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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
ADVANCE CIRCUITS, INC.
(NAME OF SUBJECT COMPANY)
ADVANCE CIRCUITS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
007383 10 2
(CUSIP NUMBER OF CLASS OF COMMON STOCK)
ROBERT W. HELLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADVANCE CIRCUITS, INC.
5929 BAKER ROAD, SUITE 470
MINNETONKA, MINNESOTA 55345
(612) 988-8700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
TIMOTHY M. HEANEY
FREDRIKSON & BYRON, P.A.
900 SECOND AVENUE, SUITE 1100
MINNEAPOLIS, MN 55402
(612) 347-7019
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ITEM 1. SECURITY AND SUBJECT COMPANY
This Statement relates to the Common Stock, $.10 par value per share (the
"Shares"), of Advance Circuits, Inc., a Minnesota corporation and the subject
company (the "Company"). The address of the Company's principal executive
offices is 5929 Baker Road, Suite 470, Minnetonka, Minnesota 55345.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer described in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") dated August 21, 1995 filed
by Johnson Matthey Public Limited Company, an English public limited company
("Parent"), ACI Acquisition Corporation, a Minnesota corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Parent (collectively
referred to as the "Bidder") and Johnson Matthey, Inc., a Pennsylvania
corporation ("JMI"), to purchase all outstanding Shares at $22.50 per share,
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 21, 1995 (the
"Offer to Purchase"), and the related Letter of Transmittal (which
collectively constitute the "Offer"), copies of which are filed as Exhibits
(a)(1) and (a)(2) to the Schedule 14D-1. According to the Offer to Purchase,
the principal executive offices of the Purchaser are located at 460 East
Swedesford Road, Wayne, Pennsylvania 19087-1880 and the principal executive
offices of Parent are located at 2-4 Cockspur Street, Trafalgar Square,
London, SW1Y 5BQ.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, is as set forth in Item 1 above.
(b)(1) Arrangements between Management and the Company. Certain contracts,
agreements, arrangements and understandings between the Company and certain of
its directors and executive officers are described in Annex A hereto, and
incorporated herein by reference.
(2) Merger Agreement. The Company, the Purchaser and Parent have entered
into an Agreement and Plan of Merger dated as of August 14, 1995 (the "Merger
Agreement"), a copy of which is filed with this Statement as Exhibit (c)(1)
and incorporated herein by reference. The following is a summary of certain
provisions of the Merger Agreement. Such summary is qualified in its entirety
by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser as described in Item 2 above. The obligation of the Purchaser to
accept for payment, purchase and pay for Shares tendered pursuant to the Offer
is subject to, among other things, there being validly tendered and not
withdrawn prior to the expiration date of the Offer a number of Shares
representing in the aggregate at least fifty-one (51%) percent of the total
outstanding Shares on a fully diluted basis, and certain conditions set forth
in the Offer to Purchase. The Purchaser has agreed that, without the written
consent of the Company, no change in the Offer may be made which reduces the
number of Shares subject to the Offer, decreases the price per Share payable
in the Offer, or modifies or adds to conditions to the Offer. If such
conditions are not satisfied, Purchaser has various options including the
right to terminate the Offer and return all tendered Shares.
The Merger. The Merger Agreement also provides that, at the effective time
of the Merger, the Purchaser will be merged with and into the Company, and
each then outstanding Share (other than Shares owned by the Company, any
subsidiary of the Company, Parent, the Purchaser or any other subsidiary of
Parent or that are subject to dissenters' rights) will be converted into the
right to receive $22.50 per Share in cash, without interest.
Pursuant to the Merger Agreement, the Company has agreed that, among other
things, during the period from the date of the Merger Agreement until the
effective time of the Merger, except as expressly contemplated by the Merger
Agreement or to the extent that the Purchaser shall otherwise agree in
writing, it will and will cause each of its subsidiaries to: (i) conduct its
operations only in the ordinary and usual course of business consistent with
past practice; (ii) not amend its Articles of Incorporation or By-laws; (iii)
not issue, reissue, sell
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or pledge, or authorize or propose the issuance, reissuance, sale or pledge of
any of its capital stock of any class, or securities convertible or
exchangeable into capital stock of any class or any rights, warrants or
options to acquire any convertible or exchangeable securities or capital stock
(other than the issuance of Shares upon the exercise of warrants and employee
stock options outstanding on the date of the Merger Agreement); (iv) not
declare, set aside or pay any dividend or other distribution (whether in cash,
securities or property or any combination thereof) in respect of any class or
series of its capital stock or otherwise make any payments to its shareholders
in their capacity as such (except for dividends from wholly owned subsidiaries
of the Company to the Company or to other wholly owned subsidiaries of the
Company); (v) not adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock; (vi) not incur or assume any long-
term debt or any short-term debt or assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligation of any person, except in the ordinary course of business
consistent with past practice and in an aggregate amount not to exceed
$500,000; (vii) not make any loans, advances (excluding the sale of products
to customers in the ordinary course) or capital contributions to, or
investments in, any person except in the ordinary course of business
consistent with past practice and in an aggregate amount not to exceed
$500,000 for any single borrower; (viii) not settle or compromise any suit,
proceeding or claim or threatened suit, proceeding or claim; (ix) except for
increases in salary, wages and benefits of employees of the Company or its
subsidiaries (other than executive officers of the Company) in accordance with
past practice, not increase the compensation or fringe benefits payable or to
become payable to its directors, officers or employees or pay any benefit not
required by any existing plan or arrangement or grant any severance or
termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or severance agreement with, any director, officer
or employee of the Company or any of its subsidiaries or establish, adopt,
enter into, terminate or amend any collective bargaining or employee benefit
plan, agreement, trust, fund, policy or arrangement for the benefit or welfare
of any directors, officers or current or former employees, except to the
extent such termination or amendment is required by applicable law; (x) not
acquire or agree to acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, other
than transactions that are in the ordinary course of business and not material
to the Company or any of its subsidiaries; (xi) not sell, lease, mortgage or
otherwise encumber or dispose of or agree to sell, lease, mortgage or
otherwise encumber or dispose of, any of its assets, other than transactions
that are in the ordinary course of business and not material to the Company or
any of its subsidiaries; (xii) not modify, amend or terminate any contract or
prepay any indebtedness of the Company or forgive any indebtedness owed to the
Company, other than in the ordinary course of business consistent with past
practice and which is not material to the business of the Company and its
subsidiaries; and (xiii) not take any action that would or might result in any
of the representations of the Company set forth in the Merger Agreement
becoming untrue.
The Company also agreed not to solicit, initiate, or encourage the
submission of any takeover proposal (as defined below), enter into any
agreement with respect to any takeover proposal or 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; provided, however, that prior to
the acceptance for payment of Shares pursuant to the Offer, to the extent
required by the fiduciary obligations of the Board of Directors of the
Company, as determined in good faith by a majority of the disinterested
members thereof based on the written advice of outside counsel (a copy of
which written advice shall be promptly furnished to Parent), the Company may,
in response to unsolicited requests therefor, participate in discussions or
negotiations with, or furnish information pursuant to an appropriate
confidentiality agreement to, any person. "Takeover proposal" means any
proposal, other than a proposal by Parent or any of its affiliates, for a
merger, consolidation, share exchange, business combination or other similar
transaction involving the Company or any of its subsidiaries or any proposal
or offer (including, without limitation any proposal or offer to shareholders
of the Company), other than a proposal or offer by Parent or any of its
affiliates, to acquire in any manner, directly or indirectly, an equity
interest in the Company or any of its subsidiaries, any voting securities of
the Company or any of its subsidiaries or a substantial portion of the assets
of the Company or any of its subsidiaries. The Board of Directors of the
Company, to the extent required
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by the fiduciary obligations thereof, as determined in good faith by a
majority of the disinterested members thereof based on the written advice of
outside counsel (a copy of which written advice shall be promptly furnished to
Parent), may approve or recommend (and, in connection therewith, withdraw or
modify its approval or recommendation of the Offer, the Merger Agreement or
the Merger) a superior proposal (as defined below). "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 statutory share exchange, 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
in its good faith reasonable judgment (based on the advice of independent
financial advisors) to be more favorable to the Company and its shareholders
than the Offer and Merger and for which financing, to the extent required, is
then fully committed or (based on the advice of independent financial
advisors) is likely to be obtained in a timely manner.
The Merger Agreement further provides that the Company will use its best
efforts to cause the holders of all outstanding warrants and employee stock
options to purchase Shares to agree, in writing, that such warrants and
options shall be surrendered and cancelled on the date of closing of the Offer
in exchange for cash payments by the Company to the holders of such warrants
or options in an amount not in excess of the difference between the price paid
for each Share pursuant to the Merger and the per Share exercise price of such
warrants or options, multiplied by the number of Shares subject to such
warrants or options.
Parent presently intends to provide, for a period of one year following the
effective time of the Merger, employees of the Company with employee benefits
that are in the aggregate not materially less favorable to such employees than
those presently provided under the Company's current benefit plans. Parent has
agreed to cause to be maintained for a period of not less than three years
from the effective time of the Merger the policies of the directors and
officers' liability and fiduciary insurance most recently maintained by the
Company; provided that there may be substituted therefor policies of at least
the same coverage containing terms and conditions no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage with respect to matters occurring prior to the effective
time to the extent available; and provided further that Parent has no
obligation to provide such policies to the extent that the cost of maintaining
such policies would be substantially higher than the current cost to the
Company. In addition, Parent has agreed, for six years after the Merger, to
cause the surviving corporation in the Merger to indemnify and hold harmless
all officers and directors of the Company to the same extent such persons are
currently indemnified by the Company pursuant to the Company's Articles of
Incorporation and By-laws for acts or omissions occurring at or prior to the
effective time of the Merger.
The Merger is subject to approval by the holders of a majority of the
outstanding Shares. The Purchaser intends to vote or to give written consent
with respect to all Shares acquired by it in the Offer or otherwise in favor
of the Merger. Accordingly, if the Purchaser purchases a majority of the
outstanding Shares pursuant to the Offer, the Purchaser will be able to effect
the Merger without the affirmative vote of any other holder of Shares.
Furthermore, if the Purchaser acquires at least 90% of the outstanding Shares
pursuant to the Offer, the Purchaser would, under Minnesota law, be able to
effect the Merger without any prior notice to, or vote by, the Company's
shareholders.
The Merger is also subject to the satisfaction of certain conditions,
including: (a) the acceptance for purchase and payment for Shares by the
Purchaser pursuant to the Offer; (b) the receipt of all authorizations,
consents, orders or approvals of, the filing of all declarations with, and the
expiration of all waiting periods imposed by, all courts, arbitral tribunals,
administrative agencies or commissions or other governmental or regulatory
authorities or agencies, domestic or foreign ("Governmental Entities"),
necessary for the consummation of the transactions contemplated by the Merger
Agreement; (c) the absence of any temporary restraining order, preliminary or
permanent injunction or other order of any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the
Merger; and (d) the absence of any pending or threatened action, suit or
proceeding (other than the DCIS Investigation) by any Governmental Entity
before any court or governmental or regulatory authority against the Company,
Parent or the Purchaser or any of their subsidiaries challenging the validity
or legality of the transactions contemplated by the Merger Agreement.
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In addition, the obligations of Parent and the Purchaser to effect the Merger
are subject to certain additional conditions, including: (a) the performance
in all material respects by the Company of its agreement under the Merger
Agreement and the accuracy in all material respects of the representations and
warranties of the Company set forth in the Merger Agreement; (b) the receipt
of all required authorizations, consents or approvals, the failure to obtain
which would have a material adverse effect on Parent and its subsidiaries or
the Company; and (c) the absence of, after August 14, 1995, in the reasonable
judgment of Parent, any change or development or prospective change or
development in the DCIS Investigation or the circumstances surrounding the
DCIS Investigation that could reasonably be expected to have a material
adverse effect on the Company. The Merger Agreement states that, for greater
certainty, such a change or development is deemed to include, without
limitation, the following: (i) any proceeding commenced by any Governmental
Entity for the suspension or debarment of the Company or any of its
subsidiaries from doing business with the United States (or any agency or
instrumentality thereof); (ii) any withdrawal of any governmental approval of
the quality control or quality assurance systems of the Company or any of its
subsidiaries or any removal of the Company or any of its subsidiaries from any
governmental "qualified products list"; (iii) any notification of the Company
or any of its subsidiaries that any of them is a target or a subject of a
criminal investigation; (iv) any indictment of the Company or of any of its
subsidiaries or of any of their respective directors or officers; (v) the
discovery of substantial evidence that any member of the senior management of
the Company was involved personally in material misconduct or that there exist
defects in the products of the Company or of any of its subsidiaries, which
defects are in excess of historical levels and, in the aggregate (and after
consideration of remedies reasonably available to the United States in
connection therewith), are reasonably likely to have a material adverse effect
on the Company; or (vi) any civil action, suit or proceeding commenced by any
Governmental Entity seeking legal or equitable relief. The obligations of the
Company to effect the Merger are subject to the accuracy in all material
respects of the representations and warranties made by Parent and the
Purchaser in the Merger Agreement and the performance in all material respects
of the agreements made by Parent and the Purchaser in the Merger Agreement. As
used in the Merger Agreement, any reference to any event, change or effect
being "material" or having a "material adverse effect" on or with respect to
an entity means such event, change or effect which is or is reasonably likely
to be materially adverse to the business, properties, results of operations or
financial condition of such entity and its subsidiaries taken as a whole.
The Merger Agreement may be terminated at any time prior to the effective
time of the Merger, whether before or after approval by the shareholders of
the Company, as follows (a) by mutual consent of Parent, the Purchaser and the
Company; (b) by either Parent or the Company if: (i) any required approval of
the shareholders of the Company shall not have been obtained at any duly held
meeting of such shareholders; (ii) (x) as the result of the failure of any of
the conditions set forth in Section 14 of the Offer to Purchase, the Offer
shall have terminated or expired in accordance with its terms without the
Purchaser having purchased any Shares pursuant to the Offer or (y) subject to
certain exceptions, the Purchaser shall not have purchased any Shares pursuant
to the Offer within 90 days following the date of the Merger Agreement; (iii)
subject to certain exceptions, the Merger shall not have been consummated
before May 14, 1996; or (iv) any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the purchase of Shares
pursuant to the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; (c) by the Company if (i) to
the extent permitted, as described above, the Board of Directors of the
Company approves or recommends a superior proposal and (ii) the Company has
paid to Parent an amount in cash equal to the sum of the "Termination Fee"
plus all "Expenses", each as defined below; or (d) by Parent if Parent or the
Purchaser shall have received notice under (x) the Exon-Florio Amendment that
the Committee on Foreign Investment in the United States has determined to
investigate the Merger, any related transaction or Parent or the Purchaser or
(y) the HSR Act that the Federal Trade Commission or the Antitrust Division of
the Department of Justice has requested additional information concerning the
Offer, the Merger, any related transaction of Parent or the Purchaser,
extending the applicable waiting period under the HSR Act.
A "Termination Fee" will be payable by the Company to Parent upon
termination of the Merger Agreement in the following circumstances: (i) The
Board of Directors of the Company withdraws its recommendation of the
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Offer or recommends another offer, in which case the Company will be obligated
to pay a fee of $2 million and reimburse Parent for its expenses (including
underwriting fees in connection with the Rights Offering) up to $3 million
("Expenses"), for a total of up to $5 million; (ii) the Company materially
breaches its covenants in the Merger Agreement, in which case the fee will be
$2 million plus Expenses for a total of up to $5 million; (iii) the Company
materially breaches its representations in the Merger Agreement, both at
signing and upon termination of the Merger Agreement, in which case the fee
will be $2 million plus Expenses for a total of up to $5 million; (iv) there
has been a material adverse change or development in the DCIS Investigation
and senior management of the Company was personally involved in material
misconduct, in which case the fee will be $2 million plus Expenses, for a
total of $5 million; (v) the Company's representations in the Merger Agreement
were true at signing of the Merger Agreement, but become untrue in any
material respect thereafter, in which case the Company will be obligated to
reimburse Parent's Expenses up to $3 million; or (vi) there has been a
material adverse change or development in the DCIS Investigation and there are
discovered defects in the Company's products that are in excess of historical
levels and, in the aggregate (and after consideration of remedies reasonably
available to the United States in connection therewith) are reasonably likely
to have a material adverse effect on the Company, in which case Parent's
Expenses will be reimbursed up to $3 million.
In connection with the Merger Agreement, each of the following directors of
the Company has submitted his written resignation, conditioned on and
effective as of the payment for Shares purchased in the Offer: Thomas F.
Leahy; David C. Malmberg; Stephen G. Shank; and William J. Cadogan. The Board
of Directors of the Company has appointed as directors of the Company,
conditioned on and effective as of such payment, the following representatives
of Parent: Geoffrey Wild; Donald J. Miller; and Daniel McL. Miller.
Accordingly, upon such payment, a majority of the Board of Directors of the
Company will be comprised of representatives of Parent.
The Company's President and Chief Executive Officer, Robert W. Heller, has
indicated that he intends to remain employed by the Company for a period of at
least two years after the closing of the Offer. The Bidder, however, has not
offered or requested an employment agreement with Mr. Heller and has not
specified what his responsibilities will be.
No dissenters' right are available to holders of Shares in connection with
the Offer. However, if the Merger is consummated, holders of Shares which have
not been tendered in the Offer will have certain rights under Sections
302A.471 and 302A.473 of the Minnesota Business Corporation Act ("MBCA") to
dissent and demand payment in cash of the fair value of their Shares. Such
rights, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value required to be paid in cash to such
dissenting holders for their Shares. In making any such judicial determination
of the fair value, the court may take into account all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use. The value so determined could be less than,
equal to or greater than the Offer price or the Merger consideration.
The Merger will have to comply with any applicable federal law. In
particular, unless registration of the Shares under the Exchange Act is
terminated prior to such transaction, if the Purchaser acquires Shares
pursuant to the Offer and a business combination with the Company is
consummated more than one year after termination of the Offer or does not
provide for shareholders to receive cash for their Shares in an amount at
least equal to the price per Share paid pursuant to the Offer, the Purchaser
may be required to comply with Rule 13e-3 promulgated by the Commission under
the Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of such business combination and the
consideration offered to minority shareholders be filed with the Commission
and distributed to minority shareholders prior to the consummation of any such
transaction.
If for any reason the Merger is not consummated, Parent and the Purchaser
will evaluate their other alternatives. Such alternatives could include
purchasing additional Shares in the open market, in privately negotiated
transactions, in another tender or exchange offer or otherwise, or taking no
further action to acquire additional Shares. Any additional purchases of
Shares could be at a price greater or less than the price to be paid for
Shares in the Offer and could be for cash or other consideration.
Alternatively, the Purchaser may sell or otherwise dispose of any or all
Shares acquired pursuant to the Offer or otherwise. Such transactions may be
effected on terms and at prices then determined by Parent or the Purchaser,
which may vary from the price paid for Shares in the Offer.
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Except as described above, the Purchaser and Parent have no present plans or
proposals that would relate to or result in any extraordinary corporate
transaction prior to the effectiveness of the Merger 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 Company's Board of Directors or
management, any material change in the Company's capitalization or dividend
policy or any other material change in the Company's corporate structure or
business.
Except as set forth in the preceding paragraphs of this Item 3 and as
described in Item 4 below, to the best knowledge of the Company, there are no
material contracts, agreements, arrangements or understanding, or any actual
or potential conflicts of interest, between the Company or its affiliates and
(i) the Company, its executive officers, directors or affiliates, or (ii) the
Bidder or its respective executive officers, directors, controlling person or
affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) On December 2, 1994, the Company acquired Acsist Associates, Inc.
("Acsist"), a custom manufacturer of multilayer printed circuit boards and
plastic packages for semi-conductors. Following the acquisition, the Company
considered various means of expanding the business in order to realize the
potential of Acsist and of its other divisions and subsidiary. The directors
of the Company, at their meeting on December 6, 1994, discussed alternative
strategies for obtaining the technological and other resources required for
such an expansion, including seeking a partner who would provide technological
expertise, marketing capability or capital. At their meeting on February 7,
1995, the directors continued their considerations and Parent was identified
as a possible partner. Officers of the Company contacted Parent and on
February 24, 1995 visited its subsidiary's facilities in Spokane, Washington.
During this period, discussions with Parent focused on the possibility of a
partnership between Parent and Acsist and on the exchange of information about
technological and marketing matters and the respective operating philosophies
of Parent and the Company.
Sporadic contacts with Parent continued through June 1995. Toward the end of
this period, Parent indicated its interest in discussing a possible
acquisition of the Company. In a telephone call at that time with a
representative of Parent, Robert W. Heller, the President and Chief Executive
Officer of the Company, acknowledged Parent's interest in acquiring the
Company but stated that he thought the Company's value might be greater than
any bid Parent might make. He suggested, as an alternative to an acquisition
of the entire Company, that Parent consider a substantial equity investment in
Acsist. In a telephone call several days later, Parent indicated that it
remained interested in all acquisition options. On June 29, 1995
representatives of Parent visited the Minnesota production facilities of the
Company and indicated that rather than any form of partnership or joint
development effort, Parent wished to discuss a possible acquisition of the
Company. As of June 28, 1995 the Company and Parent entered into an amendment
to the Confidentiality Agreement which had originally been executed between
Parent and Acsist on August 1, 1994 (i.e., prior to the acquisition of Acsist
by the Company) extending the confidentiality provisions and protections of
the Agreement to the Company. The directors of the Company had numerous
informal discussions during July 1995 concerning a possible transaction and
Parent proceeded to gather additional information about the Company. On July
28, 1995 the Company and Parent entered into a Common Interest/Joint Defense
Agreement which allowed Parent to conduct certain additional due diligence
inquiries into an investigation of the Company being conducted by the Defense
Criminal Investigation Service of the United States Department of Defense. See
Item 8 below.
On July 31, 1995 the Board of Directors of the Company met and directed the
officers of the Company to proceed with their evaluation of possible financial
advisers to the Company and retention of an investment banker to render an
opinion as to the fairness, from a financial point of view, to the
shareholders of the Company of any proposal for acquisition of the Company
which might be received. Parent continued its due diligence investigation and
the Board met on August 8 to review the status of discussions. The Board also
appointed a Special Committee of Disinterested Directors, consisting of David
C. Malmburg, Stephen G. Shank and William J. Cadogan (comprising all of the
Company's "disinterested" directors as defined by the MBCA) (the "Special
Committee") to be prepared to consider as required under the MBCA any offer
which might be received from
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the Bidder. After several days of discussion with Alex Brown & Sons
Incorporated ("Alex Brown"), on August 11 the Company retained Alex Brown to
be prepared to give a fairness opinion if requested.
On August 12, 1995, representatives of the Bidder met in Minneapolis with
representatives of the Company to negotiate a merger agreement. On that day,
representatives of the Bidder indicated to Mr. Heller that the Bidder would be
prepared to acquire all Shares at a price of $21.50 per Share, subject, among
other things, to the Company's agreement to reimburse up to $4 million of the
Bidder's expenses in the event of termination of the Merger Agreement in
certain circumstances and to pay an additional $3.5 million fee to the Bidder
under certain of those circumstances (the "August 12 Proposal").
On August 13, the Board and the Special Committee met separately to review
in detail the August 12 Proposal, the reasons for considering the possible
sale of the Company, the process engaged, the status of negotiations and a
preliminary report of Alex Brown that included information regarding the
reported price and trading activity for the Common Stock of the Company,
certain financial and stock market information for the Company compared to
similar information for certain other companies whose securities are publicly
traded and the financial terms of certain recent business combinations which
were deemed comparable in whole or in part. The Special Committee and the
Board of Directors of the Company directed Mr. Heller to negotiate further to
increase the price per Share and to lower the amount of fees and expenses to
be paid to the Bidder under certain circumstances.
On August 14, the president of the Company received from the Bidder an
offer of $22.50 per Share (the "August 14 Offer"), subject, among other
things, to the Company's agreement to reimburse up to $3 million of the
Bidder's expenses in the event of termination of the Merger Agreement in
certain circumstances and to pay an additional $2 million fee to the Bidder
under certain of those circumstances.
Later that afternoon, the Special Committee held a meeting to consider the
August 14 Offer at which all members of such committee were in attendance as
well as the Company's legal counsel and Alex Brown. At the meeting, the
Special Committee reviewed the terms of the August 14 Offer. A representative
of Alex Brown then outlined for the Company's Board of Directors Alex Brown's
valuation analysis and the methodology employed by Alex Brown in its analysis.
Alex Brown also gave the Special Committee its written opinion that the Offer
price of $22.50 per Share was fair to the shareholders of the Company from a
financial point of view. Based on the factors discussed below, the Special
Committee then unanimously approved the August 14 Offer as fair to the
shareholders of the Company and recommended that the Board approve the August
14 Offer.
Immediately after the meeting of the Special Committee, the Board held a
meeting at which all the directors were present, as well as the Company's
legal counsel and Alex Brown. At such Meeting, the entire Board reviewed the
terms of the August 14 Offer and Alex Brown's analysis of the fairness
thereof. The Board acknowledged receipt of Alex Brown's fairness opinion. The
Board was advised that the Special Committee had unanimously approved the
August 14 Offer. Acting upon the unanimous recommendation of the Special
Committee, the Board then unanimously adopted resolutions approving the Offer,
the Merger and the Merger Agreement, determining that the terms of the Offer
and Merger are fair to, and in the best interests of, the Company and its
shareholders and recommending, subject to the terms and conditions set forth
in the Merger Agreement, that the Company's shareholders accept the Offer.
During the evening of August 14, 1995, the Bidder and the Company entered
into the Merger Agreement. See Item 3 above for a description of the Merger
Agreement. Prior to the opening of business on August 15, 1995, the Bidder and
the Company issued a joint press release announcing the Merger and that the
Bidder would commence the Offer shortly.
(b) A letter to shareholders communicating the Special Committee's and the
Board's recommendation and a press release announcing the signing of the
Merger Agreement are filed as Exhibits (a)(1) and (a)(2), respectively, and
are incorporated herein by reference. In considering the Offer and determining
to recommend its acceptance, the Special Committee and the Board in several
meetings analyzed the present and potential value of the Company's Common
Stock, the terms of the Offer and its fairness from a financial point of view.
The
8
<PAGE>
Special Committee and the Board decided to recommend acceptance of the Offer
based on a number of factors, including:
(1) The Board's familiarity with and review of the business, financial
condition, results of operations and prospects of the Company, including
the need for additional capital and management resources to complete the
integration and maximize the potential of the Company's recently acquired
Targ-It-Tronics and Acsist subsidiaries and the risks of attempting to
expand the business of such subsidiaries.
(2) The difficulty of obtaining additional capital or a strategic partner
to expand the Acsist business in light of the pending DCIS Investigation of
the Company (see Item 8 below).
(3) The probable impact of the announcement of anticipated decreased
earnings in the Company's fiscal quarter ending August 26, 1995 on the
price of the Company's stock and on the valuation of the Company in a sale
transaction (see Item 8 below).
(4) A presentation by Alex Brown that included information regarding the
reported price and trading activity for the Common Stock of the Company,
certain financial and stock market information for the Company compared to
similar information for certain other companies whose securities are
publicly traded and the financial terms of certain recent business
combinations which were deemed comparable in whole or in part. Alex Brown
also delivered its written opinion that as of the date of such letter, the
consideration to be received by the Company's shareholders was fair, from a
financial point of view, to such shareholders. A copy of the written
opinion of Alex Brown, setting forth the assumptions made, factors
considered and limitations on the reviews, is attached as Exhibit (c)(2)
hereto and is incorporated herein by reference;
(5) The terms and conditions of the Merger Agreement, including the fact
that Bidder's obligation to complete the Offer and the Merger are subject
only to limited conditions and are not subject to a financing condition,
and the fact that the Merger Agreement, although it contains certain
expense reimbursement, termination payment and "no solicitation"
provisions, does not prevent the Board of Directors, to the extent required
by its fiduciary obligations as determined by a majority of its
disinterested directors based on the written advice of counsel, from (i)
providing information to and participating in discussions with a third
party, and (ii) receiving and accepting a higher offer if one is
forthcoming from any other party, and terminating the Merger Agreement.
(6) The interests of the Company's employees, customers, suppliers and
other constituencies.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
On August 11, 1995, the Company entered into an engagement letter (the
"Letter Agreement") to engage Alex Brown to render, if requested, an opinion
as to the fairness, from a financial point of view, of the consideration
payable to the shareholders of the Company in connection with the proposed
transaction with the Bidder. The Company agreed to pay Alex Brown a fee of
$300,000 upon delivery of such opinion. The Company also agreed to pay Alex
Brown's reasonable out-of-pocket expenses, including fees and disbursements of
counsel, incurred in carrying out its duties under the Letter Agreement and to
indemnify Alex Brown against certain liabilities arising out of or in
connection with its engagement.
Neither the Company nor any person acting on its behalf has retained any
other person to make solicitations or recommendations to shareholders with
respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best of the Company's knowledge, the only transaction by any
executive officer, director, affiliate or subsidiary of the Company in Company
Shares during the past sixty (60) days occurred on August 13, 1995 when Thomas
F. Leahy, a member of the Company's Board of Directors, gave an aggregate of
3,125 shares of Company Common Stock to his three children. Other directors
and/or executive officers may also give a portion of their Shares.
9
<PAGE>
(b) To the best of the Company's knowledge, its executive officers,
directors, their affiliates, and any recipients of a gift of Shares from the
foregoing presently intend to tender to Purchaser any Shares which are held of
record or which are beneficially owned by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) On August 14, 1995, the Company and Bidder executed an Agreement and
Plan of Merger, a copy of which is filed with this Statement as Exhibit
(c)(1). See the response to Item 3(b) above for a description of the proposed
transaction.
(b) Other than as described above in response to Item 3(b), there are no
transactions, board resolutions, agreements in principle or signed contracts
in response to the Offer, which relate to or would result in one or more of
the matters referred to in this Item 7, including (i) an extraordinary
transaction such as a merger or reorganization, involving the Company or its
subsidiaries; (ii) a purchase, sale or transfer of a material amount of assets
by the Company or its subsidiaries; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
DCIS Investigation
The Defense Criminal Investigation Service ("DCIS") has commenced an
investigation into the Company. The DCIS is a part of the United States
Department of Defense and is responsible for investigating defense contract
misconduct committed by prime contractors or sub-contractors. The Company's
Specialty Products division produces printed circuit boards for the Company's
military and aerospace customers, including companies that are prime
contractors for the Department of Defense. The Company has never been a prime
contractor for the Department of Defense.
The Company became aware of the investigation upon the execution of a search
warrant on June 28, 1995, which was followed by a subpoena for documents. The
DCIS Investigation is in its preliminary stages and no charges have been
filed. The Company does not know the likely duration of the investigation or
whether the Company or any of its officers or employees are likely to be
charged with any offense.
Plans for the Company
The Company's President and Chief Executive Officer, Robert W. Heller, has
indicated that he intends to remain employed by the Company for a period of at
least two years after the closing of the Offer. The Bidder, however, has not
offered or requested an employment agreement with Mr. Heller and has not
specified what his responsibilities will be.
William J. Cadogan, Thomas F. Leahy, David C. Malmberg and Stephen G. Shank,
current Company directors, have submitted written resignations to the Company,
conditioned on and effective as of the closing of the Offer. The Board of
Directors of the Company has appointed three Purchaser designees as directors
of the Company, conditioned on and effective as of the closing of the Offer.
Such resignations and appointments are pursuant to the Merger Agreement. See
Annex A hereto.
Following completion of the Offer, Parent intends to merge Purchaser with
and into the Company pursuant to and subject to certain conditions set forth
in the Merger Agreement.
Parent has indicated that it presently intends that, for a period of one
year following the effective time of the proposed Merger, the employees of the
Company will continue to be provided with employee benefits that are in the
aggregate not materially less favorable to such employees than those presently
provided under the Company's current benefit plans; provided that the right is
reserved to review all employee benefit plans after the Merger and to make
such changes as are deemed appropriate in the judgment of Parent.
10
<PAGE>
Projected Fiscal 1995 Results
The Company anticipates that its results of operations for the fourth
quarter ending August 26, 1995 will be substantially below results for each of
the previous three quarters of fiscal 1995. See Item 8 of the Offer to
Purchase.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*(a)(1) Form of Letter to Shareholders of Advance Circuits, Inc. dated
August 21, 1995.
*(a)(2) Form of Joint Press Release of Advance Circuits, Inc. and
Johnson Matthey Public Limited Company dated August 15, 1995.
(c)(1) Agreement and Plan of Merger, dated as of August 14, 1995, by
and between Advance Circuits, Inc., Johnson Matthey Public
Limited Company and ACI Acquisition Corporation.
*(c)(2) Opinion of Alex. Brown & Sons Incorporated
</TABLE>
SIGNATURE. After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Advance Circuits, Inc.
By /s/ Robert W. Heller
-------------------------------------
ROBERT W. HELLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: August 21, 1995
--------
* Included in copies mailed to shareholders of the Company.
11
<PAGE>
ANNEX A
ADVANCE CIRCUITS, INC.
5929 BAKER ROAD, SUITE 470
MINNETONKA, MINNESOTA 55345
----------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
----------------
This information statement is being mailed on or about August 21, 1995 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to holders of the Company's Common Stock $.10 per value
per share (the "Shares"). You are receiving this Information Statement in
connection with the election of persons designated by the Purchaser to seats
on the Board of Directors of Advance Circuits, Inc. (the "Company"). Under the
Merger Agreement, the Company has appointed three directors designated by the
Purchaser, conditioned on and effective as of the closing of the Offer.
Effective upon payment by the Bidder for all Shares accepted for payment
pursuant to the Offer, the Purchaser will be entitled to designate the number
of directors (rounded up to the next whole number) on the Company's Board of
Directors that equals the product of the number of directors on the Company's
Board of Directors (giving effect to the election of additional directors) and
the ratio that the combined voting power of the Shares so purchased bears to
the total combined voting power of all outstanding Shares. The Company has
secured the resignation of four directors, conditioned on and effective as of
the closing of the Offer, to enable the Purchaser's designees (the "Purchaser
Designees") to be appointed to the Board. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
Effective upon the closing of the Offer, Geoffrey Wild, Donald J. Miller and
Daniel McL. Miller, as the Purchaser Designees, will become members of the
Company's Board. Other directors and executive officers of Parent identified
on Schedule I to the Offer to Purchase, a copy of which is being mailed to
shareholders together with this Schedule 14D-9, may also be elected or
appointed to the Company's Board of Directors. The information regarding such
other directors and executive officers is incorporated by reference herein.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning the
Purchaser, Parent and the Purchaser Designees has been furnished to the
Company by such persons, and the Company assumes no responsibility for the
accuracy or completeness of such information.
A-1
<PAGE>
CURRENT DIRECTORS AND DESIGNEES
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Robert W. Heller................................................ 49 1978
Thomas I. Mueller............................................... 53 1989
William J. Cadogan.............................................. 47 1995
Thomas F. Leahy................................................. 53 1977
David C. Malmberg............................................... 52 1993
Stephen G. Shank................................................ 51 1993
Geoffrey Wild(1)................................................ 39 --
Donald J. Miller(1)............................................. 34 --
Daniel McL. Miller(1)........................................... 59 --
</TABLE>
--------
(1) Purchaser Designee
Mr. Heller joined the Company as Vice President in 1977. In April 1978, he
was elected to the Board, in December 1979 he was elected Executive Vice
President, and in May 1987 he was elected President and Chief Executive
Officer.
Mr. Mueller joined the Company in December 1984 as Vice President of Finance
and in August 1985 was elected to the additional offices of Secretary and
Treasurer. In May 1987, he was elected Executive Vice President. He was
elected a director in September 1989.
Mr. Cadogan has been a director of the Company since February 1995. He is
currently the President and a director of ADC Telecommunications, Inc., a
position he has held since March 1990. Mr. Cadogan also serves on the board of
directors of Banta Corporation.
Mr. Leahy has been a private investor since February 1990, and has held the
position of Chairman of the Board of Help/Systems Incorporated since 1985. Mr.
Leahy has served continuously since January 1977 as a director of the Company,
and served as Chairman of the Board and a paid consultant to the Company from
May 1987 to September 1993.
Mr. Malmberg has been a private investor since May 1994. He served as Vice
Chairman of National Computer Systems, Inc. ("NCS") (information systems and
services) and President of NCS/Technology from August 1992 to May 1994. Prior
to August 1992, he served as President and Chief Operating Officer of NCS for
more than five years. Mr. Malmberg is also a director of Three Five Systems,
Inc., National City Bank Corporation and Pattern Processing, Inc.
Mr. Shank has been President and Chief Executive Officer of Learning
Ventures, Inc. (education programs and services) since December 1991, and
served as Chairman and Chief Executive Officer of Tonka Corporation for more
than five years prior to September 1991. Mr. Shank is also a director of
National Computer Systems and Polaris Industries, Inc.
Mr. Wild has been the President of Johnson Matthey Electronics, Inc.
("JMEI"), a direct wholly owned subsidiary of Johnson Matthey Inc., since
October 1994 and a director of Johnson Matthey Inc. since April 1995. He has
also been Vice President, Electronics, Materials Technology Division, Johnson
Matthey Inc. since April 1992 and a director of Ryoka Matthey Corporation
(Japan) since 1994. From April 1992 through October 1994, Mr. Wild was Vice
President of JMEI, and from August 1990 through April 1992, he was General
Manager of JMEI. Mr. Wild is also currently the President and a director of
ACI Acquisition Corporation. Mr. Wild is a citizen of the United Kingdom.
Mr. Donald J. Miller has been Finance Director of JMEI since 1994. From 1990
through 1994, Mr. Miller was a Controller of JMEI. Mr. Miller is a citizen of
the United States.
Mr. Daniel McL. Miller is currently the Vice President and General Counsel
of Johnson Matthey Inc. and Johnson Matthey Investments, Inc., positions he
has held since 1985. Mr. Miller is also a director and Secretary of ACI
Acquisition Corporation. Mr. Miller is a citizen of the United States.
A-2
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not also employed as full-time officers of the Company
receive $15,000 annually and $300 for each committee meeting attended.
BOARD AND COMMITTEE MEETINGS
The Company has established an Audit Committee to review with the Company's
independent accountants the annual financial statements and the results of the
annual audit, and a Compensation Committee to review and make recommendations
respecting executive compensation. During Fiscal 1994 Messrs. Leahy, Malmberg
and Shank were members of both committees. During the fiscal year ended August
27, 1994, the Audit Committee met twice and the Compensation Committee met
once. The Board does not have a nominating committee.
The directors are in close contact with each other and frequently gather or
communicate informally to discuss the affairs of the Company and, when
appropriate, take formal Board action by unanimous written consent of all
directors, in accordance with Minnesota law, rather than hold formal Board
meetings. During the fiscal year ended August 27, 1994, the Board held five
formal meetings. Each current director attended all meetings of the Board and
of Board Committees on which the director served. There are no family
relationships among the directors of the Company.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert W. Heller.................. 49 President, Chief Executive Officer and
Director
Thomas I. Mueller................. 54 Executive Vice President, Secretary,
Treasurer and Director
Jon P. Kerrick.................... 57 Vice President of Engineering
John C. Kimball................... 49 Vice President of Marketing
</TABLE>
The term of office of each officer is one year from the date of the most
recent annual meeting of the Company's Board of Directors, or until the
successor of each is elected. There are no arrangements or understandings
between any officer and any other person pursuant to which such officer was
elected.
Mr. Heller--see discussion under Directors.
Mr. Mueller--see discussion under Directors.
Mr. Kerrick has been employed by the Company for approximately 15 years in
various process engineering positions. In December 1979, he was elected Vice
President of Engineering.
Mr. Kimball joined the Company in 1978 as Vice President, Quality Assurance.
He started the Commercial Sales and Marketing Department in 1983 and was named
Vice President, Commercial Division Sales and Marketing in 1987. In 1989 he
was elected Vice President of Marketing.
A-3
<PAGE>
EXECUTIVE COMPENSATION
General
SUMMARY COMPENSATION TABLE
The following table shows all the cash compensation paid or to be paid by
the Company, as well as certain other compensation paid or accrued during the
fiscal years indicated, to the Chief Executive Officer and the three other
executive officers of the Company for such period in all capacities in which
they served:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- -------------------- -------
RESTRICTED
FISCAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OTHER AWARD($)(2) SARS(#) PAYOUTS COMPENSATION
--------------------------- ------ --------- ----------- ----- ----------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Heller........ 1994 183,022 96,713 -- None None -- --
President, Chief Execu-
tive 1993 162,294 115,618 -- None 11,000 -- --
Officer and Director 1992 159,938 40,000 -- None None -- --
Thomas I. Mueller....... 1994 140,780 73,921 -- None None -- --
Executive Vice 1993 132,809 91,977 -- None 10,000 -- --
President,
Treasurer, Secretary 1992 133,754 31,250 -- None None -- --
and Director
Jon P. Kerrick.......... 1994 125,781 66,220 -- None None -- --
Vice President 1993 117,808 80,895 -- None 10,000 -- --
1992 119,112 28,000 -- None None -- --
John C. Kimball......... 1994 132,499 71,149 -- None None -- --
Vice President 1993 117,527 80,895 -- None 10,000 -- --
1992 119,165 28,000 -- None None -- --
</TABLE>
--------
(1) Bonus amounts represent amounts earned based on fiscal year results. The
amounts are paid in the following year.
(2) See "Employment Contracts and Change-in-Control Arrangements." The
aggregate number and value of restricted stock holdings using the Offer
price are as follows: R. Heller, 28,750 shares, $646,875; T. Mueller,
20,000 shares, $450,000; J. Kerrick, 20,000 shares, $450,000; J. Kimball,
20,000 shares, $450,000.
OPTION EXERCISES DURING 1994 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table presents information with respect to the named
executives concerning the number and value of options held at the end of
fiscal year 1994. No options were granted to or exercised by any named
executive officer during the fiscal year. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#)(1) AT FY-END($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Heller........ -- -- 4,400 6,600 $5,500 $8,250
Thomas I. Mueller....... -- -- 4,000 6,000 5,000 7,500
Jon P. Kerrick.......... -- -- 4,000 6,000 5,000 7,500
John C. Kimball......... -- -- 4,000 6,000 5,000 7,500
</TABLE>
--------
(1) The Merger Agreement provides that, effective upon closing of the Offer,
all issued and outstanding stock options and warrants to purchase Company
Common Stock will become immediately exercisable and the holders thereof
will receive in cash from the Company an amount per share equal to $22.50
minus the per share exercise price of such option. The options reflected
in the above table each have a per share exercise price of $8.38 per
share.
(2) The value of unexercised options represents the difference between the
exercise price thereof and the closing price of the Common Stock on August
27, 1994. The values were calculated only for "In-the-Money" options,
which consist of those options whose exercise price is less than the
market price per share on the last day of the fiscal year. Using the Offer
price of $22.50 per share, the value of all options held by Messrs.
Heller, Mueller, Kerrick and Kimball would be $155,320, $141,200, $141,200
and $141,200, respectively.
A-4
<PAGE>
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
On July 31, 1995, the Company amended its 1990 Restricted Stock Plan (the
"Restricted Stock Plan") to provide that all remaining restrictions on
outstanding shares of Company common stock issued thereunder would lapse upon
a sale of the Company. There are 326,000 shares of restricted stock issued and
outstanding under the Restricted Stock Plan, including the following shares
owned by the Company's executive officers:
<TABLE>
<CAPTION>
SHARES SUBJECT
NAME TO RESTRICTIONS
---- ---------------
<S> <C>
Robert W. Heller........................................... 28,750
Thomas I. Mueller.......................................... 20,000
Jon P. Kerrick............................................. 20,000
John C. Kimball............................................ 20,000
All executive officers as a group.......................... 88,750
</TABLE>
The restrictions on such shares shall lapse upon closing of the Offer and
the holders thereof have indicated an intent to tender such shares in the
Offer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation. The Company is
engaged in a highly competitive industry. In order to succeed, the Company
believes that it must be able to attract and retain qualified executives. To
achieve this objective, the Company has structured an executive compensation
system tied to operating performance that the Company believes has enabled it
to attract and retain key executives. The Compensation Committee of the Board
of Directors was comprised during fiscal 1994 of Thomas F. Leahy, a former
officer and employee of the Company, David C. Malmberg and Stephen G. Shank,
both outside directors. All decisions by the Compensation Committee relating
to the compensation of the Company's executive officers are reviewed by the
full Board. Messrs. Leahy and Mueller are directors of Help Systems, Inc. and
in such capacity Mr. Mueller participates in the decision regarding
compensation of Mr. Leahy who receives remuneration as chairman of that
corporation.
Compensation Policy. The goal of the Company's executive compensation policy
is to ensure that an appropriate relationship exists between executive pay and
the creation of shareholder value, while at the same time motivating and
retaining key employees. The compensation program is viewed in total
considering all of the component parts: base salary, annual performance
incentives, benefits, and long-term incentive opportunity in the form of stock
options. The annual compensation components consist generally of lower base
salaries than of comparative companies combined with higher incentive plans
based on the Company's financial performance. Long-term incentive is based on
the Company's financial performance. Long-term incentive is based on stock
performance through stock options. The Compensation Committee's position is
that stock ownership by management is beneficial in maintaining a proper
balance between management's and shareholders' interests in the enhancement of
shareholder value. Overall, the intent is to have more significant emphasis on
variable compensation components and less on fixed cost components. The
Committee believes this philosophy and structure are in the best interests of
the shareholders.
Performance Measures. In evaluating annual executive compensation, the
Committee examines earnings per share, return on equity, sales growth and
total return to shareholders. These factors are compared with prior years'
performance, performance of other companies in the industry, and designated
Company goals.
Fiscal 1994 Compensation. For fiscal 1994, the Company's executive
compensation program consisted of (i) base salary and (ii) an incentive bonus
based on achieving net income over a predetermined return to shareholders. In
1994, base salaries of Mr. Heller and the other executive offers were
increased as a result of comparing the Company's net profit and return on
investment to other companies in the printed circuit board industry. The
Committee believes that options and other stock based performance compensation
arrangements
A-5
<PAGE>
are an effective incentive for managers to create value for shareholders since
the value of an option bears a direct relationship to the Company's stock
price.
The Company's objective is to obtain a financial performance that achieves
financial goals over a period of time, including a return on equity of over
15%, and sales volume and earnings per share growth of 10% or more. The
Company's performance in fiscal 1994 included all time record sales levels and
slightly higher after tax income. In fiscal 1994, sales increased 14% and
earnings per share remained the same as the prior year. The Company's return
on equity decreased as a result of a higher equity and only slightly higher
net income. Mr. Heller's and the other executive officers' bonuses for fiscal
1994 reflect this decrease in return.
The Committee believes that linking executive compensation to corporate
performance results in a better alignment of compensation with corporate goals
and shareholder interest. As performance goals are met or exceeded, resulting
in increased value to shareholders, executives are rewarded commensurately.
The Committee believes that compensation levels during fiscal 1994 adequately
reflect the Company's compensation goals and policies.
Thomas F. Leahy
David C. Malmberg
Stephen G. Shank
A-6
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five fiscal
years ended August 27, 1994 with the cumulative total return for the NASDAQ
Market Index and a peer group selected by the Company (the "SIC Peer Group
Index"). The SIC Peer Group Index includes the following NASDAQ companies:
Advance Circuits, Inc., Altron, Inc., Benchmark Electronics, Circuit Systems,
Inc., DDL Electronics, Electronic Associates Inc., Electronic Fab Technology,
Hadco CP, IEC Electronics CP, Jabil Circuit, Inc., Level One Comm, Inc., M-
Wave, Inc., Media Vision Technology, Merix CP, Micronics Computers, Inc., Park
Electrochemical CP, Parlex CP, Plexus CP, QLogic CP, Sanmina CP, SCI Systems
Inc., Sheldahl, Inc., Sigma Circuits, Inc., Solectron CP, U.S. Technologies,
Inc., and Video Display CP. All of the members of the peer group have the same
four-digit SIC (Standard Industrial Classification) code labeled 3672--Printed
Circuit Boards. The comparison assumes $100 was invested on August 27, 1989 in
the Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ADVANCE CIRCUITS INC., INDUSTRY INDEX AND BROAD MARKET
<CAPTION>
Measurement period ADVANCE INDUSTRY BROAD
(Fiscal Year Covered) CIRCUITS INDEX MARKET
--------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
08/27/89 $ 100.00 $ 100.00 $ 100.00
FYE 08/27/90 $ 138.73 $ 81.37 $ 87.46
FYE 08/27/91 $ 143.35 $ 109.38 $ 99.42
FYE 08/27/92 $ 124.28 $ 156.27 $ 101.10
FYE 08/27/93 $ 236.99 $ 207.06 $ 131.61
FYE 08/27/94 $ 222.54 $ 202.26 $ 143.81
</TABLE>
A-7
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than ten percent shareholders ("Insiders") are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, during the fiscal year ended August 27,
1994, all Section 16(a) filing requirements applicable to Insiders were
complied with except that one report covering one transaction was filed late
by David C. Malmberg, and Robert W. Heller was late filing a Form 5 reporting
a gift of stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table provides information concerning those persons known by
the Company to be the beneficial owners of more than five percent (5%) of the
Company's outstanding voting capital stock as of June 30, 1995, unless
otherwise indicated:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) CLASS
------------------------------------ ------------------- ----------
<S> <C> <C>
Dimensional Fund Advisors, Inc.............. 396,098(2) 5.2%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Heartland Advisors, Inc..................... 565,000(3) 7.5%
790 North Milwaukee Street
Milwaukee, WI 53202
Prudential Insurance Co. of America......... 548,800(4) 7.3%
5 Prudential Plaza
751 Broad Street, 5th Floor
Newark, NJ
Robert W. Heller............................ 416,662(5) 5.5%
5929 Baker Road, Suite 470
Minnetonka, MN 55345
</TABLE>
--------
(1) Unless otherwise indicated, the shareholder has sole power to vote and
sole power to direct the disposition of all shares listed as beneficially
owned.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, has advised the Company that, as of June 30, 1995, all of the
shares listed are held in portfolios of DFA Investment Dimensions Group,
Inc. (the "Fund"), a registered open-end investment company, or in series
of The DFA Investment Trust Company (the "Trust"), a Delaware business
trust, or the DFA Group Trust and the DFA Participating Group Trust,
investment vehicles for qualified employee benefit plans, for all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares. Dimensional has sole voting power as to
234,611 of the shares. Persons who are officers of Dimensional also serve
as officers of the Fund and the Trust, each an open-end management
investment company. In their capacity as officers of the Fund and the
Trust, such persons vote 154,012 additional shares which are owned by the
Fund and 7,475 shares which are owned by the Trust (both included in the
shares listed in the table).
(3) Shareholdings are as of July 31, 1995.
(4) Shareholdings are as of June 30, 1995.
A-8
<PAGE>
(5) Amount includes 4,500 shares held by Mr. Heller's children and 6,600
shares which may be acquired upon exercise of options which are
exercisable as of August 14, 1995 or will become exercisable within 60
days of such date. Mr. Heller may, prior to the closing of the Offer, give
a portion of the above-listed shares to family members, a charitable
trust, and/or non-profit organizations with the understanding that such
recipients will tender such shares in the Offer.
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Company Common Stock
beneficially owned as of August 14, 1995, by each executive officer of the
Company named in the Summary Compensation Table, by each director or nominee
for election as a director, and by all directors and executive officers
(including the named individuals) as a group:
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER SHARES BENEFICIALLY
OR IDENTITY OF GROUP OWNED (1) PERCENT OF CLASS
-------------------- ------------------- ----------------
<S> <C> <C>
Robert W. Heller...................... 416,662(2) 5.5%
Thomas F. Leahy....................... 241,636(3) 3.2%
William J. Cadogan.................... 0 *
Thomas I. Mueller..................... 71,406(4) *
John C. Kimball....................... 56,375(4) *
Jon P. Kerrick........................ 47,637(4) *
David C. Malmberg..................... 1,000 *
Stephen G. Shank...................... 1,000 *
Executive Officers and Directors as a
Group (8 persons).................... 835,716(5) 11.0%
</TABLE>
--------
* Less than one percent.
(1) See Note (1) to the preceding table.
(2) See Note (5) to the preceding table.
(3) Amount includes 4,218 shares held by Mr. Leahy's spouse.
(4) Amount includes 6,000 shares which may be acquired upon exercise of
options which are exercisable as of August 14, 1995 or will become
exercisable within 60 days of such date.
(5) Amount includes 24,600 shares which may be acquired upon exercise of
options which are exercisable as of August 14, 1995 or will become
exercisable within 60 days of such date. One or more of the above listed
persons may, prior to the closing of the Offer, give a portion of the
above-listed shares to family members, a charitable trust, and/or non-
profit organizations with the understanding that such recipients will
tender such shares in the Offer.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on May 27, 1995, there were outstanding 7,564,895
shares of Common Stock, par value $.10, which is the only outstanding class of
voting stock of the Company. Each share of Common Stock is entitled to one
vote.
A-9
<PAGE>
EXHIBIT (a)(1)
ADVANCE CIRCUITS, INC.
5929 BAKER ROAD, SUITE 470
MINNETONKA, MINNESOTA 55345
August 21, 1995
Dear Fellow Advance Circuits, Inc. Shareholders:
Johnson Matthey Public Limited Company ("Johnson Matthey") today initiated a
tender offer, subject to certain conditions described later in this letter, to
purchase your Advance Circuits, Inc. ("ACI") common stock at a price of $22.50
per share, net cash to tendering shareholders. The aggregate value of this
transaction, including amounts to "cash out" outstanding warrants and options,
is approximately $172 million. On August 14, 1995, the Board of Directors of
ACI and a Special Committee of Disinterested Directors each unanimously voted
to approve Johnson Matthey's tender offer and recommend that you tender your
ACI stock to Johnson Matthey pursuant to the tender offer.
Since ACI's acquisition of Acsist Associates, Inc. in December 1994, the
Company has considered various means of expanding and leveraging the Acsist
business to its full potential, including raising additional capital or
seeking a corporate partner. When ACI discussed with Johnson Matthey a
partnering arrangement, they responded by indicating an interest in acquiring
all of ACI. This interest has continued despite the pending Department of
Defense investigation and projections of a disappointing fiscal 1995 fourth
quarter. Due to the significant risks inherent in ACI's pursuing its growth
strategy in light of these recent developments, the Board determined to accept
Johnson Matthey's offer.
Our Board and its Special Committee of Disinterested Directors believe
Johnson Matthey's offer is fair, and they recommend that you accept the offer.
Alex. Brown & Sons Incorporated has rendered an opinion to the Board and the
Special Committee that the Johnson Matthey offer is fair to ACI's shareholders
from a financial point of view.
Enclosed are the following materials relating to the Johnson Matthey tender
offer: (i) the Offer to Purchase dated August 21, 1995 prepared by Johnson
Matthey which states the basic terms of the Offer; (ii) the letter of
transmittal which must be filled out by you in order to tender your shares to
Johnson Matthey, with related documents; and (iii) a
Solicitation/Recommendation Statement on Schedule 14D-9 which has been
prepared by ACI in order, among other things, to explain more fully to you the
reasons ACI's Board recommends that you tender your ACI stock to Johnson
Matthey. These documents contain material information relevant to your
decision whether to tender your ACI stock to Johnson Matthey which it is not
feasible to provide in a letter of this length. We strongly encourage you to
read these materials before you decide whether to tender your shares.
The Board recommends that you tender all of your ACI stock to Johnson
Matthey as promptly as possible, as I and my fellow directors and executive
officers intend to do. In order to do so, you should take the following steps:
1. Complete, date and sign the enclosed letter of transmittal, and
2. Arrange to send your completed letter of transmittal and the
certificates representing your ACI stock (or, tender common shares pursuant
to the procedures for book-entry transfer outlined in the letter of
transmittal) and all other required documents to Chemical Mellon
Shareholder Services at the appropriate address given in the letter of
transmittal.
In the alternative, you may ask your broker, dealer, commercial bank, trust
company or nominee to effect the transfer for you.
<PAGE>
If you have any questions about how to tender your shares or about the
status of the tender offer, please feel free to make a collect telephone call
to Georgeson & Company Inc. at (212) 440-9800.
Sincerely,
Advance Circuits, Inc.
/s/ Robert W. Heller
Robert W. Heller
President and Chief Executive Officer
Enclosure
<PAGE>
EXHIBIT (a)(2)
Joint News Release by:
JOHNSON MATTHEY PLC ADVANCE CIRCUITS, INC.
2-4 Cockspur Street 5929 Baker Road
Trafalgar Square Suite 470
London SW1Y 5BQ Minnetonka, Minnesota 55345
Phone 011 44 171 269 8400 Phone 612 988 8700
Contact: Contact:
Thomas Clohesy Tom Mueller
Gavin Anderson & Company Exec. VP, Secretary and Treasurer
212 373 0231 612 988 8702
FOR IMMEDIATE RELEASE
JOHNSON MATTHEY TO ACQUIRE ADVANCE CIRCUITS
MINNEAPOLIS, August 15, 1995.--Johnson Matthey plc and Advance Circuits,
Inc. announced today that they have signed a definitive merger agreement
providing for Johnson Matthey to acquire Advance Circuits. Under this
agreement, which has been approved by the boards of each company, an indirect
wholly owned US subsidiary of Johnson Matthey will be merged into Advance
Circuits. In connection with the merger, Johnson Matthey intends shortly to
commence a cash tender offer for all the outstanding shares of common stock of
Advance Circuits at $22.50 per share. Based upon 7.6 million Advance Circuits
common shares currently outstanding, the aggregate consideration to be paid in
the tender offer and the merger, including payment in respect of outstanding
stock options, will amount to approximately $171 million.
The acquisition is not subject to a financing condition but is subject to
clearance under the Hart-Scott-Rodino Antitrust Improvements Act and to
certain other conditions.
Advance Circuits, Inc. is a leading interconnect solution provider whose
products include complex multilayer printed circuit boards, flexible circuit
assemblies, semiconductor packages and other manufacturing services.
In the nine months ended May 27, 1995, Advance Circuits had net sales of
$127.8 million and net income of $7.2 million ($0.98 per share). Advance
Circuits anticipates that its earnings for the fourth quarter ended August 26,
1995 will be substantially less than its earnings for the third quarter.
Johnson Matthey, a United Kingdom public company, is a world leader in
advanced materials technology. Its principal businesses are the production of
electronic materials, specialty chemical and pharmaceutical compounds; the
manufacture of catalysts and pollution control systems; the refining,
fabrication and marketing of precious metals and the manufacturing of
decorative and specialized materials for the ceramics, plastics, paint, ink,
and construction industries. Johnson Matthey has operations in 29 countries
and employs 6,000 people. Its products are sold across the world to a wide
range of advanced technology industries. In the fiscal year ended March 31,
1995, Johnson Matthey's sales totaled approximately $3.5 billion.
Commenting on this news, David Davies, Chairman and Chief Executive of
Johnson Matthey, said:
"The acquisition of Advance Circuits will greatly expand the product
range of Johnson Matthey's Electronic Materials business, in particular in
the key emerging market of plastic laminate packaging. Johnson Matthey is
committed to investing in superior technology and to serving our customers
in markets worldwide. The acquisition of Advance Circuits further
underlines this commitment."
<PAGE>
Robert Heller, Chairman and Chief Executive Officer of Advance Circuits,
said:
"I am especially pleased with the merger because of Advance Circuits'
enhanced ability to execute its global and semiconductor packaging
strategies."
Dillon, Read & Co. Inc. and Baring Brothers Limited are acting as financial
advisors for Johnson Matthey, with Dillon Read acting as dealer manager for
the offer. Alex. Brown & Sons Incorporated has rendered a fairness opinion for
Advance Circuits.
The common stock of Advance Circuits is traded in the over-the-counter
market and prices are quoted on the Nasdaq National Market under the symbol
"ADVC."
<PAGE>
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
among
JOHNSON MATTHEY PUBLIC LIMITED COMPANY
ACI ACQUISITION CORPORATION
and
ADVANCE CIRCUITS, INC.
Dated as of August 14, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C> <C>
THE TENDER OFFER........................... 2
Section 1.1 The Offer............................................. 2
---------
Section 1.2 Company Action........................................ 3
--------------
ARTICLE II
THE MERGER.............................. 5
Section 2.1 Effective Time of the Merger.......................... 5
----------------------------
Section 2.2 Closing............................................... 6
-------
Section 2.3 Effects of the Merger................................. 6
---------------------
Section 2.4 Articles of Incorporation and By-Laws................. 6
-------------------------------------
Section 2.5 Directors............................................. 7
---------
Section 2.6 Officers.............................................. 7
--------
ARTICLE III
CONVERSION OF SECURITIES; DISSENTING SHARES............. 7
Section 3.1 Conversion of Capital Stock........................... 7
---------------------------
Section 3.2 Exchange of Certificates.............................. 8
------------------------
Section 3.3 No Further Ownership Rights in Company Common Stock... 9
---------------------------------------------------
Section 3.4 Closing of Company Transfer Books..................... 9
---------------------------------
Section 3.5 Withholding........................................... 9
-----------
Section 3.6 Dissenting Company Common Stock....................... 10
-------------------------------
Section 3.7 Lost, Stolen or Destroyed Certificates................ 10
--------------------------------------
Section 3.8 Further Assurances.................................... 10
------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 11
Section 4.1 Organization.......................................... 11
------------
Section 4.2 Capitalization........................................ 12
--------------
Section 4.3 Authority............................................. 13
---------
Section 4.4 Consents and Approvals; No Violations................. 13
-------------------------------------
Section 4.5 SEC Reports and Financial Statements.................. 15
------------------------------------
Section 4.6 Information in Disclosure Documents................... 16
-----------------------------------
Section 4.7 Litigation............................................ 16
----------
Section 4.8 No Material Adverse Change............................ 16
--------------------------
Section 4.9 Taxes................................................. 17
-----
Section 4.10 Benefit Plans......................................... 18
-------------
Section 4.11 Opinion of Financial Advisor.......................... 21
----------------------------
Section 4.12 Certain Antitakeover Provisions Not Applicable........ 21
----------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.13 Intellectual Property................................. 21
---------------------
Section 4.14 Government Contracting Matters........................ 22
------------------------------
Section 4.15 Votes Required........................................ 24
--------------
Section 4.16 Brokers............................................... 24
-------
Section 4.17 Certain Agreements.................................... 24
------------------
Section 4.18 Environmental Compliance.............................. 25
------------------------
Section 4.19 Contracts............................................. 25
---------
Section 4.20 New Directors......................................... 26
-------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........... 26
Section 5.1 Organization.......................................... 26
------------
Section 5.2 Authority............................................. 26
---------
Section 5.3 Consents and Approvals; No Violations................. 27
-------------------------------------
Section 5.4 Operations of Sub..................................... 28
-----------------
Section 5.5 Information in Disclosure Documents................... 28
-----------------------------------
Section 5.6 Financing............................................. 28
---------
Section 5.7 Brokers............................................... 28
-------
ARTICLE VI
COVENANTS.............................. 28
Section 6.1 Conduct of Business of the Company.................... 28
----------------------------------
Section 6.2 Reasonable Best Efforts............................... 31
-----------------------
Section 6.3 Access to Information................................. 31
---------------------
Section 6.4 Company Shareholders Meeting.......................... 32
----------------------------
Section 6.5 Company Option Plan................................... 33
-------------------
Section 6.6 Company Benefit Plans................................. 34
---------------------
Section 6.7 No Solicitation....................................... 34
---------------
Section 6.8 Fees and Expenses..................................... 35
-----------------
Section 6.9 Notification of Certain Matters....................... 36
-------------------------------
Section 6.10 Company Debt Agreements............................... 37
-----------------------
Section 6.11 Public Announcements.................................. 37
--------------------
Section 6.12 State Takeover Laws................................... 37
-------------------
Section 6.13 Indemnification....................................... 38
---------------
Section 6.14 Shareholder Litigation................................ 38
----------------------
ARTICLE VII
CONDITIONS.............................. 38
Section 7.1 Conditions to Each Party's Obligation To
----------------------------------------
Effect the Merger.................................... 38
-----------------
Section 7.2 Conditions to Obligations of Parent and Sub........... 39
-------------------------------------------
Section 7.3 Conditions to Obligations of the Company.............. 40
----------------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII
TERMINATION............................. 40
Section 8.1 Termination........................................... 40
-----------
Section 8.2 Effect of Termination................................. 42
---------------------
ARTICLE IX
MISCELLANEOUS............................ 42
Section 9.1 Nonsurvival of Representations and Warranties......... 42
---------------------------------------------
Section 9.2 Amendment............................................. 42
---------
Section 9.3 Extension; Waiver..................................... 42
-----------------
Section 9.4 Notices............................................... 42
-------
Section 9.5 Interpretation........................................ 44
--------------
Section 9.6 Counterparts.......................................... 44
------------
Section 9.7 Entire Agreement; No Third Party Beneficiaries........ 44
----------------------------------------------
Section 9.8 Governing Law......................................... 45
-------------
Section 9.9 Specific Performance.................................. 45
--------------------
Section 9.10 Assignment............................................ 45
----------
Section 9.11 Validity.............................................. 45
--------
Section 9.12 Parent Guarantee and No Solicitation Agreement........ 45
----------------------------------------------
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 14, 1995 (this
"Agreement"), among JOHNSON MATTHEY PUBLIC LIMITED COMPANY, an English public
---------
limited company ("Parent"), ACI ACQUISITION CORPORATION, a Minnesota corporation
------
and an indirect, wholly-owned subsidiary of Parent ("Sub"), and ADVANCE
---
CIRCUITS, INC., a Minnesota corporation (the "Company"; together with Sub, 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 determined that the acquisition of the Company by Parent upon the
terms and subject to the conditions of this Agreement would be advantageous and
beneficial to their respective corporations and that such transaction is
consistent with and in furtherance of such entities' respective long-term
business strategies;
WHEREAS, in furtherance thereof, it is proposed that Sub will make a
tender offer (as it may be amended from time to time as permitted hereunder, the
"Offer") to purchase all the outstanding shares of the Company's common stock,
-----
par value $0.10 per share (the "Company Common Stock"), for $22.50 per share of
--------------------
Company Common Stock (such amount, or any greater amount per share offered
pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"),
----------------
net to the seller in cash, in accordance with the terms and subject to the
conditions provided herein and in the Offer Documents (as defined in
Section 1.1(b)); and the Board of Directors of the Company and the Special
--------------
Committee (as defined below) have adopted resolutions approving this Agreement,
the Offer and the Merger (as defined below) and recommending that the Company's
shareholders accept the Offer and approve the Merger; and
WHEREAS it is proposed that, following the consummation of the Offer,
there be a merger (the "Merger") of Sub with and into the Company (the
------
"Surviving Corporation") upon the terms and subject to the conditions hereof.
---------------------
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
-1-
<PAGE>
ARTICLE I
THE TENDER OFFER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement has not been terminated in
accordance with Section 8.1, Sub will, and Parent will cause Sub to, commence
-----------
the Offer as promptly as practicable after the date hereof, but in no event
later than the fifth business day after the date of initial public announcement
of this Agreement and the Offer. The obligation of Sub to, and of Parent to
cause Sub to, commence the Offer and accept for payment, and pay for, any shares
of Company Common Stock tendered pursuant to the Offer will be subject only to
the satisfaction of the conditions set forth in Annex I hereto (any of which may
be waived by Sub in its sole discretion) and to the terms and conditions of this
Agreement. Sub expressly reserves the right to modify the terms of the Offer,
except that, without the consent of the Company (unless the Company takes any
action permitted to be taken pursuant to the second sentence of Section 6.7(b)),
--------------
Sub shall not (i) reduce the number of shares of Company Common Stock subject to
the Offer, (ii) reduce the Per Share Amount, (iii) modify or add to the
conditions set forth in Annex I (other than to waive any 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 expiration date of the Offer
any of the conditions to Sub's obligation to purchase shares of Company Common
Stock shall not be satisfied until such time as such conditions are satisfied or
waived, (ii) extend the Offer for any period required by any order, decree or
ruling of, or any rule, regulation, interpretation or position of, any
Governmental Entity (as defined in Section 4.4(a)) applicable to the Offer and
--------------
(iii) extend the Offer for any reason for a period of not more than five
business days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence. The Offer will be made by
means of an offer to purchase (the "Offer to Purchase") and related letter of
-----------------
transmittal containing the terms set forth in this Agreement and the conditions
set forth in Annex I hereto. Subject to the terms of the Offer and this
Agreement and the satisfaction or waiver of all the conditions of the Offer set
forth in Annex I hereto as of the final expiration date of the Offer, Sub will,
and Parent will cause Sub to, accept for payment and pay for all shares of
Company Common Stock validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after such expiration date.
(b) On the date of commencement of the Offer, Parent and Sub will
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
---
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1
--------------
will contain (including as an exhibit) or will incorporate by reference the
Offer to Purchase (or portions thereof) and
-2-
<PAGE>
forms of the related letter of transmittal and summary advertisement (which
Schedule 14D-1, Offer to Purchase, and other documents pursuant to which the
Offer will be made, together with any supplements or amendments thereto, are
referred to herein collectively as the "Offer Documents"). Parent and Sub will
---------------
disseminate the Offer to Purchase, the related letter of transmittal and other
Offer Documents to holders of shares of the Company Common Stock. Each of
Parent, Sub and the Company will promptly correct any information provided by it
for use in the Offer Documents that becomes false or misleading in any material
respect, and each of Parent and Sub will 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 shares of Company
Common Stock, in each case as and to the extent required by applicable law. Sub
will provide the Company and its counsel in writing with any comments Sub or its
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments. Parent, Sub and their
counsel will provide the Company and its counsel with a reasonable opportunity
to participate in all communications with the SEC and its staff, including any
meetings and telephone conferences relating to the Offer Documents, the Offer,
the Merger or this Agreement.
(c) Sub will, and Parent will cause Sub to, designate a bank or trust
company reasonably acceptable to the Company as the paying agent for the Offer
(the "Offer Paying Agent"). Sub agrees to deposit, and Parent agrees to cause
------------------
Sub to deposit, with the Offer Paying Agent simultaneously with the consummation
of the Offer such funds as are necessary to make the cash payments required by
the Offer. In no event shall any shareholder of the Company who has surrendered
certificates representing Company Common Stock be entitled to receive interest
on any of the funds to be received pursuant to the Offer. If a check is to be
sent to a person other than the person in whose name a certificate for Company
Common Stock surrendered in connection with the Offer is registered, it shall be
a condition of the transfer that the person requesting such transfer shall pay
to the Offer Paying Agent any transfer or other taxes required by reason of the
delivery of such check to a person other than the registered holder of the
certificate surrendered, or shall establish to the satisfaction of the Offer
Paying Agent that such tax has been paid or is not applicable. Notwithstanding
the foregoing, neither the Offer Paying Agent nor any party hereto shall be
liable to a holder of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(d) Sub and Parent will file with the Commissioner of Commerce of the
State of Minnesota any registration statement relating to the Offer required to
be filed pursuant to Chapter 80B of the Minnesota Statutes.
Section 1.2 Company Action.
--------------
-3-
<PAGE>
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Board of Directors of the Company, at a meeting
duly called and held, acting on the unanimous recommendation of the special
committee of all independent directors (the "Special Committee") of the Board of
-----------------
Directors of the Company established pursuant to Section 302A.673(d) of the
Minnesota Business Corporation Act (the "MCBA") on August 14, 1995, has
----
unanimously and duly adopted resolutions approving this Agreement, the Offer and
the Merger, determining that the Merger is advisable and that the terms of the
Offer and Merger are fair to, and in the best interests of, the Company and its
shareholders and recommending, subject to the terms and conditions set forth
herein, that the Company's shareholders accept the Offer and approve the Merger
and approve and adopt this Agreement. The Company represents and warrants that
its Board of Directors has received the opinion of Alex Brown & Sons
Incorporated ("Alex Brown") that the proposed consideration to be received by
the Company's shareholders pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view, and a complete and correct copy of
such opinion has been delivered by the Company to Parent and Sub. The Company
has been advised by each of its directors and executive officers that each such
person intends to tender all shares of Company Common Stock owned by such person
pursuant to the Offer, except to the extent of any restrictions created by
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
------------- --------
Act").
---
(b) The Company will file with the SEC, on the date of the filing by
Sub of the Schedule 14D-1, 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 recommendations described in Section
-------------- -------
1.2(a) above and will disseminate the Schedule 14D-9 as required by Rule 14d-9
------
promulgated under the Exchange Act. Each of the Company, Parent and Sub will
promptly correct any information provided by it for use in the Schedule 14D-9
that becomes false or misleading in any material respect, and the Company will
further take all steps necessary to cause the Schedule 14D-9 as so corrected to
be filed with the SEC and disseminated to the Company's shareholders, in each
case as and to the extent required by applicable law. The Company will provide
Parent and Sub and their counsel in writing with 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. The Company and its counsel will
provide Parent and Sub and their counsel with a reasonable opportunity to
participate in all communications with the SEC and its staff, including any
meetings and telephone conferences relating to the Schedule 14D-9, the Offer,
the Merger or this Agreement.
(c) In connection with the Offer, the Company will (i) promptly
furnish Parent and Sub with mailing labels containing the names and addresses of
all record holders of shares of Company Common Stock as of a recent date and of
those persons
-4-
<PAGE>
becoming record holders after such date, together with copies of all security
position listings and computer files and all other information in the Company's
control regarding the beneficial owners of shares of Company Common Stock that
Parent or Sub may reasonably request and (ii) furnish to Parent or Sub such
other information and assistance as Parent or Sub or their agents may reasonably
request in expeditiously communicating the Offer to holders of shares of Company
Common Stock.
(d) Effective upon payment by Sub for all shares of Company Common
Stock accepted for payment pursuant to the Offer (the "Closing of the Offer"),
--------------------
Sub will be entitled to designate up to such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as will give Sub
representation on such Board equal to the product of the number of directors on
such Board (giving effect to any increase in the number of directors pursuant to
this Section 1.2) and the ratio that the combined voting power of the shares of
-----------
the Company Common Stock so purchased bears to the total combined voting power
of all outstanding shares of the Company Common Stock, and the Company will use
its best efforts to take all action necessary to cause Sub's designees to be
elected or appointed to the Company's Board of Directors, including, without
limitation, amending the Company's by-laws, increasing the number of directors
or seeking and accepting resignations of incumbent directors. The Company agrees
to comply with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in connection with this Section 1.2(d). Sub will supply to the
--------------
Company in writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by such
Section and Rule. Following the election or appointment of Sub's designees
pursuant to this Section 1.2 and prior to the Effective Time, if there shall be
-----------
any directors of the Company who were directors as of the date hereof, any
amendment of this Agreement, any termination of this Agreement by the Company,
any extensions by the Company of the time for the performance of any of the
obligations or other acts of Sub or Parent or waiver of any of the Company's
rights hereunder, will require the concurrence of a majority of such directors.
ARTICLE II
THE MERGER
Section 2.1 Effective Time of the Merger.
----------------------------
(a) Upon the terms and subject to the conditions hereof, and in
accordance with the MBCA, Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined), with the Company continuing as the
Surviving Corporation and succeeding to and assuming all the rights and
obligations of Sub in accordance with the MBCA.
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<PAGE>
(b) Upon the terms and subject to the conditions hereof, articles of
merger or other appropriate documents (the "Articles of Merger") will be duly
------------------
prepared and executed by the Company and Sub and thereafter delivered to the
Secretary of State of the State of Minnesota for filing as provided in the MBCA
as soon as practicable on the Closing Date (as defined in Section 2.2). The
-----------
Merger will become effective upon the filing of the Articles of Merger with the
Secretary of State of the State of Minnesota or at such other later date or time
as Sub and the Company shall agree and as specified in the Articles of Merger
(the time the Merger becomes effective being the "Effective Time").
--------------
Section 2.2 Closing. Unless this Agreement is terminated and the
-------
transactions contemplated herein abandoned pursuant to Section 8.1, the closing
-----------
of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be
-------
specified by the parties, which will be no later than the second business day
following the satisfaction or, if permissible, waiver of each of the conditions
set forth in Article VII (the "Closing Date"), at the offices of Sidley &
------------
Austin, 875 Third Avenue, New York, New York 10022, unless another date or place
is agreed to by the parties hereto.
Section 2.3 Effects of the Merger. The Merger will have the effects
---------------------
set forth in the MBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the rights, privileges, immunities,
powers and franchises (of a public as well as of a private nature) of the
Company and of Sub and all the property (real, personal and mixed) of the
Company and of Sub and all debts due to either the Company or Sub on any
account, including subscriptions to shares, and all choses in action, and every
other interest of or belonging to or due to either the Company or Sub, will vest
in the Surviving Corporation, and all debts, liabilities, obligations and duties
of the Company and Sub shall become the debts, liabilities, obligations and
duties of the Surviving Corporation and may be enforced against the Surviving
Corporation to the same extent as if such debts, liabilities, obligations and
duties had been incurred or contracted by the Surviving Corporation. The title
to any real estate or any interest therein vested, by deed or otherwise, in the
Company or Sub shall not revert or in any way become impaired by reason of the
Merger, and all rights of creditors and all liens upon any property of the
Company or Sub shall be preserved unimpaired following the Merger.
Section 2.4 Articles of Incorporation and By-Laws.
-------------------------------------
(a) The Articles of Incorporation of the Company, as in effect
immediately prior to the Effective Time, will be amended as of the Effective
Time so that Article V thereof reads in its entirety as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,000 shares of
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<PAGE>
Common Stock, par value $1.00 per share."
and, as so amended, such Articles of Incorporation will be the Articles of
Incorporation of the Surviving Corporation, until amended in accordance
therewith and with applicable law.
(b) The By-Laws of Sub, as in effect immediately prior to the
Effective Time, will be the By-Laws of the Surviving Corporation until amended
in accordance therewith and with applicable law.
Section 2.5 Directors. The directors of Sub at the Effective Time
---------
will be the directors of the Surviving Corporation, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation and until his or her successor is duly elected and
qualified.
Section 2.6 Officers. The officers of Sub at the Effective Time will
--------
be the officers of the Surviving Corporation, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation and until his or her successor is duly appointed and
qualified.
ARTICLE III
CONVERSION OF SECURITIES; DISSENTING SHARES
Section 3.1 Conversion of Capital Stock. As of the Effective Time, by
---------------------------
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Company or of Sub:
(a) Each issued and outstanding share of common stock of Sub, $1.00
par value per share, shall be converted into issued and outstanding shares of
Common Stock, par value $1.00 per share, of the Surviving Corporation.
(b) All shares of Company Common Stock that are owned, directly or
indirectly, by any Subsidiary (as hereinafter defined) of the Company, any
shares of Company Common Stock owned by Parent, Sub or any wholly owned
Subsidiary of Parent and any shares of Company Common Stock that have been
acquired by the Company and are subject to an outstanding pledge by the Company
immediately prior to the Effective Time to secure the future payment of the
purchase price therefor will be cancelled and will cease to exist and no shares
of capital stock of Parent or Sub or other consideration will be delivered in
exchange therefor. As used in this Agreement, "Subsidiary" means, with respect
----------
to any party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary
-7-
<PAGE>
of such party is a general partner (excluding any partnership, the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party, by any
one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. References to a wholly owned Subsidiary of an entity include a
Subsidiary all the common equity of which is owned directly or through wholly
owned Subsidiaries by such entity.
(c) Subject to Section 3.6, each share of Company Common Stock issued
-----------
and outstanding immediately prior to the Effective Time (other than shares to be
cancelled in accordance with Section 3.1(b)) shall be converted into the right
--------------
to receive from the Surviving Corporation in cash, without interest, the Per
Share Amount paid pursuant to the Offer (the "Merger Consideration"). All such
--------------------
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and each holder of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
Section 3.2 Exchange of Certificates. (a) Paying Agent. Parent shall
------------------------ ------------
authorize a commercial bank or such other person or persons as shall be
acceptable to Parent and the Company to act as paying agent hereunder (the
"Paying Agent") for the payment of the Merger Consideration upon surrender of
------------
the Certificates.
(b) Surviving Corporation to Provide Funds. Parent shall deposit or
--------------------------------------
cause to be deposited in trust with the Paying Agent at the Effective Time cash
in an aggregate amount necessary to make the payments pursuant to Section 3.1
hereof to holders (other than Parent or Sub or any of their respective
subsidiaries) of shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time (such amounts being hereinafter referred
to as the "Payment Fund"). The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in the preceding sentence out of
the Payment Fund. The Paying Agent shall invest portions of the Payment Fund as
Parent directs, provided that substantially all such investments shall be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations receiving the highest rating from either Moody's Investors
Services, Inc. or Standard and Poor's Corporation, or in certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial banks
with capital exceeding $100 million. The Payment Fund shall not be used for any
other purpose, except as provided in this Agreement.
-8-
<PAGE>
(c) Exchange Procedures. As soon as practicable after the Effective Time,
-------------------
the Paying Agent shall mail to each holder of record of a Certificate, other
than Parent, the Company, any Subsidiary of Parent or the Company and any holder
of Dissenting Company Common Stock (as defined below), (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 actual 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 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 the Surviving
Corporation, 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 of Company Common Stock theretofore represented by
such Certificate shall have been converted pursuant to Section 3.1, and the
-----------
Certificates so surrendered shall forthwith be cancelled. No interest will be
paid or will accrue on the cash payable upon the surrender of any Certificate.
If payment is to be made to a person other than the person in whose name the
Certificate so surrendered is registered, it shall be a condition of payment
that such Certificate shall be properly endorsed or otherwise in proper form for
transfer and that 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 3.2, each Certificate 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 of Company Common Stock theretofore represented by such Certificate shall
have been converted pursuant to Section 3.1. Notwithstanding the foregoing,
-----------
neither the Paying Agent nor any party shall be liable to a former shareholder
of the Company for any cash or interest delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws. Any portion of the
Payment Fund (including the proceeds of any investments thereof) that remains
unclaimed by the shareholders of the Company for at least two years after the
Effective Time shall be repaid to the Surviving Corporation. Any holders of
shares of Company Common Stock who have not theretofore complied with Section
3.1 shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration, but will have no greater rights against the Surviving
Corporation (or any of the parties hereto) than may be accorded to general
creditors thereof under applicable law.
Section 3.3 No Further Ownership Rights in Company Common Stock. All cash
---------------------------------------------------
paid upon the surrender of Certificates in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock theretofore represented by such
Certificates.
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<PAGE>
Section 3.4 Closing of Company Transfer Books. At the Effective Time, the
---------------------------------
stock transfer books of the Company shall be closed and no registration of
transfers of shares of Company Common Stock shall thereafter be made on the
stock transfer books of the Surviving Corporation. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged as provided in this Article III.
-----------
Section 3.5 Withholding. The Surviving Corporation or the Paying Agent
-----------
will be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Surviving Corporation or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any applicable provision of
----
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation or the Paying Agent, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or the Paying Agent.
Section 3.6 Dissenting Company Common Stock. If required by the MBCA, but
-------------------------------
only to the extent required thereby, shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time and that are held
by holders of such shares who have properly exercised dissenters' rights with
respect thereto in accordance with Sections 302A.471 and 302A.473 of the MBCA
(the "Dissenting Company Common Stock") will not be converted into or
-------------------------------
exchangeable for the right to receive the Merger Consideration, and holders of
such shares of Dissenting Company Common Stock will be entitled to receive
payment of the appraised value of such shares of Dissenting Company Common Stock
in accordance with the provisions of such Section 302A.473 unless and until such
holders fail to perfect or effectively withdraw or lose their rights to payment
under Section 302A.473 of the MBCA. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of Dissenting Company Common Stock will thereupon be treated as if they
had been converted into and become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without interest. The Company will
give Parent prompt written notice of any notice of intent to demand payment of
the fair value of Company Common Stock under Section 302A.473 of the MCBA
received by the Company and, prior to the Effective Time, Parent and Sub will
have the right to direct all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company will not, except with the
prior written consent of Parent and Sub, make any payments with respect to, or
settle or offer to settle, any such demands.
Section 3.7 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
-10-
<PAGE>
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 subject to such other conditions as the Board of
Directors of the Surviving Corporation may impose, the Surviving Corporation
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof as determined in accordance
herewith. When authorizing such issue of the Merger Consideration in exchange
therefor, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Surviving
Corporation a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
Section 3.8 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 in the Merger, all such deeds,
bills of sale, assignments and assurances and do, in the name and on behalf of
such Constituent Corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization.
------------
(a) Each of the Company and each of its Subsidiaries is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite corporate or partnership power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing or in good standing or to have such
power and authority would not, individually or in the
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<PAGE>
aggregate, have a material adverse effect on the Company or on the ability of
the Company to perform its obligations under this Agreement. Each of the
Company and each of its Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except as disclosed in Section 4.1 of
the Company Disclosure Letter and except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a material adverse effect on the Company or on the ability of
the Company to perform its obligations under this Agreement.
(b) The Company has heretofore made available to Parent a complete and
correct copy of the charter and by-laws or comparable organization documents,
each as amended to date, of the Company and each of its Subsidiaries. Such
charters, by-laws and comparable organizational documents are in full force and
effect. Neither the Company nor any Subsidiary of the Company is in violation
of any provision of its charter, by-laws or comparable organizational documents.
Section 4.2 Capitalization.
--------------
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of (i) 10,000,000 shares of Company Common Stock of which, as
of May 27, 1995, 7,564,895 shares were issued and outstanding, (ii) 75,000
shares of Class A Preferred Stock, of which, as of the date hereof, none were
issued or outstanding, (iii) 125,000 shares of Class B Preferred Stock, of
which, as of the date hereof, none were issued or outstanding and (iv) 125,000
shares of Class C Preferred Stock, of which, as of the date hereof, none were
issued or outstanding. No shares of capital stock of the Company have been
acquired by the Company that are subject to outstanding pledges to secure the
future payment of the purchase price therefor. As of May 27, 1995, the Company
had reserved for issuance (i) 56,000 shares of Company Common Stock upon
exercise of then outstanding options under the Company's now expired 1983
Incentive Stock Option Plan (as amended, the "Company Option Plan"), all of
-------------------
which options are exercisable at $8.38 per share, (ii) 25,954 shares of Company
Common Stock upon exercise of then outstanding options issued under a stock
option plan of Acsist Associates Inc. ("Acsist") prior to the Company's
acquisition thereof (the "Acsist Plan") or warrants issued by Acsist, 5,018 of
which are exercisable at $16.64 per share and 20,936 of which are exercisable at
$24.96 per share, and (iii) 326,000 shares of Company Common Stock in respect of
the Company's 1990 Restricted Stock Plan (the "Company Restricted Stock Plan"),
-----------------------------
with respect to all of which shares the restrictions, conditions and limitations
set forth in Section 7 thereof will lapse, upon the Closing of the Offer. Since
May 27, 1995, the Company has not issued any shares of its capital stock, except
for the issuance of Company Common Stock upon the exercise of options granted
under the Company Option Plan which were outstanding on May 27, 1995, and
pursuant to the Company
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<PAGE>
Restricted Stock Plan, and has not repurchased, redeemed or otherwise retired
any shares of its capital stock. All the outstanding shares of the Company's
capital stock are, and all shares which may be issued pursuant to the Company
Option Plan and the Company Restricted Stock Plan will be, when issued and paid
for in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to any preemptive rights of
third parties in respect thereto.
(b) Each of the outstanding shares of capital stock of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid,
nonassessable and free of any preemptive rights in respect thereto, and all such
shares are owned by the Company or by a Subsidiary of the Company free and clear
of any lien, claim, option, charge, security interest, limitation on voting
rights or encumbrance of any kind (collectively, "Liens"). Except for the
-----
capital stock of its Subsidiaries described in Section 4.2 of the disclosure
letter dated the date hereof from the Company to Parent (the "Company Disclosure
------------------
Letter"), the Company does not own, directly or indirectly, any capital stock or
------
other ownership interest in any corporation, partnership, trust, limited
liability company or other entity.
(c) As of the date of this Agreement, (i) no bonds, debentures, notes or
other indebtedness having the right to vote under ordinary circumstances (or
convertible into securities having such right to vote) ("Voting Debt") of the
-----------
Company or any of its Subsidiaries are issued or outstanding, (ii) except as set
forth above, there are no existing options, warrants, calls, subscriptions or
other rights or other agreements or commitments of any character (collectively,
"Warrants") relating to the issued or unissued capital stock or Voting Debt of
--------
the Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interests
in, the Company or of any of its Subsidiaries or securities convertible into or
exchangeable for such shares, Voting Debt or equity interests or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
Warrant, and (iii) there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its Subsidiaries or any
Warrants.
Section 4.3 Authority. The Company has the requisite power and authority
---------
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby, subject to, with respect to the Merger, the approval and
adoption of this Agreement and the Merger by the affirmative vote of the holders
of Company Common Stock entitled to cast at least 51% of the total number of
votes entitled to be cast by holders of Company Common Stock. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the Merger and of the other transactions contemplated hereby
have been duly authorized by all
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<PAGE>
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated, other than, with respect to
the Merger, the approval and adoption of this Agreement and the Merger by the
Company's shareholders as described in the preceding sentence. 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, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.4 Consents and Approvals; No Violations.
-------------------------------------
(a) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, arbitral tribunal, administrative agency
or commission or other governmental or regulatory authority or agency, domestic
or foreign (a "Governmental Entity"), or compliance with any law, statute,
-------------------
ordinance, rule or regulation that conditions, restricts, prohibits or requires
any notification or disclosure, triggered by the transfer, sale, lease or
closure of any property, is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Merger or the other
transactions contemplated hereby, except for (i) the filing of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing
-------
with the SEC of the Schedule 14D-9 and if required by applicable law, the
Company Proxy Statement (as defined in Section 4.6), and such reports as may be
-----------
required by Section 13(a) of the Exchange Act in connection with this Agreement
and the transactions contemplated hereby, (iii) the filing of the Articles of
Merger with the Minnesota Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iv) the filing required by Chapter 80B of the Minnesota Statutes and
(v) such other consents, approvals, orders, authorization, registrations,
declarations or filings the failure to obtain or make which would not have a
material adverse effect on the Company or on the ability of the Company to
perform its obligations under this Agreement. Neither the execution, delivery
or performance of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or result in any violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or to loss of a material benefit) under, or result in the creation
of any Lien on any property or asset of the Company or any of its Subsidiaries
pursuant to (any such conflicts, violations, breaches, defaults, rights, or
creations of
-14-
<PAGE>
Liens are herein referred to, collectively, as "Violations"), any of the terms,
----------
conditions or provisions of (i) the articles of incorporation or by-laws or
comparable organizational documents of the Company or any of its Subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument, permit, concession, franchise
or obligation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets or (iii) any judgment, order, writ,
injunction, decree, law, statute, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries or their respective properties or assets,
except, in the case of clause (ii), for Violations that would not prevent the
consummation of the Offer or the Merger and would not in the aggregate have a
material adverse effect on the Company or on the ability of the Company to
perform its obligations under this Agreement.
(b) Except as disclosed in the Company SEC Documents (as defined in
Section 4.5) filed prior to the date of this Agreement, neither the Company nor
-----------
any of its Subsidiaries is in default under or in violation of (i) any judgment,
order, writ, injunction, decree, law, statute, ordinance, rule or regulation of
any Governmental Entity applicable to the Company or any of its Subsidiaries or
by which any of them or any of their properties or assets may be bound or (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or affected, except in each case for any such
defaults or violations which would not in the aggregate have a material adverse
effect on the Company or on the ability of the Company to perform its
obligations under this Agreement.
Section 4.5 SEC Reports and Financial Statements. Since January 1, 1992,
------------------------------------
the Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it under the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), and has heretofore
--------------
made available to Parent true and complete copies of all such forms, reports,
schedules, statements and documents (as they have been amended or supplemented
since the time of their filing and including all such forms, reports, schedules,
statements and documents filed with the SEC after the date of this Agreement,
collectively, the "Company SEC Documents"). The Company SEC Documents,
---------------------
including without limitation any financial statements or schedules included or
incorporated by reference therein, (i) did not at the time they were filed, or
will not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied or will be prepared in
compliance in all material respects with the applicable requirements of the
Exchange Act or the Securities Act, as the case may be, and the applicable rules
and regulations thereunder, except that no representation
-15-
<PAGE>
is made by the Company with respect to information provided by Parent or Sub for
inclusion in Company SEC Documents filed after the date hereof. The financial
statements of the Company included or incorporated by reference in the Company
SEC Documents comply or will be prepared in compliance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been or will be prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, to normal year-end
audit adjustments) and fairly present or will fairly present (subject, in the
case of the unaudited statements, to normal year-end audit adjustments) the
consolidated financial position of the Company and its Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended. Except as disclosed in the Company Disclosure
Letter, and except as reflected, reserved against or otherwise disclosed in the
financial statements of the Company included in the Company SEC Documents or as
otherwise disclosed in the Company SEC Documents, in each case filed prior to
the date of this Agreement, neither the Company nor any of its Subsidiaries has
any liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) material to the Company and its Subsidiaries, other than liabilities
incurred in the ordinary course of business consistent with past practice. The
amounts that would appear on the Company's consolidated balance sheet as of the
date of this Agreement as "Long-term debt", including current portions, does not
exceed $300,000.
Section 4.6 Information in Disclosure Documents.
-----------------------------------
(a) Neither the Schedule 14D-9 nor the information statement to be filed by
the Company in connection with the Offer pursuant to Rule 14f-1 under the
Exchange Act (the "Information Statement") nor any of the information supplied
---------------------
by the Company or any of its Subsidiaries specifically for inclusion in the
Offer Documents will, at the respective times the Schedule 14D-9, the
Information Statement or the Offer Documents are filed with the SEC or are first
published, sent or given to shareholders, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information provided by
Parent or Sub for inclusion therein. The Schedule 14D-9 and the Information
Statement will comply as to form in all material respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations
thereunder.
(b) The proxy or information statement relating to any meeting of the
Company's shareholders that may be required to be held in connection with the
Merger (as it may be amended from time to time, the "Company Proxy Statement")
-----------------------
will not, at
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<PAGE>
the date mailed to the Company's shareholders and at the time of the meeting of
shareholders to be held in connection with the Merger, 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, except that no
representation is made by the Company with respect to information provided by
Parent or Sub for inclusion therein. The Company Proxy Statement will, when
filed with the SEC by the Company, comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.7 Litigation. Except as described in Section 4.7 of the Company
---------- -----------
Disclosure Letter, there is no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened, against the
Company or any of its Subsidiaries before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Company or a material adverse effect on the ability of the
Company to perform its obligations under this Agreement. Except as described in
Section 4.7 of the Company Disclosure Letter, neither the Company nor any of its
-----------
Subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Company or a material adverse effect on the ability of the
Company to perform its obligations under this Agreement.
Section 4.8 No Material Adverse Change. Except as disclosed in the
--------------------------
Company SEC Documents filed prior to the date of this Agreement and except as
disclosed in Section 4.8 of the Company Disclosure Letter, (i) since August 27,
-----------
1994, there has not been any action which would be prohibited under Section 6.1
-----------
were it to occur after the date of this Agreement or any material adverse change
with respect to the Company and its Subsidiaries and (ii) as of the date of this
Agreement, neither the Company nor any of its Subsidiaries has become a party to
any agreement or amendment to an existing agreement which would be required to
be filed by the Company as an exhibit to its next Annual Report on Form 10-K.
Section 4.9 Taxes.
-----
(a) Except as disclosed in Section 4.9 of the Company Disclosure Letter,
-----------
each of the Company and its Subsidiaries has duly filed all material Tax Returns
(as defined in Section 4.9(b)) required to be filed by it, all such Tax Returns
--------------
are complete and accurate in all material respects and disclose all material
Taxes (as defined in Section 4.9(b)) required to be paid by the Company and its
--------------
Subsidiaries, and the Company or its Subsidiaries has duly paid or caused to be
paid all Taxes shown to be due on such Tax Returns in respect of the periods
covered by such returns and has made provision adequate in all material respects
in the Company's financial statements for payment of all
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<PAGE>
Taxes anticipated to be payable in respect of all taxable periods or portions
thereof ending on or before the date hereof. No Tax Returns filed by the
Company or its Subsidiaries have been "examined" by the Internal Revenue Service
(the "IRS") or other appropriate taxing authority. Except as described in
---
Section 4.9 of the Company Disclosure Letter, no issue or claim has been
-----------
asserted in writing for Taxes by any taxing authority for any prior period (and
to the best of the Company's knowledge no basis exists therefor), the adverse
determination of which would result in a deficiency which would have a material
adverse effect on the Company, other than those heretofore paid or provided for
in the Company's financial statements. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Return of the Company or its Subsidiaries. There are no material liens for
Taxes upon the assets of the Company or any of its Subsidiaries except liens
relating to current Taxes not yet due. No transaction contemplated by this
Agreement is subject to withholding under Section 1445 of the Code and no stock
transfer Taxes, sales Taxes, use Taxes, real estate transfer Taxes, or other
similar Taxes will be imposed on Parent, Sub or the Company as a result of the
transactions contemplated by this Agreement under the laws of any jurisdiction
where the Company or any of its Subsidiaries does business. All Taxes which the
Company or any of its Subsidiaries have been required by law to withhold or to
collect for payment have been duly withheld or collected and paid to the
appropriate taxing authority, except where the failure to so withhold or collect
such Taxes would not have a material adverse effect on the Company. Neither the
Company nor any of its Subsidiaries is 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.
Except as set forth in Section 4.9 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries (i) has been a member of a group filing
consolidated returns for federal income tax purposes, or (ii) is a party to a
tax sharing or tax indemnity agreement or any other agreement of a similar
nature that remains in effect.
(b) For purposes of this Agreement, the term "Taxes" means all taxes,
-----
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, use, transfer, license,
payroll, employment, withholding, environmental, capital stock, ad valorem,
alternate or add-on minimum and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto. For purposes of this
Agreement, the term "Tax Return" means any report, return or other information
----------
or document required to be supplied to a taxing authority in connection with
Taxes.
Section 4.10 Benefit Plans. (a) With respect to any "employee benefit
------------- ----------------
plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act
----
of 1974, as amended ("ERISA")), maintained or contributed to by the Company or
any
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<PAGE>
entity treated as a single employer under Section 414 of the Code ("ERISA
Affiliates") with the Company or with respect to which the Company or any of its
ERISA Affiliates is required to make any payment and any deferred compensation,
stock option, bonus, vacation or other such compensation arrangement to which
the Company is required to make any payment (collectively referred to as the
"Company Benefit Plans"), the Company has made available to Sub a true and
correct copy of (i) the most recent annual report (Form 5500) filed with the
IRS, (ii) such Company Benefit Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Company Benefit Plan and (iv) the
most recent actuarial report or valuation relating to a Company Benefit Plan
subject to Title IV of ERISA. Each Company Benefit Plan (i) has been
administered in accordance with its terms in all material respects and (ii)
complies in form and has been administered in accordance with any and all
applicable state and federal laws, including ERISA and the Code, so as not to
give rise to any liability that would have a material adverse effect on the
Company and its Subsidiaries. Each Company Benefit Plan and each trust that is
intended to qualify under Section 401(a) and 501(a) of the Code is so qualified
or, if not so qualified, the failure to be so qualified would not have a
material adverse effect on the Company. Section 4.10 of the Company Disclosure
Letter sets forth a true and complete list of each material Company Benefit
Plan.
(b) All contributions and premiums required by law or by the terms of such
employee benefit plan or any agreement relating thereto have been timely made
(without regard to any waiver granted with respect thereto), except where the
failure to make such contributions and premiums would not have a material
adverse effect on the Company.
(c) With respect to the Company Benefit Plans, individually and in the
aggregate, no event has occurred, and neither the Company nor any of its ERISA
Affiliates has knowledge of any condition or set of circumstances in connection
with which the Company or any of its ERISA Affiliates is reasonably likely to be
subject to any liability that would have a material adverse effect on the
Company under ERISA, the Code or any other applicable law, including of any
"reportable event" (as defined in Section 4043(b) of ERISA) or any "prohibited
transaction" (as defined in Section 406 of ERISA and Section 4975(c) of the
Code).
(d) With respect to the Company Benefit Plans, individually and in the
aggregate, there has not occurred any "accumulated funding deficiency" (within
the meaning of Section 412 of the Code), neither the Company nor any of its
ERISA Affiliates has failed to make a payment required under Section 412 of the
Code before the applicable due date, and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of the Company or any of its ERISA Affiliates, which would
have a material adverse effect on the Company.
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<PAGE>
(e) There have been no violations of ERISA with respect to the filing of
applicable returns, reports, documents or notices regarding any of the Company
Benefit Plans with the Secretary of Labor or the Secretary of Treasury or the
furnishing of such notices or documents to the participants or beneficiaries of
the Company Benefit Plans which have not subsequently been resolved or corrected
which would have a material adverse effect on the Company and its Subsidiaries.
(f) To the Company's knowledge, there are no pending legal proceedings
which have been asserted or instituted against any Company Benefit Plan, the
assets of any such plan or the Company, or the plan administrator or fiduciary
of any Company Benefit Plan with respect to the operation of any such plan
(other than routine, uncontested benefit claims), and there are no facts or
circumstances which could form the basis for any such legal proceedings. To the
Company's knowledge, neither the Company nor any fiduciary of any plan which is
not a multiemployer plan has engaged in a nonexempt prohibited transaction
described in Section 406 of ERISA or 4975 of the Code.
(g) Each Company Benefit Plan complies in all material respects with all
applicable requirements of (i) the Age Discrimination in Employment Act of 1967,
as amended, and the regulations thereunder and (ii) Title VII of the Civil
Rights Act of 1964, as amended, and the regulations thereunder. Each group
medical plan sponsored by the Company materially complies with the health care
continuation provisions of COBRA and (ii) the Medicare Secondary Payor
Provisions of Section 1826(b) of the Social Security Act, and the regulations
promulgated thereunder.
(h) With respect to each Company Benefit Plan which is a multi-employer
plan (as described in Section 3(37) of ERISA), to the Company's knowledge, no
proceeding has been initiated to terminate any such plan with respect to which
the Company or any of its ERISA Affiliates has or has had an obligation to
contribute which would have a material adverse effect on the Company. Neither
the Company or any of its ERISA Affiliates has any material liability
outstanding on account of a "partial withdrawal" (within the meaning of Sections
4205 and 4203, respectively, of ERISA) from any Company Benefit Plan which is a
multi-employer plan and, to the Company's knowledge, no such liability has been
asserted and there are no events or circumstances which would have a material
adverse effect on the Company and its Subsidiaries. In the event that the
Company incurred a complete withdrawal under Section 4203 of ERISA, the
withdrawal liability arising under Section 4201 of ERISA with respect to each
Company Benefit Plan which is a multi-employer plan as a result thereof would
not have a material adverse effect on the Company.
(i) The Company has no liability under Sections 4063, 4064, 4069 or 4212(c)
of ERISA.
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<PAGE>
(j) The Company has no obligations under any of the Company Benefit
Plans to provide health or life insurance benefits to its prior employees (or
their beneficiaries or dependents) for periods after termination of employment,
except as specifically required by Part 6 of Title I of ERISA.
(k) Except as described in Section 4.10 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or bound
by any written, or to the Company's knowledge, oral:
(i) employee collective bargaining agreement, employment
agreement (other than employment agreements terminable by the Company or
any of its Subsidiaries without premium or penalty on notice of 30 days or
less under which the only monetary obligation of the Company or any of its
Subsidiaries is to make current wage or salary payments and provide current
fringe benefits), consulting, advisory or service agreement, deferred
compensation agreement, confidentiality agreement or covenant not to
compete;
(ii) contract or agreement with any officer, director or
employee (other than employment agreements disclosed in response to clause
(i) or excluded from the scope of clause (i)), agent, or attorney-in-fact
of the Company or any of its Subsidiaries; or
(iii) stock option, stock purchase, bonus or similar incentive
plan or agreement.
(l) Except as set forth in Section 4.10 of the Company Disclosure
Letter, the Company and each of its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations which relate to prices,
wages, hours, discrimination in employment and collective bargaining and to its
operations and each is liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing. The Company believes that its
and its Subsidiaries' relations with their employees are satisfactory. Neither
the Company nor any of its Subsidiaries are a party to, and none of such parties
are materially affected by or threatened with, any dispute or controversy with a
union or with respect to unionization or collective bargaining involving its
employees. Neither the Company nor any of its Subsidiaries are materially
affected by any dispute or controversy with a union or with respect to
unionization or collective bargaining involving any supplier or customer.
Section 4.10 of the Company Disclosure Letter sets forth a description of any
union organizing or election activities involving any non-union employees of the
Company and its Subsidiaries which have occurred since August 27, 1994 or, to
the knowledge of the Company, are threatened as of the date hereof.
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<PAGE>
(m) None of the Offer, the Merger or any other transaction
contemplated by this Agreement will, whether by itself or as a result of any
subsequent termination of employment, result in the acceleration of entitlement
to, or the payment of, any benefit or compensation.
Section 4.11 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of Alex Brown, its financial advisor, to the effect that, as of
August 14, 1995, the consideration to be received in the Offer and the Merger,
taken as a whole, by the Company's shareholders is fair to the Company's
shareholders from a financial point of view, a copy of which opinion has been
delivered to Parent.
Section 4.12 Certain Antitakeover Provisions Not Applicable. The
----------------------------------------------
Board of Directors of the Company and the Special Committee have each approved
the Offer, the Merger and this Agreement, such Special Committee has been duly
constituted pursuant to Section 302A.673 of the MBCA and consists only of
disinterested directors as defined therein and such approval by the Special
Committee is sufficient to render inapplicable to this Agreement, the Merger and
to the other transactions contemplated by this Agreement the restrictions on
business combinations (as defined in Section 302A.011 of the MBCA) contained in
Section 302A.673 of the MBCA. Pursuant to Article 13 of the Company's Articles
of Incorporation, Section 302A.671 of the MBCA is not applicable to the Offer,
the Merger or the other transactions contemplated by this Agreement. Other than
Chapter 80B of the Minnesota Statutes, no other state takeover statute or
similar statute or regulation in any jurisdiction in which the Company or any of
its Subsidiaries does business, applies or purports to apply to the Offer, the
Merger or to this Agreement, or any of the transactions contemplated hereby or
thereby.
Section 4.13 Intellectual Property. Section 4.13 of the Company
--------------------- ------------
Disclosure Letter contains a correct and complete list of all patents,
trademarks, trade names, copyright registrations, mask work registrations and
applications therefor now or heretofore used or presently proposed to be used in
the conduct of the businesses of the Company and its Subsidiaries, excluding
computer software which is widely available. Except as set forth in
Section 4.13 of the Company Disclosure Letter, (i) the Company and its
------------
Subsidiaries own or possess adequate licenses or other valid rights to use
(without the making of any payment to others or the obligation to grant rights
to others in exchange) all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyright registrations, know-how and other
proprietary information ("Rights") necessary to the conduct of their business as
presently being conducted, except where the failure to have such licenses or
rights would not have a material adverse effect on the Company; (ii) neither the
Company nor any of its Subsidiaries has licensed any Rights to any third party;
(iii) the validity of such items and the title thereto of the Company and its
Subsidiaries has not been questioned in any litigation to which the Company or
any of its Subsidiaries is a party, nor is any such litigation threatened; nor
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<PAGE>
have any claims to such effect been made to the Company or any of its
Subsidiaries; (iv) the conduct of the business of the Company and its
Subsidiaries as now conducted does not and will not conflict with Rights of
others in any way which has a material adverse effect on the Company and (v) no
proceedings are pending against the Company or any of its Subsidiaries nor, to
the Company's knowledge, are any proceedings threatened against the Company or
any of its Subsidiaries alleging any violation of Rights of any third party.
The Company does not know of (x) any use that has heretofore been or is now
being made of any Rights owned by the Company or any of its Subsidiaries, except
by the Company or any of its Subsidiaries or by an entity duly licensed by it to
use the same under an agreement described in Section 4.13 of the Company
------------
Disclosure Letter or (y) any material infringement of any Right owned by or
licensed by or to the Company. All Rights heretofore owned or held by any
employee or officer of the Company or any of its Subsidiaries and used in the
business of the Company or any of its Subsidiaries in any manner have been duly
and effectively transferred to the Company or such Subsidiary. The consummation
of the Merger and the transactions contemplated hereby will not alter or impair
the rights and interests of the Company in any of the items listed in
Section 4.13 of the Company Disclosure Letter, and the Surviving Corporation
------------
will have the same rights and interests in such items as the Company will have
immediately prior to the Effective Time.
Section 4.14 Government Contracting Matters.
------------------------------
(a) Except as set forth in Section 4.14 of the Company Disclosure
Letter, the Company has complied with all material terms and conditions of all
Government Contracts, including all clauses, provisions and requirements
incorporated by reference or by operation of law therein. For the purposes of
this Agreement, "Government Contract" means any bid, quotation, proposal,
-------------------
contract, agreement, work authorization, lease, commitment or sale or purchase
order of the Company or any of its Subsidiaries that is with the United States
Government or any agency or instrumentality of the United States Government,
including all contracts and work authorizations to supply goods and services to
the United States Government and including contracts that are first-tier
subcontracts on United States Government prime contracts.
(b) Except as set forth in Section 4.14 of the Company Disclosure
Letter, the Company has complied with all applicable requirements of all laws,
regulations or agreements pertaining to Government Contracts. Neither the
United States Government, nor any United States Government agency or
instrumentality, nor any prime contractor, subcontractor or other person has
notified the Company or any of its Subsidiaries that the Company or any of its
Subsidiaries has breached or violated any law, regulation, certification,
representation, clause, provision or requirement pertaining to a Government
Contract.
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<PAGE>
(c) Except for the investigation of the Company by the Defense
Criminal Investigation Service of the United States Department of Defense that
the Company first received notice of in June 1995, including the related search
warrant and subpoena received by the Company prior to the date hereof (the "DCIS
----
Investigation"), there is no action, suit, proceeding or, to the Company's
-------------
knowledge, investigation relating to any proposed suspension or debarment of the
Company or any of its Subsidiaries or any of their respective directors,
officers, employees or agents from doing business with the United States (or any
agency or instrumentality thereof). Neither the Company nor any of its
Subsidiaries, nor any of their respective directors, officers, or employees is
(or during the last five years has been) suspended, proposed for debarment, or
debarred from doing business with the United States (or any agency or
instrumentality thereof) or is (or during such period was) the subject of a
finding of nonresponsibility or ineligibility for United States Government
contracting.
(d) Except in connection with the DCIS Investigation, (i) to the best
of the Company's knowledge, after diligent inquiry, none of the Company's or any
of its Subsidiaries' respective directors, officers, employees, consultants or
agents is (or during the last five years has been) under administrative, civil,
or criminal investigation, indictment or information by any governmental
authority with respect to any material alleged irregularity, misstatement or
omission arising under or relating to any Government Contract. Neither the
Company nor any of its Subsidiaries has any knowledge or, other than the
existence of the DCIS Investigation, any reason to know of any material
irregularity, misstatement or omission arising under or relating to any
Government Contract that has led or could reasonably lead, either before or
after the Closing Date, to any of the consequences set forth in Section 4.14(c)
---------------
or to any other material damage, penalty, assessment, recoupment of payment or
disallowance of cost.
(e) Except as set forth in Section 4.14 of the Company Disclosure
Letter, there exist (i) no outstanding material claims against the Company or
any of its Subsidiaries, either by the United States Government or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (ii) no material disputes between the
Company and the United States Government, or any prime contractor,
subcontractor, vendor or other third party, arising under or relating to any
Government Contract.
(f) Neither the Company nor any of its Subsidiaries has, nor are any
of them in the conduct of their respective businesses required to have, any
facility security clearance or personnel security clearance or other security
clearance from the United States Government, and none of them have any access to
United States Government classified information in connection with any
Government Contract or otherwise.
(g) The Company has furnished Parent or Parent's attorneys with copies
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<PAGE>
of all material correspondence or written communication between the Company or
any of its Subsidiaries (or, to the knowledge of the Company, any of their
respective directors, officers or employees), on the one hand, and any agency or
instrumentality of the United States Government, including the Department of
Defense and the Office of the United States Attorney for the District of
Minnesota, on the other hand, concerning the DCIS Investigation.
Section 4.15 Votes Required. The affirmative vote of the holders of
--------------
at least 51% of the outstanding shares of Company Common Stock entitled to vote
with respect to the Merger, is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve the Merger, this
Agreement and the transactions contemplated hereby.
Section 4.16 Brokers. No broker, investment banker or other person,
-------
other than Alex Brown, the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder'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 the Company. A true, correct
and complete copy of the engagement letter or other agreement between the
Company and Alex Brown has been delivered to Sub.
Section 4.17 Certain Agreements. Except as set forth in Section 4.17
------------------
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any oral or written agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, 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 value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Except as described in Section 4.17 of the
Company Disclosure Letter, the transactions contemplated by this Agreement will
not constitute a "change of control" under, require the consent from or the
giving of notice to any third party pursuant to, or accelerate the vesting or
repurchase rights under, the terms, conditions or provisions of any loan or
credit agreement, note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound. There are no amounts payable by the Company to any officers
of the Company (in their capacity as officers) as a result of the transactions
contemplated by this Agreement and/or any subsequent employment termination.
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<PAGE>
Section 4.18 Environmental Compliance.
------------------------
(a) Except as set forth in the Company SEC Documents or otherwise
disclosed in Section 4.18 of the Company Disclosure Letter, to the knowledge of
the Company, there are no Environmental Liabilities (as defined below) of the
Company that have had or are likely to have a material adverse effect on the
Company.
(b) As used in this Agreement, "Environmental Laws" means any and all
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes in the indoor or outdoor environment, including without limitation
ambient air, surface water, ground water, land or interior of structures, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof,
"Environmental Liabilities" means any and all liabilities, losses, costs,
obligations, awards, fines, penalties, damages or expenses of or relating to the
Company or any of its Subsidiaries (including any entity which is, in whole or
in part, a predecessor of the Company or any of its Subsidiaries), whether
vested or unvested, contingent or fixed, actual or potential, known or unknown,
which arise under or relate to matters covered by Environmental Laws.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, including, without limitation, any substance
regulated under Environmental Laws.
Section 4.19 Contracts. Except as set forth in Section 4.19 of the
---------
Company Disclosure Letter or as filed as an exhibit to the Company SEC
Documents, neither the Company nor any of its Subsidiaries is a party to or
bound by:
(i) any contract for the purchase or sale of real property;
(ii) any contract (excluding individual purchase orders) for the
purchase of raw materials which involved the payment of more than $500,000
in 1994, which the Company reasonably anticipates will involve the payment
of more than $500,000 in 1995, or which extends beyond August 27, 1997;
(iii) any contract (excluding individual purchase orders) for the
sale of goods or services which involved the payment of more than $500,000
in 1994, which the Company reasonably anticipates will involve the payment
of more than
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<PAGE>
$500,000 in 1995 or which extends beyond August 27, 1997;
(iv) any contract for the purchase, licensing or development of
software to be used by the Company or any of its Subsidiaries (excluding
paid-up software licenses to widely available computer software programs);
(v) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract;
(vi) any guarantee of the obligations of customers, suppliers,
officers, directors, employees, affiliates or others;
(vii) any agreement which provides for, or relates to, the incurrence
by the Company or any of its Subsidiaries of debt for borrowed money in
excess of $300,000 (including, without limitation, 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 and/or foreign exchange risk
associated with its financing); or
(viii) any other contract, agreement, commitment, understanding or
instrument which is material to the Company or any of its Subsidiaries.
Section 4.20 New Directors. Each of the following directors of the
-------------
Company has submitted to the Company his written resignation, conditioned on and
effective as of the Closing of the Offer: Thomas F. Leahy; David C. Malmberg;
Stephen G. Shank; and William J. Cadogan. The Board of Directors of the Company
has appointed Geoff Wild, Donald J. Miller and D. McL. Miller, as directors of
the Company, conditioned on and effective as of the Closing of the Offer.
Copies of such resignations and such appointment have been furnished to Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 5.1 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 own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power and authority would not, individually or
in the aggregate, have a material adverse effect on
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<PAGE>
Parent and its Subsidiaries.
Section 5.2 Authority. Each of Parent and Sub has the requisite
---------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent (as a party hereto and as the
sole shareholder of Sub) and Sub and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of each of Parent and Sub. This
Agreement has been duly executed and delivered by each of Parent and Sub and
constitutes a valid and binding obligation of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 5.3 Consents and Approvals; No Violations. No consent,
-------------------------------------
approval, order or authorization of, or registration, declaration or filing
with, any 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
by Parent and Sub or the consummation by Parent and Sub of the Merger or the
other transactions contemplated hereby, except for (i) the filing of a premerger
notification and report form by Parent under the HSR Act, (ii) the filing with
the SEC by Parent and Sub of the Offer Documents and of such reports under
Sections 13 and 16(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (iii) the filing of the
Articles of Merger with the Minnesota Secretary of State and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (iv) such filings, approvals, orders, notices,
registrations, declarations and consents as may be required under any applicable
state takeover or similar laws, including Chapter 80B of the Minnesota Statutes,
and any applicable state environmental laws or laws with respect to the
ownership by a foreign entity of real property, (v) the filing of a notice as
required or deemed advisable pursuant to Section 721 of Title VII of the Defense
Production Act of 1950, as amended by the Omnibus Trade and Competitiveness Act
of 1988 (the "Exon-Florio Amendment") and (vi) such other consents, approvals,
---------------------
orders, authorizations, registrations, declarations or filings the failure to
obtain or make which would not have a material adverse effect on Parent or on
Parent's ability to perform its obligations under this Agreement. Neither the
execution, delivery or performance of this Agreement nor the consummation of the
transactions contemplated hereby will result in any Violation of any of the
terms, conditions or provisions of (i) the respective certificates of
incorporation or by-laws or comparable organizational documents of Parent or
Sub, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument, permit
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concession, franchise or obligation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets or (iii) any
judgment, order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or any of its Subsidiaries or their respective properties
or assets except, in the case of clause (ii), for Violations that would not
prevent or impair the consummation of the Merger in any respect and would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries or on the ability of Parent and Sub to perform their
obligations under this Agreement.
Section 5.4 Operations of Sub. Sub was organized 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 5.5 Information in Disclosure Documents.
-----------------------------------
(a) None of the Offer Documents or the information supplied by Parent
or Sub specifically for inclusion in the Schedule 14D-9 will, at the respective
times the Offer Documents (including any amendments or supplements thereto) or
the Schedule 14D-9 are filed with the SEC or are first published, sent or given
to shareholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) None of the information supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the Company Proxy Statement will, at
the date mailed to the Company's shareholders and at the time of the meeting of
shareholders, if required by applicable law to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 5.6 Financing. Parent and Sub collectively have (through
---------
existing credit facilities or otherwise) all the funds necessary to consummate
the Offer and the Merger and to pay all related fees and expenses.
Section 5.7 Brokers. No broker, investment banker or other person,
-------
other than Dillon Read & Co. and Baring Brothers Limited, the fees and expenses
of which will be paid by Parent and Sub, is entitled to any broker's, finder'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 and Sub.
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ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement or with the prior written consent of Sub, during the period
from the date of this Agreement to the Effective Time, the Company will, and
will cause each of its Subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its best efforts, and will cause each of its Subsidiaries to use its best
efforts, to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and any
others having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, the Company will not, and will not permit any of its Subsidiaries to,
prior to the Effective Time, without the prior written consent of Sub:
(a) adopt any amendment to its certificate of incorporation or by-laws
or comparable organizational documents;
(b) issue, reissue, sell or pledge or authorize or propose the
issuance, reissuance, sale or pledge of any of its capital stock of any class,
or securities convertible or exchangeable into capital stock of any class, or
any rights, warrants or options to acquire any convertible or exchangeable
securities or capital stock, other than the issuance of shares of Company Common
Stock upon the exercise of stock options outstanding on the date of this
Agreement under the Company Option Plan in accordance with their present terms;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock or otherwise make any payments to
its shareholders in their capacity as such, except that any wholly owned
Subsidiary of the Company may pay dividends and make distributions to the
Company or any of the Company's wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock;
(e) incur or assume any long-term debt or any short-term debt or
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any person, except
in the ordinary course
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of business consistent with past practice and in an aggregate amount not to
exceed $500,000;
(f) make any loans, advances (excluding the sale of products to
customers in the ordinary course) or capital contributions to, or investments
in, any person except in the ordinary course of business consistent with past
practice and in an aggregate amount not to exceed $500,000 for any single
borrower;
(g) settle or compromise any suit, proceeding or claim or threatened
suit, proceeding or claim;
(h) except for increases in salary, wages and benefits of employees of
the Company or its Subsidiaries (other than executive officers of the Company)
in accordance with past practice, increase the compensation or fringe benefits
payable or to become payable to its directors, officers or employees (whether
from the Company or any of its Subsidiaries), or pay any benefit not required by
any existing plan or arrangement (including the granting of, or waiver of
performance or other vesting criteria under, stock options, stock appreciation
rights, shares of restricted stock or deferred stock or performance units) or
grant any severance or termination pay to (except pursuant to existing
agreements or policies), or enter into any employment or severance agreement
with, any director, officer or employee of the Company or any of its
Subsidiaries or establish, adopt, enter into, terminate or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, welfare, deferred compensation,
employment, termination, severance or other employee benefit plan, agreement,
trust, fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees, except to the extent such termination
or amendment is required by applicable law;
(i) 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, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary course of
business and not material to the Company or any of its Subsidiaries;
(j) sell, lease, mortgage or otherwise encumber or dispose of or agree
to sell, lease, mortgage or otherwise encumber or dispose of, any of its assets,
other than transactions that are in the ordinary course of business and not
material to the Company or any of its Subsidiaries;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any Subsidiary;
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(l) knowingly violate or fail to perform any obligation or duty
imposed upon it or any Subsidiary by any applicable federal, state or local law,
rule, regulation, guideline or ordinance;
(m) (i) modify, amend or terminate any contract, (ii) waive, release,
relinquish or assign any contract (including any insurance policy) or other
right or claim, (iii) prepay any indebtedness of the Company or any of its
Subsidiaries or (iv) cancel or forgive any indebtedness owed to the Company or
its Subsidiaries, other than in each case in a manner in the ordinary course of
business consistent with past practice and which is not material to the business
of the Company and its Subsidiaries;
(n) make any tax election not required by law or settle or compromise
any tax liability;
(o) change any of the accounting principles or practices used by it
except as required by the SEC or the Financial Accounting Standards Board; or
(p) authorize, recommend, announce, propose or agree to take any of
the foregoing actions or any action which would make any representation or
warranty in this Agreement that is qualified as to materiality untrue or
incorrect or which would make any representation or warranty in this Agreement
that is not so qualified untrue or incorrect in any material respect.
Section 6.2 Reasonable Best Efforts. Upon the terms and subject to
-----------------------
the conditions of this Agreement, unless, to the extent permitted by
Section 6.7(b), the Board of Directors of the Company approves or recommends a
--------------
superior proposal, each of the parties hereto will use its reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or non-actions, waivers, consents and
approvals from 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 the HSR Act and the Exon-Florio Amendment),
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any claims, investigations, actions, lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, 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 (including any required supplemental
indentures) necessary to
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consummate the transactions contemplated by this Agreement. Each party will
promptly consult with the other with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby. In addition, if at any
time prior to the Effective Time any event or circumstance relating to any of
the Company, Parent or Sub or any of their respective Subsidiaries, or any of
their respective officers or directors, should be discovered by the Company,
Parent or Sub, as the case may be, and which should be set forth in an amendment
or supplement to the Offer Documents, the discovering party will promptly inform
the other party of such event or circumstance.
Section 6.3 Access to Information. Upon reasonable notice, the
---------------------
Company will afford to the officers, employees, accountants, counsel and other
representatives of Parent and Sub, access, during normal business hours during
the period prior to the Effective Time, to all its properties, facilities,
books, contracts, commitments and records and other information as reasonably
requested by such party and, during such period, the Company will (and will
cause each of its Subsidiaries to) furnish promptly to Parent and Sub (a) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of United States
federal securities laws or regulations and (b) all other information concerning
its business, properties and personnel as Parent or Sub may reasonably request.
The parties will hold any such information which is nonpublic in confidence in
accordance with the terms of the Confidentiality Agreement, dated as of
August 1, 1994, as amended on June 28, 1995, between Johnson Matthey Inc. and
the Company (the "Confidentiality Agreement"), and in the event of termination
-------------------------
of this Agreement for any reason each party will promptly comply with the terms
of the Confidentiality Agreement. The Company shall use its best efforts to keep
Parent fully informed with respect to the DCIS Investigation and shall consult
with Parent prior to taking any material action in connection with the DCIS
Investigation.
Section 6.4 Company Shareholders Meeting. (a) Subject to Section 6.4(d),
---------------------------- --------------
the Company will, at Parent's request, duly call a meeting of its shareholders
(the "Shareholders' Meeting") for the purpose of voting upon this Agreement
---------------------
(insofar as it relates to the Merger), the Merger and related matters and use
its best efforts duly to give notice of, convene and hold such Shareholders'
Meeting as soon as practicable following consummation of the Offer. The Company
will, through its Board of Directors, recommend to its shareholders approval and
adoption of this Agreement and approval of the Merger, except to the extent that
the Board of Directors of the Company shall have withdrawn its approval or
recommendation of this Agreement or the Merger as permitted by Section 6.7(b).
--------------
(b) Subject to Section 6.4(d), the Company will, at Parent's request,
--------------
as
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<PAGE>
soon as practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement with the SEC and will use its best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy Statement
to be mailed to the Company's shareholders. The Company will 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 approval of this Agreement
by the Company's shareholders there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company will
promptly notify Parent thereof and prepare and mail to its shareholders such an
amendment or supplement. The Company will not mail any Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects.
(c) At the Shareholder's Meeting, Parent, Sub and their affiliates
will vote all shares of Company Common Stock owned by them in favor of approval
and adoption of this Agreement and approval of the Merger.
(d) If at any time after the satisfaction or waiver of the conditions
set forth in Article VII (other than Section 7.1(b)), Parent and Sub own 90% or
--------------
more of the outstanding shares of Company Common Stock, then the provisions of
Sections 6.4 (a), (b) and (c) shall not apply and, as soon as practicable after
the satisfaction or waiver of the conditions set forth in Article VII (other
than Section 7.1(b)), the parties hereto will cause the Merger to be consummated
--------------
by filing the Articles of Merger with the Secretary of State of the State of
Minnesota in accordance with Sections 302A.621 and 302A.641 of the MBCA, and
make all other filings or recordings required by the MBCA in connection with the
Merger, including filing the notice to shareholders required by the MBCA in
connection with the Merger.
Section 6.5 Company Option Plan. (a) Subject to the next sentence,
-------------------
the Company shall use its best efforts to cause each holder of an outstanding
option (collectively, the "Employee Options") to purchase shares of Company
----------------
Common Stock granted under the Company Option Plan or under the Acsist Plan,
whether or not then exercisable, to agree in writing prior to the Effective Time
that (i) such holder shall be entitled to receive from the Company on the date
of the Closing of the Offer, in lieu of such Employee Option, an amount in cash
in respect of each share of Company Common Stock subject to such Employee Option
equal to the excess, if any, of the Merger Consideration over the per share
exercise price of such Employee Option (it being understood that if there is no
such excess with respect to any such Employee Option, such holder will not be
entitled to receive any cash, securities or other consideration with respect
thereto) and (ii) such Employee Option shall be cancelled concurrently
therewith.
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<PAGE>
Notwithstanding the foregoing, the Company shall use its best efforts to cause
each person subject to Section 16(b) of the Exchange Act to whom an Employee
Option was granted six months or less before the date of the Closing of the
Offer, whether or not then exercisable, to agree in writing prior to the date of
the Closing of the Offer (but effective as of and upon the date of the Closing
of the Offer) that (i) each such Employee Option shall be cancelled as of the
date of such agreement; (ii) no shares of Company Common Stock shall be issued
in respect thereof; and (iii) such person shall be entitled to receive from the
Company on the date (the "Option Payment Date") that is six months and one day
-------------------
following the date of grant of such option (but in no event earlier than the
Closing Date), in lieu of such Employee Option, a payment equal to the aggregate
amount of cash, if any, determined under the preceding sentence; provided that
--------
such person shall not be entitled to receive any such amount if prior to the
Option Payment Date such person (x) terminates his employment by the Surviving
Corporation or any of its Subsidiaries, otherwise than as a result of death or
disability or (y) is terminated by the Surviving Corporation or any of its
Subsidiaries for cause. All amounts payable pursuant to this Section 6.5(a)
--------------
shall be subject to any applicable withholding taxes and shall be paid without
interest.
(b) The Company shall use its best efforts to ensure that from and
after the Effective Time neither the Surviving Corporation nor any of its
Subsidiaries is or will be bound by any options, warrants, rights or agreements
which would entitle any person, other than Parent, Sub or their wholly owned
Subsidiaries, to beneficially own, or receive any payments (other than as
otherwise contemplated by Sections 3.1 and 3.6 and this Section 6.5) in respect
------------ --- -----------
of, any capital stock of the Company or the Surviving Corporation.
(c) The Company shall take all actions necessary, if any, to terminate
the Company Option Plan and the Acsist Plan effective as of the Effective Time.
Section 6.6 Company Benefit Plans. Parent presently intends that,
---------------------
for a period of one year following the Effective Time, the employees of the
Company will continue to be provided with employee benefits that are in the
aggregate not materially less favorable to such employees than those presently
provided under the Company's current benefit plans; provided that the right is
--------
reserved to review all employee benefit plans after the Effective Time and to
make such changes as are deemed appropriate in the judgment of Parent.
Section 6.7 No Solicitation. (a) The Company shall not, nor shall
---------------
it permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of or any investment banker, attorney or other
advisor or representative of the Company or any of its Subsidiaries to, (i)
solicit, initiate, or encourage the submission of, any takeover proposal, (ii)
enter into any agreement with respect to any takeover proposal
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<PAGE>
or (iii) 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; provided, however,
-------- -------
that prior to the acceptance for payment of shares of Company Common Stock
pursuant to the Offer, to the extent required by the fiduciary obligations of
the Board of Directors of the Company, as determined in good faith by a majority
of the disinterested members thereof based on the written advice of outside
counsel (a copy of which written advice shall be promptly furnished to Parent),
the Company may, in response to unsolicited requests therefor, participate in
discussions or negotiations with, or furnish information pursuant to an
appropriate confidentiality agreement to, any person. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director or other management employee of
the Company or any of its Subsidiaries or any investment banker, attorney or
other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or
otherwise, shall be deemed to be a breach of this paragraph by the Company. For
purposes of this Agreement, "takeover proposal" means any proposal, other than a
-----------------
proposal by Parent or any of its affiliates, for a merger, consolidation, share
exchange, business combination or other similar transaction involving the
Company or any of its Subsidiaries or any proposal or offer (including, without
limitation, any proposal or offer to shareholders of the Company), other than a
proposal or offer by Parent or any of its affiliates, to acquire in any manner,
directly or indirectly, an equity interest in the Company or any of its
Subsidiaries, any voting securities of the Company or any of its Subsidiaries or
a substantial portion of the assets of the Company or any of its Subsidiaries.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by the Board of
Directors of the Company or any such committee of the Offer, this Agreement or
the Merger or (ii) approve or recommend, or propose to approve or recommend, any
takeover proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent required by the fiduciary obligations thereof, as
determined in good faith by a majority of the disinterested members thereof
based on the written advice of outside counsel (a copy of which written advice
shall be promptly furnished to Parent), may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of the
Offer, this Agreement or the Merger) a superior proposal and the Company may
take such actions as are contemplated by Rule 14e-2(a) and Rule 14d-9
promulgated under the Exchange Act. For purposes of this Agreement, "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 statutory share
exchange, a sale of all or substantially all its assets or otherwise on terms
which a majority of the disinterested
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<PAGE>
members of the Board of Directors of the Company determines in its good faith
reasonable judgment (based on the advice of independent financial advisors) to
be more favorable to the Company and its shareholders than the Offer and the
Merger and for which financing, to the extent required, is then fully committed
or (based on the advice of independent financial advisors) is likely to be
obtained in a timely manner.
(c) The Company promptly shall advise Parent orally and in writing of
any takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal and the identity of the person making any such takeover
proposal or inquiry. The Company will keep Parent fully informed of the status
and details of any such takeover proposal or inquiry.
Section 6.8 Fees and Expenses. (a) Except as provided in
-----------------
paragraphs (b) and (c) of this Section 6.8, all fees and expenses incurred in
-----------
connection with the Offer, the Merger, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees or expenses,
whether or not the Offer or the Merger is consummated.
(b) The Company shall pay to Parent upon demand a fee of $2 million
(the "Termination Fee"), payable in same day funds, plus all Expenses (as
---------------
defined below), if:
(i) this Agreement is terminated pursuant to Section 8.1(b)(ii) as a
------------------
result of the failure of any condition set forth in paragraph (f)(ii), (g)
(but only if any member of the senior management of the Company was
personally involved in material misconduct discovered as a result of or in
connection with the DCIS Investigation), (h) (but only if the condition set
forth in such paragraph (h) was not satisfied on the date of this
Agreement) or (i) of Annex I; or
(ii) this Agreement is terminated pursuant to Section 8.1(c).
--------------
(c) If this Agreement is terminated pursuant to Section 8.1(b)(ii) as
------------------
a result of the failure of any condition set forth in paragraph (g) (but only
if, as a result of or in connection with the DCIS Investigation, there are
discovered any defects in the Company's products that are in excess of
historical levels and, in the aggregate (and after consideration of remedies
reasonably available to the United States in connection therewith), are
reasonably likely to have a material adverse effect on the Company) or (h) (but
only if the condition set forth in such paragraph (h) was satisfied on the date
of this Agreement) of Annex I (it being understood that in the event payment is
required under both paragraph (b)(i) and paragraph (c) of this Section 6.8,
-----------
payment shall be made pursuant to said paragraph (b)(i)), the Company shall,
whether or not the Termination Fee shall have been paid or shall be payable,
reimburse each of Parent and its affiliates
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<PAGE>
upon demand for all out-of-pocket fees and expenses incurred or paid by or on
behalf of Parent or any of its affiliates 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 counsel, investment banking firms,
accountants, experts and consultants to Parent or any of its affiliates and all
fees and expenses payable of banks, investment banking firms and other financial
institutions and their respective counsel, accountants or agents in connection
with arranging or providing financing (including underwriting fees in connection
with Parent's contemplated rights offering); provided that all such out-of-
pocket fees and expenses shall not exceed $3 million (collectively, the
"Expenses").
--------
(d) The Company acknowledges that the agreements contained in
paragraphs (b) and (c) of this Section 6.8 are an integral part of the
-----------
transactions contemplated by this Agreement, and that, without these agreements,
Parent and Sub would not enter into this Agreement; accordingly, if the Company
fails to pay promptly any amount due pursuant to this Section 6.8 and, in order
-----------
to obtain such payment, Parent or Sub commences a suit that results in a
judgment against the Company for any such amount, the Company shall pay to
Parent or Sub its costs and expenses (including attorneys' fees) in connection
with such suit, together with interest on the amount of the fee at the prime or
base rate of Bank of America NT&SA from the date such payment was due under this
Agreement.
Section 6.9 Notification of Certain Matters. Upon obtaining
-------------------------------
knowledge of any of the following, the Company will give prompt notice to Parent
and Sub, and Parent (or Sub, as the case may be) will give prompt notice to the
Company, of (a) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be reasonably likely to cause (i) any
representation or warranty contained in this Agreement that is qualified as to
materiality to be untrue or incorrect or any representation or warranty that is
not so qualified to be untrue or incorrect in any material respect or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in any material respect, (b) any failure of the Company,
Parent or Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder in any
material respect and (c) any change or event which has or is reasonably likely
to have a material adverse effect on the Company and its Subsidiaries or Parent
and its Subsidiaries, as the case may be; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 6.9 will not limit or otherwise affect
-----------
the remedies available hereunder to the party receiving such notice.
Section 6.10 Company Debt Agreements. The Company will (a) promptly
-----------------------
seek agreement, on terms reasonably acceptable to Sub, of the banks party to the
credit agreements of the Company or any of its Subsidiaries and the holders of
debt instruments
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<PAGE>
of the Company or any of its Subsidiaries (collectively, the "Company Debt") to
------------
amend such agreements and instruments to permit the execution by the Company of
this Agreement, and the purchase of shares of Company Common Stock pursuant to
the Offer, and the consummation of the Merger, and to provide that such actions
do not constitute an event permitting the banks or lenders which are parties
thereto to accelerate the amounts outstanding under such agreements and
instruments, and (b) in the event that such acceleration occurs prior to the
Merger, cooperate with Parent and Sub in arranging financing on terms reasonably
acceptable to Parent and Sub to finance any required repurchase or prepayment of
Company Debt.
Section 6.11 Public Announcements. The Company, Parent and Sub will
--------------------
consult with each other before issuing any press releases or otherwise making
any public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press releases or make any such public
statements prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or the NASDAQ National Market.
Section 6.12 State Takeover Laws. If any "fair price", "control
-------------------
share acquisition" or "business combination" statute or other takeover or tender
offer statute or regulation shall become applicable to the transactions
contemplated by this Agreement, Parent, Sub and the Company and their respective
Boards of Directors shall use their best efforts to grant such approvals and
take such actions as are necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to minimize the effects of such statute or regulation on the
transactions contemplated hereby.
Section 6.13 Indemnification.
---------------
(a) For six years from and after the Effective Time, Parent agrees,
to the extent permitted by law, to cause the Surviving Corporation to indemnify
and hold harmless all current officers and directors of the Company and of its
Subsidiaries to the same extent such persons are currently indemnified by the
Company pursuant to the Company's Articles of Incorporation and By-Laws for acts
or omissions occurring at or prior to the Effective Time.
(b) Parent shall cause the Surviving Corporation to maintain in effect
for not less than three years from the Effective Time the policies of the
directors and officers' liability and fiduciary insurance most recently
maintained by the Company; provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof so long
as such substitution does not result in gaps or lapses in
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coverage with respect to matters occurring prior to the Effective Time to the
extent available; provided further that Parent shall have no obligation under
this Section 6.13(b) to the extent that the cost of maintaining said policies
---------------
would be substantially higher than the current cost to the Company.
Section 6.14 Shareholder Litigation. Each of Parent and the Company
----------------------
shall use their best efforts to settle, and the Company shall give Parent the
opportunity to direct the defense, any shareholder litigation against the
Company and its directors relating to the transactions contemplated by this
Agreement; provided, however, that no such settlement shall be agreed to without
-------- -------
Parent's consent, which shall not be unreasonably withheld; and provided further
-------- -------
that no settlement requiring a payment by a director shall be agreed to without
such director's consent.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger. The respective obligations of the parties to effect the Merger are
------
subject to the satisfaction, on or prior to the Closing Date, of the following
condition:
(a) Offer. Sub shall have accepted for purchase and paid for shares
-----
of Company Common Stock pursuant to the Offer.
(b) Shareholder Approval. If required by applicable law, this
--------------------
Agreement (insofar as it relates to the Merger) and the Merger shall have been
approved and adopted by the requisite affirmative vote or consent of the holders
of the Company Common Stock in accordance with applicable law and the Company's
Articles of Incorporation.
(c) Other Approvals. All authorizations, consents, orders or
---------------
approvals of, or declarations or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, shall have occurred or shall have been obtained.
(d) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing or
impairing the consummation of the Merger in any material respect shall be in
effect on the Closing Date.
(e) No Action. No action, suit or proceeding (other than the DCIS
---------
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<PAGE>
Investigation) by any Governmental Entity before any court or governmental or
regulatory authority shall be pending or threatened on the Closing Date against
the Company, Parent or Sub or any of their Subsidiaries challenging the validity
or legality of the transactions contemplated by this Agreement.
Section 7.2 Conditions to Obligations of Parent and Sub. The
-------------------------------------------
respective obligations of Parent and Sub to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following condition:
(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 each of the representations and warranties of the Company
contained in this Agreement that are qualified by materiality shall be true and
correct and each of the representations and warranties that is not so qualified
shall be true and correct in all material respects, in each case, on and as of
the Effective Time as if made on and as of such date, and Parent and Sub shall
have received a certificate of the Company, signed by the President of the
Company, to that effect.
(b) Third Party Consents. All required authorizations, consents or
--------------------
approvals of any third party, the failure to obtain which would have a material
adverse effect on Parent, Sub and their Subsidiaries or the Company and its
Subsidiaries (assuming the Merger had taken place) shall have been obtained.
(c) Tax Statement. The Company shall have delivered to Parent a duly
-------------
executed and valid statement in the form prescribed by Treasury Regulation
(S) 1.897-2(h) to the effect that the Company Common Stock does not constitute a
"United States real property interest" within the meaning of Section 897(c)(1)
of the Code.
(d) Stock Option Plan. All Employee Options shall have been exercised
-----------------
or cancelled prior to the Effective Time as contemplated by Section 6.5.
-----------
(e) DCIS Investigation. After August 14, 1995, there shall have been,
------------------
in the reasonable judgment of Parent, no change or development or prospective
change or development in the DCIS Investigation or the circumstances surrounding
the DCIS Investigation that could reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole. For
greater certainty, such a change or development shall be deemed to include the
following: (i) any proceeding commenced by any Governmental Entity for the
suspension or debarment of the Company or any of its Subsidiaries from doing
business with the United States (or any agency or instrumentality thereof); (ii)
any withdrawal of any governmental approval of the quality control or quality
assurance systems of the Company or any of its Subsidiaries or any removal of
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the Company or any of its Subsidiaries from any governmental "qualified products
list"; (iii) any notification of the Company or any of its Subsidiaries that any
of them is a target or subject of a criminal investigation; (iv) any indictment
of the Company or any of its Subsidiaries or of any of their respective
directors or officers; (v) the discovery of substantial evidence that any member
of the senior management of the Company was involved personally in material
misconduct or that there exists defects in the products of the Company or of any
of its Subsidiaries, which defects are in excess of historical levels and, in
the aggregate (and after consideration of remedies reasonably available to the
United States in connection therewith), are reasonably likely to have a material
adverse effect on the Company; or (vi) any civil action, suit or proceeding
commenced by any Governmental Entity seeking legal or equitable relief.
Section 7.3 Conditions to Obligations of the Company. The
----------------------------------------
obligation of the Company to effect the Merger is subject to the satisfaction,
on or prior to the Closing Date, of the following conditions:
(a) Performance of Obligations; Representations and Warranties. Each
----------------------------------------------------------
of Parent and Sub 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 each of the representations and warranties of Parent and
Sub contained in this Agreement that is qualified by materiality shall be true
and correct and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects, in each case, on
and as of the Effective Time as if made on and as of such date, and the Company
shall have received a certificate of Sub, signed by the President of Sub, to
that effect.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval of any
matters presented in connection with the Merger by the shareholders of the
Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company if:
(i) any required approval of the Merger by the shareholders of the
Company shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of such shareholders
or at any adjournment thereof;
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<PAGE>
(ii) (x) as the result of the failure of any of the conditions set
forth in Annex I hereto, (A) Sub shall have failed to commence the Offer
within 30 days following the date hereof or (B) the Offer shall have
terminated or expired in accordance with its terms without Sub having
purchased any shares of Company Common Stock pursuant to the Offer or (y)
Sub shall not have purchased any shares of Company Common Stock pursuant to
the Offer within 90 days following the date hereof; provided, however, that
-------- -------
the passage of the period referred to in clause (y) shall be tolled for any
part thereof during which any party shall be subject to a nonfinal order,
decree or ruling or action restraining, enjoining or otherwise prohibiting
the purchase of shares of Company Common Stock pursuant to the Offer or the
consummation of the Merger; and provided further that the right to
-------- -------
terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be
------------------
available to (i) the Company in connection with the failure of the
condition set forth in paragraph (f) of Annex I or (ii) any party whose
failure to fulfill any of its obligations under this Agreement results in
the failure of any such condition;
(iii) the Merger shall not have been consummated on or before the
date nine months following the date hereof, unless the failure to
consummate the Merger is the result of a material breach of this Agreement
by the party seeking to terminate this Agreement; provided, however, that
-------- -------
the passage of such period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree or ruling or
action restraining, enjoining or otherwise prohibiting the Merger or the
calling or holding of a meeting of the shareholders of the Company called
to approve, inter alia, the Merger; or
----- ----
(iv) any court of competent jurisdiction or any governmental,
administrative or regulatory authority, agency or body shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the purchase of shares of Company
Common Stock pursuant to the Offer or the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
(c) by the Company if (i) to the extent permitted by Section 6.7(b),
--------------
the Board of Directors of the Company approves or recommends a superior
proposal and (ii) the Company has paid to Parent an amount in cash equal to the
sum of the Termination Fee plus all Expenses as provided by Section 6.8(b); or
--------------
(d) by Parent if Parent or Sub shall have received notice under (x)
the Exon-Florio Amendment that the Committee on Foreign Investment in the United
States ("CFIUS") has determined to investigate the Merger, any related
-----
transaction or Parent or Sub or (y) the HSR Act that the Federal Trade
Commission or the Antitrust Division of the Department of Justice has requested
additional information concerning the Offer, the
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<PAGE>
Merger, any related transaction or Parent or Sub, extending the applicable
waiting period under the HSR Act.
Section 8.2 Effect of Termination. In the event of termination of
---------------------
this Agreement by either the Company or Parent as provided in Section 8.1, this
-----------
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 4.16, Section 5.7, the penultimate sentence of Section
------------ ----------- -------
6.3, Section 6.8, this Section 8.2 and Article IX, and except to the extent that
--- ----------- ----------- ----------
such termination results from the material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations and Warranties. None of
---------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement will survive the Effective Time.
Section 9.2 Amendment. This Agreement may be amended by the
---------
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company, but, after any
such approval, no amendment will 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 9.3 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties hereto, by action taken or authorized by the respective Boards
of Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver will be valid only if set
forth in a written instrument signed on behalf of such party.
Section 9.4 Notices. All notices and other communications
-------
hereunder will be in writing and will be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as is specified by like notice):
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<PAGE>
(a) if to Sub to:
ACI Acquisition Corporation
In care of Johnson Matthey public limited company
460 East Swedesford Road
Wayne, Pennsylvania 19087-1880
Attention: D. McL. Miller
Vice President & General Counsel
Telecopy No.: (610) 971-3022
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: James G. Archer
Telecopy No.: (212) 906-2021
(b) if to Parent to:
Johnson Matthey public limited company
460 East Swedesford Road
Wayne, Pennsylvania 19087-1880
Attention: D. McL. Miller
Vice President & General Counsel
Telecopy No.: (610) 971-3022
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: James G. Archer
Telecopy No.: (212) 906-2021
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<PAGE>
(c) if to the Company, to:
Advance Circuits, Inc.
5929 Baker Road (Suite 470)
Minnetonka, Minnesota 55345
Attention: Chief Executive Officer
Telecopy No.: (612) 988-8727
with copies to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Timothy M. Heaney
Telecopy No.: (612) 347-7077
Section 9.5 Interpretation. When a reference is made in this Agreement
--------------
to a Section, such reference will be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and will 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 will be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, will be deemed
to refer to August 14, 1995. As used in this Agreement, any reference to any
event, change or effect being "material" or having a "material adverse effect"
on or with respect to an entity means such event, change or effect which is or
is reasonably likely to be materially adverse to the business, properties,
results of operations or financial condition of such entity and its Subsidiaries
taken as a whole. As used in this Agreement, any reference to the "knowledge" of
the Company shall refer to the actual knowledge of any of the executive officers
or directors of the Company (or, with respect to each plant or facility of the
Company and its Subsidiaries, the person primarily responsible for environmental
matters at such plant or facility), after reasonable investigation.
Section 9.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which will be considered one and the same agreement and
will become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
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<PAGE>
Agreement (including the documents and the instruments referred to herein) and
the Confidentiality Agreement (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof, and (b) other
than Section 6.13, are not intended to confer upon any person other than the
------------
parties hereto and thereto any rights or remedies hereunder or thereunder.
Section 9.8 Governing Law. This Agreement will be governed and
-------------
construed in accordance with the laws of the State of Minnesota applicable to
contracts made, executed, delivered and performed wholly within the State of
Minnesota, without regard to any applicable conflicts of law.
Section 9.9 Specific Performance. The parties hereto agree that if
--------------------
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties will be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 9.10 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 9.11 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement will not affect the validity or enforceability of
any other provisions hereof, which will remain in full force and effect.
Section 9.12 Parent Guarantee and No Solicitation Agreement.
----------------------------------------------
(a) Parent hereby irrevocably and unconditionally guarantees to the
Company the prompt and complete performance by Sub of each and every obligation
Sub may have under this Agreement. At the Company's discretion, Parent may be
joined in any action, suit or proceeding brought by the Company against Sub in
connection with this Agreement and Parent shall conclusively be bound by the
judgment in any action, suit or proceeding brought by the Company against Sub as
if Parent were a party thereto.
(b) For a period of one year from the date hereof, neither Parent nor
any of its affiliates shall, without the Company's consent, solicit the
employment of any person who, as of the date hereof, is a director, officer,
employee, independent sales agent or independent representative of the Company
or of any of its Subsidiaries;
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<PAGE>
provided that the provisions of this Section 9.12(b) shall terminate upon the
Closing of the Offer.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
JOHNSON MATTHEY PUBLIC LIMITED
COMPANY
By:/s/ David W. Morgan
--------------------------------
Name: David W. Morgan
Title: Finance Director, Materials Technology
Division
ACI ACQUISITION CORPORATION
By:/s/ D. McL. Miller
--------------------------------
Name: D. McL. Miller
Title: Secretary
ADVANCE CIRCUITS, INC.
By:/s/ Robert W. Heller
--------------------------------
Name: Robert W. Heller
Title: President and Chief Executive Officer
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<PAGE>
Annex I
Conditions to the Offer
-----------------------
Notwithstanding any other term or provision of the Offer or this
Agreement, Sub will 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 a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's offer),
to pay for any Company Common Stock tendered pursuant to the Offer and not
theretofore accepted for payment or paid for unless (1) there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares of Company Common Stock that would represent at least 51% of
the Fully Diluted Shares (the "Minimum Tender Condition"), (2) CFIUS shall have
------------------------
determined not to investigate the transactions contemplated by the Offer and the
Merger under the Exon-Florio Amendment, (3) any waiting period under the HSR Act
applicable to the purchase of Company Common Stock pursuant to the Offer shall
have expired or been terminated and (4) the Offer shall be effective under
Sections 80B.01 to 80B.13 of the Minnesota Statutes and no Governmental Entity
shall have claimed or ruled the provisions of Sections 302.671 and 302.673 of
the MBCA to be applicable to this Agreement, the Offer or the Merger. "Fully
Diluted Shares" means all outstanding securities entitled generally to vote in
the election of directors of the Company on a fully diluted basis, after giving
effect to the exercise or conversion of all options, rights and securities
exercisable or convertible into such voting securities. Furthermore,
notwithstanding any other term or provision of the Offer or this Agreement, Sub
will not be required to accept for payment or, subject as aforesaid, to pay for
any Company Common Stock not theretofore accepted for payment or paid for, and
may terminate or amend the Offer if, at any time on or after the date of this
Agreement, and before the acceptance of such Company Common Stock for payment or
the payment therefor, any of the following events or facts shall have occurred:
(a) there shall be threatened, instituted or pending any action,
proceeding or application by any Governmental Entity, or by any other
person, domestic or foreign, before any court or Governmental Entity
(which, if brought by such other person, has a reasonable likelihood of
success), (i)(A) challenging or seeking to, or which is reasonably likely
to, make illegal, delay or otherwise directly or indirectly restrain or
prohibit, or seeking to, or which is reasonably likely to, impose voting,
procedural, price or other requirements, in addition to those required by
Federal securities laws and the MBCA each as in effect on the date of the
Offer, in connection with the making of the Offer, the acceptance for
-1-
<PAGE>
payment of, or payment for, some of or all the shares of Company Common
Stock by Parent, Sub or any other affiliate of Parent or the consummation
by Parent, Sub or any other affiliate of Parent of the Merger, (B) seeking
to obtain material damages or otherwise directly or indirectly relating to
the transactions contemplated by the Offer or the Merger, (ii) seeking to
prohibit the ownership or operation by Parent, Sub or any other affiliate
of Parent of all or any portion of the business or assets of the Company
and its Subsidiaries or of Parent, Sub or any other affiliate of Parent or
to compel Parent, Sub or any other affiliate of Parent to dispose of or
hold separate all or any portion of the business or assets of the Company
or any of its Subsidiaries or of Parent, Sub or any other affiliate of
Parent or seeking to impose any limitation on the ability of Parent, Sub or
any other affiliate of Parent to conduct such business or own such assets,
(iii) seeking to impose or confirm limitations on the ability of Parent,
Sub or any other affiliate of Parent effectively to exercise full rights of
ownership of the Company Common Stock, including, without limitation, the
right to vote any Company Common Stock acquired or owned by Parent, Sub or
any other affiliate of Parent on all matters properly presented to the
Company's shareholders, (iv) seeking to require divestiture by Parent, Sub
or any other affiliate of Parent of any Company Common Stock, or (v)
otherwise directly or indirectly relating to the Offer or the Offer
Documents or which otherwise, in the sole good faith judgment of Sub, is
reasonably likely to materially adversely affect the Company or any of its
Subsidiaries or Parent, Sub or any other affiliate of Parent or the value
of the Company Common Stock;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, entered, enforced, promulgated, amended or issued with respect to,
or deemed applicable to, (i) Parent, Sub or any other affiliate of Parent
or the Company or any of its Subsidiaries or (ii) the Offer or the Merger
by any government, legislative body or court, domestic, foreign or
supranational, or Governmental Entity, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (vi) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that is reasonably likely to result in a material adverse
effect on the Company;
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States or on The International Stock Exchange of the United Kingdom
and the Republic of Ireland Limited, (ii) any extraordinary or material
adverse change in the financial
-2-
<PAGE>
markets or major stock exchange indices in the United States or abroad,
(iii) any change in the general political, market, economic or financial
conditions in the United States or United Kingdom that is reasonably likely
to have a material adverse effect upon the Company or Parent or the trading
in, or value of, the Company Common Stock, (iv) any material change in
United States or the United Kingdom currency exchange rates or a suspension
of, or limitation on, the markets therefor, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or in the United Kingdom, (vi) any limitation (whether or not
mandatory) by any government, domestic, foreign or supranational, or
Governmental Entity on, or other event that is reasonably likely to affect
the extension of credit by banks or other lending institutions in the
United States or the United Kingdom, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or the United Kingdom or (viii) in
the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof;
(e) any material approval, permit, authorization, favorable review or
consent of any Governmental Entity required in connection with the Offer
shall not have been obtained on terms satisfactory to Sub;
(f) (i) it shall have been publicly disclosed or Parent shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 25% of the outstanding shares of Company Common Stock has
been acquired by another person, entity or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) or (ii) (x) 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, (y) the Company shall have entered into any agreement
with respect to any takeover proposal or (z) the Board of Directors of the
Company or any committee thereof shall have resolved to do any of the
foregoing;
(g) there shall have been, in the reasonable judgment of Parent, any
change or development or prospective change or development in the DCIS
Investigation or the circumstances surrounding the DCIS Investigation that
could reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. For greater certainty, such
a change or development shall be deemed to include the following: (i) any
proceeding commenced by any Governmental Entity for the suspension or
debarment of the Company or any of its Subsidiaries from doing business
with the United States (or
-3-
<PAGE>
any agency or instrumentality thereof); (ii) any withdrawal of any
governmental approval of the quality control or quality assurance systems
of the Company or any of its Subsidiaries or any removal of the Company or
any of its Subsidiaries from any governmental "qualified products list";
(iii) any notification of the Company or any of its Subsidiaries that any
of them is a target or subject of a criminal investigation; (iv) any
indictment of the Company or any of its Subsidiaries or of any of their
respective directors or officers; (v) the discovery of substantial evidence
that any member of the senior management of the Company was involved
personally in material misconduct or that there exist defects in the
products of the Company or of any of its Subsidiaries, which defects are in
excess of historical levels and, in the aggregate (and after consideration
of remedies reasonably available to the United States in connection
therewith), are reasonably likely to have a material adverse effect on the
Company; or (vi) any civil action, suit or proceeding commenced by any
Governmental Entity seeking legal or equitable relief;
(h) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made as of such time;
(i) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(j) this Agreement shall have been terminated in accordance with its
terms or the Offer shall have been amended or terminated with the consent
of the Company;
which, in the good faith judgment of Sub, in any such case, and regardless of
the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent
and may be asserted by Sub regardless of the circumstances giving rise to any
such condition or may 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 will not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances will
not be deemed a waiver with respect to any other facts and circumstances and
each such right will be deemed an ongoing right that may be
-4-
<PAGE>
asserted at any time and from time to time. Any good faith determination by Sub
concerning the events described in this Annex I will be final and binding upon
all parties.
-5-
<PAGE>
EXHIBIT (C)(2)
[LOGO OF ALEX. BROWN & SONS INCORPORATED APPEARS HERE]
August 14, 1995
Advance Circuits, Inc.
5929 Baker Road, Suite 470
Minnetonka, MN 55345
Dear Sirs:
Advance Circuits, Inc. ("Target" or the "Company"), Johnson Matthey Public
Limited Corporation ("Buyer") and ACI Acquisition Corporation, a Minnesota
corporation and an indirect, wholly-owned subsidiary of Buyer (the "Merger
Sub"), have entered into an Agreement and Plan of Merger dated August 14, 1995
(the "Agreement"). Pursuant to the Agreement, the Merger Sub will commence a
tender offer to purchase all outstanding shares of the common stock, $.10 par
value per share (the "Common Stock"), of Target at a price of $22.50 per
share, net to the seller in cash. The Agreement also provides that following
such tender offer, Merger Sub will be merged with and into Target (the
"Merger"), and that each then outstanding share of Common Stock, other than
shares held by Buyer or the Company, will be converted into the right to
receive $22.50 in cash. You have requested our opinion as to whether the
consideration to be received by the holders of the Common Stock pursuant to
the Agreement is fair, from a financial point of view, to such holders.
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We will receive a fee for rendering our opinion to the Board
of Directors.
In connection with our opinion, we have reviewed the Agreement and certain
publicly available financial information concerning Target and certain
internal financial analyses and other information furnished to us by Target.
We have also held discussions with members of the senior management of Target
regarding the business and prospects of the Company. In addition, we have (i)
reviewed the reported price and trading activity for the Common Stock of
Target, (ii) compared certain financial and stock market information for
Target with similar information for certain other companies whose securities
are publicly traded, (iii) reviewed the financial terms of certain recent
business combinations which we deemed comparable in whole or in part and (iv)
performed such other studies and analyses and considered such other factors as
we deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information furnished to us or otherwise
reviewed by or discussed with us for purposes of this opinion. With respect to
the financial projections used in our analyses and the information relating to
the prospects of Target, we have assumed that such information reflects the
best currently available estimates and judgments of management of Target as to
the likely future financial performance of Target. In addition, we have not
made an independent evaluation or appraisal of the assets of Target, nor have
we been furnished with any such evaluation or appraisal. Our opinion is based
on market, economic and other conditions as they exist and can be evaluated as
of the date of this letter.
The opinion expressed herein is for the information of the Board of
Directors of the Company. This letter does not constitute a recommendation by
us to any stockholder of Target as to how such stockholder should vote with
respect to the Merger. We hereby consent, however, to the inclusion of this
opinion as an exhibit to any proxy or tender offer document distributed in
connection with this Merger. This letter should not be used for any other
purpose without our prior written consent.
ONE THIRTY-FIVE EAST BALTIMORE STREET, BALTIMORE, MARYLAND 21202
. TELEPHONE: 410-727-1700 . TELEX: 198186
<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the consideration to be received by the holders of the
Common Stock pursuant to the Agreement is fair, from a financial point of
view, to such holders.
Very truly yours,
Alex. Brown & Sons Incorporated
