<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
Fusion Systems Corporation
(Name of Subject Company)
ETN Acquisition Corp.
Eaton Corporation
(Bidders)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
361129109
(CUSIP number of class of securities)
Gerald L. Gherlein, Esq.
Eaton Corporation
Eaton Center
1111 Superior Avenue, N.E.
Cleveland, Ohio 44114
(216) 523-5000
(Name, address and telephone number of person authorized
to receive notices and communications on behalf of bidder)
Copies to:
Daniel A. Neff, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee**
$292,224,465 $58,445
* For purposes of calculating the filing fee only. Based upon 7,492,935
shares of Common Stock, par value $.01 per share, of Fusion Systems
Corporation outstanding on June 27, 1997.
** The fee, calculated in accordance with Rule 0-11(d) of the Securities
Exchange Act of 1934, is 1/50 of one percent of the aggregate Transaction
Valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and date of its filing.
Amount Previously Paid: None Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
<PAGE> 2
CUSIP No. 361129109 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ETN Acquisition Corp. 13-3954725
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
AF
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by
Each Reporting Person
- 0 -
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row (7) excludes
Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount
in Row (7)
- 0 -
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
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CUSIP No. 361129109 14D-1
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Eaton Corporation 34-0196300
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Sources of Funds
00
- --------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Ohio
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by
Each Reporting Person
- 0 -
- --------------------------------------------------------------------------------
8. Check if the Aggregate Amount in Row (7) excludes
Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount
in Row (7)
- 0 -
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
<PAGE> 4
This Schedule 14D-1 relates to the offer by ETN Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Eaton
Corporation, an Ohio corporation ("Parent"), to purchase all outstanding shares
of Common Stock, par value $.01 per share (the "Shares"), of Fusion Systems
Corporation, a Delaware corporation (the "Company"), and the associated
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of September 8, 1994, as amended as of April 19, 1995 and
June 30, 1997, between the Company and BankBoston, N.A. (formerly The First
National Bank of Boston), as Rights Agent (as the same may be amended, the
"Rights Agreement"), at a purchase price of $39.00 per Share (and associated
Right), net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"), which are annexed
to and filed with this Schedule 14D-1 as Exhibits (a)(1) and (a)(2),
respectively. This Schedule 14D-1 is being filed on behalf of the Purchaser and
Parent.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Fusion Systems Corporation. The
address of its principal executive offices is 7600 Standish Place, Rockville,
Maryland 20855.
(b) Reference is hereby made to the information set forth in the
"Introduction," Section 1 ("Terms of the Offer") and Section 11 ("Purpose of the
Offer; The Merger Agreement; Statutory Requirements; Appraisal Rights; Plans for
the Company; The Rights; The Contingent Rights") of the Offer to Purchase,
which is incorporated herein by reference.
(c) Reference is hereby made to the information set forth in Section 6
("Price Range of the Shares; Dividends") of the Offer to Purchase, which is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) Reference is hereby made to the information set forth in the
"Introduction," Section 9 ("Certain Information Concerning Parent and the
Purchaser") and Schedule I (Directors and Executive Officers of Parent and the
Purchaser) of the Offer to Purchase, which is incorporated herein by reference.
(e)-(f) During the last five years, neither Parent nor the Purchaser, nor,
to the best of their knowledge, any of
<PAGE> 5
their respective executive officers and directors listed in Schedule I
(Directors and Executive Officers of Parent and the Purchaser) of the Offer to
Purchase, which is incorporated herein by reference, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or State securities laws or finding any violation
of such laws.
(g) Reference is hereby made to the information set forth in Schedule I
(Directors and Executive Officers of Parent and the Purchaser) of the Offer to
Purchase, which is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) Reference is hereby made to the information set forth in the
"Introduction," Section 9 ("Certain Information Concerning Parent and the
Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company")
and Section 11 ("Purpose of the Offer; The Merger Agreement; Statutory
Requirements; Appraisal Rights; Plans for the Company; The Rights; The
Contingent Rights") of the Offer to Purchase, which is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is made to the information set forth in Section 12
("Source and Amount of Funds") of the Offer to Purchase, which is incorporated
herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) Reference is hereby made to the information set forth in the
"Introduction," Section 7 ("Possible Effects of the Offer on the Market for the
Shares; NASDAQ Quotation; Exchange Act Registration; Margin Regulations"),
Section 10 ("Background of the Offer; Contacts with the Company"), Section 11
("Purpose of the Offer; The Merger Agreement; Statutory Requirements; Appraisal
Rights; Plans for the Company; The
<PAGE> 6
Rights; The Contingent Rights") and Section 13 ("Dividends and Distributions")
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) Reference is hereby made to the information set forth in Section 9
("Certain Information Concerning Parent and the Purchaser") and Schedule I
(Directors and Executive Directors of Parent and the Purchaser) of the Offer
to Purchase, which is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
Reference is hereby made to the information set forth in the
"Introduction," Section 9 ("Certain Information Concerning Parent and the
Purchaser"), Section 10 ("Background of the Offer; Contacts with the Company"),
Section 11 ("Purpose of the Office; The Merger Agreement; Statutory
Requirements; Appraisal Rights; Plan for the Company; The Rights; The Contingent
Rights") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals")
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Reference is hereby made to the information set forth in Section 16
("Certain Fees and Expenses") of the Offer to Purchase, which is incorporated
herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Reference is hereby made to the information set forth in Section 9
("Certain Information Concerning Parent and the Purchaser") of the Offer to
Purchase, which is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Reference is hereby made to the information set forth in the
"Introduction," Section 10 ("Background of the Offer; Contacts with the
Company") and Section 11 ("Purpose of the Offer; The Merger Agreement; Statutory
Requirements; Appraisal Rights; Plans for the Company; The Rights; The
Contingent Rights") of the Offer to Purchase, which is incorporated herein by
reference.
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(b)-(c) Reference is hereby made to the information set forth in the
"Introduction," Section 11 ("Purpose of the Offer; The Merger Agreement;
Statutory Requirements; Appraisal Rights; Plans for the Company; The Rights; The
Contingent Rights") and Section 15 ("Certain Legal Matters; Required Regulatory
Approvals") of the Offer to Purchase, which is incorporated herein by reference.
(d) Reference is hereby made to the information set forth in Section 7
("Possible Effects of the Offer on the Market for the Shares; NASDAQ Quotation;
Exchange Act Registration; Margin Regulations") of the Offer to Purchase, which
is incorporated herein by reference.
(e) To the best knowledge of Parent and the Purchaser, no such proceedings
are pending or have been instituted.
(f) Reference is hereby made to the entire texts of the Offer to Purchase
and the related Letter of Transmittal, which are incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Offer to Purchase, dated July 7, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(4) -- Form of Letter to Clients for Use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) -- Press release issued by Parent on June 30, 1997.
(a)(8) -- Form of Summary Advertisement, dated July 7,
1997.
(c)(1) -- Confidentiality Agreement between Parent and the
Company, dated April 7, 1997.
(c)(2) - Letter agreement between Parent and the Company, dated
June 24, 1997.
<PAGE> 8
(c)(3) -- Agreement and Plan of Merger, dated as of June 30, 1997
by and among the Company, the Purchaser and Parent.
(c)(4) -- Executive Noncompetition Agreement, dated as of June
30, 1997, by and among Parent, John C.
Matthews and the Company.
(c)(5) -- Consulting and Noncompetition Agreement, dated as of
June 30, 1997, by and among Parent, Leslie S.
Levine and the Company.
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
<PAGE> 9
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Dated: July 7, 1997
EATON CORPORATION
By: /s/ Alexander M. Cutler
--------------------------------------
Name: Alexander M. Cutler
Title: President and Chief
Operating Officer
ETN ACQUISITION CORP.
By: /s/ Brian R. Bachman
--------------------------------------
Name: Brian R. Bachman
Title: President
<PAGE> 10
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
(a)(1) -- Offer to Purchase, dated July 7, 1997.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(4) -- Form of Letter to Clients for Use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(5) -- Notice of Guaranteed Delivery.
(a)(6) -- Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) -- Press release issued by Parent on June 30, 1997.
(a)(8) -- Form of Summary Advertisement, dated July 7,
1997.
(c)(1) -- Confidentiality Agreement between Parent and the
Company, dated April 7, 1997.
(c)(2) - Letter agreement between Parent and the Company, dated
June 24, 1997.
(c)(3) -- Agreement and Plan of Merger dated as of June 30,
1997 by and among the Company, the Purchaser and Parent.
(c)(4) -- Executive Noncompetition Agreement, dated as of June
30, 1997, by and among Parent, John C.
Matthews and the Company.
(c)(5) -- Consulting and Noncompetition Agreement, dated as of
June 30, 1997, by and among Parent, Leslie S.
Levine and the Company.
<PAGE> 11
(d) -- Not applicable.
(e) -- Not applicable.
(f) -- Not applicable.
<PAGE> 1
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
EATON CORPORATION
AT
$39.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 1, 1997, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER,
THE MERGER AND THE DISTRIBUTION OF THE CONTINGENT RIGHTS (AS SUCH TERMS ARE
DEFINED HEREIN), IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S STOCKHOLDERS.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SHARES REPRESENTING AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK OF
THE COMPANY ON A FULLY DILUTED BASIS BEING VALIDLY TENDERED PRIOR TO THE
EXPIRATION OF THE OFFER AND NOT PROPERLY WITHDRAWN. SEE SECTION 14.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) either should (a) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it together with the certificate(s)
representing tendered Shares and any other required documents to the Depositary
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in Section 3 or (b) request such stockholder's broker, dealer, commercial
bank, trust company or other nominee to effect such transaction. A stockholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such stockholder desires to tender such
Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or from brokers, dealers, commercial
banks and trust companies.
------------------------
The Information Agent for the Offer is:
MORROW & CO., INC.
July 7, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Introduction............................................................................ 1
1. Terms of the Offer.............................................................. 2
2. Acceptance for Payment and Payment.............................................. 3
3. Procedures for Accepting the Offer and Tendering Shares......................... 4
4. Withdrawal Rights............................................................... 7
5. Certain Tax Consequences........................................................ 8
6. Price Range of the Shares; Dividends............................................ 8
7. Possible Effects of the Offer on the Market for the Shares; NASDAQ Quotation;
Exchange Act Registration; Margin Regulations................................. 9
8. Certain Information Concerning the Company...................................... 10
9. Certain Information Concerning Parent and the Purchaser......................... 12
10. Background of the Offer; Contacts with the Company.............................. 14
11. Purpose of the Offer; The Merger Agreement; Statutory Requirements;
Appraisal Rights; Plans for the Company; The Rights; The Contingent Rights.... 16
12. Source and Amount of Funds...................................................... 34
13. Dividends and Distributions..................................................... 34
14. Certain Conditions of the Offer................................................. 35
15. Certain Legal Matters; Required Regulatory Approvals............................ 36
16. Certain Fees and Expenses....................................................... 39
17. Miscellaneous................................................................... 39
Schedule I -- Directors and Executive Officers of Parent and the Purchaser.............. I-1
</TABLE>
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EXHIBIT (A)(4)
To: All Holders of Shares of Common Stock of Fusion Systems Corporation:
INTRODUCTION
ETN Acquisition Corp. (the "Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Eaton Corporation, an Ohio corporation ("Parent"),
hereby offers to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of Fusion Systems Corporation, a Delaware corporation
(the "Company"), and the associated Preferred Share Purchase Rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of September 8,
1994, as amended as of April 19, 1995 and June 30, 1997, between the Company and
BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent
(as the same may be amended, the "Rights Agreement"), at a purchase price of
$39.00 per Share (and associated Right), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). Unless the context otherwise requires, all references
to Shares shall include the associated Rights.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of
Citibank, N.A., as Depositary (the "Depositary"), and Morrow & Co., Inc., as
Information Agent (the "Information Agent"), incurred in connection with the
Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER,
THE MERGER AND THE DISTRIBUTION OF THE CONTINGENT RIGHTS (AS SUCH TERMS ARE
DEFINED HEREIN), IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND
RECOMMENDS ACCEPTANCE OF THE OFFER BY THE COMPANY'S STOCKHOLDERS.
Salomon Brothers Inc ("Salomon Brothers"), the Company's financial advisor,
has delivered to the Board of Directors of the Company a written opinion dated
June 29, 1997 to the effect that, as of such date, the consideration to be
received by the holders of Shares (other than Parent or any of its affiliates)
pursuant to the Offer, the Merger and the Contingent Rights is fair to the
Company's stockholders from a financial point of view. A copy of such opinion is
included with the Company's Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders concurrently
herewith, and stockholders are urged to read the opinion in its entirety for a
description of the assumptions made, matters considered and limitations of the
review undertaken by Salomon Brothers.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF
THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS BEING VALIDLY
TENDERED PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) AND NOT PROPERLY
WITHDRAWN (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
TERMS AND CONDITIONS. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 1, 1997, UNLESS EXTENDED. SEE SECTIONS 1, 14, AND 15
BELOW.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of June 30, 1997 (the "Merger Agreement"), among the Company, the Purchaser
and Parent pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company (the "Merger"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"). In the Merger, each
outstanding Share (other than Shares held by Parent, the Purchaser or any
subsidiary of Parent or the Purchaser or in the treasury of the Company, which
will be cancelled with no payment being made with respect thereto, and other
than Shares, if any, held by stockholders who perfect their appraisal rights
under Delaware law ("Dissenting Shares")) will, by virtue of the Merger and
without any action by the holder thereof, be converted into the right to receive
$39.00 in cash (the "Merger Consideration"), payable to the holder thereof,
without interest thereon, upon the surrender of the certificate formerly
representing such Share. The Merger Agreement is more fully described in Section
11
<PAGE> 4
below. Certain federal income tax consequences of the sale of Shares pursuant to
the Offer and the Merger, as the case may be, are described in Section 5 below.
The Company's Restated Certificate of Incorporation and the Delaware
General Corporation Law (the "GCL") require the affirmative vote of holders of a
majority of the outstanding Shares to approve the Merger. As a result, if the
Minimum Condition and the other conditions to the Offer are satisfied and the
Offer is consummated, the Purchaser will own a sufficient number of Shares to
ensure that the Merger will be approved. Under the GCL, if after consummation of
the Offer the Purchaser owns at least 90% of the Shares then outstanding, the
Purchaser will be able to cause the Merger to occur without a vote of the
Company's stockholders. If, however, after consummation of the Offer, the
Purchaser owns less than 90% of the then outstanding Shares, a vote of the
Company's stockholders will be required under the GCL to approve the Merger, and
a significantly longer period of time will be required to effect the Merger. See
Section 11.
The Company has informed the Purchaser that, as of June 27, 1997, there
were 7,492,935 Shares issued and outstanding and 865,392 Shares reserved for
issuance upon the exercise of outstanding stock options ("Options") granted
under the Company's stock option or similar plans (the "Stock Plans").
On June 29, 1997, the Board of Directors of the Company declared a dividend
of Contingent Payment Rights (the "Contingent Rights") payable on September 23,
1997 with respect to Shares outstanding on July 25, 1997 (the "Record Date").
Contingent Rights will also be issued with respect to Shares issued between July
25, 1997 and the earlier of December 31, 1997 or the redemption date of the
Contingent Rights, upon exercise of Options issued under Stock Plans and
outstanding on the Record Date. THE OFFER IS NOT BEING MADE FOR THE CONTINGENT
RIGHTS. HOLDERS OF RECORD OF SHARES ON THE RECORD DATE WILL BE ENTITLED TO
RECEIVE THE CONTINGENT RIGHTS ON THE PAYMENT DATE OF SEPTEMBER 23, 1997 WHETHER
OR NOT THEIR SHARES ARE PURCHASED IN THE OFFER OR THE MERGER. See Section 11.
No appraisal rights are available in connection with the Offer; however,
stockholders may have appraisal rights in connection with the Merger regardless
of whether the Merger is consummated with or without a vote of the Company's
stockholders. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and thereby purchase all
Shares validly tendered on or prior to the Expiration Date and not withdrawn in
accordance with the procedures set forth in Section 4, as soon as practicable
after such Expiration Date; provided that, if all of the conditions to the Offer
are satisfied and more than 75% but less than 90% of the outstanding Shares on a
fully diluted basis (excluding Options which are not exercisable for 30 days)
have been validly tendered and not withdrawn in the Offer, the Purchaser
reserves the right, in its sole discretion, to extend the Offer from time to
time for up to a maximum of five additional business days in the aggregate for
all such extensions provided the Purchaser agrees to waive the conditions set
forth in paragraphs (b), (c), (f) and (h) of Section 14. The Offer shall remain
open until 12:00 midnight, New York City time, on Friday, August 1, 1997 (the
"Expiration Date"), unless and until the Purchaser shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the time and date at which the Offer, as so extended by the
Purchaser, shall expire. If, at any Expiration Date, the conditions to the Offer
described in Section 14 hereof shall not have been satisfied or waived, the
Purchaser reserves the right (but shall not be obligated) to extend the Offer
from time to time by giving oral or written notice to the Depositary. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer and subject to the right of a tendering stockholder to
withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), the Purchaser also expressly reserves the right,
in its sole discretion, at any time or from time to time, to
2
<PAGE> 5
(i) terminate the Offer if any condition referred to in Section 14 has not been
satisfied by any Expiration Date and return all tendered Shares; (ii) waive any
condition (except, without the prior written consent of the Company, the Minimum
Condition); or (iii) except as set forth in the Merger Agreement, otherwise
amend the Offer in any respect, in each case, by giving oral or written notice
of such termination, waiver or amendment to the Depositary. In the Merger
Agreement, the Purchaser has agreed that, without the prior written consent of
the Company, it will not (i) decrease the price per Share or change the form of
consideration payable in the Offer, (ii) decrease the number of Shares sought to
be purchased in the Offer, (iii) impose additional conditions to the Offer or
(iv) amend any other term of the Offer in any manner adverse to the holders of
Shares.
Any such extension, termination or amendment will be followed as promptly
as practicable by public announcement thereof, and such announcement in the case
of an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Purchaser may choose to make any public
announcement, subject to applicable law (including Rules 14d-4(c) and 14d-6(d)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service. The rights reserved by the Purchaser in
the preceding paragraph are in addition to the Purchaser's rights pursuant to
Section 14.
If the Purchaser makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality of the changes. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to stockholders, and, if material changes are
made with respect to information that approaches the significance of price and
the percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination and investor response. With respect
to a change in price, a minimum ten business day period from the date of such
change is generally required under applicable Commission rules and regulations
to allow for adequate dissemination to stockholders. For purposes of the Offer,
a "business day" means any day other than a Saturday, Sunday or a federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
As of the date of this Offer to Purchase, the Rights are evidenced by the
certificates representing Shares and do not trade separately. Accordingly, by
tendering a certificate representing Shares, a stockholder is automatically
tendering a similar number of associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate
certificates representing rights ("Rights Certificates") are issued,
stockholders will be required to tender one Right for each Share tendered in
order to effect a valid tender of such Share.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares and will be furnished by the Purchaser to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the securityholder lists or, if applicable, who are listed
as participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment, and
will pay for, all Shares validly tendered and not properly withdrawn (in
accordance with
3
<PAGE> 6
Section 4) prior to the Expiration Date promptly after the Expiration Date. See
Sections 1 and 14. In addition, subject to applicable rules of the Commission,
the Purchaser expressly reserves the right to delay acceptance for payment of,
or payment for, Shares in order to comply with applicable law, including the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations thereunder (the "HSR Act"). See Section 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
representing such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or Philadelphia Depository
Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 3; (ii) the appropriate Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or an Agent's Message (as defined below) in
connection with a book-entry transfer; and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE
PAID BY THE PURCHASER.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than are
tendered, Share Certificates representing unpurchased or untendered Shares will
be returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right, subject to the provisions of the Merger
Agreement, to assign, in whole or from time to time in part, to one or more of
Parent's subsidiaries or affiliates the right to purchase all or any portion of
the Shares tendered pursuant to the Offer, but no such assignment will relieve
Parent of any liability under the Merger Agreement for any breach of the Merger
Agreement by any such assignee.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender of Shares. Except as set forth below, in order for Shares to
be validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees or an Agent's Message in connection with a
book-entry delivery of
4
<PAGE> 7
Shares and any other documents required by the Letter of Transmittal must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date and either (i)
Share Certificates representing tendered Shares must be received by the
Depositary or tendered pursuant to the procedure for book-entry transfer set
forth below and Book-Entry Confirmation must be received by the Depositary, in
each case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE), THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at each of the Book-Entry Transfer
Facilities for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
system of any Book-Entry Transfer Facility may make book-entry delivery of
Shares by causing such Book-Entry Transfer Facility to transfer such Shares into
the Depositary's account at such Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other required documents must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase on or prior to the Expiration Date,
or the guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date or the procedures for book-entry transfer
cannot be
5
<PAGE> 8
completed on a timely basis, such Shares or Rights may nevertheless be tendered
if all of the following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary within three
Nasdaq National Market trading days after the date of execution of such
Notice of Guaranteed Delivery. A "NASDAQ trading day" is any day on which
The Nasdaq Stock Market Inc.'s ("NASDAQ") Nasdaq National Market is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or, of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the appropriate Letter of
Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time, and will depend upon when Share Certificates are
received by the Depositary or Book-Entry Confirmations of such Shares are
received into the Depositary's account at a Book-Entry Transfer Facility.
Backup Federal Income Tax Withholding. Under the backup federal income tax
withholding laws applicable to certain stockholders (other than certain exempt
stockholders, including, among others, all corporations and certain foreign
individuals), the Depositary may be required to withhold 31% of the amount of
any payments made to such stockholders pursuant to the Offer or the Merger. To
prevent backup federal income tax withholding, each such stockholder must
provide the Depositary with such stockholder's correct taxpayer identification
number and certify that such stockholder is not subject to backup federal income
tax withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Instruction 9 of the Letter of Transmittal.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser, and each of them,
as such stockholder's agents, attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after the date of this Offer to Purchase, other
than the Contingent Rights. All such powers of attorney and proxies shall be
considered irrevocable and coupled with an interest in the tendered Shares. Such
appointment will be effective upon the acceptance for payment of such Shares by
the Purchaser in accordance with the terms of the Offer. Upon such acceptance
for payment, all other powers of attorney and proxies given by such stockholder
with respect to such Shares and such other securities or rights prior to such
payment will be revoked, without further action, and no subsequent powers of
attorney and proxies may be given by such stockholder (and, if given, will not
be deemed effective). The designees of the Purchaser will, with respect to the
Shares and such other securities and rights for which such appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders, or any
6
<PAGE> 9
adjournment or postponement thereof, or by consent in lieu of any such meeting
or otherwise. In order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, the Purchaser or its designee
must be able to exercise full voting rights with respect to such Shares and
other securities, including voting at any meeting of stockholders.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer (other than the
Minimum Condition, which may not be waived without the consent of the Company)
or any defect or irregularity in any tender of Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders.
The Purchaser's interpretation of the terms and conditions of the Offer
will be final and binding. No tender of Shares will be deemed to have been
validly made until all defects and irregularities with respect to such tender
have been cured or waived by the Purchaser. None of Parent, the Purchaser or any
of their respective affiliates or assigns, the Depositary, the Information Agent
or any other person or entity will be under any duty to give any notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after September 4, 1997.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares
may not be withdrawn except to the extent that the tendering stockholder is
entitled to and duly exercises withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will
be deemed not validly tendered for purposes of the Offer, but may be tendered at
any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3.
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<PAGE> 10
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of Parent, the
Purchaser or any of their respective affiliates or assigns, the Depositary, the
Information Agent or any other person or entity will be under any duty to give
any notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. CERTAIN TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, each selling or exchanging stockholder would
generally recognize gain or loss equal to the difference between the amount of
cash received and such stockholder's tax basis for the sold or exchanged Shares.
Such gain or loss will be capital gain or loss (assuming the Shares are held as
a capital asset) and any such capital gain or loss will be long term if, as of
the date of sale or exchange, the Shares were held for more than one year or
will be short term if, as of such date, the Shares were held for one year or
less.
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired Shares pursuant to the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States and foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (such as insurance companies, tax-exempt
entities and regulated investment companies).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND MERGER,
INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (as amended, the "Form 10-K"), the Shares are traded over the
counter on the Nasdaq National Market under the symbol "FUSN." The following
table sets forth, for the periods indicated, the reported high and low sale
prices for the Shares on the Nasdaq National Market as reported in the Form 10-K
with respect to periods occurring in 1995 and 1996, and as reported thereafter
by published financial sources with respect to periods occurring in 1997.
8
<PAGE> 11
FUSION SYSTEMS CORPORATION
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1995
First Quarter............................................................... $32 3/4 $21 1/2
Second Quarter.............................................................. $38 $25 3/4
Third Quarter............................................................... $37 $26
Fourth Quarter.............................................................. $33 1/2 $22 3/4
1996
First Quarter............................................................... $28 $21 1/4
Second Quarter.............................................................. $30 1/2 $23 1/4
Third Quarter............................................................... $26 $16 3/4
Fourth Quarter.............................................................. $24 $17
1997
First Quarter............................................................... $33 3/4 $21 1/4
Second Quarter.............................................................. $39 7/8 $23 1/4
</TABLE>
On June 27, 1997, the last full day of trading prior to the announcement of
the execution of the Merger Agreement and the declaration of the distribution of
the Contingent Rights, according to published sources, the reported closing
price on the NASDAQ National Market for the Shares was $35 per Share. On July 3,
1997, the last full day of trading prior to the commencement of the Offer,
according to published sources, the reported closing price on NASDAQ National
Market for the Shares was $39 3/8 per Share. The Company has not declared or
paid any dividends on the Shares (other than the Contingent Rights) since public
trading of the Shares commenced on May 12, 1994.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Possible Effects of the Offer on the Market for the Shares. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. The Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or marketability of the Shares or whether it
would cause future market prices to be greater or less than the Offer price
therefor.
NASDAQ Quotation. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the standards for continued
inclusion in NASDAQ. According to NASDAQ's published guidelines, the Shares
would not be eligible to be included for quotation if, among other things, the
number of publicly held Shares falls below 500,000, the number of holders of
Shares falls below 400 or the aggregate market value of such publicly held
Shares falls below $3,000,000. If these standards are not met, the Shares might
continue to be quoted on The Nasdaq SmallCap Market, Inc., but if the number of
holders of the Shares falls below 300, or if the number of publicly held Shares
falls below 100,000, or if the aggregate market value of such publicly held
Shares falls below $200,000 or there are not at least two registered and active
market makers (one of which may be a market maker entering a stability bid),
NASDAQ rules provide that the securities would no longer qualify for inclusion
in NASDAQ and NASDAQ would cease to provide any quotations. Shares held directly
or indirectly by an officer or director of the Company or by a beneficial owner
of more than 10% of the Shares will ordinarily not be considered as being
publicly held for purposes of these standards. In the event the Shares are no
longer eligible for NASDAQ quotation, quotations might still
9
<PAGE> 12
be available from other sources. The extent of the public market for the Shares
and the availability of such quotations would, however, depend upon the number
of holders of such Shares remaining at such time, the interest in maintaining a
market in such Shares on the part of securities firms, the possible termination
of registration of such Shares under the Exchange Act as described below and
other factors.
Purchaser has been advised by the Company that as of July 3, 1997, there
were approximately 315 holders of record of the Shares. The Company has advised
Purchaser that it believes that the number of beneficial owners of the Shares as
of July 3, 1997 is in excess of 3,200.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for deregistration under the Exchange Act. Registration
of the Shares may be terminated upon application by the Company to the
Commission if the Shares are not listed on a "national securities exchange" and
there are fewer than 300 record holders of Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and the Commission
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirements of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) or 14(c) and the related requirement of an annual report, no longer
applicable to the Company. If the Shares are no longer registered under the
Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect
to "going private" transactions would no longer be applicable to the Company.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or, with respect to certain persons, eliminated. If registration of the
Shares under the Exchange Act were terminated, the Shares would no longer be
"margin securities" or eligible for stock exchange listing or NASDAQ reporting.
The Purchaser believes that the purchase of the Shares pursuant to the Offer may
result in the Shares becoming eligible for deregistration under the Exchange
Act, and it would be the intention of the Purchaser to cause the Company to make
an application for termination of registration of the Shares as soon as possible
after successful completion of the Offer if the Shares are then eligible for
such termination.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will no longer be eligible for NASDAQ quotation and the registration
of the Shares under the Exchange Act will be terminated following the
consummation of the Merger.
The Company has advised the Purchaser that it plans to file a Registration
Statement on Form 8-A to register the Contingent Rights under the Exchange Act.
As long as the Contingent Rights are so registered, the Company would continue
to be required to make certain filings under the Exchange Act.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which have the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors such as the number of record holders of the Shares and the number and
market value of publicly held Shares, following the purchase of Shares pursuant
to the Offer, the Shares might no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations and, therefore, could
no longer be used as collateral for Purpose Loans made by brokers. In addition,
if registration of the Shares under the Exchange Act were terminated, the Shares
would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 7600 Standish Place, Rockville, Maryland 20855. The following
description of the Company's business has been taken from the Form 10-K and is
qualified in its entirety by reference to the Form 10-K:
Fusion Systems Corporation (the "Company" or "Fusion") is a
leading worldwide supplier of single-wafer ashers and photostabilizers
used in the fabrication of advanced semiconductor devices.
10
<PAGE> 13
The Company was founded in 1971 to develop microwave-powered electrodeless
ultraviolet ("UV") originally used to cure coatings, adhesives and inks on
a variety of end-use products. The Company began commercial shipments in
1975 and introduced its first product for the semiconductor industry in
1983. On September 6, 1996, Fusion sold its UV curing business to Fairey
Group, plc of Egham, United Kingdom.
The selected financial information of the Company and its consolidated
subsidiaries set forth below has been excerpted and derived from the Form 10-K.
More comprehensive financial and other information is included in such report
(including management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed by the Company
with the Commission. The financial information set forth below is qualified in
its entirety by reference to such reports and documents filed with the
Commission and the financial statements and related notes contained therein.
These reports and other documents may be examined and copies thereof may be
obtained in the manner set forth below.
FUSION SYSTEMS CORPORATION
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................. $ 84,594 $58,481 $37,939
Cost of sales................................................ 40,271 25,536 15,666
------- ------- -------
Gross profit............................................... 44,323 32,945 22,273
------- ------- -------
Operating expenses:
Selling, general and administrative........................ 18,246 12,764 10,019
Research, development and engineering...................... 15,756 7,682 3,997
------- ------- -------
Total operating expenses................................... 34,002 20,446 14,016
------- ------- -------
Operating income............................................. 10,321 12,499 8,257
Other income, net............................................ 3,367 2,082 703
------- ------- -------
Income from continuing operations before provision for income
taxes...................................................... $ 13,688 $14,581 $ 8,960
======= ======= =======
Income from continuing operations............................ $ 8,729 $ 9,136 $ 5,505
======= ======= =======
Earnings per share from continuing operations................ $ 1.09 $ 1.13 $ 0.76
======= ======= =======
Weighted-average shares outstanding.......................... 8,022 8,120 7,277
======= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and marketable securities............. $112,912 $36,691 $32,198
Working capital.............................................. 128,131 75,360 61,331
Total assets................................................. 161,714 95,037 72,916
Long-term debt............................................... -- -- --
Stockholders' equity......................................... 146,774 85,733 68,333
</TABLE>
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning the Company's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and the stock options granted to them), the principal holders of
the Company's securities, any material interests of such persons in transactions
with the Company and certain other matters is required to be
11
<PAGE> 14
disclosed in proxy statements and annual reports distributed to the Company's
stockholders and filed with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 500 West Madison Street,
Chicago, Illinois 60606 and 7 World Trade Center, New York, New York 10048.
Copies of such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may be obtained
electronically by visiting the Commission's web site on the Internet at
http://www.sec.gov. The Common Stock of the Company is traded on the Nasdaq
National Market System. Reports, proxy statements and other information
concerning the Company should also be available for inspection at the National
Association of Securities Dealers, Inc., at 1735 K Street, N.W., Washington D.C.
20006.
Although neither Parent nor the Purchaser has any knowledge that any such
information is untrue, neither Parent nor the Purchaser takes any responsibility
for the accuracy or completeness of information contained in this Offer to
Purchase with respect to the Company or any of its subsidiaries or affiliates or
for any failure by the Company to disclose events which may have occurred or may
affect the significance or accuracy of any such information.
In the course of the discussions between representatives of Parent and the
Company (see Section 10) certain forecasts of future operating performance were
furnished to Parent's representatives.
THESE FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS, AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THEY WERE
PROVIDED TO PARENT. NEITHER PARENT, THE PURCHASER NOR THE COMPANY ASSUMES ANY
RESPONSIBILITY FOR THE ACCURACY OF THESE FORECASTS. WHILE PRESENTED WITH
NUMERICAL SPECIFICITY, THESE FORECASTS ARE BASED UPON A VARIETY OF ASSUMPTIONS
RELATING TO THE BUSINESSES OF THE COMPANY WHICH MAY NOT BE REALIZED AND ARE
SUBJECT TO SIGNIFICANT FINANCIAL, MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES
AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY, MANY
OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY AND PARENT. THERE CAN BE NO
ASSURANCE THAT THE FORECASTS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF THE PROJECTIONS SET FORTH BELOW
SHOULD NOT BE REGARDED AS A REPRESENTATION BY PARENT OR ANY OF ITS AFFILIATES OR
REPRESENTATIVES OR BY THE COMPANY OR ITS REPRESENTATIVES THAT THE PROJECTED
RESULTS WILL BE ACHIEVED.
In May 1997, the Company provided Parent with its 1997 Operating Plan,
which had been approved by the Company Board in December 1996, and which
estimated sales for 1997 and 1998 of $93.3 million and $116.0 million,
respectively, and operating income of $13.9 million and $23.2 million,
respectively. Thereafter, the Company provided Parent with an updated 1997
forecast of $90.0 million in sales and $13.5 million of operating income. The
Company also provided Parent with two new forecasts for 1998 without any change
in the 1997 forecast: a "high" forecast of $141.1 million of sales based on an
estimate of potential sales in 1998 and $38.1 million of operating income, after
estimating expenses for 1998, and a "low" estimate of $127.0 million of sales
and $28.8 million of operating income which discounted the "high" sales estimate
by 10%. In late June 1997, the Company prepared a further update of its
forecasts which estimated 1997 sales of $93.0 million and operating income of
$12.5 million, and 1998 sales of $118.9 million and operating income of $20.6
million. The Company advised Parent that, compared to the second set of
forecasts, the latter forecasts gave effect to a higher level of anticipated
engineering costs and eliminated business that was recently lost, production
capacity that may not be built in 1998 and orders for new products or from new
customers that the Company's management considered to be more speculative.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER.
Parent is a corporation whose principal executive offices are located at
Eaton Center, Cleveland, Ohio 44114. Parent is a global manufacturer of highly
engineered products which serve industrial, vehicle, construction, commercial
and aerospace markets. Principal products of Parent include electrical power
distribution and control equipment, truck transmissions and axles, engine
components, hydraulic products, ion
12
<PAGE> 15
implanters and a wide variety of controls. Parent has 54,000 employees and 155
manufacturing sites in 26 countries around the world, and had revenues in 1996
of approximately $7 billion.
The Purchaser's principal executive offices are located care of Eaton
Corporation, Eaton Center, Cleveland, Ohio 44114. The Purchaser is a newly
formed Delaware corporation and a wholly-owned subsidiary of Parent. The
Purchaser has not conducted any business other than in connection with the Offer
and the Merger.
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of Parent and the Purchaser are set forth in Schedule I.
Parent is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning Parent's business, principal physical properties,
capital structure, material pending legal proceedings, operating results,
financial condition, directors and officers (including their remuneration and
stock options granted to them), the principal holders of Parent's securities,
any material interests of such persons in transactions with Parent and certain
other matters is required to be disclosed in proxy statements and annual reports
distributed to Parent's stockholders and filed with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the Commission's public reference facilities and should also be available for
inspection at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
Set forth below is certain consolidated financial information with respect
to Parent and its consolidated subsidiaries for its fiscal years ended and as of
December 31, 1996, 1995 and 1994. More comprehensive financial and other
information is included in Parent's Annual Report on Form 10-K for its fiscal
year ended December 31, 1996 (including management's discussion and analysis of
financial condition and results of operations) and in other reports and
documents filed by Parent with the Commission. The financial information set
forth below is qualified in its entirety by reference to such reports and
documents filed with the Commission and the financial statements and related
notes contained therein. These reports and other documents may be examined and
copies thereof may be obtained in the manner set forth above.
13
<PAGE> 16
EATON CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31
-----------------------------
1996(A) 1995 1994
------- ------ ------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................................... $6,961 $6,822 $6,052
Net Income..................................................... 349 399 333
PER COMMON SHARE:
Net Income..................................................... 4.50 5.13 4.40
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................................ $ 787 $ 822 $ 744
Total assets................................................... 5,307 5,053 4,682
Long-term debt................................................. 1,062 1,084 1,053
Total debt..................................................... 1,092 1,134 1,089
Shareholders' equity........................................... 2,160 1,975 1,680
</TABLE>
- ---------------
(a) Income in 1996 was reduced by pretax restructuring charges of $50 million.
Except as set forth elsewhere in this Offer to Purchase or Schedule I
hereto: (i) neither Parent nor the Purchaser nor, to the knowledge of Parent or
the Purchaser, any of the persons listed in Schedule I hereto or any associate
or majority-owned subsidiary of Parent or the Purchaser or any of the persons so
listed, beneficially owns or has a right to acquire any Shares or any other
equity securities of the Company; (ii) neither Parent nor the Purchaser nor, to
the knowledge of Parent or the Purchaser, any of the persons or entities
referred to in clause (i) above or any of their executive officers, directors or
subsidiaries has effected any transaction in the Shares or any other equity
securities of the Company during the past 60 days; (iii) neither Parent nor the
Purchaser nor, to the knowledge of Parent or the Purchaser, any of the persons
listed in Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies, consents or
authorizations); (iv) since January 1, 1994, there have been no transactions
which would require reporting under the rules and regulations of the Commission
between Parent or the Purchaser or any of their respective subsidiaries or, to
the knowledge of Parent or the Purchaser, any of the persons listed in Schedule
I hereto, on the one hand, and the Company or any of its executive officers,
directors or affiliates, on the other hand; and (v) since January 1, 1994, there
have been no contacts, negotiations or transactions between Parent or the
Purchaser or any of their respective subsidiaries or, to the knowledge of Parent
or the Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or any of its subsidiaries or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
Historically, over the last few years, Parent has been generally familiar
with the Company's business through their sale of products to the same customers
(although for different applications, relevant at different times in their
customers' production processes). Parent and the Company had also collaborated
on the technical level concerning the effect of certain of the Company's
processes on Parent's "ion implant" process.
In November 1996, Brian R. Bachman, Senior Vice President -- Semiconductor
and Specialty Systems of Parent, met with John C. Matthews, Senior Vice
President of the Company, at an industry trade conference and exchanged views
concerning the semiconductor equipment industry generally and the opportunities
for their respective companies to collaborate with respect to technology.
14
<PAGE> 17
In January 1997, the Company's Chairman of the Board, Daniel Tessler, its
President and Chief Executive Officer, Leslie S. Levine, and Mr. Matthews met
with Mr. Bachman and two other Parent executives who are involved in Parent's
semiconductor equipment operations to discuss collaboration with respect to
technology and various approaches for sharing intellectual property, including a
possible joint venture or acquisition transaction, and certain of the Company's
senior executives visited the headquarters of Parent's semiconductor equipment
operations to discuss Parent's potential strategies with respect to product
technology matters.
In February 1997, several of Parent's executives met with Messrs. Tessler,
Levine and Matthews. At the February meeting, Parent's executives and the
Company's executives discussed issues related to the provision to Parent by the
Company of confidential information, and further discussed the desirability from
the Company's perspective of receiving an indication of value in connection with
any possible transaction involving Parent and the Company.
On March 26, 1997, Mr. Tessler met with Stephen R. Hardis, Parent's
Chairman of the Board and Chief Executive Officer, and Mr. Bachman. At this
meeting, Mr. Tessler, acting on behalf of the Company, requested that Parent
provide an indication of value before pursuing further negotiations or the
sharing of non-public information. In response, Parent's representatives
indicated that Parent would consider proposing an acquisition of the Company for
$37.50 per share in cash, subject to the negotiation and approval of definitive
terms. Mr. Tessler rejected this, indicating that the price was too low, but
indicated he would be prepared to provide confidential information subject to an
appropriate confidentiality agreement.
In April 1997, Parent and the Company entered into a confidentiality
agreement and the Company began to furnish confidential information to Parent
and met with representatives of Parent and provided responses to Parent's
inquiries in connection with Parent's due diligence investigation. Parent also
conducted independent due diligence investigations into the nature and quality
of the Company's product and process technology, customer relations and other
similar matters.
In late May 1997, in the course of several discussions between Mr. Tessler,
Mr. Hardis and Alexander M. Cutler, Parent's President and Chief Operating
Officer, as well as at a meeting whose participants included Mr. Tessler,
Messrs. Cutler and Bachman and other Parent representatives, Parent's
representatives indicated Parent's willingness to raise its cash acquisition
price to $39 per share and to accomplish the transaction by means of a cash
tender offer for all Company shares. Messrs. Hardis and Cutler indicated that
Parent's willingness to proceed further was subject to the Company entering into
an agreement obligating it to negotiate exclusively with Parent for up to 30
days.
In early June, Parent and the Company exchanged financial forecasts which
each had prepared with respect to the Company, discussed the projections and the
assumptions each had used in their preparation, and continued to negotiate with
respect to a mutually acceptable price for a transaction. Parent also furnished
to the Company a summary of certain other important elements of a transaction,
including a form of exclusivity agreement. During a series of telephone calls
among Messrs. Hardis, Cutler and Tessler, Parent's representatives indicated
their unwillingness to increase the cash acquisition price above $39 per share
but indicated their willingness for additional consideration to be made
available to the Company's shareholders if the Company's performance in 1998 was
consistent with certain of the more optimistic forecasts which the Company had
prepared.
Following the meeting of the Company's Board of Directors on June 19, Mr.
Tessler told Parent's representatives that the Company would be willing to enter
into exclusive negotiations with Parent provided, among other matters, that
additional compensation would be paid if the Company achieved certain revenue
levels in 1998. In the course of further negotiations, Parent's representatives
proposed a contingent payment of up to $5.00 per Share depending upon the
Company's 1998 revenues.
On June 24, 1997, the Company entered into an agreement providing for
exclusive negotiations with Parent through July 7, 1997. On June 25, 1997,
Parent furnished the Company with a draft of a merger agreement, and Parent's
Board of Directors approved the proposed transaction. During the period from
June 26 through the morning of June 30, 1997, the parties negotiated the terms
of the Merger Agreement, the
15
<PAGE> 18
Contingent Rights and related agreements. On the morning of June 30, 1997, the
parties executed the Merger Agreement and publicly announced the Offer.
11. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; STATUTORY REQUIREMENTS;
APPRAISAL RIGHTS; PLANS FOR THE COMPANY; THE RIGHTS; THE CONTINGENT RIGHTS.
Purpose. The purpose of the Offer and the Merger is to acquire control of,
and the entire equity interest in, the Company.
The Merger Agreement. The Merger Agreement should be read in its entirety
for a more complete description of the matters summarized below. Defined terms
used below and not defined herein have the respective meanings assigned to those
terms in the Merger Agreement.
The Merger Agreement provides that, without the prior written consent of
the Company, the Purchaser may not (i) decrease the amount offered per Share or
change the form of consideration payable in the Offer, (ii) decrease the number
of Shares sought to be purchased in the Offer, (iii) waive the Minimum
Condition, (iv) impose additional conditions to the Offer, or (v) amend any
other term of the Offer in any manner adverse to the holders of Shares. Subject
to the terms of the Offer and the Merger Agreement and the satisfaction of all
the conditions of the Offer as of any expiration date, the Purchaser will accept
for payment and pay for all Shares validly tendered and not withdrawn pursuant
to the Offer as soon as practicable after such expiration date of the Offer,
provided that, if all of the conditions to the Offer are satisfied and more than
75% but less than 90% of the outstanding Shares on a fully diluted basis
(excluding Options which are not exercisable for 30 days) have been validly
tendered and not properly withdrawn in the Offer, the Purchaser will have the
right, in its sole discretion, to extend the Offer from time to time for up to a
maximum of five additional business days in the aggregate, provided the
Purchaser agrees to waive the conditions set forth in paragraphs (b), (c), (f)
and (h) of Section 14 hereof. The Merger Agreement provides that, without
written consent of the Company, the Purchaser will not accept for payment or pay
for any Shares in the Offer if, as a result, the Purchaser would acquire less
than the number of Shares necessary to satisfy the Minimum Condition.
The Company has represented to Parent in the Merger Agreement that the
Board of Directors of the Company (the "Company Board"), at a meeting duly
called and held, has (i) determined by unanimous vote of its directors that each
of the transactions contemplated by the Merger Agreement, including each of the
Offer and the Merger and the distribution of the Contingent Rights, is fair to
and in the best interests of the Company and its stockholders, (ii) approved the
distribution of the Contingent Rights, (iii) approved the Offer and adopted the
Merger Agreement in accordance with the GCL, (iv) recommended acceptance of the
Offer and approval of the Merger Agreement by the Company's stockholders (if
such approval is required by applicable law), and (v) taken all other action
necessary to render Section 203 of the GCL and the Rights inapplicable to the
Offer and the Merger; provided, however, that such recommendation and approval
may be withdrawn, modified or amended to the extent that the Company Board
determines in good faith, after consultation with its outside legal counsel,
that failure to take such action would reasonably be expected to result in a
breach of the Company Board's fiduciary obligations under applicable law. The
Company further represented that, prior to the execution of the Merger
Agreement, Salomon Brothers has delivered to the Company Board its written
opinion that the consideration to be received by the holders of Shares (other
than Parent or any of its affiliates) pursuant to the Offer, the Merger and the
Contingent Rights is fair to the Company's stockholders from a financial point
of view.
The Merger Agreement provides that Parent, upon the payment by the
Purchaser for Shares pursuant to the Offer representing at least such number of
Shares as shall satisfy the Minimum Condition, and from time to time thereafter,
is entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of the total number of
directors on the Company Board (determined after giving effect to the directors
so elected pursuant to such provision) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Parent or its affiliates bears
to the total number of Shares then outstanding. The Company shall, upon request
of Parent, promptly take all actions necessary to cause Parent's designees to be
so elected, including, if necessary, seeking the resignations of one
16
<PAGE> 19
or more existing directors; provided, however, that prior to the time the Merger
becomes effective (the "Effective Time"), the Company Board shall always have at
least two members who are neither officers, directors, shareholders or designees
of the Purchaser or any of its affiliates ("Purchaser Insiders"). If the number
of directors who are not Purchaser Insiders is reduced below two prior to the
Effective Time, the remaining director who is not a Purchaser Insider will be
entitled to designate a person to fill such vacancy who is not a Purchaser
Insider and who will be a director not deemed to be a Purchaser Insider for all
purposes of the Merger Agreement. Following the election or appointment of
Parent's designees and prior to the Effective Time, any amendment or termination
of the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Parent or the
Purchaser or waiver of any of the Company's rights thereunder, will require the
concurrence of a majority of the directors of the Company then in office who are
not Purchaser Insiders (or in the case where there are two or fewer directors
who are not Purchaser Insiders, the concurrence of one director who is not a
Purchaser Insider) if such amendment, termination, extension or waiver would be
reasonably likely to have an adverse effect on the minority stockholders of the
Company.
THE MERGER. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
The Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation, until thereafter amended in accordance with the
provisions thereof and of the Merger Agreement and applicable law. The By-Laws
of the Purchaser in effect at the time of the Effective Time shall be the
By-Laws of the Surviving Corporation until amended, subject to the provisions of
the Merger Agreement relating to indemnification of directors and officers in
accordance with the provisions thereof and applicable law.
Subject to applicable law, the directors of the Purchaser immediately prior
to the Effective Time will be the initial directors of the Surviving Corporation
and will hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal, and the officers of
the Surviving Corporation will be those persons designated by Parent and the
Purchaser.
By virtue of the Merger and without any action on the part of the holders
thereof, at the Effective Time, each Share issued and outstanding immediately
prior to the Effective Time (other than (i) any Shares held by Parent, the
Purchaser, any wholly owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly owned subsidiary of the Company which
Shares, by virtue of the Merger and without any action on the part of the holder
thereof, will be cancelled and retired and will cease to exist with no payment
being made with respect thereto and (ii) Dissenting Shares) will be cancelled
and retired and will be converted into the right to receive $39.00 net per Share
in cash, payable to the holder thereof, without interest thereon (the "Merger
Price"), upon surrender of the certificate formerly representing such Share. At
the Effective Time, each share of common stock of the Purchaser, par value $.01
per share, issued and outstanding immediately prior to the Effective Time will,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. The Contingent Rights will remain outstanding after the Effective
Time in accordance with their terms.
The Merger Agreement provides that, prior to the Effective Time, the
Company Board (or, if appropriate, any committee thereof) will adopt appropriate
resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of Options granted prior to the
date of the Merger Agreement under any of the Stock Plans, without any payment
therefor except as described below. Pursuant to the Merger Agreement,
immediately prior to the Effective Time, the Company shall accelerate the
vesting of certain specified Options and each then vested Option will no longer
be exercisable but will entitle each holder thereof, in cancellation and
settlement therefor, to (i) a payment in cash by the Company (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(x) the total number of Shares subject to such vested Option and (y) the excess
of the Merger Consideration over the exercise price per Share subject to such
vested Option, and (ii) a payment in cash by the Surviving Corporation (subject
to
17
<PAGE> 20
any applicable withholding taxes), at the earlier of March 31, 1999 or the
redemption date of the Contingent Rights, equal to the product of (x) the total
number of Shares subject to such cancelled vested Option, and (y) the $5.00 per
right redemption price of the Contingent Rights or the Contingent Payment, as
the case may be, if any (the amounts payable under clauses (i) and (ii) of this
sentence being referred to as the "Cash Payments"). Pursuant to the Merger
Agreement, Options which are not vested and exercisable at the Effective Time
will be cancelled at the Effective Time without any payment therefor. Parent has
agreed to cause the Surviving Corporation to establish a special bonus plan (the
"Special Bonus Plan") for all employees of the Company or any of its
subsidiaries who held Options which were outstanding as of immediately before
the Effective Time which were not then vested and were terminated as of the
Effective Time. The Special Bonus Plan shall provide for a cash payment on the
second anniversary of the Effective Time to each employee who continues to be an
employee of the Surviving Corporation, Parent or any of their respective
subsidiaries on such second anniversary in an amount (subject to any applicable
withholding taxes) equal to the sum of (i) the product of (x) the total number
of Shares subject to such terminated Options and (y) the excess of the Merger
Consideration over the exercise price per Share of such terminated Options, plus
(ii) interest on the amount set forth in clause (i) at a rate of 6% per annum
from the Effective Time, plus (iii) the product of (x) the total number of
Shares subject to such terminated Option and (y) the amount of cash, if any,
paid with respect to each Contingent Right pursuant to the Contingent Rights
Agreement. Any employee of the Company who is involuntarily terminated without
cause or whose employment ceases by reason of death or disability, in each case
prior to the second anniversary of the Effective Time, shall be entitled,
promptly following such termination or cessation of employment (or, in the case
of any payment pursuant to clause (iii) of the preceding sentence, promptly
following the later of March 31, 1999 or the date of such termination or
cessation of employment), to receive from the Company a cash payment equal to
the amount which such employee would have received pursuant to the formula in
the immediately preceding sentence had such employee remained employed
throughout the period ending on the second anniversary of the Effective Time.
The Company has represented in the Merger Agreement that the Company Board
has taken all necessary action to terminate its 1994 Employee Stock Purchase
Plan effective prior to the beginning of the payment period which would have
commenced on July 1, 1997, and no Options have been or will be issued under such
Stock Plan with respect to any payment period beginning on or after July 1,
1997. All other Stock Plans and any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any subsidiary will terminate as of the Effective Time. The
Company has agreed to take all reasonable steps to ensure that none of Parent,
the Company or any of their respective subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof other than to the extent provided with respect to the Contingent
Rights. The Company further agreed to use its reasonable best efforts to obtain
all necessary consents to ensure that, after the Effective Time, holders of
Options will have no rights other than the rights of the holders of vested
Options to receive the Cash Payments in cancellation and settlement thereof.
The Company has agreed pursuant to the Merger Agreement that, if required
by applicable law in order to consummate the Merger, it will (i) convene a
special meeting of its stockholders as soon as practicable following the
acceptance for payment of and payment for Shares by the Purchaser pursuant to
the Offer for the purpose of considering and taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy
statement relating to the Merger Agreement, and use its reasonable efforts (x)
to obtain and furnish the information required to be included by the Commission
in the Proxy Statement (as defined herein) and, after consultation with Parent,
to respond promptly to any comments made by the Commission with respect to the
preliminary proxy statement and to cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders and (y) to obtain the
necessary approvals of the Merger and the Merger Agreement by its stockholders;
and (iii) subject to the fiduciary obligations of the Company Board under
applicable law as provided in the Merger Agreement, include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of the Merger Agreement. Parent has agreed
in the Merger Agreement that it will vote, or cause to be voted, all of
18
<PAGE> 21
the Shares then owned by it, the Purchaser or any of its other subsidiaries in
favor of the approval of the Merger and the Merger Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if Parent, the Purchaser or any other subsidiary of Parent acquires at least 90%
of the outstanding Shares of the Company pursuant to the Offer or otherwise, the
parties to the Merger Agreement will take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
acceptance for payment of and payment for the Shares by the Purchaser pursuant
to the Offer without a meeting of the stockholders of the Company, in accordance
with Section 253 of the GCL.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Merger Agreement
contains customary representations and warranties with respect to the Company,
including, among other things, (i) with respect to the organization, corporate
powers and qualifications of the Company and each of its significant
subsidiaries; (ii) with respect to the capitalization of the Company and its
significant subsidiaries; (iii) that the execution and delivery of the Merger
Agreement by the Company and the consummation by the Company of the transactions
contemplated therein have been duly and validly authorized and approved by the
Company Board and that no other corporate proceedings on the part of the Company
are necessary to authorize or approve the Merger Agreement or to consummate the
transactions contemplated therein (other than, with respect to the Merger, the
approval of the Merger Agreement by the affirmative vote of the holders of a
majority of the then outstanding Shares entitled to vote thereon, to the extent
required by applicable law); (iv) with respect to the absence of any conflict
between the terms and provisions of the Merger Agreement and the transactions
contemplated thereby with any statute, ordinance, rule, regulation, order,
judgment, decree, permit or license, agreements, contracts or other instruments
and obligations; (v) with respect to the accuracy of the documents filed with
the Commission; (vi) with respect to the Company's financial statements, its
financial condition, the amount of cash and cash equivalents the Company had on
hand as of May 23, 1997 and its net working capital as of such date; (vii) with
respect to the compliance of the Company and its subsidiaries with certain laws
relating to the protection of the environment; (viii) that the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (as defined in the Merger Agreement)
required for the conduct of their respective businesses and are otherwise in
compliance with all applicable laws; (ix) with respect to the absence, as a
result of the transactions contemplated by the Merger Agreement, of a "change of
control" under or other detriment under agreements or instruments to which the
Company or its subsidiaries are bound; (x) with respect to the absence of
certain litigation with respect to the Company; (xi) with respect to the
accuracy and completeness of the information supplied by the Company in
connection with the Offer, the Proxy Statement or any other document to be filed
with the Commission or any other Governmental Entity in connection with the
transactions contemplated by the Merger Agreement; (xii) that Section 203 of GCL
is not applicable to the Offer and the Merger and the transactions contemplated
by the Merger Agreement; (xiii) with respect to the Company's employee benefit
plans; (xiv) with respect to patents, trademarks and other intellectual property
of the Company and its subsidiaries; (xv) with respect to certain tax returns
required to be filed and certain taxes required to be paid by the Company and
its subsidiaries; (xvi) the absence of certain events since December 31, 1996,
including that there has not been any change in or effect on the business,
assets, liabilities, condition (financial or otherwise), prospects or results of
operations of the Company or any of its subsidiaries that would reasonably be
expected to be materially adverse to the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect"); (xvii) with respect to certain union and
labor matters; (xviii) with respect to relationships with customers, suppliers,
distributors and sales representatives; (xix) with respect to certain
contractual obligations; (xx) that the Company has taken all necessary action
pursuant to the Rights Agreement to provide that no Triggering Event or
Distribution Date (as each term is defined in the Rights Agreement) will occur,
and that Parent, the Purchaser and their affiliates will not become an Acquiring
Person (as defined in the Rights Agreement), in each case as a result of the
announcement, commencement or consummation of the Offer or Merger, the execution
or delivery of the Merger Agreement or the consummation of the transactions
contemplated thereby; (xxi) with respect to certain product recalls; (xxii) with
respect to certain liabilities in connection with the Company's disposition of
its ultraviolet curing systems business; and (xxiii) with respect to the absence
of brokerage or finders fees or commissions payable in connection with the
Merger Agreement and the transactions contemplated thereby (other than with
respect to fees payable to Salomon Brothers or
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Venture Advisors, Inc.) and the aggregate amount of certain fees and expenses in
connection with the Merger Agreement and the transactions contemplated thereby.
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. The Merger
Agreement contains customary representations and warranties by Parent and the
Purchaser, including, among other things, (i) with respect to the organization,
corporate powers and qualifications of Parent and the Purchaser; (ii) that each
of Parent and the Purchaser has the necessary corporate power and authority to
execute and deliver the Merger Agreement and to consummate the transactions
contemplated thereby; (iii) with respect to the absence of any conflict between
the terms and provisions of the Merger Agreement and the transactions
contemplated thereby with any laws, regulations, agreements, contracts or other
instruments and obligations; (iv) that neither Parent nor any of its
subsidiaries was, immediately prior to the execution of the Merger Agreement, an
"interested stockholder" within the meaning of Section 203 of the GCL; and (v)
that Parent has and will cause the Purchaser to have the funds necessary to
consummate the Offer and the Merger and the transactions contemplated thereby.
COVENANTS. The Merger Agreement obligates the Company and its
subsidiaries, from the date of the Merger Agreement until the Effective Time, to
conduct their operations only in the ordinary and usual course of business
consistent with past practice and obligates the Company and its subsidiaries to
use their reasonable efforts to preserve intact their business organizations, to
keep available the services of their present officers and key employees and to
preserve the good will of those having business relationships with them. The
Merger Agreement also contains specific covenants as to certain impermissible
activities of the Company prior to the Effective Time, which provide that the
Company will not (and will not permit any of its subsidiaries to) without the
prior written consent of Parent: (i) adopt any amendment to its Certificate of
Incorporation or By-Laws or comparable organizational documents or the
Contingent Rights Agreement (as defined herein) or the Rights Agreement other
than the amendment such that the effectuation of the merger will not cause the
Rights under the Rights Agreement to become exercisable, cause Parent or the
Purchaser to be an Acquiring Person, or trigger other provisions of the Rights
Agreement including giving rise to a Distribution Date or a Triggering Event;
(ii) sell, pledge or encumber any stock owned by it in any of its subsidiaries;
(iii) (A) issue, reissue or sell, or authorize the issuance, reissuance or sale
of (1) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Shares (and the related Rights), in accordance with the terms of the
instruments governing such issuance on the date of the Merger Agreement,
pursuant to the exercise of Options outstanding on the date of the Merger
Agreement (or, if a Triggering Event by a party other than Parent or the
Purchaser shall occur, Rights), or (2) any other securities in respect of, in
lieu of, or in substitution for, Shares outstanding on the date of the Merger
Agreement other than the Contingent Rights, or (B) make any other changes in its
capital structure; (iv) 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 other than
between any of the Company and any of its wholly owned subsidiaries or the
Contingent Rights; (v) 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, or any of its other securities; (vi) 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)
other than certain bonuses previously disclosed to Parent, or pay or award any
benefit not required by any existing plan or arrangement to any officer,
director or employee, or grant any severance or termination pay to any officer,
director or other employee of the Company or any of its subsidiaries (other than
as required by existing agreements or policies disclosed to Parent), or enter
into any employment or severance agreement with, any director, officer or other
employee of the Company or any of its subsidiaries or establish, adopt, enter
into, amend or waive any performance or vesting criteria or accelerate vesting
or exercisability under any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, savings, 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 of the Company or its
subsidiaries (any of the foregoing being an "Employee Benefit Arrangement"),
except in each case to the extent required by applicable law or regulation;
(vii) acquire, mortgage, encumber, sell, lease, license or dispose of any assets
(including Intellectual Property (as defined in the Merger Agreement))
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<PAGE> 23
or securities, except pursuant to existing contracts or commitments or the sale
or purchase of goods in the ordinary course of business consistent with past
practice, or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice other than transactions between
a wholly owned subsidiary of the Company and the Company or another wholly owned
subsidiary of the Company, subject to certain specified exceptions; (viii) (A)
incur, assume or pre-pay any long-term debt or incur or assume any short-term
debt, except that the Company and its subsidiaries may incur, assume or pre-pay
debt in the ordinary course of business in amounts and for purposes consistent
with past practice under existing lines of credit, (B) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business consistent with past practice, (C) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), except in the ordinary course of business consistent with past
practice and in accordance with their terms, (D) make any loans, advances or
capital contributions to, or investments in, any other person, except for loans,
advances, capital contributions or investments between any wholly owned
subsidiary of the Company and the Company or another wholly owned subsidiary of
the Company, (E) authorize or make capital expenditures not provided for in the
Company's capital budget which are in excess of $100,000, (F) accelerate or
delay collection of notes or accounts receivable in advance of or beyond their
regular due dates or the dates when the same would have been collected in the
ordinary course of business consistent with past practice, (G) delay or
accelerate payment of accounts payable beyond or in advance of its due date or
the date such liability would have been paid in the ordinary course of business
consistent with past practice, or (H) vary the Company's inventory practices in
any material respect from the Company's past practices; (ix) settle or
compromise any suit or claim or threatened suit or claim where the amount
involved is greater than $100,000; (x) other than in the ordinary course of
business consistent with past practice, (A) modify, amend or terminate any
contract, (B) waive, release, relinquish or assign any contract (or any of the
Company's rights thereunder), right or claim, or (C) cancel or forgive any
indebtedness owed to the Company or any of its subsidiaries; provided, however,
that the Company may not under any circumstance waive or release any of its
rights under any confidentiality agreement to which it is a party; (xi) make any
tax election not required by law or settle or compromise any tax liability;
(xii) permit any insurance policy naming it as a beneficiary or a loss payable
payee to be cancelled or terminated without notice to the Purchaser, except in
the ordinary course of business consistent with past practice; (xiii) acquire
(by merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or, except in the
ordinary course of business consistent with past practice, any assets; (xiv)
enter into any contract or agreement other than in the ordinary course of
business consistent with past practice; (xv) except as may be required as a
result of a change in law or in generally accepted accounting principles, make
any change in its methods of accounting, including tax accounting policies and
procedures; or (xvi) agree in writing or otherwise take any of the foregoing
prohibited actions or any action which would cause any representation or
warranty in the Merger Agreement to be or become untrue or incorrect.
ACCESS TO INFORMATION. The Merger Agreement provides that, until the
Effective Time, the Company will give Parent and the Purchaser and their
representatives full access, during normal business hours, to the offices and
other facilities and to the books and records of the Company and its
subsidiaries, subject to Parent and the Purchaser's maintaining the
confidentiality of any non-public information disclosed to them.
EFFORTS. Subject to the terms and conditions provided in the Merger
Agreement, each of the Company, Parent and the Purchaser shall cooperate and use
reasonable efforts to make all filings necessary or proper under applicable laws
and regulations to consummate and make effective the transactions contemplated
by the Merger Agreement.
Each of the parties also will use its reasonable efforts to obtain as
promptly as practicable all Consents (as defined in the Merger Agreement) of any
Governmental Entity or any other person required in connection with, and waivers
of any Violations (as defined in the Merger Agreement) that may be caused by,
the consummation of the transactions contemplated by the Offer and the Merger
Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company, on
the one hand, and Parent and the Purchaser, on the other hand, agree to consult
promptly with each other prior to issuing any press release or otherwise making
any public statement with respect to the Offer, the Merger and the other
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<PAGE> 24
transactions contemplated by the Merger Agreement, agree to provide to the other
party for review a copy of any such press release or statement, and shall not
issue any such press release or make any such public statement prior to such
consultation and review, unless required by applicable law or any listing
agreement with a securities exchange.
EMPLOYEE BENEFIT ARRANGEMENTS. With respect to employee benefit matters,
the Merger Agreement provides that the Company will honor and, from and after
the Effective Time, Parent will cause the Surviving Corporation to honor, all
obligations under specified Employee Benefit Arrangements. Notwithstanding the
foregoing, from and after the Effective Time, subject to the remainder of this
paragraph, the Surviving Corporation will have the right to amend, modify, alter
or terminate any Employee Benefit Arrangements, provided that any such action
will not adversely affect the rights of any employees or other beneficiaries
which shall have arisen thereunder prior to such amendment, modification,
alteration or termination, and shall not affect any rights or benefits for which
the agreement of the other party or a beneficiary is required.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The Merger Agreement
provides that, from and after the time the Purchaser purchases Shares pursuant
to the Offer through and including the Effective Time (without regard to the
termination of the Merger Agreement), neither Parent nor the Purchaser will take
any action, nor permit any action to be taken, which would change or amend the
provisions of the Certificate of Incorporation or By-Laws of the Company in
effect on the date of the Merger Agreement relating to limitation of liability
or indemnification or make any modification in the Company's existing director's
and officer's insurance, in each case inconsistent with the obligations of
Parent and the Purchaser under the Merger Agreement. Pursuant to the Merger
Agreement, Parent has agreed that from and after the Effective Time all rights
to indemnification existing at the date of the Merger Agreement in favor of
individuals who at or prior to the Effective Time were directors or officers of
the Company or any of its subsidiaries as set forth in the Certificate of
Incorporation or By-Laws of the Company shall survive the Merger with respect to
matters existing or occurring at or prior to the Effective Time and shall
continue in full force and effect for a period of six years following the
Effective Time. The Merger Agreement further provides that the Company shall,
and from and after the Effective Time, the Surviving Corporation shall,
indemnify, defend and hold harmless each person who is at the date of the Merger
Agreement, or has been at any time prior to such date or who becomes prior to
the Effective Time, an officer or director of the Company or any of its
subsidiaries (each individually an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities or judgments or amounts
that are paid in settlement with the approval of the Indemnifying Party as a
result of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such person
is or was a director or officer of the Company or any of its subsidiaries or out
of or in connection with activities in such capacity, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based on, or arising out
of, or pertaining to the Merger Agreement or the transactions contemplated
thereby, in each case to the full extent a corporation is permitted under the
GCL to indemnify any such person and, without limiting the generality or effect
of the foregoing, to the fullest extent provided in the respective Certificates
of Incorporation or By-Laws of the Company and its subsidiaries as in effect on
the date of the Merger Agreement. Parent has agreed to cause the Surviving
Corporation to pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent permitted
by law and, without limiting the generality or effect of the foregoing, to the
fullest extent provided in the respective Certificates of Incorporation or
By-Laws of the Company and its subsidiaries as in effect on the date of the
Merger Agreement subject to receipt by the Company of an undertaking by or on
behalf of such officer or director contemplated by Section 145(e) of the GCL.
Without limiting the generality or effect of the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time) and, in
the opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, there is a conflict on any significant issue between the
position of the Company and an Indemnified Party or different defenses may
reasonably be expected to exist, the Merger Agreement provides that the
Indemnified Parties may retain counsel which counsel shall be reasonably
satisfactory to the Company (or the Surviving Corporation after the Effective
Time) and the Company shall (or after the Effective Time, Parent will cause
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<PAGE> 25
the Surviving Corporation to) pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that (i) Parent or the Surviving Corporation shall
have the right, from and after the purchase of Shares pursuant to the Offer, to
assume the defense thereof (which right shall not affect the right of the
Indemnified Parties to be reimbursed for separate counsel as specified in the
preceding sentence), (ii) the Company and the Indemnified Parties will cooperate
in the defense of any such matter and (iii) neither Parent, the Company nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent. The Indemnified Parties as a group may not retain more
than one counsel to represent them with respect to each such matter unless there
is, in the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties or unless different
defenses may reasonably be expected to exist. The Company, Parent and the
Purchaser have agreed in the Merger Agreement that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities. Parent has also agreed that the Company, and from and after the
Effective Time, the Surviving Corporation will cause to be maintained in effect
for not less than six years (except as provided in the next immediate sentence)
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company; provided that the Surviving
Corporation may substitute therefor other policies of at least the same coverage
amounts and which contain terms and conditions not less advantageous (other than
to a de minimis extent) to the beneficiaries of the current policies and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided further that the Surviving Corporation shall not be required to pay an
annual premium in excess of 125% of the last annual premium paid by the Company
prior to the date of the Merger Agreement and if the Surviving Corporation is
unable to obtain the insurance required by this sentence, it shall obtain as
much comparable insurance coverage as possible for an annual premium equal to
such maximum amount. Notwithstanding the foregoing, at any time on or after the
second anniversary of the Effective Time, Parent may, at its election, undertake
to provide funds to the Surviving Corporation to the extent necessary so that
the Surviving Corporation may self-insure with respect to the level and scope of
insurance coverage required under the immediately preceding sentence in lieu of
causing to remain in effect any directors' and officers' liability insurance
policy. Parent has agreed to guarantee the obligations of the Surviving
Corporation under the foregoing indemnification provisions and these provisions
will survive consummation of the Merger and be binding on all successors and
assigns.
NOTIFICATION OF CERTAIN MATTERS. Parent and the Company have agreed to
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (a) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (b) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied and (ii) any failure of the Company, Parent, or the Purchaser,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the Merger Agreement;
provided, however, that no such notification will affect the representations or
warranties of any party or the conditions to the obligations of any party. Each
of the Company, Parent and the Purchaser is also required to give prompt notice
to the other parties of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by the Merger Agreement.
RIGHTS AGREEMENT. The Company covenants and agrees in the Merger Agreement
that it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii)
take any action which would allow any Person (as defined in the Rights
Agreement) other than Parent or the Purchaser to acquire beneficial ownership of
15% or more of the Shares without causing a Distribution Date or a Triggering
Event (as such terms are defined in the Rights Agreement) to occur.
Notwithstanding the foregoing, the Company may upon at least two business days'
prior written notice to Parent take the actions described in clauses (i) or
(iii) of the preceding sentence, if (x) the Company Board determines in good
faith, after consultation with its outside
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<PAGE> 26
legal counsel, that failing to take such action would reasonably be expected to
result in a breach of the fiduciary duties of the Company Board, and (y) prior
to such action the Company will have paid to Parent a fee of $13 million (which
amount shall be paid in lieu of any Termination Fee (as defined below)). The
Company has also agreed pursuant to the Merger Agreement that neither the
Company Board nor the Continuing Directors of the Company will make a
determination that Parent, the Purchaser or any of their respective Affiliates
or Associates (as such terms are defined in the Rights Agreement) is an "Adverse
Person" for purposes of the Rights Agreement.
STATE TAKEOVER LAWS. The Merger Agreement provides that the Company will,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, of any
state takeover law.
NO SOLICITATION. The Merger Agreement requires the Company, its affiliates
and their respective officers, directors, employees, representatives and agents
to immediately cease any existing discussions or negotiations, with any parties
with respect to any acquisition or exchange of all or any material portion of
the assets of, or any equity interest in, the Company or any of its subsidiaries
or any business combination with the Company or any of its subsidiaries. The
Merger Agreement further provides that, prior to the Effective Time, the Company
will not authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or encourage, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any merger, liquidation, recapitalization,
consolidation or other business combination involving the Company or its
subsidiaries or acquisition of any capital stock or any material portion of the
assets (except for acquisitions of assets in the ordinary course of business
consistent with past practice) of the Company or of its subsidiaries, or any
combination of the foregoing (other than the Offer and the Merger) (an
"Acquisition Transaction") or negotiate, explore or otherwise engage in
substantive discussions with any person (other than the Purchaser, Parent or
their respective directors, officers, employees, agents and representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement; provided that the Company may furnish information to, and negotiate
or otherwise engage in substantive discussions with, any person who delivers a
written proposal for an Acquisition Transaction if the Company Board determines
in good faith by a majority vote, after consultation with its outside legal
counsel, that failing to take such action would reasonably be expected to result
in a breach of the fiduciary duties of the Company Board and prior to furnishing
non-public information to such party, the Company shall have entered into a
confidentiality agreement containing terms at least as favorable to the Company
as those of the confidentiality agreement dated April 7, 1997 between Parent and
the Company with respect to the maintenance of confidentiality and the permitted
use of information provided by or on behalf of the Company. The Merger Agreement
further provides that, from and after the execution of the Merger Agreement, the
Company will immediately advise the Purchaser in writing of the receipt,
directly or indirectly, of any discussions, negotiations or proposals relating
to an Acquisition Transaction, identify the offeror and furnish to the Purchaser
a copy of any such proposal, if it is in writing, or a written summary of any
such proposal relating to an Acquisition Transaction if it is not in writing,
and that the Company will promptly advise Parent of any development relating to
such proposal, including results of any discussions or negotiations with respect
thereto.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger
Agreement, the respective obligations of Parent, the Purchaser and the Company
to consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the stockholders of the
Company shall have duly approved the transactions contemplated by the Merger
Agreement, if required by applicable law; (ii) the Purchaser shall have accepted
for payment and paid for Shares in an amount sufficient to meet the Minimum
Condition and otherwise pursuant to the Offer in accordance with the terms of
the Merger Agreement; provided, however, that this condition will be satisfied
with respect to the obligation of Parent and the Purchaser to effect the Merger
if the Purchaser fails to accept for payment or pay for Shares pursuant to the
Offer in violation of the terms of the Offer; (iii) the consummation of the
Merger is not
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restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
is not any statute, rule or regulation enacted, promulgated or deemed applicable
to the Merger by any Governmental Entity which prevents the consummation of the
Merger or has the effect of making the purchase of Shares illegal; and (iv) any
waiting period (and any extension thereof) under the HSR Act applicable to the
Merger shall have expired or terminated.
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time, notwithstanding approval thereof by the stockholders of
the Company (with any termination by Parent also being an effective termination
by the Purchaser): (i) by the mutual written consent of Parent and the Company;
(ii) by the Company if (1) Parent or the Purchaser fails to commence the Offer
by July 7, 1997, (2) Parent or the Purchaser has not accepted for payment and
paid for Shares pursuant to the Offer in accordance with the terms thereof or
the Merger Agreement on or before October 31, 1997 (provided that the Company
may not so terminate the Merger Agreement if it has materially breached the
Merger Agreement); (iii) by Parent or the Company (A) if the Offer is terminated
or withdrawn pursuant to its terms without any Shares being purchased thereunder
or (B) the Merger shall not have been consummated on or before December 31,
1997; provided, however, that neither Parent nor the Company may so terminate
the Merger Agreement if such party shall have materially breached the Merger
Agreement; (iv) by Parent or the Company if any court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant to
the Offer or the Merger and such order, decree or ruling or other action shall
have become final and nonappealable, provided that the party seeking to
terminate the Merger Agreement shall have used its reasonable efforts to remove
or lift such order, decree or ruling; (v) by the Company if, prior to the
acceptance for payment of Shares pursuant to the Offer, the Company Board
approves an Acquisition Transaction, on terms which a majority of the members of
the Company Board have determined in good faith (A) after consultation with
Salomon Brothers or another nationally recognized investment banking firm, to be
more favorable to the Company and its stockholders than the transactions
contemplated by the Merger Agreement, taking into account the distribution of
the Contingent Rights, and (B) after consultation with outside legal counsel,
that failure to approve such proposal and terminate the Merger Agreement would
reasonably be expected to result in a breach of fiduciary duties of the Company
Board under applicable law; provided that the termination described in this
provision shall not be permissible unless and until the Company shall have
provided the Purchaser and Parent prior written notice at least two business
days prior to such termination that the Company Board has authorized and intends
to effect the termination of the Merger Agreement pursuant to this provision
(including copies of all proposed written agreements, arrangements or
understandings, including the forms of any agreements supplied by third parties,
with respect to such Acquisition Transaction (and a description of all material
oral agreements with respect thereto)), the Company shall otherwise be in
compliance with its obligations under the Merger Agreement and on or prior to
such termination shall have paid to Parent the Termination Fee; provided
further, that notwithstanding anything in the Merger Agreement to the contrary
the termination of the Merger Agreement by the Company in compliance with this
provision shall not be deemed to violate other obligations of the Company under
the Merger Agreement; (vi) by Parent if the Company breaches its covenant with
regard to the Rights Agreement or makes certain amendments to the Rights
Agreement, provided, however, such breach occurs prior to the time that
designees of Parent constitute a majority of the Company Board; (vii) by Parent
prior to the purchase of Shares pursuant to the Offer, if the Company Board
shall have withdrawn or modified (including by amendment of the Schedule 14D-9)
in a manner adverse to the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger, shall have approved or recommended an
Acquisition Transaction, or shall have resolved to effect any of the foregoing;
or (viii) by Parent prior to the purchase of Shares pursuant to the Offer, if
the Minimum Condition has not been satisfied by the expiration date of the Offer
and on or prior to such date an Acquisition Transaction has been publicly
announced or disclosed.
Pursuant to the Merger Agreement, in the event of the termination of the
Merger Agreement, the Merger Agreement will become void and have no effect,
without any liability on the part of any party or its directors, officers or
shareholders, other than certain specified provisions, which shall survive any
such termination; provided that no party would be relieved from liability for
any breach of the Merger Agreement.
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FEES AND EXPENSES. Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated by the Merger Agreement will
be paid by the party incurring such expenses. In the event that the Merger
Agreement is terminated pursuant to clauses (v), (vi) or (vii) in the second
preceding paragraph above (or is terminated pursuant to clause (iii)(A) in such
paragraph as a result of the failure to satisfy the conditions set forth in
paragraphs (d) or (g) of Section 14) then the Company will promptly (and in any
event within one business day after such termination) or in the case of any such
termination by the Company, prior to such termination, pay Parent a termination
fee of $13,000,000 (the "Termination Fee"), provided that in no event shall more
than one Termination Fee be payable by the Company. In the event that the Merger
Agreement is terminated pursuant to clause (viii) in the second preceding
paragraph above and within six months of the date of the termination of the
Merger Agreement a transaction constituting an Acquisition Transaction is
consummated or the Company or any of its subsidiaries enters into an agreement
with respect to, or approves or recommends such a transaction, the Company will
promptly (and in any event within one business day thereafter) pay Parent the
Termination Fee. The prevailing party in any legal action undertaken to enforce
the Merger Agreement or any provision thereof will be entitled to recover from
the other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
AMENDMENT. The Merger Agreement may be amended by the Company, Parent and
the Purchaser at any time before or after any approval of the Merger Agreement
by the stockholders of the Company but, after any such approval, no amendment
will be made which decreases the price to be paid in the Merger or which
adversely affects the rights of the Company's stockholders thereunder without
the approval of such stockholders. The Merger Agreement provides that any
amendment or termination of the Merger Agreement following the election of
Parent's designees to the Company Board requires the concurrence of a majority
of the directors of the Company Board who are not Purchaser Insiders (or in the
case where there are two or fewer directors who are not Purchaser Insiders, the
concurrence of one director who is not a Purchaser Insider).
EXTENSION; WAIVER. At any time prior to the Effective Time, Parent and the
Purchaser, on the one hand, and the Company, on the other hand, may (i) extend
the time for the performance of any of the obligations or other acts of the
other, (ii) waive any inaccuracies in the representations and warranties
contained therein of the other or in any document, certificate or writing
delivered pursuant to the Merger Agreement by the other or (iii) waive
compliance by the other with any of the agreements or conditions.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. If the Merger is consummated, however, stockholders of the Company who
have not tendered their Shares will have certain rights under the GCL to dissent
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Stockholders who perfect such rights by complying with the
procedures set forth in Section 262 of the GCL ("Section 262") will have the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) determined by the Delaware Court of
Chancery and will be entitled to receive a cash payment equal to such fair value
from the Surviving Corporation. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The Weinberger court also noted that under Section 262,
fair value is to be determined "exclusive of any element of value arising from
the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor,
Inc., however, the Delaware Supreme Court stated that, in the context of a
two-step cash merger, "to the extent that value has been added following a
change in majority control before cash-out, it is still value attributable to
the going concern," to be included in the appraisal process. As a consequence of
the foregoing, the fair value determined in any appraisal proceeding could be
the same as or more or less than $39.00 per Share.
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<PAGE> 29
Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares. Parent
intends, however, to cause the Surviving Corporation to argue in an appraisal
proceeding that, for purposes of such proceeding, the fair value of each Share
is less than the price paid in the Merger. In this regard, stockholders should
be aware that opinions of investment banking firms as to the fairness from a
financial point of view (including Salomon Brothers' opinion described herein)
are not necessarily opinions as to "fair value" under Section 262.
Several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders that requires that the merger be "entirely
fair" to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and in Rabkin v. Philip A. Hunt Chemical Corp. that although the
remedy ordinarily available to minority stockholders in a cash-out merger that
is found to be not fair to the minority stockholders is the right to appraisal
described above, monetary damages, injunctive relief or such other relief as the
court may fashion may be available if a merger is found to be the product of
procedural unfairness, including fraud, misrepresentation or other misconduct.
THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF THE GCL.
Plans for the Company. Following consummation of the Merger, Parent
presently intends to operate the Company as a subsidiary with substantially the
same operating management under the leadership of John C. Matthews, Senior Vice
President of the Company. In addition, Parent has agreed in the Merger Agreement
that it shall not take any action to cause the Company, including the Surviving
Corporation after the consummation of the Merger, to breach its covenants and
other obligations in the Contingent Rights Agreement. A summary of certain of
the Company's covenants and obligations under the Contingent Rights Agreement
appears below in this Section 11.
Except as described in this Offer to Purchase, none of the Purchaser,
Parent nor, to the best knowledge of the Purchaser and Parent, any of the
persons listed on Schedule I, has any present plans or proposals that would
relate to or would result in (i) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries, (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, (iii) any change in the present Company
Board or management of the Company, (iv) any material change in the present
capitalization or dividend policy of the Company, (v) any material change in the
Company's corporate structure or business, (vi) causing a class of securities of
the Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association or (vii) a class of equity securities of the
Company becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger. However, Rule
13e-3 would be inapplicable if (i) the Shares are deregistered under the
Exchange Act prior to the Merger or other business combination or (ii) the
Merger or other business combination is consummated within one year after the
purchase of the Shares pursuant to the Offer and the amount paid per Share in
the Merger or other business combination is at least equal to the amount paid
per Share in the Offer. If applicable, Rule 13e-3 requires, among other things,
that certain financial information concerning the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior to
the consummation of the transaction.
The Rights. According to the Company's Current Report on Form 8-K dated
September 9, 1994 (together with subsequent filings relating to the Rights
Agreement, the "Company 8-K"), on September 8, 1994, the Company Board declared
a dividend distribution of one Right for each outstanding Share, which
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<PAGE> 30
Right then entitled the holder to purchase one one-hundredth of a share of a new
Series A Junior Participating Preferred Stock, at a purchase price of $40.00,
subject to adjustment.
According to the Company 8-K, the Rights are attached to all certificates
representing Shares outstanding, and no separate Rights Certificates have been
distributed. The Rights will separate from the Shares and a Distribution Date
will occur upon the earlier of (i) 10 days following a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding Shares, (ii) 10 business days following the commencement
of a tender offer or exchange offer that may result in a person or group
beneficially owning 15% or more of such outstanding Shares or (iii) 10 business
days after the Continuing Directors of the Company shall declare any person to
be an Adverse Person, upon a determination that such person, alone or together
with its affiliates and associates, has become the Beneficial Owner (as defined
in the Rights Agreement) of a number of Shares which the Continuing Directors
determine to be substantial and a majority of the Continuing Directors (with the
concurrence of a majority of the Independent Directors (as defined in the Rights
Agreement)) determines, after reasonable inquiry and investigation, including
consultation with such persons as such directors shall deem appropriate, that
(a) such beneficial ownership by such person is intended to cause the Company to
repurchase the Shares beneficially owned by such person or to cause pressure on
the Company to take action or enter into a series of transactions intended to
provide such person with short-term financial gain under circumstances where
such directors determine that the best long-term interests of the Company and
its stockholders would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such beneficial
ownership is causing or is reasonably likely to cause a material adverse impact
on the business or prospects of the Company. According to the Company 8-K, the
Rights are not exercisable until the Distribution Date. The Rights will expire
at the close of business on October 17, 2004, unless earlier redeemed by the
Company as described below.
In the event that the Continuing Directors determine that a person is an
Adverse Person or, at any time following the Distribution Date, (i) the Company
is the surviving corporation in a merger with an Acquiring Person and the Shares
are not changed or exchanged, (ii) a Person becomes an Acquiring Person (except
pursuant to an offer for all outstanding shares of Common Stock which the
Independent Directors determine to be fair to, and otherwise in the best
interests of, the Company and its stockholders), (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
will thereafter have the right to receive, upon exercise, that number of Shares
(or, in certain circumstances, cash, property or other securities of the
Company) which equals the exercise price of the Right divided by one-half of the
current market price (as defined in the Rights Agreement) of the Shares at the
date of the occurrence of the event. However, Rights are not exercisable
following the occurrence of any of the events set forth above until such time as
the Rights are no longer redeemable by the Company as set forth below.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person or Adverse Person will be null and void. The events set forth
in this paragraph are referred to as "Section 11(a)(ii) Events."
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger which
follows an offer determined by the Company Board to be fair as described in
clause (ii) of the preceding paragraph), or (ii) more than 50% of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, that number of shares of common stock
of the acquiring company which equals the exercise price of the Right divided by
one-half of the current market price of such common stock at the date of the
occurrence of the event. The events set forth in this paragraph and the Section
11(a)(ii) Events are collectively referred to as "Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event, a majority
of the Continuing Directors may exchange the Rights (other than Rights owned by
an Acquiring Person or Adverse Person which have
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<PAGE> 31
become void), in whole or in part, at an exchange ratio of one Share, or one
Common Stock Equivalent (as defined in the Rights Agreement), per Right (subject
to adjustment).
According to the Company 8-K, until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Company Board prior to the earlier to occur of the determination that a person
is an Adverse Person or the Distribution Date. After the earlier of such events,
the provisions of the Rights Agreement may be amended by the Company Board (in
certain circumstances with the occurrence of the Continuing Directors) in order
to cure any ambiguity, to make changes which do not aversely affect the
interests of holders of Rights (excluding the interests of any Acquiring Person
or any Adverse Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
Pursuant to an amendment dated as of June 30, 1997, the Rights Agreement
was amended to provide that, among other things, no Triggering Event or
Distribution Date would result under the Rights Agreement by reason of the
approval, execution or delivery of the Merger Agreement, the announcement or
consummation of the Offer or consummation of the other transactions contemplated
by the Merger Agreement.
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Company 8-K and
the text of the Rights Agreement as set forth as an exhibit thereto filed with
the Commission, copies of which may be obtained in the manner set forth in
Section 8.
STOCKHOLDERS ARE REQUIRED TO TENDER ONE ASSOCIATED RIGHT FOR EACH SHARE
TENDERED IN ORDER TO EFFECT A VALID TENDER OF SUCH SHARE. IF THE DISTRIBUTION
DATE DOES NOT OCCUR PRIOR TO THE EXPIRATION DATE, A TENDER OF SHARES WILL ALSO
CONSTITUTE A TENDER OF THE ASSOCIATED RIGHTS. SEE SECTIONS 1 AND 3.
The Contingent Rights. On June 29, 1997, the Board of Directors of the
Company declared a dividend of Contingent Payment Rights (the "Contingent
Rights") payable on September 23, 1997 with respect to Shares outstanding on
July 25, 1997. Contingent Rights will also be issued with respect to Shares
issued between July 25, 1997 and the earlier of December 31, 1997 or the
redemption date of the Contingent Rights, upon exercise of options to purchase
Shares issued under the Company's stock option and stock purchase plans and
outstanding on July 25, 1997. THE OFFER IS NOT BEING MADE FOR THE CONTINGENT
RIGHTS. HOLDERS OF RECORD OF SHARES ON JULY 25, 1997 WILL BE ENTITLED TO RECEIVE
THE CONTINGENT RIGHTS ON THE PAYMENT DATE OF SEPTEMBER 23, 1997 WHETHER OR NOT
THEIR SHARES ARE PURCHASED IN THE OFFER OR THE MERGER.
The Contingent Rights will be issued under the Contingent Payment Rights
Agreement (the "Contingent Rights Agreement"), a form of which is attached as
Exhibit B to the Merger Agreement which is filed as an exhibit to the Schedule
14D-1 and incorporated herein by reference. The following summary of certain
provisions of the Contingent Rights Agreement does not purport to be complete,
and such summary is qualified in its entirety by such reference. The definition
of certain capitalized terms used in the following summary are set forth under
the caption "-- Certain Definitions."
GENERAL. The Contingent Rights will be unsecured obligations of the
Company and will rank equally with all other unsubordinated indebtedness of the
Company. PARENT HAS NOT GUARANTEED OR OTHERWISE ASSUMED ANY LIABILITY FOR THE
CONTINGENT RIGHTS. The Contingent Rights will represent the right to receive on
March 31, 1999 (the "Contingent Payment Date") a Contingent Payment, if any,
based upon Net Sales of the Company during calendar year 1998 (the "Contingent
Payment Period").
DETERMINATION OF CONTINGENT PAYMENT. Unless the Contingent Rights have
been extinguished or redeemed as described below, each Holder of a Contingent
Right at the close of business on the Contingent Payment Date will be entitled
to receive in respect of each Contingent Right held, only upon presentation and
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surrender of the Right Certificate at the offices or agencies of the Company
designated pursuant to the Contingent Rights Agreement, an amount in cash, if
any, determined by the following table:
<TABLE>
<CAPTION>
NET SALES OF THE COMPANY FOR
THE CONTINGENT PAYMENT PERIOD CONTINGENT PAYMENT
------------------------------------------------------------------- -------------------
<S> <C>
$149,000,000 or greater $5.00
$141,000,000 $3.50
$134,000,000 $2.25
$127,000,000 $1.00
$122,000,000 or less $0.00
</TABLE>
If Net Sales falls between two of the levels (each, a "Threshold Level")
specified above, the amount of the Contingent Payment shall be equal to "C" in
the following equation:
S - L = C - PL
----- ------
G - S PG - C
Where:
<TABLE>
<S> <C> <C>
S = Net Sales
L = Highest Threshold Level of Net Sales which is less than S
G = Lowest Threshold Level of Net Sales which is greater than S
PL = Contingent Payment if Net Sales were L
PG = Contingent Payment if Net Sales were G
C = Contingent Payment
</TABLE>
UNDER NO CIRCUMSTANCES WILL ANY PAYMENT BE MADE IN RESPECT OF THE
CONTINGENT RIGHTS IF NET SALES FOR THE CONTINGENT PAYMENT PERIOD DO NOT EXCEED
$122,000,000. The determination of Net Sales shall be made by the Company and
set forth in an Officers' Certificate and accompanied by a certificate or
opinion of an independent public accountant, delivered to the trustee under the
Contingent Rights Agreement (the "Trustee") not later than March 15, 1999. Such
determination absent manifest error shall be final and binding on the Company
and the Holders.
No interest shall accrue on any amounts payable on the Contingent Rights to
any Holder.
Contingent Payments on each Contingent Right shall be calculated to the
nearest cent, with one-half cent rounded for such purpose to the next greater
whole number.
OPTIONAL REDEMPTION OF CONTINGENT RIGHTS. The Company may, at its option,
at any time after the occurrence of a Change of Control, upon not less than 30
days nor more than 60 days notice, redeem the then outstanding Rights, in whole
or in part, at a price of $5.00 per Right, without interest.
EXTINGUISHMENT OF CONTINGENT RIGHTS. The Rights shall be extinguished
without any payment therefor and have no further force and effect (i) on
December 31, 1997, if no Change of Control has occurred prior to such date or
(ii) on March 31, 1999 if Net Sales for the Contingent Payment Period shall not
have exceeded $122,000,000.
CERTAIN COVENANTS. The Contingent Rights Agreement provides that the
Company will cause all properties used or useful in the conduct of its business
or the business of any Subsidiary (as defined in the Contingent Rights
Agreement) to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that the foregoing shall not prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, as determined by the Company Board in good
faith, desirable in the conduct of its business or the business of any
Subsidiary.
The Contingent Rights Agreement further provides that the Company will use
reasonable efforts during the Contingent Payment Period to operate its business
in the ordinary course and substantially as operated
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<PAGE> 33
heretofore, provided, however, that the foregoing shall not prevent the Company
from operating the business of the Company in accordance with its business
judgment to enhance the growth and profitable development of the Company's
business, so long as the Company is not motivated by an intention to diminish
the value of the Contingent Rights.
The Contingent Rights Agreement also provides that the Company will not
engage in material transactions with Affiliates (other than Subsidiaries of the
Company), or material transactions with other persons which are primarily for
the benefit of such Affiliates, which would reduce Net Sales during the
Contingent Payment Period, except on terms that are comparable to those that
would be obtained from unaffiliated parties on an arms-length basis.
The Contingent Rights Agreement also provides that, prior to January 1,
1999, the Company will not sell or transfer a substantial portion of the assets
of the Company, other than in the ordinary course of business or pursuant to a
transaction which constitutes a sale of all or substantially all of the
Company's assets, unless the Company shall have called for the redemption of all
of the then outstanding Contingent Rights.
The Contingent Rights Agreement also provides that the Company will not
merge or consolidate with or into any other Person or sell or convey all or
substantially all of its assets to any Person unless (i) either the Company
shall be the continuing corporation, or the successor corporation shall be a
Person organized in the United States and shall expressly assume the obligations
of the Company under the Contingent Rights Agreement, by supplemental agreement
satisfactory to the Trustee, and (ii) the Company or such successor corporation,
as the case may be, shall not, immediately after such transaction, be in default
in the performance of any such covenant or condition.
NON-PAYMENT UNDER THE CONTINGENT RIGHTS AGREEMENT. In case the Company
shall default in the payment of any Contingent Payment when and as the same
shall have become due and payable and such default continues for a period of 30
days, then upon demand of the Trustee, the Company will pay to the Trustee for
the benefit of the Holders of the Contingent Rights the whole amount then due
and payable; and in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including reasonable compensation
to the Trustee and each predecessor Trustee, their respective agents, attorneys
and counsel, and any expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of its negligence
or bad faith.
In case the Company shall fail to pay such amounts upon such demand, the
Trustee, in its own name and as trustee of an express trust, shall be entitled
and empowered to institute any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against the Company or other obligor upon such Contingent Rights
and collect in the manner provided by law out of the property of the Company or
other obligor upon such Contingent Rights, wherever situated, the moneys
adjudged or decreed to be payable.
No Holder of any Contingent Right shall have any right by virtue or by
availing of any provision of the Contingent Rights Agreement to institute any
action or proceeding at law or in equity or in bankruptcy or otherwise upon or
under or with respect thereto, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official or for any other remedy
thereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, and unless also the
Holders of not less than 25% of the then outstanding Contingent Rights shall
have made written request upon the Trustee to institute such action or
proceedings in its own name as trustee under the Contingent Rights Agreement and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby
and the Trustee for 60 days after receipt of such notice, request and offer of
indemnity shall have failed to institute any such action or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to the Contingent Rights Agreement.
Notwithstanding any other provision in the Contingent Rights Agreement and
any provision of any Contingent Right, the right of any Holder of any Contingent
Right to receive payment of the Contingent Payment payable in respect of such
Contingent Right on or after the Contingent Payment Date, or to institute
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<PAGE> 34
suit for the enforcement of any such payment on or after the Contingent Payment
Dates, shall not be impaired or affected without the consent of such Holder.
The Trustee shall transmit to the Holders, as the names and addresses of
such Holders appear on the security register kept pursuant to the Contingent
Rights Agreement, notice by mail of all defaults which have occurred, such
notice to be transmitted within 90 days after the occurrence thereof, unless
such defaults shall have been cured before the giving of such notice (the term
"default" or "defaults" defined to mean any event or condition which is, or with
notice or lapse of time or both would become, an Event of Default (as defined in
the Contingent Rights Agreement); provided that, except in the case of default
in the payment of the amounts payable in respect of any of the Contingent
Rights, the Trustee shall be protected in withholding such notice if and so long
as the Trustee in good faith determines that the withholding of such notice is
in the interests of the Holders.
AMENDMENTS. Without the consent of any of the Holders, the Company and the
Trustee may modify and amend the Contingent Rights Agreement, in the form
satisfactory to the Trustee, (i) in order to convey, transfer, assign, mortgage
or pledge any property or assets to the Trustee as security for the Contingent
Rights, (ii) to provide for a guarantee by any Person (as defined in the
Contingent Rights Agreement) of some or all of the obligations of the Company
under the Contingent Rights Agreement for the benefit of the Holders, (iii) to
add further covenants, restrictions, conditions or provisions to the Contingent
Rights Agreement as the Company Board and the Trustee consider to be for the
protection of the Holders, or (iv) to cure any ambiguity or to make changes that
do not adversely affect the interests of the Holders in any material respect.
With the consent of not less than a majority of the Holders, the Company and the
Trustee may modify and amend the Contingent Rights Agreement and the Contingent
Rights for the purpose of adding, eliminating or changing any provision therein,
or to modifying in any manner the rights of the Holders under the Contingent
Rights Agreement; provided, however, that no such amendment will, without the
consent of each Holder, (i) modify the definition of Contingent Payment Period,
Contingent Payment, Contingent Payment Date, or Net Sales as such terms are
defined in the Contingent Rights Agreement, or otherwise reduce the amounts
payable in respect of the Contingent Rights or (ii) reduce the amount of the
outstanding Contingent Rights.
TRANSFERABILITY. The Contingent Rights will be issued only in registered
form. The Company has agreed to use all reasonable efforts to cause the
Contingent Rights to be registered under the Exchange Act prior to the issuance
of the Contingent Rights or as promptly as practicable thereafter. Following
such registration, the Contingent Rights are expected to be freely transferable
subject to compliance with the Securities Act of 1933, as amended and other
applicable laws. The Contingent Rights are not expected to be listed on a
national securities exchange or quoted for trading on the NASDAQ National Market
following the Merger, and neither the Company nor Parent is committed nor has
any present intent to so list or quote the Contingent Rights.
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE CONTINGENT RIGHTS, AND THE
PRICES AT WHICH THE CONTINGENT RIGHTS MAY TRADE CANNOT BE PREDICTED. NO
ASSURANCE CAN BE GIVEN THAT AN ACTIVE PUBLIC MARKET FOR THE CONTINGENT RIGHTS
WILL DEVELOP OR THAT ANY CONTINGENT PAYMENT THEREUNDER WILL EVER BE PAID TO
HOLDERS THEREOF PURSUANT TO THE CONTINGENT RIGHTS. Until such securities are
fully distributed and an orderly market develops, the prices at which trading
occurs may fluctuate significantly. Trading prices will be determined by the
market and may be influenced by many factors, including, among others, the depth
and liquidity of the market for such securities, investor perception of the
Company, the prospects for payment pursuant to the Contingent Rights, and
general economic and market conditions.
CERTAIN DEFINITIONS. "Affiliate" of any specified Person means any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct or cause the direction of the management and policies of such
Person, directly or indirectly, whether through the ownership of Voting
Securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"Change of Control" shall be deemed to have occurred if:
(a) there shall be consummated any reorganization, recapitalization,
consolidation or merger, or sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets, of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Shares and Outstanding
Voting Securities (as such terms are defined in the Contingent Value Rights
Agreement) immediately prior to such Business Combination beneficially own
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Common Shares and Outstanding
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Board of Directors of the Company as of the date of the
Contingent Value Rights Agreement; or
(b) the stockholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and 14(d)(2) of
the Exchange Act) other than the Company, or any employee benefit plan
sponsored by the Company, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company
representing twenty-five percent (25%) or more of either (i) the then
outstanding Shares or (ii) the Outstanding Voting Securities; provided,
however, that an acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of paragraph (a) above
shall not be deemed to be a Change of Control; or
(d) individuals which constituted the Board of Directors of the
Company as of the date of the Contingent Value Rights Agreement shall cease
for any reason to constitute at least a majority thereof.
"Holder" means a Person in whose name a Contingent Right is registered in
the Security Register.
"Net Sales" means the amount of net sales reflected on the audited income
statement of the Company and its consolidated subsidiaries for the Contingent
Payment Period prepared by the Company in accordance with generally accepted
accounting principles consistent with the Company's policies in effect prior to
the date hereof.
"Officers' Certificate" means a certificate signed by the chairman of the
Board of Directors or the president or any vice president, the controller or
assistant controller and the treasurer or assistant treasurer or the secretary
or any assistant secretary of the Company, and delivered to the Trustee.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Right Certificate" means a certificate representing any of the Rights.
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"Subsidiary" means each Person more than 50% of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company or one or more
Subsidiaries, or by the Company and one or more other Subsidiaries.
"Voting Stock" means stock having ordinary voting power to elect a majority
of the directors irrespective of whether or not stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency.
Certain Employee Arrangements
Parent and the Company have entered into an agreement with Mr. John C.
Matthews, Senior Vice President of the Company, pursuant to which, effective
upon the consummation of the Merger, Parent would grant Mr. Matthews an option
to purchase 12,000 shares of the common stock of Parent ("Parent Option"). The
per-share option price of the Parent Option will equal the fair market value of
a share of the common stock of Parent on the date of grant. The Parent Option
will have a ten-year term and will become exercisable on the fifth anniversary
of the date of grant, unless Mr. Matthews' employment has previously been
terminated by the Company for cause or by Mr. Matthews because of a significant
change in his status (as defined in Mr. Matthews' existing employment
agreement). In consideration of the grant of the Parent Option, Mr. Matthews
agreed to a covenant not to compete with the semiconductor equipment business of
Parent and entities controlled by Parent or with the business of the Company and
its subsidiaries during the period of two years after the termination of his
employment for any reason. Parent and the Company have also entered into an
agreement with one employee of the Company who is not a director or executive
officer of the Company.
Parent and the Company have also entered into an agreement with Mr. Leslie
S. Levine, President and Chief Executive Officer of the Company, pursuant to
which, for a period of five years following the consummation of the Merger, he
will render consulting services to Parent and the Company and will abide by a
covenant not to compete with the semiconductor equipment businesses of Parent
and entities controlled by Parent or with the business of the Company and its
subsidiaries, in exchange for a fee of $750,000 payable promptly following the
consummation of the Merger, plus $12,500 per month during such period.
12. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$307 million. Parent will ensure that the Purchaser has sufficient funds to
acquire all the outstanding Shares pursuant to the Offer and the Merger. Parent
plans to provide such funds from its cash accounts and from the sale of
commercial paper.
Parent anticipates that any commercial paper borrowings may be refinanced
from time to time. Such decision will be made based on Parent's review from time
to time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions and such other
factors as Parent may deem appropriate.
13. DIVIDENDS AND DISTRIBUTIONS.
If on or after the date of the Merger Agreement the Company (i) splits,
combines or otherwise changes the Shares or its capitalization (other than the
issuance of the Contingent Rights), (ii) acquires Shares or otherwise causes a
reduction in the number of Shares, (iii) issues or sells additional Shares
(other than the issuance of Shares reserved for issuance as of the date of the
Merger Agreement under option and employee stock purchase plans in accordance
with their terms as publicly disclosed as of the date of the Merger Agreement)
or any shares of any other class of capital stock, other voting securities or
any securities convertible into or exchangeable for, or rights (other than the
Rights and the Contingent Rights), warrants or options, conditional or
otherwise, to acquire, any of the foregoing or (iv) discloses that it has taken
such action, then, without prejudice to the Purchaser's rights under Section 14,
the Purchaser, in its sole discretion, may make such adjustments in the purchase
price and other terms of the Offer as it deems appropriate to reflect such
split, combination or other change or action, including, without limitation, the
Minimum Condition or the number or type of securities offered to be purchased.
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If on or after the date of the Merger Agreement the Company declares or
pays any dividend on the Shares or any distribution (including, without
limitation, the issuance of additional Shares pursuant to a stock dividend or
stock split, the issuance of other securities or the issuance of rights (other
than the Contingent Rights) for the purchase of any securities) with respect to
the Shares or Rights that is payable or distributable to stockholders of record
on a date prior to the transfer into the name of the Purchaser or its nominees
or transferees on the Company's stock transfer records of the Shares and Rights
purchased pursuant to the Offer, and if Shares are purchased in the Offer, then,
without prejudice to the Purchaser's rights under Section 14, (i) the purchase
price per Share payable by the Purchaser pursuant to the Offer shall be reduced
by the amount of any such cash dividend or cash distribution and (ii) any such
non-cash dividend, distribution, issuance, proceeds or rights to be received by
the tendering stockholders shall (A) be received and held by the tendering
stockholders for the account of the Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (B) at the direction of the Purchaser, be exercised
for the benefit of the Purchaser, in which case the proceeds of such exercise
will promptly be remitted to the Purchaser. Pending such remittance and subject
to applicable law, the Purchaser will be entitled to all rights and privileges
as owner of any such non-cash dividend, distribution, issuance, proceeds or
rights and may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Purchaser in its sole
discretion.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) promulgated under the
Exchange Act, pay for any tendered Shares and may terminate or, subject to the
terms of the Merger Agreement, amend the Offer, if (i) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the HSR
Act or under any applicable foreign statutes or regulations shall not have
expired or been terminated prior to the Expiration Date, or (iii) at any time on
or after June 30, 1997 and prior to the time of acceptance for payment or
payment for any Shares, any of the following events (each, an "Event") shall
occur:
(a) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction enacted,
enforced, promulgated, amended, issued or deemed applicable to the Offer,
by any legislative body, court, government or governmental, administrative
or regulatory authority or agency, domestic or foreign, other than the
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger, that, in the reasonable judgment of Parent, would be
expected to, directly or indirectly: (i) make illegal or otherwise prohibit
or materially delay consummation of the Offer or the Merger or seek to
obtain material damages or make materially more costly the making of the
Offer, (ii) prohibit or materially limit the ownership or operation by
Parent or the Purchaser of all or any material portion of the business or
assets of the Company or any of its subsidiaries taken as a whole or compel
Parent or the Purchaser to dispose of or hold separately all or any
material portion of the business or assets of Parent or the Purchaser or
the Company or any of its subsidiaries taken as a whole, or seek to impose
any material limitation on the ability of Parent or the Purchaser to
conduct its business or own such assets, (iii) impose material limitations
on the ability of Parent or the Purchaser effectively to acquire, hold or
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by the Purchaser
or Parent on all matters properly presented to the Company's stockholders,
(iv) require divestiture by Parent or the Purchaser of any Shares, or (v)
may, in the reasonable judgment of Parent, be expected to result in a
Material Adverse Effect on the Company; or
(b) there shall be instituted or pending any action or proceeding by
any Governmental Entity seeking, or that would reasonably be expected to
result in, any of the consequences referred to in clauses (i) through (v)
of paragraph (a) above or by any third party for which there is a
substantial likelihood of resulting in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above; or
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(c) any change shall have occurred (or any development shall have
occurred involving prospective changes) in the business, assets,
liabilities, condition (financial or otherwise), prospects or results of
operations of the Company or any of its subsidiaries that has, or could
reasonably be expected to have, a Material Adverse Effect on the Company;
or
(d) (i) the Company Board or any committee thereof shall have
withdrawn, or shall have modified or amended in a manner adverse to Parent
or the Purchaser, the approval, adoption or recommendation, as the case may
be, of the Offer or the Merger Agreement, or approved or recommended any
Acquisition Transaction, (ii) a Person shall have entered into a definitive
agreement or an agreement in principle with the Company with respect to an
Acquisition Transaction, or (iii) the Company Board or any committee
thereof shall have resolved to do any of the foregoing; or
(e) the Company and the Purchaser and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement, when read without any exception or qualification
as to materiality or Material Adverse Effect on the Company, shall not be
true and correct, as if such representations and warranties were made at
the time of such determination (except as to any such representation or
warranty which speaks as of a specific date, which must be untrue or
incorrect as of such specific date) except where the failure to be so true
and correct would not, individually or in the aggregate, reasonably be
expected to (i) have a Material Adverse Effect on the Company, (ii) prevent
or materially delay the consummation of the Offer, (iii) materially
increase the cost of the Offer to the Purchaser or (iv) have a material
adverse effect on the benefits to Parent of the transactions contemplated
by this Agreement; or
(g) the Company shall have failed to perform in any material respect
or to comply in any material respect with any of its material obligations,
covenants or agreements under the Merger Agreement; or
(h) there shall have occurred, and continued to exist, (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange or on the over-the-counter stock market, as
reported by NASDAQ, (ii) any decline of at least 25% in either the Dow
Jones Average of Industrial Stocks or the Standard & Poor's 500 Index from
the close of business on the last trading day immediately preceding the
date of the Merger Agreement through the applicable Expiration Date, (iii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, or (iv) a commencement of a war,
armed hostilities or other national or international crisis involving the
United States or a material limitation (whether or not mandatory) by any
Governmental Entity on the extension of credit by banks or other lending
institutions.
The foregoing conditions (including those set forth in clauses (i) and (ii)
of the initial paragraph of this Section) are for the benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by Parent or
the Purchaser in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Company with the Commission and other
information regarding the Company, neither Parent nor the Purchaser is aware of
any licenses or regulatory permits that appear to be material to the business of
the Company and its subsidiaries, taken as a whole, and that might be adversely
affected by the Purchaser's acquisition of Shares (and the indirect acquisition
of the stock of the Company's subsidiaries) as contemplated herein, or any
filings, approvals or other actions by or with any domestic, foreign or
supranational governmental authority or administrative or regulatory agency that
would be required for the acquisition or
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ownership of the Shares (or the indirect acquisition of the stock of the
Company's subsidiaries) by the Purchaser pursuant to the Offer as contemplated
herein. Should any such approval or other action be required, it is presently
contemplated that such approval or action would be sought except as described
below under "State Takeover Laws." Should any such approval or other action be
required, there can be no assurance that any such approval or action would be
obtained without substantial conditions or that adverse consequences might not
result to the Company's or its subsidiaries' businesses, or that certain parts
of the Company's, Parent's, the Purchaser's or any of their respective
subsidiaries' businesses might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action or in the event that such approvals were not obtained or such actions
were not taken. The Purchaser's obligation to purchase and pay for Shares is
subject to certain conditions, including conditions with respect to litigation
and governmental actions. See Introduction and Section 14 for a description
thereof.
State Takeover Laws. A number of states (including Delaware where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Merger, the
Purchaser believes that such laws conflict with federal law and constitute an
unconstitutional burden on interstate commerce. In 1982, the Supreme Court of
the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds
the Illinois Business Takeovers Statute, which as a matter of state securities
law made takeovers of corporations meeting certain requirements more difficult.
The reasoning in such decision is likely to apply to certain other state
takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court of the United States held that the State of Indiana could as a
matter of corporate law and, in particular, those aspects of corporate law
concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders, provided that such laws were applicable
only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex
Corp., a Federal district court in Oklahoma ruled that the Oklahoma statutes
were unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee. This
decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a Federal district court in Florida held, in Grand
Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated
Transactions Act and Florida Control Share Acquisition Act were unconstitutional
as applied to corporations incorporated outside of Florida.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger although, pursuant to the Merger
Agreement, the Company has represented that the Company Board has taken
appropriate action to render Section 203 of the GCL inapplicable to the Offer,
the Merger and the transactions contemplated by the Merger Agreement. The
Purchaser reserves the right to challenge the validity or applicability of any
state law allegedly applicable to the Offer or the Merger, and nothing in this
Offer to Purchase nor any action taken in connection herewith is intended as a
waiver of that right. In the event that it is asserted that one or more takeover
statutes apply to the Offer or the Merger, and it is not determined by an
appropriate court that such statute or statutes do not apply or are invalid as
applied to the Offer or the Merger, as applicable, the Purchaser may be required
to file certain documents with, or receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or purchase
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for purchase, or pay for, any Shares tendered. See Section 14.
Antitrust. Under the HSR Act, and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the FTC and the Antitrust
Division of the Department of Justice (the "Antitrust Division") and certain
waiting period requirements
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have been satisfied. The acquisition of Shares pursuant to the Offer and the
Merger is subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer and the Merger,
the purchase of Shares pursuant to the Offer and the Merger may not be
consummated until the expiration of a 15-calendar-day waiting period following
the filing of certain required information and documentary material with respect
to the Offer with the FTC and the Antitrust Division, unless such waiting period
is earlier terminated by the FTC and the Antitrust Division. Parent has filed a
Premerger Notification and Report Form with the FTC and the Antitrust Division
in connection with the purchase of Shares pursuant to the Offer and the Merger
under the HSR Act on July 3, 1997, and the required waiting period with respect
to the Offer and the Merger will expire at 11:59 p.m., New York City time, on
July 18, 1997, unless earlier terminated by the FTC or the Antitrust Division or
Parent receives a request for additional information or documentary material
prior thereto. If within such 15-calendar-day waiting period either the FTC or
the Antitrust Division were to request additional information or documentary
material from Parent, the waiting period with respect to the Offer and the
Merger would be extended for an additional period of 10 calendar days following
the date of substantial compliance with such request by Parent. Only one
extension of the waiting period pursuant to a request for additional information
is authorized by the rules promulgated under the HSR Act. Thereafter, the
waiting period could be extended only by court order or with the consent of
Parent. The additional 10-calendar-day waiting period may be terminated sooner
by the FTC or the Antitrust Division. Although the Company is required to file
certain information and documentary material with the FTC and the Antitrust
Division in connection with the Offer, neither the Company's failure to make
such filings nor a request made to the Company from the FTC or the Antitrust
Division for additional information or documentary material will extend the
waiting period with respect to the purchase of Shares pursuant to the Offer and
the Merger.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Merger. At any time before or after the
Purchaser's purchase of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer and the Merger, the divestiture of Shares purchased pursuant to the
Offer or the divestiture of substantial assets of Parent, the Purchaser, the
Company or any of their respective subsidiaries or affiliates. Private parties
as well as state attorneys general may also bring legal actions under the
antitrust laws under certain circumstances. See Section 14.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Merger should not violate
the applicable antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer and the Merger on antitrust grounds will not be made, or,
if such challenge is made, what the result will be. See Section 14.
Foreign Approvals. According to publicly available information, the
Company conducts business in a number of other foreign countries and
jurisdictions. In connection with the acquisition of the Shares pursuant to the
Offer or the Merger, the laws of certain of those foreign countries and
jurisdictions may require the filing of information with, or the obtaining of
the approval or consent of, governmental authorities in such countries and
jurisdictions. The governments in such countries and jurisdictions might attempt
to impose additional conditions on the Company's operations conducted in such
countries and jurisdictions as a result of the acquisition of the Shares
pursuant to the Offer or the Merger. If such approvals or consents are found to
be required the parties intend to make the appropriate filings and applications.
In the event such a filing or application is made for the requisite foreign
approvals or consents, there can be no assurance that such approvals or consents
will be granted and, if such approvals or consents are received, there can be no
assurance as to the date of such approvals or consents. In addition, there can
be no assurance that the Purchaser will be able to cause the Company or its
subsidiaries to satisfy or comply with such laws or that compliance or
noncompliance will not have adverse consequences for the Company or any
subsidiary after purchase of the Shares pursuant to the Offer or the Merger.
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16. CERTAIN FEES AND EXPENSES.
Morrow & Co., Inc. has been retained by the Purchaser as Information Agent
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the Offer to beneficial owners of Shares. The Purchaser will pay the
Information Agent reasonable and customary compensation for all such services in
addition to reimbursing the Information Agent for reasonable out-of-pocket
expenses in connection therewith.
In addition, Citibank, N.A. has been retained as the Depositary. The
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, will reimburse the Depositary for its
reasonable out-of-pocket expenses in connection therewith and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
Except as set forth above, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by Parent or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
Parent and the Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. Such Schedule 14D-1
and any amendments thereto, including exhibits, may be examined and copies may
be obtained from the office of the Commission in the same manner as described in
Section 8 with respect to information concerning the Company, except that copies
will not be available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer shall under any circumstances create any implication that there has
been no change in the affairs of Parent, the Purchaser, the Company or any of
their respective subsidiaries since the date as of which information is
furnished or the date of this Offer to Purchase.
ETN ACQUISITION CORP.
July 7, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Parent are set forth below. Unless otherwise indicated, the business address of
each such director and each such executive officer is Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114. Unless otherwise indicated below, each
occupation set forth opposite an individual's name refers to employment with
Parent. Unless otherwise indicated below, all directors and executive officers
listed below are citizens of the United States.
DIRECTORS
POSITION WITH PARENT; BUSINESS ADDRESS;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
----------------------------------------
Neil A. Armstrong.................. DIRECTOR SINCE 1981. Former Chairman of
Computing Technologies for Aviation,
Inc., a computer systems company, a
position he held from 1982 until 1992.
He is currently President of Lorain
Inc., 777 Columbus Ave., Lebanon, Ohio
45036. He is a director of Cincinnati
Milacron, Inc., Cinergy Corp., RMI
Titanium Co., Thiokol Corporation and
USX Corporation.
Ernie Green........................ DIRECTOR SINCE 1995. Founder, President
and Chief Executive Officer of EGI,
Inc., a manufacturer of automotive
components. He is also President of
Florida Production Engineering, Inc., a
subsidiary of EGI. He is a director of
Acordia, Inc., Bank One, Dayton, N.A.,
DP&L Inc., Duriron Company, Inc., Fluor
Daniel GTI, Inc. and Gradall Industries,
Inc.
A. William Reynolds................ DIRECTOR SINCE 1987. Chief Executive
Officer of Old Mill Group, a private
investment firm. Former Chairman of
GenCorp Inc., a technology-based company
with positions in aerospace, automotive
and polymer products. Mr. Reynolds'
association with GenCorp began in
September, 1984, as President and Chief
Operating Officer. He was Chief
Executive Officer from August, 1985, to
July, 1994. He was Chairman of GenCorp
from 1987 through March, 1995. Mr.
Reynolds is a director of Boise Cascade
Corporation, Boise Cascade Office
Products Corp. and Stant Corp.
Ned C. Lautenbach.................. DIRECTOR SINCE 1997. Senior Vice
President and Group Executive, Worldwide
Sales and Distribution, of IBM
Corporation. Prior to that, he was
Senior Vice President, Sales and
Services (from 1995-1997), Chairman of
IBM World Trade Corporation (1993-1995)
and Senior Vice President (1992), of
IBM.
John R. Miller..................... DIRECTOR SINCE 1985. President and
Chief Executive Officer of TBN Holdings
Inc., an environmental company engaged
primarily in the resource recovery and
recycling business. He was President,
Chief Operating Officer and a
I-1
<PAGE> 43
POSITION WITH PARENT; BUSINESS ADDRESS;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
----------------------------------------
director of The Standard Oil Company
from August, 1980 through March, 1986.
Mr. Miller formerly served as Chairman
of the Federal Reserve Bank of
Cleveland.
Furman C. Moseley.................. DIRECTOR SINCE 1975. Chairman of
Sasquatch Publishing Company. Former
president of Simpson Investment Company,
holding company for Simpson Paper
Company and Simpson Timber Company. He
was Chairman of Simpson Paper from 1969
to January, 1995 and retired as
President of Simpson Investment Company
in July, 1995. Mr. Moseley is a director
of OwensCorning Fiberglas Corporation.
Victor A. Pelson................... DIRECTOR SINCE 1994. Retired Director
of Dillon, Read & Co., Inc., investment
bankers, and Senior Advisor to the firm.
Before joining Dillon Read in April
1996, Mr. Pelson was associated with
AT&T Corp. from 1959 to March, 1996,
where he held a number of executive
positions, including Group Executive and
President responsible for the
Communications Services Group, Executive
Vice President and member of the
Management Executive Committee. At his
retirement from AT&T, Mr. Pelson was
Chairman of Global Operations and a
member of the Board of Directors. Mr.
Pelson is also a director of United
Parcel Service.
Alexander M. Cutler................ DIRECTOR SINCE 1993. President and
Chief Operating Officer of Parent. Mr.
Cutler joined Cutler-Hammer, Inc. in
1975, which was subsequently acquired by
Parent, and became President of Parent's
Industrial Group in 1986. Mr. Cutler was
named President of the Controls Group in
1989, Executive Vice President --
Operations in 1991, and was elected
Executive Vice President and Chief
Operating Officer -- Controls in
September, 1993 and assumed his current
position in September, 1995.
Phyllis B. Davis................... DIRECTOR SINCE 1991. Former Senior Vice
President, Corporate Affairs of Avon
Products, Inc., a manufacturer and
marketer of cosmetics, toiletries and
jewelry. Mrs. Davis joined Avon in 1968,
advanced to Group Vice President (U.S.)
in 1977 and was head of its sales and
distribution from 1985 to 1988. She
became Corporate Senior Vice President
of Business Development in 1989 and
served as Senior Vice President,
Corporate Affairs from 1990 until her
retirement in September, 1991. Mrs.
Davis is a director of BellSouth
Corporation and The TJX Companies, Inc.,
and a trustee of various open-end mutual
funds in the Fidelity Group.
Stephen R. Hardis.................. DIRECTOR SINCE 1983. Chairman and Chief
Executive Officer of Parent. Mr. Hardis
served as Executive Vice
President -- Finance and Administration
prior to April, 1986, was elected Vice
Chairman in 1986 and designated
I-2
<PAGE> 44
POSITION WITH PARENT; BUSINESS ADDRESS;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
----------------------------------------
Chief Financial and Administrative
Officer, and became Chief Executive
Officer in September, 1995 and Chairman
in January, 1996. He joined Parent in
1979. Mr. Hardis is a director of
KeyCorp, Lexmark International Group,
Inc., Nordson Corporation and
Progressive Corporation.
Gary L. Tooker..................... DIRECTOR SINCE 1992. Chairman of the
Board of Motorola, Inc., a manufacturer
of electronics equipment. Mr. Tooker
joined Motorola in 1962 and advanced to
the position of Senior Executive Vice
President and Chief Corporate Staff
Officer in 1986. He became Chief
Operating Officer in 1988, President in
1990, Vice Chairman and Chief Executive
Officer in December, 1993 and Chairman
in 1997.
EXECUTIVE OFFICERS
Stephen R. Hardis.................. Chairman (January 1, 1996) and Chief
Executive Officer (September 1, 1995);
Director. (For additional information
concerning employment history, see the
information set forth above regarding
Directors of Parent.)
Alexander M. Cutler................ President and Chief Operating Officer
(September 1, 1995); Director. (For
additional information concerning
employment history, see the information
set forth above regarding Directors of
Parent.)
Gerald L. Gherlein................. Executive Vice President and General
Counsel (September 4, 1991).
Adrian T. Dillon................... Executive Vice President -- Chief
Financial and Planning Officer (April
1997). Vice President -- Chief Financial
and Planning Officer (September
1995-April 1997); Vice President --
Planning (1991-1995). Director, IVHS
Technology, Inc. and Eaton VORAD
Technologies.
Brian R. Bachman................... Senior Vice President -- Semiconductor
and Specialty Systems (January 1, 1996).
Vice President, Philips Semiconductor
(October 1991-December 1995).
Joseph L. Becherer................. Senior Vice President -- Cutler-Hammer,
Inc. (September 1, 1995). Operations
Vice President (February 1994-August
1995). Vice President of Westinghouse
Electric Corp. (1989-January 1994).
Robert J. McCloskey................ Senior Vice President -- Controls and
Hydraulics (September 1, 1995).
Operations Vice President (September
1991-September 1995).
Thomas W. O'Boyle.................. Senior Vice President -- Truck
Components (September 1, 1995). Vice
President -- Truck Components
Operations -- Worldwide (September
1991-September 1995).
I-3
<PAGE> 45
POSITION WITH PARENT; BUSINESS ADDRESS;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
----------------------------------------
Larry M. Oman...................... Senior Vice President -- Automotive
Components (September 1, 1995). Employed
by Parent for more than the past five
years.
Susan J. Cook...................... Vice President -- Human Resources
(January 16, 1995). Vice
President -- Human Resources of Tandem
Computers (October 1988-October 1994).
Patrick X. Donovan................. Vice President -- International (April
27, 1988).
Earl R. Franklin................... Secretary and Associate General Counsel
(September 1, 1991).
John W. Hushen..................... Vice President -- Corporate Affairs
(August 1, 1991).
Stanley V. Jaskolski............... Vice President -- Technical Management
(October 1, 1990).
Joseph J. Mikelonis................ Vice President -- Taxes (May 1, 1996).
Director of Taxes prior thereto for more
than the past five years.
William T. Muir.................... Vice President -- Manufacturing
Technologies (April 1, 1989).
Derek R. Mumford................... Vice President -- Information
Technologies (April 1, 1992). (Subject
of the United Kingdom.)
Robert E. Parmenter................ Vice President and Treasurer (January 1,
1997). Assistant Treasurer, Director of
Domestic Finance (more than the past
five years).
Billie K. Rawot.................... Vice President and Controller (March 1,
1991).
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER
The name, business address, present principal occupation or employment and
five-year history of each of the directors and executive officers of the
Purchaser are set forth below. Unless otherwise indicated, the business address
of each such director and each such executive officer is Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114. Unless otherwise indicated, all
directors and executive officers listed below are citizens of the United States.
DIRECTORS
POSITION WITH THE PURCHASER;
BUSINESS ADDRESS; PRINCIPAL
OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
----------------------------------------
Alexander M. Cutler................ DIRECTOR SINCE 1997. (For further
information, see the information set
forth above concerning Parent.)
Gerald L. Gherlein................. DIRECTOR SINCE 1997. (For further
information, see the information set
forth above concerning Parent.)
Stephen R. Hardis.................. CHAIRMAN; DIRECTOR SINCE 1997. (For
further information, see the information
set forth above concerning Parent.)
I-4
<PAGE> 46
EXECUTIVE OFFICERS
Brian R. Bachman................... President since 1997. (For further
information, see the information set
forth above concerning Parent.)
Adrian T. Dillon................... Vice President and Assistant Treasurer
since 1997. (For further information,
see the information set forth above
concerning Parent.)
Earl R. Franklin................... Secretary since 1997. (For further
information, see the information set
forth above concerning Parent.)
Gerald L. Gherlein................. Vice President and Assistant Secretary
since 1997. (For further information,
see the information set forth above
concerning Parent.)
Robert E. Parmenter................ Treasurer since 1997. (For further
information, see the information set
forth above concerning Parent.)
I-5
<PAGE> 47
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT CARRIER:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data c/o Citicorp Data
111 Wall Street, 5th Floor Distribution, Inc. Distribution, Inc.
New York, New York 10043 P.O. Box 7072 404 Sette Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
FACSIMILE FOR
ELIGIBLE INSTITUTIONS:
(201) 262-3240
TO CONFIRM FAX ONLY:
(800) 422-2077
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number set forth below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and other tender offer
materials may be obtained from the Information Agent as set forth below and will
be furnished promptly at the Purchaser's expense. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage
Firms please call:
(800) 662-5200
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO
TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 7, 1997
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
EATON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 1, 1997 UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Carrier:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, c/o Citicorp Data Distribution,
111 Wall Street, 5th Floor Inc. Inc.
New York, New York 10043 P.O. Box 7072 404 Sette Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
Facsimile for Eligible
Institutions:
(201) 262-3240
To confirm fax only:
(800) 422-2077
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates for Shares (as defined in the Offer to Purchase dated July 7, 1997
(the "Offer to Purchase")) are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if tenders of Shares
are to be made by book-entry transfer to an account maintained by Citibank, N.A.
(the "Depositary") at The Depository Trust Company ("DTC") or Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively referred to as the "Book-Entry Transfer Facilities"), pursuant to
the procedures set forth in Section 3 of the Offer to Purchase. Stockholders who
tender Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders."
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date (as defined in the Offer to Purchase) or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. See Instruction 2.
<PAGE> 2
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------
Name of Book-Entry Transfer Facility:
(Check one)
[ ] The Depository Trust Company (DTC)
[ ] Philadelphia Depository Trust Company (PDTC)
Account Number:
---------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
----------------------------------------------
Window Ticket Number (if any):
------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED NUMBER
CERTIFICATE BY SHARE OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated it will be assumed that all Shares represented
by Share Certificates delivered to the Depositary are being tendered. See
Instruction 4.
================================================================================
<PAGE> 3
LADIES AND GENTLEMEN:
The undersigned hereby tenders to ETN Acquisition Corp. (the "Purchaser"),
a Delaware corporation and a wholly-owned subsidiary of Eaton Corporation, an
Ohio corporation ("Parent"), the above described shares of Common Stock, par
value $.01 per share (the "Shares"), of Fusion Systems Corporation, a Delaware
corporation (the "Company"), and the associated preferred share purchase rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of September 8,
1994, as amended as of April 19, 1995 and June 30, 1997, between the Company and
BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent
(as the same may be amended, the "Rights Agreement"), pursuant to the
Purchaser's offer to purchase all outstanding Shares at a price of $39.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, receipt of which
is hereby acknowledged, and in this Letter of Transmittal (which together with
the Offer to Purchase constitute the "Offer"). Unless the context otherwise
requires, all references to Shares shall include the associated Rights. The
undersigned understands that the Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its
subsidiaries or affiliates the right to purchase all or any portion of the
Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby and any and all dividends on
the Shares (including, without limitation, the issuance of additional Shares
pursuant to a stock dividend or stock split, the issuance of other securities,
the issuance of rights for the purchase of any securities, or any cash
dividends, but excluding the Contingent Payment Rights which will be distributed
pursuant to a dividend declared by the Board of Directors of the Company on June
29, 1997 (the "Contingent Rights")) that are declared or paid by the Company on
or after the date of the Offer to Purchase and are payable or distributable to
stockholders of record on a date prior to the transfer into the name of the
Purchaser or its nominees or transferees on the Company's stock transfer records
of the Shares purchased pursuant to the Offer (collectively "Distributions",
which term shall not include the Contingent Rights), and constitutes and
irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact
and proxy of the undersigned to the full extent of the undersigned's rights with
respect to such Shares (and Distributions) with full power of substitution (such
power of attorney and proxy being deemed to be an irrevocable power coupled with
an interest), to (a) deliver Share Certificates (and Distributions), or transfer
ownership of such Shares on the account books maintained by the Book-Entry
Transfer Facilities, together in either such case with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser
upon receipt by the Depositary, as the undersigned's agent, of the purchase
price, (b) present such Shares (and Distributions) for transfer on the books of
the Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and Distributions), all in accordance with
the terms of the Offer. THE OFFER IS NOT BEING MADE FOR THE CONTINGENT RIGHTS.
HOLDERS OF RECORD OF SHARES ON JULY 25, 1997 WILL BE ENTITLED TO RECEIVE THE
CONTINGENT RIGHTS ON THE PAYMENT DATE OF SEPTEMBER 23, 1997 WHETHER OR NOT THEIR
SHARES ARE PURCHASED IN THE OFFER OR THE MERGER. See Sections 11 and 13 of the
Offer to Purchase.
The undersigned hereby irrevocably appoints designees of the Purchaser, and
each of them, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote in such manner as each such attorney and
proxy or his or her substitute shall, in his or her sole discretion, deem
proper, and otherwise act (including pursuant to written consent) with respect
to all of the Shares tendered hereby which have been accepted for payment by the
Purchaser prior to the time of such vote or action (and Distributions) which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned meeting), or by
written consent in lieu of such meeting, or otherwise. This power of attorney
and proxy is coupled with an interest in the Company and in the Shares and is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke, without further
action, any other power of attorney or proxy granted by the undersigned at any
time with respect to such Shares (and Distributions) and no subsequent powers of
attorney or proxies will be given (and if given will be deemed not
<PAGE> 4
to be effective) with respect thereto by the undersigned. The undersigned
understands that the Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser is able to exercise full
voting rights with respect to such Shares and Distributions, including voting at
any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and Distributions) and that when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
Distributions). In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of the Purchaser any and all other
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights and
privileges as owner of such Distributions and may withhold the entire purchase
price or deduct from the purchase price of Shares tendered hereby the amount or
value thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or herein agreed to be conferred shall not
be affected by, and shall survive, the death or incapacity of the undersigned
and any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Tenders of Shares pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment
pursuant to the Offer, may also be withdrawn at any time after September 4,
1997. See Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Shares by book-entry transfer may request that any Shares not accepted
for payment be returned by crediting such account maintained at such Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the "Special Payment Instructions" to
transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of such Shares.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be issued in the name of someone other than the undersigned, or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at a Book-Entry Transfer
Facility other than that designated on the front cover.
Issue check and/or certificates to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
[ ] Credit unpurchased Shares tendered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
[ ] DTC [ ] PDTC
------------------------------------------------------------
(ACCOUNT NUMBER)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown on the front cover.
Mail check and/or certificate to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
<PAGE> 6
IMPORTANT -- SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
-----------------------------------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s)
on the Share Certificate(s) or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide
the necessary information. See Instruction 5.)
Name(s):
-----------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
---------------------------------------------------
Address:
-----------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
---------------------------------------------
Tax Identification or
Social Security No.:
-----------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------
Name (Please print):
------------------------------------------------------
Name of Firm:
-------------------------------------------------------------
Address:
------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
------------------------------------------
Dated:
------------------------------------, 1997
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES.
No signature guarantee on this Letter of Transmittal is required (i) if
this Letter of Transmittal is signed by the registered holder(s) (which term,
for purposes of this document, shall include any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Shares) of the Shares tendered herewith, unless such holder(s) has completed
either the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the inside front cover hereof or (ii) if such
Shares are tendered for the account of a firm that is a bank, broker, dealer,
credit union, savings association or other entity which is a member in good
standing of the Securities Transfer Agents Medallion Program (an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES.
This Letter of Transmittal is to be used either if Share Certificates are
to be forwarded herewith or, unless an Agent's Message is utilized, if tenders
are to be made pursuant to the procedures for tender by book-entry transfer set
forth in Section 3 of the Offer to Purchase. Share Certificates, or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares into the Depositary's account at a Book-Entry Transfer Facility, as well
as this Letter of Transmittal (or a facsimile hereof), properly completed and
duly executed, with any required signature guarantees, or an Agent's Message in
the case of a book-entry delivery, and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date. Stockholders whose
Share Certificates are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary prior to
the Expiration Date or who cannot complete the procedures for delivery by
book-entry transfer on a timely basis may tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Purchaser,
must be received by the Depositary on or prior to the Expiration Date; and (iii)
the Share Certificates (or a Book-Entry Confirmation) representing all tendered
Shares, in proper form for transfer together with a properly completed and duly
executed Letter of Transmittal (or a facsimile hereof), with any required
signature guarantees (or in the case of a book-entry delivery an Agent's
Message) and any other documents required by this Letter of Transmittal, must be
received by the Depositary within three NASDAQ trading days after the date of
execution of such Notice of Guaranteed Delivery. A "NASDAQ trading day" is any
day on which The Nasdaq Stock Market, Inc.'s Nasdaq National Market is open for
business. If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile hereof)
must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal or facsimile hereof, waive any right to receive any
notice of the acceptance of their Shares for payment.
<PAGE> 8
3. INADEQUATE SPACE.
If the space provided herein is inadequate, the certificate numbers and/or
the number of Shares and any other required information should be listed on a
separate schedule attached hereto and separately signed on each page thereof in
the same manner as this Letter of Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If fewer than all the Shares evidenced by any certificate submitted are to
be tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such case, new certificate(s) for the
remainder of the Shares that were evidenced by your old certificate(s) will be
sent to you, unless otherwise provided in the appropriate box marked "Special
Payment Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered owner(s) appear(s) on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES.
Except as set forth in this Instruction 6, the Purchaser will pay or cause
to be paid any stock transfer taxes with respect to the transfer and sale of
purchased Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or if certificates for Shares not
tendered or purchased are to be registered in the name of, any person other than
the registered holder(s), or if tendered certificates are registered in the name
of any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder(s)
or such person) payable on account of the transfer to such person will be
deducted from the purchase price received by such holder(s) pursuant to this
Offer (i.e., such purchase price will be reduced) unless satisfactory evidence
of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
<PAGE> 9
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS.
If (i) a check is to be issued in the name of and/or (ii) certificates for
unpurchased Shares are to be returned to a person other than the signer of this
Letter of Transmittal or if a check is to be sent and/or such certificates are
to be returned to someone other than the signer of this Letter of Transmittal or
to an address other than that shown on the front cover hereof, the appropriate
boxes on this Letter of Transmittal should be completed. Stockholders tendering
Shares by book-entry transfer (i.e., Book-Entry Stockholders) may request that
Shares not purchased be credited to such account maintained at such Book-Entry
Transfer Facility as such Book-Entry Stockholder may designate hereon. If no
such instructions are given, such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above. See
Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Requests for assistance may be directed to the Information Agent at its
addresses set forth below. Requests for additional copies of the Offer to
Purchase and this Letter of Transmittal may be directed to the Information Agent
or to brokers, dealers, commercial banks or trust companies.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9.
Under U.S. Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on Substitute Form
W-9 below. If the Depositary is not provided with the correct TIN, the Internal
Revenue Service may subject the stockholder or other payee to a $50 penalty, and
payments that are made to such stockholder or other payee with respect to Shares
purchased pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing a Substitute Form W-9 certifying (i) that the TIN provided on
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and
(ii) that (a) such stockholder is exempt from backup withholding or (b) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (c) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN of the record
owner of the Shares or of the last transferee appearing on the transfers
attached to, or endorsed on, the Shares. If the Shares are in more
<PAGE> 10
than one name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
10. LOST, DESTROYED OR STOLEN CERTIFICATES.
If any certificate(s) representing Shares has been lost, destroyed or
stolen, the stockholder should promptly notify the Depositary. The stockholder
will then be instructed as to the steps that must be taken in order to replace
the certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A.
- ----------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR NAME, AD-
FORM W-9 DRESS AND TIN AND CERTIFY BY SIGNING AND ------------------------------
DEPARTMENT OF THE TREASURY DATING BELOW. Social Security Number
INTERNAL REVENUE SERVICE Name: or
------------------------------------------
------------------------------
Address: Employer ID Number
-----------------------------------------
----------------------------------------
------------------------------------------------------------------------
PART 2 -- CERTIFICATIONS -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me and have
PAYER'S REQUEST FOR checked the box in Part 3) and
TAXPAYER IDENTIFICATION (2) I am not subject to backup withholding because:
NUMBER ("TIN") (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must PART 3
cross out item (2) above if you have been Awaiting TIN [ ]
notified by the IRS that you are
currently subject to backup withholding
because of underreporting interest or
dividends on your tax return. However, if
after being notified by the IRS that you
were subject to backup withholding you
received another notification from the
IRS that you are no longer subject to
backup withholding, do not cross out such
item (2).
- ----------------------------------------------------------------------------------------------------
Signature ---------------------------------------------------------------- Date -----------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
<PAGE> 12
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature:
- ---------------------------------- Date: -----------------------, 1997
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER
OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER
NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Carrier:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Distribution, Inc.
111 Wall Street, 5th Floor P.O. Box 7072 404 Sette Drive
New York, New York 10043 Paramus, New Jersey 07653 Paramus, New Jersey 07652
Facsimile for Eligible Institutions:
(201) 262-3240
To confirm fax only:
(800) 422-2077
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage
Firms please call:
(800) 662-5200
<PAGE> 1
EXHIBIT (a)(3)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
EATON CORPORATION
AT
$39.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 1, 1997, UNLESS THE OFFER IS EXTENDED.
July 7, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by ETN Acquisition Corp., a Delaware corporation
(the "Purchaser"), and Eaton Corporation, an Ohio corporation ("Parent"), to act
as Information Agent in connection with the Purchaser's offer to purchase all
outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of
Fusion Systems Corporation, a Delaware corporation (the "Company"), and the
associated preferred share purchase rights at a purchase price of $39.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated July 7, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer") enclosed herewith.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is conditioned upon, among other things, Shares representing at
least a majority of the total number of outstanding Shares on a fully diluted
basis being validly tendered and not withdrawn prior to the expiration of the
Offer. The Offer is also subject to other terms and conditions contained in the
Offer to Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer
to Purchase.
IMPORTANT: THE OFFER IS NOT BEING MADE FOR THE CONTINGENT PAYMENT RIGHTS
(THE "CONTINGENT RIGHTS") DECLARED AS A DIVIDEND BY THE BOARD OF DIRECTORS OF
THE COMPANY ON JUNE 29, 1997. HOLDERS OF RECORD OF SHARES ON JULY 25, 1997 WILL
BE ENTITLED TO RECEIVE THE CONTINGENT RIGHTS ON THE PAYMENT DATE OF SEPTEMBER
23, 1997 WHETHER OR NOT THEIR SHARES ARE PURCHASED IN THE OFFER OR THE MERGER.
See Section 11 of the Offer to Purchase.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated July 7, 1997.
2. The Letter of Transmittal for your use to tender Shares and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
<PAGE> 2
3. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
<PAGE> 3
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if certificates for Shares ("Share Certificates") and all other
required documents are not immediately available or cannot be delivered to
Citibank, N.A. (the "Depositary") by the Expiration Date (as defined in the
Offer to Purchase) or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
5. A Letter to stockholders from the Secretary of the Company
accompanied by the Company's Solicitation/Recommendation Statement on
Schedule 14D-9.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 1, 1997, UNLESS
THE OFFER IS EXTENDED.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry delivery of
Shares, and any other required documents should be sent to the Depositary and
either Share Certificates representing the tendered Shares should be delivered
to the Depositary, or Shares should be tendered by book-entry transfer into the
Depositary's account maintained at one of the Book Entry Transfer Facilities (as
described in the Offer to Purchase), all in accordance with the instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer. The
Purchaser will, however, upon request, reimburse you for customary clerical and
mailing expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Purchaser will pay or cause to be paid any stock transfer
taxes payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
Morrow & Co., Inc.,
as Information Agent
909 Third Avenue
20th Floor
New York, NY 10022
(800) 566-9061 (Toll free)
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, THE PURCHASER, THE COMPANY, THE
DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
EATON CORPORATION
AT
$39.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, AUGUST 1, 1997, UNLESS THE OFFER IS EXTENDED.
July 7, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated July 7,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by ETN Acquisition Corp.,
a Delaware corporation (the "Purchaser"), and a wholly-owned subsidiary of Eaton
Corporation, an Ohio corporation, to purchase all outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of Fusion Systems Corporation, a
Delaware corporation (the "Company"), and the associated preferred share
purchase rights (the "Rights"), at a purchase price of $39.00 per Share, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal enclosed herewith. Unless the context otherwise requires, all
references to Shares shall include the associated Rights. Holders of Shares
whose certificates for such Shares (the "Share Certificates") are not
immediately available, or who cannot deliver their Share Certificates and all
other required documents to the Depositary on or prior to the Expiration Date
(as defined in the Offer to Purchase), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $39.00 per Share net to you in cash without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
2. The Offer is being made for all outstanding Shares.
<PAGE> 2
3. THE OFFER IS NOT BEING MADE FOR THE CONTINGENT PAYMENT RIGHTS (THE
"CONTINGENT RIGHTS") DECLARED AS A DIVIDEND BY THE BOARD OF DIRECTORS OF
THE COMPANY ON JUNE 29, 1997. HOLDERS OF RECORD OF SHARES ON JULY 25, 1997
WILL BE ENTITLED TO RECEIVE THE CONTINGENT RIGHTS ON THE PAYMENT DATE OF
SEPTEMBER 23, 1997 WHETHER OR NOT THEIR SHARES ARE PURCHASED IN THE OFFER
OR THE MERGER. See Section 11 of the Offer to Purchase.
4. The Offer is conditioned upon, among other things, Shares
representing at least a majority of the total number of outstanding Shares
on a fully diluted basis being validly tendered and not properly withdrawn
prior to the expiration of the Offer. The Offer is also subject to other
terms and conditions contained in the Offer to Purchase. See the
Introduction and Sections 1, 14 and 15 of the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Purchaser pursuant to the Offer.
6. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, August 1, 1997, unless the Offer is extended.
7. Payment for Shares purchased pursuant to the Offer will in all
cases be made only after timely receipt by Citbank, N.A. (the "Depositary")
of (a) Share Certificates or timely confirmation of the book-entry transfer
of such Shares into the account maintained by the Depositary at The
Depository Trust Company or Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities"), pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees or an Agent's Message (as
defined in the Offer to Purchase), in connection with a book-entry
delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when certificates for or
confirmations of book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility are actually received by the
Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth on the back page of this letter. If you
authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified on the back page of this letter. An envelope to return your
instructions to us is enclosed. Your instructions should be forwarded to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL
OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED
PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
EATON CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated July 7, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection with
the offer by ETN Acquisition Corp., a Delaware corporation (the "Purchaser"),
and a wholly-owned subsidiary of Eaton Corporation, an Ohio corporation, to
purchase all outstanding shares of Common Stock, par value $.01 per share (the
"Shares"), of Fusion Systems Corporation, a Delaware corporation, and the
associated preferred share purchase rights, at a purchase price of $39.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to Be Tendered: _____________ Shares*
Date: ________________________, 1997
_________________
* Unless otherwise indicated, it will be assumed that you instruct us to tender
all Shares held by us for your account.
<PAGE> 4
SIGN HERE
Signature(s)_________________________________________________________________
(Print Name(s))______________________________________________________________
(Print Address(es))__________________________________________________________
(zip code)
(Area Code and Telephone Number(s))__________________________________________
(Taxpayer Identification or Social Security Number(s))_______________________
<PAGE> 1
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
shares of Common Stock, par value $.01 per share (the "Shares"), of Fusion
Systems Corporation, a Delaware corporation (the "Company"), and the associated
Rights (as defined in the Offer to Purchase), are not immediately available or
time will not permit all required documents to reach Citibank, N.A. (the
"Depositary") on or prior to the Expiration Date (as defined in the Offer to
Purchase), or the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be delivered
by hand or sent by facsimile transmission or mail to the Depositary. See Section
3 of the Offer to Purchase.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Carrier:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Distribution, Inc.
111 Wall Street, 5th P.O. Box 7072 404 Sette Drive
Floor
New York, New York 10043 Paramus, New Jersey 07653 Paramus, New Jersey 07652
Facsimile for Eligible Institutions:
(201) 262-3240
To confirm fax only:
(800) 422-2077
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to ETN Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of Eaton
Corporation, an Ohio corporation, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated July 7, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer"), receipt of each of which is hereby acknowledged, the number of
Shares (including the associated preferred share purchase rights) indicated
below pursuant to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Number of Shares: ______________________________________________________________
Certificate No(s). (if available): _____________________________________________
If Share(s) will be tendered by book-entry transfer, check ONE box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number: ________________________________________________________________
Date: __________________________________________________________________________
Name(s) of Record Holder(s) ____________________________________________________
(PLEASE PRINT)
Address(es): ___________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
Area Code and Telephone Number(s): _____________________________________________
________________________________________________________________________________
Signature(s): __________________________________________________________________
________________________________________________________________________________
<PAGE> 3
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, hereby guarantees to deliver to
the Depositary at one of its addresses set forth above either the certificates
representing all tendered Shares, in proper form for transfer, a Book-Entry
Confirmation (as defined in the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of book-entry delivery of
Shares, an Agent's Message (as defined in the Offer to Purchase), and any other
documents required by the Letter of Transmittal within three NASDAQ trading days
after the date of execution of this Notice of Guaranteed Delivery. A "NASDAQ
trading day" is any day on which The Nasdaq Stock Market, Inc.'s Nasdaq National
Market is open for business.
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
Area Code and Telephone Number: ________________________________________________
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
Title: _________________________________________________________________________
Name: __________________________________________________________________________
(PLEASE TYPE OR PRINT)
Date ________, 1997
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE> 1
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- The taxpayer identification number for an individual is the
individual's social security number. Social security numbers have nine
digits separated by two hyphens: i.e., 000-00-0000. The taxpayer
identification number for an entity is the entity's employer
identification number. Employer identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer.
------------------------------------------------------------------
<TABLE>
<S> <C> <C>
GIVE THE NAME AND TAXPAYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF --
- ------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the ac-
account) count or, if combined funds,
any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the ac-
count or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor
is the only contributor, the
minor(1)
6. Account in the name of guardian The ward, minor, or incompe-
or committee for a designated tent person(3)
ward, minor, or incompetent
person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is also
trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or pension The legal entity (Do not
trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization account
12. Partnership account The partnership
13. A broker or registered nominee The broker or nominee
14... Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL broker transactions
and interest and dividend payments include the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a) of the Code.
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one non-resident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
- - Payments described in Code section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451 of the Code.
- - Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON
THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
EXHIBIT (a)(7)
June 30, 1997
Renald M. Romain (216) 523-4736
FOR IMMEDIATE RELEASE
EATON CORPORATION AND FUSION SYSTEMS CORPORATION REACH
DEFINITIVE AGREEMENT ON MERGER
CLEVELAND, OHIO......Eaton Corporation (NYSE:ETN) and Fusion Systems Corporation
(NASDAQ:FUSN), a Rockville, Maryland semiconductor equipment manufacturer, today
announced that they have entered into a definitive merger agreement under which
Eaton has agreed to acquire Fusion Systems. The boards of directors of Eaton and
Fusion Systems have approved the agreement.
Under terms of the agreement, Eaton will initiate a cash tender offer for all
Fusion shares at $39 per share by no later than July 7, 1997. The tender offer
will be subject to a majority of the outstanding Fusion shares on a fully
diluted basis being tendered, and other customary conditions. Following
consummation of the tender offer, Eaton will acquire the remaining Fusion shares
in a merger at the same $39 per share price. Fusion Systems had approximately
7.5 million shares outstanding as of June 27, 1997.
<PAGE> 2
Page 2
In addition, Fusion Systems has declared a dividend of one contingent payment
right on each Fusion share outstanding on July 25, 1997. The contingent payment
right entitles Fusion shareholders to receive on March 31, 1999, an additional
cash payment if Fusion Systems' 1998 revenues exceed $122 million, with a
maximum $5 per right payment made if Fusion's revenues are $149 million or more.
The contingent payment rights will expire on December 31, 1997, unless Eaton or
another third party acquires control of Fusion by that date.
Founded in 1971, Fusion has approximately 400 employees and offices throughout
the United States, Europe, Japan and Korea. Sales in 1996 were $84.6 million,
more than half of which were coming from Europe and Pacific Rim countries.
Fusion Systems is a leading supplier of front-end process equipment to the
semiconductor industry with strong positions in photoresist ashing, post-ash
residue removal and photostabilization. Ashing is a low-pollution,
high-technology resist removal process that is key to new generations of
semiconductor technology. Fusion Systems' photostabilizer rapidly hardens
photoresist patterns on silicon wafers, which allows for greater reliability and
higher yields than with conventional thermal resist stabilization methods.
<PAGE> 3
Page 3
Stephen R. Hardis, Eaton Chairman and Chief Executive Officer said the merger is
consistent with Eaton's stated growth strategy. "We have set a growth goal for
our semiconductor equipment business of $1.5 billion in sales in the next five
years. It is one of the major drivers for our overall corporate target of
becoming a $10 billion company by the year 2000. The potential of Fusion Systems
will be a significant factor in our semiconductor equipment growth plans."
Hardis said.
Brian R. Bachman, Eaton Senior Vice President-Semiconductor and Specialty
Systems, said the merger of Fusion Systems' photostabilization and asher
technologies with Eaton's ion implantation and thermal processing systems will
enhance the product portfolio the company brings to its semiconductor
manufacturing customers.
"Fusion has demonstrated the ability to define, develop and supply products
which bring clear competitive advantages to its customers," Bachman said. He
noted that Fusion was selected by VLSI Research, Inc. as one of the 10 best
small suppliers of wafer processing equipment in 1996.
John C. Matthews, President of Fusion Semiconductor Systems, the principal
operating unit of Fusion Systems, said, "I have
<PAGE> 4
Page 4
known Dr. Peter Younger (Eaton Vice President-Semiconductor Equipment
Operations) for many years. Our businesses have collaborated periodically on
technology opportunities. We have similar business and personal values, and with
the common culture that exists within our two organizations, and the business
strengths we each possess, this is a very powerful match."
Eaton's Semiconductor Equipment Operations (SEO), headquartered in Beverly,
Massachusetts, is currently comprised of three business units offering a full
line of ion implantation and thermal processing equipment. SEO is a market
leader in the manufacture of high current, medium current and high energy ion
implantation equipment for semiconductor device manufacturers worldwide. SEO has
recently shipped its first ion implanter for the emerging flat panel liquid
crystal display business.
In 1996, Eaton acquired Eaton Thermal Processing Systems, a manufacturer of
rapid thermal processor furnaces and small batch vertical furnaces for use in
the production of semiconductor wafers. SEO has manufacturing facilities in
Beverly, and Austin, Texas, and a joint venture operation in Japan. In June,
1997, SEO opened a new semiconductor equipment manufacturing facility in Korea.
<PAGE> 5
Page 5
Eaton Corporation, headquartered in Cleveland, Ohio, is a global manufacturer of
highly engineered products which serve industrial, vehicle, construction,
commercial and aerospace markets. Principal products include electrical power
distribution and control equipment, truck transmissions and axles, engine
components, hydraulic products, ion implanters and a wide variety of controls.
Eaton has 54,000 employees and 155 manufacturing sites in 26 countries around
the world. Sales for 1996 were $7 billion.
<PAGE> 1
EXHIBIT (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated July 7,
1997, and the related Letter of Transmittal, and is being made to all holders of
Shares. The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other law
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of ETN Acquisition Corp. by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
FUSION SYSTEMS CORPORATION
BY
ETN ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
EATON CORPORATION
AT
$39.00 NET PER SHARE
ETN Acquisition Corp. (the "Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of Eaton Corporation, an Ohio corporation ("Parent"), is
offering to purchase all outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of Fusion Systems Corporation, a Delaware corporation (the
"Company"), and the associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of September 8, 1994, as
amended as of April 19, 1995 and June 30, 1997, between the Company and
BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent
(as the same may be amended, the "Rights Agreement"), at a purchase price of
$39.00 per Share (and associated Right), net to the seller in
<PAGE> 2
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated July 7, 1997 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which together constitute the
"Offer"). Unless the context otherwise requires, all references to Shares herein
and in the Offer to Purchase shall include the associated Rights.
2
<PAGE> 3
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
AUGUST 1, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 30, 1997 (the "Merger Agreement"), by and among the Company, the
Purchaser and Parent pursuant to which, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation. On the effective date of the Merger, each outstanding
Share (other than any Shares held by Parent, the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly-owned subsidiary of the Company, and other than Shares, if any, held by
stockholders who perfect their appraisal rights under Delaware law) will be
converted into the right to receive an amount equal to $39.00 in cash (without
interest).
On June 29, 1997, the Board of Directors of the Company declared a dividend
of Contingent Payment Rights (the "Contingent Rights") with respect to (i)
Shares outstanding on July 25, 1997 (the "Record Date") and (ii) Shares issued
between the Record Date and the earlier of December 31, 1997 or the redemption
date of the Contingent Rights upon exercise of options to purchase Shares issued
under the Company's stock option and stock purchase plans and outstanding on the
Record Date. THE OFFER IS NOT BEING MADE FOR THE CONTINGENT RIGHTS. HOLDERS OF
RECORD OF SHARES ON JULY 25, 1997 WILL BE ENTITLED TO RECEIVE THE CONTINGENT
RIGHTS ON THE PAYMENT DATE OF SEPTEMBER 23, 1997 WHETHER OR NOT THEIR SHARES ARE
PURCHASED IN THE OFFER OR THE MERGER. SEE SECTION II OF THE OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT EACH
OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER,
THE MERGER AND THE DISTRIBUTION OF THE CONTINGENT RIGHTS, IS FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND
ADOPTED THE MERGER AGREEMENT AND RECOMMENDS ACCEPTANCE OF THE OFFER BY THE
COMPANY'S STOCKHOLDERS.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, AT LEAST A MAJORITY OF
THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF
PURCHASE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THE OFFER TO
PURCHASE.
3
<PAGE> 4
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser. In all cases, payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates
representing Shares (the "Share Certificates") for such Shares or timely
confirmation of the book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal
delivered with the Offer to Purchase (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer of Shares and (iii) any other documents required by the
Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion (subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend the period during which the Offer is open for any reason,
including the existence of any of the conditions specified in Section 14 of the
Offer to Purchase, by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, and such announcement will be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date (as defined below).
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment as provided
in the Offer to Purchase, may also be withdrawn at any time after September 4,
1997. The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, August 1, 1997, unless and until the Purchaser, subject to the terms of
the Merger Agreement, shall have further extended the period of
4
<PAGE> 5
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the time and date at which the Offer, as so extended by the
Purchaser, shall expire. In order for a withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and
(if Share Certificates have been tendered) the name of the registered holder of
the Shares as set forth in the Share Certificate, if different from that of the
person who tendered such Shares. If Share Certificates have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the tendering stockholder must submit the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn and
the signature on the notice of withdrawal must be guaranteed by a firm that is a
bank, broker, dealer, credit union, savings association or other entity which is
a member in good standing of the Securities Transfer Agents Medallion Program
(an "Eligible Institution"), except in the case of Shares tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in this
paragraph. All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. Any Shares properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be tendered at any subsequent time prior to the Expiration Date by following any
of the procedures described in Section 3 of the Offer to Purchase.
The information required to be disclosed pursuant to Rule 14d-6(e)(1)(vii)
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase, and is incorporated herein by
reference.
The Company is providing the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant materials will be mailed to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names,
5
<PAGE> 6
or the names of whose nominees, appear on the stockholder list or who are listed
as participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained at the Purchaser's expense from the
Information Agent or from brokers, dealers, commercial banks and trust
companies. Neither Parent nor the Purchaser will pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC
909 Third Avenue
20th Floor
New York, New York 10022
(212) 754-8000 (collect)
or
CALL TOLL FREE: (800) 566-9061
Banks and Brokerage Firms please call:
(800) 662-5200
July 7, 1997
6
<PAGE> 1
EXHIBIT (c)(1)
EATON CORPORATION
Eaton Center
Cleveland, OH 44114-2584
216/523-5000
FAX: 216/523-4787
- --------------------------------------------------------------------------------
[L O G O]
April 7, 1997
Mr. Leslie S. Levine
President and CEO
Fusion Systems Corporation
7600 Standish Place
Rockville, Maryland 20855-2798
RE: CONFIDENTIALITY AGREEMENT
Dear Mr. Levine:
Eaton Corporation ("Eaton") and Fusion Systems Corporation ("Company") have
initiated discussions regarding possible business arrangements between the
Company and Eaton, including the possibility of Eaton acquiring certain
ownership interests in or assets of the Company, and intend to continue with
those discussions (collectively the "Discussions"). In order to protect the
relative interests of Eaton and the Company, the parties hereby agree as
follows:
All information heretofore or hereafter disclosed or transmitted by Eaton to the
Company or its Authorized Representatives (as defined below), including, but not
limited to, all written and oral financial information, marketing information,
customer and supplier information, technical information, and intellectual
property, and all corresponding information transmitted by the Company to Eaton
or its Authorized Representatives, together with all information and all
analyses, compilations, studies or other documents or records prepared by the
receiving party which contain or otherwise reflect or are generated from such
disclosed information (collectively "Confidential Information"), (i) shall be
maintained in confidence by the receiving party, (ii) shall be protected from
disclosure to others using at least the same degree of care as it normally
exercises to protect its own proprietary information of a similar nature, but,
in any case, using no less than a high degree of care, (iii) shall not be used
in any way detrimental to the delivering party, (iv) shall not be utilized by
the receiving party for any purpose other than for conducting the Discussions,
and (v) shall in no event whatsoever be disclosed to any third party or entity;
<PAGE> 2
Mr. Leslie S. Levine
April 7, 1997
Page 2
provided, however, that the obligations imposed by this Agreement shall not
cover disclosed or transmitted information which the receiving party can show:
(a) to have been in its possession prior to receipt from the delivering
party hereunder;
(b) to have been available to the public at the time of receipt from the
delivering party hereunder;
(c) became available to the receiving party or the public subsequent to
receipt from the delivering party hereunder without any fault
whatsoever by the receiving party or its Authorized Representatives; or
(d) was developed by the receiving party, or others, independently of and
without reference to the Confidential Information.
The receiving party shall be responsible for any improper use of the
Confidential Information by its Authorized Representatives. The term "Authorized
Representatives" includes only those employees, officers, directors, attorneys
and accountants of the receiving party who are participating in the Discussions,
but excludes all other outside advisors or agents of the receiving party, unless
previously authorized in writing by an officer of the delivering party.
The parties hereto agree that they will not disclose the fact that the
Discussions are being conducted, any terms, conditions or other facts regarding
the Discussions or the status thereof unless the parties agree to such
disclosure or unless otherwise required by law.
It is further agreed that, if the opinion of counsel, either party is required
to disclose Confidential Information or the Discussions in or before any court,
governmental agency or tribunal they may disclose such information to the extent
so required. In the event the receiving party is required by law, regulation or
court order to disclose any of the Confidential Information or the Discussions,
the receiving party will promptly notify the delivering party prior to making
any such disclosure in order to facilitate the delivering party seeking a
protective order or other appropriate remedy from the property authority. The
receiving party agrees to cooperate with the delivering party in seeking such
order or other remedy. The receiving party further agrees that if the delivering
party is not successful in precluding the requesting legal body from requiring
the disclosure of the Confidential Information or the Discussions, it will
furnish only that portion of the Confidential Information which is legally
required and will exercise all reasonable efforts to obtain reliable assurances
that confidential treatment will be accorded that Information. Notwithstanding
the foregoing, disclosure of the Confidential Information or the Discussions may
be made which, in the reasonable opinion of the disclosing party's counsel, is
required under the Securities Act of 1933, as
<PAGE> 3
Mr. Leslie S. Levine
April 7, 1997
Page 3
amended (the "1933 Act") or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or by applicable stock exchange rules and regulations, and then
only after the disclosing party shall first give the other party an opportunity
to review and comment, if done in a timely fashion, on the proposed disclosure
and the basis therefor, and the disclosing party shall consider in good faith
the other party's comments relating thereto and reflect any such reasonable
comments in such disclosure.
At the request of either party or if either of the parties should terminate the
Discussions, all Confidential Information and other information which a party
involved herein has obtained from the other shall be returned promptly, and all
memoranda, notes and other material prepared by or for the parties based on or
reflecting any Confidential Information will be destroyed promptly, and such
destruction shall be certified in writing to the delivering party by the person
authorized to supervise such destruction. Any oral Confidential Information will
continue to be held subject to the terms of this Agreement. Notwithstanding the
above, one copy of the Confidential Information and all such memoranda, notes
and other material based on Confidential Information may be retained in the law
department of the receiving party for archival purposes which shall remain
subject to the terms of this Agreement.
Except as modified by a formal agreement between Eaton and the Company the
foregoing obligations which are imposed by this Agreement shall remain in effect
for a period of three (3) years from the date hereof, regardless of whether or
not any business arrangement is consummated.
The parties will not initiate any communications concerning the Discussions with
any employee or customer, supplier, or distributor of the other party (other
than the Chairman of the Board, the President, Chief Financial Officer, Senior
Vice President, or any other officer or manager designated by the other party)
without the other party's prior written consent.
For a period of three (3) years from the date hereof the parties agree not to
solicit for hire as an employee or independent contractor any person who is at
that time employed by the other party who becomes known to a party as a result
of the Discussions; provided, however, that this provision shall not prevent
hiring any such person who responds to an advertisement or to a non-directed
search inquiry or who makes an unsolicited contract for employment.
Unless specifically approved in advance by the Company, for the period
commencing on the date hereof and ending on the date three years from the date
hereof, Eaton, its affiliates, representatives and agents will not (a) acquire,
announce an intention to acquire, offer to acquire, solicit an offer to sell or
agree to acquire, directly or indirectly, alone or in concert with others, any
interest in any securities or assets of the Company or rights, warrants or
options to acquire any securities or assets of the Company (other than ordinary
course commercial dealings), (b) make or participate in, directly or indirectly,
alone or in concert with others, any
<PAGE> 4
Mr. Leslie S. Levine
April 7, 1997
Page 4
solicitation of proxies from the stockholders of the Company, become a
participant in any election contest with respect to the Board of Directors of
the Company, solicit or execute any written consent in lieu of a meeting of
holders of voting securities of the Company or seek to have called any meeting
of the stockholders of the Company, (c) propose or seek to effect alone or in
concert with any other person, any business combination transaction,
restructuring, recapitalization or similar transaction with respect to the
Company or any tender offer, takeover bid or exchange offer for any securities
of the Company or (d) announce an intention to do any of the actions restricted
under clauses (a) through (c) of this paragraph. The foregoing provisions of
this paragraph do not apply to purchases of Company securities by any Eaton
pension or other retirement fund, provided that such purchases shall not have
been specifically requested or directed by Eaton. Nothing in this paragraph
shall prohibit discussions between Eaton, its representatives and agents and the
Company, its representatives and agents pertaining to a business arrangement as
described in the first paragraph of this Agreement.
This Agreement shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns. It is understood that each
party may institute appropriate proceedings against the other party to enforce
its rights hereunder. Each party acknowledges that the other party may not have
an adequate remedy in the event that this Agreement is breached, and that the
other party may suffer irreparable damage and injury in such event and,
accordingly, the other party may be entitled to specific performance and
injunctive relief as remedies for any violation. These remedies shall not be
deemed to be the exclusive remedies or a violation of the terms of this
Agreement but shall be in addition to all other remedies available at law or
equity.
Neither party shall be deemed to have made any representation or warranty
concerning the accuracy or completeness of any Confidential Information
furnished by it to the other party, except to the extent that such a
representation or warranty may be expressly set forth later in a definitive
agreement between the parties. Unless and until a definitive agreement regarding
a business arrangement has been executed, neither party will be under any legal
obligation with respect to a business arrangement by virtue of this Agreement
except for the express undertakings set forth herein.
This Agreement shall be governed and construed in accordance with the laws of
the State of Delaware without giving effect to the conflicts of law provisions
thereof.
This Agreement constitutes the entire understanding between the parties hereto
as to the Confidential Information and other covenants herein and merges all
prior discussions between them relating thereto.
<PAGE> 5
Mr. Leslie S. Levine
April 7, 1997
Page 5
If the foregoing represents an acceptable description of the confidentiality
agreement between Eaton and the Company, please execute your acceptance on both
copies of this letter, and return one to me at the above address.
EATON CORPORATION
By /s/ Brian R. Bachman
-------------------------------
Brian R. Bachman
Senior Vice President - Semiconductor and
Specialty Systems
FUSION SYSTEMS CORPORATION
By /s/Leslie S. Levine
------------------------------
President and Chief
Executive Officer
Date April 9, 1997
<PAGE> 1
EXHIBIT (c)(2)
Eaton Corporation
Eaton Center
Cleveland, Ohio 44114
June 24, 1997
Fusion Systems Corporation
7600 Standish Place
Rockville, Maryland 20855
Gentlemen:
To induce Eaton Corporation ("Eaton") to continue its due diligence
investigation of Fusion Systems Corporation (the "Company") and to pursue its
interest in a possible business combination with the Company, Eaton and the
Company have agreed as follows:
(1) The Company agrees to negotiate exclusively with Eaton through July
7, 1997 or such later date as the parties may agree in writing (such period
being referred to herein as the "Exclusivity Period") with respect to a possible
business combination between the Company and Eaton.
(2) During the Exclusivity Period, the Company agrees that it shall
not, and it shall not permit its subsidiaries, or any officers, directors,
employees, financial advisors and other agents or representatives of the Company
or its subsidiaries, directly or indirectly, to solicit or initiate (including
by way of furnishing any non-public information concerning the Company or its
assets) inquiries or proposals, or participate in any discussions or
negotiations with any person, corporation, partnership or other entity (other
than Eaton), concerning a merger or other business combination or an acquisition
of all or any substantial portion of the Company or its assets (a
"Transaction").
(3) The Company and Eaton agree that they shall not, and shall cause
their officers, directors, agents and representatives not to, make any public
announcement or otherwise disclose to any person (other than the respective
officers, directors, employees, lawyers and financial advisors of Eaton and the
Company as required to negotiate a definitive agreement who are informed of the
confidential nature of this information)
<PAGE> 2
the fact that discussions or negotiations are taking place concerning a possible
transaction between the Company and Eaton or any of the terms, conditions or
other facts with respect to any such possible transaction, including the status
thereof unless the parties agree to such disclosure, or unless otherwise
required by law.
Please confirm your agreement with the foregoing by signing the
enclosed copy of this letter and returning it to us, whereupon it will become a
binding obligation of Eaton and the Company. The agreements set forth in this
letter may be modified or waived only by a separate writing by the Company and
Eaton expressly so modifying or waiving such agreements. Nothing herein
contained shall modify or supersede the obligations of the Company and Eaton
under the Confidentiality Agreement dated April 7, 1997, which agreement remains
in full force and effect for the term provided therein.
Very truly yours,
EATON CORPORATION
By: /s/ Alexander M. Cutler
-----------------------
ACCEPTED AND AGREED:
FUSION SYSTEMS CORPORATION
By: /s/ Leslie S. Levine
-----------------------------
Date: 6/24/97
<PAGE> 1
EXHIBIT (C)(3)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
June 30, 1997, by and among Eaton Corporation, an Ohio corporation ("Parent"),
ETN Acquisition Corp., a Delaware corporation and a subsidiary of Parent (the
"Purchaser"), and Fusion Systems Corporation, a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, the
Purchaser and the Company have approved the acquisition of the Company by Parent
on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Company has declared a dividend of Contingent
Payment Rights (the "Contingent Rights") to holders of the Company's common
stock, par value $.01 per share (the "Common Shares"), having the terms set
forth in Exhibit A which will be issued pursuant to a Contingent Payment Rights
Agreement (the "Contingent Payment Rights Agreement") between the Company and
BankBoston, N.A., as trustee or such other mutually acceptable trustee (the
"Trustee");
WHEREAS, pursuant to this Agreement the Purchaser has agreed
to commence a tender offer (the "Offer") to purchase all of the outstanding
Common Shares (including the associated preferred share purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of September 8,
1994, as amended as of April 19, 1995 and June 30, 1997, between the Company and
The First National Bank of Boston, as Rights Agent (the "Rights Agreement"),
which Rights together with the Common Shares are hereinafter referred to as the
"Shares"), at a price per Share of $39.00 net to the seller in cash (the "Offer
Price"), it being understood that the Offer is not being made with respect to
the Contingent Rights;
WHEREAS, the Board of Directors of the Company (the "Company
Board") has, in light of and subject to the conditions set forth herein, (i)
approved the Offer and (ii) adopted this Agreement and is recommending that the
Company's stockholders accept the Offer, tender their Shares to the Purchaser
and approve this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser
and the Company have approved the merger of the Purchaser with and into the
Company, as set forth below (the "Merger"), in accordance with the General
Corporation Law of
<PAGE> 2
the State of Delaware (the "GCL") and upon the terms and subject to the
conditions set forth in this Agreement, whereby each of the issued and
outstanding Common Shares not owned directly or indirectly by Parent, the
Purchaser or the Company will be converted into the right to receive $39.00 in
cash; and
WHEREAS, Parent, the Purchaser and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Parent, the Purchaser and the Company agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Article VIII hereof and none of the events set
forth in Annex I hereto (the "Tender Offer Conditions") shall have occurred, as
promptly as practicable but in no event later than the fifth business day from
the date of this Agreement, Parent shall cause the Purchaser to commence (within
the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(including the rules and regulations promulgated thereunder, the "Exchange
Act")) an offer to purchase all outstanding Shares at the Offer Price, shall,
after affording the Company a reasonable opportunity to review and comment
thereon, file all necessary documents with the Securities and Exchange
Commission (the "SEC") in connection with the Offer (the "Offer Documents") and
shall use reasonable efforts to consummate the Offer, subject to the terms and
conditions thereof. The obligation of the Purchaser to accept for payment or pay
for any Shares tendered pursuant thereto will be subject only to the
satisfaction of the conditions set forth in Annex I hereto.
(b) Without the prior written consent of the Company,
the Purchaser shall not decrease the Offer Price or
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<PAGE> 3
change the form of consideration payable in the Offer, decrease the number of
Shares sought to be purchased in the Offer, impose additional conditions to the
Offer or amend any other term of the Offer in any manner adverse to the holders
of Common Shares. The Offer shall remain open until the date that is 20 business
days (as such term is defined in Rule 14d-1(c)(6) under the Exchange Act) after
the commencement of the Offer (the "Expiration Date"), unless the Purchaser
shall have extended the period of time for which the Offer is open pursuant to,
and in accordance with, the two succeeding sentences or as may be required by
applicable law, in which event the term "Expiration Date" shall mean the latest
time and date as the Offer, as so extended, may expire. If at any Expiration
Date, any of the Tender Offer Conditions are not satisfied or waived by the
Purchaser, the Purchaser may extend the Offer from time to time. Subject to the
terms of the Offer and this Agreement and the satisfaction of all the Tender
Offer Conditions as of any Expiration Date, the Purchaser will accept for
payment and pay for all Shares validly tendered and not withdrawn pursuant to
the Offer as soon as practicable after such expiration date of the Offer;
provided that, if all of the Tender Offer Conditions are satisfied and more than
75% but less than 90% of the outstanding Common Shares on a fully diluted basis
(excluding Options (as defined herein) which are not exercisable for 30 days)
have been validly tendered and not withdrawn in the Offer, the Purchaser shall
have the right, in its sole discretion, to extend the Offer from time to time
for up to a maximum of five additional business days in the aggregate for all
such extensions provided the Purchaser agrees to waive the conditions set forth
in paragraphs (b), (c), (f) and (h) of Annex I. Without the prior written
consent of the Company, the Purchaser shall not accept for payment or pay for
any Shares in the Offer if, as a result, Purchaser would acquire less than the
number of Shares necessary to satisfy the Minimum Condition (as defined in Annex
I hereto).
(c) Parent and the Purchaser represent that the Offer
Documents will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company in writing for inclusion in
the Offer Documents. Each of Parent
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<PAGE> 4
and the Purchaser, on the one hand, and the Company, on the other hand, agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and the Purchaser further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to stockholders of the Company, in each case, as and to
the extent required by applicable federal securities laws.
SECTION 1.02 Company Actions.
(a) The Company shall, after affording Parent a
reasonable opportunity to review and comment thereon, file with the SEC and mail
to the holders of Common Shares, as promptly as practicable on the date of the
filing by Parent and the Purchaser of the Offer Documents, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "Schedule 14D-9") reflecting the
recommendation of the Company Board that holders of Shares tender their Shares
pursuant to the Offer and shall disseminate the Schedule 14D-9 as required by
Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set
forth, and the Company hereby represents, that the Company Board, at a meeting
duly called and held, has (i) determined by unanimous vote of its directors that
each of the transactions contemplated hereby, including each of the Offer and
the Merger and the distribution of the Contingent Rights, is fair to and in the
best interests of the Company and its stockholders, (ii) approved the
distribution of the Contingent Rights, (iii) approved the Offer and adopted this
Agreement in accordance with the GCL, (iv) recommended acceptance of the Offer
and approval of this Agreement by the Company's stockholders (if such approval
is required by applicable law), and (v) taken all other action necessary to
render Section 203 of the GCL and the Rights inapplicable to the Offer and the
Merger; provided, however, that such recommendation and approval may be
withdrawn, modified or amended to the extent that the Company Board determines
in good faith, after consultation with its outside legal counsel, that failure
to take such action would reasonably be expected to result in a breach of the
Company Board's fiduciary obligations under applicable law. The Company further
represents that, prior to the execution hereof, Salomon Brothers Inc ("Salomon
Brothers"), has delivered to the Company Board its written opinion that, as of
June 29, 1997, the consideration to be received by the holders of Common Shares
(other than Parent or any of its affiliates) pursuant to the Offer, the Merger
and the Contingent Rights is fair to the Company's stockholders from a financial
point of view. The Company hereby con-
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<PAGE> 5
sents to the inclusion in the Offer Documents of the recommendations of the
Company Board described in this Section 1.02(a).
(b) The Company represents that the Schedule 14D-9
will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made 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
supplied by Parent or the Purchaser in writing for inclusion in the Schedule
14D-9. Each of the Company, on the one hand, and Parent and the Purchaser, on
the other hand, agree promptly to correct any information provided by either of
them for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to the holders of Shares, in each case, as and to the
extent required by applicable federal securities law.
(c) In connection with the Offer, the Company will
promptly furnish the Purchaser with mailing labels, security position listings,
any available non-objecting beneficial owner lists and any available listing or
computer list containing the names and addresses of the record holders of the
Common Shares as of the most recent practicable date and shall furnish the
Purchaser with such additional available information (including, but not limited
to, updated lists of holders of Common Shares and their addresses, mailing
labels and lists of security positions and non-objecting beneficial owner lists)
and such other assistance as the Purchaser or its agents may reasonably request
in communicating the Offer to the Company's record and beneficial stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, the Purchaser and their affiliates,
associates, agents and advisors, shall keep such information confidential and
use the information contained in any such labels, listings and files only in
connection with the Offer and the Merger and, should the Offer terminate or if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
-5-
<PAGE> 6
SECTION 1.03 Directors.
(a) Subject to compliance with applicable law,
promptly upon the payment by the Purchaser for Shares pursuant to the Offer
representing at least such number of Shares as shall satisfy the Minimum
Condition, and from time to time thereafter, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as is equal to the product of the total number of directors on the
Company Board (determined after giving effect to the directors elected pursuant
to this sentence) multiplied by the percentage that the aggregate number of
Common Shares beneficially owned by Parent or its affiliates bears to the total
number of Common Shares then outstanding, and the Company shall, upon request of
Parent, promptly take all actions necessary to cause Parent's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors; provided, however, that prior to the Effective Time (as
defined in Section 2.02), the Company Board shall always have at least two
members who are neither officers, directors or designees of the Purchaser or any
of its affiliates ("Purchaser Insiders"). If the number of directors who are not
Purchaser Insiders is reduced below two prior to the Effective Time, the
remaining director who is not a Purchaser Insider shall be entitled to designate
a person to fill such vacancy who is not a Purchaser Insider and who shall be a
director not deemed to be a Purchaser Insider for all purposes of this
Agreement.
(b) The Company's obligations to appoint Parent's
designees to the Board shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder. The Company shall promptly take all actions required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.03 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.03.
Parent will supply any information with respect to itself and its officers,
directors and affiliates required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's
designees pursuant to this Section 1.03 and prior to the Effective Time, any
amendment or termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or the Purchaser or waiver of any of the Company's rights hereunder,
will require the concurrence of a
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<PAGE> 7
majority of the directors of the Company then in office who are not Purchaser
Insiders (or in the case where there are two or fewer directors who are not
Purchaser Insiders, the concurrence of one director who is not a Purchaser
Insider) if such amendment, termination, extension or waiver would be reasonably
likely to have an adverse effect on the minority stockholders of the Company.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the GCL, at the Effective Time the
Purchaser shall be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation").
SECTION 2.02 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Sections 7.01(a) and
7.01(b), but subject to Sections 7.01(c) and 7.01(d), the Company shall execute,
in the manner required by the GCL, and deliver to the Secretary of State of the
State of Delaware a duly executed and verified certificate of merger, and the
parties shall take such other and further actions as may be required by law to
make the Merger effective. The time the Merger becomes effective in accordance
with applicable law is referred to herein as the "Effective Time."
SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the GCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and the Purchaser shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 2.04 Certificate of Incorporation and ByLaws of the
Surviving Corporation.
(a) The Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective
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<PAGE> 8
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with the provisions thereof and hereof
and applicable law.
(b) The By-Laws of the Purchaser in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until amended,
subject to the provisions of Section 6.06 of this Agreement, in accordance with
the provisions thereof and applicable law.
SECTION 2.05 Directors. Subject to applicable law, the
directors of the Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 2.06 Officers. The individuals specified by Parent
prior to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
SECTION 2.07 Conversion of Common Shares; Effect on Contingent
Rights. (a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, each Common Share issued and
outstanding immediately prior to the Effective Time (other than (i) any Common
Shares held by Parent, the Purchaser, any wholly owned subsidiary of Parent or
the Purchaser, in the treasury of the Company or by any wholly owned subsidiary
of the Company, which Common Shares, by virtue of the Merger and without any
action on the part of the holder thereof, shall be cancelled and retired and
shall cease to exist with no payment being made with respect thereto and (ii)
Dissenting Shares (as defined in Section 3.01)), shall be cancelled and retired
and shall be converted into the right to receive $39 in cash (the "Merger
Price"), payable to the holder thereof, without interest thereon, upon surrender
of the certificate formerly representing such Common Share.
(b) The Contingent Rights shall not be changed or
affected by the Merger and shall remain outstanding after the Effective Time in
accordance with their terms.
SECTION 2.08 Conversion of Purchaser Common Stock. The
Purchaser has outstanding 10 shares of common stock, par value $.01 per share,
all of which are entitled to vote with respect to approval of this Agreement. At
the Effective Time, each share of common stock of the Purchaser issued and
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<PAGE> 9
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
SECTION 2.09. Options; Stock Plans. Prior to the Effective
Time, the Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options (the "Options") heretofore granted under any stock option or similar
plan of the Company (the "Stock Plans"), without any payment therefor except as
otherwise provided in this Section 2.09. Immediately prior to the Effective
Time, the Company shall accelerate the vesting of all Options which are listed
on Section 2.09 of the Company Disclosure Schedule and each then vested Option
shall no longer be exercisable but shall entitle each holder thereof, in
cancellation and settlement therefor, to (i) a payment in cash by the Company
(subject to any applicable withholding taxes), at the Effective Time, equal to
the product of (x) the total number of Common Shares subject to such vested
Option and (y) the excess of the Merger Price over the exercise price per Common
Share subject to such vested Option, and (ii) a payment in cash by the Surviving
Corporation (subject to any applicable withholding taxes) at the earlier of
March 31, 1999 or the redemption date of the Contingent Rights equal to the
product of (x) the total number of Common Shares subject to such cancelled
vested Option and (y) the Redemption Price or the Contingent Payment (as such
terms are defined in the Contingent Payment Rights Agreement), as the case may
be, if any (the amounts payable under clauses (i) and (ii) being referred to as
the "Cash Payments"). The Company Board has taken all necessary action to
terminate the 1994 Employee Stock Purchase Plan effective prior to the beginning
of the payment period which would have commenced on July 1, 1997, and no Options
have been or will be issued under such Stock Plan with respect to any payment
period beginning on or after July 1, 1997. All other Stock Plans and any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary shall
terminate as of the Effective Time. The Company will take all reasonable steps
to ensure that none of Parent, the Company or any of their respective
subsidiaries is or will be bound by any Options, other options, warrants, rights
or agreements which would entitle any Person, other than Parent or its
affiliates, to own any capital stock of the Surviving Corporation
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or any of its subsidiaries or to receive any payment in respect thereof other
than, to the extent provided herein, with respect to the Contingent Rights. The
Company will use its reasonable best efforts to obtain all necessary consents to
ensure that after the Effective Time, holders of Options will have no rights
other than the rights of the holders of vested Options to receive the Cash
Payment in cancellation and settlement thereof.
SECTION 2.10 Stockholders' Meeting.
(a) If required by applicable law in order to
consummate the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Special Meeting") as
soon as practicable following the acceptance for payment of and payment
for Common Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a
preliminary proxy statement relating to this Agreement, and use its
reasonable efforts (x) to obtain and furnish the information required
to be included by the SEC in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, to respond promptly to
any comments made by the SEC with respect to the preliminary proxy
statement and cause a definitive proxy statement (the "Proxy
Statement") to be mailed to its stockholders and (y) to obtain the
necessary approvals of the Merger and this Agreement by its
stockholders; and
(iii) subject to the fiduciary obligations
of the Company Board under applicable law as provided in Section
1.02(a), include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the
approval of this Agreement.
(b) Parent agrees that it will vote, or cause to be
voted, all of the Common Shares then owned by it, the Purchaser or any of its
other subsidiaries in favor of the approval of the Plan of Merger and of this
Agreement.
SECTION 2.11 Merger Without Meeting of Stockholders.
Notwithstanding Section 2.10, in the event that Parent, the Purchaser or any
other subsidiary of Parent shall acquire at least 90% of the outstanding Common
Shares pursuant to the
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<PAGE> 11
Offer or otherwise, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Common Shares by
the Purchaser pursuant to the Offer without a meeting of stockholders of the
Company, in accordance with Section 253 of the GCL.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01. Dissenting Shares. Notwithstanding Section 2.07,
Common Shares outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such Common Shares in accordance with the GCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Price, unless such holder fails to perfect or withdraws or otherwise loses his
right to appraisal. If after the Effective Time such holder fails to perfect or
withdraws or loses his right to appraisal, such Common Shares shall be treated
as if they had been converted as of the Effective Time into a right to receive
the Merger Price. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Common Shares, and Parent shall have
the right to participate in all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands.
SECTION 3.02. Payment for Common Shares.
(a) From and after the Effective Time, such bank or
trust company as shall be mutually acceptable to Parent and the Company shall
act as paying agent (the "Paying Agent") in effecting the payment of the Merger
Price in respect of certificates (the "Certificates") that, prior to the
Effective Time, represented Common Shares entitled to payment of the Merger
Price pursuant to Section 2.07. Promptly following the Effective Time, Parent or
the Purchaser shall deposit, or cause to be deposited, with the Paying Agent the
aggregate Merger Price to which holders of Common Shares shall be entitled at
the Effective Time pursuant to Section 2.07.
(b) Promptly after the Effective Time, Parent shall
cause the Paying Agent to mail to each record holder of Certificates that
immediately prior to the Effective Time
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<PAGE> 12
represented Common Shares a form of letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying Agent
and instructions for use in surrendering such Certificates and receiving the
Merger Price in respect thereof. Upon the surrender of each such Certificate,
the Paying Agent shall pay the holder of such Certificate the Merger Price
multiplied by the number of Common Shares formerly represented by such
Certificate, in consideration therefor, and such Certificate shall forthwith be
cancelled. Until so surrendered, each such Certificate (other than Certificates
representing Common Shares held by Parent or the Purchaser, any wholly owned
subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly owned subsidiary of the Company or Dissenting Shares) shall represent
solely the right to receive the aggregate Merger Price relating thereto. No
interest or dividends shall be paid or accrued on the Merger Price. If the
Merger Price (or any portion thereof) is to be delivered to any person other
than the person in whose name the Certificate formerly representing Common
Shares surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Price that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Common Shares shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of the Merger Price to
a person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Paying Agent that such tax has been
paid or is not applicable.
(c) Promptly following the date which is 180 days
after the Effective Time, the Paying Agent shall deliver to the Surviving
Corporation all cash, Certificates and other documents in its possession
relating to the transactions described in this Agreement, and the Paying Agent's
duties shall terminate. Thereafter, each holder of a Certificate formerly
representing a Common Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration therefor the aggregate Merger Price relating
thereto, without any interest or dividends thereon.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any Common
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates formerly representing Common Shares are
presented to the Surviving Corporation or the Paying Agent,
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<PAGE> 13
they shall be surrendered and cancelled in return for the payment of the
aggregate Merger Price relating thereto, as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the
Purchaser as follows:
SECTION 4.01 Organization and Qualification; Subsidiaries. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Company's Significant
Subsidiaries (as defined herein) is a corporation duly organized, validly
existing and, with respect to the Company's Significant Subsidiaries that are
incorporated or organized in a jurisdiction in the United States of America, in
good standing under the laws of the jurisdiction of its incorporation. The
Company and each of its subsidiaries has the requisite corporate power and
authority to own, operate or lease its properties and to carry on its business
as it is now being conducted, and is duly qualified or licensed to do business,
and, with respect to the Company and the Company's Significant Subsidiaries that
are incorporated or organized in a jurisdiction in the United States of America,
is in good standing, in each jurisdiction in which the nature of its business or
the properties owned, operated or leased by it makes such qualification,
licensing or good standing necessary, except where the failure to have such
power or authority, or the failure to be so qualified, licensed or in good
standing, would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. The term "Material Adverse Effect
on the Company," as used in this Agreement, means any change in or effect on the
business, assets, liabilities, condition (financial or otherwise), prospects or
results of operations of the Company or any of its subsidiaries that would
reasonably be expected to be materially adverse to the Company and its
subsidiaries taken as a whole. The Company has heretofore made available to
Parent and the Purchaser a complete and correct copy of the certificate of
incorporation and the by-laws or comparable organizational documents, each as
amended to the date hereof, of the Company and each of its Significant
Subsidiaries and has made available a complete and correct copy of the Rights
Agreement as amended to the date hereof. A "Significant Subsidiary" of any
person means the subsidiaries identified on Section 4.02 of the Company
Disclosure Schedule as a
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"Significant Subsidiary" and any subsidiary or person that constitutes a
significant subsidiary of such person within the meaning of Rule 1-02(v) of
Regulation S-X.
SECTION 4.02 Capitalization; Subsidiaries. The authorized
capital stock of the Company consists of 40,000,000 Common Shares and 5,000,000
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
which 100,000 shares are designated Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Junior Preferred Stock"). As of the close
of business on June 27, 1997, 7,492,935 Common Shares were issued and
outstanding, all of which are entitled to vote on this Agreement, and 438,920
Common Shares were held in treasury. The Company has no shares of Preferred
Stock issued and outstanding. The Company has no shares reserved for issuance,
except that, as of June 27, 1997, there were 865,392 Common Shares reserved for
issuance pursuant to outstanding Options and rights granted under the Stock
Plans and 100,000 shares of Series A Junior Participating Preferred Stock
reserved for issuance upon exercise of the Rights. Section 4.02 of the
disclosure schedule delivered to Parent by the Company prior to the date hereof
(the "Company Disclosure Schedule") sets forth the holders of all outstanding
Options and the number, exercise prices, vesting schedules and expiration dates
of each grant to such holders. Since January 1, 1997, the Company has not issued
any shares of capital stock except pursuant to the exercise of Options
outstanding as of such date; provided, however, that not more than 10,000 Common
Shares are reserved for issuance as of June 30, 1997 pursuant to the exercise of
options (the "Purchase Plan Options") granted prior to the date of this
Agreement pursuant to the Company's 1994 Employee Stock Purchase Plan. All the
outstanding Common Shares are, and all Common Shares which may be issued
pursuant to the exercise of outstanding Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any preemptive rights. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or convertible into securities
having such rights) ("Voting Debt") of the Company or any of its subsidiaries
issued and outstanding. Except as set forth in this Section 4.02, and except for
the Contingent Rights and the Rights, there are no existing options, warrants,
calls, subscriptions or other rights, agreements, arrangements or commitments of
any character to which the Company or any of its subsidiaries is a party or by
which any of them is bound, 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
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<PAGE> 15
Voting Debt of, or other equity interest in, the Company or any of its
subsidiaries or securities convertible into or exchangeable for such shares or
equity interests or obligating the Company or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment. Except as contemplated by this
Agreement or the Rights Agreement and except for the Company's obligations in
respect of the Options under the Stock Plans, there are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Common Shares or the capital stock of the
Company or any of its subsidiaries. Each of the outstanding shares of capital
stock of each of the Company's Significant Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and, except as set forth in
Section 4.02 of the Company Disclosure Schedule, such shares of the Company's
Significant Subsidiaries are owned by the Company or by a subsidiary of the
Company in each case free and clear of any lien, claim, option, charge, security
interest, limitation, encumbrance and restriction of any kind (any of the
foregoing being a "Lien"). Set forth in Section 4.02 of the Company Disclosure
Schedule is a complete and correct list of each subsidiary (direct or indirect)
of the Company and indicates whether such subsidiary is a Significant
Subsidiary. No entity in which the Company owns, directly or indirectly, less
than a 50% equity interest is, individually or when taken together with all such
other entities, material to the business of the Company and its subsidiaries
taken as a whole.
SECTION 4.03 Authority Relative to this Agreement and Related
Matters. The Company has all necessary corporate power and authority to execute
and deliver this Agreement and, except for any required approval by the
Company's stockholders in connection with consummation of the Merger, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized and
approved by the Company Board and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval of this Agreement by the affirmative vote of the holders of
a majority of the then outstanding Common Shares entitled to vote thereon, to
the extent required by applicable law). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement by Parent and the
Purchaser, constitutes a valid and binding obligation
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of the Company enforceable against the Company in accordance with its terms.
SECTION 4.04 No Conflict; Required Filings and
Consents.
(a) Assuming (i) the filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
are made and the waiting periods thereunder have been terminated or have
expired, (ii) the requirements of the Exchange Act and any applicable state
securities, "blue sky" or takeover law are met, (iii) the filing of the
certificate of merger and other appropriate merger documents, if any, as
required by the GCL, is made and (iv) approval of this agreement by the holders
of a majority of the Common Shares, if required by the GCL, is received, none of
the execution and delivery of this Agreement by the Company, the consummation by
the Company of the transactions contemplated hereby or compliance by the Company
with any of the provisions hereof will (i) conflict with or violate the
Certificate of Incorporation or By-Laws of the Company or the comparable
organizational documents of any of its Significant Subsidiaries, (ii) except as
disclosed on Section 4.04(a) of the Company Disclosure Schedule, result in a
breach or violation of, a default under or the triggering of any payment or
other material obligations pursuant to, any of the Company's existing Employee
Benefit Arrangements (as hereinafter defined) or any grant or award made under
any of the foregoing, (iii) conflict with or violate any statute, ordinance,
rule, regulation, order, judgment, decree, permit or license applicable to the
Company or any of its subsidiaries, or by which any of them or any of their
respective properties or assets may be bound or affected, or (iv) result in a
violation or breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
any loss of any benefit, or the creation of any Lien on any of the properties or
assets of the Company or any of its subsidiaries (any of the foregoing referred
to in clause (ii), (iii) or this clause (iv) being a "Violation") pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties may be bound or affected,
other than, in the case of clause (iii) or (iv) above, any such Violations that,
individually or in the aggregate, would not (A) reasonably be expected to have a
Material Adverse Effect
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<PAGE> 17
on the Company, (B) impair the ability of the Company to perform its obligations
under this Agreement or (C) prevent or materially delay consummation of any
transactions contemplated by this Agreement.
(b) None of the execution and delivery of this
Agreement by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will require any consent, waiver, approval, authorization or permit of,
or registration or filing with or notification to (any of the foregoing being a
"Consent"), any government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or regulatory authority,
agency, commission, tribunal or body, domestic, foreign or supranational (a
"Governmental Entity"), except for (i) compliance with any applicable
requirements of the Exchange Act, (ii) the filing of the certificate of merger
pursuant to the GCL, (iii) compliance with the HSR Act and any requirements of
any foreign or supranational antitrust laws, and (iv) such filings,
authorizations, orders and approvals (which to the Company's knowledge are set
forth on Section 4.04(b) of the Company Disclosure Schedule) as (A) may be
required under the laws of any foreign country in which the Company or any of
its subsidiaries conducts any business or owns any property or assets or (B) as
to which failure to obtain or make would not (x) reasonably be expected to have
a Material Adverse Effect on the Company or (y) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
SECTION 4.05 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy statements
required to be filed by the Company with the SEC since January 1, 1994 (as they
have been amended since the time of their filing, and including any documents
filed as exhibits thereto, collectively, the "SEC Reports") and has heretofore
made available to Parent complete and correct copies of all such forms, reports,
schedules, registration statements, and proxy statements. As of their respective
dates, the SEC Reports (including but not limited to any financial statements or
schedules included or incorporated by reference therein) complied in all
material respects with the requirements of the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations of
the SEC promulgated thereunder applicable, as the case may be, to such SEC
Reports, and none of the SEC Reports contained any untrue statement of a
material fact or
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omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) The consolidated balance sheets as of December
31, 1996 and 1995 and the consolidated statements of income, common
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 (including the related notes and schedules thereto) of
the Company contained in the Company's Form 10-K, as amended prior to the date
hereof, for the fiscal year ended December 31, 1996 present fairly the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated subsidiaries as of the dates or
for the periods presented therein and were prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied
during the periods involved except as otherwise noted therein, including the
related notes.
(c) Except as reflected, reserved against or
otherwise disclosed in the financial statements of the Company included in the
SEC Reports filed prior to the date of this Agreement or as set forth in Section
4.05(c) of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries have any liabilities or obligations (absolute, accrued, fixed,
contingent or otherwise) other than liabilities incurred in the ordinary course
of business consistent with past practice since December 31, 1996 which would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(d) The Company has heretofore furnished to Parent a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Securities
Act and the rules and regulations promulgated thereunder or the Exchange Act and
the rules and regulations promulgated thereunder.
(e) As of May 23, 1997, the Company had on hand cash
and cash equivalents (collectively, "Cash") of at least $110,440,000 and Net
Working Capital of at least $129,901,000. For purposes of this Agreement, "Net
Working Capital" shall mean, as of any date of determination, the remainder of
(1) Total Current Assets less (2) Total Current Liabilities, in each case as of
such date, calculated in the same manner, using the same methods, as the line
items on the
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Company's balance sheet as reported in the Company's Form 10-K, as amended prior
to the date hereof, for the fiscal year ended December 31, 1996 (the "Balance
Sheet").
SECTION 4.06 Environmental Matters.
(a) The business and operations of the Company and its
subsidiaries comply in all material respects with all applicable Environmental
Laws. The Company and its subsidiaries have obtained all material Governmental
Permits relating to Environmental Laws necessary for the operation of their
businesses; all such material Governmental Permits are set forth on Schedule
4.06 and are in full force and effect and the Company and its subsidiaries are
in compliance in all material respects with all terms and conditions of such
permits. To the best knowledge of the Company, neither the Company nor its
subsidiaries is subject to, and no facts exist that would form the basis for,
any investigation by, order from or claim by any person (including without
limitation any Governmental Entity or prior owner or operator of any of the
Company Property) respecting (i) any Environmental Law, (ii) any Remedial Action
or (iii) any claim arising from the Release or threatened Release of a
Contaminant into the environment. Neither the Company nor any of its
subsidiaries is subject to any judicial or administrative proceeding, order,
judgment, decree or settlement alleging or addressing a violation of or
liability under any Environmental Law.
(b) Neither the Company nor any of its subsidiaries has (i)
reported a Release of a hazardous substance pursuant to Section 103(a) of
CERCLA, or any state equivalent; (ii) filed a notice pursuant to Section 103(c)
of CERCLA; or (iii) filed any notice under any applicable Environmental Law
reporting a violation of any applicable Environmental Law. There is not now with
respect to the operations of the Company or any of its subsidiaries, nor to the
best knowledge of the Company has there ever been, on or in any Company
Property: (A) any Release, (B) any treatment, recycling, storage or disposal of
any hazardous waste, as that term is defined under RCRA or any state equivalent,
or (C) any underground storage tank or surface impoundment or landfill or waste
pile, except for such events which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(c) There is not now on or in any Company Property any
polychlorinated biphenyls (PCB) used in the Company's operations in pigments,
hydraulic oils, electrical transformers or other equipment.
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(d) To the best knowledge of the Company, any
asbestos-containing material or presumed asbestos-containing material which is
on or part of any Company Property is in good repair according to the current
standards and practices governing such material, and its presence or condition
does not violate any currently applicable Environmental Law. None of the
products manufactured, distributed or sold by the Company or any of its
subsidiaries contained asbestos or asbestos-containing material.
(e) For purposes of this Section:
(i) "Company Property" means any real or
personal property, plant, building, facility, structure, underground
storage tank, equipment or unit, or other asset now or, to the
Company's knowledge, previously owned, leased or operated primarily by
the Company or any of its present or, to the Company's knowledge, past
subsidiaries.
(ii) "CERCLA" means the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and
any regulations promulgated thereunder.
(iii) "Contaminant" means any waste,
pollutant, hazardous or toxic substance or waste, petroleum,
petroleum-based substance or waste, special waste, hazardous material
or any constituent of any such substance, waste or material.
(iv) "Environmental Law" means all federal,
state and local laws or regulations relating to or addressing the
environment, health or safety, including but not limited to CERCLA,
OSHA and RCRA and any state equivalent thereof.
(v) "Governmental Permits" means any
permits, licenses, certificates, orders, consents, authorizations,
franchises and other approvals from, or required by, any Governmental
Entity that are used by, or are necessary to own and to operate, the
business of the Company and its subsidiaries as currently configured
and operated, together with any applications for the issuance, renewal,
modification or extension thereof and all supporting information and
analyses.
(vi) "OSHA" means the Occupational Safety
and Health Act, as amended, and any regulations promulgated
thereunder.
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(vii) "RCRA" means the Resource Conservation
and Recovery Act, as amended, and any regulations promulgated
thereunder.
(viii) "Release" means release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration of a Contaminant into the environment
or into or out of any Company Property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or
Company Property.
SECTION 4.07 Compliance with Applicable Laws. Except with
respect to Environmental Laws which are covered in Section 4.06, the Company and
its subsidiaries hold all material permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities (the "Company Permits"). The
Company and its subsidiaries are in compliance with the terms of the Company
Permits, except for such failures to comply which would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
Company. Except with respect to Environmental Laws which are covered in Section
4.06, the business operations of the Company and its subsidiaries have been
conducted in compliance with all laws, ordinances and regulations of any
Governmental Entity, except for possible violations which could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on the Company.
SECTION 4.08 Change of Control. Except as set forth on Section
4.08 of the Company Disclosure Schedule, the transactions contemplated by this
Agreement will not constitute a "change of control" under, require the consent
from or the giving of notice to a third party pursuant to, permit a third party
to terminate or accelerate vesting or repurchase rights or create any other
detriment under the terms, conditions or provisions of any 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, except where the adverse
consequences resulting from such change of control or where the failure to
obtain such consents or provide such notices would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company; provided, however, that the foregoing exception will not be applicable
to any (i) note, bond, mortgage, indenture, contract, agreement or other
instrument or obligation relating to (x) indebtedness of the Company or any of
its subsidiaries with an outstanding principal amount of more than $100,000 or
(y) annual revenues
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to the Company of more than $150,000 or (ii) employment, compensation,
termination or severance agreement, instrument or obligation of the Company or
any of its subsidiaries. The total amounts payable to the executives identified
in Section 4.08 of the Company Disclosure Schedule, as a result of the
transactions contemplated by this Agreement and/or any subsequent employment
termination (including any cash-out or acceleration of options and restricted
stock and any "gross-up" payments with respect to any of the foregoing), based
on compensation data applicable as of the date hereof will not exceed the amount
set forth on such schedule.
SECTION 4.09 Litigation. There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened, against the Company or any of its subsidiaries, individually or in
the aggregate, which would reasonably be expected to have a Material Adverse
Effect on the Company and its subsidiaries or could prevent or materially delay
the consummation of the transactions contemplated by this Agreement. Except as
disclosed in the SEC Reports filed prior to the date of this Agreement, neither
the Company nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company or could
prevent or materially delay the consummation of the transactions contemplated
hereby.
SECTION 4.10 Information. None of the information supplied by
the Company in writing (other than projections of future financial performance)
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Proxy Statement or (iii) any other document to be filed with
the SEC or any other Governmental Entity in connection with the transactions
contemplated by this Agreement (the "Other Filings") will, at the respective
times filed with the SEC or other Governmental Entity and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement is
mailed to stockholders, at the time of the Special Meeting and at the Effective
Time, 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 made therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or the Purchaser
in writing specifically for inclusion in the Proxy Statement.
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SECTION 4.11 Certain Approvals. The Company Board has taken
any and all necessary and appropriate action to render inapplicable to the
Offer, the Merger and the transactions contemplated by this Agreement the
provisions of Section 203 of the GCL. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Offer, the Merger or
the transactions contemplated by this Agreement.
SECTION 4.12 Employee Benefit Plans.
(a) Section 4.12(a) of the Company Disclosure
Schedule includes a complete list of all employee benefit plans, programs, and
other arrangements providing benefits to any employee or former employee or
beneficiary or dependent thereof, whether or not written, and whether covering
one person or more than one person, sponsored or maintained by the Company or
any of its subsidiaries or to which the Company or any of its subsidiaries
contributes or is obligated to contribute ("Plans"). Without limiting the
generality of the foregoing, the term "Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended, and the regulations thereunder
("ERISA") and all employee pension benefit plans within the meaning of Section
3(2) of ERISA.
(b) With respect to each Plan, the Company has made
available to Parent a true, correct and complete copy of: (i) each writing
constituting a part of such Plan, including without limitation all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan description,
if any; (iv) the most recent annual financial report, if any; (v) the most
recent actuarial report, if any; and (vi) the most recent determination letter
from the Internal Revenue Service (the "IRS"), if any. Except as specifically
provided in the foregoing documents made available to Parent, there are no
amendments to any Plan that have been adopted or approved nor has the Company or
any of its subsidiaries undertaken to make any such amendments.
(c) Section 4.12(c) of the Company Disclosure
Schedule identifies each Plan that is intended to be a "qualified plan" within
the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations thereunder (the "Code") ("Qualified Plans"). The
IRS has issued a favorable determination letter with respect
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to each Qualified Plan that has not been revoked, and there are no existing
circumstances nor any events that have occurred that could adversely affect the
qualified status of any Qualified Plan or the related trust. Schedule 4.12(c)
identifies each Plan which is intended to meet the requirements of Code
Section 501(c)(9), and each such plan meets such requirements and provides no
disqualified benefits (as such term is defined in Code Section 4976(b).
(d) All contributions required to be made to any Plan
by applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Plan, for any period through the date hereof have been timely made
or paid in full or, to the extent not required to be made or paid on or before
the date hereof, have been fully reflected in the financial statements of the
Company included in the SEC Reports to the extent required under generally
accepted accounting principles.
(e) The Company and each of its subsidiaries has
complied, and is now in compliance, in all material respects with all provisions
of ERISA, the Code and all laws and regulations applicable to the Plans. There
is not now, nor do any circumstances exist that could give rise to, any
requirement for the posting of security with respect to a Plan or the imposition
of any lien on the assets of the Company or any of its subsidiaries under ERISA
or the Code. No prohibited transaction has occurred with respect to any Plan.
(f) No Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. Without limiting the generality of the
foregoing, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA
(a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries, or
any of their respective ERISA Affiliates (as defined in the next sentence), at
any time since September 2, 1974, contributed to or been obligated to contribute
to any Multiemployer Plan or Multiple Employer Plan. An "ERISA Affiliate" means
any entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the Company or any of its subsidiaries, or that is a member of the same
"controlled group" as the Company or any of its subsidiaries, pursuant to
Section 4001(a)(14) of ERISA.
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(g) There does not now exist, nor do any
circumstances exist that could result in, any liability under (i) Title IV of
ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv)
the continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code, or (v) corresponding or similar provisions of foreign
laws or regulations, other than a liability that arises solely out of, or relate
solely to, the Plans, that would be a liability of the Company or any of its
subsidiaries following the Closing. Without limiting the generality of the
foregoing, none of the Company, its subsidiaries nor any ERISA Affiliate of the
Company or any of its subsidiaries has engaged in any transaction described in
Section 4069 or Section 4204 or 4212 of ERISA.
(h) Neither the Company nor any of its subsidiaries
has any liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA
and at no expense to the Company and its subsidiaries.
(i) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or arbitrations which
have been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts under
any of the Plans which could reasonably be expected to result in any material
liability of the Company or any of its subsidiaries to the Pension Benefit
Guaranty Corporation, the Department of Treasury, the Department of Labor or any
Multiemployer Plan.
SECTION 4.13 Intellectual Property.
(a) Set forth on Section 4.13(a) of the Company
Disclosure Schedule is a list of all material patents, patent applications,
patent disclosures, trademark registrations and trademark applications, service
mark registrations and service mark applications, certification mark
registrations and certification mark applications, copyright registrations and
copyright registration applications, mask works registrations and mask works
registration applications, both domestic and foreign, which are owned by the
Company or any of its subsidiaries. The assets described on Section 4.13(a) of
the Company Disclosure Schedule and all computer software, trade secrets,
trademarks, trade names, service marks, certification marks, copyrights,
know-how, methods, processes,
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procedures, apparatus, equipment, industrial property, discoveries, inventions,
designs, drawings, plans, specifications, engineering data, manuals, development
projects, research and development work in progress, technology or other
proprietary rights or confidential information which are owned or used by the
Company or any of its subsidiaries are referred to as the "Intellectual
Property." Except as otherwise indicated on Section 4.13(a) of the Company
Disclosure Schedule, the Company and its subsidiaries own all right, title and
interest in and to the Intellectual Property validly and beneficially, free and
clear of all material Liens, with the sole and exclusive right to use the same,
subject to those licenses listed on Section 4.13(b) of the Company Disclosure
Schedule.
(b) Set forth on Section 4.13(b) of the Company
Disclosure Schedule is a list of (i) all material licenses, assignments and
other transfers of Intellectual Property granted to others by the Company or any
of its subsidiaries, and (ii) all material licenses, assignments and other
transfers of patents, trade names, trademarks, service marks, copyrights, mask
works registrations, software, trade secrets, know-how, technology or other
proprietary rights or information granted to the Company or any of its
subsidiaries by others. Except as set forth in Section 4.13(b) of the Company
Disclosure Schedule, none of the licenses, assignments or other transfers
described above is subject to termination or cancellation or change in its terms
or provisions as a result of this Agreement or the transactions provided for in
this Agreement.
(c) To the knowledge of the Company, there is no
material unauthorized use, infringement or misappropriation of any Intellectual
Property.
(d) Except as disclosed in Section 4.13(d) of the
Company Disclosure Schedule, no material claim with respect to the Intellectual
Property has been asserted or, to the best knowledge of the Company, is
threatened by any person nor does the Company know of any valid ground for any
bona fide claims (i) to the effect that the manufacture, sale or use of any
product or process as used (currently or in the past) or offered or proposed for
use or sale by the Company infringes on any copyright, trade secret, patent,
tradename or other intellectual property right of any person, (ii) against the
Company relating to the use of any Intellectual Property, or (iii) challenging
the ownership, validity or effectiveness of any Intellectual Property. To the
Company's best knowledge, all granted and issued patents and all registered
trademarks and service marks listed in Section 4.13(a)
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of the Company Disclosure Schedule and all copyrights held by the Company are
valid, enforceable and subsisting.
(e) No material Intellectual Property is subject to
any outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing, assignment or other transfer, use or enforceability
thereof by the Company. The Company has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, except indemnities agreed to in the ordinary course of
business included as part of the Company's license agreements. The Company has
the exclusive right to file, prosecute and maintain all applications and
registrations with respect to Intellectual Property.
SECTION 4.14 Taxes.
(a) The Company and each of its subsidiaries has
filed all federal, state, local and foreign income Tax Returns (as hereinafter
defined) required to be filed by it, and all other material Tax Returns required
to be filed by it, and has paid or caused to be paid all Taxes (as hereinafter
defined) shown as due and payable on such Tax Returns in respect of the periods
covered by such returns and has made adequate provision in the Company's
financial statements for payment of all Taxes anticipated to be payable in
respect of all taxable periods or portions thereof ending on or before the date
hereof, except where the failures to so file or pay or make adequate provision
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. Section 4.14 of the Company Disclosure
Schedule lists the periods through which the Tax Returns required to be filed by
the Company or any of its subsidiaries have been examined by the IRS or other
appropriate taxing authority, or the period during which any assessments may be
made by the IRS or other appropriate taxing authority has expired. All material
deficiencies and assessments asserted as a result of such examinations or other
audits by federal, state, local or foreign taxing authorities have been paid,
fully settled or adequately provided for in the Company's financial statements,
and no issue or claim has been asserted in writing for Taxes by any taxing
authority for any prior period, the adverse determination of which would result
in a deficiency which could 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
any of its subsidiaries. Neither the Company nor any of its subsidiaries has
filed a consent pursuant to Section 341(f) of the
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Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(2) of the
Code) owned by the Company or any of its subsidiaries. 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 or that would
not be deductible pursuant to the terms of Section 162(m) of the Code. Neither
the Company nor any of its subsidiaries (i) has been a member of a group filing
consolidated returns for federal income tax purposes (except for the group of
which the Company is the common parent), 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, transfer, license,
payroll, withholding, capital stock 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 4.15 Absence of Certain Changes. Except as disclosed
in the SEC Reports filed prior to the date of this Agreement or as otherwise
disclosed on Section 4.15 of the Company Disclosure Schedule, since December 31,
1996 (i) there has not been any Material Adverse Effect on the Company; (ii) the
businesses of the Company and each of its subsidiaries have been conducted only
in the ordinary course and in a manner consistent with past practice; (iii)
neither the Company nor any of its subsidiaries has incurred any material
liabilities (direct, contingent or otherwise) or engaged in any material
transaction or entered into any material agreement or commitments outside the
ordinary course of business; (iv) neither the Company nor any of its
subsidiaries has taken any action referred to in Section 6.01 hereof except as
permitted thereby; or (v) there has not been any revaluation by the Company or
any of its subsidiaries of any material assets, including but not limited to
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business.
SECTION 4.16 Labor Matters. No employees of the Company or of
any of its subsidiaries are represented by any
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labor union or any collective bargaining organization. No labor organization or
group of employees of the Company or any of its subsidiaries has made a pending
demand for recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation proceeding
presently pending or threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority, which would
reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.17 Relationships with Customers, Suppliers,
Distributors and Sales Representatives. Except as set forth in Section 4.17 of
the Company Disclosure Schedule, the Company has not received written notice
that any customer, supplier, distributor or sales representative intends to
cancel, terminate or otherwise modify its relationship with the Company or any
subsidiary which would reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 4.18 Contracts. Section 4.18 of the Company Disclosure
Schedule lists all written or oral contracts, agreements, guarantees, leases
(each a "Contract") to which the Company or any of its subsidiaries is a party
and which fall within any of the following categories: (i) Contracts not entered
into in the ordinary course of business, (ii) joint venture, partnership and
like agreements, (iii) Contracts containing covenants purporting to limit the
freedom of the Company or any of its subsidiaries to compete in any line of
business in any geographic area or to hire or solicit any individual or group of
individuals, (iv) Contracts which after the Effective Time would have the effect
of limiting the freedom of Parent or its subsidiaries (other than the Company
and its subsidiaries) to compete in any line of business in any geographic area
or to hire any individual or group of individuals, (v) Contracts which contain
minimum purchase conditions or requirements or other terms that restrict or
limit the purchasing relationships of the Company or any of its subsidiaries,
(vi) Contracts relating to any outstanding commitment for capital expenditures
in excess of $100,000, (vii) indentures, mortgages, promissory notes, loan
agreements, guarantees of amounts in excess of $100,000, letters of credit or
other agreements or instruments of the Company or any of its subsidiaries or
commitments for the borrowing or the lending of amounts in excess of $100,000 by
the Company or any of its subsidiaries or providing for the creation of any
charge, security interest, encumbrance or lien upon any of the assets of the
Company or any of its subsidiaries and (viii) Contracts with or for the benefit
of any
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affiliate of the Company (other than subsidiaries of the Company). All of the
Contracts required to be disclosed by this Section 4.18 are valid and binding
obligations of the Company or a subsidiary of the Company and the valid and
binding obligation of each other party thereto, except such Contracts which if
not so valid and binding would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. Neither the
Company nor any of its subsidiaries nor, to the knowledge of the Company, any
other party thereto is in violation of or in default in respect of, nor has
there occurred an event or condition which with the passage of time or giving of
notice (or both) could constitute a default under, any such Contract except such
violations or defaults under such Contracts which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
SECTION 4.19 Rights Agreement. The Company and the Company
Board have authorized all necessary action to amend the Rights Agreement
(without redeeming the Rights) so that none of the execution or delivery of this
Agreement, the making of the Offer, the acquisition of Common Shares pursuant to
the Offer or the consummation of the Merger will (i) cause any Rights issued
pursuant to the Rights Agreement to become exercisable or to separate from the
stock certificates to which they are attached, (ii) cause Parent, the Purchaser
or any of their Affiliates or Associates to be an Acquiring Person (as each such
term is defined in the Rights Agreement) or (iii) trigger other provisions of
the Rights Agreement, including giving rise to a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement), and
such amendment shall be in full force and effect from and after the date hereof.
SECTION 4.20 Product Recalls. The Company is not aware of any
pattern or series of claims against the Company or any of its subsidiaries which
reasonably could be expected to result in a generalized product recall relating
to products sold by the Company or any of its subsidiaries, regardless of
whether such product recall is formal, informal, voluntary or involuntary.
SECTION 4.21 Sale of UV Curing Business. The Company is not
aware of any pending or threatened claim against the Company or any of its
subsidiaries, whether for indemnification, retained liabilities or otherwise,
arising out of or related to the sale by the Company of its ultraviolet curing
systems business to affiliates of Fairey Group, plc pursuant to a Purchase
Agreement, dated as of August 14, 1996, a
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true, correct and complete copy of which has previously been made available to
Parent.
SECTION 4.22 Brokers. Except for the engagement of Salomon
Brothers and Venture Advisors, Inc. ("VAI"), an affiliate of Daniel Tessler,
Chairman of the Company Board, none of the Company, any of its subsidiaries, or
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement. The Company has previously delivered to Parent a copy of the
Company's engagement letters with Salomon Brothers and VAI. The aggregate Merger
Fees owed or which will be owing by the Company and its subsidiaries in
connection with the Offer, the Merger and the transactions contemplated by this
Agreement will not exceed the amount set forth in Section 4.22 of the Company
Disclosure Schedule. "Merger Fees" means all fees and expenses paid or payable
by or on behalf of the Company or any of its subsidiaries to all attorneys,
accountants, investment bankers, financial advisors and other experts and
advisors incident to negotiation, preparation, execution and consummation of
this Agreement and the transactions contemplated hereby, and all amounts payable
to any officer, director or significant employee of the Company or any of its
subsidiaries whose Options are covered by Schedule 2.09 arising out of severance
of employment following consummation of the transactions contemplated by this
Agreement or otherwise attributable to the consummation of the transactions
contemplated by this Agreement, exclusive of payments in respect of Options.
SECTION 4.23 Opinion of Salomon Brothers. The Company has
received the written opinion of Salomon Brothers to the effect that, as of June
29, 1997, the consideration to be received by the holders of Common Shares
(other than Parent or any of its affiliates) pursuant to the Offer, the Merger
and the Contingent Rights, is fair to the Company's stockholders from a
financial point of view. The Company has previously delivered to Parent a copy
of such opinion.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company
as follows:
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SECTION 5.01 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of Ohio and each material subsidiary of Parent is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent and each of
its material subsidiaries (including the Purchaser) has the requisite corporate
power and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or
in good standing, would not have a Material Adverse Effect on Parent. The term
"Material Adverse Effect on Parent", as used in this Agreement, means any
change in or effect on the business, assets, liabilities, condition (financial
or otherwise), prospects or results of operations of Parent or any of its
subsidiaries that would be materially adverse to Parent and its subsidiaries
taken as a whole.
SECTION 5.02 Authority Relative to this Agreement. Each of
Parent and the Purchaser has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the Purchaser and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly and validly authorized and
approved by the respective Boards of Directors of Parent and the Purchaser and
by Parent as sole stockholder of the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to authorize or
approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and the
Purchaser and, assuming the due and valid authorization, execution and delivery
by the Company, constitutes a valid and binding obligation of each of Parent and
the Purchaser enforceable against each of them in accordance with its terms.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) Assuming (i) the filings required under the HSR
Act are made and the waiting periods thereunder have
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terminated or have expired, (ii) the requirements of the Exchange Act and any
applicable state securities, "blue sky" or takeover law are met and (iii) the
filing of the certificate of merger and other appropriate merger documents, if
any, as required by the GCL, is made, none of the execution and delivery of this
Agreement by Parent or the Purchaser, the consummation by Parent or the
Purchaser of the transactions contemplated hereby or compliance by Parent or the
Purchaser with any of the provisions hereof will (i) conflict with or violate
the organizational documents of Parent or the Purchaser, (ii) conflict with or
violate in any material respect any statute, ordinance, rule, regulation, order,
judgment, decree, permit or license applicable to Parent or the Purchaser or any
of their subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iii) result in a Violation
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
the Purchaser or any of their subsidiaries is a party or by which Parent or the
Purchaser or any of their subsidiaries or any of their respective properties or
assets may be bound or affected, which would prevent or materially delay the
consummation of the transactions contemplated hereby.
(b) None of the execution and delivery of this
Agreement by Parent and the Purchaser, the consummation by Parent and the
Purchaser of the transactions contemplated hereby or compliance by Parent and
the Purchaser with any of the provisions hereof will require any Consent of any
Governmental Entity, except for (i) compliance with any applicable requirements
of the Exchange Act and any state securities "blue sky" or takeover law, (ii)
the filing of a certificate of merger pursuant to the GCL, and (iii) compliance
with the HSR Act and any requirements of any foreign or supranational antitrust
laws.
SECTION 5.04 Information. None of the information supplied or
to be supplied by Parent and the Purchaser in writing specifically for inclusion
in (i) the Schedule 14D-9, (ii) the Proxy Statement or (iii) the Other Filings
will, at the respective times filed with the SEC or such other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to stockholders, at the time of the
Special Meeting and at the Effective Time, 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 made therein, in light of the
circumstances under which they were made, not misleading.
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SECTION 5.05 Financing. Parent has possession of, or has
available to it under existing lines of credit, sufficient funds to consummate
the transactions contemplated by this Agreement, and will cause the Purchaser to
have sufficient funds available to consummate the Offer and the Merger and the
transactions contemplated hereby.
SECTION 5.06 Delaware Law. Neither Parent nor any of its
subsidiaries was, immediately prior to the execution of this Agreement, an
"interested stockholder" within the meaning of Section 203 of the GCL.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
required by this Agreement or otherwise with the prior written consent of
Parent, 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 reasonable efforts, and will cause each of its
subsidiaries to use its reasonable efforts, to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available the
services of its and their present officers and key employees, and to preserve
the good will of those having business relationships with it, including, without
limitation, maintaining satisfactory relationships with licensors, suppliers,
distributors, customers and others having business relationships with the
Company. Without limiting the generality of the foregoing, and except as
otherwise required by 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 Parent:
(a) adopt any amendment to its Certificate of
Incorporation or By-Laws or comparable organizational documents or the Rights
Agreement (other than the amendment contemplated by Section 4.19) or the
Contingent Payment Rights Agreement;
(b) sell, pledge or encumber any stock owned by it in
any of its subsidiaries;
(c) (i) issue, reissue or sell, or authorize the
issuance, reissuance or sale of (A) additional shares of capital stock of any
class, or securities convertible into
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capital stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, other than the issuance of Common
Shares (and the related Rights), in accordance with the terms of the instruments
governing such issuance on the date hereof, pursuant to the exercise of Options
outstanding on the date hereof (or, if a Triggering Event (as defined in the
Rights Agreement) by a party other than Parent or the Purchaser shall occur,
Rights) or (B) any other securities in respect of, in lieu of, or in
substitution for, Common Shares outstanding on the date hereof, other than the
Contingent Rights or (ii) make any other changes in its capital structure;
(d) 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 other than (i)
between any of the Company and any of its wholly owned subsidiaries or (ii) the
Contingent Rights;
(e) 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, or any of its other securities;
(f) 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) other than an aggregate of $8,000
in bonuses previously disclosed to Parent, or pay or award any benefit not
required by any existing plan or arrangement to any officer, director or
employee (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units pursuant to
the Stock Plans or otherwise), or grant any severance or termination pay to any
officer, director or other employee of the Company or any of its subsidiaries
(other than as required by existing agreements or policies described in the
Company Disclosure Schedule), or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or any of
its subsidiaries or establish, adopt, enter into, amend or waive any performance
or vesting criteria or accelerate vesting or exercisability under any bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, 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 of the Company or its subsidiaries (any of the foregoing being
an
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"Employee Benefit Arrangement"), except, in each case, to the extent required
by applicable law or regulation;
(g) acquire, mortgage, encumber, sell, lease, license
or dispose of any assets (including Intellectual Property) or securities, except
pursuant to existing contracts or commitments or the sale or purchase of goods
in the ordinary course of business consistent with past practice, or enter into
any commitment or transaction outside the ordinary course of business consistent
with past practice other than transactions between a wholly owned subsidiary of
the Company and the Company or another wholly owned subsidiary of the Company,
provided that nothing herein shall prevent the Company from extending until
December 31, 1997 an agreement to provide benefits administration services to
Lighting, and extending the Company's MIS support for Lighting until the later
of June 30, 1998 or the Company's cessation of use of the Company's ASK Man Man
software system, in each case on their current terms and conditions;
(h) (i) incur, assume or pre-pay any long-term debt
or incur or assume any short-term debt, except that the Company and its
subsidiaries may incur, assume or pre-pay debt in the ordinary course of
business in amounts and for purposes consistent with past practice under
existing lines of credit, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice, (iii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), except
in the ordinary course of business consistent with past practice and in
accordance with their terms, (iv) make any loans, advances or capital
contributions to, or investments in, any other person, except for loans,
advances, capital contributions or investments between any wholly owned
subsidiary of the Company and the Company or another wholly owned subsidiary of
the Company, (v) authorize or make capital expenditures not provided for in the
Company's capital budget included in Section 6.01(h) of the Company Disclosure
Schedule which are in excess of $100,000, (vi) accelerate or delay collection of
notes or accounts receivable in advance of or beyond their regular due dates or
the dates when the same would have been collected in the ordinary course of
business consistent with past practice, (vii) delay or accelerate payment of
accounts payable beyond or in advance of its due date or the date such liability
would have been paid in the ordinary course of business consistent with past
practice, or (viii) vary the Company's inventory practices in any material
respect from the Company's past practices;
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(i) settle or compromise any suit or claim or
threatened suit or claim where the amount involved is greater than $100,000;
(j) other than in the ordinary course of business
consistent with past practice, (i) modify, amend or terminate any contract, (ii)
waive, release, relinquish or assign any contract (or any of the Company's
rights thereunder), right or claim, or (iii) cancel or forgive any indebtedness
owed to the Company or any of its subsidiaries; provided, however, that the
Company may not under any circumstance waive or release any of its rights under
any confidentiality agreement to which it is a party;
(k) make any tax election not required by law or
settle or compromise any tax liability;
(l) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated without notice
to the Purchaser, except in the ordinary course of business consistent with past
practice;
(m) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or, except in the ordinary course of business
consistent with past practice, any assets;
(n) enter into any contract or agreement other than
in the ordinary course of business consistent with past practice;
(o) except as may be required as a result of a change
in law or in generally accepted accounting principles, make any change in its
methods of accounting, including tax accounting policies and procedures; or
(p) agree in writing or otherwise to take any of the
foregoing actions prohibited under this Section 6.01 or any action which would
cause any representation or warranty in this Agreement to be or become untrue or
incorrect.
SECTION 6.02 Access to Information. From the date of this
Agreement until the Effective Time, the Company will, and will cause its
subsidiaries, and each of their respective officers, directors, employees,
counsel, advisors and representatives (collectively, the "Company
Representatives") to, give Parent and the Purchaser and their respective
officers, employees, counsel, advisors and representatives (collectively, the
"Parent Representatives") full access, during
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normal business hours, to the offices and other facilities and to the books and
records of the Company and its subsidiaries and will cause the Company
Representatives and the Company's subsidiaries to furnish Parent, the Purchaser
and the Parent Representatives with such financial and operating data and such
other information with respect to the business and operations of the Company and
its subsidiaries as Parent and the Purchaser may from time to time reasonably
request. The Company shall furnish promptly to Parent and the Purchaser a copy
of each report, schedule, registration statement and other document filed by it
or its subsidiaries during such period pursuant to the requirements of federal
or state securities laws. Parent and the Purchaser agree that any information
furnished pursuant to this Section 6.02 will be subject to the provisions of the
letter agreement dated April 7, 1997 between the Parent and the Company (the
"Confidentiality Agreement"), it being understood that the provisions set forth
in the eighth, ninth and tenth paragraphs thereof shall have no further force
and effect.
SECTION 6.03 Efforts.
(a) Subject to the terms and conditions provided
herein, each of the Company, Parent and the Purchaser shall, and the Company
shall cause each of its subsidiaries to, cooperate and use reasonable efforts to
make, or cause to be made, all filings necessary or proper under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement, including but not limited to cooperation in the preparation
and filing of the Offer Documents, the Schedule 14D-9, the distribution of
Contingent Rights and any actions or filings related thereto, the Proxy
Statement, any required filings under the HSR Act, or other foreign filings and
any amendments to any thereof.
In addition, if at any time prior to the Effective
Time any event or circumstance relating to either the Company or Parent or the
Purchaser or any of their respective subsidiaries should be discovered by the
Company or Parent, as the case may be, which should be set forth in an amendment
to the Offer Documents or Schedule 14D-9, the discovering party will promptly
inform the other party of such event or circumstance. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, including the execution of additional instruments,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
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(b) Each of the parties will use its reasonable
efforts to obtain as promptly as practicable all Consents of any Governmental
Entity or any other person required in connection with, and waivers of any
Violations that may be caused by, the consummation of the transactions
contemplated by the Offer and this Agreement.
SECTION 6.04 Public Announcements. The Company, on the one
hand, and Parent and the Purchaser, on the other hand, agree to consult promptly
with each other prior to issuing any press release or otherwise making any
public statement with respect to the Offer, the Merger and the other
transactions contemplated hereby, agree to provide to the other party for review
a copy of any such press release or statement, and shall not issue any such
press release or make any such public statement prior to such consultation and
review, unless required by applicable law or any listing agreement with a
securities exchange.
SECTION 6.05 Employee Benefit Arrangements.
(a) Parent agrees that the Company will honor and,
from and after the Effective Time, Parent will cause the Surviving Corporation
to honor, all obligations under Employee Benefit Arrangements to which the
Company or any of its subsidiaries is presently a party which are listed in
Section 6.05(a) of the Company Disclosure Schedule. Notwithstanding the
foregoing, from and after the Effective Time, subject to the remaining
provisions of this Section 6.05(a), the Surviving Corporation shall have the
right to amend, modify, alter or terminate any Employee Benefit Arrangements,
provided that any such action shall not adversely affect the rights of any
employees or other beneficiaries which shall have arisen thereunder prior to
such amendment, modification, alteration or termination, and shall not affect
any rights for which the agreement of the other party or a beneficiary is
required.
(b) Parent shall cause the Surviving Corporation to
establish a special bonus plan (the "Special Bonus Plan") for all employees of
the Company or any of its subsidiaries who held Options which were outstanding
as of immediately before the Effective Time which were not then vested and were
terminated as of the Effective Time. The Special Bonus Plan shall provide for a
cash payment on the second anniversary of the Effective Time to each employee
who continues to be an employee of the Surviving Corporation, Parent or any of
their respective subsidiaries on such second anniversary in an amount (subject
to any applicable withholding taxes) equal to the sum of (i) the product of (x)
the total
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number of Common Shares subject to such terminated Options and (y) the excess of
the Merger Price over the exercise price per Common Share of such terminated
Options, plus (ii) interest on the amount set forth in clause (i) at a rate of
6% per annum from the Effective Time, plus (iii) the product of (x) the total
number of Common Shares subject to such terminated Option and (y) the amount of
cash, if any, paid with respect to each Contingent Right pursuant to the
Contingent Rights Agreement. Any employee of the Company who is involuntarily
terminated without cause or whose employment ceases by reason of death or
disability, in each case prior to the second anniversary of the Effective Time,
shall be entitled, promptly following such termination or cessation of
employment (or, in the case of any payment pursuant to clause (y) of the
preceding sentence, promptly following the later of March 31, 1999 or the date
of such termination or cessation of employment), to receive from the Company a
cash payment equal to the amount which such employee would have received
pursuant to the formula in the immediately preceding sentence, had such employee
remained employed throughout the period ending on the second anniversary of the
Effective Time.
SECTION 6.06 Indemnification; Directors' and Officers'
Insurance.
(a) From and after the time the Purchaser purchases
Shares pursuant to the Offer through and including the Effective Time (without
regard to the termination of this Agreement), neither Parent nor the Purchaser
will take any action, nor permit any action to be taken, which would change or
amend the provisions of the Certificate of Incorporation or By-Laws of the
Company in effect on the date hereof (copies of which previously have been
supplied to Parent) relating to limitation of liability or indemnification
inconsistent with its obligations under Section 6.06(b) hereof or eliminate or
make any modification in the Company's existing director's and officer's
insurance inconsistent with its obligations under Section 6.06(c) hereof. Parent
agrees that from and after the Effective Time all rights to indemnification now
existing in favor of individuals who at or prior to the Effective Time were
directors or officers of the Company or any of its subsidiaries as set forth in
the Certificate of Incorporation or By-Laws of the Company shall survive the
Merger with respect to matters existing or occurring at or prior to the
Effective Time and shall continue in full force and effect for a period of six
years following the Effective Time.
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(b) The Company shall, and from and after the
Effective Time, the Surviving Corporation shall, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of the
Company or any of its subsidiaries (each individually an "Indemnified Party"
and, collectively, the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement with the approval of the
Indemnifying Party as a result of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based on or arising out of the
fact that such person is or was a director or officer of the Company or any of
its subsidiaries or out of or in connection with activities in such capacity,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent a corporation
is permitted under the GCL to indemnify any such person and, without limiting
the generality or effect of the foregoing, to the fullest extent provided in the
respective Certificates of Incorporation or By-Laws of the Company and its
subsidiaries as in effect on the date hereof. Parent will cause the Surviving
Corporation to pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent permitted
by law and, without limiting the generality or effect of the foregoing, to the
fullest extent provided in the respective Certificates of Incorporation or
By-Laws of the Company and its subsidiaries as in effect on the date hereof
subject to receipt by the Company of an undertaking by or on behalf of such
officer or director contemplated by Section 145(e) of the GCL. Without limiting
the generality or effect of the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time) and, in the opinion of
counsel to an Indemnified Party, under applicable standards of professional
conduct, there is a conflict on any significant issue between the position of
the Company and an Indemnified Party or different defenses may reasonably be
expected to exist, the Indemnified Parties may retain counsel which counsel
shall be reasonably satisfactory to the Company (or the Surviving Corporation
after the Effective Time) and the Company shall (or after the Effective Time,
Parent will cause the Surviving Corporation to) pay all reasonable fees and
expenses of such counsel for the Indemnified Parties
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promptly as statements therefor are received, provided, however that (i) Parent
or the Surviving Corporation shall have the right, from and after the purchase
of Common Shares pursuant to the Offer, to assume the defense thereof (which
right shall not affect the right of the Indemnified Parties to be reimbursed for
separate counsel as specified in the preceding sentence), (ii) the Company and
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) neither Parent, the Company nor the Surviving Corporation shall be liable
for any settlement effected without its prior written consent. Any Indemnified
Party wishing to claim indemnification under this Section 6.06, upon learning of
any such claim, action, suit, proceeding or investigation, shall promptly notify
both Parent and the Company (or, after the Effective Time, the Surviving
Corporation) (but the failure to so notify shall not relieve a party from any
liability which it may have under this Section 6.06 except and only to the
extent such failure materially prejudices such party), and shall deliver to both
Parent and the Company (or after the Effective Time, the Surviving Corporation)
the undertaking contemplated by Section 145(e) of the GCL. The Indemnified
Parties as a group may not retain more than one counsel to represent them with
respect to each such matter unless there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties or unless different defenses may reasonably be expected to
exist. The Company, Parent and Purchaser agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the Indemnified Parties
with respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Indemnified Liabilities asserted or made
within such period shall continue until the disposition of such Indemnified
Liabilities.
(c) Parent agrees that the Company, and from and
after the Effective Time, the Surviving Corporation shall cause to be maintained
in effect for not less than six years (except as provided in the last sentence
of this Section 6.06(c)) from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company; provided
that the Surviving Corporation may substitute therefor other policies of at
least the same coverage
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amounts and which contain terms and conditions not less advantageous (other than
to a de minimus extent) to the beneficiaries of the current policies and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 125% of the last annual premium paid by the
Company prior to the date hereof (which the Company represents to be $196,000
for the 12-month period ending May 12, 1998) and if the Surviving Corporation is
unable to obtain the insurance required by this Section 6.06(c) it shall obtain
as much comparable insurance as possible for an annual premium equal to such
maximum amount. Notwithstanding the foregoing, at any time on or after the
second anniversary of the Effective Time, Parent may, at its election, undertake
to provide funds to the Surviving Corporation to the extent necessary so that
the Surviving Corporation may self-insure with respect to the level and scope of
insurance coverage required under this Section 6.06(c) in lieu of causing to
remain in effect any directors' and officers' liability insurance policy.
(d) Parent shall guarantee the obligations of the
Surviving Corporation under this Section 6.06.
(e) This Section 6.06 shall survive the consummation
of the Merger at the Effective Time, is intended to benefit the Company, the
Surviving Corporation and the Indemnified Parties, shall be binding on all
successors and assigns of Parent and the Surviving Corporation and shall be
enforceable by the Indemnified Parties.
SECTION 6.07 Notification of Certain Matters. Parent and the
Company shall promptly notify each other of (a) the occurrence or non-occurrence
of any fact or event which would be reasonably likely (i) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (ii) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied and (b) any failure of the
Company, Parent or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that no such notification shall affect the
representations or warranties of any party or the conditions to the obligations
of any party hereunder. Each of the Company, Parent and the Purchaser shall give
prompt notice to the other parties hereof of any notice or other communication
from any third party alleging that the consent of such third party is or may be
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required in connection with the transactions contemplated by this Agreement.
SECTION 6.08 Rights Agreement. The Company covenants and
agrees that it will not (i) redeem the Rights, (ii) amend the Rights Agreement
or (iii) take any action which would allow any Person (as defined in the Rights
Agreement) other than Parent or the Purchaser to acquire beneficial ownership of
15% or more of the Common Shares without causing a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement) to
occur. Notwithstanding the foregoing, the Company may upon at least two business
days prior written notice to Parent take the actions described in clauses (i) or
(iii) of the preceding sentence, if (x) the Company Board determines in good
faith, after consultation with its outside legal counsel, that failing to take
such action would reasonably be expected to result in a breach of the fiduciary
duties of the Company Board, and (y) prior to such action the Company shall have
paid to Parent a fee of $13 million (which amount shall be paid in lieu of any
Termination Fee payable pursuant to Section 8.03(b)). Neither the Board of
Directors of the Company nor the Continuing Directors (as defined in the Rights
Agreement) of the Company shall make a determination that Parent, the Purchaser
or any of their respective Affiliates or Associates is an "Adverse Person" for
purposes of the Rights Agreement.
SECTION 6.09 State Takeover Laws. The Company shall, upon the
request of the Purchaser, take all reasonable steps to assist in any challenge
by the Purchaser to the validity or applicability to the transactions
contemplated by this Agreement, including the Offer and the Merger, of any state
takeover law.
SECTION 6.10 No Solicitation.
(a) The Company, its affiliates and their respective
officers, directors, employees, representatives and agents shall immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition or exchange of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its subsidiaries or any business combination with the Company or any of its
subsidiaries. The Company agrees that, prior to the Effective Time, it shall
not, and shall not authorize or permit any of its subsidiaries or any of its or
its subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or encourage, or furnish or
disclose non-public information in furtherance of, any inquiries or the
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making of any proposal with respect to any merger, liquidation,
recapitalization, consolidation or other business combination involving the
Company or its subsidiaries or acquisition of any capital stock or any material
portion of the assets (except for acquisition of assets in the ordinary course
of business consistent with past practice) of the Company or its subsidiaries,
or any combination of the foregoing (other than the Offer and the Merger) (an
"Acquisition Transaction"), or negotiate, explore or otherwise engage in
substantive discussions with any person (other than the Purchaser, Parent or
their respective directors, officers, employees, agents and representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by this Agreement;
provided that the Company may furnish information to, and negotiate or otherwise
engage in substantive discussions with, any person who delivers a written
proposal for an Acquisition Transaction if the Company Board determines in good
faith by a majority vote, after consultation with its outside legal counsel,
that failing to take such action would reasonably be expected to result in a
breach of the fiduciary duties of the Company Board, and prior to furnishing
non-public information to any such party, the Company shall have entered into a
confidentiality agreement containing terms at least as favorable to the Company
as those of the Confidentiality Agreement with respect to the maintenance of
confidentiality and the permitted use of information provided by or on behalf of
the Company.
(b) From and after the execution of this Agreement,
the Company shall immediately advise the Purchaser in writing of the receipt,
directly or indirectly, of any, discussions, negotiations or proposals relating
to an Acquisition Transaction, identify the offeror and furnish to the Purchaser
a copy of any such proposal, if it is in writing, or a written summary of any
such proposal relating to an Acquisition Transaction if it is not in writing.
The Company shall promptly advise Parent of any development relating to such
proposal, including the results of any discussions or negotiations with respect
thereto.
SECTION 6.11 Parent Agreements. (a) Parent agrees to cause the
Purchaser to comply with its obligations under this Agreement.
(b) Parent shall not take any action to cause the
Company, including after the Effective Time the Surviving Corporation, to breach
its covenants and other obligations in the Contingent Payment Rights Agreement.
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SECTION 6.12 Contingent Payment Rights Agreement. As promptly
as practicable after the date hereof, the Company shall enter into a Contingent
Payment Rights Agreement in the form set forth in Exhibit B, except for such
immaterial changes as shall be approved by Parent, such approval not to be
unreasonably withheld.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions. The respective obligations of Parent,
the Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the
Company shall have duly approved the transactions contemplated by this
Agreement, if required by applicable law.
(b) Purchase of Common Shares. The Purchaser shall
have accepted for payment and paid for Common Shares in an amount sufficient to
meet the Minimum Condition and otherwise pursuant to the Offer in accordance
with the terms hereof; provided, however, that this condition shall be deemed to
be satisfied with respect to the obligation of Parent and the Purchaser to
effect the Merger if the Purchaser fails to accept for payment or pay for Common
Shares pursuant to the Offer in violation of the terms of the Offer or of this
Agreement.
(c) Injunctions; Illegality. The consummation of the
Merger shall not be restrained, enjoined or prohibited by any order, judgment,
decree, injunction or ruling of a court of competent jurisdiction or any
Governmental Entity and there shall not have been any statute, rule or
regulation enacted, promulgated or deemed applicable to the Merger by any
Governmental Entity which prevents the consummation of the Merger or has the
effect of making the purchase of Common Shares illegal.
(d) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger shall have expired or
terminated.
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ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company (with any termination by Parent also being an effective termination by
the Purchaser):
(a) by the mutual written consent of Parent and the
Company, by action of their respective Boards of Directors;
(b) by the Company if (i) Parent or the Purchaser
fails to commence the Offer as provided in Section 1.01 hereof, or (ii) Parent
or the Purchaser shall not have accepted for payment and paid for Common Shares
pursuant to the Offer in accordance with the terms hereof and thereof on or
before October 31, 1997; provided, however, that the Company may not terminate
this Agreement pursuant to this Section 8.01(b) if the Company shall have
materially breached this Agreement;
(c) by Parent or the Company if (i) the Offer is
terminated or withdrawn pursuant to its terms without any Common Shares being
purchased thereunder or (ii) the Merger shall not have been consummated on or
before December 31, 1997; provided, however, that neither Parent nor the Company
may terminate this Agreement pursuant to this Section 8.01(c) if such party
shall have materially breached this Agreement;
(d) by Parent or the Company if any court of
competent jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, Common
Shares pursuant to the Offer or the Merger and such order, decree or ruling or
other action shall have become final and nonappealable, provided that the party
seeking to terminate this Agreement shall have used its reasonable efforts to
remove or lift such order, decree or ruling;
(e) by the Company if, prior to the acceptance for
payment of Common Shares pursuant to the Offer, the Company Board approves an
Acquisition Transaction, on terms which a majority of the members of the Company
Board have determined in good faith (i) after consultation with Salomon Brothers
or another nationally recognized investment banking
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firm, to be more favorable to the Company and its stockholders than the
transactions contemplated by this Agreement, taking into account the
distribution of the Contingent Rights, and (ii) after consultation with outside
legal counsel, that failure to approve such proposal and terminate this
Agreement would reasonably be expected to result in a breach of fiduciary duties
of the Company Board under applicable law; provided that the termination
described in this Section 8.01(e) shall not be permissible unless and until the
Company shall have provided the Purchaser and Parent prior written notice at
least two business days prior to such termination that the Company Board has
authorized and intends to effect the termination of this Agreement pursuant to
this Section 8.01(e), including copies of all proposed written agreements,
arrangements, or understandings, including the forms of any agreements supplied
by third parties, with respect to such Acquisition Transaction (and a
description of all material oral agreements with respect thereto), the Company
shall otherwise be in compliance with its obligations under this Agreement and
on or prior to such termination shall have paid to Parent the Termination Fees
described in Section 8.03(b); provided further, that notwithstanding anything in
this Agreement to the contrary the termination of this Agreement by the Company
in compliance with this Section 8.01(e) shall not be deemed to violate other
obligations of the Company under this Agreement.
(f) by Parent if the Company breaches its covenant in
Section 6.08 or takes an action pursuant to the second sentence of Section 6.08,
provided, however, such breach occurs prior to the time that designees of Parent
constitute a majority of the Company Board pursuant to Section 1.03;
(g) by Parent prior to the purchase of Common Shares
pursuant to the Offer, if the Company Board shall have withdrawn or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to the
Purchaser its approval or recommendation of the Offer, this Agreement or the
Merger, shall have approved or recommended an Acquisition Transaction, or shall
have resolved to effect any of the foregoing; or
(h) by Parent prior to the purchase of Common Shares
pursuant to the Offer if the Minimum Condition (as defined in Annex I) shall not
have been satisfied by the Expiration Date of the Offer and on or prior to such
Date an Acquisition Transaction shall have been publicly announced or disclosed.
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SECTION 8.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers or stockholders, other than the provisions
of the last sentence of Section 6.02 and the provisions of this Section 8.02
and Section 8.03, which shall survive any such termination. Nothing contained
in this Section 8.02 shall relieve any party from liability for any breach of
this Agreement.
SECTION 8.03 Fees and Expenses.
(a) Whether or not the Merger is consummated, except
as otherwise specifically provided herein, all costs and expenses incurred in
connection with the Offer, this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
(b) In the event that this Agreement is terminated
pursuant to SECTION 8.01(e), (f) or (g) hereof, or is terminated pursuant to
SECTION 8.01(c)(i) hereof as a result of the failure to satisfy any of the
conditions set forth in paragraphs (d) or (g) of Annex I, then the Company shall
promptly (and in any event within one business day after such termination or, in
the case of any such termination by the Company, prior to such termination) pay
Parent a termination fee of $13 million (the "Termination Fee"), provided that
in no event shall more than one Termination Fee be payable by the Company
(including for this purpose the fee payable under Section 6.08).
(c) In the event that this Agreement is terminated
pursuant to Section 8.01(h) hereof and within six months of the date of
termination of this Agreement a transaction constituting an Acquisition
Transaction is consummated or the Company or any of its subsidiaries enters into
an agreement with respect to, or approves or recommends such a transaction, the
Company shall promptly (and in any event within one business day thereafter) pay
Parent the Termination Fee; provided, however, that in no event shall the
Company be obligated to pay more than one such Termination Fee with respect to
all such occurrences (including for this purpose the fee payable under Section
6.08).
(d) The prevailing party in any legal action
undertaken to enforce this Agreement or any provision hereof shall be entitled
to recover from the other party the costs and expenses (including attorneys' and
expert witness fees) incurred in connection with such action.
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<PAGE> 50
SECTION 8.04 Amendment. Subject to Section 1.03(c), this
Agreement may be amended by the Company, Parent and the Purchaser at any time
before or after any approval of this Agreement by the stockholders of the
Company but, after any such approval, no amendment shall be made which decreases
the Merger Price or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of all
the parties.
SECTION 8.05 Extension; Waiver. Subject to Section 1.03(c), at
any time prior to the Effective Time, Parent and the Purchaser, on the one hand,
and the Company, on the other hand, may (i) extend the time for the performance
of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties contained herein of the other
or in any document, certificate or writing delivered pursuant hereto by the
other or (iii) waive compliance by the other with any of the agreements or
conditions. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties.
The representations and warranties made in this Agreement shall not survive
beyond the Effective Time. Notwithstanding the foregoing, the agreements set
forth in Section 2.09, Section 3.02, the last sentence of the second paragraph
of Section 6.03(a), Section 6.05(b), 6.11(b) and Section 6.06 shall survive the
Effective Time indefinitely (except to the extent a shorter period of time is
explicitly specified therein).
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the
instruments referred to herein) 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.
(b) 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
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<PAGE> 51
party (except that Parent may assign its rights and the Purchaser may assign its
rights, interest and obligations to any affiliate or direct or indirect
subsidiary of Parent without the consent of the Company provided that no such
assignment shall relieve Parent of any liability for any breach by such
assignee. 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 9.03 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, each of which shall remain in full
force and effect.
SECTION 9.04 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered in person, by overnight courier or facsimile
to the respective parties as follows:
If to Parent or the Purchaser:
Eaton Corporation
Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2584
Attention: General Counsel
Facsimile Number: (216) 479-7056
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
Facsimile Number: (212) 403-2000
If to the Company:
Fusion Systems Corporation
7600 Standish Place
Rockville, Maryland 20855
Attention: General Counsel
Facsimile Number: (301) 309-0783
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<PAGE> 52
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street Tower
Boston, MA 02110
Attention: Gordon H. Hayes, Jr., Esq.
Facsimile Number: (617) 248-7100
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.05 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 9.08 Parties in Interest. Except with respect to
Sections 2.09, 6.05(b) and 6.06 (which are intended to be for the benefit of the
persons identified therein, and may be enforced by such persons) and Section
6.11(b) (which is intended to be for the benefit of the Trustee, and may be
enforced by such person or, to the extent holders are permitted under the
Contingent Payment Rights Agreement to enforce their rights thereunder, by such
holders), this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.09 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any person,
shall mean any other person directly or indirectly controlling, controlled by,
or under common control with,
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<PAGE> 53
that person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that person, whether through the ownership of voting securities, by
contract or otherwise;
(b) the term "Person" or "person" shall include
individuals, corporations, partnerships, trusts, other entities and groups
(which term shall include a "group" as such term is defined in Section 13(d)(3)
of the Exchange Act); and
(c) the term "Subsidiary" or "subsidiaries" means,
with respect to Parent, the Company or any other person, any corporation,
partnership, joint venture or other legal entity of which Parent, the Company or
such other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.10 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
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<PAGE> 54
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its respective officer thereunto duly
authorized, all as of the day and year first above written.
EATON CORPORATION
By: /s/ Brian R. Bachman
----------------------------------
Name: Brian R. Bachman
Title: Senior Vice President --
Semiconductor and
Specialty Systems
By: /s/ Gerald L. Gherlein
----------------------------------
Name: Gerald L. Gherlein
Title: Executive Vice President
ETN ACQUISITION CORP.
By: /s/ Brian R. Bachman
----------------------------------
Name: Brian R. Bachman
Title: President
FUSION SYSTEMS CORPORATION
By: /s/ Leslie S. Levine
----------------------------------
Name: Leslie S. Levine
Title: President and
Chief Executive Officer
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<PAGE> 55
ANNEX I
Conditions to the Offer. Notwithstanding any other provisions
of the Offer, the Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) promulgated under the Exchange Act, pay for any tendered Common
Shares and may terminate or, subject to the terms of the Merger Agreement, amend
the Offer, if (i) there shall not be validly tendered and not properly withdrawn
prior to the Expiration Date for the Offer that number of Common Shares which
represents at least a majority of the total number of outstanding Common Shares
on a fully diluted basis on the date of purchase (not taking into account the
Rights) (the "Minimum Condition"), (ii) any applicable waiting period under the
HSR Act or under any applicable foreign statutes or regulations shall not have
expired or been terminated prior to the Expiration Date, or (iii) at any time on
or after June 30, 1997 and prior to the time of acceptance for payment or
payment for any Common Shares, any of the following events (each, an "Event")
shall occur:
(a) there shall be any action taken, or any statute,
rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, enforced, promulgated, amended, issued or deemed
applicable to the Offer, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the application of the waiting period
provisions of the HSR Act to the Offer or to the Merger, that, in the
reasonable judgment of Parent, would be expected to, directly or
indirectly: (i) make illegal or otherwise prohibit or materially delay
consummation of the Offer or the Merger or seek to obtain material
damages or make materially more costly the making of the Offer, (ii)
prohibit or materially limit the ownership or operation by Parent or
the Purchaser of all or any material portion of the business or assets
of the Company or any of its subsidiaries taken as a whole or compel
Parent or the Purchaser to dispose of or hold separately all or any
material portion of the business or assets of Parent or the Purchaser
or the Company or any of its subsidiaries taken as a whole, or seek to
impose any material limitation on the ability of Parent or the
Purchaser to conduct its business or own such assets, (iii) impose
material limitations on the ability of Parent or the Purchaser
effectively to acquire, hold or exercise full rights of ownership of
the Common Shares, including, without limitation, the right to vote any
Common Shares acquired or owned by the Purchaser or Parent on all
matters properly presented to the Company's stockholders, (iv) require
divestiture by
<PAGE> 56
Parent or the Purchaser of any Common Shares, or (v) may, in the
reasonable judgment of Parent, be expected to result in a Material
Adverse Effect on the Company; or
(b) there shall be instituted or pending any action
or proceeding by any Governmental Entity seeking, or that would
reasonably be expected to result in, any of the consequences referred
to in clauses (i) through (v) of paragraph (a) above or by any third
party for which there is a substantial likelihood of resulting in any
of the consequences referred to in clauses (i) through (v) of paragraph
(a) above; or
(c) any change shall have occurred (or any
development shall have occurred involving prospective changes) in the
business, assets, liabilities, condition (financial or otherwise),
prospects or results of operations of the Company or any of its
subsidiaries that has, or could reasonably be expected to have, a
Material Adverse Effect on the Company; or
(d) (i) the Company Board or any committee thereof
shall have withdrawn, or shall have modified or amended in a manner
adverse to Parent or the Purchaser, the approval, adoption or
recommendation, as the case may be, of the Offer or the Merger
Agreement, or approved or recommended any Acquisition Transaction, (ii)
a Person shall have entered into a definitive agreement or an agreement
in principle with the Company with respect to an Acquisition
Transaction, or (iii) the Company Board or any committee thereof shall
have resolved to do any of the foregoing; or
(e) the Company and the Purchaser and Parent shall
have reached an agreement that the Offer or the Merger Agreement be
terminated, or the Merger Agreement shall have been terminated in
accordance with its terms; or
(f) any of the representations and warranties of the
Company set forth in the Merger Agreement, when read without any
exception or qualification as to materiality or Material Adverse Effect
on the Company, shall not be true and correct, as if such
representations and warranties were made at the time of such
determination (except as to any such representation or warranty which
speaks as of a specific date, which must be untrue or incorrect as of
such specific date) except where the failure to be so true and correct
would not,
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<PAGE> 57
individually or in the aggregate, reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) prevent or materially
delay the consummation of the Offer, (iii) materially increase the cost
of the Offer to the Purchaser or (iv) have a material adverse effect on
the benefits to Parent of the transactions contemplated by this
Agreement; or
(g) the Company shall have failed to perform in any
material respect or to comply in any material respect with any of its
material obligations, covenants or agreements under the Merger
Agreement; or
(h) there shall have occurred, and continued to
exist, (i) any general suspension of, or limitation on prices for,
trading in securities on the New York Stock Exchange or on the
over-the-counter stock market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"),
(ii) any decline of at least 25% in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 Index from the close of
business on the last trading day immediately preceding the date of the
Merger Agreement through the applicable Expiration Date, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, or (iv) a commencement of a war,
armed hostilities or other national or international crisis involving
the United States or a material limitation (whether or not mandatory)
by any Governmental Entity on the extension of credit by banks or other
lending institutions.
The foregoing conditions (including those set forth in clauses
(i) and (ii) of the initial paragraph) are for the benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by Parent or
the Purchaser in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
The capitalized terms used in this Annex I shall have the
meanings set forth in the Agreement to which it is annexed, except that the term
"Merger Agreement" shall be deemed to refer to the Agreement to which this Annex
I is appended.
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<PAGE> 58
EXHIBIT A
PRINCIPAL TERMS OF CONTINGENT PAYMENT RIGHTS
GENERAL: The Rights will be cash settlement
"earn-out" rights which will pay
specified amounts if, and only if,
(i) a "Change of Control" of the
Company occurs prior to December 31,
1997 and (ii) the Company achieves
certain levels of Company Sales (as
defined below) during the
Measurement Period (as defined
below). The Rights will be issued
by the Company as a dividend on the
Common Shares, consisting of one
Right per share outstanding on the
record date. One Right will also be
issued (i) upon exercise of an
option outstanding on the record
date with respect to each Common
Share issued upon exercise thereof
and (ii) upon the cash-out of any
vested option outstanding on the
record date in connection with a
"Change of Control" with respect to
each Common Share that would have
been issuable upon exercise of such
vested option. The Rights will be
issued pursuant to a Rights
Agreement between the Company and a
major financial institution, as
Rights Agent.
DIVIDEND RECORD DATE: July __, 1997 [15 business days
after declaration].
DIVIDEND PAYMENT DATE: September __, 1997 [60 days after
record date].
MEASUREMENT PERIOD: January 1, 1998 to December 31,
1998.
COMPANY SALES: All net sales of the Company and its
subsidiaries during the Measurement
Period, calculated in accordance
with generally accepted accounting
principles.
<PAGE> 59
CASH PAYMENT AMOUNT: The payment made per Right will be
an amount in cash equal to:
(a) $5.00, if Company Sales are
$149 million or greater;
(b) $3.50, if Company Sales are
$141 million;
(c) $2.25, if Company Sales are
$134 million; or
(d) $1.00, if Company Sales are
$127 million.
(e) $0.00 if less than $122
million.
If the Company Sales fall between
two of the levels specified above,
the amount of the payment made per
Right shall be determined by
interpolation. No payment shall be
made if Company Sales are less than
$122 million.
CASH PAYMENT DATE: March 31, 1999.
EXPIRATION DATE: The Rights shall expire without any
payment on December 31, 1997 if no
"Change of Control" of the Company
has occurred prior to such date. If
a "Change of Control" has occurred
prior to December 31, 1997, but
Company Sales are less than $122
million, the Rights shall expire
without any payment on April 1,
1999.
OPTIONAL REDEMPTION: The Rights may be redeemed at the
option of the Company at any time
after a "Change of Control" of the
Company, in whole or in part, at a
redemption price of $5.00 per Right.
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<PAGE> 60
EXHIBIT B
FUSION SYSTEMS CORPORATION
TO
-----------------------------------------------
Trustee
------------------------
CONTINGENT PAYMENT RIGHTS
AGREEMENT
Dated as of ___________, 1997
------------------------
<PAGE> 61
<TABLE>
<CAPTION>
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TABLE OF CONTENTS*
<S> <C>
PARTIES & RECITALS.................................................................................... 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
Section 1.01. Definitions ......................................................................... 1
Act.......................................................................................... 2
Affiliate.................................................................................... 2
Agreement.................................................................................... 2
Board of Directors........................................................................... 2
Board Resolution............................................................................. 2
Business Day................................................................................. 2
Change of Control............................................................................ 3
Commission................................................................................... 4
Common Shares................................................................................ 4
Company...................................................................................... 4
Company Request; Company Order............................................................... 4
Contingent Payment........................................................................... 4
Contingent Payment Date...................................................................... 4
Contingent Payment Period.................................................................... 4
Corporate Trust Office....................................................................... 4
Event of Default............................................................................. 5
Exchange Act................................................................................. 5
Holder....................................................................................... 5
Net Sales.................................................................................... 5
Officers' Certificate........................................................................ 5
Opinion of Counsel........................................................................... 5
Outstanding.................................................................................. 5
Outstanding Common Shares.................................................................... 6
Outstanding Options.......................................................................... 6
Outstanding Voting Securities................................................................ 6
Paying Agent ................................................................................ 6
Person....................................................................................... 6
Record Date.................................................................................. 6
Redemption Date.............................................................................. 6
Redemption Price............................................................................. 6
</TABLE>
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* Note: This table of contents shall not, for any purpose, be deemed
to be a part of this Agreement.
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<TABLE>
<CAPTION>
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<S> <C>
Responsible Officer.......................................................................... 6
Right Certificate............................................................................ 6
Rights....................................................................................... 6
Securities................................................................................... 6
Security Register; Security Registrar........................................................ 7
Stock Plans.................................................................................. 7
Subsidiary................................................................................... 7
Threshold Level.............................................................................. 7
Trust Indenture Act.......................................................................... 7
Trustee...................................................................................... 7
vice president............................................................................... 7
Voting Stock................................................................................. 7
Section 1.02. Compliance Certificates and Opinions....................................... 7
Section 1.03. Form of Documents Delivered to Trustee..................................... 8
Section 1.04. Acts of Holders............................................................ 9
Section 1.05. Notices, etc. to Trustee and Company....................................... 10
Section 1.06. Notice to Holders; Waiver.................................................. 11
Section 1.07. Conflict with Trust Indenture Act.......................................... 11
Section 1.08. Effect of Headings and Table of Contents................................... 11
Section 1.09. Successors and Assigns..................................................... 11
Section 1.10. Benefits of Agreement...................................................... 11
Section 1.11. Governing Law.............................................................. 12
Section 1.12. Legal Holidays............................................................. 12
Section 1.13. Separability Clause........................................................ 12
ARTICLE TWO
Security Forms
Section 2.01. Forms Generally ........................................................... 12
Section 2.02. Form of Face of Right Certificates ........................................ 13
Section 2.03. Form of Reverse of Security ............................................... 14
Section 2.04. Form of Trustee's Certificate of
Authentication ......................................................... 16
ARTICLE THREE
The Securities
Section 3.01. Title and Terms ........................................................... 17
Section 3.02. Registrable Form .......................................................... 18
Section 3.03. Execution, Authentication, Delivery and
Dating ................................................................. 18
Section 3.04. Temporary Securities ...................................................... 19
Section 3.05. Registration, Registration of Transfer
and Exchange ........................................................... 20
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
Section 3.06. Mutilated, Destroyed, Lost and
Stolen Securities ...................................................... 21
Section 3.07. Payments Under Right Certificate .......................................... 21
Section 3.08. Persons Deemed Owners ..................................................... 22
Section 3.09. Cancellation .............................................................. 22
Section 3.10. Redemption ................................................................ 22
Section 3.11. Extinguishment ............................................................ 24
ARTICLE FOUR
The Trustee
Section 4.01. Certain Duties and Responsibilities ....................................... 24
Section 4.02. Certain Rights of Trustee ................................................. 26
Section 4.03. Not Responsible for Recitals or Issuance
of Securities .......................................................... 27
Section 4.04. May Hold Securities ....................................................... 27
Section 4.05. Money Held in Trust ....................................................... 27
Section 4.06. Compensation and Reimbursement ............................................ 27
Section 4.07. Disqualification; Conflicting Interests ................................... 28
Section 4.08. Corporate Trustee Required; Eligibility ................................... 28
Section 4.09. Resignation and Removal; Appointment
of Successor ........................................................... 28
Section 4.10. Acceptance of Appointment by Successor .................................... 30
Section 4.11. Merger, Conversion, Consolidation or
Succession to Business ................................................. 30
Section 4.12. Preferential Collection of Claims
Against Company ........................................................ 31
ARTICLE FIVE
Holders' Lists and Reports by
Trustee and Company
Section 5.01. Company to Furnish Trustee Name and
Addresses of Holders .................................................... 31
Section 5.02. Preservation of Information; Communications
to Holders .............................................................. 31
Section 5.03. Reports by Trustee ......................................................... 32
Section 5.04. Reports by Company ......................................................... 32
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE SIX
Amendments Page
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<S> <C> <C>
Section 6.01. Amendments Without Consent of Holders ..................................... 33
Section 6.02. Amendments with Consent of Holders ........................................ 34
Section 6.03. Execution of Amendments ................................................... 35
Section 6.04. Effect of Amendments ...................................................... 35
Section 6.05. Conformity with Trust Indenture Act ....................................... 36
Section 6.06. Reference in Securities to Amendments ..................................... 36
ARTICLE SEVEN
Covenants
Section 7.01. Payment of Amounts, If Any, to Holders .................................... 36
Section 7.02. Maintenance of Office or Agency ........................................... 36
Section 7.03. Money for Security Payments to Be
Held in Trust .......................................................... 37
Section 7.04. Maintenance of Properties ................................................. 38
Section 7.05. Conduct of Business ....................................................... 38
Section 7.06. Affiliate Transactions ................................................... 38
Section 7.07. Certain Asset Sales ....................................................... 38
Section 7.08. Exchange Act Registration ................................................. 38
ARTICLE EIGHT
Remedies of the Trustee and Holders
on Event of Default
Section 8.01. Event of Default Defined; Waiver of
Default ................................................................ 38
Section 8.02. Collection of Indebtedness by Trustee;
Trustee May Prove Debt ................................................. 39
Section 8.03. Application of Proceeds .................................................. 42
Section 8.04. Suits for Enforcement .................................................... 42
Section 8.05. Restoration of Rights on Abandonment
of Proceedings ......................................................... 42
Section 8.06. Limitations on Suits by Holders .......................................... 43
Section 8.07. Unconditional Right of Holders to
Institute Certain Suits ................................................ 43
Section 8.08. Powers and Remedies Cumulative; Delay
or Omission Not Waiver of Default ...................................... 44
Section 8.09. Control by Holders ....................................................... 44
Section 8.10. Waiver of Past Defaults .................................................. 45
Section 8.11. Trustee to Give Notice of Default, But
May Withhold in Certain Circumstances .................................. 45
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
Section 8.12. Right of Court to Require Filing of
Undertaking to Pay Costs ............................................... 45
ARTICLE NINE
Consolidation, Merger, Sale or Conveyance
Section 9.01. Company May Consolidate, etc. on
Certain Terms .......................................................... 46
Section 9.02. Successor Corporation Substituted ......................................... 46
Section 9.03. Opinion of Counsel to Trustee ............................................. 47
</TABLE>
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<PAGE> 66
AGREEMENT, dated as of ___________, 1997, between FUSION SYSTEMS
CORPORATION, a Delaware corporation (hereinafter called the "Company"), and
_______________________________________________ as trustee (hereinafter called
the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Board of Directors of the Company has authorized
the creation of an issue of contingent payment rights (hereinafter called the
"Securities" or "Rights") and the distribution of one Right with respect to (i)
each share of common stock, $.01 par value (the "Common Shares"), of the Company
outstanding on July 25, 1997 (the "Record Date"), and (ii) each Common Share
issued between the Record Date and the earlier of December 31, 1997 or the
Redemption Date (as herein defined) upon exercise of options to purchase Common
Shares issued under the Stock Plans (as herein defined) and outstanding on the
Record Date ("Outstanding Options");
WHEREAS, all things necessary have been done to make the
Securities, when executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company and to make this Agreement a
valid agreement of the Company, in accordance with their and its terms.
NOW, THEREFORE, for and in consideration of the premises, it
is mutually covenanted and agreed, for the equal and proportionate benefit of
all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all accounting terms used herein and not expressly defined
herein shall have the meanings assigned to
<PAGE> 67
such terms in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any
computation;
(c) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning
specified in Section 1.04.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of Voting Securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" means this instrument as originally executed and
as it may from time to time be supplemented or amended pursuant to the
applicable provisions hereof.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day (other than a Saturday or a
Sunday) on which banking institutions in The City of New York, New York are not
authorized or obligated by law or executive order to close and, if the Rights
are listed on a national securities exchange, such exchange is open for trading.
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<PAGE> 68
"Change of Control" shall be deemed to have occurred
if:
(a) there shall be consummated any reorganization,
recapitalization, consolidation or merger, or sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions)
of all or substantially all the assets, of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Shares and Outstanding Voting Securities immediately
prior to such Business Combination beneficially own (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Common Shares and
Outstanding Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 25% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Board of
Directors of the Company as of the date of this Agreement; or
(b) the stockholders of the Company shall approve any
plan or proposal for the liquidation or dissolution of the
Company; or
(c) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) other than the Company, or any employee
benefit plan sponsored by the Company, shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty-five percent (25%)
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or more of either (i) the then outstanding Common Shares or (ii) the
Outstanding Company Voting Securities; provided, however, that an
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of paragraph (a) above shall not be
deemed to be a Change of Control; or
(d) individuals which constituted the Board of Directors of
the Company as of the date hereof shall cease for any reason to
constitute at least a majority thereof.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Shares" means the common stock, $.01 par value, of the
Company.
"Company" means Fusion Systems Corporation, a Delaware
corporation, until a successor Person shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter "Company" shall mean
such successor Person. To the extent necessary to comply with the requirements
of the provisions of the Trust Indenture Act Sections 310 through 317 as they
are applicable to the Company, the term "Company" shall include any other
obligor with respect to the Securities for the purposes of complying with such
provisions.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by the chairman of the Board of
Directors or the president or any vice president, the controller or assistant
controller and the treasurer or assistant treasurer or the secretary or any
assistant secretary, and delivered to the Trustee.
"Contingent Payment" shall have the meaning set forth in
Section 3.01.
"Contingent Payment Date" means March 31, 1999.
"Contingent Payment Period" means the calendar year beginning
January 1, 1998 and ending December 31, 1998.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the
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date of execution of this Agreement is located at ___________________________.
"Event of Default" shall have the meaning set forth in Section
8.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Net Sales" means the amount of net sales reflected on the
audited income statement of the Company and its consolidated subsidiaries for
the Contingent Payment Period prepared by the Company in accordance with
generally accepted accounting principles consistent with the Company's policies
in effect prior to the date hereof.
"Officers' Certificate" means a certificate signed by the
chairman of the Board of Directors or the president or any vice president, the
controller or assistant controller and the treasurer or assistant treasurer or
the secretary or any assistant secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably acceptable to the
Trustee.
"Outstanding" when used with respect to the Securities means,
as of the date of determination, all Securities theretofore authenticated and
delivered under this Agreement, except:
(a) Securities theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation; and
(b) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Agreement, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
Outstanding Securities have given any request, demand, direction, consent or
waiver hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be
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disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
direction, consent or waiver, only Securities which the Trustee knows to be so
owned shall be so disregarded.
"Outstanding Common Shares" means, as of the date of
determination, all outstanding Common Shares.
"Outstanding Options" shall have the meaning set forth in the
recitals.
"Outstanding Voting Securities" means, as of the date of
determination, all outstanding voting securities of the Company having the right
to vote generally in the election of directors.
"Paying Agent" means any Person authorized by the Company to
pay the amount determined pursuant to Section 3.01, if any, on any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Record Date" means July 25, 1997.
"Redemption Date" means the date established by the Company
for the redemption of the Rights in whole or in part pursuant to Section 3.10.
"Redemption Price" means $5.00 per Right, without
interest.
"Responsible Officer" when used with respect to the Trustee
means any officer assigned to the Corporate Trust Office and also means, with
respect to any particular corporate trust matter, any other officer of the
Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Right Certificate" means a certificate representing any of
the Rights.
"Rights" shall have the meaning set forth in the recitals to
this Agreement.
"Securities" shall have the meaning set forth in the recitals
to this Agreement.
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"Security Register" and "Security Registrar" have the
respective meanings specified in Section 3.05.
"Stock Plans" means the following plans of the Company: 1984
Stock Option Plan; 1994 Stock Option Plan; 1994 Non-Employee Director Plan; and
1994 Employee Stock Purchase Plan.
"Subsidiary" means each Person more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company or one or more Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Threshold Level" shall have the meaning set forth in Section
3.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Agreement, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter
"Trustee" shall mean such successor Trustee.
"vice president" when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title of "vice president".
"Voting Stock" means stock having ordinary voting power to
elect a majority of the directors irrespective of whether or not stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency.
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Agreement, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Agreement (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the
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case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Agreement relating
to such particular application or request, no additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each
such individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that
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the information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous. Any certificate or
opinion of any independent firm of public accountants filed with the Trustee
shall contain a statement that such firm is independent.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
Section 1.04. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 4.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section. The Company may set a record date for purposes of
determining the identity of Holders entitled to vote or consent to any action by
vote or consent authorized or permitted under this Agreement. If not set by the
Company prior to the first solicitation of a Holder of Securities made by any
Person in respect of any such action, or, in the case of any such vote, prior to
such vote, the record date for such action shall be the later of 10 days prior
to the
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first solicitation of such consent or the date of the most recent list of
Holders furnished to the Trustee pursuant to Section 5.01 of this Agreement
prior to such solicitation. If a record date is fixed, those Persons who were
Holders of securities at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to take such action by vote or consent
or, except with respect to clause (d) below, to revoke any vote or consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such vote or consent shall be valid or effective for more than
120 days after such record date.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) At any time prior to (but not after) the evidencing to the
Trustee, as provided in this Section 1.04, of the taking of any action by the
Holders of the Securities specified in this Agreement in connection with such
action, any Holder of a Security the serial number of which is shown by the
evidence to be included among the serial numbers of the Securities the Holders
of which have consented to such action may, by filing written notice at the
Corporate Trust Office and upon proof of holding as provided in this Section
1.04, revoke such action so far as concerns such Security. Any request, demand,
authorization, direction, notice, consent, waiver or other action by the Holder
of any Security shall bind every future Holder of the same Security or the
Holder of every Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, suffered or
omitted to be done by the Trustee, any Paying Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
Section 1.05. Notices, etc. to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Agreement to be made
upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed, in writing, to or with the Trustee at its Corporate Trust
Office, Attention: [ ]; or
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(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class postage prepaid, to the Company addressed to it at 7600
Standish Place, Rockville, Maryland 20855, Attention: Treasurer, or at
any other address previously furnished in writing to the Trustee by the
Company.
Section 1.06. Notice to Holders; Waiver. Where this Agreement
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Agreement, then any method of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.07. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
which is required to be included in this Agreement by any of the provisions of
the Trust Indenture Act, such required provision shall control.
Section 1.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.09. Successors and Assigns. All covenants and
agreements in this Agreement by the Company shall bind its successors and
assigns, whether so expressed or not.
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Section 1.10. Benefits of Agreement. Nothing in this Agreement
or in the Securities, express or implied, shall give to any Person (other than
the parties hereto and their successors hereunder, any Paying Agent and the
Holders) any benefit or any legal or equitable right, remedy or claim under this
Agreement or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the Holders.
Section 1.11. Governing Law. This Agreement and the Securities
shall be governed by and construed in accordance with the laws of the State of
New York.
Section 1.12. Legal Holidays. In the event that any date on
which any payment in respect of any Security is due shall not be a Business Day,
then (notwithstanding any provision of this Agreement or the Securities to the
contrary) payment on the Securities need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the date due.
Section 1.13. Separability Clause. In case any provision in
this Agreement or in the Rights shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
ARTICLE TWO
SECURITY FORMS
Section 2.01. Forms Generally. The Right Certificates and the
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may be required by law or any
rule or regulation pursuant thereto, all as may be determined by officers
executing such Right Certificates, as evidenced by their execution of the Right
Certificates. Any portion of the text of any Right Certificate may be set forth
on the reverse thereof, with an appropriate reference thereto on the face of the
Right Certificate.
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The definitive Right Certificates shall be printed,
lithographed or engraved on steel engraved borders or produced by any
combination of these methods or may be produced in any other manner permitted by
the rules of any securities exchange on which the Securities may be listed, all
as determined by the officers executing the Right Certificates representing such
Securities, as evidenced by their execution of such Right Certificates.
Section 2.02. Form of Face of Right Certificates.
FUSION SYSTEMS CORPORATION
CONTINGENT PAYMENT RIGHTS
Certificate No. ___________ Rights
This certifies that ___________________, or registered assigns
(the "Holder"), is the registered holder of the number of Contingent Payment
Rights ("Rights") set forth above. Fusion Systems Corporation, a Delaware
corporation (the "Company"), shall, subject to the terms and provisions
contained herein and in the Agreement referred to on the reverse hereof, unless
the Rights have been extinguished or redeemed pursuant to the Agreement, pay to
the Holder hereof on March 31, 1999 (the "Contingent Payment Date") an amount,
if any, as determined by the Company in accordance with Section 3.01 of the
Agreement (the "Contingent Payment"). Such determination by the Company absent
manifest error shall be final and binding on the Company and the Holder.
Payment of said Contingent Payment shall be made, net of any
applicable withholding taxes, only upon presentation and surrender of this Right
Certificate by the Holder hereof at the offices or agencies of the Company
maintained for that purpose in The City of New York, New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts. BankBoston N.A. has been
appointed as the initial paying agent at its office located at ______________,
New York, New York _____.
Reference is hereby made to the further provisions of the
Rights set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by or on behalf of the Trustee referred to on the reverse hereof by
facsimile or manual signature, the
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Rights represented by this Right Certificate shall not be entitled to any
benefit under the Agreement, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated: FUSION SYSTEMS CORPORATION
By_____________________________
Attest:
__________________________ [SEAL]
Authorized Signature
Section 2.03. Form of Reverse of Security. This Right
Certificate is issued under and in accordance with the Contingent Payment Rights
Agreement, dated as of ___________, 1997 (the "Agreement"), between the Company
and _______________________________________________, as trustee (the "Trustee",
which term includes any successor Trustee under the Agreement), and is subject
to the terms and provisions contained in the Agreement, to all of which terms
and provisions the Holder of this Right Certificate consents by acceptance
hereof. The Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Agreement for a full statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the holders of the Rights. Copies of
the Agreement can be obtained by contacting the Trustee.
The Company may, at its option, at any time after the
occurrence of a Change of Control, upon not less than 30 days nor more than 60
days notice, redeem the then outstanding Rights, in whole or in part, at a price
of $5.00 per Right, without interest.
The Rights shall be extinguished without any payment therefor
and have no further force and effect (i) on December 31, 1997, if no Change of
Control has occurred prior to such date or (ii) on March 31, 1999 if Net Sales
for the Contingent Payment Period shall not have exceeded $122,000,000.
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The Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Agreement at
any time by the Company and the Trustee with the consent of the holders of a
majority of the Rights at the time Outstanding.
No reference herein to the Agreement and no provision of the
Rights or of the Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to make the Contingent Payment on the
Rights at the time and in the amounts and in the coin or currency prescribed in
the Agreement; provided, however, that all such payments will be made net of any
applicable withholding taxes.
The Rights are issuable only in registered form, and Right
Certificates representing any integral number of Rights may be issued. As
provided in the Agreement and subject to certain limitations therein set forth,
the transfer of the Rights represented by this Right Certificate is registrable
on the Security Register of the Company, upon surrender of this Right
Certificate for registration of transfer at the office or agency of the Company
maintained for such purpose in The City of New York, New York, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Right
Certificates, for the same number of Rights, will be issued to the designated
transferee or transferees. The Company hereby initially designates the office of
_______________________________________________ as the office for registration
of transfer of this Right Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, this Right Certificate is exchangeable for one or
more Right Certificates representing the same number of Rights as represented by
this Right Certificate as requested by the Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Rights, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to the time of due presentment of this Right Certificate
for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Right Certificate
is registered as the owner hereof for all purposes, and neither the Company,
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the Trustee nor any agent shall be affected by notice to the contrary.
The obligation of the Company to the Holder of the Rights
represented hereby to make the payments required in respect of the Rights
represented hereby shall be governed by, and construed in accordance with, the
laws of the State of New York, without giving effect to the principles of
conflict of laws thereof.
All capitalized terms used in this Right Certificate without
definition shall have the meanings assigned to them in the Agreement.
Section 2.04. Form of Trustee's Certificate of Au-
thentication.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Right Certificates referred to in the
within-mentioned Agreement.
[_______________________
______________________],
___________________________________
as Trustee
By
___________________________________
Authorized Officer
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ARTICLE THREE
THE SECURITIES
Section 3.01. Title and Terms. (a) The aggregate number of
Right Certificates which may be authenticated and delivered under this Agreement
is limited to the number equal to the number of Rights issued by the Company (i)
to holders of record of Common Shares on the Record Date and (ii) to holders of
Outstanding Options upon exercise thereof between the Record Date and the
earlier of December 31, 1997 or the Redemption Date, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 3.10
or 6.06.
(b) The Securities shall be known and designated as the
"Contingent Payment Rights" of the Company.
(c) Unless the Rights have been extinguished pursuant to
Section 3.11 or redeemed pursuant to Section 3.10, each Person who is the Holder
of a Right at the close of business on the Contingent Payment Date will be
entitled to receive in respect of each Right held, only upon presentation and
surrender of the Right Certificate at the offices or agencies of the Company
designated pursuant to Section 3.07, in such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts, the amount determined by the following schedule:
<TABLE>
<CAPTION>
Net Sales of the Company for
the Contingent Payment Period Contingent Payment
- ----------------------------- ------------------
<S> <C>
$149,000,000 or greater $5.00
$141,000,000 $3.50
$134,000,000 $2.25
$127,000,000 $1.00
$122,000,000 or less $0.00
</TABLE>
If Net Sales falls between two of the levels (each, a "Threshold Level")
specified above, the amount of the Contingent Payment shall be equal to "C" in
the following equation:
S - L = C - PL
_____ ______
G - S PG - C
Where:
S = Net Sales
L= Highest Threshold Level of Net Sales which is less than S
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G = Lowest Threshold Level of Net Sales which is greater than S
PL= Contingent Payment if Net Sales were L
PG= Contingent Payment if Net Sales were G
C = Contingent Payment
For example, if Net Sales are $147,000,000, the Contingent Payment determined by
such formula would be $4.63. Under no circumstances shall any payment be made in
respect of the Rights if Company Sales for the Contingent Payment Period do not
exceed $122,000,000. The determination of Net Sales shall be made by the Company
and set forth in an Officers' Certificate and accompanied by a certificate or
opinion of an independent public accountant prepared in accordance with Section
1.03, delivered to the Trustee not later than March 15, 1999. Such determination
absent manifest error shall be final and binding on the Company and the Holders.
(d) Contingent Payments on each Right shall be calculated to
the nearest cent, with one-half cent rounded for such purpose to the next
greater whole number.
(e) Notwithstanding any provision of this Agreement or the
Right Certificates to the contrary, other than as expressly provided under this
Agreement, no interest shall accrue on any amounts payable on the Rights to any
Holder.
Section 3.02. Registrable Form. The Securities shall be
issuable only in registered form.
Section 3.03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its chairman of the
Board of Directors or any vice chairman of the Board of Directors or its
president or any vice president or its treasurer, under its corporate seal which
may, but need not, be attested. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Agreement, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such
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Company Order shall authenticate and deliver such Securities as provided in this
Agreement and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and that the Holder is entitled to the benefits of this
Agreement.
Section 3.04. Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, substantially of
the tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine with the concurrence of the
Trustee. Temporary Securities may contain such reference to any provisions of
this Agreement as may be appropriate. Every temporary Security shall be executed
by the Company and be authenticated by the Trustee upon the same conditions and
in substantially the same manner, and with like effect, as the definitive
Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 7.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
amount of definitive Securities. Until so exchanged the temporary Securities
shall in all respects be entitled to the same benefits under this Agreement as
definitive Securities.
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Section 3.05. Registration, Registration of Transfer and
Exchange. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 7.02 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby initially
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
the office or agency of the Company designated pursuant to Section 7.02, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Right
Certificates representing the same aggregate number of Rights represented by the
Right Certificate so surrendered that are to be transferred and the Company
shall execute and the Trustee shall authenticate and deliver, in the name of the
transferor, one or more new Right Certificates represented by such Right
Certificate that are not to be transferred.
At the option of the Holder, Right Certificates may be
exchanged for other Right Certificates that represent in the aggregate the same
number of Rights as the Right Certificates surrendered at such office or agency.
Whenever any Right Certificates are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Right
Certificates which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same right, and entitled to the same benefits under this Agreement, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other
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governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
3.04 or 6.06 not involving any transfer.
Section 3.06. Mutilated, Destroyed, Lost and Stolen
Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Security or in lieu
of any such destroyed, lost or stolen Security, a new Right Certificate of like
tenor and amount of Rights, bearing a number not contemporaneously outstanding.
Upon the issuance of any new Securities under this Section,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Agreement equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.07. Payments Under Right Certificate. Payment of the
Contingent Payment shall be made, net of any applicable withholding taxes, upon
presentation and surrender of the Right Certificate at the offices or agencies
of the Company maintained for that purpose in The City of New York, New York, in
such coin or currency of the United States of America as at the time is legal
tender for the payment of public and private debts. BankBoston N.A. has been
appointed as paying agent in The City of New York, New York.
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Section 3.08 Persons Deemed Owners. Prior to the time of due
presentment for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payment on
such Security and for all other purposes whatsoever, whether or not any such
payment be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Section 3.09 Cancellation. All Securities surrendered for
payment, redemption, registration of transfer or exchange shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Agreement. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
Section 3.10. Redemption.
(a) The Company may, at its option, at any time after the
occurrence of a Change of Control, redeem the then Outstanding Securities, in
whole or in part, at the Redemption Price.
(b) The election of the Company to redeem any Securities shall
be evidenced by an Officers' Certificate which shall also evidence compliance
with the condition set forth in paragraph (a). In case of any redemption at the
election of the Company of less than all the Securities of any series, the
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the number of Securities to be
redeemed.
(c) If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected from the outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate. The Trustee shall promptly
notify the Company in writing of the Securities selected for redemption. For all
purposes of this Agreement, unless the
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context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of such Securities which has been or is to
be redeemed.
(d) Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the certificate number) of the particular Securities to be redeemed;
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed;
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
Any notice which is mailed in the manner herein provided shall
be conclusively presumed to be duly given, whether or not the Holder receives
such notice; any failure to give such notice by mail or any defect in such
notice to the Holder of a particular Security designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
(e) On or prior to any Redemption Date, the Company shall
deposit with the Trustee or with a paying agent (or, if the Company is acting as
its own paying agent, segregate and hold in trust) an amount of money sufficient
to pay the Redemption Price of all the Securities which are to be redeemed on
that date.
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(f) Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default on the payment of the Redemption Price) such
Securities shall cease to be Outstanding. Upon surrender of any such Security
for redemption in accordance with said office, such Security shall be paid by
the Company at the Redemption Price.
(g) Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company to be maintained pursuant to
Section 3.07 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
to the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a Security or Securities representing the unredeemed portion of the Security so
surrendered and bearing a number not contemporaneously outstanding.
Section 3.11. Extinguishment. The Rights shall be extinguished
without payment therefor and have no further force and effect (i) on December
31, 1997, if no Change of Control has occurred prior to such date as evidenced
by an Officers' Certificate delivered to the Trustee or (ii) on March 31, 1999
if Net Sales for the Contingent Payment Period shall not have exceeded
$122,000,000 as evidenced by an Officers' Certificate and accompanied by a
certificate or opinion of an independent public accountant prepared in
accordance with Section 1.03 delivered to the Trustees.
ARTICLE FOUR
THE TRUSTEE
Section 4.01. Certain Duties and Responsibilities. (a) With
respect to the Holders of Securities issued hereunder, the Trustee, prior to the
occurrence of an Event of Default with respect to the Securities and after the
curing or waiving of all Events of Default which may have occurred, undertakes
to perform such duties and only such duties as are specifically set forth in
this Agreement. In case an Event of Default with respect to the Securities has
occurred (which has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use
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the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(b) In the absence of bad faith on its part, prior to the
occurrence of an Event of Default and after the curing or waiving of all such
Events of Default which may have occurred, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Agreement; but in the case of any such certificates
or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
(1) this Subsection (c) shall not be construed to limit the
effect of Subsections (a) and (b) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) no provision of this Agreement shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it; and
(4) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders pursuant to Section 8.09 relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or
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affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 4.02. Certain Rights of Trustee. Subject to
the provisions of Section 4.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance
with such advice or opinion of counsel;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request
or direction of any of the Holders pursuant to this Agreement, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) prior to the occurrence of an Event of Default hereunder
and after the curing or waiving of all Events of Default, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, appraisal,
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bond, debenture, note, coupon, security, or other paper or document
unless requested in writing to do so by the Holders of not less than a
majority of the Securities then Outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable
expenses of every such investigation shall be paid by the Company or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by
the Company upon demand; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
Section 4.03. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
Section 4.04. May Hold Securities. The Trustee, any Paying
Agent, Security Registrar or any other agent of the Company, in its individual
or any other capacity, may become the owner or pledgee of Securities, and,
subject to Sections 4.07 and 4.12, may otherwise deal with the Company with the
same rights it would have if it were not Trustee, Paying Agent, Security
Registrar or such other agent.
Section 4.05. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder.
Section 4.06. Compensation and Reimbursement. The Company
agrees:
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(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
Section 4.07. Disqualification; Conflicting Interests. If the
Trustee has or shall acquire any conflicting interest within the meaning of the
Trust Indenture Act, it shall, within 90 days after ascertaining that it has
such conflicting interest, either eliminate such conflicting interest or resign
to the extent and in the manner provided by, and subject to the provisions of,
the Trust Indenture Act and this Agreement.
Section 4.08. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a corporation that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of a supervising or examining authority, then for the purposes of this Section,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 4.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee
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and no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 4.10.
(b) The Trustee or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an Act of the
Holders of a majority of the Outstanding Securities, delivered to the Trustee
and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 4.07 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 4.08
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee
or (ii) the Holder of any Security who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith
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upon its acceptance of such appointment in accordance with Section 4.10, become
the successor Trustee and supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by the Company or
the Holders of the Securities and so accepted appointment, the Holder of any
Security who has been a bona fide Holder for at least six months may on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office. If the Company fails to send such notice
within ten days after acceptance of appointment by a successor Trustee, it shall
not be a default hereunder but the successor Trustee shall cause the notice to
be mailed at the expense of the Company.
Section 4.10. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such appointment
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 4.11. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any
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corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and such certificate shall have the full force which it is anywhere in the
Securities or in this Agreement provided that the certificate of the Trustee
shall have; provided that the right to adopt the certificate of authentication
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
Section 4.12. Preferential Collection of Claims Against
Company. If and when the Trustee shall be or shall become a creditor, directly
or indirectly, secured or unsecured, of the Company (or any other obligor upon
the Securities), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of claims against the Company (or any
such other obligor).
ARTICLE FIVE
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 5.01. Company to Furnish Trustee Names and Addresses
of Holders. The Company will furnish or cause to be furnished to the Trustee (a)
semiannually, not later than May 1 and November 1, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders as of
April 15 and October 15, respectively, and (b) at such times as the Trustee may
request in writing, within 30 days after receipt by the Company of any such
request, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a date not more than 15 days prior to
the time such list is furnished; provided, however, that if and so long as the
Trustee shall be the Security Registrar, no such list need be furnished.
Section 5.02. Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 5.01 and the names and
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addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 5.01 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other
Holders with respect to their rights under this Agreement and the corresponding
rights and privileges of the Trustee shall be as provided by the Trust Indenture
Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders made pursuant to the
Trust Indenture Act.
Section 4.3. Reports by Trustee. (a) Within 60 days after May
15 of each year commencing with the first May 15 after the first issuance of
Securities, the Trustee shall transmit to all Holders such reports concerning
the Trustee and its actions under this Agreement as may be required pursuant to
the Trust Indenture Act at the time and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to the Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission and also with the
Company. The Company will notify the Trustee when the Securities are listed on
any stock exchange.
Section 5.04. Reports by Company. The Company shall:
(a) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the Company
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or if the Company is not required to
file information, documents or reports pursuant to either of said
Sections, then it shall nonetheless, during such period as the
Securities remain outstanding, file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from
time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
Section 13 of the Exchange Act in
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respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(b) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Agreement as may be required from time to time by such rules
and regulations;
(c) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, within 30 days after the
filing thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Company pursuant to
Subsections (a) and (b) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission; and
(d) furnish to the Trustee, not less often than annually, a
brief certificate from the principal executive officer, principal
financial officer or principal accounting officer as to his or her
knowledge of the Company's compliance with all conditions and covenants
under this Agreement (for purpose of this paragraph, such compliance
shall be determined without regard to any period of grace or
requirement of notice provided under this Agreement).
ARTICLE SIX
AMENDMENTS
Section 6.01. Amendments Without Consent of Holders. Without
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
amendments hereto, in form satisfactory to the Trustee, for any of the following
purposes:
(a) to convey, transfer, assign, mortgage or pledge to the
Trustee as security for the Securities any property or assets; or
(b) to provide for a guarantee by any Person of some or all of
the obligations of the Company under this Agreement for the benefit of
the Holders of Securities;
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(c) to evidence the succession of another Person to the
Company in accordance with Article Nine hereof, and the assumption by
any such successor of the covenants of the Company herein and in the
Securities; or
(d) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as its Board of
Directors and the Trustee shall consider to be for the protection of
the Holders of Securities, and to make the occurrence, or the
occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies
provided in this Agreement as herein set forth, provided that in
respect of any such additional covenant, restriction, condition or
provision such amendment may provide for a particular period of grace
after default (which period may be shorter or longer than that allowed
in the case of other defaults) or may provide for an immediate
enforcement upon such an Event of Default or may limit the remedies
available to the Trustee upon such an Event of Default or may limit the
rights of the Holders of a majority of the Outstanding Securities to
waive such an Event of Default; or
(e) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Agreement that shall not
adversely affect the interests of the Holders in any material respect;
or
(f) to make any amendments or changes necessary to comply or
maintain compliance with the Trust Indenture Act.
Promptly following any amendment of this Agreement or the
Securities in accordance with this Section 6.01, the Trustee shall notify the
Holders of the Securities of such amendment; provided that any failure so to
notify the Holders shall not affect the validity of such amendment.
Section 6.02. Amendments with Consent of Holders. With the
consent of the Holders of a majority of the Outstanding Securities, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into one or more
amendments hereto or to the Securities for the purpose of adding any provisions
to or changing in any manner or eliminating any of the
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provisions of this Agreement or to the Securities or of modifying in any manner
the rights of the Holders under this Agreement or to the Securities; provided,
however, that no such amendment shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(a) modify the definition of Contingent Payment Period,
Contingent Payment, Contingent Payment Date, Net Sales, or otherwise
reduce the amounts payable in respect of the Securities;
(b) reduce the amount of the Outstanding Securities, the
consent of whose Holders is required for any such amendment; or
(c) modify any of the provisions of this Section or Section
8.10, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without
the consent of the Holder of each Security affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of
any amendment pursuant to the provisions of this Section, the Company shall mail
a notice thereof by first class mail to the Holders of Securities at their
addresses as they shall appear on the Security Register, setting forth in
general terms the substance of such amendment. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such amendment.
Section 6.03. Execution of Amendments. In executing any
amendment permitted by this Article, the Trustee shall be entitled to receive,
and (subject to Section 4.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 6.04. Effect of Amendments. Upon the execution of any
amendment under this Article, this Agreement and the Securities shall be
modified in accordance therewith, and
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such amendment shall form a part of this Agreement and the Securities for all
purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.
Section 6.05. Conformity with Trust Indenture Act. Every
amendment executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
Section 6.06. Reference in Securities to Amendments. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. Securities authenticated and
delivered after the execution of any amendment pursuant to this Article may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such amendment. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such amendment may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities. Failure to make the appropriate notation or
to issue a new Security shall not affect the validity of such amendment.
ARTICLE SEVEN
COVENANTS
Section 7.01. Payment of Amounts, If Any, to Holders. The
Company will duly and punctually pay the amounts, if any, on the Securities in
accordance with the terms of the Securities and this Agreement.
Section 7.02. Maintenance of Office or Agency. As long as any
of the Securities remain Outstanding, the Company will maintain in The City of
New York, New York, an office or agency (i) where Securities may be surrendered
for registration of transfer or exchange and (ii) where notices and demands to
or upon the Company in respect of the Securities and this Agreement may be
served. The Company hereby designates the office of BankBoston N.A. as such
office or agency of the Company, unless the Company shall designate and maintain
some other office or agency for one or more of such purposes. The Company will
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of
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the Trustee, and the Company hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other
offices or agencies (in or outside of The City of New York, New York) where the
Securities may be presented or surrendered for any or all such purposes, and may
from time to time rescind such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York, New York for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such office
or agency. The Company also designates the Corporate Trust Office as one of such
offices.
Section 7.03. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of any amount due on any of the Rights, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the amounts, if any, so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Securities, it will, on or before each due date of any amount due on any of
the Rights, deposit with a Paying Agent a sum in same day funds sufficient to
pay the amount, if any, so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such amount, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of such action or any
failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that (A) such Paying Agent will hold all sums held by it for the payment of any
amount payable on Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided and (B) that it will give the Trustee notice of any failure
by the Company (or by any other obligor on the Securities) to make any payment
on the Securities when the same shall be due and payable.
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Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment on any Security and remaining
unclaimed for one year after such amount has become due and payable, shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease.
Section 7.04. Maintenance of Properties. The Company will
cause all properties used or useful in the conduct of its business or the
business of any Subsidiary of the Company to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, as
determined by the Board of Directors in good faith, desirable in the conduct of
its business or the business of any Subsidiary.
Section 7.05. Conduct of Business. The Company shall
use reasonable efforts during the Contingent Payment Period to operate its
business in the ordinary course and substantially as operated heretofore,
provided, however, that nothing in this Section shall prevent the Company from
operating the business of the Company in accordance with its business judgment
to enhance the growth and profitable development of the Company's business, so
long as the Company is not motivated by an intention to diminish the value of
the Securities.
Section 7.06. Affiliate Transactions. The Company shall not
engage in material transactions with Affiliates (other than Subsidiaries of the
Company), or material transactions with other persons which are primarily for
the benefit of such Affiliates, which would reduce Net Sales during the
Contingent Payment Period, except on terms that are comparable to those that
would be obtained from unaffiliated parties on an arms-length basis.
Section 7.07. Certain Asset Sales. Prior to January 1, 1999,
the Company will not sell or transfer a substantial portion of the assets of the
Company, other than in the ordinary course of business or pursuant to a
transaction which is
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subject to Section 9.01 of this Agreement, unless the Company shall have called
for the redemption of all of the then Outstanding Securities pursuant to Section
3.10 of this Agreement.
Section 7.08. Exchange Act Registration. If the Securities are
not registered under the Exchange Act prior to the issuance of the Securities,
the Securities shall not be transferable by the Holders thereof until such
registration is effective. The Company shall use all reasonable efforts to cause
such registration to become effective prior to the issuance of the Securities or
as promptly as practicable thereafter.
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
Section 8.01. Event of Default Defined; Waiver of Default.
"Event of Default" with respect to Securities, means any of the following events
which shall have occurred and be continuing (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of the Contingent Payment when the
same shall become due and payable, and continuance of such default for
a period of 30 days; or
(b) default in the performance, or breach, of any covenant of
the Company in this Agreement (other than a covenant or a default in
whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for
a period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% of the Outstanding Securities, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(c) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee,
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custodian, trustee or sequestrator (or similar official) of the Company
or for any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or
(d) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee or sequestrator or similar official, of the Company or for any
substantial part of its property, or make any general assignment for
the benefit of creditors.
Section 8.02. Collection of Indebtedness by Trustee; Trustee
May Prove Debt. The Company covenants that in case default shall be made in the
payment of the Contingent Payment when and as the same shall have become due and
payable and such default continues for the period of 30 days, then upon demand
of the Trustee, the Company will pay to the Trustee for the benefit of the
Holders of the Securities the amount of such Contingent Payment; and in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to the Trustee and
each predecessor Trustee, their respective agents, attorneys and counsel, and
any expenses and liabilities incurred, and all advances made, by the Trustee and
each predecessor Trustee except as a result of its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or proceedings at
law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceedings to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other obligor
upon such Securities and collect in the manner provided by law out of the
property of the Company or other obligor upon such Securities, wherever
situated, the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the
Company or any other obligor upon the Securities under Title 11 of the United
States Code or any other applicable Federal or State bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Company or
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its property or such other obligor, or in case of any other judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of any Securities shall then be due and
payable as herein expressed or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount
owing and unpaid in respect of the Securities, and to file such other
papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of negligence
or bad faith) and of the Holders allowed in any judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor;
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy
or insolvency proceedings or person performing similar functions in
comparable proceedings; and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Holders and of the
Trustee on their behalf; and any trustee, receiver, or liquidator,
custodian or other similar official is hereby authorized by each of the
Holders to make payments to the Trustee, and, in the event that the
Trustee shall consent to the making of payments directly to the
Holders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee
and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence
or bad faith and all other amounts due to the Trustee or any
predecessor Trustee pursuant to Section 4.06.
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Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
All rights of action and of asserting claims under this
Agreement, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities or the production thereof and
any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders.
In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Agreement to
which the Trustee shall be a party) the Trustee shall be held to represent all
the Holders, and it shall not be necessary to make any Holders of such
Securities parties to any such proceedings.
Section 8.03. Application of Proceeds. Any moneys collected by
the Trustee pursuant to this Article in respect of any Securities shall be
applied in the following order at the date or dates fixed by the Trustee upon
presentation of the several Securities in respect of which monies have been
collected and stamping (or otherwise noting) thereon the payment in exchange for
the presented Securities if only partially paid or upon surrender thereof if
fully paid:
FIRST: To the payment of costs and expenses in respect of
which monies have been collected, including reasonable compensation to
the Trustee and each predecessor Trustee and their respective agents
and attorneys and of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith, and all other amounts due to the
Trustee or any predecessor Trustee pursuant to Section 406;
SECOND: To the payment of Contingent Payments on the
Securities, in the order of such Contingent Payments, and in case such
moneys shall be insufficient to pay in full the whole amount so due and
unpaid upon the Securities,
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then to the payment of such amounts without preference or priority of
any Security over any other Security, ratably to the aggregate of such
amounts due and payable; and
THIRD: To the payment of the remainder, if any, to the Company
or any other Person lawfully entitled thereto.
Section 8.04. Suits for Enforcement. In case an Event of
Default has occurred, has not been waived and is continuing, the Trustee may in
its discretion proceed to protect and enforce the rights vested in it by this
Agreement by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Agreement or in and of the exercise
of any power granted in this Agreement or to enforce any other legal or
equitable right vested in the Trustee by this Agreement or by law.
Section 8.05. Restoration of Rights on Abandonment of
Proceedings. In case the Trustee or Holder shall have proceeded to enforce any
right under this Agreement and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely to the Trustee
or to such Holder, then and in every such case the Company and the Trustee and
the Holder shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and
the Holders shall continue as though no such proceedings had been taken.
Section 8.06. Limitations on Suits by Holders. No Holder of
any Security shall have any right by virtue or by availing of any provision of
this Agreement to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Agreement, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Holder previously shall
have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the Holders of not less than
25% of the Securities then Outstanding shall have made written request upon the
Trustee to institute such action or proceedings in its own name as trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby and the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity shall have failed to institute any such action or
proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to Section 8.09; it being
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understood and intended, and being expressly covenanted by the taker and Holder
of every Security with every other taker and Holder and the Trustee, that no one
or more Holders of Securities shall have any right in any manner whatever by
virtue or by availing of any provision of this Agreement to effect, disturb or
prejudice the rights of any other such Holder of Securities, or to obtain or
seek to obtain priority over or preference to any other such Holder or to
enforce any right under this Agreement, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders of Securities. For the
protection and enforcement of the provisions of this Section, each and every
Holder and the Trustee shall be entitled to such relief as can be given either
at law or in equity.
Section 8.07. Unconditional Right of Holders to Institute
Certain Suits. Notwithstanding any other provision in this Agreement and any
provision of any Security, the right of any Holder of any Security to receive
payment of the Contingent Payments payable in respect of such Security on or
after the respective Contingent Payment Dates, or to institute suit for the
enforcement of any such payment on or after such respective Contingent Payment
Dates, shall not be impaired or affected without the consent of such Holder.
Section 8.08. Powers and Remedies Cumulative; Delay or
Omission Not Waiver of Default. Except as provided in Section 8.06, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and, subject to Section 8.06, every power and remedy given by this
Agreement or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as shall be deemed expedient, by the Trustee or by the
Holders.
Section 8.09. Control by Holders. The Holders of a majority of
the Securities at the time Outstanding shall have the right to direct the time,
method, and place of conducting
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any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee with respect to the Securities by this
Agreement; provided that such direction shall not be otherwise than in
accordance with law and the provisions of this Agreement; and provided further
that (subject to the provisions of Section 4.01) the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, shall determine that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or responsible officers
of the Trustee shall determine that the action or proceedings so directed would
involve the Trustee in personal liability or if the Trustee in good faith shall
so determine that the actions or forebearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders of the
Securities not joining in the giving of said direction, it being understood that
the Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders.
Nothing in this Agreement shall impair the right of the
Trustee in its discretion to take any action deemed proper by the Trustee and
which is not inconsistent with such direction or directions by Holders.
Section 8.10. Waiver of Past Defaults. In the case of a
default or an Event of Default specified in clause (b), (c) or (d) of Section
8.01, the Holders of a majority of all the Securities then Outstanding may waive
any such default or Event of Default, and its consequences except a default in
respect of a covenant or provisions hereof which cannot be modified or amended
without the consent of the Holder of each Security affected. In the case of any
such waiver, the Company, the Trustee and the Holders of the Securities shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
Upon any such waiver, such default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured, and not to have occurred
for every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
Section 8.11. Trustee to Give Notice of Default, But May
Withhold in Certain Circumstances. The Trustee shall transmit to the Holders, as
the names and addresses of such Holders
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appear on the Security Register, notice by mail of all defaults which have
occurred, such notice to be transmitted within 90 days after the occurrence
thereof, unless such defaults shall have been cured before the giving of such
notice (the term "default" or "defaults" for the purposes of this Section being
hereby defined to mean any event or condition which is, or with notice or lapse
of time or both would become, an Event of Default); provided that, except in the
case of default in the payment of the amounts payable in respect of any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee of
directors or trustees and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
Section 8.12. Right of Court to Require Filing of Undertaking
to Pay Costs. All parties to this Agreement agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Agreement or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith or the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder or group of Holders holding in the
aggregate more than 10% of the Securities Outstanding or to any suit instituted
by any Holder for the enforcement of the payment of any Security on or after the
due date expressed in such Security.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.01. Company May Consolidate, etc. on Certain Terms.
The Company covenants that it will not merge or consolidate with or into any
other Person or sell or convey all or substantially all of its assets to any
Person, unless (i) either the Company shall be the continuing corporation, or
the successor corporation or the Person which acquires by sale or conveyance
substantially all the assets of the Company (if other than the Company) shall be
a Person organized under the laws of the United States of America or any State
thereof and
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shall expressly assume the due and punctual payment of the Securities, according
to their tenor, and the due and punctual performance and observance of all of
the covenants and conditions of this Agreement to be performed or observed by
the Company, by supplemental agreement satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation, and (ii) the Company or such
successor corporation, as the case may be, shall not, immediately after such
merger or consolidation, or such sale or conveyance, be in default in the
performance of any such covenant or condition.
Section 9.02. Successor Corporation Substituted. In case of
any such consolidation, merger, sale or conveyance in which the Company shall
not be the continuing corporation, and following such an assumption by the
successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein. Such successor corporation may cause to be signed, and may issue either
in its own name or in the name of the Company prior to such succession any or
all of the Securities issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Agreement prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Agreement as the Securities theretofore or thereafter issued
in accordance with the terms of this Agreement as though all of such Securities
had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or
conveyance, such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a
conveyance by way of lease) the Company or any Person which shall theretofore
have become such in the manner described in this Article shall be discharged
from all obligations and covenants under this Agreement and the Securities and
may be liquidated and dissolved.
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<PAGE> 113
Section 9.03. Opinion of Counsel to Trustee. The Trustee may
receive an opinion of Counsel, prepared in accordance with Section 1.03, as
conclusive evidence that any such consolidation, merger, sale, lease or
conveyance, and any such assumption, and any such liquidation or dissolution,
complies with the applicable provisions of this Agreement.
* * * * *
This Agreement may be signed in any number of counterparts
with the same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of
this Agreement.
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<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
FUSION SYSTEMS CORPORATION
By_________________________
Title:
Attest:____________________
Title:
[TRUSTEE]
By_________________________
Title:
Attest:____________________
Title:
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<PAGE> 115
STATE OF )
: ss.:
COUNTY OF )
On the day of , 1997, before me personally
came , to me known, who, being by me duly sworn, did depose and say
that s/he resides at ; that s/he is of ,
one of the corporations described in and which executed the above instrument;
that s/he knows the corporate seal of such corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed pursuant to
authority of the Board of Directors of such corporation; and that s/he signed
her/his name thereto pursuant to like authority.
(NOTARIAL SEAL)
________________________
<PAGE> 116
STATE OF )
: ss.:
COUNTY OF )
On the day of , 1997, before me personally came
, to me known, who, being by me duly sworn, did depose and say that
s/he resides at ; that s/he is
of , one of the corporations described in and which executed
the above instrument; that s/he knows the corporate seal of such corporation;
that the seal affixed to said instrument is such corporate seal; that it was
so affixed pursuant to authority of the Board of Directors of such corporation;
and that s/he signed her/his name thereto pursuant to like authority.
(NOTARIAL SEAL)
________________________
<PAGE> 1
EXHIBIT (C)(4)
EXECUTIVE NONCOMPETITION
AGREEMENT
This Executive Noncompetition Agreement ("Agreement") is
entered into this 30th day of June, 1997, by and among Eaton Corporation, an
Ohio corporation, having its principal place of business at Eaton Center,
Cleveland, Ohio 44114-2584 ("Parent"), John C. Matthews ("Executive") and Fusion
Systems Corporation, a Delaware corporation having its principal place of
business at 7600 Standish Place, Rockville, Maryland 20855 (the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger ("Merger
Agreement") of even date herewith by and among Parent, a subsidiary of Parent
("Subsidiary"), and the Company, the Company and Parent have agreed to commence
a tender offer to purchase all of the outstanding shares of the Company's common
stock, par value $.01 per share, and the associated preferred share purchase
rights, and the parties thereto have agreed, subject to the terms and provisions
thereof, that Subsidiary shall be merged with and into the Company (the
"Merger");
WHEREAS, Parent and the Company desire by this Agreement to
provide for certain items and conditions relating to the continued employment of
the Executive by the Company after consummation of the Merger and for the
protection of the goodwill and proprietary rights of Parent and the Company;
WHEREAS, the Executive desires to continue to be employed
by the Company upon the terms and conditions stated herein; and
WHEREAS, the Executive and the Company have entered into an
employment agreement dated March 8, 1993 (the "Existing Agreement"), providing
for payments to the Executive following a change of control of the Company.
NOW, THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS
CONTAINED HEREIN, INTENDING TO BE LEGALLY BOUND, PARENT, THE
COMPANY AND THE EXECUTIVE HEREBY AGREE AS FOLLOWS:
Section 1. Definitions
Unless otherwise specifically defined herein, terms used
herein which are initially capitalized herein shall have the same meaning as in
the Existing Agreement.
Section 2. Stock Option
(A) Grant of Option. The Parent shall grant to the Executive,
effective upon the consummation of the Merger, an option to purchase 12,000
shares of the common stock of Parent ("Parent Option"). The per-share option
price of the Parent
<PAGE> 2
Option shall be the fair market value of a share of the common stock of Parent
on the date of grant. The Parent Option shall have a ten-year term. Subject to
the terms and conditions set forth in this Agreement, the Parent Option shall
become exercisable only after five years have elapsed since the date of grant,
and only if the Executive remains continuously employed by the Company or
Parent during that five-year period. The other terms of the Parent Option shall
be in accordance with the terms of the option plan of Parent under which it is
granted.
(B) Other Benefit Upon Termination. If the Executive's
employment terminates under the conditions set forth in Paragraph 10 or 11 of
the Existing Agreement (except that the reference in each such Paragraph to
"three years following the Change in Control Date" shall, for purposes of this
Section 2(B) only, be deemed to refer to the period of five years beginning on
the date on which the Merger is consummated), the Parent Option shall remain in
effect, shall become fully exercisable on the fifth anniversary of the date of
grant, and shall be exercisable throughout the remainder of its ten-year term in
accordance with its terms. If the Executive's employment terminates other than
as described in the preceding sentence (including without limitation as a result
of the Executive's death or disability) or if the Executive breaches any of the
covenants set forth in Section 17 or 18 of the Existing Agreement or of Section
3 of this Agreement (all such covenants being referred to collectively as the
"Covenants"), the Parent Option shall terminate.
Section 3. Covenants
(A) Non-Competition. The Executive hereby consents to the
amendment of Addendum E of the Existing Agreement by the Company to add products
of Parent's semiconductor equipment operations. Furthermore, in addition to the
Covenants set forth in the Existing Agreement, in consideration of the grant of
the Parent Option and other good and valuable consideration, the Executive
hereby agrees that during the Restricted Period (as defined below), the
Executive shall not, as a shareholder, employee, officer, director, partner,
lender, investor, advisor, consultant or otherwise (whether or not being
compensated in any way in any such capacity), engage directly or indirectly in
any business or enterprise which is in Competition with Parent/Company (as
defined below);
(B) "Competition with Parent/Company" shall mean any of the
following:
(i) Competition with the semiconductor equipment
business of the Parent, of any entity controlled by Parent or of the respective
successors and assigns of Parent or any such entity;
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<PAGE> 3
(ii) Competition with the Company or an entity
controlled by it or the respective successors and assigns of the Company or any
such entity;
(iii) Any business activity which is the same as or
comparable to any business activity of the Company or any other entity described
in clause (ii) above or of the semiconductor equipment business of Parent or of
any other entity described in clause (i) above, in any case from time to time
during the Restricted Period in any geographic area throughout the world in
which Parent or the Company or any such entity is engaged in such business
activity.
Notwithstanding the foregoing, nothing in this Section 3 shall prevent the
Executive from purchasing and holding for investment less than one percent of
the shares of any corporation.
(C) "Restricted Period" shall mean the two-year period
beginning on the date upon which the Executive's employment with the Company,
with Parent or with any entity controlled by Parent terminates for any reason.
(D) Enforcement. With respect to any Covenant finally
determined by a court of competent jurisdiction to be unenforceable in whole or
in part, the Executive, Parent and the Company hereby agree that such court
shall have jurisdiction to reform the Existing Agreement and/or this Agreement
or any provision thereof or hereof so that such Covenant is enforceable to the
maximum extent permitted by law, and the parties agree to abide by such court's
determination. If any of the Covenants is determined to be wholly or partially
unenforceable in any jurisdiction, such determination shall not be a bar to or
in any way diminish the right of the Company, Parent and their respective
affiliates and successors to enforce any such Covenant in any other
jurisdiction. The Executive acknowledges and agrees that: (i) the purpose of the
Covenants is to protect the goodwill, trade secrets and other confidential
information of the Company being acquired by Parent, that because of the nature
of the businesses in which the Company, Parent and their respective affiliates
and successors are engaged and because of the nature of the Confidential
Information to which the Executive has access, it would be impractical and
excessively difficult to determine the actual damages of the Company, Parent and
their respective affiliates and successors in the event the Executive breached
any of the Covenants, and that remedies at law (such as monetary damages) for
any breach of the Executive's obligations under the Covenants would be
inadequate. The Executive therefore agrees and consents that if he commits any
breach of any Covenant or threatens to commit any such breach, the Company,
Parent and their respective affiliates and successors shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary
-3-
<PAGE> 4
and permanent injunctive relief from a court of competent jurisdiction, without
posting any bond or other security and without the necessity of proof of actual
damage.
Section 4. Effect on Existing Agreement.
The date on which the Merger is consummated will be the Change
in Control Date for purposes of the Existing Agreement, and no other transaction
contemplated by the Merger Agreement will constitute a Change in Control nor
will it be considered to give rise to any other Change in Control Date. Except
as specifically amended by this Agreement, the Existing Agreement shall remain
in full force and effect after the date hereof without amendment. This Agreement
shall be null and void ab initio if the Merger is not consummated.
Section 5. Governing Law
This Agreement shall be governed and construed in accordance
with the laws of the State of Maryland.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from their Boards of
Directors, the Company and the Parent have caused this Executive Noncompetition
Agreement to be executed in their names on their behalf, all as of the day and
year first above written.
/s/ John C. Matthews
------------------------------
John C. Matthews
EATON CORPORATION
By /s/ Gerald L. Gherlein
--------------------------
FUSION SYSTEMS CORPORATION
By /s/ Leslie S. Levine
--------------------------
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<PAGE> 1
EXHIBIT (c)(5)
CONSULTING AND NONCOMPETITION AGREEMENT
AGREEMENT, dated as of June 30, 1997, by and among Eaton
Corporation, an Ohio corporation, having its principal place of business at
Eaton Center, Cleveland, Ohio 44114-2584 ("Parent"), Leslie S. Levine
("Consultant") and Fusion Systems Corporation, a Delaware corporation having its
principal place of business at 7600 Standish Place, Rockville, Maryland 20855
(the "Company").
WHEREAS, pursuant to an Agreement and Plan of Merger ("Merger
Agreement") of even date herewith by and among Parent, a subsidiary of Parent
("Subsidiary"), and the Company, the Company and Parent have agreed to commence
a tender offer to purchase all of the outstanding shares of the Company's common
stock, par value $.01 per share, and the associated preferred share purchase
rights, and the parties thereto have agreed, subject to the terms and provisions
thereof, that Subsidiary shall be merged with and into the Company (the
"Merger");
WHEREAS, Parent and the Company desire by this Agreement to
provide for certain items and conditions relating to the rendering of consulting
services by the Consultant to the Company and Parent after consummation of the
Merger and for the protection of the goodwill and proprietary rights of Parent
and the Company; and
WHEREAS, the Consultant desires to render consulting services
to the Company upon the terms and conditions stated herein; and
NOW, THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS
CONTAINED HEREIN, INTENDING TO BE LEGALLY BOUND, PARENT, THE
COMPANY AND THE CONSULTANT HEREBY AGREE AS FOLLOWS:
1. Consulting Period. The Consultant shall make himself
available to render consulting services, on the terms and conditions set forth
in this Agreement, for the period beginning on the date of the Merger and ending
on the earlier of (i) the fifth anniversary of the date of the Merger or (ii)
the date on which the Consultant becomes disabled or dies (the "Consulting
Period").
2. Consulting Services. During the Consulting Period, the
Consultant shall render services regarding business opportunities in the
semiconductor equipment industry and such other services relating to the
business of
<PAGE> 2
the Company and Parent as may be requested from time to time by the Board of
Directors or the Chief Executive Officer of the Company or the Board of
Directors or the Chief Executive Officer of Parent. The Consultant's services
shall be performed at such times and locations as shall be mutually convenient
to the Consultant and the Company or Parent, as the case may be.
3. Fee. In consideration of the foregoing and of the covenants
set forth below, the Company shall pay the Consultant a fee (the "Fee")
consisting of (a) $750,000 in a lump sum payment promptly following the first
day of the Consulting Period, and (b) $12,500 per month thereafter during the
Consulting Period.
4. Confidential Information. During the Consulting Period and
at all times thereafter, the Consultant shall hold in a fiduciary capacity for
the benefit of the Company and Parent all secret or confidential information,
knowledge or data relating to the Company, Parent or any of their respective
affiliated companies, and their respective businesses, which shall have been
obtained by the Consultant during the Consultant's employment by or consulting
service to the Company, Parent or any of their respective affiliated companies
(whether before, on or after the date of this Agreement) and which shall not be
or become public knowledge (other than by acts by the Consultant or
representatives of the Consultant in violation of this Agreement). After
termination of the Consultant's services to the Company and Parent the
Consultant shall not, without the prior written consent of the Company, Parent
or as may otherwise be required by law or legal process, communicate or divulge
any such information, knowledge or data to anyone other than the Company, Parent
and those designated by them.
5. Noncompetition. (a) Non-Competition. In con-
sideration of the Fee and other good and valuable consideration,
the Consultant hereby agrees that during the Consulting Period, the
Consultant shall not, as a shareholder, employee, officer,
director, partner, lender, investor, advisor, consultant or
otherwise (whether or not being compensated in any way in any such
capacity), engage directly or indirectly in any business or
enterprise which is in Competition with Parent/Company (as defined
below), without the prior written consent of Parent.
(b) "Competition with Parent/Company" shall mean any of
the following:
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<PAGE> 3
(i) Competition with the semiconductor equipment
business of the Parent, of any entity controlled by Parent or of the respective
successors and assigns of Parent or any such entity;
(ii) Competition with the Company or an entity
controlled by it or the respective successors and assigns of the Company or any
such entity;
(iii) Any business activity which is the same as or
comparable to any business activity of the Company or any other entity described
in clause (ii) above or of the semiconductor equipment business of Parent or of
any other entity described in clause (i) above, in any case from time to time
during the Consulting Period in any geographic area throughout the world in
which Parent or the Company or any such entity is engaged in such business
activity.
Notwithstanding the foregoing, nothing in this Section 5 shall prevent the
Consultant from purchasing and holding for investment (i) less than five percent
of the equity of any entity, if such equity is listed on a national securities
exchange or regularly traded in an over-the-counter market or such entity
consists of a pooled investment vehicle in which the Consultant is a purely
passive investor, or (ii) less than one percent of the equity of any
corporation, partnership or similar entity.
(c) Enforcement. If any of the covenants set forth in Section
4 or this Section 5 (the "Covenants") is finally determined by a court of
competent jurisdiction to be unenforceable in whole or in part, the Consultant
and the Company hereby agree that such court shall have jurisdiction to reform
this Agreement or any provision hereof so that such Covenant is enforceable to
the maximum extent permitted by law, and the parties agree to abide by such
court's determination. If any of the Covenants is determined to be wholly or
partially unenforceable in any jurisdiction, such determination shall not be a
bar to or in any way diminish the right of the Company, Parent and their
respective affiliates and successors to enforce any such Covenant in any other
jurisdiction. The Consultant acknowledges and agrees that: (i) the purpose of
the Covenants is to protect the goodwill, trade secrets and other confidential
information of the Company being acquired by Parent, that because of the nature
of the businesses in which the Company, Parent and their respective affiliates
and successors are engaged and because of the nature of the Confidential
Information to which the Consultant has access, it would be impractical and
excessively difficult to determine the actual damages of the
-3-
<PAGE> 4
Company, Parent and their respective affiliates and successors in the event the
Consultant breached any of the Covenants, and that remedies at law (such as
monetary damages) for any breach of the Consultant's obligations under the
Covenants would be inadequate. The Consultant therefore agrees and consents that
if he commits any breach of any Covenant or threatens to commit any such breach,
the Company, Parent and their respective affiliates and successors shall have
the right (in addition to, and not in lieu of, any other right or remedy that
may be available to them) to temporary and permanent injunctive relief from a
court of competent jurisdiction, without posting any bond or other security and
without the necessity of proof of actual damage.
6. Fusion Lighting, Inc. The parties hereto acknowledge that
the Consultant is the President and a significant shareholder of Fusion
Lighting, Inc., a manufacturer of lighting systems and light sources employing
technology common to the Company's technology, and that nothing contained in
this Agreement shall limit the Consultant's freedom to engage in or further such
business of that corporation in those capacities.
7. Successors. (a) This Agreement is personal to the
Consultant and, without the prior written consent of the Company, shall not be
assignable by the Consultant otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Consultant's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company, Parent and their respective successors and assigns.
8. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(c) The Consultant acknowledges that his services hereunder
are to be rendered as an independent contractor,
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<PAGE> 5
and that he is solely responsible for the payment of all Federal, state, local
and foreign taxes that are required by applicable laws or regulations to be paid
with respect to the Fee.
(d) The Consultant, the Company and Parent acknowledge that
this Agreement supersedes any other agreement between them concerning the
provision of consulting services by the Consultant to the Company and Parent.
IN WITNESS WHEREOF, the Consultant has hereunto set his hand
and, pursuant to the authorization of their respective Board of Directors, the
Company and Parent have caused this Agreement to be executed in their names on
their behalf, all as of the day and year first above written.
/s/ Leslie S. Levine
--------------------------
Leslie S. Levine
EATON CORPORATION
By /s/ Gerald L. Gherlein
----------------------
FUSION SYSTEMS CORPORATION
By /s/ Joseph F. Greeves
----------------------
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