ALL OUTSTANDING WARRANTS TO PURCHASE SHARES OF COMMON STOCK OR
SHAREHOLDER WARRANTS
OF
PACIFIC RESEARCH & ENGINEERING CORPORATION
AT $2.35 NET PER SHARE OF COMMON STOCK
AND
$0.15 NET PER SHAREHOLDER WARRANT
AND
$0.15 NET PER REPRESENTATIVE WARRANT AND EXECUTIVE WARRANT
(FOR EACH SHARE UNDERLYING SUCH WARRANTS)
BY
SPACE COAST MERGER CORP.
A WHOLLY OWNED SUBSIDIARY OF
HARRIS CORPORATION
Space Coast Merger Corp., a California corporation (the "Offeror") and
a wholly owned subsidiary of Harris Corporation, a Delaware corporation
("Harris"), is offering to purchase (i) all outstanding shares of Common Stock,
no par value (the "Shares") of Pacific Research & Engineering Corporation, a
California corporation (the "Company"), at a purchase price of $2.35 per Share,
(ii) any and all issued and outstanding warrants issued by the Company pursuant
to the Warrant Agreement (the "Shareholder Warrant Agreement"), dated as of May
28, 1996, by and between the Company and Wells Fargo Bank N.A. as Warrant Agent
(the "Shareholder Warrants") of the Company, at a purchase price of $0.15 per
Shareholder Warrant, (iii) each of the six issued and outstanding warrants
issued by the Company pursuant to the Representative's Warrant to purchase Units
of Common Stock and Redeemable Warrants (the "Representative Warrant
Agreement"), each dated as of May 31, 1996 (the "Representative Warrants"), at a
purchase price of $0.15 per each Share underlying each such Representative
Warrant and (iv) the issued and outstanding warrant issued to John W. Barrett
pursuant to the Warrant to Purchase Common Stock of the Company (the "Executive
Warrant Agreement"), by and between John W. Barrett and the Company (the
"Executive Warrant" and, collectively with the Shareholder Warrants and the
Representative Warrants, the "Warrants") at a purchase price of $0.15 per each
Share underlying the Executive Warrant, in each case, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 9, 1999 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). As used herein,
"Offer Securities" shall mean the Shares and the Warrants.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, SEPTEMBER 3, 1999, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SHARES
CONSTITUTING AT LEAST 90% OF THE THEN OUTSTANDING SHARES (THE "MINIMUM
CONDITION") AND (ii) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15 OF THE OFFER TO PURCHASE.
The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of August 2, 1999 (the "Merger Agreement"), among Harris, the Offeror
and the Company. The Merger Agreement provides that after the purchase of the
Offer Securities pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the California General Corporation Law, as amended (the "CGCL"),
the Offeror will be merged with and into the Company (the "Merger"). At the
effective time of the Merger (the "Effective Time"), (i) each Share that is
issued and outstanding (other than Shares owned by the Company, any wholly owned
subsidiary of the Company, Harris, the Offeror or any wholly owned subsidiary of
Harris or Shares held by shareholders who perfect their appraisal rights under
the CGCL) will be canceled and converted into the right to receive $2.35 (or any
higher price that may be paid for each Share pursuant to the Offer) in cash,
without interest thereon, (ii) each Shareholder Warrant that is issued and
outstanding immediately prior to the Effective Time (other than any Shareholder
Warrants owned by the Company, any wholly owned subsidiary of the Company,
Harris, the Offeror or any other wholly owned subsidiary of Harris) shall no
longer be exercisable into the right to receive Shares, but shall become
exercisable into the right to receive $2.35 (or any higher price that may be
paid for each Share pursuant to the Offer) in cash, without interest, upon
exercise of the Shareholder Warrant and payment by the holder of the $8.00 per
Share exercise price provided in the Shareholder Warrant Agreement, (iii) each
Representative Warrant that is issued and outstanding immediately prior to the
Effective Time (other than any Representative Warrants owned by the Company, any
wholly owned subsidiary of the Company, Harris, the Offeror or any other wholly
owned subsidiary of Harris) shall no longer be exercisable into the right to
receive Shares or Shareholder Warrants, but shall become exercisable into the
right to receive (A) for each Share underlying the Representative Warrant, $2.35
(or any higher price that may be paid for each Share pursuant to the Offer) in
cash, without interest, upon exercise of the Representative Warrant and payment
by the holder of the $8.52 per Share exercise price for each Share provided in
the Representative Warrant Agreement and (B) for each Shareholder Warrant
underlying the Representative Warrant, $0.15 (or any higher price that may be
paid for each Shareholder Warrant pursuant to the Offer) in cash, without
interest, upon exercise of the Representative Warrant and payment by the holder
of the $0.155 per Shareholder Warrant exercise price for each Shareholder
Warrant provided in the Representative Warrant Agreement, and (iv) if issued and
outstanding immediately prior to the Effective Time, the Executive Warrant shall
no longer be exercisable into the right to receive Shares, but shall become
exercisable into the right to receive for each Share underlying the Executive
Warrant, $2.35 (or any higher price that may be paid for each Share pursuant to
the Offer) in cash, without interest, upon exercise of the Executive Warrant and
payment of the $4.68 per Share exercise price for each Share provided in the
Executive Warrant Agreement.
In connection with the Merger Agreement, Harris and the Offeror entered
into Stockholder Agreements, each dated as of August 2, 1999 (the "Shareholder
Agreements"), with each of the directors of the Company that holds Shares and
certain other shareholders who together beneficially own approximately 56.4% of
the outstanding Shares. Pursuant to the Shareholder Agreements, such
shareholders have agreed, among other things, to tender all of their Shares
(with one shareholder agreeing to tender only on or after September 30, 1999 if
the Offer is open on or after that date) and Warrants pursuant to the Offer.
Harris and the Company have also entered into a Stock Option Agreement dated as
of August 2, 1999 (the "Option Agreement"), pursuant to which the Company has
granted Harris an
- 2 -
<PAGE> 3
irrevocable option to purchase (the "Option") up to 461,099 authorized and
unissued Shares, or such other number of Shares as equals 19.9% of the Company's
issued and outstanding Shares at the time of exercise of the Option, at a price
of $2.35 per Share, exercisable upon the occurrence of certain events.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT, THE OPTION AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF OFFER SECURITIES AND UNANIMOUSLY RECOMMENDS THAT
THE HOLDERS OF OFFER SECURITIES ACCEPT THE OFFER AND TENDER THEIR OFFER
SECURITIES PURSUANT TO THE OFFER.
For purposes of the Offer, the Offeror will be deemed to have accepted
for payment, and thereby purchased, Offer Securities validly tendered and not
withdrawn, if and when the Offeror gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of the Offeror's acceptance of
such Offer Securities for payment. In all cases, payment for Offer Securities
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which shall act as agent for tendering holders of Offer
Securities for the purpose of receiving payment from the Offeror and
transmitting payment to the tendering holders of Offer Securities. Payment for
Shares or Shareholder Warrants purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares or
Shareholder Warrants, or timely confirmation of a book-entry transfer of such
Shares or Shareholder Warrants into the Depositary's account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase), (ii) a properly
completed and executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees or, in the case of a book-entry transfer of Shares
or Shareholder Warrants, an Agent's Message (as defined in the Offer to
Purchase), and (iii) any other documents required by the Letter of Transmittal.
Payment for Representative Warrants or the Executive Warrant purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
agreements for such Representative Warrants or the Executive Warrant, (ii) a
properly completed and executed Letter of Transmittal (or a facsimile thereof)
and (iii) any other documents required by the Letter of Transmittal.
If the Minimum Condition is not satisfied by 12:00 Midnight, New York
City time, on September 3, 1999 (or any other time then set as the Expiration
Date), the Offeror may, subject to the terms of the Merger Agreement, elect to
(i) subject to the right of the Company to request that the Offeror extend the
Offer until September 30, 1999, withdraw the Offer or allow it to expire and not
accept for payment any Offer Securities and return all tendered Offer Securities
to tendering holders of Offer Securities, (ii) extend the Offer and, subject to
applicable withdrawal rights, retain all tendered Offer Securities until the
expiration of the Offer, as extended, (iii) withdraw the Offer and, at the
request of the Offeror, the Company, acting through its Board of Directors,
will, in accordance with applicable law, duly call, give notice of, convene and
hold a special meeting of the shareholders of the Company for the purpose of
considering and taking action upon the Merger and the Merger Agreement, or (iv)
subject to complying with applicable rules and regulations of the Commission,
amend the Offer to provide that in the event (A) the Minimum Condition is not
satisfied at the next scheduled expiration date of the Offer and (B) the number
of Shares tendered pursuant to the Offer and not withdrawn as of such next
scheduled expiration date is more than 50% of the then outstanding Shares, the
Offeror will waive the Minimum Condition and amend the Offer to reduce the
number of Shares subject to the Offer to a number of Shares that, when added to
the Shares then owned by the Offeror, will equal 49.99% of the Shares then
outstanding (the "Revised Minimum Number") and, if a greater number of Shares is
tendered into the Offer and not withdrawn, the Offeror may elect to purchase, on
a pro rata basis, the Revised Minimum Number of Shares. The Offeror reserves the
right, in its sole discretion, to terminate the Offer if, at any time prior to
the payment of Offer Securities pursuant to the Offer, any of the conditions set
forth in the Offer to Purchase that relate to the Offeror's obligations to
purchase the Offer Securities, including the Minimum Condition, have not been
satisfied. The term "Expiration Date" shall mean 12:00 Midnight, New York
- 3 -
<PAGE> 4
City time, on Friday, September 3, 1999, unless the Offeror shall have extended
the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended, shall expire.
Subject to the limitations set forth in the Offer and the Merger
Agreement, the Offeror reserves the right, at any time or from time to time in
its sole discretion, to extend the period during which the Offer is open by
giving oral or written notice of such extension to the Depositary and by making
a public announcement of such extension. There can be no assurance that the
Offeror will exercise its right to extend the Offer. Any extension of the period
during which the Offer is open will be followed, as promptly as practicable, by
public announcement thereof, such announcement to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. During any extension, all Offer Securities previously
tendered and not withdrawn will remain subject to the Offer and subject to the
right of a tendering holder of Offer Securities to withdraw such holder's Offer
Securities. Under no circumstances will the Offeror pay interest on the purchase
price for tendered Offer Securities, regardless of any extension of the Offer or
any delay in making such payment.
Except as otherwise provided in Section 4 of the Offer to Purchase,
tenders of Offer Securities made pursuant to the Offer are irrevocable. Offer
Securities tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date, and, unless theretofore accepted for payment, may also be
withdrawn at any time after October 8, 1999. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Depositary at one of its addresses set forth on the back cover of the
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Offer Securities to be withdrawn, the number of Offer
Securities to be withdrawn and (if certificates representing Shares or
Shareholder Warrants or agreements representing Representative Warrants or the
Executive Warrant have been tendered) the name in which the certificates or
agreements are registered, if different from the name of the person who tendered
the Offer Securities. If certificates representing Shares or Shareholder
Warrants have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and, unless such Shares or
Shareholder Warrants have been tendered for the account of an Eligible
Institution (as defined in the Offer to Purchase), the signatures on the notice
of withdrawal must be guaranteed by an Eligible Institution. If Shares or
Shareholder Warrants have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares or Shareholder Warrants and must otherwise comply with such
Book-Entry Transfer Facility's procedures. All questions as to the form and
validity (including time of receipt) of a notice of withdrawal will be
determined by the Offeror, in its sole discretion, and its determination shall
be final and binding on all parties.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934 is
contained in the Offer to Purchase and is incorporated herein by reference.
The Company has provided to the Offeror its lists of holders of Offer
Securities and security position listings for the purpose of disseminating the
Offer to holders of Offer Securities. The Offer to Purchase, the Letter of
Transmittal and other materials are being mailed to record holders of Offer
Securities and will be mailed to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the lists of holders of Offer Securities or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Offer Securities.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
- 4 -
<PAGE> 5
Any questions or requests for assistance or for copies of the Offer to
Purchase and the related Letter of Transmittal and other tender offer materials
may be directed to the Information Agent or the Dealer Manager as set forth
below, and copies will be furnished promptly at the Offeror's expense. No fees
or commissions will be payable to brokers, dealers or other persons other than
the Information Agent and the Dealer Manager for soliciting tenders of Offer
Securities pursuant to the Offer.
<TABLE>
<CAPTION>
The Information Agent for the Offer is: The Dealer Manager for the Offer is:
<S> <C>
[LOGO] [LOGO]
Wall Street Plaza Wall Street Plaza
New York, New York 10005 New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800 (212) 440-9084 (voice)
All Others Call Toll Free: (800) 223-2064 (212) 440-9013 (fax)
August 9, 1999 or Call Toll Free: (800) 445-1790
</TABLE>
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<PAGE> 1
EXHIBIT (a)(8)
HARRIS CORPORATION TO ACQUIRE
PACIFIC RESEARCH & ENGINEERING CORPORATION
MELBOURNE, FL/CARLSBAD, CA, August 3, 1999 - Harris Corporation (NYSE:HRS) and
Pacific Research & Engineering Corporation "PR&E" (ASE:PXE) today jointly
announced the signing of a definitive agreement for Harris to acquire PR&E
through a cash tender offer that values PR&E at approximately $9.5 million,
including the assumption of debt. The board of directors of each company has
unanimously approved the transaction.
Under the terms of the transaction, a subsidiary of Harris will commence a cash
tender offer for all of PR&E's outstanding common shares at a price of $2.35 per
share, all of PR&E's outstanding publicly-traded warrants at a price of $0.15
per warrant, and certain other warrants at a price of $0.15 per each common
share underlying such warrants.
Directors and executive officers of PR&E that hold shares, as well as its
principal shareholder, have agreed to support the transaction and to tender
their shares pursuant to agreements with Harris Corporation. Harris Corporation
and PR&E have also entered into a Stock Option Agreement, pursuant to which PR&E
has granted Harris an irrevocable option to purchase from time to time up to
461,099 authorized and unissued shares (19.9%), at a price of $2.35 per share.
The tender offer is contingent upon customary conditions, including the tender
of at least 90 percent of PR&E's outstanding stock. The tender offer is expected
to commence on or about August 9, 1999 and the acquisition is expected to close
in September, 1999, unless the offer is extended. After the tender is completed,
all non-tendered shares will be converted into the right to receive $2.35 per
share in cash. Harris will consummate the transaction with cash on hand.
"This agreement unites two successful radio businesses and reinforces Harris'
commitment to supply a complete range of solutions including advanced studio
solutions to radio stations worldwide," Jim Woods, vice president, radio systems
business unit of Harris Broadcast Communications Division. "PR&E is a recognized
industry leader in the design, development and integration of analog and digital
radio studio solutions. Their complete range of analog and digital audio
consoles have defined performance and reliability in the studio. Coupled with
Harris' extensive sales and distribution channels as well as our systems design
and integration capabilities, this acquisition brings together two companies
with proven custom engineering, integration and customer service that will
ultimately provide radio broadcasters a comprehensive range of analog and
digital broadcast equipment and systems. PR&E also provides Harris' Broadcast
Communications Division a solid base of operations on the west coast."
"The complementary strengths of the two organizations brings both a wider and
deeper range of services and high-technology products to the rapidly changing
broadcast industry. PR&E's thirty years of consulting, custom system design and
integration work, along with its expertise in both analog and digital audio
technology, are an excellent fit with Harris' strategic vision for the domestic
and international broadcast marketplaces. As we merge together with Harris
Corporation, we see that our #1 priority of serving our clients will be met on a
world-wide basis. The availability of resources
<PAGE> 2
within the two companies will trigger faster paced solutions in appropriate
integration platforms for our client base", says Jack Williams, PR&E Chairman &
CEO. "On a world-wide basis, both companies have been recognized for their
skills. As the two units come together our clients will be served with a broader
base of representatives and a multitude of products and services will be
available to them. We are looking forward to the merger and enhancing the
overall capabilities to support the broadcast marketplace."
Harris is an international communications equipment company focused on providing
product, system and service solutions that take its customers to the next level.
The company provides a wide range of products and services for commercial and
government communications markets such as wireless, broadcast, government and
network support. The company has sales and service facilities in nearly 90
countries.
PR&E manufactures high quality broadcast studio products and provides turnkey
studio design/integration services to the worldwide broadcasting industry.
Products include on-air and production mixing consoles, studio furniture and
systems integration services. For more information, visit PR&E's web site at
www.PRE.com.
This press release contains forward-looking statements made in reliance upon the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements reflect management's current assumptions and
estimates of future performance and economic conditions. Harris and PR&E caution
investors that any forward-looking statements are subject to risks and
uncertainties that may cause actual results and future trends and events to
differ materially from those matters expressed in or implied by such
forward-looking statements. Reference is made to Harris' and PR&E's filings with
the Securities and Exchange Commission for a discussion of such facts and risks.
HARRIS MEDIA INQUIRIES: PR&E INQUIRIES:
Jim Burke Don Naab, President/COO
(407) 727-9126 Blake Clark, CFO
(760) 438-3911
HARRIS INVESTOR RELATIONS INQUIRIES:
Pamela Padgett
(407) 727-9384
G:\Harris\Press1.wpd August 5, 1999 (9:11am)
<PAGE> 1
Exhibit (a)(9)
HARRIS CORPORATION COMMENCES TENDER OFFER
FOR PACIFIC RESEARCH & ENGINEERING CORPORATION
MELBOURNE, FL, August 9, 1999 - Harris Corporation (NYSE: HRS) today announced
that its wholly owned subsidiary has commenced its previously announced tender
offer for all of Pacific Research & Engineering Corporation's "PR&E" (ASE: PXE)
outstanding common shares at a price of $2.35 per share, all of PR&E's
outstanding publicly-traded warrants at a price of $0.15 per warrant, and
certain other warrants at a price of $0.15 per each common share underlying such
warrants. The tender offer is being made pursuant to an Agreement and Plan of
Merger dated as of August 2, 1999. The tender offer is scheduled to expire on
September 3, 1999, unless the offer is extended.
ChaseMellon Shareholder Services, L.L.C. is the Depositary for the tender offer.
Georgeson Shareholder Communications Inc. is the Information Agent. The Dealer
Manager is Georgeson Securities Corporation.
Harris is an international communications equipment company focused on providing
product, system and service solutions that take its customers to the next level.
The company provides a wide range of products and services for commercial and
government communications markets such as wireless, broadcast, government and
network support. The company has sales and services in nearly 90 countries.
HARRIS MEDIA INQUIRIES:
Jim Burke
(407) 727-9126
HARRIS INVESTOR RELATIONS INQUIRIES:
Pamela Padgett
(407) 727-9384
<PAGE> 1
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
HARRIS CORPORATION,
SPACE COAST MERGER CORP.
AND
PACIFIC RESEARCH & ENGINEERING CORPORATION
DATED AS OF AUGUST 2, 1999
<PAGE> 2
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
THE OFFER................................................................................................2
Section 1.1 THE OFFER...................................................................................2
Section 1.2 COMPANY ACTIONS.............................................................................4
ARTICLE II
THE MERGER
........................................................................................................5
Section 2.1 THE MERGER..................................................................................5
Section 2.2 EFFECTIVE TIME..............................................................................6
Section 2.3 EFFECTS OF THE MERGER.......................................................................6
Section 2.4 CHARTER AND BYLAWS; DIRECTORS AND OFFICERS..................................................6
Section 2.5 CONVERSION OF SECURITIES....................................................................7
Section 2.6 EXCHANGE OF CERTIFICATES....................................................................9
(a) PAYING AGENT................................................................................9
(b) EXCHANGE PROCEDURE........................................................................10
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES.....................................................10
(d) TERMINATION OF PAYMENT FUND...............................................................10
(e) NO LIABILITY..............................................................................10
(f) LOST CERTIFICATES.........................................................................10
Section 2.7 MERGER WITHOUT MEETING OF SHAREHOLDERS.....................................................11
Section 2.8 SHAREHOLDERS' MEETING......................................................................11
Section 2.9 FURTHER ASSURANCES.........................................................................12
Section 2.10 CLOSING...................................................................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........................................................12
Section 3.1 ORGANIZATION...............................................................................12
Section 3.2 AUTHORITY..................................................................................13
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS......................................................13
Section 3.4 INFORMATION SUPPLIED.......................................................................14
Section 3.5 INTERIM OPERATIONS OF SUB..................................................................14
Section 3.6 BROKERS....................................................................................15
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................................15
Section 4.1 ORGANIZATION, STANDING AND POWER...........................................................15
Section 4.2 CAPITAL STRUCTURE..........................................................................15
Section 4.3 AUTHORITY..................................................................................16
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATION.......................................................17
Section 4.5 SEC DOCUMENTS AND OTHER REPORTS............................................................17
Section 4.6 INFORMATION SUPPLIED.......................................................................18
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................................................18
Section 4.8 PERMITS AND COMPLIANCE.....................................................................19
Section 4.9 TAX MATTERS................................................................................20
Section 4.10 ACTIONS AND PROCEEDINGS...................................................................21
Section 4.11 CERTAIN AGREEMENTS........................................................................21
Section 4.12 ERISA AND CHANGE OF CONTROL AGREEMENTS....................................................21
Section 4.13 COMPLIANCE WITH WORKER SAFETY LAWS........................................................23
Section 4.14 LIABILITIES; PRODUCTS.....................................................................23
Section 4.15 LABOR MATTERS.............................................................................24
Section 4.16 INTELLECTUAL PROPERTY; YEAR 2000..........................................................24
Section 4.17 TITLE TO AND SUFFICIENCY OF ASSETS........................................................26
Section 4.18 BROKERS...................................................................................26
Section 4.19 REQUIRED VOTE OF COMPANY SHAREHOLDERS.....................................................26
Section 4.20 ACCOUNTS RECEIVABLE.......................................................................27
Section 4.21 INVENTORIES...............................................................................27
Section 4.22 ENVIRONMENTAL MATTERS.....................................................................27
Section 4.23 SUPPLIERS, CUSTOMERS AND EMPLOYEES........................................................28
Section 4.24 INSURANCE.................................................................................29
Section 4.25 ACCURACY OF INFORMATION...................................................................29
Section 4.26 TRANSACTIONS WITH AFFILIATES..............................................................29
Section 4.27 STATE TAKEOVER LAWS.......................................................................30
Section 4.28 CONTRACTS.................................................................................30
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................31
Section 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER......................................31
Section 5.2 NO SOLICITATION............................................................................33
Section 5.3 THIRD PARTY STANDSTILL AGREEMENTS..........................................................34
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VI
ADDITIONAL AGREEMENTS............................................................................................35
Section 6.1 PUBLIC ANNOUNCEMENTS.......................................................................35
Section 6.2 ACCESS TO INFORMATION......................................................................35
Section 6.3. DIRECTORS.................................................................................36
Section 6.4 FEES AND EXPENSES..........................................................................36
Section 6.5 STOCK OPTIONS..............................................................................38
Section 6.6 COMMERCIALLY REASONABLE EFFORTS............................................................39
Section 6.7 OBLIGATIONS OF PARENT......................................................................39
Section 6.8 STATE TAKEOVER LAWS........................................................................40
Section 6.9 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE..........................................40
Section 6.10 NOTIFICATION OF CERTAIN MATTERS...........................................................41
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
.......................................................................................................41
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.................................41
Section 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER...........................41
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
.......................................................................................................42
Section 8.1 TERMINATION................................................................................42
Section 8.2 EFFECT OF TERMINATION......................................................................44
Section 8.3 AMENDMENT..................................................................................44
Section 8.4 WAIVER.....................................................................................44
ARTICLE IX
GENERAL PROVISIONS......................................................................................44
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................44
Section 9.2 NOTICES....................................................................................44
Section 9.3 INTERPRETATION.............................................................................45
Section 9.4 COUNTERPARTS...............................................................................50
Section 9.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES................................................50
Section 9.6 GOVERNING LAW..............................................................................50
Section 9.7 WAIVER.....................................................................................50
Section 9.8 DISPUTES. .................................................................................50
Section 9.9 ASSIGNMENT.................................................................................50
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 9.10 SEVERABILITY..............................................................................51
Section 9.11 ENFORCEMENT OF THIS AGREEMENT.............................................................51
Section 9.12 WAIVER OF JURY TRIAL......................................................................51
</TABLE>
-iv-
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of August 2, 1999 (this
"AGREEMENT"), among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly-owned subsidiary of
Parent ("SUB"), and Pacific Research & Engineering Corporation, a California
corporation (the "COMPANY") (Sub and the Company being hereinafter collectively
referred to as the "CONSTITUENT CORPORATIONS").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Sub to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "OFFER") to purchase (i) any and all issued
and outstanding shares of Common Stock, no par value, of the Company (the
"COMPANY COMMON STOCK"; the shares of Company Common Stock being hereinafter
referred to as the "SHARES"), (ii) any and all issued and outstanding warrants
issued by the Company pursuant to the Warrant Agreement, dated as of May 28,
1996 (the "SHAREHOLDER WARRANT AGREEMENT") by and between the Company and Wells
Fargo Bank N.A. as Warrant Agent (the "SHAREHOLDER WARRANTS"), (iii) any and all
issued and outstanding warrants issued by the Company to representatives of
Nutmeg Securities, Ltd. pursuant to the Representative's Warrant to Purchase
Units of Common Stock and Redeemable Warrants (the "REPRESENTATIVE WARRANT
AGREEMENT"), each dated as of May 31, 1996, by and between the Company and each
of John Lane, Daniel Guilfoile, Matthew Rochlin, Gayle Aufderhide, Cathy
Mayberry and Stephen Marchese (the "REPRESENTATIVE WARRANTS") and (iv) the
issued and outstanding warrant issued to John W. Barrett pursuant to the Warrant
to Purchase Common Stock of the Company (the "EXECUTIVE WARRANT AGREEMENT"), by
and between John W. Barrett and the Company (the "EXECUTIVE WARRANT," and
together with the Shares, Shareholder Warrants and Representative Warrants, the
"OFFER SECURITIES") at the Applicable Offer Prices (as such term is defined in
SECTION 9.3), net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in this Agreement; and the Board
of Directors of the Company has adopted resolutions approving the Offer and the
Merger (as defined below) and recommending that holders of Offer Securities
accept the Offer and tender their Offer Securities pursuant to the Offer and
that the Company's shareholders approve this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have (i) determined that the merger of Sub and the Company (the
"MERGER"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding Share not owned directly or indirectly by
Parent or the Company and not constituting a Dissenting Share (as such term is
defined in Section 2.5(d)) will be converted into the right to receive the
Common Stock
-1-
<PAGE> 7
Merger Consideration, is fair and in the best interests of their shareholders
and (ii) the respective Boards of Directors of Sub and the Company have approved
and adopted this Agreement; and
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith (i) Parent and the Company are entering into
the Stock Option Agreement dated as of the date hereof (the "STOCK OPTION
AGREEMENT") in the form of the attached EXHIBIT A and (ii) Parent and certain of
the shareholders of the Company are entering into Stockholder Agreements dated
as of the date hereof (the "SHAREHOLDER AGREEMENTS") in the forms of the
attached EXHIBIT B.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
Section 1.1 THE OFFER. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than August 9, 1999,
Sub shall, and Parent shall cause Sub to, commence, within the meaning of Rule
14d-2 under the Securities Exchange Act of 1934, as amended (together with the
rules and regulations promulgated thereunder, the "EXCHANGE ACT"), the Offer.
Subject to Section 1.1(c), the obligation of Sub to, and of Parent to cause Sub
to, commence the Offer and accept for payment, and pay for, any Offer Securities
tendered pursuant to the Offer shall be subject only to the Minimum Condition
(as defined in the attached EXHIBIT C) and the other conditions set forth in
EXHIBIT C (the Minimum Condition and such other conditions being hereinafter
collectively referred to as the "OFFER CONDITIONS") (any of which may be waived
by Sub in whole or in part at any time and from time to time in its sole
discretion, except that, subject to Section 1.1(c), Sub shall not waive the
Minimum Condition without the consent of the Company) and subject to the rights
of Parent or Sub to terminate this Agreement as provided in Section 8.1. Sub
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Sub shall not (i) reduce the number of Offer
Securities subject to the Offer, (ii) reduce the Applicable Offer Prices, (iii)
impose any other conditions to the Offer other than the Offer Conditions or
modify the Offer Conditions (other than to waive any Offer Conditions to the
extent permitted by this Agreement), (iv) except as provided in the next
sentence, extend the Offer, or (v) change the form of consideration payable in
the Offer. Notwithstanding the foregoing, Sub may, without the consent of the
Company, (i) extend the Offer, if at the scheduled or extended expiration date
of the Offer any of the Offer Conditions shall not be satisfied or waived, until
such time as such conditions are satisfied or waived, (ii) extend the Offer for
any period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof applicable
to the Offer, (iii) extend the Offer for any reason on one or more occasions for
an aggregate period of not more than 15 business days beyond the latest
expiration date that would otherwise be permitted
-2-
<PAGE> 8
under clause (i) or (ii) of this sentence, and (iv) exercise Sub's rights under
Section 1.1(c), in each case subject to the right of Parent, Sub or the Company
to terminate this Agreement pursuant to the terms hereof. Parent and Sub agree
that if at any scheduled expiration date of the Offer, either of the conditions
set forth in paragraphs (e) and (f) of EXHIBIT C or the Minimum Condition shall
not have been satisfied, but at such scheduled expiration date all the
conditions set forth in paragraphs (a), (b), (c), (d), (g), (h) and (i) shall
then be satisfied, at the request of the Company (confirmed in writing), Sub
shall extend the Offer from time to time, subject to the right of Parent, Sub or
the Company to terminate this Agreement pursuant to the terms hereof and
provided that Sub shall not be required to extend the Offer beyond September 30,
1999. Subject to the terms and conditions of the Offer and this Agreement, Sub
shall, and Parent shall cause Sub to, accept for payment, and pay for, all Offer
Securities validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer as
soon as practicable after the expiration of the Offer, and in any event in
compliance with the obligations respecting prompt payment pursuant to Rule
14e-1(c) under the Exchange Act.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"SCHEDULE 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
will be made, together with any supplements or amendments thereto, the "OFFER
DOCUMENTS"), and Parent and Sub shall cause to be disseminated the Offer
Documents to holders of Offer Securities as and to the extent required by
applicable Federal securities laws. Parent, Sub and the Company each agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall be or shall have
become false or misleading in any material respect, and Parent and Sub further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Offer Securities, in each case as and to the extent
required by applicable Federal securities laws. The Company and its counsel
shall be given reasonable opportunity to review and comment upon the Offer
Documents prior to their filing with the SEC or dissemination to holders of
Offer Securities. Parent and Sub agree to provide the Company and its counsel
any comments Parent, Sub or their counsel may receive from the SEC or its staff
with respect to the Offer Documents promptly after the receipt of such comments
and to cooperate with the Company and its counsel in responding to any such
comments.
(c) In the event the Minimum Condition is not satisfied on any
scheduled expiration date of the Offer, Sub may, in its sole discretion and
without the consent of the Company (i) if any Offer Conditions other than the
Minimum Condition shall not have been satisfied or waived, withdraw the Offer or
allow it to expire, subject to the right of the Company to request that Sub
extend the Offer by reason of the failure to satisfy either of the conditions
set forth in paragraphs (e) and (f) of EXHIBIT C or the Minimum Condition, as
set forth in Section 1.1(a), (ii) extend the Offer pursuant to Section 1.1(a),
(iii) withdraw the Offer and, at the request of Sub (confirmed in writing),
Company, acting through the Company's Board of Directors, shall,
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in accordance with applicable law, the Company Charter and Company Bylaws, duly
call, give notice of, convene and hold a special meeting of its shareholders as
promptly as practicable following the giving of such request by Sub for the
purpose of considering and taking action upon the Merger and this Agreement, and
the parties shall comply with the procedures and obligations set forth in
Section 2.8 with respect to a Special Meeting or (iv) amend the Offer to provide
that, in the event (A) the Minimum Condition is not satisfied at the next
scheduled expiration date of the Offer (after giving effect to the issuance of
any Shares issued pursuant to the Stock Option Agreement but without giving
effect to the potential issuance of any Shares issuable upon exercise of the
Stock Option Agreement), and (B) the number of Shares tendered pursuant to the
Offer and not withdrawn as of such next scheduled expiration date is more than
50% of the then outstanding Shares, Sub shall waive the Minimum Condition and
amend the Offer to reduce the number of Shares subject to the Offer to a number
of Shares that, when added to the Shares then owned by Sub, will equal 49.99% of
the Shares then outstanding (the "REVISED MINIMUM NUMBER"), and, if a greater
number of Shares is tendered into the Offer and not withdrawn, purchase, on a
pro rata basis, the Revised Minimum Number of Shares, and, in the case of each
of clauses (i), (ii), (iii) and (iv), subject to the right of Parent, Sub or the
Company to terminate this Agreement pursuant to the terms hereof. In no event,
however, shall Sub be required to accept for purchase or pay for any Offer
Security if less than the Revised Minimum Number of Shares are tendered pursuant
to the Offer and not withdrawn at the expiration date. Notwithstanding any other
provisions of this Agreement, in the event that Sub purchases a number of Shares
equal to the Revised Minimum Number, then without the prior written consent of
Sub prior to the termination of this Agreement, Company shall take no action
whatsoever to increase the percentage of Shares owned by Sub in excess of the
Revised Minimum Number.
(d) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to accept for payment, and pay for, any Offer
Securities that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
Section 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 has unanimously (A) determined that this Agreement and
the transactions contemplated hereby, including each of the Offer, the Merger
and the entering into of the Stock Option Agreement, are fair to and in the best
interests of the holders of the Offer Securities, (B) approved and adopted this
Agreement and the transactions contemplated hereby and (C) resolved to recommend
that the holders of the Offer Securities accept the Offer and approve and tender
their Offer Securities pursuant thereto and that the shareholders adopt this
Agreement and approve the transactions contemplated hereby; PROVIDED, HOWEVER,
that subject to the provisions of Section 5.2, such recommendation may be
withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 5.2). The Company hereby consents to the inclusion in the
Offer Documents of the recommendation of the Company's Board of Directors
described in the first sentence of this Section 1.2(a).
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<PAGE> 10
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "SCHEDULE 14D-9") containing the recommendation described in
Section 1.2(a) (subject to the right to withdraw, modify or amend such
recommendation as and to the extent referred to in Section 1.2(a)), and the
Company shall cause to be disseminated the Schedule 14D-9 to holders of Offer
Securities as and to the extent required by applicable Federal securities laws.
Each of the Company, Parent and Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall be or shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to holders of Offer
Securities, in each case as and to the extent required by applicable Federal
securities laws. Parent and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to holders of the Offer Securities. The Company agrees to provide
Parent and its counsel any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments and to cooperate with Parent, Sub and their counsel in
responding to any such comments.
(c) In connection with the Offer and the Merger, the Company
shall direct its transfer agent or agents to furnish Sub promptly with mailing
labels containing the names and addresses of the record holders of Offer
Securities as of a recent date and of those persons becoming record holders
subsequent to such date, together with copies of all lists of shareholders,
security position listings and computer files and all other information in the
Company's possession or control, to the extent reasonably available to the
Company, regarding the beneficial owners of Offer Securities and any securities
convertible into Shares, and shall furnish to Sub such information and
assistance (including updated lists of shareholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the holders of Offer Securities. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Merger, Parent and
Sub and their agents shall hold in confidence the information contained in any
such labels, listings and files, will use such information only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, will,
upon request, deliver, and will use their commercially reasonable efforts to
cause their agents to deliver, to the Company all copies of such information
then in their possession or control.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER. Upon the terms and subject to the
conditions hereof, and in accordance with the California General Corporation
Law, as amended ("CGCL"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 2.2).
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Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue its corporate existence under the laws of the State
of California as the surviving corporation (the "SURVIVING CORPORATION") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the CGCL. Notwithstanding anything to the contrary herein, at the election
of Parent, any direct wholly-owned Subsidiary (as defined in Section 9.3) of
Parent may be substituted for Sub as a constituent corporation in the Merger. In
such event, the parties agree to execute an appropriate amendment to this
Agreement, in form and substance reasonably satisfactory to Parent and the
Company, in order to reflect such substitution.
Section 2.2 EFFECTIVE TIME. As soon as practicable after the
satisfaction of the conditions set forth in Article VII, the Company shall duly
execute and file with the Secretary of State of the State of California, an
agreement of merger together with the requisite officer's certificate (the
"CALIFORNIA MERGER AGREEMENT") or a certificate of ownership (the "CERTIFICATE
OF OWNERSHIP") or such other documents or certificates as may be required under
the CGCL to effect the Merger. In addition, the parties shall take such other
and further actions as may be required by law to make the Merger effective. The
Merger shall become effective when the California Merger Agreement or the
Certificate of Ownership, as applicable, is filed with the Secretary of State of
the State of California or at such later time as specified in the document so
filed. The time the Merger becomes effective in accordance with applicable law
is referred to herein as the "EFFECTIVE TIME."
Section 2.3 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in applicable provisions of the CGCL including, without
limitation, Section 1107 thereof. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.4 CHARTER AND BYLAWS; DIRECTORS AND OFFICERS. (a) At
the Effective Time, the Articles of Incorporation of Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein and permitted by applicable law. At the Effective Time, the Bylaws of
Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation until thereafter changed or amended as provided
therein, or in the Articles of Incorporation and permitted by applicable law.
(b) At the Effective Time, the directors of the Company
immediately prior to the Effective Time shall be deemed to have resigned and the
directors of Sub at the Effective Time of the Merger shall be the directors of
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be. At the Effective Time, the officers of the Company immediately prior to
the Effective Time shall be deemed to have resigned and the officers of Sub at
the Effective Time shall be the officers of
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<PAGE> 12
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
Section 2.5 CONVERSION OF SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par
value $.01 per share, of Sub shall be converted into one validly
issued, fully paid and nonassessable share of common stock of the
Surviving Corporation and shall constitute the only outstanding shares
of capital stock of the Surviving Corporation.
(b) All Shares that are held in the treasury of the Company or
by any wholly-owned Subsidiary of the Company and any Shares owned by
Parent or by any wholly-owned Subsidiary of Parent shall be canceled
and no capital stock of Parent or other consideration shall be
delivered in exchange therefor.
(c) Each Share issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with
Section 2.5(b) and other than Dissenting Shares (as defined in Section
2.5(d)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Common Stock Merger
Consideration. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each
holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
Common Stock Merger Consideration.
(d) SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding
Shares held by a person (a "DISSENTING SHAREHOLDER") who has not voted
in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares and perfected such holder's right to
such appraisal in accordance with the CGCL (if the CGCL provides for
appraisal rights for such Shares in the Merger) ("DISSENTING SHARES")
shall not be converted as described in Section 2.5(c), but shall be
converted into the right to receive such consideration as may be
determined to be due to such Dissenting Shareholder pursuant to the
CGCL. If, after the Effective Time, such Dissenting Shareholder
withdraws his demand for payment or fails to perfect or otherwise loses
his right of payment, in any case pursuant to the CGCL, the Shares of
such Dissenting Shareholder shall be deemed to be converted as of the
Effective Time into the right to receive the Common Stock Merger
Consideration. The Company shall give Parent (i) prompt written notice
of any demands for payment received by the Company and (ii) the
opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not,
without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
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(e) WARRANTS.
(i) Each Shareholder Warrant issued and outstanding
immediately prior to the Effective Time (other than any Shareholder
Warrant which is held in the treasury of the Company or by any wholly
owned Subsidiary of the Company and any Shareholder Warrant owned by
Parent or any wholly owned Subsidiary of Parent (including Sub), all of
which shall cease to be outstanding and be canceled and retired and
none of which shall receive any payment with respect thereto) shall, by
virtue of the Merger and without any action on the part of the holder
thereof, no longer be exercisable into the right to receive Shares, but
shall become exercisable, in accordance with Section 9.4 of the
Shareholder Warrant Agreement, into the right to receive from the
Surviving Corporation an amount in cash, without interest, equal to the
Common Stock Merger Consideration upon exercise of the Shareholder
Warrant and payment by the holder of the exercise price as provided in
the Shareholder Warrant Agreement. The Surviving Corporation shall
execute with the Warrant Agent of the Shareholder Warrant Agreement an
agreement setting forth the terms of this clause (i) pursuant to
Section 9.4 of the Shareholder Warrant Agreement.
(ii) Each Representative Warrant issued and
outstanding immediately prior to the Effective Time (other than any
Representative Warrant which is held in the treasury of the Company or
by any wholly owned Subsidiary of the Company and any Representative
Warrant owned by Parent or any wholly owned Subsidiary of Parent
(including Sub), all of which shall cease to be outstanding and be
canceled and retired and none of which shall receive any payment with
respect thereto) shall, by virtue of the Merger and without any action
on the part of the holder thereof, no longer be exercisable into the
right to receive Shares or Shareholder Warrants, but shall become
exercisable, in accordance with Section (g)(B) of the Representative
Warrant Agreement, into the right to receive from the Surviving
Corporation (A) for each Share underlying the Representative Warrant,
an amount in cash, without interest, equal to the Common Stock Merger
Consideration upon exercise of the Representative Warrant and payment
by the holder of the exercise price for each Share as provided in the
Representative Warrant Agreement and (B) for each Shareholder Warrant
underlying the Representative Warrant, an amount in cash, without
interest, equal to the Shareholder Warrant Consideration upon exercise
of the Representative Warrant and payment by the holder of the exercise
price for each Shareholder Warrant as provided in the Representative
Warrant Agreement. The Surviving Corporation shall cause a statement
evidencing the terms of this clause (ii) to be filed in accordance with
Section (g)(B) of the Representative Warrant Agreement.
(iii) If issued and outstanding immediately prior to
the Effective Time, the Executive Warrant shall, by virtue of the
Merger and without any action on the part of the holder thereof, no
longer be exercisable into the right to receive Shares, but shall
become exercisable, in accordance with Section 13.1(a) of the Executive
Warrant Agreement, into the right to receive from the Surviving
Corporation for each Share underlying the Executive Warrant, an amount
in cash, without interest, equal to the Common Stock
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<PAGE> 14
Merger Consideration upon exercise of the Executive Warrant and payment
by the holder of the exercise price for each Share as provided in the
Executive Warrant Agreement.
(f) NOTICE OF SHORT-FORM MERGER. If Parent is not required
under the CGCL to obtain the approval of the other shareholders of the
Company in order to effect the Merger and effects the Merger without
holding a meeting of the shareholders, then, prior to consummating the
Merger, Parent will provide notice, as required by the CGCL, that the
Merger will become effective on or after a specified date and that the
shareholders are entitled to exercise their dissenters' rights.
Section 2.6 EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior
to the Effective Time, Parent shall designate a bank or trust company (or such
other person or persons as shall be reasonably acceptable to Parent and the
Company) to act as paying agent in the Merger (the "PAYING AGENT"), and at the
Effective Time, Parent shall make available, or cause the Surviving Corporation
to make available, to the Paying Agent cash in the amount necessary for the
payment of the Common Stock Merger Consideration upon surrender of certificates
representing Shares as part of the Merger pursuant to Section 2.5. Any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be paid over to Parent.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates that immediately prior to the Effective Time
represented Shares (the "CERTIFICATES"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Common Stock Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.5, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.6, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 2.5. No interest will
be paid or will accrue on the cash payable upon the
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<PAGE> 15
surrender of any Certificate. Parent or the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as Parent or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Code (as
hereinafter defined) or under any provisions of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the person in respect of which such deduction or withholding was
made by the Parent or the Paying Agent.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) TERMINATION OF PAYMENT FUND. Any portion of the funds made
available to the Paying Agent to pay the Common Stock Merger Consideration which
remains undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Shares who have not theretofore complied with this Article II and the
instructions set forth in the letter of transmittal mailed to such holders after
the Effective Time shall thereafter look only to Parent for payment of the
Common Stock Merger Consideration to which they are entitled.
(e) NO LIABILITY. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to seven
years after the Effective Time (or immediately prior to such earlier date on
which any payment pursuant to this Article II would otherwise escheat to or
become the property of any Governmental Entity (as hereinafter defined), the
cash payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.
(f) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Paying Agent, the posting by such person of a bond, in
such reasonable amount as Parent or the Paying Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Paying Agent will pay in exchange for such lost, stolen or
destroyed Certificate the amount of cash to which the holders thereof are
entitled pursuant to Section 2.5.
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Section 2.7 MERGER WITHOUT MEETING OF SHAREHOLDERS.
Notwithstanding the foregoing, if Sub, or any other direct or indirect
subsidiary of Parent, shall acquire (including as a result of exercising the
option granted pursuant to the Stock Option Agreement) and own at least 90
percent of the outstanding Shares, and provided that the conditions set forth in
Section 7.1 have been satisfied, the parties hereto agree to take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after acceptance and payment for the Shares by Sub pursuant to the
Offer without a meeting of shareholders of the Company, in accordance with
Section 1110 of the CGCL.
Section 2.8 SHAREHOLDERS' MEETING.
(a) If Sub is unable to utilize the provisions of Section 1110
of the CGCL, then as soon as practicable following the consummation of the Offer
or withdrawal of the Offer pursuant to Section 1.1(c)(iii) and if required by
applicable law in order to consummate the Merger, Company, acting through the
Company's Board of Directors shall, in accordance with applicable law, the
Company Charter and Company Bylaws:
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "SPECIAL MEETING") as promptly as
practicable following the acceptance for payment and purchase of Offer
Securities by Sub pursuant to the Offer or withdrawal of the Offer pursuant to
Section 1.1(c)(iii) for the purpose of considering and taking action upon the
Merger and this Agreement;
(ii) prepare and file with the SEC in compliance with
applicable law a preliminary proxy or information statement relating to the
Special Meeting (together with any amendments thereto or supplements thereof,
the "PROXY STATEMENT") and use its commercially reasonable efforts (A) to obtain
and furnish the information required to be included by the SEC in the Proxy
Statement and, after consultation with Parent, to respond promptly to any
comments made by the SEC with respect to any preliminary Proxy Statement and
cause a definitive Proxy Statement to be mailed to its shareholders and (B) to
obtain the necessary approval of this Agreement by its shareholders (the
"COMPANY SHAREHOLDER APPROVAL"); and
(iii) subject to the fiduciary obligations of the
Company Board under applicable law as advised by outside legal counsel, include
in the Proxy Statement the recommendation of the Company's Board of Directors
that shareholders of the Company vote in favor of the approval and adoption of
the Merger and of this Agreement.
(b) The Company shall notify Parent promptly of the receipt of
any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and will supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
at any time prior to the Special Meeting there shall occur any event that should
be set forth in an
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<PAGE> 17
amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its shareholders such an amendment or supplement. The
Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects. Parent shall cooperate with the
Company in the preparation of the Proxy Statement or any amendment or supplement
thereto.
(c) Parent will provide Company with the information
concerning Parent and Sub required to be included in the Proxy Statement. If Sub
purchases Shares pursuant to the Offer, the record date for the Special Meeting
shall be a date subsequent to the date Parent or Sub becomes a record holder of
Company Common Stock pursuant to the Offer. Parent shall vote, or cause to be
voted, all of the Shares then owned by it, Sub or any of their subsidiaries and
affiliates in favor of the approval of this Agreement.
(d) If Company Shareholder Approval is obtained and provided
that the conditions set forth in Article VII have been satisfied, the parties
hereto agree to take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after obtaining Company Shareholder
Approval in accordance with the CGCL.
Section 2.9 FURTHER ASSURANCES. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 2.10 CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") and all actions specified in this
Agreement to occur at the Closing shall take place at the offices of Sidley &
Austin, at 10:00 a.m., local time, no later than the second business day
following the day on which the last of the conditions set forth in Article VII
shall have been fulfilled or waived (if permissible) or at such other time and
place as Parent and the Company shall agree.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
------------------------------------------------
Parent and Sub represent and warrant to the Company as
follows:
Section 3.1 ORGANIZATION. Each of Parent and 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 authority to carry on its business as now being conducted.
Section 3.2 AUTHORITY. On or prior to the date of this
Agreement, the Boards of Directors of Parent and Sub have approved the
acquisition of the Company and have approved and adopted this Agreement in
accordance with the laws of the jurisdiction of its incorporation. Each of
Parent and Sub has all requisite corporate power and authority to execute and
deliver this Agreement and the Shareholder Agreements, Parent has all requisite
corporate power and authority to enter into the Stock Option Agreement, and each
of Parent and Sub has all requisite corporate power and authority to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the Shareholder Agreements,
the execution and delivery by Parent of the Stock Option Agreement, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action (including Board action) on the
part of Parent and Sub, including by Parent as the sole shareholder of Sub,
subject, in the case of this Agreement, to the filing of the California Merger
Agreement or the Certificate of Ownership as required by the CGCL. This
Agreement and the Shareholder Agreements have been duly executed and delivered
by Parent and Sub, and the Stock Option Agreement has been duly executed and
delivered by Parent, and (assuming the valid authorization, execution and
delivery of this Agreement and the Stock Option Agreement by the Company, the
valid authorization, execution and delivery of the Shareholder Agreements by the
shareholders who are parties thereto and the validity and binding effect hereof
and thereof on the Company and such shareholders) this Agreement and the
Shareholder Agreements constitute the valid and binding obligation of each of
Parent and Sub enforceable against them in accordance with its terms and the
Stock Option Agreement constitutes the valid and binding obligation of Parent
enforceable against Parent in accordance with its terms.
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming
that all filings and obligations described in this Section 3.3 have been made,
and the execution and delivery of this Agreement, the Stock Option Agreement and
the Shareholder Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or result in the loss of a
material benefit under, or result in the
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creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent under, any provision of (i) the Certificate of
Incorporation or the By-Laws of Parent, each as amended to date, (ii) any
provision of the comparable charter or organization documents of Sub, (iii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or (iv) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or under the Stock Option Agreement or the
Shareholder Agreements or prevent the consummation of any of the transactions
contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "GOVERNMENTAL ENTITY") is required by or with respect
to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement, the Stock Option Agreement or the Shareholder
Agreements by Parent or Sub or is necessary for the consummation of the Offer,
the Merger and the other transactions contemplated by this Agreement, the Stock
Option Agreement or the Shareholder Agreements, except for (i) in connection, or
in compliance, with the provisions of the Exchange Act, (ii) the filing of the
California Merger Agreement or the Certificate of Ownership with the Secretary
of State of the State of California and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) such filings, authorizations, orders and approvals as may be required by
state takeover laws (the "STATE TAKEOVER APPROVALS"), (iv) applicable
requirements, if any, of state securities or "blue sky" laws ("BLUE SKY LAWS"),
(v) as may be required under foreign laws and (vi) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, materially impair the ability of Parent or Sub to
perform its obligations hereunder or under the Stock Option Agreement or the
Shareholder Agreements or prevent the consummation of any of the transactions
contemplated hereby or thereby.
Section 3.4 INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the information to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the "INFORMATION
STATEMENT") or (iv) the Proxy Statement will (a) in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the respective
times the Offer Documents, the Schedule 14D-9 and the Information Statement are
filed with the SEC or first published, sent or given to the holders of the Offer
Securities, or (b) in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Special Meeting (as defined in Section 6.1), 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. The
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Offer Documents will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
therein.
Section 3.5 INTERIM OPERATIONS OF SUB. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
Section 3.6 BROKERS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as disclosed in the letter dated the date hereof and
delivered on the date hereof by the Company to Parent, and which is designated
the Company Letter (the "COMPANY LETTER"), the Company represents and warrants
to Parent and Sub as follows:
Section 4.1 ORGANIZATION, STANDING AND POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has the requisite corporate power and authority
to carry on its business as now being conducted. The Company is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of their properties owned or held under lease or the nature of their
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company does not, directly or indirectly, own, of
record or beneficially, any outstanding voting securities or other equity
interests in or control any corporation, limited liability company, partnership,
trust, joint venture or other entity.
Section 4.2 CAPITAL STRUCTURE. As of the date hereof, the
authorized capital stock of the Company consists of 25,000,000 Shares. At the
close of business on June 30, 1999:
(i) 2,305,500 Shares were issued and outstanding, all of which
were validly issued, fully paid and nonassessable and free of
preemptive rights;
(ii) No Shares were held in the treasury of the Company;
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(iii) 1,010,501 Shares were reserved for issuance in the
aggregate upon the exercise of outstanding stock options issued under
the Company's 1996 Employee Stock Option Plan, as amended (the "COMPANY
STOCK OPTION PLAN");
(iv) 515,000 Shares were reserved for issuance upon the
exercise of the Shareholder Warrants;
(v) 135,000 Shares were reserved for issuance upon the
exercise of the Representative Warrants; and
(vi) 100,100 Shares were reserved for issuance upon the
exercise of the Executive Warrant.
Section 4.2 of the Company Letter contains a correct and
complete list as of the date of this Agreement of each outstanding option to
purchase shares of Company Common Stock issued under the Company Stock Option
Plan (collectively, the "COMPANY STOCK OPTIONS"), including the holder, date of
grant, exercise price and number of shares of Company Common Stock subject
thereto and whether the option is vested and exercisable. Except for the Company
Stock Options, the Company Stock Option Plan, the Shareholder Warrants, the
Representative Warrants and the Executive Warrant, there are no options,
warrants, calls, rights or agreements to which the Company is a party or by
which any of them is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or obligating the Company to grant, extend or enter into any such
option, warrant, call, right or agreement. Except as set forth in Section 4.2 of
the Company Letter, there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of Company Common
Stock. The Company does not have any outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
shareholders of the Company on any matter.
Section 4.3 AUTHORITY. On or prior to the date of this
Agreement, the Board of Directors of the Company has unanimously approved the
Offer and declared the Merger advisable and fair to and in the best interest of
the Company and the holders of the Offer Securities, approved and adopted this
Agreement and the transactions contemplated hereby in accordance with the CGCL,
resolved to recommend the acceptance of the Offer by the holders of the Offer
Securities and directed that this Agreement be submitted to the Company's
shareholders for approval if required by applicable law in order to consummate
the Merger. The Company has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreement, to consummate the
transactions contemplated by the Stock Option Agreement and, subject to approval
by the shareholders of the Company of this Agreement, if required by applicable
law in order to consummate the Merger to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the Stock
Option Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and
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thereby have been duly authorized by all necessary corporate action (including
Board action) on the part of the Company, subject, in the case of this
Agreement, to (x) approval and adoption of this Agreement by the shareholders of
the Company and (y) the filing of the California Merger Agreement or the
Certificate of Ownership as required by the CGCL. This Agreement and the Stock
Option Agreement have been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub and the Stock Option Agreement by Parent and the validity and
binding effect of this Agreement on Parent and Sub and the Stock Option
Agreement on Parent) constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The issuance of up
to 461,099 Shares pursuant to the Stock Option Agreement has been duly
authorized by the Company's Board of Directors.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 4.4 have been obtained and all filings and obligations described in this
Section 4.4 have been made, the execution and delivery of this Agreement and the
Stock Option Agreement do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or result in the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company under, any provision of (i) the Company Charter or the Company Bylaws,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license applicable
to the Company or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or any of its properties or assets,
other than, in the case of clauses (ii) and (iii), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations hereunder or under the Stock Option Agreement or prevent the
consummation of any of the transactions contemplated hereby or thereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company in connection
with the execution and delivery of this Agreement or the Stock Option Agreement
by the Company or is necessary for the consummation of the Offer, the Merger and
the other transactions contemplated by this Agreement or the Stock Option
Agreement, except for (i) in connection, or in compliance, with the provisions
of the Exchange Act, (ii) the filing of the California Merger Agreement or the
Certificate of Ownership with the Secretary of State of the State of California
and appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (iii) such filings, authorizations,
orders and approvals as may be required to obtain the State Takeover Approvals,
(iv) applicable requirements, if any, of Blue Sky Laws or the American Stock
Exchange, (v) as may be required under foreign laws and (vi) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair the
ability of the Company to
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perform its obligations hereunder or under the Stock Option Agreement or prevent
the consummation of any of the transactions contemplated hereby or thereby.
Section 4.5 SEC DOCUMENTS AND OTHER REPORTS. The Company has
filed all required documents (including proxy statements) with the SEC since May
1, 1996 (the "COMPANY SEC DOCUMENTS"). As of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or the Exchange Act,
as the case may be, and, at the respective times each was filed, none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements (including, in each case, any
notes thereto) of the Company included in the Company SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
(except, in the case of the unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and fairly presented in all
material respects the financial position of the Company as at the respective
dates thereof and the results of operations and cash flows of the Company for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the Company SEC Documents or as required by generally
accepted accounting principles, the Company has not, since May 1, 1996, made any
change in the accounting practices or policies applied in the preparation of
financial statements.
Section 4.6 INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the Information Statement or (iv) the Proxy Statement, will (a) in the
case of the Offer Documents, the Schedule 14D-9 and the Information Statement,
at the respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or given
to the holders of Offer Securities, or (b) in the case of the Proxy Statement,
at the time the Proxy Statement is first mailed to the Company's shareholders or
at the time of the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Schedule 14D-9, the Information
Statement and the Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date of
this Agreement or as set forth
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in the Company Letter, since December 31, 1998, (A) the Company has not incurred
any liability or obligation (indirect, direct or contingent) that would result
in a Material Adverse Effect on the Company, or entered into any material oral
or written agreement or other transaction that is not in the ordinary course of
business or that would result in a Material Adverse Effect on the Company, (B)
the Company has not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that has had a Material Adverse Effect on the Company,
(C) there has been no change in the capital stock of the Company except for the
issuance of shares of the Company Common Stock pursuant to Company Stock Options
and no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock, (D) there has not been (v) any adoption of a
new Company Plan (as hereinafter defined), (w) any amendment to a Company Plan
materially increasing benefits thereunder, (x) any granting by the Company to
any executive officer or other key employee of the Company of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Company Annual
Report, (y) any granting by the Company to any such executive officer or other
key employee of any increase in severance or termination agreements in effect as
of the date of the most recent audited financial statements included in the
Company Annual Report or (z) any entry by the Company into any employment,
severance or termination agreement with any such executive officer or other key
employee, (E) there has not been any material changes in the amount or terms of
the indebtedness of the Company from that described in the Company SEC Documents
filed prior to the date hereof and (F) there has been no event causing a
Material Adverse Effect on the Company, nor any development that would,
individually or in the aggregate, result in a Material Adverse Effect on the
Company.
Section 4.8 PERMITS AND COMPLIANCE. The Company is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company to own, lease and operate
its properties or to carry on its business as it is now being conducted (the
"COMPANY PERMITS"), except where the failure to have any of the Company Permits
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, and no suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company (as hereinafter defined),
threatened, except where the suspension or cancellation of any of the Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company is not in violation of (A) the Company
Charter or the Company Bylaws, (B) any law, ordinance, administrative or
governmental rule or regulation, or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company, except, in the case of
clauses (A) and (C), for any violations that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. Except as disclosed in
the Company SEC Documents filed prior to the date of this Agreement, there are
no contracts or agreements of the Company having terms or conditions which would
have a Material Adverse Effect on the Company or having covenants not to compete
that materially impair the ability of the Company to conduct its business as
currently conducted or would reasonably be expected to
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materially impair Parent's ability to conduct its business or, to the Knowledge
of the Company, purport to bind any shareholder or any Affiliated Person of any
shareholder of the Company after the Effective Time. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement, no event of
default or event that, but for the giving of notice or the lapse of time or
both, would constitute an event of default exists or, upon the consummation by
the Company of the transactions contemplated by this Agreement or the Stock
Option Agreement, will exist under any indenture, mortgage, loan agreement, note
or other agreement or instrument for borrowed money, any guarantee of any
agreement or instrument for borrowed money or any lease, contractual license or
other agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties, assets or operations of the
Company is subject, other than any defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. "KNOWLEDGE
OF THE COMPANY" means the actual knowledge of the directors and executive
officers of the Company.
Section 4.9 TAX MATTERS. Except as otherwise set forth in
Section 4.9 of the Company Letter, (i) the Company has filed in compliance with
applicable laws all Tax Returns (as hereinafter defined) required to have been
filed, and such Tax Returns are correct and complete, and disclose all Taxes (as
hereinafter defined) required to be paid by the Company for the periods covered
thereby, except to the extent that any failure to so file or any failure to be
correct and complete and to disclose all Taxes required to be paid would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; (ii) all Taxes shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, or such Taxes are being timely and properly contested; (iii) the
Company has complied with all rules and regulations relating to the withholding
of Taxes and the remittance of withheld Taxes, except to the extent that any
failure to comply with such rules and regulations would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company; (iv) the Company has not waived any statute of limitations in respect
of its Taxes; (v) any Tax Returns required to have been filed by or with respect
to the Company relating to federal and state income Taxes have been examined by
the Internal Revenue Service ("IRS") or the appropriate foreign or state taxing
authority or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired; (vi) no issues that have been
raised by the relevant taxing authority in connection with the examination of
Tax Returns required to have been filed by or with respect to the Company are
currently pending; (vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full; and (viii) there is no action, suit, investigation, audit, claim
or assessment pending or proposed or threatened in writing with respect to Taxes
of the Company; (ix) there are no liens for Taxes upon the assets of the Company
except liens relating to current Taxes not yet due; (x) the Company has never
been a member of any group of corporations filing Tax Returns on a consolidated,
combined, unitary or similar basis; (xi) no transaction contemplated by this
Agreement is subject to withholding under Section 1445 of the Code (relating to
the Foreign Investment Real Property Tax Act) and no stock transfer Taxes, sales
Taxes, use Taxes, real estate transfer Taxes, or other similar Taxes will be
imposed on the transactions contemplated by this Agreement; and (xii) the
Company has never had any direct or
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indirect ownership in any corporation, partnership, joint venture or other
entity. For purposes of this Agreement: (i) "TAXES" means any federal, state,
local or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, value-added, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty imposed by any Governmental Entity, and
(ii) "TAX RETURN" means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 4.10 ACTIONS AND PROCEEDINGS. There are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company, or against or involving any of the present or
former directors, officers, employees, consultants, agents or shareholders of
the Company with respect to the Company, any of the properties, assets or
business of the Company or any Company Plan. There are no actions, suits or
claims or legal, administrative or arbitrative proceedings or investigations
(including claims for workers' compensation) pending or, to the Knowledge of the
Company, threatened against or involving the Company or any of its or their
present or former directors, officers, employees, consultants, agents or
shareholders with respect to the Company, or any of the properties, assets or
business of the Company or any Company Plan. There are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its present or former
officers, directors, employees, consultants, agents or shareholders with respect
to the Company, or any of the properties, assets or business of the Company
relating to the transactions contemplated by this Agreement and the Stock Option
Agreement.
Section 4.11 CERTAIN AGREEMENTS. Except as set forth in
Section 4.11 of the Company Letter, the Company is not a party to any oral or
written agreement or plan, including any employment agreement, severance
agreement, stock option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan (collectively, the "COMPENSATION AGREEMENTS"),
pension plan (as defined in Section 3(2) of ERISA) or welfare plan (as defined
in Section 3(1) of ERISA) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the Stock Option Agreement
or the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement or the Stock Option
Agreement. No holder of any option to purchase Shares, or Shares granted in
connection with the performance of services for the Company, is or will be
entitled to receive cash from the Company in lieu of or in exchange for such
option or shares as a result of the transactions contemplated by this Agreement
or the Stock Option Agreement. Section 4.11 of the Company Letter sets forth (i)
for each officer, director or employee who is a party to, or will receive
benefits under, any Compensation Agreement as a result of the transactions
contemplated herein, the total amount that each such person may receive, or is
eligible to receive, assuming that the transactions
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contemplated by this Agreement are consummated on the date hereof, and (ii) the
total amount of indebtedness owed to the Company from each officer, director or
employee of the Company.
Section 4.12 ERISA AND CHANGE OF CONTROL AGREEMENTS. (a) Each
Company Plan is listed in Section 4.12(a) of the Company Letter. With respect to
each Company Plan, the Company has made available to Parent a true and correct
copy of (i) the three most recent annual reports (Form 5500) filed with the IRS,
(ii) each such Company Plan that has been reduced to writing and all amendments
thereto, (iii) each trust agreement, insurance contract or administration
agreement relating to each such Company Plan, (iv) a written summary of each
unwritten Company Plan, (v) the most recent summary plan description or other
written explanation of each Company Plan provided to participants, (vi) the most
recent determination letter and request therefor, if any, issued by the IRS with
respect to any Company Plan intended to be qualified under section 401(a) of the
Code, (vii) any request for a determination currently pending before the IRS,
(viii) the three most recent actuarial reports or valuations relating to a
Company Plan subject to Title IV of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and (ix) all correspondence with the IRS, the
Department of Labor, the SEC or Pension Benefit Guaranty Corporation relating to
any outstanding controversy. Except as would not have a Material Adverse Effect
on the Company, each Company Plan complies in all respects with ERISA, the Code
and all other applicable statutes and governmental rules and regulations.
Neither the Company nor any ERISA Affiliate currently maintains, contributes to
or has any liability or, at any time during the past six years has maintained or
contributed to any pension plan which is subject to section 412 of the Code or
section 302 of ERISA or Title IV of ERISA. Neither the Company nor any ERISA
Affiliate currently maintains, contributes to or has any liability or, at any
time has maintained or contributed to any Company Multiemployer Plan.
(b) Except as listed in Section 4.12(b) of the Company Letter,
with respect to the Company Plans, no event has occurred and, to the Knowledge
of the Company, there exists no condition or set of circumstances in connection
with which the Company or ERISA Affiliate or Company Plan fiduciary could be
subject to any liability under the terms of such Company Plans, ERISA, the Code
or any other applicable law which would have a Material Adverse Effect on the
Company. All Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so qualified, or a
timely application for such determination is now pending and the Company is not
aware of any reason why any such Company Plan is not so qualified in operation.
Except as disclosed in Section 4.12(b) of the Company Letter, neither the
Company nor any ERISA Affiliate has any liability or obligation under any
welfare plan to provide benefits after termination of employment to any employee
or dependent other than as required by Section 4980B of the Code. All
contributions (including all employer contributions and employee salary
reduction contributions) required to have been made under each Company Plan or
by law (without regard to any waivers granted under Section 412 of the Code)
have been made by the due date thereof (including any valid extension).
(c) As used herein, (i) "COMPANY PLAN" means a "PENSION PLAN"
(as defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)),
a "WELFARE PLAN" (as defined
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in Section 3(1) of ERISA), or any other written or oral bonus, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, restricted stock, stock appreciation right, holiday
pay, vacation, severance, medical, dental, vision, disability, death benefit,
sick leave, fringe benefit, personnel policy, insurance or other plan,
arrangement or understanding, in each case established or maintained by the
Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate
has contributed or otherwise may have any liability, (ii) "COMPANY MULTIEMPLOYER
PLAN" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or ERISA Affiliates is or has been obligated to contribute
or otherwise may have any liability, and (iii) "ERISA AFFILIATE" means any trade
or business (whether or not incorporated) which would be considered a single
employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder.
(d) Section 4.12(d) of the Company Letter contains a list of
all (i) severance and employment agreements with employees of the Company, (ii)
severance programs and policies of the Company with or relating to its employees
and (iii) plans, programs, agreements and other arrangements of the Company with
or relating to its employees containing change of control or similar provisions.
(e) Except as set forth in Section 4.12(e) of the Company
Letter, the Company is not a party to any agreement, contract or arrangement
that could result, separately or in the aggregate, in the payment of any "EXCESS
PARACHUTE PAYMENTS" within the meaning of Section 280G of the Code.
(f) Except as set forth in Section 4.12(f) of the Company
Letter, no Company Plan is subject to laws outside of United States law.
Section 4.13 COMPLIANCE WITH WORKER SAFETY LAWS. The
properties, assets and operations of the Company are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "WORKER SAFETY LAWS"), except for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations currently owned, leased or operated by the Company, and with respect
to any properties, assets or operations previously owned, leased or operated by
the Company, during any time such properties, assets and operations were owned,
leased or operated by the Company, there are no past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans of
the Company that may interfere with or prevent compliance or continued
compliance with applicable Worker Safety Laws, other than any such interference
or prevention as would not, individually or in the aggregate with any such other
interference or prevention, have a Material Adverse Effect on the Company.
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Section 4.14 LIABILITIES; PRODUCTS. (a) Except as fully
reflected or reserved against in the financial statements included in the
Company SEC Documents filed prior to the date hereof, or disclosed in the
footnotes thereto, since December 31, 1998 the Company has incurred no
liabilities (including Tax liabilities) or obligations of any nature, absolute
or contingent, other than liabilities or obligations that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
other than in the ordinary course of business and consistent with past
practices. As of the date hereof, the indebtedness for borrowed money of the
Company does not exceed $3,000,000.
(b) Except as set forth in Section 4.14(b) of the Company
Letter, since December 31, 1998, the Company has not received a claim for or
based upon breach of product warranty (other than warranty service and repair
claims in the ordinary course of business not material in amount or
significance), strict liability in tort, negligent manufacture of product,
negligent provision of services or any other allegation of liability including
or resulting in product recalls, arising from the materials, design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of
its products or from the provision of services; and, to the Knowledge of the
Company, there is no basis for any such claim which, if asserted, would likely
have a Material Adverse Effect on the Company. No product sold or delivered or
service rendered by the Company is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale for
products delivered and services rendered by the Company, copies of which have
previously been delivered to Parent.
(c) The Company has provided to Parent a schedule of products
in development and planned introductions, a copy of which is attached to the
Company Letter. The Company reasonably expects the goals set forth therein to be
achieved in all material respects, except for such deviations as would not have
a Material Adverse Effect on the Company. The product and service engineering,
development, manufacturing and quality control processes which have been and are
being followed by the Company are reasonably designed to produce products and
services which (i) are consistent with the claims made about them in the
Company's sales brochures and other statements made about them by or on behalf
of the Company, (ii) otherwise meet the reasonable expectations of customers,
(iii) comply with applicable regulatory requirements and (iv) avoid claims of
the type described in Section 4.14 (b).
Section 4.15 LABOR MATTERS. Except as set forth in Section
4.15 of the Company Letter, the Company is not a party to any collective
bargaining agreement or labor contract. The Company has not engaged in any
unfair labor practice with respect to any persons employed by or otherwise
performing services primarily for the Company (the "COMPANY BUSINESS
PERSONNEL"), and there is no unfair labor practice charges or complaints
pending, or to the Knowledge of the Company, threatened before the National
Labor Relations Board or any equivalent governmental entity, except where such
unfair labor practice or complaint would not have a Material Adverse Effect on
the Company. The Company has not at any time during the last three (3) years
had, and to the Knowledge of the Company there is not now threatened, any
walk-out, strike, union activity, picketing, work stoppage, work slow-down or
any other similar occurrence relating to
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the Company, except where such walk-out, strike, union activity, picketing, work
stoppage, work slow-down or any other similar occurrence would not have a
Material Adverse Effect on the Company. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company which may interfere with the business
activities of the Company, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect on the Company. To the Knowledge of the
Company, there has not been any attempt to organize or represent the Company
Business Personnel at any time during the last three (3) years. The Company has
not had a plant closing or mass layoff relating to its business as such terms
are defined in the Worker Adjustment and Retraining Notification Act.
Section 4.16 INTELLECTUAL PROPERTY; YEAR 2000. "COMPANY
INTELLECTUAL PROPERTY" means all trademarks, trademark registrations, trademark
rights and renewals thereof, trade names, trade name rights, patents, patent
rights, patent applications, industrial models, inventions, invention
disclosures, designs, utility models, inventor rights, software, computer
programs, computer systems, modules and related data and materials, copyrights,
copyright registrations and renewals thereof, servicemarks, servicemark
registrations and renewals thereof, servicemark rights, trade secrets,
applications for trademark and servicemark registrations, know-how, confidential
information and other proprietary rights, and any data and information of any
nature or form used or held for use in connection with the business of the
Company as currently conducted or as currently contemplated by the Company,
together with all applications currently pending or in process for any of the
foregoing. Except as disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof, the Company owns, or possesses adequate licenses or
other valid rights to use (including the right to sublicense to customers,
suppliers or others as needed), all of the Company Intellectual Property that is
necessary, appropriate or desirable for the conduct or contemplated conduct of
the Company's business. Section 4.16 of the Company Letter lists each license or
other agreement pursuant to which the Company has the right to use Company
Intellectual Property utilized in connection with any product of, or service
provided by, the Company, the cancellation or expiration of which would have a
Material Adverse Effect on the Company (the "COMPANY LICENSES"). There are no
pending, or, to the Knowledge of the Company, threatened interferences,
re-examinations, oppositions or cancellation proceedings involving any patents
or patent rights, trademarks or trademark rights, or applications therefor, of
the Company, except such as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. There is no breach or violation by the
Company under, and, to the Knowledge of the Company, there is no breach or
violation by any other party to, any Company License that is reasonably likely
to give rise to any termination or any loss of rights thereunder. To the
Knowledge of the Company, there has been no unauthorized disclosure or use of
confidential information, trade secret rights, processes and formulas, research
and development results and other know-how of the Company, except where such
disclosure or use of such information would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. To the Knowledge of
the Company, the conduct of the business of the Company as currently conducted
or contemplated does not infringe upon or conflict with, in any way, any
license, trademark, trademark right, trade name, trade name right, patent,
patent right, industrial model, invention, service mark, service mark right,
copyright, trade secret or any other intellectual
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property rights of any third party that, individually or in the aggregate, would
have a Material Adverse Effect on the Company. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date hereof, there are no
infringements of, or conflicts with, any Company Intellectual Property which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. Except as set forth in Section 4.16 of the Company Letter, the Company
has not licensed or otherwise permitted the use by any third party of any
proprietary information or Company Intellectual Property on terms or in a manner
which, individually or in the aggregate, would have a Material Adverse Effect on
the Company. Except as set forth in Section 4.16 of the Company Letter, the
current and previously sold products of the Company and software, operations,
systems and processes (including, to the Knowledge of the Company, software,
operations, systems and processes obtained from third parties) used in the
conduct of the business of the Company, are Year 2000 Compliant, and the Company
has delivered to Parent true and correct copies of any consultant or other
third-party reports prepared on behalf of the Company with respect to such
compliance. For purposes of this Agreement, "YEAR 2000 COMPLIANT" means the
ability to process (including calculate, compare, sequence, display or store),
transmit or receive data or data/time data from, into and between the twentieth
and twenty-first centuries, and the years 1999 and 2000, and leap year
calculations without error or malfunction.
Section 4.17 TITLE TO AND SUFFICIENCY OF ASSETS. (a) As of the
date hereof, the Company owns, and as of the Effective Time the Company will
own, good and marketable title to all of their assets (excluding, for purposes
of this sentence, assets held under leases), free and clear of any and all
mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security
interests or impositions (collectively, "LIENS"), except as set forth in the
Company SEC Documents filed with the SEC prior to the date hereof or Section
4.17 of the Company Letter and except where the failure to own such title would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. Such assets, together with all assets held by the Company under leases,
include all tangible and intangible personal property, contracts and rights
necessary or required for the operation of the businesses of the Company as
presently conducted, except for such assets the failure to have would,
individually or in the aggregate, have a Material Adverse Effect.
(b) The Company does not own any Real Estate. All Real Estate
assets held by the Company under leases are adequate for the operation of the
business of the Company as presently conducted. The leases to all Real Estate
occupied by the Company which are material to the operation of the business of
the Company are in full force and effect and no event has occurred which with
the passage of time, the giving of notice, or both, would constitute a default
or event of default by the Company or, to the Knowledge of the Company, any
other person who is a party signatory thereto, other than such defaults or
events of default which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. For purposes of this Agreement, "REAL
ESTATE" means, with respect to the Company, as applicable, all of the fee or
leasehold ownership right, title and interest of such person, in and to all real
estate and improvement owned or leased by any such person and which is used by
any such person in connection with the operation of its business.
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Section 4.18 BROKERS. No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement and by the
Stock Option Agreement based upon arrangements made by or on behalf of the
Company.
Section 4.19 REQUIRED VOTE OF COMPANY SHAREHOLDERS. No vote of
the security holders of the Company is required by law, the Company Charter or
the Company Bylaws or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby and in the Stock Option
Agreement other than the affirmative vote of the holders of at least a majority
of Shares entitled to vote if such vote is required by the CGCL in order to
consummate the Merger.
Section 4.20 ACCOUNTS RECEIVABLE. All of the accounts and
notes receivable of the Company set forth on the books and records of the
Company (net of the applicable reserves reflected on the books and records of
the Company and in the financial statements included in the Company SEC
Documents) (i) represent sales actually made or transactions actually effected
in the ordinary course of business for goods or services delivered or rendered
to unaffiliated customers in bona fide arm's length transactions, (ii)
constitute valid claims, and (iii) are good and collectible at the aggregate
recorded amounts thereof (net of such reserves) without right of recourse,
defense, deduction, return of goods, counterclaim, or offset and have been or
will be collected in the ordinary course of business and consistent with past
experience.
Section 4.21 INVENTORIES. Except as set forth in Section 4.21
of the Company Letter, all inventories of the Company consist of items of
merchantable quality and quantity usable or salable in the ordinary course of
business, are salable at prevailing market prices that are not less than the
book value amounts thereof or the price customarily charged by the Company,
conform to the specifications established therefor, and have been manufactured
in accordance with applicable regulatory requirements, except to the extent that
the failure of such inventories so to consist, be saleable, conform, or be
manufactured would not have a Material Adverse Effect on the Company. Except as
set forth in Section 4.21 of the Company Letter, the quantities of all
inventories, materials, and supplies of the Company (net of the obsolescence
reserves therefor shown in the financial statements included in the Company SEC
Documents and determined in the ordinary course of business consistent with past
practice) are not obsolete, damaged, slow-moving, defective, or excessive, and
are reasonable and balanced in the circumstances of the Company, except to the
extent that the failure of such inventories to be in such conditions would not
have a Material Adverse Effect on the Company.
Section 4.22 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "HAZARDOUS SUBSTANCES" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any other
chemicals, materials or substances regulated as toxic
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or hazardous or as a pollutant, contaminant or waste or for which liability or
standards of care are imposed under any applicable Environmental Law; (ii)
"ENVIRONMENTAL LAW" means any law, past or present and as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, or common law, relating to
pollution or protection of the environment, health or safety or natural
resources, including those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Substances; and
(iii) "ENVIRONMENTAL PERMIT" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental Law.
(b) Except as disclosed in Section 4.22 of the Company Letter,
the Company is and has been in compliance with all applicable Environmental
Laws, has obtained all Environmental Permits and are in compliance with their
requirements, and has resolved all past non-compliance with Environmental Laws
and Environmental Permits without any pending, on-going or future obligation,
cost or liability, except in each case for the notices set forth in Section 4.22
of the Company Letter or where such non-compliance would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) Except as disclosed in Section 4.22 of the Company Letter,
the Company has not (i) placed, held, located, released, transported or disposed
of any Hazardous Substances on, under, from or at any of the Company's
properties or any other properties, nor caused any facts or conditions that
could give rise to an environmental claim, other than in a manner that would
not, in all such cases taken individually or in the aggregate, result in a
Material Adverse Effect on the Company, (ii) any Knowledge or reason to know of
the presence of any Hazardous Substances on, under, emanating from, or at any of
the Company's properties or any other property but arising from the Company's
current or former properties or operations, other than in a manner that would
not result in a Material Adverse Effect on the Company, or (iii) any Knowledge
or reason to know, nor has it received any written notice (A) of any violation
of or liability under any Environmental Laws, (B) of the institution or pendency
of any suit, action, claim, proceeding or investigation by any Governmental
Entity or any third party in connection with any such violation or liability,
(C) requiring the investigation of, response to or remediation of Hazardous
Substances at or arising from any of the Company's current or former properties
or operations or any other properties, (D) alleging noncompliance by the Company
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's current or former properties or operations or
any other properties, except in each case for the notices set forth in Section
4.22 of the Company Letter.
(d) Except as disclosed in Section 4.22 of the Company Letter,
no Environmental Law imposes any obligation upon the Company arising out of or
as a condition to any transaction contemplated by this Agreement, including any
requirement to modify or to transfer any permit or license, any requirement to
file any notice or other submission with any Governmental Entity, the placement
of any notice, acknowledgment or covenant in any land
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records, or the modification of or provision of notice under any agreement,
consent order or consent decree.
(e) The Company has provided or made available to Parent
copies of any Environmental assessment or audit report or other similar studies
or analyses currently in the possession of or available to the Company relating
to any real property currently or formerly owned, leased or occupied by the
Company.
Section 4.23 SUPPLIERS, CUSTOMERS AND EMPLOYEES. Except as set
forth in Section 4.23 of the Company Letter, the Company has not received any
notice nor has any reason to believe that (a) any significant supplier will not
sell raw materials, supplies, merchandise and other goods to the Company at any
time after the Effective Time on terms and conditions substantially similar to
those used in its current sales to the Company, subject only to general and
customary price increases, unless comparable raw materials, supplies,
merchandise or other goods are readily available from other sources on
comparable terms and conditions (b) any significant customer intends to
terminate or limit or alter its business relationship with the Company, or (c)
any employee or group of employees significant to the Company or any of its
operations intends to terminate or has terminated his or their employment with
the Company.
Section 4.24 INSURANCE. All material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by the Company are with reputable
insurance carriers, provide full and adequate coverage for all normal risks
incident to the business of the Company and its properties and assets, and are
in character and amount at least equivalent to that carried by persons engaged
in similar businesses and subject to the same or similar perils or hazards,
except for any such failures to maintain insurance policies that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
The Company has made any and all payments required to maintain such policies in
full force and effect. Except as set forth in Section 4.24 of the Company
Letter, the Company has not received notice of default under any such policy,
and has not received written notice or, to the Knowledge of the Company, oral
notice of any pending or threatened termination or cancellation, coverage
limitation or reduction or material premium increase with respect to such
policy.
Section 4.25 ACCURACY OF INFORMATION. Neither this Agreement
nor any other document provided by the Company or any of its employees or agents
to Parent in connection with the transactions contemplated herein, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein not misleading.
Section 4.26 TRANSACTIONS WITH AFFILIATES. (a) For purposes of
this Section 4.26, the term "AFFILIATED PERSON" means (i) any holder of 2% or
more of the Company Common Stock, (ii) any director, officer or senior executive
of the Company, (iii) any person, firm or corporation that directly or
indirectly controls, is controlled by, or is under common control with, the
Company or (iv) any member of the immediate family or any of such persons.
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(b) Except as set forth in Section 4.26 of the Company Letter
or in the Company SEC Reports filed with the SEC prior to the date hereof, since
December 31, 1997, the Company has not, in the ordinary course of business or
otherwise, (i) purchased, leased or otherwise acquired any material property or
assets or obtained any material services from, (ii) sold, leased or otherwise
disposed of any material property or assets or provided any material services to
(except with respect to remuneration for services rendered in the ordinary
course of business as director, officer or employee of the Company), (iii)
entered into or modified in any manner any contract with, or (iv) borrowed any
money from, or made or forgiven any loan or other advance (other than expenses
or similar advances made in the ordinary course of business) to, any Affiliated
Person.
(c) Except as set forth in Section 4.26 of the Company Letter
or in the Company SEC Reports filed with the SEC prior to the date hereof, (i)
the contracts of the Company do not include any material obligation or
commitment between the Company and any Affiliated Person, (ii) the assets of the
Company do not include any receivable or other obligation or commitment from an
Affiliated Person to the Company and (iii) the liabilities of the Company do not
include any payable or other obligation or commitment from the Company to any
Affiliated Person.
(d) To the Knowledge of the Company and except as set forth in
Section 4.26 of the Company Letter or in the Company SEC Reports filed with the
SEC prior to the date hereof, no Affiliated Person is a party to any contract
with any customer or supplier of the Company that affects in any material manner
the business, financial condition or results of operation of the Company.
Section 4.27 STATE TAKEOVER LAWS No "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation applies or purports to apply to the Offer, the Merger, this Agreement
or any of the other transactions contemplated hereby or thereby.
Section 4.28 CONTRACTS. Except as set forth in Section 4.28 of
the Company Letter, the Company is not a party to or bound by any (i) "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated by the SEC), (ii) non-competition agreement or any other agreement
or obligation which purports to limit in any respect the manner in which, or the
localities in which, all or any material portion of the business of the Company
may be conducted, (iii) transaction, agreement, arrangement or understanding
with any affiliate of the Company that would be required to be disclosed under
Item 404 of Regulation S-K promulgated by the SEC, (iv) voting or other
agreement governing how any Shares shall be voted, (v) acquisition, merger,
asset purchase or sale agreement, (vi) agreement which provides for, or relates
to, the incurrence by the Company of indebtedness for borrowed money (including
any interest rate or foreign currency swap, cap, collar, hedge or insurance
agreements, or options or forwards on such agreements, or other similar
agreements for the purpose of managing the interest rate or foreign exchange
risk associated with its financing), or (vii) contract or other
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agreement which would prohibit or materially delay the consummation of the
Merger or any of the transactions contemplated by this Agreement (all contracts
of the type described in clauses (i) through (vii) being referred to herein as
"MATERIAL CONTRACTS"). Each Material Contract is valid and binding on the
Company and is in full force and effect, and the Company has performed all
obligations required to be performed by it to date under each Material Contract,
except where such noncompliance, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Except as set forth in Section
4.28 of the Company Letter, the Company is not in default or does not know of,
or has not received notice of, any violation or default under (nor, to the
knowledge of the Company, does there exist any condition which with the passage
of time or the giving of notice or both would result in such a violation or
default under) any Material Contract, except any such default or violation that,
individually or in the aggregate, would not have a Material Adverse Effect.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. During the period from the date of this Agreement through the Effective
Time, the Company shall in all material respects carry on its business in the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use its commercially reasonable efforts to preserve intact
its current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it. Without limiting the generality of
the foregoing, and except as otherwise expressly contemplated by this Agreement,
the Company shall not without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to its
shareholders in their capacity as such, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options (including options under the Company Stock Option
Plan) to acquire any such shares, voting securities, equity equivalent
or convertible securities, other than (A) the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement in accordance with their
current terms, (B) the issuance of shares of Company Common
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Stock upon exercise of the Shareholder Warrants, Representative
Warrants or Executive Warrant, (C) the issuance of shares of Company
Common Stock pursuant to the Stock Option Agreement and (D) as set
forth in Section 5.1(ii) of the Company Letter;
(iii) amend the Company Charter or Company Bylaws;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business
organization or division thereof;
(v) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets, other than sales of
inventory that are in the ordinary course of business consistent with
past practice;
(vi) incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions
to, or other investments in, any other person, other than in the
ordinary course of business consistent with past practice;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company;
(viii) enter into or adopt any, or amend any existing,
severance plan, agreement or arrangement or enter into or amend any
Company Plan or employment or consulting agreement;
(ix) increase the compensation payable or to become payable to
its directors, officers or employees (except for increases in the
ordinary course of business consistent with past practice in salaries
or wages of employees of the Company who are not officers of the
Company) or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director or officer of
the Company, or establish, adopt, enter into, or, except as may be
required to comply with applicable law, amend in any material respect
or take action to enhance in any material respect or accelerate any
rights or benefits under, any labor, collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon the Company by any applicable material
federal, state or local law, rule, regulation, guideline or ordinance;
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(xi) make any change to accounting policies or procedures
(other than actions required to be taken by generally accepted
accounting principles);
(xii) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(xiii) settle or compromise any federal, state, local or
foreign income tax dispute;
(xiv) settle or compromise any claims or litigation or
commence any litigation or proceedings;
(xv) enter into or amend any agreement or contract (i) having
a term in excess of 12 months and which is not terminable by the
Company without penalty or premium by notice of 30 days or less, (ii)
which involves or is expected to involve future payments of $100,000 or
more during the term thereof, or (iii) any other agreement or contract
material to the Company; or purchase any real property, or make or
agree to make any new capital expenditure or expenditures (other than
the purchase of real property) which in the aggregate are in excess of
$100,000;
(xvi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any
such claims, liabilities or obligations, in the ordinary course of
business consistent with past practice or in accordance with their
terms;
(xvii) purchase or exercise the option to purchase the
aircraft pursuant to the Aircraft Purchase and Sale Agreement between
the Company and VisionAire Corporation dated December 18, 1996; or
(xviii) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
Section 5.2 NO SOLICITATION. (a) The Company shall not, nor
shall it permit any Company Affiliate (as defined below) to, nor shall it
authorize or permit any officer, director or employee of or any financial
advisor, attorney or other advisor or representative of, the Company or any
Company Affiliate to, (i) solicit, initiate or encourage the submission of, any
Takeover Proposal (as hereafter defined), (ii) enter into any agreement with
respect to or approve or recommend any Takeover Proposal or (iii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to the Company or any Company Affiliate in connection
with, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal;
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PROVIDED, HOWEVER, that nothing contained in this Section 5.2(a) shall prohibit
the Company or its directors from (i) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or (ii)
referring a third party to this Section 5.2(a) or making a copy of this Section
5.2(a) available to any third party; and PROVIDED, FURTHER, that prior to the
acceptance for payment of Offer Securities pursuant to the Offer, if the Board
of Directors of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal (as defined below), then, to the extent required
by the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by a majority thereof after consultation with
independent counsel (who may be the Company's regularly engaged independent
counsel), the Company and its representatives may, in response to an unsolicited
request therefor, and subject to compliance with Section 5.2(b), furnish
information with respect to the Company and the Company Affiliates to any person
pursuant to a customary confidentiality statement (as determined by the
Company's independent counsel) and participate in discussions or negotiations
with such person. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any officer
or director of the Company or any Company Affiliate or any financial advisor,
attorney or other advisor or representative of the Company or any Company
Affiliate, whether or not such person is purporting to act on behalf of the
Company or any Company Affiliate or otherwise, shall be deemed to be a breach of
this Section 5.2(a) by the Company. For purposes of this Agreement, "COMPANY
AFFILIATE" means any person that (i) directly or indirectly controls the
Company, (ii) directly or indirectly is controlled by the Company or (iii) is
under direct or indirect common control with the Company; "TAKEOVER PROPOSAL"
means any proposal for a merger or other business combination involving the
Company or any Company Affiliate or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in, any voting securities of,
or a substantial portion of the assets of the Company or any Company Affiliate,
other than (i) the transactions contemplated by this Agreement and the Stock
Option Agreement and (ii) any financing or investment solely by the Company's
officers and directors after termination of this Agreement pursuant to the terms
approved by the Company's Board of Directors on June 10, 1999 (the
"POST-TERMINATION COMPANY FINANCING"), and "SUPERIOR PROPOSAL" means a bona fide
proposal made by a third party to acquire the Company pursuant to a tender or
exchange offer, a merger, a sale of all or substantially all its assets or
otherwise on terms which a majority of the disinterested members of the Board of
Directors of the Company determines, at a duly constituted meeting of the Board
of Directors or by unanimous written consent, in its reasonable good faith
judgment to be more favorable to the Company's shareholders than the Merger
(after consultation with the Company's independent financial advisor) and for
which financing, to the extent required, is then committed or which, in the
reasonable good faith judgment of a majority of such disinterested members, as
expressed in a resolution adopted at a duly constituted meeting of such members
(after consultation with the Company's independent financial advisor), is
reasonably capable of being obtained by such third party.
(b) The Company shall advise Parent orally and in writing of
(i) any Takeover Proposal or any inquiry with respect to or which could lead to
any Takeover Proposal received by any officer or director of the Company or, to
the Knowledge of the Company, any financial
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advisor, attorney or other advisor or representative of the Company, (ii) the
material terms of such Takeover Proposal (including a copy of any written
proposal), and (iii) the identity of the person making any such Takeover
Proposal or inquiry no later than 24 hours following receipt of such Takeover
Proposal or inquiry. If the Company intends to furnish any Person with any
information with respect to any Takeover Proposal in accordance with Section
5.2(a), the Company shall advise Parent orally and in writing of such intention
not less than one full business day in advance of providing such information.
The Company will keep Parent fully informed of the status and details of any
such Takeover Proposal or inquiry.
Section 5.3 THIRD PARTY STANDSTILL AGREEMENTS. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company is a party (other than any
involving Parent). During such period, the Company agrees to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.1 PUBLIC ANNOUNCEMENTS. Parent and the Company will
not issue any press release with respect to the transactions contemplated by
this Agreement or otherwise issue any written public statements with respect to
such transactions without the prior written consent of the other party, except
as may be required by applicable law or by obligations pursuant to any listing
agreement with any national securities exchange, in which case Parent and the
Company will not issue any such press release or written public statements
without prior consultation of the other party.
Section 6.2 ACCESS TO INFORMATION. Subject to currently
existing contractual and legal restrictions applicable to the Company, the
Company shall afford to the accountants, counsel, financial advisors and other
representatives of Parent reasonable access to, and permit them to make such
inspections as they may reasonably require of, during the period from the date
of this Agreement through the Effective Time, all of their respective
properties, books, contracts, commitments and records (including engineering
records and Tax Returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants) and,
during such period, the Company shall (i) furnish promptly to Parent a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws, (ii) furnish promptly to Parent all other information concerning its
business, properties and personnel as Parent may reasonably request and (iii)
promptly make available to Parent all personnel of the Company knowledgeable
about
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matters relevant to such inspections. No investigation pursuant to this Section
6.2 shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained by Parent pursuant to this Section 6.2 shall be kept
confidential in accordance with the Agreement Regarding the Receipt of
Confidential Information between Parent and the Company (the "CONFIDENTIALITY
AGREEMENT").
Section 6.3. DIRECTORS. Promptly after such time as Sub
purchases the Offer Securities pursuant to the Offer, Sub shall be entitled, to
the fullest extent permitted by law, to designate at its option up to that
number of directors, rounded to the nearest whole number, of the Company's Board
of Directors, subject to compliance with Section 14(f) of the Exchange Act, as
will make the percentage of the Company's directors designated by Sub equal to
the percentage of the aggregate voting power of the shares of Common Stock held
by Parent or any of its Subsidiaries (determined after giving effect to the
directors elected pursuant to this Section 6.3); PROVIDED, HOWEVER, that,
subject to the next sentence, if Parent and its subsidiaries shall hold at least
90% of the aggregate voting power of the shares of Common Stock, Sub shall be
entitled to designate all of the members of Company's Board of Directors;
PROVIDED, FURTHER, that if Sub shall have purchased the Revised Minimum Number
of Shares in the Offer, such number of directors shall be rounded up to the
greatest whole number plus one to give Sub at least a majority of the members of
the Company's Board of Directors. In the event that Sub's designees are elected
to the Board of Directors of the Company, until the Effective Time such Board of
Directors shall have at least three directors who are directors on the date of
this Agreement and who are not officers of the Company (the "INDEPENDENT
DIRECTORS"); PROVIDED, HOWEVER, that, in such event, if the number of
Independent Directors shall be reduced below three for any reason whatsoever,
the remaining Independent Directors or Director shall designate a person or
persons to fill such vacancy or vacancies, each of whom shall be deemed to be an
Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors shall designate three persons to fill
such vacancies who shall not be officers or affiliates of the Company, or
officers or affiliates of Parent or any of its subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Following the election or appointment of Sub's designees pursuant to this
Section 6.3 and prior to the Effective Time, any amendment, or waiver of any
term or condition, of this Agreement or the Company Charter or the Company
Bylaws, any termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Sub or waiver or assertion of any of the Company's rights hereunder, and any
other consent or action by the Board of Directors of the Company with respect to
this Agreement, will require the concurrence of a majority of the Independent
Directors and no other action by the Company, including any action by any other
director of the Company, shall be required for purposes of this Agreement. To
the fullest extent permitted by applicable law, the Company shall take all
action requested by Parent that is reasonably necessary to effect any such
election, including mailing to its shareholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's
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designees). In connection with the foregoing, the Company will promptly, at the
option of Parent, to the fullest extent permitted by law, either increase the
size of the Company's Board of Directors and/or obtain the resignation of such
number of its current directors as is necessary to enable Sub's designees to be
elected or appointed to the Company's Board of Directors as provided above.
Section 6.4 FEES AND EXPENSES. (a) Except as provided in this
Section 6.4, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, in same day
funds to Parent the following amounts under the circumstances and at the times
set forth as follows:
(i) if Parent or Sub terminates this Agreement under Section
8.1(d), the Company shall pay the Expenses (as defined below) of Parent
and the Termination Fee (as defined below) upon demand;
(ii) if the Company terminates this Agreement under Section
8.1(e), the Company shall pay the Termination Fee within one business
day following such termination and the Expenses of Parent upon demand;
(iii) if Parent or Sub terminates this Agreement under Section
8.1(c) and at the time of any such termination, a Takeover Proposal
shall have been made, (x) the Company shall pay the Expenses of Parent
upon demand, and (y) if concurrently therewith or within nine months
thereafter, (A) the Company enters into a merger agreement, acquisition
agreement or similar agreement (including a letter of intent) with
respect to a Takeover Proposal, or a Takeover Proposal is consummated,
involving any party (1) with whom the Company had any discussions with
respect to a Takeover Proposal, (2) to whom the Company furnished
information with respect to or with a view to a Takeover Proposal or
(3) who had submitted a proposal or expressed any interest publicly in
a Takeover Proposal, in the case of each of clauses (1), (2) and (3),
prior to such termination, or (B) the Company enters into a merger
agreement, acquisition agreement or similar agreement (including a
letter of intent) with respect to a Superior Proposal, or a Superior
Proposal is consummated, then, in the case of either (A) or (B) above,
the Company shall pay the Termination Fee upon the earlier of the
execution of such agreement or upon consummation of such Takeover
Proposal or Superior Proposal.
If the Company does not pay, or cause to be paid, the amounts described above
and at the times set forth above, such amounts shall accrue interest at a rate
of prime rate plus 2% as set forth in the "Money Rate" section of The Wall
Street Journal.
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(c) Parent shall pay, or cause to be paid, in same day funds
to the Company, the Expenses of the Company if the Company terminates this
Agreement under Section 8.1(f). If Parent does not pay, or cause to be paid,
such amount at such time, such amount shall accrue interest at a rate of prime
rate plus 2% as set forth in the "Money Rate" section of The Wall Street
Journal.
(d) "EXPENSES" means with respect to Parent or the Company, as
the case may be, documented out-of-pocket fees and expenses incurred or paid by
or on behalf of Parent or the Company, as the case may be, in connection with
the Offer, the Merger or the consummation of any of the transactions
contemplated by this Agreement, including all fees and expenses of law firms,
commercial banks, investment banking firms, accountants, experts and consultants
to Parent or the Company, as the case may be; PROVIDED that the Expenses of
Parent payable by the Company under this Section 6.4 shall not exceed $250,000
and the Expenses of the Company payable by Parent under this Section 6.4 shall
not exceed $250,000; and "TERMINATION FEE" means $750,000; PROVIDED, HOWEVER,
that the aggregate amount of the Termination Fee and Expenses payable to Parent
shall be reduced to an amount not less than zero by subtracting from the
aggregate amount otherwise payable to Parent the amount realized or anticipated
to be realizable (based on the facts as they exist on the date such aggregate
amount shall become due) by Parent under the Stock Option Agreement; PROVIDED
FURTHER that if such aggregate amount shall be so reduced by an amount
realizable by Parent and thereafter the Stock Option Agreement shall terminate
without receipt by Parent of such amount, then, to the extent Parent is entitled
to receive such aggregate amount, an additional payment shall be made to Parent
in such amount promptly following such termination.
Section 6.5 STOCK OPTIONS. (a) Prior to the consummation of
the Offer or the Effective Time, whichever is earlier, the Board of Directors of
the Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary or appropriate to (i) cause
each Company Stock Option that is outstanding as of the date hereof to vest and
to be exercisable immediately prior to the consummation of the Offer or the
Effective Time, whichever is earlier and (ii) cause each Company Stock Option
that is outstanding upon the consummation of the Offer or the Effective Time,
whichever is earlier, to be canceled as of the consummation of the Offer or the
Effective Time, whichever is earlier, in consideration for which the holder of
such canceled option (an "OPTION HOLDER") shall be entitled to receive from the
Company an amount equal to (A) the product of (1) the number of shares of
Company Common Stock subject to such Option and (2) the excess, if any, of the
Common Stock Merger Consideration over the exercise price per share for the
purchase of the Company Common Stock subject to such Option, minus (B) all
applicable federal, state and local Taxes required to be withheld in respect of
such payment. The amounts payable pursuant to clause (ii) of the first sentence
of this Section 6.5 shall be paid as soon as reasonably practicable following
the acceptance for payment by Sub of Offer Securities pursuant to the Offer or
the Effective Time, whichever is earlier. The amount payable to any Option
Holder pursuant to clause (ii) of the first sentence of this Section 6.5 shall
be reduced to the extent necessary to prevent such payment, together with any
other amounts payable to such Option Holder by the Company, from
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constituting a "parachute payment," within the meaning of section 280G of the
Code. The surrender of an Option in exchange for the consideration contemplated
by clause (ii) of the first sentence of this Section 6.5 shall be deemed a
release of any and all rights the Option Holder had or may have had in respect
thereof.
(b) The Company shall take all actions necessary to provide
that, effective as of acceptance for payment by Sub of Offer Securities pursuant
to the Offer or the Effective Time, whichever is earlier, (i) the Company Stock
Option Plan and any similar plan or agreement of the Company shall be
terminated, (ii) any rights under any other plan, program, agreement or
arrangement to the issuance or grant of any other interest in respect of the
capital stock of the Company shall be terminated, and (iii) no Option Holder
will have any right to receive any shares of capital stock of the Company or, if
applicable, the Surviving Corporation, upon exercise of any Company Stock
Option.
(c) The Company represents and warrants that it has the power
and authority under the terms of the Company Stock Option Plan to comply with
this Section 6.5 without the consent of any Option Holder.
(d) In order to aid Parent and Sub in determining whether the
Minimum Condition has been satisfied, the Company shall give prompt notice to
Parent of any Company Stock Option or Warrant that is exercised by a holder
thereof between the date of this Agreement and the expiration of the Offer or
the Effective Time, whichever is earlier.
Section 6.6 COMMERCIALLY REASONABLE EFFORTS. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger and the other transactions contemplated by this Agreement,
including: (i) the obtaining of all necessary actions or non-actions, waivers,
consents and approvals from all Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with State Takeover
Approvals), (ii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement, the
Stock Option Agreement or the consummation of the transactions contemplated
hereby and thereby, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Agreement. No party to this
Agreement shall consent to any voluntary delay of the consummation of the Offer,
the
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Merger at the behest of any Governmental Entity without the consent of the other
parties to this Agreement, which consent shall not be unreasonably withheld.
(b) Each party shall use all commercially reasonable efforts
to not take any action, or enter into any transaction, which would cause any of
its representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.
Section 6.7 OBLIGATIONS OF PARENT.
(a) Subject to obtaining the consent from Imperial Bank to an
assignment and assumption of the Line of Credit Facility and Note Payable
between the Company and Imperial Bank, dated October 5, 1998, Parent shall
assume and pay, or shall cause a Subsidiary of Parent to assume and pay, the
indebtedness for borrowed money under such Facility in the principal amount of
$2,705,812 plus accrued interest within five days of the purchase of Shares
constituting the Minimum Condition by Sub pursuant to the Offer or the Effective
Time, whichever is earlier.
(b) Parent shall assume, or shall cause a Subsidiary of Parent
to assume, the promissory notes payable to the Williams Family Trust dated June
11, 1999, June 17, 1999, July 8, 1999 and July 9, 1999 in the aggregate amount
of $240,000 (the "WILLIAMS NOTES") and shall pay the principal amount and any
accrued interest in respect of the Williams Notes within five days of the
purchase of the Shares constituting the Minimum Condition by Sub pursuant to the
Offer or the Effective Time, whichever is earlier, upon delivery and
cancellation of the Williams Notes pursuant to Section 3(f) of the Shareholder
Agreement among the Williams Family Trust, Parent and Sub.
(c) Parent agrees that, after the Effective Time, it shall use
commercially reasonable efforts to terminate the guarantee obligations of Jack
and Ellyn Williams related to those certain lease agreements with the Levine
Family Trust and Carlsbad Las Palmas, LLC, respectively. Parent and its
Affiliates shall not be obligated to pay any fee in connection with its efforts
under this clause (c).
Section 6.8 STATE TAKEOVER LAWS. If any "fair price,"
"business combination" or "control share acquisition" statute or other similar
statute or regulation shall become applicable to the transactions contemplated
hereby or in the Stock Option Agreement or the Shareholder Agreements, Parent
and the Company and their respective Boards of Directors shall use their
commercially reasonable efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 6.9 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless all past and present officers and
directors of the Company to the same extent and in the same manner and subject
to the same limits as such persons are indemnified as of the date of this
Agreement by the Company pursuant to the CGCL, the Company Charter or the
Company Bylaws for acts or omissions occurring at or prior to the Effective
Time.
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(b) Parent shall cause the Surviving Corporation to provide,
for an aggregate period of not less than three years from the Effective Time,
the Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring prior to the Effective Time
(the "D&O INSURANCE") that is substantially similar to the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; PROVIDED, HOWEVER, that the Surviving Corporation shall
not be required to pay an annual premium for the D&O Insurance in excess of the
last annual premiums paid prior to the date hereof but in such case shall
purchase as much coverage as possible for such amount.
(c) Parent hereby agrees that, effective at the Effective
Time, Parent will guarantee the obligations of the Surviving Corporation under
Section 6.9(a) and (b).
Section 6.10 NOTIFICATION OF CERTAIN MATTERS. Parent shall use
its commercially reasonable efforts to give prompt notice to the Company, and
the Company shall use its commercially reasonable efforts to give prompt notice
to Parent, of: (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty contained in this
Agreement and made by it to be untrue or inaccurate in any material respect or
(y) any covenant, condition or agreement contained in this Agreement and made by
it not to be complied with or satisfied in all material respects, (ii) any
failure of Parent or the Company, as the case may be, to comply in a timely
manner with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder or (iii) any change or event which would be
reasonably likely to have a Material Adverse Effect on the Company; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this Section 6.10 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) SHAREHOLDER APPROVAL. If required by applicable law, the
Company Shareholder Approval shall have been obtained.
(b) PURCHASE OF OFFER SECURITIES. Unless Sub shall have
exercised its rights under Section 1.1(c)(iii), Sub shall have previously
accepted for payment and paid for Offer Securities pursuant to the Offer.
(c) NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or
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other order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making the Merger illegal.
Section 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO
EFFECT THE MERGER. The obligations of Parent and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND
WARRANTIES. The Company shall have performed in all material respects each of
its agreements contained in this Agreement required to be performed on or prior
to the Effective Time, and the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the Effective
Time as if made on and as of such date, and Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) CONSENTS. (i) The Company shall have obtained the consent
or approval of each person or Governmental Entity whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except as to which the failure to obtain such consents
and approvals would not, in the reasonable opinion of Parent, individually or in
the aggregate, have a Material Adverse Effect on the Company or Parent or upon
the consummation of the transactions contemplated in this Agreement, the Stock
Option Agreement or the Shareholder Agreements.
(ii) In obtaining any approval or consent required to
consummate any of the transactions contemplated herein, in the Stock Option
Agreement or the Shareholder Agreements, no Governmental Entity shall have
imposed or shall have sought to impose any condition, penalty or requirement
which, in the reasonable opinion of Parent, individually or in aggregate would
have a Material Adverse Effect on the Company or Parent.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Material Adverse Change with respect to the Company.
Parent shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to such
effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of this
Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
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(i) if (x) as a result of the failure of any of the
Offer Conditions the Offer shall have terminated or expired in
accordance with its terms without Sub having accepted for
payment any Offer Securities pursuant to the Offer or (y) Sub
shall not have accepted for payment any Offer Securities
pursuant to the Offer and Sub shall not have exercised its
rights under Section 1.1(c)(iii) on or prior to September 30,
1999; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this Section 8.1(b)(i) shall not be
available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of any
such condition or if the failure of such condition results
from facts or circumstances that constitute a breach of any
representation or warranty under this Agreement by such party;
or
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance
for payment of, or payment for, Offer Securities pursuant to
the Offer and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by Parent or Sub prior to the purchase of Offer Securities
pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set
forth in paragraph (e) or (f) of EXHIBIT C and (ii) cannot be or has
not been cured within 30 days after the giving of written notice to the
Company;
(d) by Parent or Sub if either Parent or Sub is entitled to
terminate the Offer as a result of the occurrence of any event set
forth in paragraph (d) of EXHIBIT C to this Agreement;
(e) by the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a Superior
Proposal and a majority of the members of the Board of Directors
determines, in its reasonable good faith judgment, after consultation
with independent counsel, that failing to terminate this Agreement
would constitute a breach of such Board's fiduciary duties under
applicable law, provided that the Company has complied with all
provisions of Section 5.2, including the notice provisions therein, and
that it has complied with, or will comply with, the requirements of
Section 6.4(b) relating to the payment (including the timing of any
payment) of the Expenses and the Termination Fee to the extent required
by Section 6.4(b); and provided further that the Company may not
terminate this Agreement pursuant to this Section 8.1(e) unless and
until one full business day has elapsed following delivery to Parent of
a written notice of such determination by the Board of Directors of the
Company; or
(f) by the Company, if (i) any of the representations or
warranties of Parent or Sub set forth in this Agreement shall not be
true and correct in any material respect, or (ii) Parent or Sub shall
have failed to perform in any material respect any material obligation
or to comply in any material respect with any material agreement or
covenant of Parent or
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Sub to be performed or complied with by it under this Agreement and
such untruth, incorrectness or failure cannot be or has not been cured
within 30 days after the giving of written notice to Parent or Sub, as
applicable.
The right of any party hereto to terminate this Agreement
pursuant to this Section 8.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
Section 8.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either Parent or the Company, as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective officers
or directors (except for the last sentence of Section 6.2 and the entirety of
Section 6.4, which shall survive the termination); PROVIDED, HOWEVER, that
nothing contained in this Section 8.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
Section 8.3 AMENDMENT. Subject to Section 6.3, this Agreement
may be amended by the parties hereto, by or pursuant to action taken by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the shareholders of the
Company, but, after any such approval, no amendment shall be made which by law
requires further approval by such shareholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 8.4 WAIVER. At any time prior to the Effective Time,
subject to Section 6.3, the parties hereto may (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 which may legally be
waived. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time.
Section 9.2 NOTICES. All notices or other communications
required or permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax when
confirmation of transmission is received, or (iii) if
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sent by registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
If to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: 407/727-9234
with a copy (which shall not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Jim Kaput
Facsimile: 312/853-7036
If to the Company, to:
Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Attention: President
Facsimile: 760/438-9277
with a copy (which shall not constitute notice) to:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858/677-1477
or to such other address as such party may indicate by a notice delivered to the
other parties in accordance with this SECTION 9.2.
Section 9.3 INTERPRETATION. (a) When a reference is made in
this Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." This Agreement shall be
deemed to have been
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drafted and negotiated by each party hereto and neither this Agreement nor any
other agreement, document, or instrument referred to herein or executed and
delivered in connection herewith shall be construed against any of the parties
as a principal draftsperson hereof or thereof.
(b) "APPLICABLE OFFER PRICES" shall mean, with respect to (i)
each Share, the Common Stock Merger Consideration, (ii) each Shareholder
Warrant, the Shareholder Warrant Consideration, (iii) each Representative
Warrant, the Representative Warrant Consideration for each Share underlying such
Representative Warrant and (iv) the Executive Warrant, the Executive Warrant
Consideration for each Share underlying such Executive Warrant.
(c) "COMMON STOCK MERGER CONSIDERATION" shall mean $2.35, or
any greater amount to be paid per share of Company Common Stock in the Offer.
(d) "COMPANY CHARTER" shall mean the Amended and Restated
Articles of Incorporation of the Company.
(e) "COMPANY BYLAWS" shall mean the Amended and Restated
Bylaws of the Company.
(f) "EXECUTIVE WARRANT CONSIDERATION" shall mean $0.15, or any
greater amount to be paid in the Offer.
(g) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT"
means, when used with respect to the Company or Parent, as the case may be, any
change or effect that is or could reasonably be expected (as far as can be
foreseen at the time) to be materially adverse to the business, operations,
properties, assets, liabilities, employee relationships, customer or supplier
relationships, earnings or results of operations, or the business prospects and
condition (financial or otherwise), of the Company, or Parent and its
Subsidiaries, taken as a whole, as the case may be.
(h) "MERGER CONSIDERATION" shall mean, collectively, the
Common Stock Merger Consideration, the Shareholder Warrant Consideration, the
Representative Warrant Consideration and the Executive Warrant Consideration.
(i) "PERSON" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or Governmental Entity.
(j) "REPRESENTATIVE WARRANT CONSIDERATION" shall mean $0.15,
or any greater amount to be paid in the Offer.
(k) "SHAREHOLDER WARRANT CONSIDERATION" shall mean $0.15, or
any greater amount to be paid per Shareholder Warrant in the Offer.
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(l) "SUBSIDIARY" shall mean any corporation, partnership,
limited liability company, joint venture or other legal entity of which Parent
or the Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or other
legal entity.
(m) OTHER DEFINITIONS. Each of the following terms is defined
in the Section set forth opposite each term:
TERM SECTION
- ---- -------
Agreement Introduction
Blue Sky Laws 3.3
California Merger Agreement 2.1
Certificate of Ownership 2.1
Certificates 2.6(b)
CGCL 2.1
Closing 2.10
Company Introduction
Company Affiliate 5.2(a)
Company Business Personnel 4.15
Company Common Stock 2nd Recital
Company Intellectual Property 4.16
Company Letter 4.2
Company Licenses 4.16
Company Multiemployer Plan 4.12(c)
Company Permits 4.8
Company Plan 4.12(c)
Company SEC Documents 4.5
Company Shareholder Approval 2.8(a)(ii)
Company Stock Options 4.2
Compensation Agreements 4.11
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<PAGE> 53
Confidentiality Agreement 6.2
Constituent Corporations Introduction
D & O Insurance 6.9(b)
Dissenting Shareholder 2.5(d)
Dissenting Shares 2.5(d)
Effective Time 2.2
Environmental Law 4.22(a)
Environmental Permit 4.22(a)
ERISA 4.12(a)
ERISA Affiliate 4.12(c)
Excess Parachute Payments 4.12(e)
Exchange Act 1.1(a)
Executive Warrant Agreement 2nd Recital
Executive Warrant 2nd Recital
Expenses 6.4(d)
Governmental Entity 3.3
Hazardous Substances 4.22(a)
Independent Directors 6.3
Information Statement 3.4
IRS 4.9
Knowledge of the Company 4.8
Liens 4.17(a)
Merger 3rd Recital
Minimum Condition Exhibit C
Offer 2nd Recital
Offer Conditions 1.1(a)
Offer Documents 1.1(b)
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<PAGE> 54
Offer Securities 2nd Recital
Option Holder 6.5
Parent Introduction
Paying Agent 2.6(a)
Pension Plan 4.12(c)
Post-Termination Company Financing 5.2(a)
Proxy Statement 2.8(a)(ii)
Real Estate 4.17(b)
Representative Warrant Agreement 2nd Recital
Representative Warrants 2nd Recital
Revised Minimum Number 1.1(c)
Schedule 14D-1 1.1(b)
Schedule 14D-9 1.2(b)
SEC 1.1(a)
Securities Act 4.5
Shareholder Agreements 4th Recital
Shareholder Warrant Agreement 2nd Recital
Shareholder Warrants 2nd Recital
Shares 2nd Recital
Special Meeting 2.8(a)(i)
State Takeover Approvals 3.3
Stock Option Agreement 4th Recital
Sub Introduction
Superior Proposal 5.2(a)
Surviving Corporation 2.1
Takeover Proposal 5.2(a)
Tax Return 4.9
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<PAGE> 55
Taxes 4.9
Termination Fee 6.4(d)
Welfare Plan 4.12(c)
Williams Notes 6.7(b)
Worker Safety Laws 4.13
Year 2000 Compliant 4.16
Section 9.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement, and shall become
binding when such counterparts have been signed by each of the parties hereto
and delivered to each of the other parties.
Section 9.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This
Agreement, except for the Stock Option Agreement and as provided in the last
sentence of Section 6.2, constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except for the
provisions of Sections 6.7(c) and 6.9, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 9.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws (as opposed to the conflicts
of law provisions) of the State of California.
Section 9.7 WAIVER. Any term or provision of this Agreement
may be waived by the party or parties entitled to the benefit thereof. Any such
waiver shall be validly and sufficiently authorized for the purposes of this
Agreement if, as to any party, it is authorized in writing by an authorized
representative of such party. The failure of any party to enforce at any time
any provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to constitute
a waiver of any other or subsequent breach.
Section 9.8 DISPUTES. In the event of a dispute hereunder
which is submitted to mediation, arbitration or which is litigated, the
prevailing party in such dispute shall be entitled to recover from the other
party all of its costs and expenses incurred in connection therewith, including
reasonable attorneys' and experts' fees. The determination of the prevailing
party and reasonable fees may be made by the mediator, arbitrator(s) or court,
as applicable.
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Section 9.9 ASSIGNMENT. Subject to Section 2.1, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties.
Section 9.10 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other terms, conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated by this
Agreement may be consummated as originally contemplated to the fullest extent
possible.
Section 9.11 ENFORCEMENT OF THIS AGREEMENT. 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 wording or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, such remedy being in addition to any other remedy to which any party is
entitled at law or in equity. Each party hereto waives any right to a trial by
jury in connection with any such action, suit or proceeding.
Section 9.12 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT OR
THE STOCK OPTION AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE STOCK
OPTION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 9.12.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
HARRIS CORPORATION
By: /S/ DAVID S. WASSERMAN
Name: David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /S/ DAVID S. WASSERMAN
Name: David S. Wasserman
Title: Vice President - Treasurer
PACIFIC RESEARCH & ENGINEERING CORPORATION
By: /S/ JACK K. WILLIAMS
Name: Jack K. Williams
Title: Chief Executive Officer
(Signature Page for Merger Agreement)
<PAGE> 58
EXHIBIT A
---------
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of August 2, 1999 (this
"AGREEMENT"), between Harris Corporation, a Delaware corporation ("PARENT"), and
Pacific Research & Engineering Corporation, a California corporation (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent, Space Coast Merger Corp., a newly formed California
corporation and a wholly owned subsidiary of Parent ("SUB"), and the Company are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"MERGER AGREEMENT"), which provides for the merger of Sub with and into the
Company;
WHEREAS, as a condition to Parent's willingness to enter into
the Merger Agreement, Parent has requested that the Company grant to Parent an
option to purchase up to 461,099 authorized and unissued shares of Common Stock,
no par value, of the Company (the "COMPANY COMMON STOCK") upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Company has agreed to grant Parent the requested option.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS. The Company hereby
grants to Parent an irrevocable option (the "OPTION") to purchase from time to
time up to 461,099 authorized and unissued shares of Company Common Stock upon
the terms and subject to the conditions set forth herein (the "OPTIONED
SHARES"). Subject to the conditions set forth in Section 2, the Option may be
exercised by Parent in whole or from time to time in part, at any time after the
date hereof and prior to the termination of the Option in accordance with
Section 19. In the event Parent wishes to exercise the Option, Parent shall
deliver a written notice to the Company (the "STOCK EXERCISE NOTICE") specifying
the total number of Optioned Shares it wishes to purchase and a date (not later
than 20 business days, or such later date if a waiting period is applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), and not earlier than two business days from the date such notice is
given) for the closing of such purchase (the "CLOSING DATE"). Parent may revoke
an exercise of the Option at any time prior to the Closing Date by written
notice to the Company. In the event of any change in the number of issued and
outstanding shares of Company Common Stock by reason of any stock dividend,
stock split, split-up, recapitalization, merger or other change in the corporate
or capital structure of the
<PAGE> 59
Company, the number of Optioned Shares subject to the Option and the Exercise
Price (as defined in Section 3) per Optioned Share shall be appropriately
adjusted. In the event that any additional shares of Company Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the preceding sentence or pursuant to this Agreement), the number
of Optioned Shares subject to the Option shall be adjusted so that, after such
issuance, it equals (but does not exceed) 19.9% of the number of shares of
Company Common Stock then issued and outstanding and 19.9% of the voting power
of shares of capital stock of the Company then issued and outstanding, after
reduction, to the extent necessary to comply with the exception to the
shareholder approval requirements of the American Stock Exchange ("AMEX"), for
any shares issued pursuant to the Option.
2. CONDITIONS TO EXERCISE OF OPTION AND DELIVERY OF OPTIONED
SHARES. (a) Parent's right to exercise the Option is subject to the following
conditions:
(i) Neither Parent nor Sub shall have breached any of its
material obligations under the Merger Agreement;
(ii) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States invalidating the grant or prohibiting the exercise of the
Option shall be in effect; and
(iii) One or more of the following events shall have occurred
on or after the date hereof: (A) any individual, corporation,
partnership, limited liability company or other entity or group (such
person, corporation, partnership, limited liability company or other
entity or group being referred to hereinafter, singularly or
collectively, as a "PERSON"), acquires or becomes the beneficial owner
of 20% or more of the outstanding shares of Company Common Stock (other
than a person who, as of the date hereof, is the beneficial owner of
20% or more of the outstanding shares of Company Common Stock (a "20%
HOLDER")); (B) any 20% Holder increases his beneficial ownership of
Company Common Stock by more than 1% (other than Jack and Ellyn
Williams or the Williams Family Trust dated March 12, 1981 pursuant to
a Post-Termination Company Financing (as defined in the Merger
Agreement)); (C) any group (other than a group which includes or may
reasonably be deemed to include Parent or any of its affiliates) is
formed which beneficially owns 20% or more of the outstanding shares of
Company Common Stock; (D) any Person (other than Parent or its
affiliates) shall have commenced a tender or exchange offer for 20% or
more of the then outstanding shares of Company Common Stock or publicly
proposed any bona fide merger, consolidation or acquisition of all or
substantially all the assets of the Company, or other similar business
combination involving the Company; (E) the Company enters into, or
announces that it proposes to enter into, an agreement, including,
without limitation, an agreement in principle, providing for a merger
or other business combination involving the Company or a "significant
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as
promulgated by the Securities and Exchange Commission (the "SEC")) of
the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the
Company or a significant subsidiary of the Company (other than the
transactions contemplated by the Merger
<PAGE> 60
Agreement); (F) any Person (other than Parent or its affiliates or Jack
and Ellyn Williams or the Williams Family Trust dated March 12, 1981
pursuant to a Post-Termination Company Financing) is granted any option
or right, conditional or otherwise, to acquire or otherwise become the
beneficial owner of shares of Company Common Stock which, together with
all shares of Company Common Stock beneficially owned by such Person,
results or would result in such Person being the beneficial owner of
20% or more of the outstanding shares of Company Common Stock; or (G)
there is a public announcement with respect to a plan or intention by
the Company, other than Parent or its affiliates, to effect any of the
foregoing transactions. For purposes of this subparagraph (iii), the
terms "group" and "beneficial owner" shall be defined by reference to
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations promulgated thereunder.
(b) Parent's obligation to purchase the Optioned Shares
following the exercise of the Option, and the Company's obligation to issue,
sell and deliver the Optioned Shares, are subject to the conditions that:
(i) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States prohibiting the issuance, sale or delivery of the
Optioned Shares shall be in effect;
(ii) The purchase of the Optioned Shares will not violate Rule
10b-13 promulgated under the Exchange Act; and
(iii) All applicable waiting periods under the HSR Act shall
have expired or been terminated.
(c) The Company agrees to provide Parent prompt written notice
upon the occurrence of any of the events described in Section 2(a)(iii).
3. EXERCISE PRICE FOR OPTIONED SHARES. At any Closing Date,
the Company will deliver to Parent a certificate or certificates representing
the Optioned Shares in the denominations designated by Parent in its Stock
Exercise Notice and Parent will purchase the Optioned Shares from the Company at
a price per Optioned Share equal to $2.35 (the "EXERCISE PRICE"), payable in
cash. Payment made by Parent to the Company pursuant to this Agreement shall be
made by wire transfer of federal funds to a bank designated by the Company or a
check payable in immediately available funds. After payment of the Exercise
Price for the Optioned Shares covered by the Stock Exercise Notice, the Option
shall be deemed exercised to the extent of the Optioned Shares specified in the
Stock Exercise Notice as of the date such Stock Exercise Notice is given to the
Company and Parent shall be deemed a stockholder of record at the time of
payment of the Exercise Price.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent that (a) the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all
<PAGE> 61
necessary corporate action on the part of the Company and this Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms; (b) the Company has taken all necessary corporate action to
authorize and reserve the Optioned Shares for issuance upon exercise of the
Option, and the Optioned Shares, when issued and delivered by the Company to
Parent upon exercise of the Option, will be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights; (c) except for
routine filings and subject to Section 7, the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby do not require the consent, approval or authorization of, or
filing with, any person or public authority and will not violate the Company's
Amended and Restated Articles of Incorporation, as amended, or Amended and
Restated By-laws, or result in the acceleration or termination of, or constitute
a default under, any indenture, license, approval, agreement, understanding or
other instrument, or any statute, rule, regulation, judgment, order or other
restriction binding upon or applicable to the Company or any of its properties
or assets; (d) the Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; and (e) the Company's Board of
Directors has approved the Merger and the execution of this Agreement and the
consummation of the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and warrants to the Company that (a) the execution and delivery of this
Agreement by Parent and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and this Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent; and (b) Parent is acquiring
the Option and, if and when it exercises the Option, will be acquiring the
Optioned Shares issuable upon the exercise thereof, for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and will not
sell or otherwise dispose of the Optioned Shares except pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act.
6. THE CLOSING. Any closing hereunder shall take place on the
Closing Date specified by Parent in its Stock Exercise Notice pursuant to
Section 1 at 10:00 A.M., local time, or the first business day after the Closing
Date on which all of the conditions in Section 2 are met, at the principal
executive office of the Company, or at such other time and place as the parties
hereto may agree.
7. FILINGS RELATED TO OPTIONED SHARES. The Company will make
such filings with the SEC as are required by the Exchange Act, will effect all
necessary filings by the Company under the HSR Act and will have the Optioned
Shares approved for quotation on AMEX.
8. REGISTRATION RIGHTS. (a) If the Company effects any
registration or registrations of shares of Company Common Stock under the
Securities Act for its own account or for any other stockholder of the Company
at any time after the exercise of the Option (other
<PAGE> 62
than a registration on Form S-4, Form S-8 or any successor forms), it will allow
Parent to participate in such registration or registrations with respect to any
or all of the Optioned Shares acquired upon the exercise of the Option;
PROVIDED, HOWEVER, that any request of Parent pursuant to this Section 8(a)
shall be with respect to at least 100,000 Optioned Shares and PROVIDED, FURTHER,
that if the managing underwriters in such offering advise the Company that, in
their written opinion, the number of Optioned Shares requested by Parent to be
included in such registration exceeds the number of shares of Company Common
Stock which can be sold in such offering, the Company may exclude from such
registration all or a portion, as may be appropriate, of the Optioned Shares
requested for inclusion by Parent.
(b) At any time after the exercise of the Option, upon the
request of Parent, the Company will promptly file and use its best efforts to
cause to be declared effective a registration statement under the Securities Act
(and applicable Blue Sky statutes) with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; PROVIDED, HOWEVER, that any
request of Parent pursuant to this Section 8(b) shall be with respect to at
least 100,000 Optioned Shares and PROVIDED, FURTHER, that the Company shall not
be required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the effectiveness of each such
registration statement, for a period not to exceed 90 days in the aggregate, if
the commencement of such offering would, in the reasonable good faith judgment
of the Board of Directors of the Company, require premature disclosure of any
material corporate development or otherwise materially interfere with or
materially adversely affect any pending or proposed offering of securities of
the Company.
(c) In connection with any registration requested by Parent
under Section 8(b) above, if Parent requests the Company to effect such
registration within three months after the exercise of the Option, Parent will
pay the first $20,000 of the costs of such registration and all filing fees for
such registration, and the remaining costs of such registration shall be borne
by the Company. Notwithstanding the previous sentence, if Parent requests the
Company to effect a registration under Section 8(a) above, or a registration
under Section 8(b) above subsequent to three months after the exercise of the
Option, all costs of such registration shall be borne by the Company. In
connection with any registration requested by Parent under Sections 8(a) and
8(b) above, the Company and Parent each shall provide the other and any
underwriters with customary indemnification and contribution agreements.
9. OPTIONAL PUT; OPTIONAL REPURCHASE. (a) Prior to the
termination of the Option in accordance with Section 19, if a Put Event has
occurred, Parent shall have the right, upon three business days' prior written
notice given to the Company, to require the Company to purchase the Option from
Parent (the "PUT RIGHT") at a cash purchase price (the "PUT PRICE") equal to the
product determined by multiplying (A) the number of Optioned Shares as to which
the Option has not yet been exercised by (B) the Spread (as defined below). As
used herein, "PUT EVENT" means the occurrence on or after the date hereof of any
of the following: (i) any Person (other than Parent or its affiliates, or Jack
and Ellyn Williams or the Williams Family Trust dated March 12, 1981 pursuant to
a Post-Termination Company Financing) acquires or becomes the beneficial owner
of 50% or more of the outstanding shares of Company Common Stock or (ii) the
Company consummates a merger or other business combination involving the Company
or a "significant
<PAGE> 63
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as promulgated by the
SEC) of the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the Company or a
significant subsidiary of the Company (other than the transactions contemplated
by the Merger Agreement). As used herein, the term "SPREAD" shall mean the
excess, if any, of (i) the greater of (x) the highest price (in cash or fair
market value of securities or other property) per share of Company Common Stock
paid or to be paid within 12 months preceding the date of exercise of the Put
Right for any shares of Company Common Stock beneficially owned by any Person
who shall have acquired or become the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock after the date hereof or (y) the
average of the last reported sale prices quoted on AMEX of the Company Common
Stock during the five trading days immediately preceding the written notice of
exercise of the Put Right over (ii) the Exercise Price.
(b) At any time after the termination of the Option granted
hereunder pursuant to Section 19 and for a period of 90 days thereafter, the
Company shall have the right, upon three business days' prior written notice, to
repurchase from Parent (the "REPURCHASE RIGHT"), all (but not less than all) of
the Optioned Shares acquired by Parent hereby and with respect to which Parent
then has beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
at a price per share equal to the greater of (i) the average of the last
reported sale prices quoted on AMEX of the Company Common Stock during the five
trading days immediately preceding the written notice of exercise of the
Repurchase Right and (ii) the Exercise Price, plus interest at a rate per annum
equal to the costs of funds to Parent at the time of exercise of the Repurchase
Right.
10. EXPENSES. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise provided in
Section 8 or as specified in the Merger Agreement.
11. SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law. Each party hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of California in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action, suit or
proceeding shall be brought only in such courts (and waives any objection based
on forum non conveniens or any other objection to venue therein).
12. NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by Fax when confirmation of
transmission is received, or (iii) if
<PAGE> 64
sent by registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: 407-727-9234
with a copy (which shall not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Jim L. Kaput
Facsimile No.: 312- 853-7036
if to the Company, to:
Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Attention: President
Facsimile: 760-438-9277
with a copy (which shall not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile No.: 858-677-1477
or to such other address as such party may indicate by a notice delivered to the
other party in accordance with this section.
13. PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent or the
Company, or their permitted successors or assigns, any rights or remedies under
or by reason of this Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement,
together with the Merger Agreement and the other documents referred to therein,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior
<PAGE> 65
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof. This Agreement may be amended
by the parties hereto and the terms and conditions hereof may be waived only by
an instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other party, except that Parent may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to any direct or indirect wholly owned subsidiary of Parent.
Subject to the preceding sentence, this Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns.
16. HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement, and shall become
binding when such counterparts have been signed by each of the parties hereto
and delivered to the other party.
18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of California.
19. TERMINATION. This Agreement and the Option shall terminate
upon the earlier of (i) the Effective Time (as defined in the Merger Agreement)
and (ii) the termination of the Merger Agreement in accordance with its terms;
PROVIDED, HOWEVER, the Option shall not terminate until 180 days after a
termination pursuant to clause (ii) immediately above if (A) the Merger
Agreement is terminated by Parent or Sub pursuant to Section 8.1(d) thereof, (B)
the Merger Agreement is terminated by the Company pursuant to Section 8.1(e)
thereof or (C) unless the Company has terminated the Merger Agreement pursuant
to Section 8.1(f) thereof, prior to the termination, a Takeover Proposal (as
defined in the Merger Agreement) shall have been commenced or the Company shall
have entered into an agreement with respect to, approved or recommended or taken
any action to facilitate, a Takeover Proposal; PROVIDED, FURTHER, that this
Agreement shall not terminate with respect to the Repurchase Right set forth in
Section 9(b) until 90 days after the termination of the Option pursuant to the
foregoing proviso. Notwithstanding the foregoing, the provisions of Section 8
shall survive the termination of this Agreement until such time as Parent or any
of its affiliates ceases to beneficially own at least 100,000 of the Optioned
Shares and the provisions of Sections 10, 18 and 19 shall survive the
termination of this Agreement.
20. CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger Agreement.
<PAGE> 66
21. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
22. WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 22.
<PAGE> 67
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
HARRIS CORPORATION
By:
--------------------------
Name:
Title:
PACIFIC RESEARCH & ENGINEERING CORPORATION
By:
--------------------------
Name:
Title:
<PAGE> 68
EXHIBIT B
---------
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
<PAGE> 69
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of
time or both) under any provision of, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's
property or assets. Except for informational filings with the SEC, no
consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic, foreign or supranational, is required by or with respect to
the Stockholder in connection with the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
<PAGE> 70
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other Takeover
Proposal or (ii) any amendment of the Company's Articles of
Incorporation or By-laws or other proposal or transaction involving the
Company or any of its affiliates, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
<PAGE> 71
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
<PAGE> 72
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
<PAGE> 73
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
if to Stockholder, to:
---------------------
---------------------
Attention:
Facsimile:
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and
<PAGE> 74
supersedes all other prior agreements and understandings, both written
and oral, among the parties or any of them with respect to the subject
matter hereof. This Agreement may be amended by the parties hereto and
the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case
of a waiver, by an instrument signed on behalf of the party waiving
compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO
<PAGE> 75
ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES
THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS CLAUSE (k).
<PAGE> 76
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By:
-----------------------------
Name:
Title:
SPACE COAST MERGER CORP.
By:
-----------------------------
Name:
Title:
STOCKHOLDER
--------------------------
Name:
Number of Shares owned by the Stockholder on the
date hereof:
---------
<PAGE> 77
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ----------- -------------- ------- -------
<S> <C> <C> <C>
</TABLE>
<PAGE> 78
EXHIBIT C
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Offer Securities
after the termination or withdrawal of the Offer), to pay for any Offer
Securities tendered pursuant to the Offer unless there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares that would constitute at least ninety percent (90%) of the Shares that in
the aggregate are outstanding ("MINIMUM CONDITION"). In the event that any
additional shares of Company Common Stock are issued after the date of this
Agreement, the number of Shares that would constitute the Minimum Condition
shall be adjusted so that, after such issuance, the Minimum Condition equals at
least ninety percent (90%) of the number of shares of Company Common Stock then
issued and outstanding. Furthermore, notwithstanding any other term of the Offer
or this Agreement, Sub shall not be required to accept for payment or, subject
as aforesaid, to pay for any Offer Securities not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after the
date of this Agreement and before the acceptance of such Offer Securities for
payment or the payment therefor, any of the following conditions exists (other
than as a result of any action or inaction of Parent or any of its subsidiaries
that constitutes a breach of this Agreement):
(a) there shall be threatened or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition
by Parent or Sub of any Offer Securities under the Offer, seeking to
restrain or prohibit the making or consummation of the Offer or the
Merger or the performance of any of the other transactions contemplated
by this Agreement or the Shareholder Agreements (including the voting
provisions thereunder), or seeking to obtain from the Company, Parent
or Sub any damages that would have a Material Adverse Effect on the
Company, (ii) seeking to prohibit or materially limit the ownership or
operation by the Company or Parent or its subsidiaries of a material
portion of the business or assets of the Company or Parent and its
subsidiaries, taken as a whole, or to compel the Company or Parent to
dispose of or hold separate any material portion of the business or
assets of the Company or Parent and its subsidiaries, taken as a whole,
as a result of the Offer or any of the other transactions contemplated
by this Agreement or the Shareholder Agreements, (iii) seeking to
impose material limitations on the ability of Parent or Sub to acquire
or hold, or exercise full rights of ownership of, any Offer Securities
to be accepted for payment pursuant to the Offer, including the right
to vote the Shares on all matters properly presented to the
shareholders of the Company, (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect
any material portion of the business or operations of the Company or
(v) which otherwise is reasonably likely to have a Material Adverse
Effect on the Company; or there shall be pending by any other person
any suit, action or proceeding which is reasonably likely to have a
Material Adverse Effect on the Company.
<PAGE> 79
(b) there shall be enacted, entered, enforced, promulgated or
deemed applicable to the Offer or the Merger by any Governmental Entity
any statute, rule, regulation, judgment, order or injunction, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a)
above;
(c) (i) there shall have occurred any Material Adverse Change
with respect to the Company or (ii) prior to the expiration of the
Offer or the withdrawal of the Offer pursuant to Section 1.1(c)(iii),
whichever is earlier, the Company shall not have obtained the consent
of Imperial Bank, the Levine Family Trust and Carlsbad Las Palmas, LLC
to enter into this Agreement and the Stock Option Agreement;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Sub its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Takeover Proposal or (ii) the
Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(e) any of the representations and warranties of the Company
set forth in this Agreement (other than Sections 4.2, 4.3, 4.18 and
4.19) shall not be true and correct, in each case at the date of this
Agreement and at the scheduled or extended expiration of the Offer,
except where the failure of such representations, individually or in
the aggregate, to be so true and correct would not have a Material
Adverse Effect on the Company, and any of the representations and
warranties of the Company set forth in Sections 4.2, 4.3, 4.18 and 4.19
shall not be true and correct in any material respect in each case at
the date of this Agreement and at the scheduled or extended expiration
of the Offer;
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or covenant of the Company to be performed
or complied with by it under this Agreement;
(g) there shall have occurred and be continuing (i) any
general suspension of trading in, or limitation on prices for,
securities on a national securities exchange in the United States
(excluding any coordinated trading halt triggered solely as a result of
a specified decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) any limitation (whether or not mandatory) by
any Governmental Entity on, or other event that materially adversely
affects, the extension of credit by banks or other lending
institutions, (iv) a commencement of war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States which in any case is reasonably expected to have a
Material Adverse Effect on the Company or to materially adversely
affect Parent's or Sub's ability to complete the Offer and/or the
Merger or materially delay the consummation of the Offer and/or the
Merger, or (v) from the date of this Agreement
<PAGE> 80
through the date of termination or expiration, a decline of at least
25% in either the Dow Jones Industrial Average or the Standard & Poor's
500 Index;
(h) (i) the Shareholder Agreements shall not be in full force
and effect or any Shareholder (as defined therein) that is a party
thereto shall be in material breach thereof or have indicated such
Shareholder's intention not to perform such Shareholder's obligations
thereunder or (ii) an employment and noncompetition agreement between
the Company and Jack Williams, acceptable to Parent, shall not have
been entered into between Mr. Williams and the Company;
(i) any person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than Parent, Sub, or their affiliates or any
group of which any of them is a member, shall have acquired or
announced its intention to acquire beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of the Shares, or any beneficial owner of 20% or more of the
Shares or any of its affiliates or any group of which any of them is a
member shall have increased or announced its intention to increase its
beneficial ownership of Shares by more than 1%; or
(j) this Agreement shall have been terminated in accordance
with its terms.
which, in the judgment of Parent in any such case, and regardless of the
circumstances (including any action or omission by Parent or Sub) giving rise to
any such condition, makes it inadvisable to proceed with such acceptance of such
Offer Securities for payment or the payment therefor.
The foregoing conditions are for the sole benefit of Parent
and Sub and may, subject to the terms of this Agreement, be waived by Sub in
whole or in part at any time and from time to time in its sole discretion. The
failure by Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time. Terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement
to which this EXHIBIT C is a part.
<PAGE> 1
Exhibit (c)(2)
STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT, dated as of August 2, 1999 (this
"AGREEMENT"), between Harris Corporation, a Delaware corporation ("PARENT"), and
Pacific Research & Engineering Corporation, a California corporation (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent, Space Coast Merger Corp., a newly formed California
corporation and a wholly owned subsidiary of Parent ("SUB"), and the Company are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"MERGER AGREEMENT"), which provides for the merger of Sub with and into the
Company;
WHEREAS, as a condition to Parent's willingness to enter into
the Merger Agreement, Parent has requested that the Company grant to Parent an
option to purchase up to 461,099 authorized and unissued shares of Common Stock,
no par value, of the Company (the "COMPANY COMMON STOCK") upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Company has agreed to grant Parent the requested option.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS. The Company hereby
grants to Parent an irrevocable option (the "OPTION") to purchase from time to
time up to 461,099 authorized and unissued shares of Company Common Stock upon
the terms and subject to the conditions set forth herein (the "OPTIONED
SHARES"). Subject to the conditions set forth in Section 2, the Option may be
exercised by Parent in whole or from time to time in part, at any time after the
date hereof and prior to the termination of the Option in accordance with
Section 19. In the event Parent wishes to exercise the Option, Parent shall
deliver a written notice to the Company (the "STOCK EXERCISE NOTICE") specifying
the total number of Optioned Shares it wishes to purchase and a date (not later
than 20 business days, or such later date if a waiting period is applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), and not earlier than two business days from the date such notice is
given) for the closing of such purchase (the "CLOSING DATE"). Parent may revoke
an exercise of the Option at any time prior to the Closing Date by written
notice to the Company. In the event of any change in the number of issued and
outstanding shares of Company Common Stock by reason of any stock dividend,
stock split, split-up, recapitalization, merger or other change in the corporate
or capital structure of the Company, the number of Optioned Shares subject to
the Option and the Exercise Price (as defined in Section 3) per Optioned Share
shall be appropriately adjusted. In the event that any additional shares of
Company Common Stock are issued
<PAGE> 2
after the date of this Agreement (other than pursuant to an event described in
the preceding sentence or pursuant to this Agreement), the number of Optioned
Shares subject to the Option shall be adjusted so that, after such issuance, it
equals (but does not exceed) 19.9% of the number of shares of Company Common
Stock then issued and outstanding and 19.9% of the voting power of shares of
capital stock of the Company then issued and outstanding, after reduction, to
the extent necessary to comply with the exception to the shareholder approval
requirements of the American Stock Exchange ("AMEX"), for any shares issued
pursuant to the Option.
2. CONDITIONS TO EXERCISE OF OPTION AND DELIVERY OF OPTIONED
SHARES. (a) Parent's right to exercise the Option is subject to the following
conditions:
(i) Neither Parent nor Sub shall have breached any of its
material obligations under the Merger Agreement;
(ii) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States invalidating the grant or prohibiting the exercise of the
Option shall be in effect; and
(iii) One or more of the following events shall have occurred
on or after the date hereof: (A) any individual, corporation,
partnership, limited liability company or other entity or group (such
person, corporation, partnership, limited liability company or other
entity or group being referred to hereinafter, singularly or
collectively, as a "PERSON"), acquires or becomes the beneficial owner
of 20% or more of the outstanding shares of Company Common Stock (other
than a person who, as of the date hereof, is the beneficial owner of
20% or more of the outstanding shares of Company Common Stock (a "20%
HOLDER")); (B) any 20% Holder increases his beneficial ownership of
Company Common Stock by more than 1% (other than Jack and Ellyn
Williams or the Williams Family Trust dated March 12, 1981 pursuant to
a Post-Termination Company Financing (as defined in the Merger
Agreement)); (C) any group (other than a group which includes or may
reasonably be deemed to include Parent or any of its affiliates) is
formed which beneficially owns 20% or more of the outstanding shares of
Company Common Stock; (D) any Person (other than Parent or its
affiliates) shall have commenced a tender or exchange offer for 20% or
more of the then outstanding shares of Company Common Stock or publicly
proposed any bona fide merger, consolidation or acquisition of all or
substantially all the assets of the Company, or other similar business
combination involving the Company; (E) the Company enters into, or
announces that it proposes to enter into, an agreement, including,
without limitation, an agreement in principle, providing for a merger
or other business combination involving the Company or a "significant
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as
promulgated by the Securities and Exchange Commission (the "SEC")) of
the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the
Company or a significant subsidiary of the Company (other than the
transactions contemplated by the Merger Agreement); (F) any Person
(other than Parent or its affiliates or Jack and Ellyn Williams or the
Williams Family Trust dated March 12, 1981 pursuant to a
Post-Termination Company Financing) is granted any option or right,
conditional or otherwise, to acquire or otherwise become the beneficial
owner of shares of
- 2 -
<PAGE> 3
Company Common Stock which, together with all shares of Company Common
Stock beneficially owned by such Person, results or would result in
such Person being the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock; or (G) there is a public
announcement with respect to a plan or intention by the Company, other
than Parent or its affiliates, to effect any of the foregoing
transactions. For purposes of this subparagraph (iii), the terms
"group" and "beneficial owner" shall be defined by reference to Section
13(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the rules and regulations promulgated thereunder.
(b) Parent's obligation to purchase the Optioned Shares
following the exercise of the Option, and the Company's obligation to issue,
sell and deliver the Optioned Shares, are subject to the conditions that:
(i) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States prohibiting the issuance, sale or delivery of the
Optioned Shares shall be in effect;
(ii) The purchase of the Optioned Shares will not violate Rule
10b-13 promulgated under the Exchange Act; and
(iii) All applicable waiting periods under the HSR Act shall
have expired or been terminated.
(c) The Company agrees to provide Parent prompt written notice
upon the occurrence of any of the events described in Section 2(a)(iii).
3. EXERCISE PRICE FOR OPTIONED SHARES. At any Closing Date,
the Company will deliver to Parent a certificate or certificates representing
the Optioned Shares in the denominations designated by Parent in its Stock
Exercise Notice and Parent will purchase the Optioned Shares from the Company at
a price per Optioned Share equal to $2.35 (the "EXERCISE PRICE"), payable in
cash. Payment made by Parent to the Company pursuant to this Agreement shall be
made by wire transfer of federal funds to a bank designated by the Company or a
check payable in immediately available funds. After payment of the Exercise
Price for the Optioned Shares covered by the Stock Exercise Notice, the Option
shall be deemed exercised to the extent of the Optioned Shares specified in the
Stock Exercise Notice as of the date such Stock Exercise Notice is given to the
Company and Parent shall be deemed a stockholder of record at the time of
payment of the Exercise Price.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent that (a) the execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms; (b) the
Company has taken all necessary corporate action to authorize and reserve the
Optioned Shares for issuance upon exercise of the Option, and the Optioned
Shares, when issued and delivered by the Company to Parent upon
- 3 -
<PAGE> 4
exercise of the Option, will be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights; (c) except for routine filings and
subject to Section 7, the execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby do
not require the consent, approval or authorization of, or filing with, any
person or public authority and will not violate the Company's Amended and
Restated Articles of Incorporation, as amended, or Amended and Restated By-laws,
or result in the acceleration or termination of, or constitute a default under,
any indenture, license, approval, agreement, understanding or other instrument,
or any statute, rule, regulation, judgment, order or other restriction binding
upon or applicable to the Company or any of its properties or assets; (d) the
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; and (e) the Company's Board of Directors has
approved the Merger and the execution of this Agreement and the consummation of
the transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents
and warrants to the Company that (a) the execution and delivery of this
Agreement by Parent and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and this Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent; and (b) Parent is acquiring
the Option and, if and when it exercises the Option, will be acquiring the
Optioned Shares issuable upon the exercise thereof, for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and will not
sell or otherwise dispose of the Optioned Shares except pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act.
6. THE CLOSING. Any closing hereunder shall take place on the
Closing Date specified by Parent in its Stock Exercise Notice pursuant to
Section 1 at 10:00 A.M., local time, or the first business day after the Closing
Date on which all of the conditions in Section 2 are met, at the principal
executive office of the Company, or at such other time and place as the parties
hereto may agree.
7. FILINGS RELATED TO OPTIONED SHARES. The Company will make
such filings with the SEC as are required by the Exchange Act, will effect all
necessary filings by the Company under the HSR Act and will have the Optioned
Shares approved for quotation on AMEX.
8. REGISTRATION RIGHTS. (a) If the Company effects any
registration or registrations of shares of Company Common Stock under the
Securities Act for its own account or for any other stockholder of the Company
at any time after the exercise of the Option (other than a registration on Form
S-4, Form S-8 or any successor forms), it will allow Parent to participate in
such registration or registrations with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; PROVIDED, HOWEVER, that any
request of Parent pursuant to this Section 8(a) shall be with respect to at
least 100,000 Optioned Shares and PROVIDED, FURTHER, that if the managing
underwriters in such offering advise the Company that, in their written opinion,
the number of Optioned Shares requested by Parent to be included in such
registration exceeds the number of shares of Company
- 4 -
<PAGE> 5
Common Stock which can be sold in such offering, the Company may exclude from
such registration all or a portion, as may be appropriate, of the Optioned
Shares requested for inclusion by Parent.
(b) At any time after the exercise of the Option, upon the
request of Parent, the Company will promptly file and use its best efforts to
cause to be declared effective a registration statement under the Securities Act
(and applicable Blue Sky statutes) with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; PROVIDED, HOWEVER, that any
request of Parent pursuant to this Section 8(b) shall be with respect to at
least 100,000 Optioned Shares and PROVIDED, FURTHER, that the Company shall not
be required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the effectiveness of each such
registration statement, for a period not to exceed 90 days in the aggregate, if
the commencement of such offering would, in the reasonable good faith judgment
of the Board of Directors of the Company, require premature disclosure of any
material corporate development or otherwise materially interfere with or
materially adversely affect any pending or proposed offering of securities of
the Company.
(c) In connection with any registration requested by Parent
under Section 8(b) above, if Parent requests the Company to effect such
registration within three months after the exercise of the Option, Parent will
pay the first $20,000 of the costs of such registration and all filing fees for
such registration, and the remaining costs of such registration shall be borne
by the Company. Notwithstanding the previous sentence, if Parent requests the
Company to effect a registration under Section 8(a) above, or a registration
under Section 8(b) above subsequent to three months after the exercise of the
Option, all costs of such registration shall be borne by the Company. In
connection with any registration requested by Parent under Sections 8(a) and
8(b) above, the Company and Parent each shall provide the other and any
underwriters with customary indemnification and contribution agreements.
9. OPTIONAL PUT; OPTIONAL REPURCHASE. (a) Prior to the
termination of the Option in accordance with Section 19, if a Put Event has
occurred, Parent shall have the right, upon three business days' prior written
notice given to the Company, to require the Company to purchase the Option from
Parent (the "PUT RIGHT") at a cash purchase price (the "PUT PRICE") equal to the
product determined by multiplying (A) the number of Optioned Shares as to which
the Option has not yet been exercised by (B) the Spread (as defined below). As
used herein, "PUT EVENT" means the occurrence on or after the date hereof of any
of the following: (i) any Person (other than Parent or its affiliates, or Jack
and Ellyn Williams or the Williams Family Trust dated March 12, 1981 pursuant to
a Post-Termination Company Financing) acquires or becomes the beneficial owner
of 50% or more of the outstanding shares of Company Common Stock or (ii) the
Company consummates a merger or other business combination involving the Company
or a "significant subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as
promulgated by the SEC) of the Company or the acquisition of a substantial
interest in, or a substantial portion of the assets, business or operations of,
the Company or a significant subsidiary of the Company (other than the
transactions contemplated by the Merger Agreement). As used herein, the term
"Spread" shall mean the excess, if any, of (i) the greater of (x) the highest
price (in cash or fair market value of securities or other property) per share
of Company Common Stock paid or to be paid within 12 months preceding the date
of exercise of the Put Right for any shares of Company Common Stock beneficially
owned by any Person who shall have acquired
- 5 -
<PAGE> 6
or become the beneficial owner of 20% or more of the outstanding shares of
Company Common Stock after the date hereof or (y) the average of the last
reported sale prices quoted on AMEX of the Company Common Stock during the five
trading days immediately preceding the written notice of exercise of the Put
Right over (ii) the Exercise Price.
(b) At any time after the termination of the Option granted
hereunder pursuant to Section 19 and for a period of 90 days thereafter, the
Company shall have the right, upon three business days' prior written notice, to
repurchase from Parent (the "REPURCHASE RIGHT"), all (but not less than all) of
the Optioned Shares acquired by Parent hereby and with respect to which Parent
then has beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
at a price per share equal to the greater of (i) the average of the last
reported sale prices quoted on AMEX of the Company Common Stock during the five
trading days immediately preceding the written notice of exercise of the
Repurchase Right and (ii) the Exercise Price, plus interest at a rate per annum
equal to the costs of funds to Parent at the time of exercise of the Repurchase
Right.
10. EXPENSES. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise provided in
Section 8 or as specified in the Merger Agreement.
11. SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law. Each party hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of California in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action, suit or
proceeding shall be brought only in such courts (and waives any objection based
on forum non conveniens or any other objection to venue therein).
12. NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by Fax when confirmation of
transmission is received, or (iii) if sent by registered or certified mail,
return receipt requested, or by private courier, when received; and shall be
addressed as follows:
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<PAGE> 7
if to Parent, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: 407-727-9234
with a copy (which shall not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Jim L. Kaput
Facsimile No.: 312- 853-7036
if to the Company, to:
Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Attention: President
Facsimile: 760-438-9277
with a copy (which shall not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile No.: 858-677-1477
or to such other address as such party may indicate by a notice delivered to the
other party in accordance with this section.
13. PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent or the
Company, or their permitted successors or assigns, any rights or remedies under
or by reason of this Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement,
together with the Merger Agreement and the other documents referred to therein,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof. This Agreement may be amended by the parties hereto and the terms
and conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the
- 7 -
<PAGE> 8
parties hereto, or, in the case of a waiver, by an instrument signed on behalf
of the party waiving compliance.
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other party, except that Parent may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to any direct or indirect wholly owned subsidiary of Parent.
Subject to the preceding sentence, this Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns.
16. HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement, and shall become
binding when such counterparts have been signed by each of the parties hereto
and delivered to the other party.
18. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of California.
19. TERMINATION. This Agreement and the Option shall terminate
upon the earlier of (i) the Effective Time (as defined in the Merger Agreement)
and (ii) the termination of the Merger Agreement in accordance with its terms;
PROVIDED, HOWEVER, the Option shall not terminate until 180 days after a
termination pursuant to clause (ii) immediately above if (A) the Merger
Agreement is terminated by Parent or Sub pursuant to Section 8.1(d) thereof, (B)
the Merger Agreement is terminated by the Company pursuant to Section 8.1(e)
thereof or (C) unless the Company has terminated the Merger Agreement pursuant
to Section 8.1(f) thereof, prior to the termination, a Takeover Proposal (as
defined in the Merger Agreement) shall have been commenced or the Company shall
have entered into an agreement with respect to, approved or recommended or taken
any action to facilitate, a Takeover Proposal; PROVIDED, FURTHER, that this
Agreement shall not terminate with respect to the Repurchase Right set forth in
Section 9(b) until 90 days after the termination of the Option pursuant to the
foregoing proviso. Notwithstanding the foregoing, the provisions of Section 8
shall survive the termination of this Agreement until such time as Parent or any
of its affiliates ceases to beneficially own at least 100,000 of the Optioned
Shares and the provisions of Sections 10, 18 and 19 shall survive the
termination of this Agreement.
20. CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger Agreement.
21. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
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<PAGE> 9
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
22. WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 22.
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<PAGE> 10
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
HARRIS CORPORATION
By: /s/ David S. Wasserman
---------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
PACIFIC RESEARCH & ENGINEERING CORPORATION
By: /s/ Jack K. Williams
---------------------------------
Name: Jack K. Williams
Title: Chief Executive Officer
(Signature Page for Stock Option Agreement)
<PAGE> 1
Exhibit (c)(3)
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of
<PAGE> 2
the transactions contemplated hereby and compliance with the terms
hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under any
provision of, any trust agreement, loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. Except for
informational filings with the SEC, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational, is
required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the
Stockholder of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization,
-2-
<PAGE> 3
dissolution, liquidation or winding up of or by the Company or any
other Takeover Proposal or (ii) any amendment of the Company's Articles
of Incorporation or By-laws or other proposal or transaction involving
the Company or any of its affiliates, which amendment or other proposal
or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
-3-
<PAGE> 4
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
-4-
<PAGE> 5
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
-5-
<PAGE> 6
if to Stockholder, to:
Jack Williams
c/o Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Facsimile: 760-438-9277
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
-6-
<PAGE> 7
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
(l) RELEASE. Subject to limitations imposed by law, the
Stockholder, on behalf of the undersigned and anyone claiming through
the undersigned, including, but not limited to, the undersigned's past,
present and future spouses, family members, relatives, agents,
attorneys, representatives, heirs, executors and administrators, and
the predecessors, successors and assigns of each of them, hereby
releases, forever discharges and agrees not to sue Parent, Sub, any
division, subsidiary, Affiliate or other related entity of Parent or
Sub (whether or not such entity is wholly owned), including, after the
Merger, the Company, the predecessors, successors and assigns of each
of them and the directors, officers, employees and agents of each of
them (hereinafter jointly referred to as the "RELEASED PARTIES"), with
respect to any and all claims, demands, causes of action, orders,
agreements, debts and liabilities which the undersigned now has, has
ever had, or may in the future have, whether known or unknown, against
any of the Released Parties for or related to anything occurring
-7-
<PAGE> 8
on or prior to the date hereof, including, without limiting the
generality of the foregoing, any and all claims, demands, causes of
action, orders, agreements, debts and liabilities which in any way
result from, arise out of, or relate to, any rights to indemnification
or reimbursement from the Company or the undersigned's employment by
the Company, including, but not limited to, compensation (including
deferred compensation), debts and sums of money and any and all claims
that could have been asserted by the undersigned or on the
undersigneds' behalf against any of the Released Parties in any
federal, state or local court, commission, department or agency;
PROVIDED, HOWEVER, that this release shall not apply to any obligations
of Parent or Sub under Section 6.7(b), Section 6.7(c) or Section 6.9 of
the Merger Agreement.
The Stockholder hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand against any
Released Party, or commencing, instituting or causing to be commenced,
any proceeding of any kind against any Released Party, based upon any
matter released hereby.
Without in any way limiting any of the rights and remedies
otherwise available to any Released Party, the Stockholder shall
indemnify and hold harmless each Released Party from and against any
and all losses and expenses whether or not involving third party
claims, incurred by any Released Party in connection with or arising
from the assertion against any Released Party by or on behalf of the
undersigned of any claim or other matter released pursuant to this
Section 9.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /S/ DAVID S. WASSERMAN
---------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /S/ DAVID S. WASSERMAN
---------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
/s/ Jack Williams
---------------------------------------
Name: Jack Williams
Number of Shares owned by the
Stockholder on the date hereof:
11,000
------
<PAGE> 10
SCHEDULE 1
----------
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- -------------
603,217 $5.50 5/23/2006 12/31/2003
<PAGE> 1
Exhibit (c)(4)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "Subject Shares" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority and all trust power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable
<PAGE> 2
in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, any
trust agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to the Stockholder or to the
Stockholder's property or assets. Except for informational filings with
the SEC, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or
with respect to the Stockholder in connection with the execution and
delivery of this Agreement or the consummation by the Stockholder of
the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
Schedule 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any
-2-
<PAGE> 3
merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding
up of or by the Company or any other Takeover Proposal or (ii) any
amendment of the Company's Articles of Incorporation or By-laws or
other proposal or transaction involving the Company or any of its
affiliates, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
(f) The Stockholder shall deliver the Williams Notes (as
defined in the Merger Agreement) upon the purchase of the Shares by Sub
pursuant to the Offer or at the Effective Time (as defined in the
Merger Agreement), whichever is earlier, and shall cancel the Williams
Notes upon payment by Sub by wire transfer of immediately available
funds to an account specified in writing by the Stockholder of the
principal amount and any accrued interest on the Williams Notes.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and
-3-
<PAGE> 4
be enforceable by the parties and their respective successors and assigns and,
in the case of the Stockholder, the heirs, executors and administrators of the
Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
-4-
<PAGE> 5
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
-5-
<PAGE> 6
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
if to Stockholder, to:
Jack Williams, Trustee of The Williams Family Trust
c/o Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Facsimile: 760-438-9277
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
-6-
<PAGE> 7
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
(l) RELEASE. Subject to limitations imposed by law, the
Stockholder, on behalf of the undersigned and anyone claiming through
the undersigned, including, but not limited to, the undersigned's past,
present and future spouses, family members, relatives, agents,
attorneys, representatives, heirs, executors and administrators, and
the predecessors,
-7-
<PAGE> 8
successors and assigns of each of them, hereby releases, forever
discharges and agrees not to sue Parent, Sub, any division, subsidiary,
Affiliate or other related entity of Parent or Sub (whether or not such
entity is wholly owned), including, after the Merger, the Company, the
predecessors, successors and assigns of each of them and the directors,
officers, employees and agents of each of them (hereinafter jointly
referred to as the "RELEASED PARTIES"), with respect to any and all
claims, demands, causes of action, orders, agreements, debts and
liabilities which the undersigned now has, has ever had, or may in the
future have, whether known or unknown, against any of the Released
Parties for or related to anything occurring on or prior to the date
hereof, including, without limiting the generality of the foregoing,
any and all claims, demands, causes of action, orders, agreements,
debts and liabilities which in any way result from, arise out of, or
relate to, any rights to indemnification or reimbursement from the
Company or the undersigned's employment by the Company, including, but
not limited to, compensation (including deferred compensation), debts
and sums of money and any and all claims that could have been asserted
by the undersigned or on the undersigneds' behalf against any of the
Released Parties in any federal, state or local court, commission,
department or agency; PROVIDED, HOWEVER, that this release shall not
apply to any obligations of Parent or Sub under Section 6.7(b), Section
6.7(c) or Section 6.9 of the Merger Agreement.
The Stockholder hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand against any
Released Party, or commencing, instituting or causing to be commenced,
any proceeding of any kind against any Released Party, based upon any
matter released hereby.
Without in any way limiting any of the rights and remedies
otherwise available to any Released Party, the Stockholder shall
indemnify and hold harmless each Released Party from and against any
and all losses and expenses whether or not involving third party
claims, incurred by any Released Party in connection with or arising
from the assertion against any Released Party by or on behalf of the
undersigned of any claim or other matter released pursuant to this
Section 9.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /S/ DAVID S. WASSERMAN
------------------------------------
Name:David S. Wasserman
Title: David S. Wasserman
SPACE COAST MERGER CORP.
By: /S/ DAVID S. WASSERMAN
-----------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
The Williams Family Trust
By: /S/ JACK WILLIAMS
------------------------------------
Name: Jack Williams
Title: Trustee
By: /s/ Ellyn Williams
------------------------------------
Name: Ellyn Williams
Title: Trustee
Number of Shares owned by the
Stockholder on the date hereof:
1,050,000
---------
<PAGE> 10
SCHEDULE 1
----------
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- -------------
<PAGE> 1
Exhibit (c)(5)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with
-1-
<PAGE> 2
its terms. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable
to the Stockholder or to the Stockholder's property or assets. Except
for informational filings with the SEC, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational, is
required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the
Stockholder of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger),
-2-
<PAGE> 3
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company or any other Takeover Proposal or (ii) any amendment of the
Company's Articles of Incorporation or By-laws or other proposal or
transaction involving the Company or any of its affiliates, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any
of the other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants, except that the
Stockholder shall not be obligated to tender the Subject Shares
pursuant to the Offer until September 30, 1999 or any time thereafter
(so long as the Offer has not expired or been withdrawn by Sub).
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the earliest of the
following events (each a "TERMINATION EVENT"):
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<PAGE> 4
(a) the Effective Time (as defined in the Merger Agreement);
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
-4-
<PAGE> 5
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
-5-
<PAGE> 6
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
if to Stockholder, to:
Donald Naab
c/o Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Facsimile: 760-438-9277
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
-6-
<PAGE> 7
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
-7-
<PAGE> 8
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /S/ DAVID S. WASSERMAN
--------------------------------------
Name:David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /S/ DAVID S. WASSERMAN
--------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
/s/ Donald Naab
--------------------------------------
Name: Donald Naab
/s/ Eileen Naab
--------------------------------------
Name: Eileen Naab
Number of Shares owned by the
Stockholder on the date hereof:
124,980
-------
<PAGE> 9
SCHEDULE 1
----------
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- -------------
73,500 $3.6250 7/22/2008 7/22/98
<PAGE> 1
Exhibit(c)(6)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
<PAGE> 2
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with its terms. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of
time or both) under any provision of, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's
property or assets. Except for informational filings with the SEC, no
consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic, foreign or supranational, is required by or with respect to
the Stockholder in connection with the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees
as follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
-2-
<PAGE> 3
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any other Takeover
Proposal or (ii) any amendment of the Company's Articles of
Incorporation or By-laws or other proposal or transaction involving the
Company or any of its affiliates, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
-3-
<PAGE> 4
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before
-4-
<PAGE> 5
entering into this Agreement. Each of the parties hereto represents and warrants
that it has read, knows, understands and agrees with the terms and conditions of
this Agreement. None of the parties hereto has relied upon any oral
representations of the other party in entering into this Agreement.
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
-5-
<PAGE> 6
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
if to Stockholder, to:
David Pollard
c/o Pacific Research & Engineering Corporation
2070 Las Palmas Drive
Carlsbad, California 92009
Facsimile: 760-438-9277
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
-6-
<PAGE> 7
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
-7-
<PAGE> 8
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /s/ DAVID S. WASSERMAN
---------------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /s/ David S. Wasserman
---------------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
/s/ David Pollard
------------------------------------------------
Name: David Pollard
Number of Shares owned by the
Stockholder on the date hereof:
70,000
------
<PAGE> 9
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- --------------------- ---------------- ------------------ -------
<S> <C> <C> <C>
40,214 $5.50 5/23/2006 12/31/2003
</TABLE>
<PAGE> 1
Exhibit (c)(7)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with
<PAGE> 2
its terms. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable
to the Stockholder or to the Stockholder's property or assets. Except
for informational filings with the SEC, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational, is
required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the
Stockholder of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger),
-2-
<PAGE> 3
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company or any other Takeover Proposal or (ii) any amendment of the
Company's Articles of Incorporation or By-laws or other proposal or
transaction involving the Company or any of its affiliates, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any
of the other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
-3-
<PAGE> 4
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
-4-
<PAGE> 5
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
-5-
<PAGE> 6
if to Stockholder, to:
John Lane
315 Post Road West
Westport, Connecticut 06880
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
-6-
<PAGE> 7
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
-7-
<PAGE> 8
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /S/ DAVID S. WASSERMAN
----------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /S/ DAVID S. WASSERMAN
----------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
/s/ John Lane
----------------------------------------
Name: John Lane
Number of Shares owned by the
Stockholder on the date hereof:
21,000
------
<PAGE> 9
SCHEDULE 1
----------
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- -------------
(o) 2,500 $3.00 7/17/2007 7/17/1997
(o) 2,500 $4.00 6/25/2008 6/25/1998
(o) 2,500 $1.0625 6/25/2009 6/25/1999
(pw) 41,200 $8.52 5/27/2001 5/27/1997
(rw) 20,500 $8.675 5/27/2001 5/27/1997
(o) Option to purchase Common Stock.
(pw) Common stock purchase warrant.
(rw) Redeemable warrants to purchase Common stock.
<PAGE> 1
Exhibit (c)(8)
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority and all trust power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the
Stockholder enforceable
-1-
<PAGE> 2
in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, any
trust agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to the Stockholder or to the
Stockholder's property or assets. Except for informational filings with
the SEC, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or
with respect to the Stockholder in connection with the execution and
delivery of this Agreement or the consummation by the Stockholder of
the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any
-2-
<PAGE> 3
merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding
up of or by the Company or any other Takeover Proposal or (ii) any
amendment of the Company's Articles of Incorporation or By-laws or
other proposal or transaction involving the Company or any of its
affiliates, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
-3-
<PAGE> 4
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
-4-
<PAGE> 5
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
-5-
<PAGE> 6
if to Stockholder, to:
John Robbins
17444 Circa Oriente
Rancho Sante Fe, California 92067
Telephone: (619) 756-1348
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
-6-
<PAGE> 7
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
-7-
<PAGE> 8
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /s/ David S. Wasserman
---------------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /s/ DAVID S. WASSERMAN
---------------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
The Robbins Family Trust
/s/ John Robbins
------------------------------------------------
Name:
Title: Trustee
/s/ JOHN ROBBINS
------------------------------------------------
Name: John Robbins
Number of Shares owned by the
Stockholder on the date hereof:
12,500
------
<PAGE> 9
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- --------------
<S> <C> <C> <C>
5,000 $5.50 5/28/2006 5/28/1996
2,500 $3.00 7/17/2007 7/17/1997
2,500 $4.00 6/25/2008 6/25/1998
2,500 $1.0625 6/25/2009 6/25/1999
</TABLE>
<PAGE> 1
Exhibit(c)(9)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "AGREEMENT"), dated as of August
2, 1999, among Harris Corporation, a Delaware corporation ("PARENT"), Space
Coast Merger Corp., a California corporation and a wholly owned subsidiary of
Parent ("SUB"), and the undersigned stockholder (the "STOCKHOLDER") of Pacific
Research & Engineering Corporation, a California corporation (the "COMPANY").
WHEREAS, Parent, Sub and the Company, propose to enter into an
Agreement and Plan of Merger dated as of even date herewith (as the same may be
amended or supplemented, the "MERGER AGREEMENT") to provide for the making of a
cash tender offer (as such offer may be amended from time to time, the "OFFER")
by Sub for any and all shares of Common Stock, no par value, of the Company (the
"SHARES") and for any and all Shareholder Warrants (as defined in the Merger
Agreement), Representative Warrants (as defined in the Merger Agreement) and the
Executive Warrant (as defined in the Merger Agreement, and collectively with the
Shareholder Warrants and the Representative Warrants, the "WARRANTS") at the
Applicable Offer Price (as defined in the Merger Agreement) and the merger of
the Company and Sub (the "MERGER");
WHEREAS, the Stockholder legally and/or beneficially owns that
number of Shares and Warrants appearing on the signature page hereof (such
shares and warrants, as they may be increased upon any purchase of Shares or
Warrants or upon exercise of any option or warrant to purchase Shares or
Warrants as they may be adjusted by any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company (each, an
"ADJUSTMENT EVENT") being referred to herein as the "SUBJECT SHARES" and the
"SUBJECT WARRANTS," respectively); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Stockholder enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to Parent and Sub as follows:
(a) AUTHORITY. The Stockholder has all requisite capacity,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Stockholder and constitutes a
valid and binding obligation of the Stockholder enforceable in
accordance with
<PAGE> 2
its terms. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or
both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable
to the Stockholder or to the Stockholder's property or assets. Except
for informational filings with the SEC, no consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic, foreign or supranational, is
required by or with respect to the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the
Stockholder of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. The Stockholder has good and
marketable title to the Subject Shares and Subject Warrants, free and
clear of any claims, liens, encumbrances and security interests
whatsoever. The Stockholder owns no Shares or Warrants other than the
Subject Shares and Subject Warrants. The Stockholder owns options and
warrants to purchase Shares as described in reasonable detail on
SCHEDULE 1.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.
(a) AUTHORITY. Parent and Sub hereby represent and warrant to
the Stockholder that each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and constitutes a valid
and binding obligation of Parent and Sub enforceable in accordance with
its terms.
3. COVENANTS OF THE STOCKHOLDER. The Stockholder agrees as
follows:
(a) At any meeting of stockholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Subject
Shares in favor of the Merger, the approval of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares
against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger),
-2-
<PAGE> 3
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the
Company or any other Takeover Proposal or (ii) any amendment of the
Company's Articles of Incorporation or By-laws or other proposal or
transaction involving the Company or any of its affiliates, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any
of the other transactions contemplated by the Merger Agreement.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition
of, the Subject Shares or Subject Warrants (or any option or warrant to
purchase Shares or Warrants, except for any sale or transfer to the
Company) to any person other than Sub or Sub's designee or (ii) enter
into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection, directly or indirectly, with any Takeover
Proposal.
(d) The Stockholder shall not, nor shall the Stockholder
permit any investment banker, attorney or other adviser or
representative of the Stockholder to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Takeover Proposal
or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, or (iii) enter into any agreement
with respect to or approve or recommend any Takeover Proposal.
(e) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw,
all of the Subject Shares and Subject Warrants.
4. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Sub may
assign any or all of its rights, interests and obligations hereunder, in its
sole discretion, to Parent or, with the consent of the Stockholder, which
consent shall not be unreasonably withheld or delayed, to any direct or indirect
wholly owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns and, in the case of the
Stockholder, the heirs, executors and administrators of the Stockholder.
5. TERMINATION. This Agreement shall terminate upon the
earliest of the following events (each a "TERMINATION EVENT"):
(a) the Effective Time (as defined in the Merger Agreement);
-3-
<PAGE> 4
(b) the termination of the Merger Agreement pursuant to
Section 8.1 thereof, other than:
(i) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has withdrawn or modified its approval or
recommendation of the Offer, the Merger or the Merger
Agreement, as provided in paragraph d(i) of Exhibit C to the
Merger Agreement, or because the Board of Directors of the
Company or any committee thereof has adopted a resolution to
effect any of the foregoing, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement, if prior to the time of
such withdrawal or modification, or the adoption of such
resolution, a Takeover Proposal shall have been made; or
(ii) a termination under Section 8.1(d) thereof
because the Board of Directors of the Company or any committee
thereof has approved or recommended a Takeover Proposal, as
provided in paragraph d(i) of Exhibit C to the Merger
Agreement, or because the Board of Directors of the Company or
any committee thereof has adopted a resolution to effect such
approval or recommendation, as provided in paragraph d(ii) of
Exhibit C to the Merger Agreement; or
(iii) a termination of the Merger Agreement under
Section 8.1(e) thereof (the termination described in clauses
(i), (ii) and (iii) being referred to herein as the
"TERMINATION TRIGGER EVENTS");
(c) 60 days following any termination of the Merger Agreement
that constitutes a Termination Trigger Event; or
(d) the amendment of the Merger Agreement in a manner adverse
to the Stockholder without the Stockholder's consent, which consent
shall not be unreasonably withheld or delayed.
6. NO LIMITATIONS ON ACTIONS OF THE STOCKHOLDER AS A DIRECTOR,
OFFICER OR EMPLOYEE. Notwithstanding anything to the contrary in this Agreement,
nothing in this Agreement is intended or shall be construed to require the
Stockholder to take or in any way limit any action that the Stockholder may take
to discharge the Stockholder's duties as a director, officer or employee of the
Company, including fiduciary duties.
7. RELIANCE ON COUNSEL AND OTHER ADVISORS. Each of the parties
hereto has consulted with such legal, financial, technical or other experts it
deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement. None of the parties
hereto has relied upon any oral representations of the other party in entering
into this Agreement.
-4-
<PAGE> 5
8. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, none of the parties will allege, and each of the parties
hereby waives the defense, that there is an adequate remedy at law.
Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of
California in any action, suit or proceeding arising in connection with
this Agreement, and agrees that any such action, suit or proceeding
shall be brought only in such courts (and waives any objection based on
forum non conveniens or any other objection to venue therein).
(c) NOTICE. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or
delivered (i) when delivered personally, (ii) if transmitted by Fax
when confirmation of transmission is received, or (iii) if sent by
registered or certified mail, return receipt requested, or by private
courier, when received; and shall be addressed as follows:
if to Parent or Sub, to:
Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attention: Scott T. Mikuen and Corporate Secretary
Facsimile: (407) 727-9234
with a copy (which shall
not constitute notice) to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Jim L. Kaput
Facsimile: (312) 853-7036
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<PAGE> 6
if to Stockholder, to:
Herbert McCord
Granum Communications
125 Half Mile Road
Red Bank, New Jersey 07701
Telephone: 732-933-2626
with a copy (which shall
not constitute notice) to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Rebecca Schmitt
Facsimile: 858-677-1477
or to such other address as such party may indicate by a notice
delivered to the other parties in accordance with this section.
(d) PARTIES IN INTEREST. Nothing in this Agreement, expressed
or implied, is intended to confer upon any Person other than Parent,
Sub or the Stockholder, or their permitted successors or assigns, any
rights or remedies under or by reason of this Agreement.
(e) ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement
constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof. This Agreement may be
amended by the parties hereto and the terms and conditions hereof may
be waived only by an instrument in writing signed on behalf of each of
the parties hereto, or, in the case of a waiver, by an instrument
signed on behalf of the party waiving compliance.
(f) HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of
the parties hereto and delivered to each of the other parties.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of California.
-6-
<PAGE> 7
(i) CAPITALIZED TERMS. Capitalized terms not otherwise defined
in this Agreement shall have the meanings set forth in the Merger
Agreement.
(j) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other terms, conditions and
provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible
in a mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
(k) WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II)
EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV)
EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS CLAUSE (k).
-7-
<PAGE> 8
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholder
has caused this Agreement to be signed by its officer thereunto duly authorized
and the Stockholder has signed this Agreement, all as of the date first written
above.
HARRIS CORPORATION
By: /s/ David S. Wasserman
----------------------------------------
Name:David S. Wasserman
Title: Vice President - Treasurer
SPACE COAST MERGER CORP.
By: /s/ DAVID S. WASSERMAN
----------------------------------------
Name: David S. Wasserman
Title: Vice President - Treasurer
STOCKHOLDER
/s/ Herbert McCord
-----------------------------------------
Name: Herbert McCord
Number of Shares owned by the
Stockholder on the date hereof:
10,000
------
<PAGE> 9
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Number of Shares Purchase price Expiration date Exercise date
subject to options per Share of option or of option or
or warrants warrant warrant
- ------------------ -------------- --------------- --------------
<S> <C> <C> <C>
5,000 $3.1875 9/08/2007 9/08/1997
2,500 $4.00 6/25/2008 6/25/1998
2,500 $1.0625 6/25/2009 6/25/1999
</TABLE>
<PAGE> 1
Exhibit (c)(10)
SCHEDULE 13D
EXHIBIT 1
Pursuant to Rule 13-d(1)(k)(1) of Regulation 13D-G of the General Rules and
Regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, the undersigned agree that the Schedule 13D of
which this Exhibit is a part is filed on behalf of each of them with respect to
the shares of Common Stock of Pacific Research & Engineering Corporation
reported in such Schedule 13D.
Dated: August 9, 1999
HARRIS CORPORATION
By: /s/ RICHARD L. BALLANTYNE
------------------------------------
Name: Richard L. Ballantyne
Title: Vice President - General
Counsel and Corporate
Secretary
SPACE COAST MERGER CORP.
By: /s/ RICHARD L. BALLANTYNE
------------------------------------
Name: Richard L. Ballantyne
Title: Vice President and Secretary
