<PAGE>
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12
__________________Fischer & Porter Company__________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
__________________Fischer & Porter Company__________________
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
2) Aggregate number of securities to which transaction applies:
5,295,250 shares of Common Stock outstanding and stock options and
warrants to purchase 1,850,209 shares of Common Stock
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
$24.25 per share of Common Stock outstanding and an aggregate of
$28,604,859.50 in consideration of the cancellation of all
outstanding stock options and warrants
4) Proposed maximum aggregate value of transaction:
$128,409,812.50 in consideration of the outstanding shares of Common
Stock and an aggregate of $28,604,859.50 in consideration of the
cancellation of all outstanding stock options and warrants for a
total maximum aggregate value of $157,014,672
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$31,402.94
2) Form, Schedule or Registration Statement No.:
SCHEDULE 14A: FILE NO. 001-04400
3) Filing Party:
FISCHER & PORTER COMPANY
4) Dated Filed:
APRIL 29, 1994
<PAGE>
FISCHER & PORTER COMPANY
125 EAST COUNTY LINE ROAD
WARMINSTER, PENNSYLVANIA 18974
8 July 1994
Dear Shareholder:
You are invited to attend the Special Meeting of Shareholders of Fischer &
Porter Company (the 'Company') to be held on Friday, 5 August 1994 at 10:00
a.m., local time, at the Company's principal executive offices, 125 East County
Line Road, Warminster, Pennsylvania.
The purpose of the Special Meeting is to consider and vote upon approval
and adoption of the Agreement and Plan of Reorganization (the 'Reorganization
Agreement'), the related Plan of Merger and the merger to be effected thereby
(the 'Merger'), and all related transactions, pursuant to which an indirect
wholly-owned subsidiary of Elsag Bailey Process Automation N.V. ('Bailey') will
be merged with and into the Company (the 'Merger Proposal'). If the Merger is
consummated, the Company will become an indirect wholly-owned subsidiary of
Bailey, and each share of common stock, par value $1.00 per share, of the
Company (the 'Common Shares') that is issued and outstanding at the effective
time of the Merger, other than shares held by shareholders who perfect their
statutory dissenters rights, will be canceled and extinguished and converted
automatically into the right to receive an amount, in cash, without interest,
equal to $24.25 per Common Share. Copies of the Reorganization Agreement and the
Plan of Merger are included as Annex A to the attached Proxy Statement.
Approval and adoption of the Merger Proposal requires the affirmative vote
of a majority of the votes cast by the holders of the outstanding Common Shares.
Detailed information concerning the Merger is set forth in the attached Proxy
Statement, which we urge you to read carefully.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER PROPOSAL AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER PROPOSAL. In reaching its determination, the Board considered, among
other things, the opinion of CS First Boston Corporation, the Company's
financial advisor, as to the fairness, from a financial point of view, of the
consideration to be received by the shareholders of the Company pursuant to the
Merger. The opinion of CS First Boston Corporation is included as Annex B to the
attached Proxy Statement.
Whether or not you plan to attend the Special Meeting in person and
regardless of the number of Common Shares you own, we urge you to complete,
sign, date and return the enclosed proxy card promptly in the accompanying
prepaid envelope. You may, of course, attend the Special Meeting and vote in
person, even if you have previously returned your proxy card.
Sincerely,
Jay H. Tolson
Chairman and Chief Executive Officer
THE TRANSACTION TO BE CONSIDERED AT THE SPECIAL MEETING INVOLVES A MATTER
OF GREAT IMPORTANCE TO THE SHAREHOLDERS OF THE COMPANY. ACCORDINGLY,
SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THE ATTACHED PROXY STATEMENT, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE.
STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, SHAREHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR
EXCHANGING THEIR COMMON SHARES FOR CASH.
<PAGE>
FISCHER & PORTER COMPANY
125 EAST COUNTY LINE ROAD
WARMINSTER, PENNSYLVANIA 18974
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON 5 AUGUST 1994
------------------------------
To the Shareholders of Fischer & Porter Company:
Notice is hereby given that a Special Meeting of Shareholders of Fischer &
Porter Company, a Pennsylvania corporation (the 'Company'), will be held on
Friday, 5 August 1994 at 10:00 a.m., local time, at the Company's principal
executive offices, 125 East County Line Road, Warminster, Pennsylvania, for the
following purposes:
1. To consider and vote upon approval and adoption of the Agreement
and Plan of Reorganization dated as of 13 April 1994 among the Company,
Elsag Bailey Process Automation N.V., a Netherlands corporation ('Bailey'),
and EBPA Acquisition, Inc., a Pennsylvania corporation and an indirect
wholly-owned subsidiary of Bailey ('Acquisition'), the related Plan of
Merger and the merger to be effected thereby (the 'Merger'), and all
related transactions, pursuant to which (a) Acquisition will be merged with
and into the Company, and the Company will become an indirect wholly-owned
subsidiary of Bailey; and (b) each share of common stock, par value $1.00
per share, of the Company (the 'Common Shares') that is issued and
outstanding at the effective time of the Merger, other than shares held by
shareholders who perfect their statutory dissenters rights, will be
canceled and extinguished and converted automatically into the right to
receive an amount, in cash, without interest, equal to $24.25 per share
(the 'Merger Proposal').
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The Merger Proposal and other related matters are more fully described in
the attached Proxy Statement and the Annexes attached thereto.
Holders of Common Shares have the right to dissent from the Merger and
obtain payment for their shares by following the procedures prescribed in
Subchapter 15D of the Pennsylvania Business Corporation Law of 1988, which is
attached as Annex C to, and summarized under 'The Merger -- Dissenters Appraisal
Rights' in, the attached Proxy Statement.
The Board of Directors has fixed the close of business on 24 May 1994 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Special Meeting and any adjournment and postponement
thereof.
Those shareholders entitled to vote who attend, in person or by proxy, any
adjournment or adjournments of the Special Meeting that have been previously
adjourned for one or more periods aggregating at least 15 days because of an
absence of a quorum, shall constitute a quorum for the purposes of acting upon
the Merger Proposal although they constitute less than a quorum as fixed by law
or in the Articles of Incorporation or Bylaws of the Company for the originally
scheduled date of the Special Meeting.
By Order of the Board of Directors,
Joseph P. Garay
Secretary
Warminster, Pennsylvania
8 July 1994
<PAGE>
FISCHER & PORTER COMPANY
125 EAST COUNTY LINE ROAD
WARMINSTER, PENNSYLVANIA 18974
------------------------------
PROXY STATEMENT
------------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD 5 AUGUST 1994
This proxy statement (the 'Proxy Statement') is being furnished to the
shareholders of Fischer & Porter Company, a Pennsylvania corporation (the
'Company'), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at a Special Meeting of Shareholders to be held
on Friday, 5 August 1994 at 10:00 a.m., local time, at the Company's principal
executive offices, 125 East County Line Road, Warminster, Pennsylvania and at
any adjournment or postponement thereof (the 'Special Meeting').
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Reorganization dated as of 13
April 1994 (the 'Reorganization Agreement') among the Company, Elsag Bailey
Process Automation N.V., a Netherlands corporation ('Bailey'), and EBPA
Acquisition, Inc., a Pennsylvania corporation and an indirect wholly-owned
subsidiary of Bailey ('Acquisition'), the related Plan of Merger (the 'Plan of
Merger') and the merger to be effected thereby (the 'Merger'), and all related
transactions, pursuant to which Acquisition will be merged with and into the
Company (the 'Merger Proposal'). Upon consummation of the Merger, the Company
will become an indirect wholly-owned subsidiary of Bailey, and each share of
common stock, par value $1.00 per share, of the Company (the 'Common Shares')
that is issued and outstanding at the effective time of the Merger, other than
shares held by shareholders who perfect their statutory dissenters rights, will
be converted into the right to receive an amount, in cash, without interest,
equal to $24.25 per Common Share. As a result of the Merger, all shareholders of
the Company will cease to have an equity interest in, or possess any rights as
shareholders of, the Company. See 'The Merger -- General.' Copies of the
Reorganization Agreement and the Plan of Merger are included in this Proxy
Statement as Annex A. The summaries of the portions of the Reorganization
Agreement and the Plan of Merger set forth in this Proxy Statement do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, the text of the Reorganization Agreement and the Plan of
Merger.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER PROPOSAL AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER PROPOSAL.
------------------------------
This Proxy Statement is first being mailed to the Company's
shareholders on or about 8 July 1994.
------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SUMMARY.................................................................................................... iii
INTRODUCTION............................................................................................... 1
VOTING AND PROXIES......................................................................................... 1
Record Date; Solicitation of Proxies.................................................................. 1
Vote Required......................................................................................... 2
Stock Ownership of Management and Certain Beneficial Owners........................................... 3
THE MERGER................................................................................................. 5
General............................................................................................... 5
Background of the Merger.............................................................................. 5
Reasons for the Merger; Recommendation of the Board of Directors; Opinion of Financial Advisor........ 10
Conflicts of Interest................................................................................. 14
Effective Time of the Merger.......................................................................... 17
Payment for Common Shares............................................................................. 17
Effect of Merger on Control-Share Acquisition and Other Antitakeover Restrictions..................... 18
Certain Other Effects of the Merger................................................................... 18
Antitrust Matters..................................................................................... 19
Accounting Treatment.................................................................................. 19
Terms of the Merger................................................................................... 19
Conditions to Consummation of the Merger; Representations and Warranties; Certain Covenants........... 20
Termination; Fees and Expenses; Plans of the Company in Event Merger is Not Consummated............... 22
Source and Amount of Funds............................................................................ 23
Federal Income Tax Consequences of the Merger......................................................... 23
Dissenters Appraisal Rights........................................................................... 23
ADDITIONAL INFORMATION..................................................................................... 26
Legal Proceedings..................................................................................... 26
Independent Public Accountants........................................................................ 27
Available Information................................................................................. 27
Incorporation of Certain Documents by Reference....................................................... 28
OTHER MATTERS........................................................................................... 28
ANNEXES
Agreement and Plan of Reorganization.................................................................. A-1
Opinion of CS First Boston Corporation................................................................ B-1
Subchapter 15D of the Pennsylvania Business Corporation Law........................................... C-1
Opinion of Bear Stearns & Co., Inc. .................................................................. D-1
</TABLE>
(ii)
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. This Summary does not purport to be complete and should be
read in conjunction with, and is qualified in its entirety by reference to, the
more detailed information appearing elsewhere in this Proxy Statement and the
Annexes hereto.
PARTIES TO THE MERGER
FISCHER & PORTER COMPANY
Fischer & Porter Company, a Pennsylvania corporation (the 'Company'), is
engaged in the manufacture of process control instrumentation and systems. The
Company's products include flow meters, transmitters, process controllers,
microcomputers, distributed control systems, analytical instruments and various
types of disinfection equipment. The instruments and systems are an integral
part of such varied enterprises as chemical plants, pharmaceutical plants, food
and beverage processing facilities, pulp and paper mills, mines, metal
refineries, and municipal and industrial water and wastewater treatment plants.
The mailing address of the Company's principal executive offices is 125 East
County Line Road, Warminster, Pennsylvania 18974, and its telephone number is
(215) 674-6000. For more information relating to the business and operations of
the Company, reference is made to the documents of the Company which are
incorporated by reference in this Proxy Statement. See 'Additional Information
- - -- Incorporation of Certain Documents by Reference.'
ELSAG BAILEY PROCESS AUTOMATION N.V.
Elsag Bailey Process Automation N.V., a Netherlands corporation ('Bailey'),
is a global supplier of process automation systems, field instrumentation
products, and related services. Bailey's INFI 90(Registered) distributed control
systems and other technologies are installed throughout a wide range of process
industries including electric utilities, oil and gas, pulp and paper, chemicals
and pharmaceutical, water and wastewater, metals and ceramics, food and
beverage, and others. The mailing address of Bailey's principal executive
offices is Welplaathoek, 20, 3197 KP Rotterdam, The Netherlands, and its
telephone number is 31-10-416-9696. The mailing address of Bailey's shareholder
relations office in the United States is 30100 Chagrin Boulevard, Suite 101,
Pepper Pike, Ohio 44124, and its telephone number in the United States is
216-595-3728.
EBPA ACQUISITION, INC.
EBPA Acquisition, Inc., a Pennsylvania corporation ('Acquisition'), is a
corporation recently organized by Bailey for the purpose of effecting the
Merger. It has no material assets and has not engaged in any activities except
in connection with such proposed transaction. The mailing address of
Acquisition's executive office is 30100 Chagrin Boulevard, Suite 101, Pepper
Pike, Ohio 44124, and its telephone number is 216-595-3728.
SPECIAL MEETING
PURPOSE OF THE MEETING; DATE, TIME AND PLACE
A Special Meeting of Shareholders (the 'Special Meeting') of the Company
will be held on Friday, 5 August 1994 at 10:00 a.m., local time, at the
Company's principal executive offices, 125 East County Line Road, Warminster,
Pennsylvania, to consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Reorganization dated as of 13 April 1994 (the
'Reorganization Agreement') among the Company, Bailey and Acquisition, the
related Plan of Merger (the 'Plan of Merger') and the merger to be effected
thereby (the 'Merger'), and all related transactions, pursuant to which
Acquisition will be merged with and into the Company (the 'Merger Proposal').
See 'Introduction.'
In the Merger, each share of common stock, par value $1.00 per share (the
'Common Shares'), of the Company that is issued and outstanding at the effective
time of the Merger, other than Common Shares held by shareholders who perfect
their statutory dissenters rights, will be canceled and extinguished and
converted automatically into the right to receive an amount, in cash, without
interest, equal to $24.25 per Common Share (the 'Merger Price'). Copies of the
Reorganization Agreement
(iii)
<PAGE>
and the Plan of Merger are included in this Proxy Statement as Annex A. See 'The
Merger -- General.'
VOTE REQUIRED; RECORD DATE
Approval and adoption of the Merger Proposal requires the affirmative vote
of the majority of the votes cast by the holders of the outstanding Common
Shares entitled to vote thereon. Only shareholders of record at the close of
business on 24 May 1994 (the 'Record Date') are entitled to vote at the Special
Meeting or any adjournment or postponement thereof. As of the Record Date,
5,295,250 Common Shares, held by approximately 2,800 holders of record, were
issued and outstanding and entitled to vote at the Special Meeting. See 'Voting
and Proxies -- Record Date; Solicitation of Proxies.'
As of the Record Date, the executive officers and directors of the Company
beneficially owned a total of 644,727 Common Shares, constituting approximately
12.18% of the outstanding Common Shares entitled to vote at the Special Meeting.
See 'Voting and Proxies -- Stock Ownership of Management and Certain Beneficial
Owners.' These Common Shares exclude 1,664,465 Common Shares subject to the
presently exercisable stock options and warrants beneficially owned by executive
officers and directors of the Company, which options and warrants will be
canceled immediately prior to the Merger. See 'Voting and Proxies -- Vote
Required' and 'The Merger -- Conflicts of Interest.'
THE MERGER
BACKGROUND OF THE MERGER
After the completion of a two-year program of down-sizing, cost control and
cash management, the Board of Directors believed in mid-1993 that it was in a
position to make a strategic decision with respect to the future of the Company.
After careful consideration, the Board determined that the Company should pursue
the possibility of being marketed to a potential strategic acquiror. There were
two principal factors motivating the Company's decision to consider a possible
sale to a strategic acquiror. First, through a series of unrelated acquisitions,
a substantial number of major competitors of the Company had become constituents
of larger industrial groups, with the relative financial, marketing and research
and development advantages associated with such status. This factor suggested
that the long-term viability of the Company might require that it too become a
member of a strong and well-financed industrial group. In addition, it was
believed that a sale of the Company would afford the existing public
shareholders the opportunity to realize a profit on their investment in the
Company. Although in soliciting preliminary indications of interest, the
Company's financial advisor did not specify any particular form of transaction
or form of consideration that prospective bidders were required to offer, the
draft Agreement and Plan of Reorganization circulated by the Company to the
bidders contemplated a cash merger. The Company believed that a cash merger
would afford the shareholders of the Company liquidity and the opportunity to
realize a profit on their investment in the Company. For a further description
of events leading up to the approval of the Merger Proposal, see 'The Merger --
Background of the Merger.'
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board of Directors of the Company, at a special meeting held on 12-13
April 1994, unanimously approved and adopted the Merger Proposal and directed
that it be submitted to the shareholders for their approval and adoption. THE
BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER PROPOSAL IS FAIR TO AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER PROPOSAL. For a discussion of the
factors considered by the Board in reaching its determination, see 'The Merger
- - -- Reasons for the Merger; Recommendation of the Board of Directors; Opinion of
Financial Advisor.' Certain members of the Board of Directors have certain
interests which may present them with possible conflicts of interest in
connection with the Merger. See 'The Merger -- Conflicts of Interest.'
(iv)
<PAGE>
OPINION OF FINANCIAL ADVISOR
CS First Boston Corporation ('CS First Boston') has acted as the Company's
financial advisor in connection with the sale of the Company. CS First Boston
has delivered its opinion to the Company's Board of Directors to the effect
that, as of 13 April 1994, the consideration to be received by the shareholders
of the Company pursuant to the Merger is fair to the shareholders from a
financial point of view. The full text of CS First Boston's opinion, dated 13
April 1994, is included in this Proxy Statement as Annex B. Shareholders are
urged to read the opinion in its entirety for the assumptions made, matters
considered and limits of the review undertaken by CS First Boston. CS First
Boston's opinion is directed only to the fairness of the consideration to be
received by the shareholders of the Company and does not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote such shareholder's Common Shares. See 'The Merger -- Reasons for the
Merger; Recommendation of the Board of Directors; Opinion of Financial Advisor.'
CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that members of the Company's
management and Board of Directors have certain interests which may present them
with possible conflicts of interest in connection with the Merger.
The Company has agreements with nine of its executives, including Messrs.
Tolson, Hochreiter, Finnegan, Hughes and Garay, which provide that if there is
both a 'change in control' of the Company and termination of the executive
during the 'contract period' except for 'cause' or disability, or if the
executive terminates his employment for 'good reason,' the executive shall be
entitled to separation pay equal to two times the highest total compensation
received by him during the year of termination or any of the four preceding
calendar years, with the current year's compensation annualized. See 'The Merger
- - -- Conflicts of Interest.' In the event of such termination, any stock options
previously granted to the executive immediately fully vest and become
exercisable as of the date of termination and continue to be exercisable
thereafter for a period of at least 60 days. Further, the Company is required to
maintain for the terminated executive, for a period of two years after the
termination date, certain insurance, employee benefit plans, automobile,
outplacement and other benefits and the terminated executive is entitled to an
additional two years service credit under Company pension plans or comparable
benefits if the plan does not permit continued participation by a terminated
employee. See 'The Merger -- Conflicts of Interest' for additional information
concerning these change in control agreements and other agreements, including
the specific amounts payable to certain executive officers of the Company
pursuant thereto.
The Company has issued to Mr. Tolson, the Chairman and Chief Executive
Officer of the Company, and Mr. Hochreiter, the President and Chief Operating
Officer of the Company, and certain members of Mr. Hochreiter's family (the
'Hochreiters') certain warrants to acquire Common Shares of the Company. The
warrants were issued on 30 September 1993 in connection with the conversion of
the shares of Class B Common Stock owned by Mr. Tolson and the Hochreiters
pursuant to the terms of the Conversion and Warrant Agreements (as defined in
'The Merger -- Background of the Merger'). The Company entered into the
Conversion and Warrant Agreements with Messrs. Tolson and Hochreiter in order
to simplify the Company's capital structure and to eliminate Mr. Tolson's
voting control in anticipation of a future sale of the Company. The
warrants are exercisable at $8.625 a share (the closing price of
the Common Shares on the American Stock Exchange on the day before the date of
issuance) and expire on 31 March 1995 (subject to extension in certain
circumstances). The Warrant Agreements (a) restrict Mr. Tolson's and the
Hochreiters' rights to assign or transfer their warrants; (b) provide for
certain anti-dilution and other adjustments; and (c) grant Mr. Tolson and the
Hochreiters certain demand and piggy-back registration rights. Mr. Tolson owns
warrants to purchase 1,068,994 Common Shares. The Hochreiters own warrants to
purchase 60,000 Common Shares. Immediately prior to the Merger, each outstanding
warrant will be canceled and the holders will be entitled to receive from the
Company an amount in cash equal to the excess of (i) the $24.25 Merger Price
multiplied by the number of Common Shares subject to the warrant, over (ii) the
$8.625 exercise price of the warrant multiplied by the number of Common Shares
subject thereto. In addition to the cancellation of the warrants, immediately
prior to the Merger, each outstanding Company stock option,
(v)
<PAGE>
whether or not then vested or exercisable, will become exercisable in full,
will then be canceled, and the holder thereof will be entitled to receive from
the Company an amount in cash equal to the excess of (y) the Merger Price
multiplied by the number of Common Shares subject to the stock option, over
(z) the exercise price of the stock option multiplied by the
number of Common Shares subject thereto. See 'The Merger -- Conflicts of
Interest' for additional information concerning these stock options, including
the specific amounts payable to certain executive officers of the Company in
respect thereof. The Company will be obligated to pay Mr. Tolson and the
Hochreiters $16,703,031.25 and $937,500.00, respectively, in cancellation of
their warrants and to pay Messrs. Tolson and Hochreiter $2,406,250.00 each
in cancellation of their options. See 'The Merger -- Background of the Merger.'
In response to the Company's announcement of the Conversion and Warrant
Agreements, a class action suit (the 'Bucks County Action') was filed on 6
October 1993 in the Court of Common Pleas of Bucks County challenging the
Conversion and Warrant Agreements. The Bucks County Action complaint is a class
action on behalf of all shareholders against the Company, Jay H. Tolson and E.
Joseph Hochreiter. The complaint alleges claims for breach of fiduciary duty
against the individual defendants with respect to the Conversion and Warrant
Agreements. Plaintiff seeks to enjoin the individual defendants from exercising
the warrants and seeks rescission of the Conversion and Warrant Agreements.
Discovery is ongoing in the Bucks County Action. Defendants have not yet
responded to the complaint and expect to receive an amended complaint before a
response (by way of answer, motion or preliminary objection) is filed. The
Company does not expect that the outcome of the Bucks County Action will delay
or prevent the completion of the Merger.
On 10 May 1994, counsel for the plaintiffs in the Bucks County Action filed
a complaint in the United States District Court for the Eastern District of
Pennsylvania (the 'Benninghoff Action') also challenging the Conversion and
Warrant Agreements. The Benninghoff Action was filed as both a class action and
a derivative action. The plaintiffs are different shareholders than the
shareholder in the Bucks County Action. However, the named plaintiffs
in both the Bucks County Action and the Benninghoff Action seek to represent the
same class of shareholders. Messrs. Tolson and Hochreiter are the defendants in
the Benninghoff Action; the Company is a nominal defendant on the derivative
claims. See 'Additional Information -- Legal Proceedings.'
EFFECTIVE TIME OF THE MERGER; PAYMENT FOR COMMON SHARES
The Merger will become effective (the 'Effective Time') upon the filing of
Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania in accordance with the Pennsylvania Business Corporation Law of
1988 (the 'BCL'). The Articles of Merger will be presented for filing as soon as
practicable after the satisfaction or waiver of all conditions to consummation
of the Merger set forth in Article IV of the Reorganization Agreement. See 'The
Merger -- Conditions to Consummation of the Merger; Representations and
Warranties; Certain Covenants.' Detailed instructions with regard to the
surrender of certificates, together with a letter of transmittal, will be
forwarded to holders of certificates formerly evidencing Common Shares as
promptly as practicable following the Effective Time by Citibank, N.A. (the
'Paying Agent'). Payment will be made to such former holders of Common Shares
as promptly as practicable following receipt by the Paying Agent of
certificates for their Common Shares and other required documents. No
interest will be paid or accrued on the cash payable upon the surrender of
certificates. See 'The Merger -- Payment for Common Shares.'
CERTAIN OTHER EFFECTS OF THE MERGER
If the Merger is consummated, the Company's shareholders will not have the
opportunity to continue their equity interest in the Company as an ongoing
corporation and therefore will not share in any future earnings and growth of
the Company. Moreover, if the Merger is consummated, public trading of the
Common Shares will cease, the Common Shares will cease to be listed on the
American Stock Exchange, and the registration of the Common Shares under the
Securities Exchange Act of 1934, as amended, will be terminated. See 'Additional
Information -- Available Information.'
(vi)
<PAGE>
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Bailey and Acquisition to consummate the Merger are
subject to the satisfaction, at or before the Effective Time, of certain
conditions, including approval of the Company's shareholders. See 'The Merger --
Conditions to Consummation of the Merger; Representations and Warranties;
Certain Covenants.'
TERMINATION; FEES AND EXPENSES
The Reorganization Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time, before or after the approval by the
shareholders of the Company, (a) by mutual consent of the Boards of Directors of
the Company, Bailey and Acquisition; (b) by the Company, Bailey or Acquisition
if the Merger shall not have been consummated on or before 13 October 1994, or
such later date as may be mutually agreed to by the parties; (c) by the Company,
Bailey or Acquisition if any court or governmental agency of competent
jurisdiction shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling, or other action shall have become final and
nonappealable; (d) by the Company if Bailey or Acquisition shall have failed to
comply in any material respect with any of the covenants or agreements contained
in the Reorganization Agreement and such failure has not been cured within 30
days after receipt of notice thereof; (e) by the Company if the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Bailey or Acquisition its approval or recommendation of the Merger in order to
approve an acquisition transaction with a third party; (f) by Bailey and
Acquisition if the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in the Reorganization
Agreement and such failure has not been cured within 30 days after receipt of
notice thereof; (g) by Bailey and Acquisition if any condition to the Merger as
set out in the Reorganization Agreement to the obligations of Bailey and
Acquisition has not been satisfied for any reason; or (h) by Bailey and
Acquisition if the Board of Directors of the Company shall withdraw or modify in
a manner adverse to Bailey or Acquisition its approval or recommendation of the
Merger, or shall take any other action to facilitate an acquisition transaction
with a third party.
If the Company terminates the Reorganization Agreement in order to approve
an acquisition transaction with any third party, or if Bailey and Acquisition
terminate the Reorganization Agreement because the Board of Directors of the
Company has not recommended to its shareholders the approval of the
Reorganization Agreement, or if the Board of Directors of the Company has
withdrawn or modified in a manner adverse to Bailey or Acquisition its approval
or recommendation of the Merger or has taken any other actions to facilitate an
acquisition transaction with any third party, then the Company shall, within ten
business days following the termination of the Reorganization Agreement, pay
Bailey a termination fee payable in cash of approximately $5.6 million.
FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash for Common Shares pursuant to the Merger or pursuant to
the exercise of dissenters appraisal rights under Pennsylvania law will be a
taxable transaction for United States federal income tax purposes and may also
be a taxable transaction for state, local, foreign and other tax purposes. See
'The Merger -- Federal Income Tax Consequences of the Merger.' SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAXES.
DISSENTERS APPRAISAL RIGHTS
Under Pennsylvania law, shareholders of the Company who file a written
objection prior to the vote on the Merger Proposal and do not vote in favor of
approval and adoption of the Merger Proposal have the right to demand an
appraisal of the 'fair value' of their Common Shares if the required procedures
under Subchapter 15D of the BCL are followed. Appraisal rights will be forfeited
if the requirements of Subchapter 15D are not fully and precisely satisfied. See
'The Merger -- Dissenters Appraisal Rights' and a copy of the text of Subchapter
15D of the BCL included in this Proxy Statement as Annex C.
(vii)
<PAGE>
MARKET PRICES AND DIVIDENDS
The Common Shares are traded on the American Stock Exchange under the
symbol 'FP.' The following table sets forth, for the fiscal quarters indicated,
the high and low sale prices for the Common Shares:
<TABLE>
<CAPTION>
HIGH LOW
----- ---------
<S> <C> <C>
1994:
First Quarter.......................................... $ 22 7/8 $ 16 7/8
Second Quarter ........................................ 23 7/8 22 5/8
1993:
First Quarter.......................................... $ 10 1/2 $ 8 5/8
Second Quarter......................................... 9 5/8 8
Third Quarter.......................................... 9 1/4 7 5/8
Fourth Quarter......................................... 17 7/8 11
1992:
First Quarter.......................................... $ 8 3/8 $ 6 1/2
Second Quarter......................................... 9 7 3/8
Third Quarter.......................................... 8 5/8 7
Fourth Quarter......................................... 11 1/2 7 1/8
</TABLE>
On 29 September 1993, the last full trading day prior to the first public
announcement of the Company's intention to explore strategic alternatives,
including a possible sale of the Company, the last reported sales price for the
Common Shares on the American Stock Exchange was $8.625 per share. On 17 March
1994, the last full trading day prior to the first public announcement that the
Company had entered into a merger agreement with Moorco International, Inc.,
which agreement was terminated by the Company on 13 April 1994, the last
reported sales price for the Common Shares on the American Stock Exchange was
$18.75. On 12 April 1994, the last full trading day prior to the first public
announcement of the Merger, the last reported sales price was $24.625.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON
SHARES. No dividends were paid in 1993 or 1992 or the quarters ending 31 March
1994 or 30 June 1994 and the Company does not currently intend to pay dividends
on the Common Shares.
(viii)
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial information of
the Company and its consolidated subsidiaries for each of the five years ended
31 December 1993 and the quarters ended 31 March 1994 and 31 March 1993. Such
information is based upon and should be read in conjunction with the historical
consolidated financial statements and notes thereto of the Company which are
incorporated by reference in this Proxy Statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
31 MARCH YEAR ENDED 31 DECEMBER
-------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales............................ $ 48,334 $ 53,808 $ 221,644 $ 231,317 $ 236,976 $ 237,955 $ 225,324
Income (loss) from operations........ (1,342) 1,390 4,223 9,117 (14,817) (1,567) 11,680
Interest expense, net................ 709 823 2,608 2,901 3,189 4,170 1,952
Foreign exchange loss (gain)......... -- 34 366 468 289 (1,250) 38
Other income(2)...................... -- -- -- -- -- 2,124 --
Income (loss) before taxes and
accounting change.................. (2,051) 533 1,249 5,748 (18,295) (2,363) 9,690
Income taxes......................... 293 459 143 4,006 4,236 5,775 6,183
Income (loss) before accounting
change............................. (2,344) 74 1,106 1,742 (22,531) (8,138) 3,507
Accounting change (1)................ -- -- -- -- 2,821 -- --
Net income (loss)(2)................. (2,344) 74 1,106 1,742 (25,352) (8,138) 3,507
Depreciation......................... 1,498 1,668 6,302 6,878 7,082 7,350 5,924
Capital expenditures................. 1,113 914 4,517 6,997 6,356 9,155 23,079
END OF PERIOD POSITION
Current assets....................... 89,566 91,203 87,452 86,178 107,329 123,706 125,319
Current liabilities.................. 42,253 46,486 41,712 40,174 63,668 47,931 50,370
Working capital...................... 47,313 44,717 45,740 46,004 43,661 75,775 79,949
Current ratio........................ 2.12 1.96 2.10 2.15 1.69 2.58 2.49
Property, plant and equipment, net... 36,739 39,309 36,638 39,963 42,039 43,958 46,109
Total assets......................... 134,099 137,514 131,993 132,969 153,901 174,967 178,604
Asset turnover rate.................. 1.44 1.57 1.68 1.74 1.54 1.36 1.26
Long-term debt....................... 19,508 17,696 17,266 19,176 12,297 26,897 26,943
Total debt........................... 29,537 27,631 28,840 25,697 30,734 31,961 33,963
Preferred stock...................... -- 710 -- 710 1,425 2,140 3,427
Shareholders' equity................. 36,467 41,814 38,169 41,986 45,359 71,566 75,328
Total capitalization................. 66,004 70,155 67,009 68,393 77,518 105,667 112,718
Debt to shareholders' equity ratio... .81 .66 .76 .61 .68 .45 .45
Debt to total capitalization ratio... .45 .39 .43 .38 .40 .30 .30
PER SHARE DATA(1)(2)
Earnings (loss) before accounting
change............................. (.44) .01 .19 .31 (4.36) (1.61) .62
Earnings (loss) per share............ (.44) .01 .19 .31 (4.90) (1.61) .62
Dividends............................ -- -- -- -- -- 5% Stock 5% Stock
Shareholders' equity................. 6.89 8.01 7.21 8.04 8.69 13.74 14.54
</TABLE>
- - ------------------
(1) In 1991, the Company adopted FASB #106 'Accounting for Postretirement
Benefits other than Pensions.'
(2) In 1991, there was an aftertax charge of $17,704,000 for a major
restructuring; in 1990, there was an aftertax charge of $6,000,000 for
personnel reductions and additional inventory reserves and an aftertax gain
of $2,124,000 on the sale of a facility.
(ix)
<PAGE>
INTRODUCTION
This proxy statement (the 'Proxy Statement') is being furnished to the
shareholders of Fischer & Porter Company, a Pennsylvania corporation (the
'Company'), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at a Special Meeting of Shareholders to be held
on Friday, 5 August 1994 at 10:00 a.m., local time, at the Company's principal
executive offices, 125 East County Line Road, Warminster, Pennsylvania and at
any adjournment or postponement thereof (the 'Special Meeting'). This Proxy
Statement, the attached Notice of Special Meeting and the enclosed form of proxy
are first being mailed to shareholders of the Company entitled to notice of and
to vote at the Special Meeting on or about 8 July 1994.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Reorganization dated as of 13
April 1994 (the 'Reorganization Agreement') among the Company, Elsag Bailey
Process Automation N.V., a Netherlands corporation ('Bailey'), and EBPA
Acquisition, Inc., a Pennsylvania corporation and an indirect wholly-owned
subsidiary of Bailey ('Acquisition'), the related Plan of Merger (the 'Plan of
Merger') and the merger to be effected thereby (the 'Merger'), and all related
transactions, pursuant to which Acquisition will be merged with and into the
Company (the 'Merger Proposal'). The Company will be the surviving corporation
in the Merger (the 'Surviving Corporation'). Upon consummation of the Merger,
the Company will become an indirect wholly-owned subsidiary of Bailey, and each
share of common stock, par value $1.00 per share, of the Company (the 'Common
Shares') that is issued and outstanding at the effective time of the Merger,
other than shares held by shareholders who perfect their statutory dissenters
rights, will be converted into the right to receive an amount, in cash, without
interest, equal to $24.25 per Common Share (the 'Merger Price'). As a result of
the Merger, all shareholders of the Company will cease to have an equity
interest in, or possess any rights as shareholders of, the Company. See 'The
Merger -- General.' Copies of the Reorganization Agreement and Plan of Merger
are included in this Proxy Statement as Annex A. The summaries of the portions
of the Reorganization Agreement and Plan of Merger set forth in this Proxy
Statement do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the text of the Reorganization Agreement and
Plan of Merger.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER PROPOSAL AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER PROPOSAL. CS First Boston Corporation ('CS First Boston') has
delivered its opinion to the Company's Board of Directors to the effect that, as
of 13 April 1994, the consideration to be received by the shareholders of the
Company pursuant to the Merger is fair to the shareholders from a financial
point of view. The full text of CS First Boston's opinion, dated 13 April 1994,
is included in this Proxy Statement as Annex B. Shareholders are urged to read
the opinion in its entirety for the assumptions made, matters considered and
limits of the review undertaken by CS First Boston. CS First Boston's opinion is
directed only to the fairness of the consideration to be received by the
shareholders of the Company and does not constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote such
shareholder's Common Shares.
VOTING AND PROXIES
RECORD DATE; SOLICITATION OF PROXIES
The Board of Directors of the Company has fixed the close of business on 24
May 1994 as the record date (the 'Record Date') for the determination of
shareholders entitled to notice of and to vote at the Special Meeting.
Accordingly, only holders of Common Shares of record on the books of the Company
at the close of business on the Record Date will be entitled to vote at the
Special Meeting. At the close of business on the Record Date, there were
5,295,250 Common Shares issued and outstanding and entitled to vote at the
Special Meeting held by approximately 2,800 holders of record. Holders of Common
Shares are entitled to one vote at the Special Meeting for each Common Share
held of record at the Record Date.
1
<PAGE>
In addition to soliciting proxies by mail, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
personally or by telephone, telegram or other forms of wire or facsimile
communication. The Company has also retained Morrow & Co., Inc. to assist it in
the solicitation of proxies. The fee for such services will be approximately
$5,000 plus out-of-pocket expenses. Any questions or requests for assistance
regarding proxies and related materials may be directed to Morrow & Co., Inc. in
writing at 909 Third Avenue, New York, New York 10012, or by telephone at (800)
662-5200. The Company will bear the cost of the Special Meeting and of
soliciting proxies therefor, including the cost of printing and mailing of this
Proxy Statement and related materials, and the reasonable expenses incurred by
brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
material to the beneficial owners of Common Shares.
VOTE REQUIRED
In general, a majority of the outstanding Common Shares entitled to vote,
represented in person or by proxy, is required for a quorum at the Special
Meeting. However, those shareholders entitled to vote who attend, in person or
by proxy, any adjournment or adjournments of the Special Meeting that have been
previously adjourned for one or more periods aggregating at least 15 days
because of an absence of a quorum, shall constitute a quorum for the purposes of
acting upon the Merger Proposal although they constitute less than a quorum as
fixed by law or in the Articles of Incorporation or Bylaws of the Company for
the originally scheduled date of the Special Meeting. Provided that a quorum is
present at the Special Meeting, the affirmative vote of the majority of the
votes cast by the holders of the outstanding Common Shares as of the Record Date
is required for approval and adoption of the Merger Proposal.
Common Shares which are represented by properly executed proxies, unless
such proxies shall have previously been properly revoked, will be voted in
accordance with the instructions indicated in such proxies. If no contrary
instructions are indicated, such shares will be voted FOR approval and adoption
of the Merger Proposal and in the discretion of the proxy holder as to any other
matter which may properly come before the Special Meeting. Under the rules of
the American Stock Exchange, brokers may not give a proxy to vote without
instructions from beneficial owners when the matter to be voted upon involves a
merger or consolidation. Under the Pennsylvania Business Corporation Law of 1988
(the 'BCL'), if a shareholder (including a nominee or other record owner) either
records the fact of abstention or otherwise withholds authority to vote or fails
to vote in person or by proxy, such action would not be considered a 'vote cast'
and would have no effect in the approval of the Merger Proposal, other than to
reduce the number of affirmative votes needed for such approval. Any other
matter which may properly come before the Special Meeting at which a quorum is
present for such purpose requires the affirmative vote of the majority of the
votes cast on the matter unless a greater vote is required by law or the
Articles of Incorporation or Bylaws of the Company. A shareholder who has given
a proxy may revoke it at any time prior to its exercise at the Special Meeting
by delivering a written notice of revocation of the proxy being revoked, or by
submission of a properly executed proxy bearing a later date than the proxy
being revoked, to the Secretary of the Company at 125 East County Line Road,
Warminster, Pennsylvania 18974, or by voting the Common Shares covered thereby
in person at the Special Meeting.
Shareholders have the right to dissent from the Merger Proposal and,
subject to certain conditions provided under the BCL, to receive payment for the
fair value of their Common Shares. See 'The Merger -- Dissenters Appraisal
Rights' and Annex C hereto.
As of the Record Date, the executive officers and directors of the Company
beneficially owned a total of 644,727 outstanding Common Shares (excluding
1,664,465 Common Shares subject to presently exercisable stock options and
warrants beneficially owned by executive officers and directors of the Company),
constituting approximately 12.18% of the Common Shares entitled to vote at the
Special Meeting. See 'Stock Ownership of Management and Certain Beneficial
Owners.' Because the options and warrants were not exercised as of the Record
Date, the underlying Common Shares cannot be voted at the Special Meeting. See
'The Merger -- Conflicts of Interest.' The executive officers and directors of
the Company have informed the Company that they intend to vote all of the
2
<PAGE>
outstanding Common Shares owned by them in favor of the approval and adoption of
the Merger Proposal, unless the Board of Directors of the Company approves an
Acquisition Transaction (as herein defined) with a third party. See 'The Merger
- - -- Termination; Fees and Expenses; Plans of the Company in Event Merger is Not
Consummated.' The Company does not know whether the holders of any other
significant blocks of Common Shares intend to vote in favor of or against the
approval and adoption of the Merger Proposal.
THE TRANSACTION TO BE CONSIDERED AT THE SPECIAL MEETING INVOLVES A MATTER
OF GREAT IMPORTANCE TO THE SHAREHOLDERS OF THE COMPANY. ACCORDINGLY,
SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THIS PROXY STATEMENT, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE. STOCK CERTIFICATES SHOULD
NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS CONSUMMATED,
SHAREHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR EXCHANGING THEIR COMMON SHARES
FOR CASH.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of the Record Date
with respect to Common Shares beneficially owned by (i) persons who are known to
be beneficial owners of more than 5% of the outstanding Common Shares, (ii) each
director of the Company, (iii) the Chief Executive Officer of the Company, (iv)
the Company's four most highly compensated executive officers other than the
Chief Executive Officer and (v) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF OUTSTANDING COMMON
NAME OF BENEFICIAL OWNER(1) COMMON SHARES (2) SHARES(2)
- - ------------------------------------------------------------------------ ------------------ ---------------------
<S> <C> <C>
Transamerica Corporation
600 Montgomery Street
San Francisco, CA 94111 (3)............................................. 739,952 13.97%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401 (4).............................................. 295,569 5.58%
Gloria T. Chisum........................................................ 353 *
Laurence P. Finnegan, Jr. (5)........................................... 78,752 1.47%
Joseph P. Garay (6)..................................................... 49,056 *
E. Joseph Hochreiter (7)................................................ 241,000 4.38%
Daniel T. Hughes (8).................................................... 66,411 1.24%
William E. Learnard..................................................... 2,000 *
John J. Manion, Jr...................................................... 700 *
Frank J. Ryan........................................................... 2,500 *
Jay H. Tolson
125 East County Line Road
Warminster, PA 18974 (9)................................................ 1,819,921 27.94%
Robert G. Williams...................................................... 3,000 *
All executive officers and directors as a group
(12 persons) (10)..................................................... 2,309,192 33.18%
</TABLE>
- - ------------------
* Less than 1%
3
<PAGE>
<TABLE>
<S> <C>
(1) Except as indicated in the footnotes to this table, the shareholders listed in this table have sole voting
and investment power with respect to the shares owned by them. Certain information as to shareholdings of
such holders has been derived from filings made by them with the Securities and Exchange Commission (the
'Commission').
(2) Includes Common Shares subject to outstanding stock options or warrants which were exercisable as of the
Record Date or within 60 days of such date. Because these options and warrants were not exercised as of the
Record Date, the underlying Common Shares cannot be voted at the Special Meeting. All of these options and
warrants which are not exercised as of the Effective Time will be canceled immediately prior to the Merger.
See 'The Merger -- Conflicts of Interest.' The percent of the outstanding stock is calculated as required by
Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the 'Exchange Act'), and does not
necessarily indicate the percent of the outstanding Common Shares which can be voted at the Special Meeting.
(3) Transamerica Occidental Life Insurance Company ('Occidental') owns 739,952 Common Shares for its own account.
Transamerica Insurance Corporation of California ('TICC'), the parent of Occidental, and Transamerica
Corporation, the parent of TICC, are deemed to be the beneficial owners of the 739,952 Common Shares owned by
Occidental. In addition, Transamerica Investment Services, Inc. ('TIS') is deemed to be the beneficial owner
of the 739,952 Common Shares owned by Occidental pursuant to separate arrangements whereby TIS acts as
investment adviser to certain individuals and entities, including Occidental. Each of the individuals and
entities for which TIS acts as investment advisor has the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of, the securities purchased or held pursuant to such
arrangements. Transamerica Corporation files one Schedule 13G to report the beneficial ownership by all such
entities of the Common Shares.
(4) Dimensional Fund Advisors Inc. has sole voting power with respect to 184,711 Common Shares. Persons who are
officers of Dimensional Fund Advisors Inc. also serve as officers of DFA Investment Dimensions Group Inc.
(the 'Fund'), and The Investment Trust Company (the 'Trust'), each an open-end management investment company
registered under the Investment Company Act of 1940. In their capacities as officers of the Fund and the
Trust, these persons vote 106,658 additional Common Shares which are owned by the Fund and 4,200 Common
Shares which are owned by the Trust.
(5) Includes stock options to purchase 78,747 Common Shares.
(6) Includes stock options to purchase 49,054 Common Shares.
(7) Includes 2,200 Common Shares held by Mr. Hochreiter's son; 4,400 Common Shares held by Mr. Hochreiter as
custodian for his sons; and 2,200 Common Shares held by Mr. Hochreiter as custodian for his daughter. Also
includes stock options to purchase 150,000 Common Shares held by Mr. Hochreiter; warrants to purchase 42,400
Common Shares held by Mr. Hochreiter; warrants to purchase 4,400 Common Shares held by Mr. Hochreiter's son;
warrants to purchase 8,800 Common Shares held by Mr. Hochreiter as custodian for his sons; and warrants to
purchase 4,400 Common Shares held by Mr. Hochreiter as custodian for his daughter.
(8) Includes stock options to purchase 63,411 Common Shares and 1,000 Common Shares held by the wife of Mr.
Hughes as custodian for their daughter.
(9) Includes 11,052 Common Shares held in an IRA account for the benefit of Mr. Tolson; nine Common Shares held
by Mr. Tolson as custodian for his son; and 220,000 Common Shares held by the Jay H. Tolson Charitable
Remainder Unitrust. Also includes stock options to purchase 150,000 Common Shares and warrants to purchase
1,068,994 Common Shares.
(10) Includes stock options to purchase 535,471 Common Shares and warrants to purchase 1,128,994 Common Shares.
</TABLE>
4
<PAGE>
THE MERGER
GENERAL
The following information with respect to the Merger is qualified in its
entirety by reference to the complete text of the Reorganization Agreement and
the Plan of Merger, copies of which are included in this Proxy Statement as
Annex A. The Reorganization Agreement sets forth the terms and conditions upon
which the Merger is to be effected. If the Merger Proposal is approved and
adopted by the majority of the votes cast by the holders of the outstanding
Common Shares at the Special Meeting at which a quorum is present and all other
conditions to the obligations of the parties thereto are satisfied or waived,
the Merger will be consummated. At the Effective Time, (as herein defined),
Acquisition will merge with and into the Company. The Company will be the
Surviving Corporation in the Merger and will thereby become an indirect
wholly-owned subsidiary of Bailey. Pursuant to the Merger, each Common Share
that is issued and outstanding at the Effective Time, other than Common Shares
held by shareholders who perfect their statutory dissenters rights, will be
canceled and extinguished and converted automatically into the right to receive
the Merger Price. Upon consummation of the Merger, holders of Common Shares will
possess no further interest in, or rights as shareholders of, the Company.
BACKGROUND OF THE MERGER
In early 1991, several of the independent, non-management members of the
Board of Directors urged Mr. Tolson, the Chairman and Chief Executive Officer of
the Company, to consider a sale of the Company. At that time, Mr. Tolson owned
all of the Company's then outstanding Class B Capital Stock (the 'Class B
Stock') and had voting control of the Company. Each share of Class B Stock
carried ten votes per share and was convertible at the option of the holder into
one Common Share. The suggestion to sell the Company was motivated primarily by
two factors. First, through a series of unrelated acquisitions, a substantial
number of major competitors of the Company had become constituents of larger
industrial groups, with the relative financial, marketing and research and
development advantages associated with such status. This factor suggested that
the long-term viability of the Company might require that it too become a member
of a strong and well-financed industrial group. In addition, those Board members
believed that a sale of the Company would afford the existing public
shareholders the opportunity to realize a profit on their investment in the
Company.
Instead of pursuing a sale of the Company at a time when the Company had
substantial excess capacity, the Board of Directors believed that the Company
was more likely to maximize shareholder value by first initiating and completing
a program of down-sizing, cost control and cash management. At the same time, a
decision was made to hire a chief operating officer of the Company to assist in
the implementation of this program. Mr. Hochreiter became President and Chief
Operating Officer of the Company and purchased Class B Stock from Mr. Tolson at
that time. Any strategic decision with respect to the future of the Company was
deferred until the completion of the program.
In June 1993, Messrs. Tolson and Hochreiter made a proposal to the
Company's Board of Directors regarding the sale of their Class B Stock. Messrs.
Tolson and Hochreiter had voting control of the Company through their beneficial
ownership of shares of the Company's then outstanding Class B Stock. Mr. Tolson
owned Class B Stock and Common Shares of the Company having in the aggregate
approximately 52% of the voting power of the Company. Mr. Hochreiter owned Class
B Stock and Common Shares having in the aggregate approximately three percent of
the voting power. At that time, the program initiated in mid-1991 was
essentially completed and the Board of Directors was in a position to make a
strategic decision with respect to the future of the Company. After careful
consideration, the Board determined that the Company should pursue the
possibility of being marketed to a potential strategic acquiror. The principal
factors motivating the Company's decision to consider a possible sale to a
strategic acquiror were the same two factors motivating several members of the
Board to suggest the sale in 1991. In light of Messrs. Tolson and Hochreiter's
expression of interest in selling their shares of Class B Stock, the Board of
Directors determined that the best way to maximize value for all shareholders in
the sale of the Company might be first to negotiate with Messrs. Tolson
5
<PAGE>
and Hochreiter with the objective of eliminating their voting control. On 27
July 1993, a special committee of the Board of Directors (the 'Special
Committee'), consisting entirely of independent, non-management directors who
did not own any shares of Class B Stock, was formed to consider whether it would
be in the best interest of the Company and its shareholders to seek the
conversion of the shares of Class B Stock into Common Shares. The Special
Committee consisted of Gloria T. Chisum, William E. Learnard, John J. Manion,
Jr., Frank J. Ryan and Robert G. Williams.
The Special Committee believed that the absence of a predetermined
allocation of any potential purchase price for the Company between the Common
Shares and the Class B Stock, and the fact that the existence of the Class B
Stock concentrated voting power in Mr. Tolson, could delay a transaction
involving the sale of the Company and could be a significant impediment to
maximizing value for all shareholders. Accordingly, the Special Committee
determined that the best way to maximize value for all shareholders in the sale
of the Company was first to negotiate with Messrs. Tolson and Hochreiter with
the objective of eliminating their voting control. Messrs. Tolson and Hochreiter
were willing to relinquish their voting control if the Board of Directors would
agree to use its best efforts to sell the Company and if the Company provided
certain inducements to the holders of the Class B Stock to convert their Class B
Stock to Common Shares.
As a result of the negotiations between the Special Committee and Messrs.
Tolson and Hochreiter on 30 September 1993, Mr. Hochreiter and members of his
family (collectively, the 'Hochreiters'), Mr. Tolson and the Company entered
into a Conversion Agreement (the 'Conversion Agreement'), which, among other
things, provided for the execution of Warrant Agreements between the Company and
Mr. Tolson and the Hochreiters (the 'Warrant Agreements') pursuant to which Mr.
Tolson and the Hochreiters received warrants to acquire two Common Shares for
each share of their Class B Stock converted (the 'Warrant Shares'). The Company
was represented in these negotiations by the Special Committee which negotiated
at arms length with Messrs. Tolson and Hochreiter the terms of the Conversion
Agreement and the Warrant Agreements. The Special Committee was advised in these
negotiations by its own special counsel and its own financial advisor, Bear
Stearns & Co. Inc. ('Bear Stearns'), which delivered an opinion that the
transactions contemplated by the Conversion Agreement and the Warrant Agreements
were fair, from a financial point of view, to the public holders of Common
Shares. Bear Stearns is an internationally recognized investment banking firm
engaged in, among other things, the evaluation of businesses and their
securities. Bear Stearns was selected as financial advisor to the Special
Committee based on its expertise in these areas.
The following is a summary of all material financial analyses performed by
Bear Stearns in connection with its fairness opinion.
In arriving at its opinion, Bear Stearns (i) reviewed the Conversion
Agreement and the Warrant Agreements, (ii) reviewed various public filings made
by the Company, (iii) reviewed the historical stock prices and trading volume of
the Company's stock from 1991 to the date of the opinion, (iv) considered the
market valuation of warrants, (v) considered the dilutive effect of the warrants
under various hypotheses, (vi) reviewed certain other transactions with respect
to high vote shares, and (vii) conducted such other studies, analyses, inquiries
and investigations as it deemed appropriate. In the course of its review, Bear
Stearns relied upon and assumed, without independent investigation, the accuracy
and completeness of information reviewed by it. Bear Stearns did not perform or
obtain any appraisals of the assets of the Company, nor did it perform any
analysis or valuation of the stock of the Company or of the Company as a whole.
Bear Stearns discussed with the Special Committee three transactions in
which cash premiums of 140%, 275% and 338% were paid for voting or high-vote
shares, and a transaction in which high-vote shares were effectively exchanged
for more than eight shares of low-vote shares. Bear Stearns informed the Special
Committee that it would not opine favorably on a transaction involving premiums
in that range with respect to the Class B shares. Bear Stearns also noted to the
Special Committee that in one instance a premium of 20% was paid in stock for
high-vote stock, and in numerous instances, no premium was paid for high-vote
stock. Bear Stearns advised the Special Committee that the value of two
Warrants, exercisable at the then-market price, was approximately 28% of such
market price,
6
<PAGE>
calculated by use of the Black-Scholes Model, a widely accepted
method of valuing options and warrants. Bear Stearns advised the Special
Committee of its subjective opinion, based on its experience and the observation
of premiums paid for control stock over many years, that a premium of 28% was a
reasonable premium for converting Class B Shares into Common Shares.
Bear Stearns pointed out to the Special Committee that, although the
premium to the Class B shareholders at issuance was about 28%, based on the
Black-Scholes valuation of the Warrants, the premium ultimately received would
depend upon the value of the common shares at the time of exercise of the
Warrants, and that, if the Warrants were not exercised prior to their expiration
(18 months after issuance, subject to a six month extension under certain
limited circumstances), the Class B shareholders would have received no premium.
Bear Stearns also advised the Special Committee as to the effective aggregate
premium which would be received by the Class B shareholders at various
hypothetical price levels, as a percentage of the price of the Common Shares and
as a percentage of the aggregate value of the Company, and of the gain which
Common shareholders would obtain at such hypothetical price levels, as a
percentage of the then-current market price of $8.625 for the Common shares.
For example, Bear Stearns advised the Special Committee that, at
hypothetical price levels of $12, $16 and $20, the Common Shares would have
appreciated 39.1%, 85.5% and 131.9%, respectively over the then-current market
price; the Class B shareholders would receive premiums of 117.4%, 256.5% and
395.7%, respectively; and the aggregate premium to be received by the Class B
shareholders as a percentage of the aggregate value of the Company would be
5.6%, 8.7% and 10.3%, respectively.
The opinion letter issued by Bear Stearns dated 30 September 1993 is
attached as Annex D. Bear Sterns was not engaged to determine the value of the
Company or its stock and performed no such valuation.
The Conversion Agreement provided for the conversion of all issued and
outstanding shares of Class B Stock into an equal number of Common Shares (the
'Converted Shares') and other related matters, including the following: (a) as
an inducement and in consideration for their agreement to effect the conversion,
the Company entered into the Warrant Agreements pursuant to which Mr. Tolson and
the Hochreiters received warrants to acquire the Warrant Shares; (b) the Company
agreed to continue to employ Mr. Tolson as Chief Executive Officer; (c) the
Board of Directors of the Company agreed to use its best efforts to cause Mr.
Tolson and Mr. Hochreiter to remain as directors of the Company; (d) the Company
and Mr. Tolson agreed to certain modifications to the Change in Control
Agreement with Mr. Tolson dated 5 August 1991, as previously amended on 1
February 1993, and the Company agreed to similar modifications to a similar
agreement with Mr. Hochreiter; (e) the Board of Directors of the Company agreed
to use its best efforts to sell the Company; and (f) Mr. Tolson and the
Hochreiters agreed not to sell the Converted Shares or the Warrant Shares,
except in certain agreed upon transactions. In addition, in the Conversion
Agreement Mr. Tolson and the Hochreiters agreed to vote the Warrant Shares (in
the event the warrants were exercised and converted into Common Shares)
proportionally to the votes cast by all other holders of Common Shares, except
that (i) Mr. Tolson may vote his Warrant Shares to the extent necessary to
enable him to cast, together with all other votes which he is entitled to cast,
up to 11% of the total number of votes then entitled to be cast by all
shareholders, (ii) Mr. Tolson and the Hochreiters may vote their Warrant Shares
for the election of Mr. Tolson and Mr. Hochreiter as directors of the Company,
and (iii) Mr. Tolson and the Hochreiters may vote their Warrant Shares to the
extent necessary to enable them to cast, together with all other votes which
they are entitled to cast, up to the largest number of votes then entitled to be
cast by any other unaffiliated shareholder or group of shareholders who have
filed a Form 13D or 13G under the Exchange Act, plus 5% of the total number of
votes then entitled to be cast by all shareholders.
The warrants are exercisable at $8.625 a share (the closing price of the
Common Shares on the American Stock Exchange on the day before the date of
issuance) and expire on 31 March 1995 (subject to extension in certain
circumstances). The Warrant Agreements also (a) restrict Mr. Tolson's
7
<PAGE>
and the Hochreiters' rights to assign or transfer their warrants; (b) provide
for certain anti-dilution and other adjustments; and (c) grant Mr. Tolson and
the Hochreiters certain demand and piggy-back registration rights.
As a result of the foregoing transactions, Mr. Tolson's voting power was
reduced from approximately 52% to approximately 28% (assuming the exercise of
all of his options and warrants), and was further subject to the voting
restrictions described above. The warrants issued to Mr. Tolson and the
Hochreiters pursuant to the Warrant Agreement will be canceled immediately prior
to the Merger. See 'The Merger -- Conflicts of Interest' and 'Additional
Information -- Legal Proceedings.'
As described above, pursuant to the terms of the Conversion Agreement, the
Board of Directors of the Company agreed to use its best efforts to sell the
Company. In connection therewith, on 30 September 1993 the Board of Directors of
the Company established a special committee of the Company (the 'Sale Policy
Committee') consisting of Mr. Tolson, as Chairman, Messrs. Hochreiter, Manion,
Ryan and Williams and Mr. Walter Witoshkin, a nondirector and nonemployee
selected by Mr. Tolson. The Sale Policy Committee had the authority to oversee
and monitor the sale process. The Sale Policy Committee did not have the
authority to authorize the terms of any specific transaction binding upon the
Company, such authority being reserved for the full Board of Directors. Since
the Sale Policy Committee did not have final decision making authority, the
Board of Directors believed that any possible conflict of interest raised by the
presence of Messrs. Tolson and Hochreiter on the Sale Policy Committee would be
outweighed by their knowledge of the Company's operations and assets and by the
fact that the full Board would vote on any specific transaction. On 30 September
1993, the Sale Policy Committee recommended, and the Board of Directors
authorized, the retention of CS First Boston to act as its exclusive financial
advisor in connection with a possible sale of the Company.
CS First Boston contacted or was contacted by approximately 91 parties to
determine whether they would be interested in acquiring the Company. Of these 91
parties, 48 requested information about the Company and entered into
confidentiality agreements in order to receive and review confidential
information about the Company. In the confidentiality agreements it was agreed
that the Company and CS First Boston would be free to conduct the Company's sale
as they, in their sole discretion determined. In addition, the confidentiality
agreements did not include any provision entitling any bidder to be a third
party beneficiary of any other bidder's confidentiality agreement. In soliciting
preliminary indications of interest, CS First Boston did not specify any
particular form of transaction or form of consideration that prospective bidders
were required to offer. After signing such a confidentiality agreement and in
advance of receiving a request to submit an acquisition proposal, Moorco
International Inc. ('Moorco') orally proposed that the Company accept a
preemptive bid from Moorco of as much as $20 per share and implied that it would
not participate further in the auction process unless such proposal was
accepted. The Board of Directors of the Company considered and rejected Moorco's
proposal. By mid-December 1993, nine parties, including Moorco and Bailey, had
submitted preliminary proposals indicating a preliminary range of possible
purchase prices or indicating a serious interest in being included in the final
bidding process. At a meeting of the Company's Board of Directors held on 16
December 1993, representatives of CS First Boston reviewed these preliminary
indications of interest with the Board and presented certain financial analyses
of the Company described below under 'Reasons for the Merger; Recommendation of
the Board of Directors; Opinion of Financial Advisor.' Based on the Board's
review of the preliminary indications of interest, seven parties, including
Moorco and Bailey, were invited to conduct a due diligence review of the Company
in preparation for the submission of final acquisition proposals. On 2 March
1994, CS First Boston delivered bidding instructions to six parties, including
Moorco and Bailey, with detailed instructions setting forth the manner in which
bidders should submit proposals for the Company. Such instructions reserved to
the Company and CS First Boston the right to modify the procedures governing the
auction at any time. Also according to the instructions, the Company's
interpretation of the rules and procedures are final and binding on all parties
submitting proposals. In addition to the final bid letter, such parties received
a draft Agreement and Plan of Reorganization,
8
<PAGE>
which bidders were asked to mark up and return with their final bids. The draft
Agreement and Plan of Reorganization contemplated a cash merger which the
Company believed would afford the shareholders of the Company liquidity and
the opportunity to realize a profit on their investment in the Company. All of
the proposals submitted by the bidders were structured as cash mergers.
On 14 March 1994, six bidders, including Moorco and Bailey, submitted
definitive written proposals. On 18 March 1994, the Sale Policy Committee and
the Board of Directors convened to review the final written proposals submitted
by the bidders. CS First Boston reviewed the terms and conditions of each of the
bids with the Sale Policy Committee and the Board of Directors. Moorco submitted
a proposal to acquire all of the Common Shares at a cash price of $23.25 per
Common Share, which was subject to a financing condition but was supported by an
executed bank commitment letter pursuant to which such bank would provide the
necessary financing (the 'Moorco Proposal'). Bailey submitted a proposal to
acquire all of the Common Shares at a cash price of $23.00 per Common Share,
which was not subject to a financing condition and was supported by an executed
commitment letter from Chemical Bank pursuant to which Chemical Bank would,
subject to certain conditions, provide necessary financing. Following
presentations by the Company's independent legal and financial advisors, the
Sale Policy Committee unanimously recommended approval of the Moorco Proposal
and the Board of Directors unanimously approved the Moorco Proposal. In
determining to accept the Moorco Proposal over the other competing bids, the
Sale Policy Committee and the Board of Directors gave primary consideration to
the fact that the Moorco Proposal offered the highest price to the shareholders
of the Company with the fewest closing conditions that might delay or impede the
closing of the transaction as well as the smallest number of requested changes
in the draft Agreement and Plan of Reorganization. The Company and Moorco
executed an Agreement and Plan of Reorganization on 18 March 1994 (the 'Moorco
Agreement').
Following the public announcement of the Moorco Agreement, Bailey and its
advisors contacted the Company to request a copy of the Moorco Agreement. The
Company and its advisors responded by informing Bailey that the Company would
provide a courtesy copy of the Moorco Agreement to Bailey only after it became a
public document. These were the only contacts between Bailey and its advisors
and the Company and its advisors between 18 March 1994 and 8 April 1994.
On Friday, 8 April 1994, the Company received an unsolicited letter from
Bailey addressed to the Board of Directors of the Company (the 'Letter') in
which Bailey expressed its desire to enter into a merger with the Company at a
price of $24.25 per Common Share. Promptly thereafter, representatives of the
Company advised representatives of Moorco of the receipt of the Letter, as
required by the terms of the Moorco Agreement, and contacted Bailey's financial
advisor to seek clarification of certain aspects of the Letter. As permitted
under the terms of the Moorco Agreement, discussions between the Company and its
legal and financial advisors and Bailey and its legal and financial advisors
continued throughout the weekend and into the early morning hours of Wednesday,
13 April 1994. On Monday morning, 11 April 1994, the Company issued a press
release announcing that it had received the Letter. At a series of informational
meetings held on Monday, 11 April 1994, and Tuesday, 12 April 1994, members of
the Sale Policy Committee and the Board of Directors of the Company were kept
apprised of the status of the ongoing discussions with Bailey. Early Tuesday
evening, 12 April 1994, the Sale Policy Committee and the Board of Directors of
the Company formally convened to consider the Reorganization Agreement proposed
by Bailey (the 'Revised Bailey Proposal'). At the outset of the meeting, a
representative of CS First Boston advised the Sale Policy Committee and the
Board of Directors of the Company that he believed that the Revised Bailey
Proposal was more favorable to the Company and its shareholders from a financial
point of view than the terms of the Moorco Agreement. Based on such advice
(which was subsequently confirmed in writing), the Board of Directors was
permitted, under the terms of the Moorco Agreement, to terminate the Moorco
Agreement and accept the Revised Bailey Proposal if it determined to do so. The
meeting adjourned several times as the discussions with Bailey continued. By
late in the evening, Bailey had, without objection from the Company, executed a
copy of the Reorganization Agreement and delivered it to the Company. After
receiving the executed Reorganization Agreement from Bailey, a representative of
the Company contacted representatives of Moorco to inform them that the Board of
Directors was prepared to act on
9
<PAGE>
the Revised Bailey Proposal and to inquire whether Moorco was prepared to
increase the price it was proposing to pay for the Common Shares. The
Moorco representatives stated that Moorco was not prepared to increase its
price. After the Sale Policy Committee and the Board of Director Company's
legal and financial advisors reviewed the terms and conditions of the
Reorganization Agreement with the Sale Policy Committee and the Board of
Directors. CS First Boston then advised the Sale Policy Committee and the
Board of Directors that, in its opinion, the consideration to be received by the
shareholders of the Company pursuant to the terms of the Revised Bailey Proposal
was fair to the shareholders from a financial point of view and that it was
prepared to deliver its written opinion to that effect. Following the
presentations by the Company's legal and financial advisors, the Sale Policy
Committee unanimously recommended, and the Board of Directors unanimously
approved, the withdrawal of the Board's prior approval of the Moorco Proposal,
the termination of the Moorco Agreement and the execution of the Reorganization
Agreement with Bailey. In the early morning hours on Wednesday, 13 April 1994,
the Company terminated the Moorco Agreement and executed the Reorganization
Agreement with Bailey. Later that morning, the Company and Bailey issued a joint
press release announcing the execution of the Reorganization Agreement. In
connection with the termination of the Moorco Agreement on or about 25 April
1994, the Company tendered to Moorco a termination fee payment of approximately
$5.4 million, which Moorco subsequently returned to the Company. The Company and
Moorco are currently in dispute as to the calculation, amount and continuing
obligation to pay such termination fee. Moorco claims that the proper amount of
the termination fee is approximately $7.3 million and the Company believes that
the proper amount is approximately $4.5 million. On 26 April 1994 the Company
and Bailey commenced litigation against Moorco in the Court of Common Pleas of
Bucks County, Pennsylvania, seeking a declaratory judgment with respect thereto,
and for a declaration that, having validly terminated the Moorco Agreement,
neither the Company nor Bailey has any further liability to Moorco pursuant to
the Moorco Agreement or otherwise. On or about April 29, 1994, Moorco filed suit
against the Company in the United States District Court for the Southern
District of Texas seeking, among other things, damages equal to the amount of
the termination fee it claims is due. See 'Additional Information -- Legal
Proceedings.'
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS;
OPINION OF FINANCIAL ADVISOR
Reasons for the Merger; Recommendation of the Board of Directors
At its 13 April 1994 meeting, the Company's Board of Directors determined
that the Merger is fair to, and in the best interests of, the Company and its
shareholders. Therefore, the Board of Directors approved the Merger Proposal.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER PROPOSAL. Certain
members of the Board of Directors have certain interests which may present them
with possible conflicts of interest in connection with the Merger. See
'Conflicts of Interest.'
The determination of the Board of Directors to approve the Merger Proposal
was based upon consideration of a number of factors. The following list includes
all material factors considered by the Board of Directors:
(1) The fact that CS First Boston and the Company's management
conducted an active auction of the Company resulting in six bidders
submitting definitive written proposals;
(2) The fact that the $24.25 Merger Price generally compared favorably
with the hypothetical reference ranges of value per Common Share discussed
during a presentation by representatives of CS First Boston at the meeting
of the Board of Directors held on 16 December 1993 which discussed the
financial analyses of the Company performed by CS First Boston and
described under 'Opinion of Financial Advisor' below;
(3) The fact that the $24.25 Merger Price represents a substantial
premium over the closing price of $8.625 per share on 30 September 1993,
the last full trading day prior to the first public
10
<PAGE>
announcement of the Company's intention to explore strategic alternatives,
including a possible sale of the Company;
(4) The fact that the $24.25 Merger Price proposed to be paid by
Bailey was higher than the price proposed to be paid by Moorco under the
Moorco Agreement;
(5) Moorco's unwillingness to increase the price it proposed to pay
for the Common Shares;
(6) The fact that the Revised Bailey Proposal contained a limited
number of conditions that might delay or impede the closing of the
transaction;
(7) The fact that the Revised Bailey Proposal was supported by an
executed commitment letter from Chemical Bank pursuant to which Chemical
Bank would provide necessary financing, and unlike the Moorco Agreement,
the Reorganization Agreement is not subject to a financing condition;
(8) Bailey's willingness, in response to the Company's request, to
loan the Company $5.3 million to assist the Company in making the
termination payment payable to Moorco as a result of the termination of the
Moorco Agreement (see 'Conditions to Consummation of the Merger;
Representations and Warranties; Certain Covenants -- Bailey Loan to the
Company' below);
(9) The fact that the Reorganization Agreement permits the Board,
under certain circumstances as provided in the Reorganization Agreement, to
negotiate with third parties and to accept more favorable proposals, if
any, that include an all cash purchase price in excess of the $24.25 Merger
Price; and
(10) The opinion of CS First Boston, which was delivered orally to the
Board at its 13 April 1994 meeting and subsequently confirmed in writing,
as to the fairness, from a financial point of view, of the consideration to
be received by the shareholders of the Company pursuant to the Merger. See
'Opinion of Financial Advisor' below.
The Board of Directors recognizes that the Merger will deprive shareholders
of the opportunity to continue their equity interest in any future growth of the
Company as an independent entity. See 'Certain Other Effects of the Merger.'
However, the Board of Directors placed special consideration on the fact that
(i) the Merger Price represents a substantial premium over the price at which
the Common Shares had been trading prior to the first public announcement of the
Company's intention to explore strategic alternatives, including a possible sale
of the Company, and (ii) the prospect of generating a return for shareholders
greater than the Merger Price has been decreasing in light of recent operating
results and competitive pressures in the industry. See 'Summary -- Selected
Financial Data.'
Opinion of Financial Advisor
At the meeting of the Company's Board of Directors held on 12-13 April
1994, CS First Boston delivered its oral opinion (which it subsequently
confirmed in writing) to the effect that, as of 13 April 1994, and based upon
the assumptions made, matters considered and limits of the review undertaken, as
set forth in such opinion, the consideration to be received by the shareholders
of the Company pursuant to the Merger is fair to the shareholders from a
financial point of view.
THE FULL TEXT OF CS FIRST BOSTON'S OPINION, DATED 13 APRIL 1994, IS
INCLUDED AS ANNEX B TO THIS PROXY STATEMENT. SHAREHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS
OF THE REVIEW UNDERTAKEN BY CS FIRST BOSTON. CS FIRST BOSTON'S OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE
SHAREHOLDERS OF THE COMPANY AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF THE COMPANY AS TO HOW SUCH SHAREHOLDER SHOULD VOTE SUCH
SHAREHOLDER'S COMMON SHARES. THE SUMMARY OF THE OPINION OF CS FIRST BOSTON SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
11
<PAGE>
In arriving at its opinion, CS First Boston (i) reviewed the Reorganization
Agreement, (ii) reviewed certain publicly available business and financial
information relating to the Company, (iii) reviewed certain other information,
including financial forecasts, provided to CS First Boston by the Company, and
(iv) met with the management of the Company to discuss the business and
prospects of the Company. CS First Boston also considered certain financial and
stock market data of the Company, compared that data with similar data for other
publicly-held companies in businesses similar to those of the Company and
considered the financial terms of certain other business combinations that have
recently been effected. CS First Boston also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which it deemed relevant.
In connection with its review, CS First Boston did not independently verify
any of the foregoing information and relied on all such information being
complete and accurate in all material respects. With respect to the financial
forecasts provided to CS First Boston by the Company, CS First Boston assumed
that such forecasts were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company. In addition, CS First Boston
did not make an independent evaluation or appraisal of the assets of the
Company, nor was it furnished with any such appraisals.
In arriving at its opinion and making its presentations to the Board of
Directors of the Company on 16 December 1993, 18 March 1994 and 12-13 April
1994, CS First Boston performed a variety of financial analyses, including those
summarized below. Arriving at a fairness opinion is a complex process that
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not necessarily susceptible to
partial analysis or summary description. CS First Boston believes that its
analyses must be considered as a whole and that selecting portions of its
analyses or portions of the factors considered by it, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying its opinion. In performing its analyses, CS First Boston made
numerous assumptions with respect to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of the Company. Any estimates incorporated in the analyses
performed by CS First Boston are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses and
securities neither purport to be appraisals nor necessarily reflect the prices
at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. No
public company utilized as a comparison is identical to the Company, and none of
the acquisition transactions utilized as a comparison is identical to the
Merger. Accordingly, an analysis of publicly traded comparable companies and
comparable acquisition transactions is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the comparable companies and other factors that
could affect the public trading value of the comparable companies or company to
which they are being compared.
The following is a summary of all of the material financial analyses
performed by CS First Boston in connection with its fairness opinion:
Discounted Cash Flow Analysis. CS First Boston calculated the
estimated unlevered after-tax cash flows that the Company could be expected
to generate over the ten-year period ending 31 December 2003, using two
different sets of projections of the Company's future financial
performance. The first set of projections (the 'Management Case') was based
on projections prepared and provided by the Company's management for the
years 1993 through 1997 and extrapolated by CS First Boston for the years
1998 through 2003. The second set of projections (the 'Moderate Case') was
prepared by CS First Boston based on the Management Case but using somewhat
lower growth and margin assumptions that CS First Boston believed were more
consistent with the Company's historical performance. Using each set of
projections, CS First Boston then calculated estimated terminal values for
the Company at the end of the ten-year period by applying multiples ranging
from 4.5x to 6.0x (which CS First Boston believed to be appropriate for the
Company's business) to each of the projections' terminal year operating
cash
12
<PAGE>
flow. For each set of projections, the unlevered cash flows for the
projected ten-year period and the range of terminal values were then
discounted to present value using discount rates ranging from 12% to 15%
(chosen to reflect different assumptions regarding the required rates of
returns of holders or prospective buyers of the Common Shares) to imply
hypothetical enterprise values for the Company. This discounted cash flow
analysis indicated a hypothetical reference range of between $29.81 and
$33.31 per Common Share using the Management Case and of between $13.72 and
$15.81 per Common Share using the Moderate Case.
Comparable Companies Analysis. CS First Boston reviewed certain
publicly available historical and estimated 1993 and 1994 financial results
(reflecting a composite of research analysts' estimates) of certain
companies considered by CS First Boston to be reasonably comparable to the
Company, including EG&G, Inc., Emerson Electric Co., General Signal Corp.,
Honeywell Inc., IMO Industries Inc., Instron Corp., Johnson Controls Inc.,
Measurex Corp., MTS Systems Corp. and Thermo Instrument Systems Inc. CS
First Boston also looked at the current market value of the Company as a
multiple of various measures of the Company's latest 12-month and projected
1994 financial performance (including sales, operating income, operating
cash flow, net income and book value) and compared such multiples with the
corresponding multiples for each of the comparable companies. CS First
Boston then applied the comparable companies' multiples to the Company's
latest 12-month and projected 1994 financial results to imply hypothetical
enterprise values for the Company. This comparable companies' analysis
indicated a hypothetical reference range of between $10.21 and $15.81 per
Common Share using the Management Case and of between $8.82 and $14.41 per
Common Share using the Moderate Case.
Comparable Acquisitions Analysis. CS First Boston reviewed certain
recent transactions involving the acquisition of all or part of companies
considered by CS First Boston to be reasonably comparable to the Company,
including Eaton Corporation's 1993 acquisition of the distribution and
control operations of Westinghouse Electric Corp., Emerson Electric Co.'s
1992 acquisition of Fisher Controls, Schneider SA's 1991 acquisition of
Square D Co. and Siebe plc's 1990 acquisition of Foxboro Company. CS First
Boston then calculated certain multiples (including sales, operating cash
flow, operating income, net income and book value) of the prices paid in
such acquisitions and applied such multiples to the Company's latest
12-month and projected 1994 financial results to imply hypothetical
enterprise values for the Company. This comparable acquisitions analysis
indicated a hypothetical reference range of between $18.61 and $23.51 per
Common Share using both the Management Case and the Moderate Case.
CS First Boston believes that the foregoing financial analyses support its
opinion as to the fairness of the consideration to be received by the
shareholders of the Company pursuant to the Merger, notwithstanding the fact
that the discounted cash flow analysis using the Management Case (which, as
noted above, utilized growth and margin assumptions that CS First Boston
believed were not supported by the Company's historical performance) indicated a
hypothetical reference range of values above the $24.25 Merger Price. In
arriving at its opinion, CS First Boston also considered the fact that it and
the Company's management had conducted an active auction of the Company and the
$24.25 Merger Price proposed to be paid by Bailey was higher than the price any
other bidder was prepared to pay, as well as the fact that the $24.25 Merger
Price represents a substantial premium over the prices at which the Common
Shares had traded prior to the first public announcement of the Company's
intention to explore strategic alternatives and over the last ten years.
CS First Boston is an internationally recognized investment banking firm
engaged in the evaluation of businesses and their securities in connection with
mergers and acquisitions and for other purposes. CS First Boston was selected as
financial advisor to the Company based on such expertise.
In the ordinary course of its business, CS First Boston may trade the debt
and equity securities of the Company for CS First Boston's own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Pursuant to an engagement letter dated 30 September 1993, the Company has
agreed to pay CS First Boston an advisory fee of $50,000 and a transaction fee
equal to 1.5% of the aggregate
13
<PAGE>
consideration to be received by the shareholders of the Company in the Merger
upon consummation of the Merger (against which the advisory fee will be
credited). For purposes of calculating the fee payable to CS First Boston, the
aggregate consideration to be received by the shareholders of the Company in the
Merger shall also be deemed to include all debt remaining on the balance sheet
of the Company at the time the Merger is consummated. The Company has also
agreed to reimburse CS First Boston for its reasonable out-of-pocket expenses,
including the fees and disbursements of its counsel, and to indemnify CS First
Boston and certain related entities and persons against certain liabilities in
connection with its engagement, including certain liabilities under the Federal
securities laws.
CONFLICTS OF INTEREST
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders should be aware that members of the Company's
management and Board of Directors have certain interests which may present them
with possible conflicts of interest in connection with the Merger.
Employment Agreement. The Company has entered into an employment agreement
with Mr. Hochreiter, pursuant to which he is entitled to receive a minimum
annual salary of $289,700; to be included in various Company benefit plans made
available to other executive officers, including life, health or disability
insurance plans, supplemental income and supplemental retirement income plans,
and pension plans; and to receive severance compensation equal to 1.5 times his
annual base salary in effect at the time of termination in the event of
termination by the Company without cause, as defined, or termination by him
because of a breach by the Company of any of the terms of the employment
agreement. The agreement is terminable by either party upon thirty days notice,
except that it terminates earlier in the event of Mr. Hochreiter's death or at
the end of six months in the event of his continuous inability during that
period to perform his duties due to illness or other incapacity.
Change in Control Agreements. The Company has agreements (the 'Change in
Control Agreements') with nine of its executives, including Messrs. Tolson,
Hochreiter, Finnegan, Hughes and Garay, which provide that if there is both a
'change in control' (as defined below) of the Company and termination of the
executive during the 'contract period' (as defined below) except for 'cause' (as
defined below) or disability, or if the executive terminates his employment for
'good reason' (as defined below), the executive shall be entitled to separation
pay equal to two times the highest total compensation received by him during the
year of termination or any of the four preceding calendar years, with the
current year's compensation annualized. Compensation is defined under the Change
in Control Agreements as the amount reported or reportable as U.S. federal wages
on Form W-2, plus the employees' contributions to 401K, pension or similar plans
and programs. In the event of such termination, any stock options previously
granted to the executive immediately fully vest and become exercisable as of the
date of termination and continue to be exercisable thereafter for a period of a
least 60 days.
In the Change in Control Agreements with Messrs. Tolson and Hochreiter, the
'contract period' commences thirty days preceding a change in control and ends
on the second anniversary of the change in control. The Tolson and Hochreiter
Change in Control Agreements, as amended by the Conversion Agreement, define a
'change in control' as (a) a consolidation or merger of the Company with and
into another entity whereby the Company is not the surviving corporation if such
merger is effected pursuant to action by the shareholders, (b) a consolidation
or merger whereby the Company is the surviving corporation and all or part of
the outstanding Common Shares are changed into or exchanged for stock or other
securities of another person or cash or any other property if such merger is
effected pursuant to action by the shareholders, (c) the sale or transfer of
more than 75% of the assets or operating income of the Company, (d) the
acquisition by a person or group of 30% of the Common Shares then outstanding,
(e) the commencement of a tender or exchange offer by a person where such person
would be the beneficial owner of more than 30% of the Common Shares then
outstanding, or (f) the termination of the executive without 'cause' or
termination by the executive of his employment for 'good reason.'
14
<PAGE>
The Change in Control Agreements, as amended, of the other seven executives
define the 'contract period' as the period commencing on the 30th day
immediately preceding a change in control and ending on the second anniversary
of a 'relevant transaction.' Under the Change in Control Agreements of these
executives, a change in control will be deemed to occur if Mr. Tolson ceases to
own shares of the Company sufficient for him alone to cast 40% of all votes
shareholders can cast when voting as a single class and which may be cast for
the election of directors, and in certain other circumstances. Pursuant to this
provision, the contract period commenced on 1 September 1993 when Mr. Tolson
transferred a portion of his shares in accordance with the terms of the
Conversion Agreement. A 'relevant transaction' means any of the events described
in items (a) through (e) of the immediately preceding paragraph.
'Cause,' as a basis for termination of the executive's employment, means
willful and repeated significant actions or omissions against the best interest
of the Company after receipt of a written warning, done in bad faith and without
a belief that the action or omission was in the best interest of the Company.
'Good reason,' for purposes of an executive's voluntary termination of
employment, includes a reduction in pay or benefits, a material reduction in
duties, responsibilities and function, a transfer to another geographic area or
a failure by the Company to cause any successor to the Company to assume its
obligations under the agreement.
Under the terms of the Change in Control Agreements, the Company is
required to maintain for the terminated executive, for a period of two years
after the termination date, certain insurance, employee benefit plans,
automobile, outplacement and other benefits and the terminated executive is
entitled to an additional two years service credit under Company pension plans,
including, if applicable, the Supplemental Retirement Income Plan described
below, or comparable benefits if the plan does not permit continued
participation by a terminated employee. Certain monies otherwise paid on account
of such termination, such as required severance (including the severance
compensation provided in Mr. Hochreiter's employment contract) is credited to
the monies due under the Change in Control Agreements.
Assuming that, following the Merger and during the relevant contract
period, the covered executives of the Company are terminated without cause or
any such person terminates his employment for good reason, and that the
compensation at the time of such termination is equal to the amount of such
person's compensation as of the date hereof, the Company would be obligated to
pay Messrs. Tolson, Hochreiter, Finnegan, Hughes and Garay $860,800, $805,000,
$445,000, $493,800, and $357,900, respectively under such Change in Control
Agreements, excluding amounts which may be due for payment of taxes on account
of the applicability of Section 2806 of the Internal Revenue Code of 1986, as
amended, and further excluding the effect of stock options.
Severance Agreement. Mr. Stamford, an executive of the Company, entered
into an agreement with the Company on 2 December 1993 whereby, upon the
involuntary termination of his employment that is not a termination for cause or
disability, which termination occurs within one year following the effective
date of a change in control of the Company, he will be entitled to receive (a)
one month of separation pay for each full $10,000 in base pay (maximum 12
months); (b) continuation of all Company benefits for the duration of the
separation pay period (minimum six months); (c) all accrued and unused vacation
pay; and (d) one-on-one outplacement counseling. In addition, Mr. Stamford is
entitled to receive a 'stay-around' bonus of $60,000 cash which will be paid by
the Company six months after the effective day of a change in control or prior
thereto if Mr. Stamford is terminated involuntarily during the first six months
after a change in control. The determination of when a change in control will
have occurred is to be determined by Mr. Hochreiter in his sole discretion.
Assuming that, within one year following the Merger, Mr. Stamford's employment
is involuntarily terminated, and further assuming that Mr. Stamford's
compensation at the time of the termination is equal to the amount of his
compensation as of the date hereof, the Company would be obligated to pay Mr.
Stamford severance equal to $120,000. In addition, Mr. Stamford will be entitled
to the $60,000 'stay-around' bonus if he is employed by the Company for six
months after the Merger or if Mr. Stamford is terminated involuntarily during
the first six months after a change in control.
15
<PAGE>
Supplemental Retirement Income Plan. In 1983, the Company adopted a
program, pursuant to which the Company will provide Messrs. Tolson, Hochreiter,
Finnegan and one other current employee with (i) supplemental retirement income
to begin when the individual attains age 65 and retires and (ii) a preretirement
death benefit. A participating individual is entitled to supplemental retirement
income equal to 35% (excepting Mr. Finnegan, who is entitled to 30%) of his
Average Annual Salary, subject to a possible deduction based on amounts payable
under Company-paid retirement plans and Social Security. The benefits are
payable in equal monthly installments for the lifetime of the individual, or for
ten years, whichever is longer. 'Average Annual Salary' means the individual's
salary during any five of the last ten consecutive calendar years immediately
preceding his normal retirement date or the termination date if his employment
with the Company terminates prior to attaining age 65, divided by five, which
produces the highest average. In addition, if the participating individual dies
while an active employee, the Company will pay to the designated beneficiary an
aggregate sum equal to 60% of the participating individual's annual base salary,
payable in 12 equal monthly installments and thereafter each year for a minimum
of fourteen years a sum equal to 30% of the participating individual's base
salary. The retirement benefits are vested upon the individual completing five
years of service. All participants, except Mr. Hochreiter, have completed five
years of service; therefore their retirement benefits are fully vested.
Participating individuals who are vested and whose employment with the Company
terminates prior to attaining age 65 are entitled to the supplemental retirement
benefit, beginning at age 65. However, no supplemental retirement benefits are
payable under this plan if an individual's employment is terminated for cause as
defined in the plan. The estimated annual supplemental retirement benefits
payable under the Supplemental Retirement Income Plan for Messrs. Tolson and
Finnegan, assuming that the highest Average Annual Salary is the average of the
salaries for years 1989 through 1993 (and further assuming that the benefit
limitations relating to Company paid retirement plans and Social Security
benefits received, which can not be evaluated at this time, do not apply), would
be $101,400 and $43,700, respectively. As a benefit under the Change in Control
Agreements, in the event Messrs. Tolson, Hochreiter or Finnegan die during the
two year period after their date of termination of employment, their estate or
beneficiary would be entitled to the preretirement death benefit. The estimated
preretirement death benefits payable, assuming that the individual's annual base
salary is equal to the annual base salary of such person on the date hereof are
as follows: Mr. Tolson, $195,276 for the first twelve months and $97,638 per
year thereafter for a minimum of fourteen years; Mr. Hochreiter, $196,072 for
the first twelve months and $98,036 per year thereafter for a minimum of
fourteen years; and Mr. Finnegan, $102,966 for the first twelve months and
$51,483 per year thereafter for a minimum of fourteen years.
Stock Options and Warrants. Immediately prior to the Effective Time, each
outstanding Company stock option and warrant, whether or not then vested or
exercisable, will become exercisable in full and will then be canceled, and the
holder thereof shall be entitled to receive from the Company an amount equal to
the excess of (i) the Merger Price multiplied by the number of Common Shares
subject to the stock option or warrant, over (ii) the exercise price of the
stock option or warrant multiplied by the number of Common Shares subject
thereto. Accordingly, the Company will be obligated to pay Mr. Tolson and the
Hochreiters, $16,703,081.25 and $937,500, respectively, in cancellation of their
warrants, and to pay to Messrs. Tolson, Hochreiter, Finnegan, Hughes and Garay,
$2,406,250, $2,406,250, $1,131,489, $934,571 and $728,716, respectively, in
cancellation of their stock options. Once the Merger is approved by the
Company's shareholders, the cancellation of the stock options and warrants will
be accounted for as an expense of the Company in any financial statements issued
by the Company. See 'Background of the Merger' for a description of the
Conversion Agreement and the Warrant Agreements with Mr. Tolson and the
Hochreiters.
Stock Appreciation Rights. In November 1990, the base compensation of
nonemployee directors, the Chairman and Chief Executive Officer, and 21
additional executives was reduced for a period of one year. The reductions were:
20% for nonemployee directors, 10% for the Chairman and Chief Executive Officer,
5% for executives on the Chairman's staff including Messrs. Hughes, Finnegan and
Garay and 2 1/2% for other management employees in the United States who
reported to the Chairman or were on the Chairman's staff. Each person whose
salary was reduced received Units of Appreciation Rights ('Units'), under which
such person is entitled to receive a sum of money from
16
<PAGE>
the Company equal to the increase in the market price of the Common Shares above
$7.38 per share (the market price of the Common Shares on the date of grant of
the Units), times the number of Units. The number of Units granted was
calculated to result in a payment to the recipient equal to the reduction in the
individual's base compensation when the price of the Common Shares traded on the
American Stock Exchange equaled $11.00 per share. The Units are exercisable by
the recipient at any time not later than the earlier of 1 December 1995, or
three months after termination of employment.
If the Units are exercised at the Merger Price, the Company would be
obligated to pay the following officers and directors of the Company the
following amounts: Mr. Tolson -- $134,831; Mr. Hughes -- $39,487; Dr. Chisum --
$13,416; and Messrs. Ryan, Williams and Manion -- $10,041 each. Messrs. Finnegan
and Garay have no remaining Units.
Indemnification Under the Reorganization Agreement. Pursuant to the
Reorganization Agreement, Bailey has agreed that the Surviving Corporation will
indemnify and hold harmless each person who is, or has been prior to the date of
the Reorganization Agreement or who becomes prior to the Effective Time, an
officer or director of the Company or any of its subsidiaries (the 'Indemnified
Parties') against (i) all losses, claims, damages, costs, expenses, settlement
payments or liabilities arising out of or in connection with any claim, demand,
action, suit, proceeding or investigation based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was an
officer or director of the Company or any of its subsidiaries, whether or not
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether or not asserted or claimed prior to or at or after the Effective
Time ('Indemnified Liabilities') and (ii) all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to the
Reorganization Agreement, any other agreement related to the Reorganization
Agreement or the transactions contemplated by the Reorganization Agreement or
such other agreement, in each case to the fullest extent required or permitted
under applicable law or under the Surviving Corporation's Articles of
Incorporation or Bylaws or any indemnification agreements in effect on the date
of the Reorganization Agreement. Bailey has agreed that the Surviving
Corporation's Articles of Incorporation and Bylaws shall not be amended in a
manner that adversely affects the rights of any Indemnified Party thereunder or
under the Reorganization Agreement, unless otherwise required by applicable law.
Bailey has agreed that to the extent available on terms satisfactory to the
Surviving Corporation, the Surviving Corporation will maintain, for not less
than ten years after the Effective Time, directors' and officers' liability
insurance covering each indemnified person on terms not materially less
favorable than the insurance maintained in effect by the Company on the date of
the Reorganization Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective (the 'Effective Time') upon the filing of
Articles of Merger with the Department of State of the Commonwealth of
Pennsylvania in accordance with the BCL. The Articles of Merger are expected to
be presented for filing as soon as practicable after the approval and adoption
of the Merger Proposal by the Company's shareholders at the Special Meeting and
upon satisfaction or waiver of all other conditions to consummation of the
Merger. See 'Conditions to Consummation of the Merger; Representations and
Warranties; Certain Covenants.'
PAYMENT FOR COMMON SHARES
As a result of the Merger, holders of certificates formerly representing
Common Shares will cease to have any equity interest in the Company. After
consummation of the Merger, all certificates formerly evidencing Common Shares
(other than Common Shares held in the treasury of the Company or Common Shares
in respect of which dissenters appraisal rights have been properly exercised)
will be required to be surrendered to Citibank, N.A. (the 'Paying Agent') in
order to receive the Merger Price to which holders thereof will be entitled as a
result of the Merger. No interest will be paid or accrued on the cash payable
upon the surrender of such certificates. Detailed instructions with regard to
the surrender of certificates, together with a letter of transmittal, will be
forwarded to former holders of Common Shares by the Paying Agent as promptly as
practicable following the Effective Time. Holders of Common Shares should not
submit their certificates to the Paying Agent until they have received
17
<PAGE>
such materials. Upon surrender of stock certificates and other required
documents to the Paying Agent, the Paying Agent will distribute by bank check
the Merger Price for each share represented by such stock certificates to the
holder thereof. See 'Terms of the Merger.' If payment in respect of canceled
Common Shares is to be made to a person other than the person in whose name a
surrendered certificate or instrument is registered, it shall be a condition to
such payment that the certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax
either has been paid or is not payable.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
EFFECT OF MERGER ON CONTROL-SHARE ACQUISITION AND OTHER ANTITAKEOVER
RESTRICTIONS
The BCL contains a control-share acquisition statute, codified in
Subchapter 25G, which provides that, before an acquiror of at least 20%, 33 1/3%
or 50% of the voting power of a 'registered' corporation may exercise voting
power with respect to 'control shares' (as defined therein), the shareholders of
the corporation must have approved such exercise by a vote of (i) a majority of
all outstanding voting power, and (ii) a majority of outstanding 'disinterested
shares' (as defined therein). The control-share provisions do not apply to
certain specified transactions, including mergers or similar transactions
effected in compliance with the statute and to which the registered corporation
is a party, such as the Merger.
The BCL also contains a disgorgement statute, codified in Subchapter 25H,
which requires disgorgement to the corporation of profits by a 'controlling
person' (defined generally to mean a person or group seeking a 20% voting
interest or making a bid for control) on a trade in shares of the corporation
during the 18 months following acquisition of 'controlling person' status,
unless the shares involved were purchased more than 24 months before or 18
months after the acquisition of such status. The disgorgement provisions do not
apply to certain transactions, including transactions consummated by the
Company, such as the Merger.
Article VI of the Company's Articles of Incorporation provides generally
that, subject to a number of exclusions set forth therein, a controlling person
or group (defined generally to mean a person or group which acquires at least
20% of the voting power to elect directors of the Company), upon becoming such,
must give prompt notice to each shareholder of record and to the Company. The
other shareholders are thereupon entitled to demand that the controlling person
pay them the 'fair value' of their shares under procedures which are similar to
those which apply to the exercise of dissenters rights in connection with
mergers and other corporate transactions. Article VI does not apply to a control
transaction that has been approved by (i) a majority vote of the directors not
affiliated with the controlling person or group, and (ii) the affirmative vote
or consent of the holders of Common Shares entitled to cast a majority of the
votes which all holders of Common Shares, voting as a single class, are entitled
to cast thereon.
Article VII of the Company's Articles of Incorporation generally prohibits
the Company from engaging in any 'business combination,' which is broadly
defined, with an 'interested shareholder' of the Company (defined generally to
mean a person or group which acquires at least 20% of the voting power to elect
directors of the Company) for a set period of time following the date on which
the interested shareholder became such, unless, among other exceptions, the
business combination or the purchase of stock by means of which the interested
shareholder became such is approved in advance by the Company's Board of
Directors. Since the Merger has been approved by the Company's Board of
Directors, Article VII does not apply to the Merger.
CERTAIN OTHER EFFECTS OF THE MERGER
If the Merger is consummated, the Company's shareholders will not have an
opportunity to continue their equity interest in the Company as an ongoing
corporation and therefore will not share in future earnings and growth of the
Company.
18
<PAGE>
If the Merger is consummated, public trading of the Common Shares will
cease, the Common Shares will cease to be listed on the American Stock Exchange,
and the registration of the Common Shares under the Exchange Act, will be
terminated. See 'Additional Information -- Available Information' for
information concerning the effect of the Merger on the Surviving Corporation's
obligation to file periodic reports and other information with the Commission.
For information concerning the income tax consequences of the Merger, see
'Federal Income Tax Consequences of the Merger.'
ANTITRUST MATTERS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the 'HSR Act') provide that certain
acquisition transactions (including the Merger) may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice ('Justice') and the Federal Trade Commission (the 'FTC')
and certain waiting period requirements have been satisfied. The required
information was supplied by the Company and by Bailey on 2 May 1994 and the
applicable waiting period under the HSR Act expired on 1 June 1994. The German
law controlling the restraint against competition, called the Gesetz gegen
Wettbewerbsbeschrankugen (the 'GWB'), provides that certain acquisition
transactions (including the Merger) may not be consummated unless a pre-merger
notification has been filed with the German Cartel Office, called the
Bundeskartellamt (the 'BKartA'). The BkartA must communicate its intention to
investigate a merger within one month of receipt of a pre-merger notification.
The information was supplied by Bailey on 10 May 1994 and the applicable
one-month waiting period under the GWB expired on 10 June 1994. At any time
before or after the consummation of the Merger, Justice, the FTC, the GWB or
some other person could seek to enjoin or rescind the Merger on antitrust
grounds. See 'Conditions to Consummation of the Merger; Representations and
Warranties; Certain Covenants.'
ACCOUNTING TREATMENT
The Merger will be accounted for by Bailey as a 'purchase' for accounting
and financial reporting purposes.
TERMS OF THE MERGER
General. The Company has agreed in the Reorganization Agreement to submit
the Merger Proposal to its shareholders for approval and adoption at a meeting
to be held as soon as practicable in accordance with the BCL and the Company's
Articles of Incorporation and Bylaws and, in connection therewith, prepare and
file a proxy statement and cause the proxy statement to be mailed to the
Company's shareholders as soon as practicable. If the Merger Proposal is
approved and adopted by the shareholders, and the other conditions contained in
the Reorganization Agreement are satisfied or waived, Acquisition will be merged
with and into the Company. Upon the filing of Articles of Merger, or at such
later time as specified in such filing, each outstanding Common Share, other
than shares held by shareholders of the Company who have properly exercised
their dissenters rights under applicable law, will be converted into the right
to receive $24.25 in cash, without interest, and each share of common stock of
Acquisition will be converted into one Common Share of the Company. The
obligations of the Company, Bailey and Acquisition to effect the Merger are
subject to the fulfillment of certain conditions set forth in the Reorganization
Agreement, including the approval and adoption of the Merger Proposal by the
majority of votes cast by the holders of the outstanding Common Shares of the
Company. See 'Conditions to Consummation of the Merger; Representations and
Warranties; Certain Covenants.'
The terms of the Merger are set forth in the Reorganization Agreement and
the Plan of Merger which appear as Annex A to this Proxy Statement, and the
description of the Merger Proposal contained herein is qualified in its entirety
by reference to the Reorganization Agreement and the Plan of Merger.
Shareholders are urged to review the Reorganization Agreement and the Plan of
Merger carefully.
Amendments. The Reorganization Agreement may be amended at any time before
or after shareholder approval by written agreement of Bailey, Acquisition and
the Company, except that after approval of the Merger by the shareholders of the
Company, no amendment may be made, without the
19
<PAGE>
further approval of the shareholders of the Company, which either decreases the
amount of cash to which the shareholders of the Company are entitled pursuant to
the Reorganization Agreement or otherwise materially adversely affects the
shareholders of the Company.
CONDITIONS TO CONSUMMATION OF THE MERGER; REPRESENTATIONS AND WARRANTIES;
CERTAIN COVENANTS
Conditions to Consummation of the Merger. Under the Reorganization
Agreement, the obligations of the Company, Bailey and Acquisition to effect the
Merger are subject to the satisfaction, on or before the Effective Time, of
certain conditions or the waiver thereof. Among such conditions are that (a) the
Reorganization Agreement, the Plan of Merger and the Merger shall have been
approved and adopted by the requisite vote of the holders of the outstanding
Common Shares in accordance with the BCL and the Company's Articles of
Incorporation and Bylaws; (b) no order, decree, ruling or other action of a
court or governmental agency of competent jurisdiction, restraining, enjoining
or otherwise prohibiting the Merger, shall be in effect; and (c) the waiting
periods under the HSR Act and its counterpart provisions under German law shall
have terminated or early termination thereof shall have been granted or all
approvals required in connection therewith, if any, shall have been obtained.
Under the Reorganization Agreement, the obligations of Bailey and
Acquisition to effect the Merger are also subject to each of the following
conditions: (a) the aggregate number of Dissenting Shares (as defined in the
Plan of Merger) shall not exceed 10% of the outstanding Common Shares; (b) the
representations and warranties of the Company contained in the Reorganization
Agreement shall be true in all material respects at and as of the closing date
(except to the extent that such representation and warranty speaks as of another
date) and no material adverse change shall have occurred to the business,
financial condition, property or prospects of the Company taken as a whole since
31 December 1993 provided that payment of the break-up fee to Moorco and the
loss reflected on the 28 February 1994 consolidated income statement of the
Company and the subsidiaries for the two months then ended shall not be included
in any determination of a material adverse change; (c) in a manner reasonably
satisfactory to the parties, (i) Jay H. Tolson and E. Joseph Hochreiter ('Tolson
and Hochreiter') shall expressly indemnify the Company, Bailey and Acquisition
from any and all liability arising out of or related to the issuance on 30
September 1993 of Company warrants, which indemnity will be secured by the
deposit of $10,000,000 received by them in the Merger into an interest bearing
escrow account at Mellon Bank, N.A to be invested in U.S. Treasury obligations
having maturities of not more than five years, (ii) Tolson and Hochreiter
expressly shall waive any indemnities running to them from the Company, by
contract (including, without limitation, the Reorganization Agreement), charter,
by-law or otherwise for any liability arising out of or connected with the
issuance of such warrants, and (iii) Bailey shall agree that the Company shall
pay the reasonable defense costs and expenditures incurred in connection with
the defense of any claim or action relating to such warrants up to the $500,000
self-insured retention under the Company's directors and officers' liability
insurance policy and will work with Tolson and Hochreiter on a best efforts
basis to secure coverage for any additional expenditures from the directors and
officers' insurance carrier (the 'Tolson and Hochreiter Conditions'); and (d)
the Company shall have complied in all material respects with its covenants
regarding the treatment of its foreign subsidiaries. See 'Certain Covenants.' In
order to induce Bailey to enter into the transactions contemplated by the
Reorganization Agreement, Messrs. Tolson and Hochreiter entered into a
Memorandum Agreement dated 13 April 1994 with the Company pursuant to which
Messrs. Tolson and Hochreiter agreed to accept and be bound by the Tolson and
Hochreiter Conditions and to execute such further documents as may be reasonably
requested by the Company or Bailey to effect the fulfillment of the Tolson and
Hochreiter Conditions. See 'Additional Information -- Legal Proceedings.'
Representations and Warranties. The representations and warranties of the
Company and of Bailey and Acquisition contained in the Reorganization Agreement
include various representations and warranties typical in such agreements and
are included in Sections 2.01 and 2.02, respectively, of the Reorganization
Agreement, a copy of which is included in this Proxy Statement as Annex A.
Certain Covenants. The Company, Bailey and Acquisition covenanted to
certain matters in the Reorganization Agreement including, among others, the
following:
20
<PAGE>
Conduct of Business by the Company Pending the Merger. The
Reorganization Agreement provides that between the date of the
Reorganization Agreement and the Effective Time, unless Bailey and the
Company shall otherwise agree in writing or except as otherwise expressly
contemplated by the Reorganization Agreement, (a) the Company shall use its
reasonable best efforts to maintain its relationships with its suppliers
and customers and, if and as requested by Bailey or Acquisition, (i) the
Company shall make reasonable arrangements as reasonably requested by
Bailey or Acquisition for representatives of Bailey or Acquisition to meet
with customers and suppliers of the Company and (ii) the Company shall
schedule, and the management of the Company shall participate in, meetings
of the representatives of Bailey or Acquisition with employees of the
Company; (b) the Company shall not make any new commitments for capital
expenditures in excess of $100,000 individually or $500,000 in the
aggregate, except for expenditures for maintenance of capital assets in the
ordinary course of its business consistent with past practice; (c) the
Company shall not otherwise conduct its business except in the ordinary
course consistent with past practice; and (d) the Company shall obtain (i)
agreements in form and substance reasonably satisfactory to Bailey from
holders of all Company stock options and holders of all Company warrants to
cancel such options and warrants in accordance with Section 3(d) of the
Plan of Merger, and (ii) an agreement in form and substance reasonably
satisfactory to Bailey from Hochreiter waiving any and all rights Mr.
Hochreiter has or may have, by virtue of the transactions contemplated by
the Reorganization Agreement, to receive the severance payment described in
his Employment Agreement. See 'Conflicts of Interest.' The Company has also
agreed to certain additional restrictions with respect to the conduct of
its business prior to the Effective Time, as set forth in Section 3.02 of
the Reorganization Agreement.
Inquiries and Negotiations. Pursuant to, and except as otherwise
provided in, the Reorganization Agreement, the Company agreed on the date
of the Reorganization Agreement, immediately to cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties in respect of the acquisition of all or any substantial part of the
business and properties of the Company (an 'Acquisition Transaction'). The
Company agreed in the Reorganization Agreement that it would not, and would
not permit its officers, employees, representatives or agents to (a)
solicit or initiate discussions or negotiations with, or provide any
nonpublic information to, any person other than Bailey or its affiliates
concerning an Acquisition Transaction, or (b) otherwise solicit, initiate
or encourage inquiries or the submission of any proposal contemplating an
Acquisition Transaction. The Company also agreed in the Reorganization
Agreement to communicate promptly to Bailey the terms of any inquiry or
proposal which it may receive in respect of an Acquisition Transaction. The
Reorganization Agreement permits the Company to (i), if advised in writing
by counsel to be required by fiduciary obligations under applicable law,
provide nonpublic information to, and participate in negotiations with, a
person who has made a bona fide offer to effect an Acquisition Transaction
for an all cash purchase price in excess of the Merger Price and (b) accept
an offer for an Acquisition Transaction which the Board of Directors of the
Company, on the advice in writing of its financial advisor, believes is
more favorable to the Company or to its shareholders than the Merger
contemplated by the Reorganization Agreement.
Bailey Loan to the Company. Pursuant to the Reorganization Agreement,
Bailey loaned the Company $5.3 million, which was to be used by the Company
to pay a portion of the termination fee to Moorco under the Moorco
Agreement. See 'Background of the Merger' and 'Additional Information --
Legal Proceedings.' The Company's obligation to repay the loan is evidenced
by a promissory note (the 'Note'), on which interest will accrue from the
date of the loan until the Note is paid in full at the annual rate of 9 1/2
percent. The Company's obligations to pay the Note are secured by a
perfected security interest in certain of the Company's United States
assets. The Note and the security interests are, in all respects,
subordinated to the right of all other secured lenders to the Company. If
the Reorganization Agreement is terminated by the Company or Bailey
pursuant to its terms, then the due date of the Note will be ten business
days after the date of such termination, provided that if the
Reorganization Agreement is terminated as a result of conditions or
circumstances beyond the Company's control, or because Bailey or
Acquisition shall have failed to comply in any material respect with any of
the covenants or agreements contained in the Reorganization Agreement and
such failure has not been cured within 30 days
21
<PAGE>
after receipt of notice thereof, then the Note will be payable in three
annual equal installments on 13 April 1995, 1996 and 1997 and accrued
interest will be payable with each annual installment. The failure to
obtain shareholder approval of the Merger shall be deemed to be within the
Company's control and, as a result, termination of the Reorganization
Agreement because of a failure of that condition will not extend the due
date beyond ten business days after termination. If the Reorganization
Agreement is not terminated, then the due date will be such date after the
Effective Time as Bailey may select.
Foreign Subsidiaries. Following approval of the Reorganization
Agreement by the shareholders of the Company and immediately prior to the
Effective Time, Bailey shall have the right to cause such of its affiliates
as it shall select to purchase the non-United States subsidiaries of the
Company and, if Bailey so elects, the Company shall sell or otherwise cause
such subsidiaries of the Company to be sold to such affiliates of Bailey on
such terms and in such manner as Bailey shall select provided that (a) such
purchase and sale transactions do not have an adverse effect on the
Company, and (b) no such transaction will be deemed to constitute a breach
of any representation, warranty, or covenant of the Company contained in
the Reorganization Agreement.
Company Stock Options. The Company agreed in the Reorganization
Agreement to grant no additional options, warrants or similar rights. Under
the Plan of Merger, immediately prior to the Effective Time, each
outstanding Company stock option and warrant, whether or not then vested or
exercisable, shall become exercisable in full, and shall then be canceled,
and the holder thereof shall be entitled to receive from the Company
immediately prior to the Effective Time an amount equal to the excess of
(i) the Merger Price multiplied by the number of Common Shares subject to
the stock option or warrant, over (ii) the exercise price of the stock
option or warrant multiplied by the number of Common Shares subject
thereto. See 'Conflicts of Interest.'
TERMINATION; FEES AND EXPENSES; PLANS OF THE COMPANY IN EVENT MERGER IS NOT
CONSUMMATED
Termination. The Reorganization Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, before or after the approval
by the shareholders of the Company, (a) by mutual consent of the Boards of
Directors of the Company, Bailey and Acquisition; (b) by the Company, Bailey or
Acquisition if the Merger shall not have been consummated on or before 13
October 1994, or such later date as may be mutually agreed to by the parties;
(c) by the Company, Bailey or Acquisition if any court or governmental agency of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling, or other action shall have become final and
nonappealable; (d) by the Company if Bailey or Acquisition shall have failed to
comply in any material respect with any of the covenants or agreements contained
in the Reorganization Agreement and such failure has not been cured within 30
days after receipt of notice thereof; (e) by the Company if the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Bailey or Acquisition its approval or recommendation of the Merger in order to
approve an Acquisition Transaction with a third party; (f) by Bailey and
Acquisition if the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in the Reorganization
Agreement and such failure has not been cured within 30 days after receipt of
notice thereof; (g) by Bailey and Acquisition if any condition to the Merger, as
set out in the Reorganization Agreement, to the obligations of Bailey and
Acquisition has not been satisfied for any reason; or (h) by Bailey and
Acquisition if the Board of Directors of the Company shall not recommend to its
shareholders the approval of the Reorganization Agreement, or shall withdraw or
modify in a manner adverse to Bailey or Acquisition its approval or
recommendation of the Merger, or shall take any other action to facilitate an
Acquisition Transaction with a third party.
Termination Fees. If the Company terminates the Reorganization Agreement
in order to approve an Acquisition Transaction with any third party, or if
Bailey and Acquisition terminate the Reorganization Agreement because the Board
of Directors of the Company has not recommended to its shareholders the approval
of the Reorganization Agreement, or if the Board of Directors of the Company has
withdrawn or modified in a manner adverse to Bailey or Acquisition its approval
or recommendation of the Merger or has taken any other actions to facilitate an
Acquisition Transaction
22
<PAGE>
with any third party, then the Company shall, within ten business days following
the termination of the Reorganization Agreement, pay Bailey a termination fee
payable in cash of approximately $5.6 million.
SOURCE AND AMOUNT OF FUNDS
Bailey will require approximately $157 million to pay the Merger Price for
all of the outstanding Common Shares of the Company and to pay for the
cancellation of all outstanding Company stock options and warrants. Bailey has
executed a commitment letter with Chemical Bank to provide the financing
necessary for Bailey and Acquisition to complete the Merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE DISCUSSION SET FORTH BELOW CONCERNING FEDERAL INCOME TAX CONSEQUENCES
TO A PARTICULAR SHAREHOLDER MAY VARY DEPENDING UPON SUCH SHAREHOLDER'S
PARTICULAR CIRCUMSTANCES. FOR EXAMPLE, THE FOLLOWING DISCUSSION MAY NOT BE
APPLICABLE TO A SHAREHOLDER WHO ACQUIRED COMMON SHARES PURSUANT TO THE EXERCISE
OF STOCK OPTIONS OR OTHERWISE AS COMPENSATION. EACH SHAREHOLDER IS URGED TO
CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER OR THE EXERCISE OF DISSENTERS
APPRAISAL RIGHTS, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAXES.
Exchange of Common Shares pursuant to the Merger (and the receipt of cash
in respect of the exercise of dissenters appraisal rights) will be taxable
transactions for federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be taxable transactions under applicable state,
local and other tax laws. For federal income tax purposes, each holder of Common
Shares whose shares are exchanged in the Merger will generally recognize gain or
loss equal to the difference between the amount of cash received by such
shareholder in the Merger and such shareholder's tax basis in such shares. Gain
or loss recognized will be treated as a long-term capital gain or loss if the
Common Shares are held as capital assets and if the Common Shares exchanged have
a holding period of more than one year at the Effective Time.
If a noncorporate shareholder recognizes a capital loss in connection with
the sale of Common Shares, the shareholder may offset such capital loss against
any other capital gains realized by such shareholder in the taxable year and
against up to $3,000 of such shareholder's ordinary income (for individuals
filing joint returns). Any excess loss may be carried forward indefinitely. A
corporate shareholder may use a capital loss recognized in connection with the
Merger to offset any capital gains realized by it in the same taxable year but
not to offset ordinary income. Any unused capital loss of a corporation may
generally be carried back to its three preceding taxable years and then, to the
extent unused, forward for five succeeding taxable years, in each case to offset
capital gains, if any.
DISSENTERS APPRAISAL RIGHTS
For purposes of this section, the term 'Company' will be deemed to also
refer to the Surviving Corporation with respect to actions taken after the
Effective Time.
Pursuant to the Plan of Merger and the BCL, the owners of Common Shares
will have dissenters rights in connection with the Merger under BCL Subchapter
15D (hereinafter 'Subchapter 15D'), a copy of which is included in this Proxy
Statement as Annex C, and may object to the Merger Proposal and demand in
writing that the Company pay the fair value of their Common Shares.
Failure by any dissenting shareholder to comply with any procedure required
by Subchapter 15D may cause a termination of such shareholder's dissenters
rights. The Company will not give any notice of the following requirements other
than as described in this Proxy Statement and as required by the BCL.
A holder of record of Common Shares may assert dissenters rights as to
fewer than all of the Common Shares registered in such holder's name only if the
holder dissents with respect to all the Common Shares beneficially owned by any
one person and discloses the name and address of the person or persons on whose
behalf the holder dissents. In that event, the holder's rights shall be
determined as if the shares as to which the holder has dissented and the other
shares were registered in the names of different holders. A beneficial owner of
Common Shares who is not also the record holder of such shares may assert
dissenters rights with respect to shares held on the owner's behalf and
23
<PAGE>
shall be treated as a dissenting shareholder under the terms of Subchapter 15D
if the beneficial owner submits to the Company not later than the time of filing
the Notice of Intention to Dissent (as defined below) a written consent of the
record holder. Such beneficial owner may not dissent with respect to some but
less than all Common Shares of the same class or series so owned.
Holders of Common Shares (or beneficial owners thereof as provided above)
who follow the procedures of Subchapter 15D as outlined below will be entitled
to receive from the Company the fair value of their Common Shares immediately
before the Effective Time, taking into account all relevant factors but
excluding any appreciation or depreciation in anticipation of the effectuation
of the Plan of Merger. Holders of Common Shares (or a beneficial owner thereof)
who elect to exercise their dissenters rights must comply with all of the
following procedures to preserve those rights.
Holders of Common Shares (or beneficial owners thereof) who wish to
exercise dissenters rights must file a written notice of intention to demand the
fair value of their Common Shares if the Merger is effectuated (the 'Notice of
Intention to Dissent'). Such dissenters must file the Notice of Intention to
Dissent with the Secretary of the Company prior to the vote by shareholders on
the Merger Proposal; they must make no change in their beneficial ownership of
Common Shares from the date of such filing until the Effective Date; and they
must refrain from voting their Common Shares for the adoption of the Merger
Proposal. The Notice of Intention to Dissent must be in addition to and separate
from any proxy or vote against the Merger Proposal.
If the Merger Proposal is approved by the required vote at the Special
Meeting, the Company will mail a notice (the 'Notice of Approval') to all
dissenters who filed a Notice of Intention to Dissent prior to the vote on the
Merger Proposal and who refrained from voting for the adoption of the Merger
Proposal. The Company expects to mail the Notice of Approval promptly after
effectuation of the Merger. The Notice of Approval will state where and when
(the 'Demand Deadline') a demand for payment must be sent and certificates for
Common Shares must be deposited in order to obtain payment; it will supply a
form for demanding payment (the 'Demand Form') which includes a request for
certification of the date on which the holder, or the person on whose behalf the
holder dissents, acquired beneficial ownership of Common Shares; and it will be
accompanied by a copy of Subchapter 15D. Dissenters must ensure that the Demand
Form and their certificates for Common Shares are received by the Company on or
before the Demand Deadline. All mailings to the Company are at the risk of the
dissenter. However, the Company recommends that the Notice of Intention to
Dissent, the Demand Form and the holder's stock certificates be sent by
certified mail.
Any holder (or beneficial owner) of Common Shares who fails to file a
Notice of Intention to Dissent, fails to complete and return the Demand Form, or
fails to deposit stock certificates with the Company, each within the time
periods provided above, will lose the holder's (or beneficial owner's)
dissenters rights under Subchapter 15D. A dissenter will retain all rights of a
shareholder, or beneficial owner, as the case may be, until those rights are
modified by effectuation of the Plan of Merger.
Upon timely receipt of the completed Demand Form, the Company is required
by the BCL either to remit to dissenters who have returned the Notice of
Intention to Dissent and the completed Demand Form and have deposited their
certificates, the amount the Company estimates to be the fair value for their
shares or to give written notice that no such remittance will be made. The
Company does not intend to make payment of any part of the amounts payable to
dissenters until the fair value of the Common Shares affected by the Merger has
been finally determined. The remittance or notice will be accompanied by:
(1) the closing balance sheet and statement of income of the Company
for the fiscal year ended 31 December 1993, together with the latest
available interim financial statements;
(2) a statement of Company's estimate of the fair value of the Common
Shares (which will be the $24.25 per share Merger Price); and
(3) a notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
Subchapter 15D.
If the Company does not remit the amount of its estimate of the fair value
of the Common Shares, it will return any certificates that have been deposited,
and may make a notation on any such certificates that a demand for payment in
accordance with Subchapter 15D has been made. If shares carrying such notation
are thereafter transferred, each new certificate issued therefor may bear a
similar
24
<PAGE>
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares will not acquire by such transfer any
rights in the Company other than those which the original dissenter had after
making demand for payment of their fair value.
After the Company gives notice of its $24.25 estimate of the fair value of
the shares as provided above, without remitting that amount, and the dissenter
believes that the Merger Price is less than the fair value of the shares, the
dissenter may send to the Company the dissenter's own estimate (the 'Holder's
Estimate') of the fair value of the shares as contemplated by BCL Section1578,
which will be deemed a demand for payment of the amount of the deficiency. If a
dissenter does not file a Holder's Estimate within 30 days after the mailing by
the Company of its remittance or notice, the dissenter will be entitled to no
more than the Merger Price.
If, within 60 days after the Effective Time or after the timely receipt by
the Company of any Holder's Estimate, whichever is later, any demands for
payment remain unsettled, the Company may file in the Court of Common Pleas of
Bucks County, Pennsylvania an application for relief requesting that the fair
value of the Common Shares be determined by the court. There is no assurance
that the Company will file such an application. All dissenters, wherever
residing, whose demands have not been settled will be made parties to any such
appraisal proceeding. The court may appoint an appraiser to receive evidence and
recommend a decision on the issue of fair value. Each dissenter who is made a
party will be entitled to recover the amount by which the fair value of the
dissenter's Common Shares is found to exceed the amount, if any, previously
remitted, plus interest. Interest shall be payable from the Effective Date until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the Company on its principal bank loans. If the Company
fails to file an application for relief, any dissenter who has made a demand and
who has not already settled the dissenter's claim against the Company may do so
in the name of the Company at any time within 30 days after the expiration of
the 60-day period. If a dissenter does not file an application within the 30-day
period, each dissenter entitled to file an application shall be paid the Merger
Price and no more, and may bring an action to recover any amount not previously
remitted.
The costs and expenses of such court proceedings, including the reasonable
compensation and expenses of the appraiser appointed by the court, will be
determined by the court and assessed against the Company, except that any part
of the costs and expenses may be apportioned and assessed as the court deems
appropriate against all or some of the dissenters who are parties and whose
action in demanding supplemental payment the court finds to be dilatory or in
bad faith. Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the Company, and
in favor of any or all dissenters, if the Company fails to comply substantially
with the requirements of Subchapter 15D. Such fees and expenses may be assessed
against either the Company or a dissenter, if the court finds that the party
against whom the fees and expenses are assessed acted in bad faith or in a
dilatory manner. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated and
should not be assessed against the Company, it may award such counsel reasonable
fees to be paid out of the amounts awarded to the dissenters who were
benefitted.
Under the BCL, a shareholder of the Company has no right to obtain, in the
absence of fraud or fundamental unfairness, an injunction against the Merger,
nor any right to valuation and payment of the fair value of the holder's shares
because of the Merger, except to the extent provided by the dissenters rights
provisions of Subchapter 15D. The BCL also provides that absent fraud or
fundamental unfairness, the rights and remedies provided by Subchapter 15D are
exclusive.
The foregoing description of the rights of dissenters under Subchapter 15D
should be read in conjunction with Annex C to this Proxy Statement, and is
qualified in its entirety by the provisions of Subchapter 15D.
25
<PAGE>
ADDITIONAL INFORMATION
LEGAL PROCEEDINGS
In December 1991, a putative class action and derivative action was
commenced in the United States District Court for the Eastern District of
Pennsylvania against, as the complaint was amended in February 1992, the
Company, Jay H. Tolson, Geoffrey H. Sayer, and almost all of the persons who are
now, or were at any time on or after 1 January 1989, directors of the Company.
The suit (the 'Federal Action') was brought by two Company shareholders, Howard
Weiner and Lepow Equities Corporation, on behalf of a class consisting of all
persons who purchased Company stock after 1 January 1989, and, derivatively, on
behalf of the Company against the named individual defendants. The class action
claims were dismissed on 17 March 1993. The settlement of the derivative claims
was approved by the Court after a hearing on 3 June 1994. The settlement
provides for a settlement fund of $850,000 which the Company is to receive after
payment of counsel fees and expenses. Of the $850,000, approximately $550,000
will be paid by the Company's directors' and officers' insurance carrier. The
settlement also provides for certain non-monetary relief requiring, among other
things, that a majority of the Board of Directors and a majority of all
committees of the Board consist of outside directors for a period of three
years. The terms of the settlement will not have a material impact on the
Company's operations or financial condition.
On 30 September 1993, the Company entered into and announced the Conversion
and Warrant Agreements with Mr. Tolson and the Hochreiters. In response to the
Company's announcement of those Agreements, a class action suit (the 'Bucks
County Action') was filed on 6 October 1993 in the Court of Common Pleas of
Bucks County challenging the Conversion and Warrant Agreements. The complaint in
the Bucks County Action is asserted as a class action on behalf of all
shareholders by shareholder Roger Copland. The defendants are the Company, Jay
H. Tolson and E. Joseph Hochreiter. The complaint alleges claims for breach of
fiduciary duty against the individual defendants with respect to the Conversion
and Warrant Agreements. Plaintiff seeks to enjoin the individual defendants from
exercising the warrants and seeks rescission of the Conversion and Warrant
Agreements. Discovery is ongoing in the Bucks County Action. Defendants have not
yet responded to the complaint and expect to receive an amended complaint before
a response (by way of answer, motion or preliminary objection) is filed.
On 26 April 1994, the Company and Bailey filed suit against Moorco in the
Court of Common Pleas of Bucks County (the 'Moorco/Bucks County Action'). On
June 6, 1994, the Company and Bailey filed a First Amended Complaint for
Declaratory Judgment seeking a declaration that the amount owed to Moorco
pursuant to the termination fee provision of the Moorco Agreement is $4,558,637
and not the $7,310,796 sought by Moorco. The Company and Bailey also seek a
declaration that, having validly terminated the Moorco Agreement, neither the
Company nor Bailey has any further liability to Moorco pursuant to the Moorco
Agreement or otherwise. On 30 June 1994, the Company and Bailey filed a second
amended complaint in the Moorco/Bucks County Action (the 'Second Amended
Complaint'). The Second Amended Complaint seeks a declaration regarding the
proper amount of the termination fee, a declaration that Moorco forfeited the
termination fee and a declaration as to the effect of termination. The Company
and Bailey also filed a claim against Moorco for tortious interference and
Bailey filed a claim against Moorco for defamation. In response to the
Moorco/Bucks County Action, Moorco filed a complaint on 29 April 1994 in the
United States District Court for the Southern District of Texas, Galveston
Division (the 'Moorco/Texas Action'), alleging a breach of contract and seeking
damages and injunctive relief to prevent the Company from selling any
subsidiaries to Bailey. (The Reorganization Agreement provides for the sale of
certain subsidiaries of the Company to affiliates of Bailey, at Bailey's option,
following approval of the Reorganization Agreement by the shareholders of the
Company. See 'The Merger -- Conditions to the Consummation of the Merger;
Representations and Warranties; Certain Covenants') Moorco is asking the court
to award it damages in the amount of $7,310,796 as the termination fee. The
Company has moved to stay the Moorco/Texas Action pending resolution of the
Moorco/Bucks County Action or, alternatively, to transfer the Moorco/Texas
Action to the United States District Court for the Eastern District of
Pennsylvania and has answered the complaint in the Moorco/Texas Action. At a
hearing on 17 June 1994, the Moorco/Texas action was transferred sua sponte to
the Southern District of Texas, Houston Division, where the pending motions will
be decided.
26
<PAGE>
On 10 May 1994, counsel for the plaintiffs in the Bucks County Action filed
a complaint in the United States District Court for the Eastern District of
Pennsylvania (the 'Benninghoff Action') also challenging the Conversion and
Warrant Agreements. The Benninghoff Action was filed as both a class action and
a derivative action. The plaintiffs are different shareholders than the
shareholder in the Bucks County Action. However, the named plaintiffs in both
the Bucks County Action and the Benninghoff Action seek to represent the same
class of shareholders. Messrs. Tolson and Hochreiter are the defendants in the
Benninghoff Action; the Company is a nominal defendant on the derivative claims.
On 21 June 1994, Messrs. Tolson and Hochreiter filed a motion to dismiss or stay
the Benninghoff Action pending resolution of the Bucks County Action.
On or about 2 June 1994, Moorco filed a suit against Bailey in the United
States District Court for the Southern District of Texas, Galveston Division
(the 'Moorco/Bailey Action'). In the Moorco/Bailey Action, Moorco has filed
claims against Bailey arising out of the termination of the Moorco Merger
Agreement, including claims for breach of the 'standstill' provision contained
in the confidentiality agreement signed on behalf of Bailey and for tortious
interference with contract and tortious interference with prospective business
relations. Moorco seeks compensatory damages in the amount of $80,000,000 and
unspecified punitive damages. On 16 June 1994 Bailey filed a motion to dismiss
the Moorco/Bailey Action or, alternatively, to transfer it to the United States
District Court for the Eastern District of Pennsylvania. At a hearing on 17 June
1994, the Moorco/Bailey action was transferred sua sponte to the Southern
District of Texas, Houston Division where the pending motions will be decided.
The Company is not a named defendant in the Moorco/Bailey Action and,
notwithstanding the litigation, Bailey remains obligated to close the
transaction in accordance with the Reorganization Agreement and has indicated
that it intends to do so.
In order to induce Bailey to enter into the transactions contemplated by
the Reorganization Agreement, Messrs. Tolson and Hochreiter entered into a
Memorandum Agreement dated 13 April 1994 with the Company pursuant to which
Messrs. Tolson and Hochreiter agreed to accept and be bound by the Tolson and
Hochreiter Conditions and to execute such further documents as may be reasonably
requested by the Company or Bailey to effect the fulfillment of the Tolson and
Hochreiter Conditions. See 'The Merger -- Conditions to Consummation of the
Merger; Representations and Warrants; Certain Covenants.'
INDEPENDENT PUBLIC ACCOUNTANTS
A representative of Arthur Andersen & Co., independent accountants and
auditors of the Company's financial statements, is expected to be present at the
Special Meeting, will have an opportunity to make a statement if such
representative so desires and will be available to respond to appropriate
questions.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith file periodic reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Regional Offices of the Commission at the
Northwest Atrium Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661; and 7 World Trade Center, New York, New York 10048. In addition, copies
of such materials may also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549.
After the Effective Time, the Common Shares will cease to be traded on the
American Stock Exchange. Moreover, the Surviving Corporation will be relieved of
the obligation to file informational reports under the Exchange Act, such as
proxy statements, and its officers, directors and more than 10% shareholders
will be relieved of the reporting requirements under, and the 'short-swing'
profit recapture provisions of, Section 16 of the Exchange Act.
27
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended 31 December 1993;
2. Report on Form 8-K filed with the Commission on 31 March 1994;
3. Report on Form 8-K filed with the Commission on 21 April 1994;
4. Form 10-K/A (Amendment No. 1) filed with the Commission on 28 April
1994; and
5. Quarterly Report on Form 10-Q for the quarter ended 31 March 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed document which is also incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
These documents (without exhibits, unless such exhibits are specifically
incorporated by reference into the information that this Proxy Statement
incorporates by reference herein) are available without charge to each person,
including each beneficial owner, to whom a copy of this Proxy Statement is
delivered, upon written or oral request of such person and by first class mail
or other equally prompt means within one business day of receipt of request.
Requests should be directed to Fischer & Porter Company, 125 East County Line
Road, Warminster, Pennsylvania 18974, telephone number: (215) 674-6000,
attention: Secretary.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the Special Meeting and does not know of any other matters that
may be brought before the Special Meeting by others. If any other matter should
come before the Special Meeting, the persons named in the enclosed proxy will
have discretionary authority to vote the Common Shares thereby represented in
accordance with their best judgment.
28
<PAGE>
ANNEX A
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
FISCHER & PORTER COMPANY
ELSAG BAILEY PROCESS AUTOMATION N.V.
AND
EBPA ACQUISITION, INC.
DATED AS OF APRIL 13, 1994
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE I
PLAN OF REORGANIZATION................................................................ A-1
SECTION 1.01. The Merger............................................................................ A-1
SECTION 1.02. Conversion and Cancellation of Securities............................................. A-1
SECTION 1.03. Timing................................................................................ A-1
ARTICLE II
REPRESENTATIONS AND WARRANTIES........................................................ A-2
SECTION 2.01. Representations and Warranties by F&P................................................. A-2
SECTION 2.02. Representations and Warranties by Buyer and Acquisition............................... A-6
ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS................................................... A-7
SECTION 3.01. Shareholder Approval.................................................................. A-7
SECTION 3.02. Conduct of F&P's Business............................................................. A-7
SECTION 3.03. Other Agreements...................................................................... A-9
SECTION 3.04. Inquiries and Negotiations............................................................ A-9
SECTION 3.05. Notification of Certain Matters....................................................... A-9
SECTION 3.06. Access to Information................................................................. A-9
SECTION 3.07. Public Announcements.................................................................. A-10
SECTION 3.08. Indemnification; Director's and Officer's Insurance................................... A-10
SECTION 3.09. Foreign Subsidiaries.................................................................. A-11
SECTION 3.10. Buyer Loan to F&P..................................................................... A-11
ARTICLE IV
CONDITIONS TO THE MERGER.............................................................. A-11
SECTION 4.01. Conditions to the Merger Relating to Buyer and Acquisition............................ A-11
SECTION 4.02. Conditions to the Merger Relating to F&P.............................................. A-12
ARTICLE V
TERMINATION AND ABANDONMENT........................................................... A-12
SECTION 5.01. Termination by Mutual Consent......................................................... A-12
SECTION 5.02. Termination by F&P, Buyer or Acquisition.............................................. A-13
SECTION 5.03. Termination by F&P.................................................................... A-13
SECTION 5.04. Termination by Buyer and Acquisition.................................................. A-13
SECTION 5.05. Effect of Termination................................................................. A-13
SECTION 5.06. Amendment............................................................................. A-13
SECTION 5.07. Waiver................................................................................ A-13
ARTICLE VI
MISCELLANEOUS......................................................................... A-14
SECTION 6.01. Notices............................................................................... A-14
SECTION 6.02. Counterparts.......................................................................... A-14
SECTION 6.03. Headings.............................................................................. A-14
SECTION 6.04. No Survival of Representations or Warranties.......................................... A-14
SECTION 6.05. Entire Agreement...................................................................... A-14
SECTION 6.06. Cooperation........................................................................... A-15
SECTION 6.07. No Rights; Etc........................................................................ A-15
SECTION 6.08. No Assignment......................................................................... A-15
SECTION 6.09. Governing Law......................................................................... A-15
SECTION 6.10. Consent to Jurisdiction; Etc.......................................................... A-15
</TABLE>
-i-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 13, 1994 (the
'Agreement'), among FISCHER & PORTER COMPANY, a Pennsylvania corporation
('F&P'), ELSAG BAILEY PROCESS AUTOMATION N.V., a Dutch corporation ('Buyer'),
and EBPA ACQUISITION, INC., a Pennsylvania corporation and an indirect
wholly-owned subsidiary of Buyer ('Acquisition').
W I T N E S S E T H
WHEREAS, the respective boards of directors of F&P, Buyer and
Acquisition have each approved the acquisition of F&P by Buyer
through a merger (the 'Merger') of Acquisition with and into F&P
(Acquisition and F&P being sometimes hereinafter together referred
to as the 'Constituent Corporations') in accordance with the
provisions of this Agreement and the Plan of Merger set forth as
Exhibit A hereto (the 'Plan of Merger'), in which outstanding
shares of F&P common stock, par value $1.00 per share (the 'F&P
Common Stock'), will be converted into the right to receive cash,
without interest, in the amount of $24.25 (the 'Merger Price') per
share.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Merger and the mode of carrying the same into
effect, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
PLAN OF REORGANIZATION
SECTION 1.01. The Merger. At the Effective Time (as hereinafter defined),
Acquisition shall be merged with and into F&P pursuant to this Agreement and the
Plan of Merger and the separate corporate existence of Acquisition shall cease.
F&P, as it exists from and after the Effective Time, is sometimes hereinafter
referred to as the 'Surviving Corporation'.
SECTION 1.02. Conversion and Cancellation of Securities. At the Effective
Time, by virtue of the Merger and without any action on the part of Buyer,
Acquisition, F&P or any holder of any shares of capital stock of F&P, the shares
of capital stock of each of the Constituent Corporations shall be converted as
set forth in the Plan of Merger.
SECTION 1.03. Timing.
(a) Shareholder Approval. F&P shall submit this Agreement, the Plan
of Merger and the Merger to its shareholders for approval and adoption at a
meeting to be held as soon as practicable and will use its best efforts to
hold such meeting within 60 days in accordance with Section 3.01 hereof. In
connection with such meeting, F&P shall take all steps as shall be
necessary for the prompt preparation and filing by F&P of a proxy statement
(the 'Proxy Statement'), as contemplated by Rules 14a-1 et. seq. under the
Securities Exchange Act of 1934 (the 'Exchange Act'), with the Securities
and Exchange Commission (the 'SEC') and shall use its best efforts to cause
the Proxy Statement to be mailed to the holders of shares of F&P Common
Stock as soon as practicable.
(b) Closing and Effective Time. Subject to the Merger receiving all
requisite shareholder approvals and subject to the provisions of this
Agreement, the parties shall hold a closing (the 'Closing') on (i) the
later of (A) the second business day following the meeting of the
shareholders of F&P to consider and vote upon this Agreement, the Plan of
Merger and the Merger and (B) the first business day on which the last of
the conditions set forth in Article IV to be fulfilled prior to the Closing
is fulfilled or waived or (ii) such other date as the parties hereto may
agree (the 'Closing Date'), at 10:00 A.M. (local time) at the offices of
Morgan, Lewis & Bockius, Philadelphia, Pennsylvania, or at such other time
or place as the parties hereto may
A-1
<PAGE>
agree. On the Closing Date, Articles of Merger shall be filed with the
Secretary of the Commonwealth of Pennsylvania in accordance with the
provisions of the Pennsylvania Business Corporation Law of 1988 (the
'BCL'), and the Merger shall become effective upon such filing or at such
later time on the Closing Date as may be specified in the filing with the
Secretary of the Commonwealth of Pennsylvania (the 'Effective Time'). As a
result of the Merger, the Surviving Corporation shall become an indirect
wholly-owned subsidiary of Buyer at the Effective Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties by F&P. F&P represents and
warrants to Buyer and Acquisition as follows:
(a) Organization and Qualification. F&P and each of the F&P
Subsidiaries (as hereinafter defined) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as it has
been and now is being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except for such
jurisdictions where the failure so to qualify would not have a material
adverse effect on F&P and the F&P Subsidiaries taken as a whole. Schedule
2.01(a) hereto is an accurate and complete chart showing all of the
corporations in which F&P owns directly or indirectly at least a majority
of the issued and outstanding capital stock (collectively the 'F&P
Subsidiaries'), the jurisdiction of incorporation of each such corporation
and each of the owners of any of the capital stock of each such
corporation. Except as set forth in Schedule 2.01(a) hereto, neither F&P
nor any of the F&P Subsidiaries owns any equity interest in any
corporation, partnership, joint venture or similar entity. Schedule 2.01(a)
hereto also includes accurate and complete copies of the present Articles
of Incorporation and Bylaws of F&P.
(b) Capitalization. The authorized capital stock of F&P consists of
(i) 8,000,000 shares of F&P common stock, par value $1 per share
(previously defined as the F&P Common Stock), (ii) 50,000 shares of F&P
convertible exchangeable preferred stock, par value $100 per share (the
'F&P Preferred Stock'), (iii) 1,000,000 share of F&P series preference
stock, par value $1 per share (the 'F&P Series Stock'), and (iv) 700,000
shares of F&P class B capital stock, par value $1 per share (the 'F&P Class
B Stock'). At the close of business on March 17, 1994, 5,295,250 shares of
F&P Common Stock were issued and outstanding and 13 shares of F&P Common
Stock were held in treasury by F&P, and no shares of F&P Preferred Stock,
F&P Series Stock or F&P Class B Stock were issued and outstanding. All of
such issued and outstanding shares of F&P Common Stock were validly issued,
and are fully paid and nonassessable and were issued in compliance with all
applicable Federal and state securities laws. Since March 17, 1994, no
shares of F&P Common Stock, F&P Preferred Stock, F&P Series Stock or F&P
Class B Stock have been issued except for such, if any, as may have been
issued pursuant to the options and warrants described in the next sentence.
Except for options and warrants described in Schedule 2.01(b) hereto, as of
March 17, 1994 there were no options, warrants, calls, agreements or other
rights to purchase or otherwise acquire from F&P or any of the F&P
Subsidiaries at any time, or upon the happening of any stated event, any
shares of the capital stock of F&P or any of the F&P Subsidiaries, whether
or not presently issued or outstanding, and no such options, warrants,
calls, agreements or other rights to purchase or otherwise acquire have
been granted or awarded since March 17, 1994.
(c) Authority Relative to Agreements. F&P has all requisite corporate
power and authority to execute and deliver this Agreement and the
agreements and instruments to be executed and delivered by F&P in
connection herewith (collectively, the 'Other F&P Agreements') and, subject
only to the requisite approval of its shareholders, the requisite approval
to perform its obligations hereunder and thereunder. This Agreement has
been approved the Board of Directors
A-2
<PAGE>
of F&P. The execution and delivery of this Agreement and the Other F&P
Agreements by F&P and the consummation by F&P of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of F&P and, except for the approval and adoption of this
Agreement, the Plan of Merger and the Merger by its shareholders, no other
corporate proceedings on the part of F&P are necessary to authorize the
Merger and the other transactions contemplated hereby and thereby. This
Agreement has been, and each Other F&P Agreement will be, duly executed and
delivered by F&P and, subject only to the requisite approval of its
shareholders, this Agreement constitutes, and each Other F&P Agreement when
executed and delivered will constitute, a valid and binding obligation of
F&P, enforceable against F&P in accordance with its terms.
(d) Lack of Conflict With Other Agreements. The execution and
delivery of this Agreement and the Other F&P Agreements by F&P and the
consummation by F&P of the transactions contemplated hereby and thereby
will not (i) conflict with any provision of the Articles of Incorporation
or Bylaws of F&P or (ii) except for agreements between F&P or any of the
F&P Subsidiaries and its or their lenders, result in any violation of or
default or loss of a benefit under, or permit the acceleration of any
obligation under, any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to F&P or
any of the F&P Subsidiaries, which violation, default, loss or acceleration
would have a material adverse effect on F&P and the F&P Subsidiaries, taken
as a whole.
(e) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or
foreign governmental or regulatory authority is required to be obtained or
made by F&P in connection with the execution and delivery of this Agreement
or the Other F&P Agreements by F&P or the consummation by F&P of the
transactions contemplated hereby and thereby, except for (i) filings
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder, (ii) the filing of a premerger
notification and the expiration or early termination of the waiting period
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
'HSR Act'), (iii) the filing of a notification with the German Federal
Cartel Office, (iv) as described in Schedule 2.01(e) hereto and (v) the
filing of Articles of Merger with the Secretary of the Commonwealth of
Pennsylvania.
(f) SEC Filings. F&P has made available to Buyer and Acquisition a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by F&P with the SEC since January 1, 1990
(together referred to as the 'SEC Filings'). As of their respective dates,
the SEC Filings did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except, in the case of any SEC Filing, any
statement or omission therein which has been corrected or otherwise
disclosed or updated in a subsequent SEC Filing. The financial statements
of F&P included in the SEC Filings have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly
present the financial position of F&P as at the dates thereof and the
results of its operations and changes in financial position for the periods
then ended, subject, in the case of the unaudited interim financial
statements, to the omission of footnote information and to normal year-end
audit adjustments. Except as disclosed in the SEC Filings or on Schedule
2.01(f) hereto and except for liabilities incurred since December 31, 1993
in the ordinary course of business, as of the date hereof neither F&P nor
any of the F&P Subsidiaries has any liabilities or obligations due or to
become due, whether absolute, accrued, contingent or otherwise which are
material to F&P and the F&P Subsidiaries taken as a whole.
(g) F&P has furnished to Buyer its balance sheet as of December 31,
1993, together with a statement of income for the year then ended (the
'Financial Statements'). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes
thereto) and fairly
A-3
<PAGE>
present the financial position of F&P as of December 31, 1993 and the
results of its operations and changes in financial position for the year
then ended.
(h) Proxy Statement. None of the information included in the Proxy
Statement (as amended or supplemented) will, at the time the proxy
statement is mailed or at the time of the meeting of shareholders to which
the Proxy Statement relates, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made with respect
to information relating to Buyer or Acquisition supplied by Buyer or
Acquisition for inclusion in the Proxy Statement. The Proxy Statement will
comply in all material respects, as to form and otherwise, with the
requirements of the Exchange Act and the rules and regulations promulgated
by the SEC thereunder.
(i) Litigation. There is no action, suit or proceeding pending, or to
the knowledge of F&P threatened against F&P or any of the F&P Subsidiaries,
which if determined or resolved adversely to F&P or any of the F&P
Subsidiaries is reasonably likely to have a material adverse effect on F&P
and the F&P Subsidiaries, taken as a whole. In respect of the Civil Action
92-7822 in the United States District Court for the Eastern District of
Pennsylvania ('Court'), F&P represents and warrants that (i) there were
only two objectors to the settlement agreement reached among the parties in
June 1993, (ii) the parties have reached a new settlement agreement (a copy
of which was provided to Buyer by F&P under cover of letter dated February
18, 1994), (iii) the settlement agreement has been approved by F&P's
insurers who have agreed to contribute not less than $522,273.05 toward the
settlement and has been submitted to the Court for preliminary approval,
and (iv) as of the date hereof, F&P has not been advised that the original
objectors, the Court or any other F&P shareholders will raise any material
objection to the new settlement agreement or that F&P's insurers will
withdraw their approval of same.
(j) Employee Benefit Plans. Schedule 2.01(j) hereto lists all
employee benefit plans, contracts, agreements or arrangements sponsored,
maintained or contributed to by F&P or any of its United States
subsidiaries (collectively, the 'Employee Benefit Plans') including without
limitation all employment, pension, retirement, deferred compensation,
incentive, bonus, profit-sharing, stock purchase, stock option, performance
share, stock appreciation right, phantom stock, life insurance, death or
survivor's benefit, health insurance, sickness, disability, medical,
surgical, hospital, severance, layoff or vacation plans, contracts,
agreements or arrangements. Accurate summaries of the material benefits
provided under all Employee Benefit Plans have been delivered or made
available to Buyer and Acquisition. Except as described in Schedule 2.01(j)
hereto, (i) neither F&P nor any of its subsidiaries has incurred any
obligation to contribute any material amount to any multi-employer plan, as
defined in Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended ('ERISA'), (ii) neither F&P nor any of its subsidiaries
has incurred any material liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA, and (iii) each
Employee Benefit Plan, and each other employee benefit plan described in
Section 3(3) of ERISA and maintained by F&P and the F&P Subsidiaries, is in
compliance with all applicable laws and regulations in all material
respects.
(k) Brokers. Except for the arrangement regarding CS First Boston
heretofore disclosed to Buyer, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
F&P.
(l) Environmental Matters.
(1) F&P is not subject to any existing or pending (or to the
knowledge of F&P threatened) action, suit, investigation, inquiry or
proceeding by any governmental authority or private party under, or is
currently in violation of, or subject to, any remedial obligation under,
any environmental law except for (i) violations or obligations that
would not have, either individually or in the aggregate, a material
adverse effect on the business, prospects,
A-4
<PAGE>
results of operations or condition (financial or otherwise) of F&P,
taken as a whole, and (ii) actions, suits, investigations, inquiries or
proceedings that, if adversely determined, would not have, either
individually or in the aggregate, a material adverse effect on the
business, prospects, results of operations or condition (financial or
otherwise) of F&P, taken as a whole; and
(2) all environmental notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation of the business of F&P or the F&P Subsidiaries have
been obtained or filed, except where the failure to obtain or file the
same would not have, either individually or in the aggregate, a material
adverse effect on the business, prospects, results of operations or
condition (financial or otherwise) of F&P and the F&P Subsidiaries,
taken as a whole.
(m) Title to Properties. Except as described in the SEC Filings or on
Schedule 2.01(m) hereto, F&P or one of the F&P Subsidiaries has good and
marketable title to or a valid, binding and enforceable leasehold interest
in all of its respective properties and assets, whether real, personal or
mixed, tangible or intangible, including those reflected on the Financial
Statements (except those subsequently disposed of in the ordinary course of
business), free and clear of all mortgages, liens, pledges, charges,
encumbrances, title defects or third party claims of a material nature.
(n) Material Contracts. Schedule 2.01(n) hereto lists all Material
Contracts to which F&P or any of the F&P Subsidiaries is a party. For
purposes of this Agreement, the term 'Material Contract' means any contract
providing for (i) the sale of a system at a price in excess of $2 million
(a 'System Sales Contract'), (ii) F&P or any of the F&P Subsidiaries to
refrain from engaging in conduct which is competitive with the business of
the other party to the contract in any way which is also material to F&P
and the F&P Subsidiaries taken as a whole, (iii) the license to or from any
third party of any intellectual property rights that are material to the
operation of the business of F&P and the F&P Subsidiaries (other than
software licenses made in the ordinary course of the systems business,
which may not be material to the operation of such business), (iv) any
original equipment manufacture or private label manufacture agreement, (v)
the repayment of money borrowed from a third party, excluding working
capital lines of credit of foreign F&P Subsidiaries of not more than
$1,000,000 each, (vi) the sale by F&P of goods and services pursuant to any
individual contract which F&P reasonably expects will account for at least
five percent of its consolidated gross revenues during 1994, (vii) the
purchase by F&P of goods and services pursuant to any individual contract
which F&P reasonably expects will account for at least five percent of its
consolidated payments to suppliers during 1994, and (viii) the
indemnification of former or current directors and officers of F&P or the
F&P Subsidiaries. F&P has provided or made available to Buyer an accurate
and complete copy of each Material Contract except as noted on Schedule
2.01(n) hereto and those Material Contracts which have heretofore been
filed as exhibits to the SEC Filings. Except for the agreement with Fuji
listed on Schedule 2.01(n) hereto, neither F&P nor any of the F&P
Subsidiaries is a party to any binding agreement with Fuji or any of its
affiliates. F&P and the F&P Subsidiaries have no joint venture contracts.
Each System Sales Contract is on terms which F&P believes are commercially
prudent taken as a whole and was contracted in all material respects in
accordance with F&P's internal contracting and bidding procedures and with
F&P's anticipation of obtaining its normal profit margins. F&P has no
knowledge of any material problem or claim with respect to any System Sales
Contract.
(o) Taxes. Except as disclosed on Schedule 2.01(o) hereto, F&P and
the F&P Subsidiaries have duly and timely filed all material income tax
returns, reports and statements required by law to have been filed by them
(such material income tax returns, reports and statements, collectively,
'Tax Returns'), and have duly and timely paid, deposited or made proper
provision on their financial statements for all amounts shown thereon as
due and owing. All Tax Returns (including those which have been supplied to
Buyer) are accurate and complete in all material respects. Schedule 2.01(o)
hereto describes, in each case as of the date of this Agreement, all audits
and
A-5
<PAGE>
examinations underway, or to the knowledge of the senior executive officers
of F&P threatened, by any tax authority with respect to any of the Tax
Returns, with an explanation of the principal issues involved and a good
faith estimate of the relevant taxpayer's exposure with respect thereto.
SECTION 2.02. Representations and Warranties by Buyer and
Acquisition. Buyer and Acquisition each represent and warrant to F&P as
follows: (a) Organization and Qualification; Etc. Each of Buyer and Acquisition
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as it is now being conducted. Buyer owns beneficially and of record all
the issued and outstanding capital stock of Acquisition.
(b) Authority Relative to Agreements. Each of Buyer and Acquisition
has all requisite corporate power and authority to enter into this
Agreement and the agreements and instruments to be executed and delivered
by Buyer or Acquisition in connection herewith (collectively, the 'Other
Buyer Agreements') and to perform its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Other Buyer Agreements
by Buyer and Acquisition and the consummation by Buyer and Acquisition of
the transactions contemplated hereby and thereby have been duly authorized
by the Boards of Directors of Buyer and Acquisition and no other corporate
proceedings on the part of Buyer or Acquisition are necessary to authorize
the Merger and the other transactions contemplated hereby and thereby. This
Agreement has been, and each Other Buyer Agreement will be, duly executed
and delivered by Buyer or Acquisition and this Agreement constitutes, and
each Other Buyer Agreement when executed and delivered will constitute, a
valid and binding obligation of Buyer or Acquisition, as the case may be,
enforceable against Buyer and Acquisition in accordance with its terms.
(c) Lack of Conflicts with Other Agreements. The execution and
delivery of this Agreement and the Other Buyer Agreements by Buyer and
Acquisition and the consummation by Buyer and Acquisition of the
transactions contemplated hereby and thereby will not (i) conflict with any
provision of the charter or organizational documents of Buyer or
Acquisition or (ii) result in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Buyer or Acquisition,
which violation, default, loss or acceleration would have a material
adverse effect on Buyer or Acquisition.
(d) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or
foreign governmental or regulatory authority is required to be made or
obtained by Buyer or Acquisition in connection with the execution and
delivery of this Agreement or any Other Buyer Agreement by Buyer or
Acquisition or the consummation by Buyer or Acquisition of the transactions
contemplated hereby and thereby, except for (i) the filing of a premerger
notification and the expiration or early termination of the waiting period
required by the HSR Act, (ii) the filing of a notification with the German
Federal Cartel Office and (iii) the filing of Articles of Merger with the
Secretary of the Commonwealth of Pennsylvania.
(e) Proxy Statement and Other Information. None of the information
relating to Buyer or Acquisition which is supplied by Buyer for inclusion
in the Proxy Statement (as such information is amended or supplemented)
will, at the time the Proxy Statement is mailed or at the time of the
meeting of shareholders to which the Proxy Statement relates, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation
or warranty is otherwise made by Buyer or Acquisition with respect to the
Proxy Statement.
(f) Brokers. Except for Merrill Lynch & Co., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or
on behalf of Buyer or Acquisition.
A-6
<PAGE>
(g) Financing. Buyer has on hand or access to, and will make
available to Acquisition on or prior to the Effective Time, funds
sufficient to pay the Merger Price for all issued and outstanding shares of
F&P Common Stock pursuant to the Merger and to pay all other amounts owing
by F&P or Acquisition in connection with the transactions contemplated by
this Agreement.
ARTICLE III
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.01. Shareholder Approval.
(a) As soon as reasonably practicable following the date of this
Agreement, F&P shall take all action necessary in accordance with the
Exchange Act, the laws of the Commonwealth of Pennsylvania and its Articles
of Incorporation and Bylaws to call, give notice of and convene a meeting
on a date proposed by F&P as to which Buyer has no reasonable objection
(the 'Meeting') of its shareholders to consider and vote upon the approval
and adoption of this Agreement, the Plan of Merger and the Merger and for
such other purposes as may be necessary or desirable. The Board of
Directors of F&P shall, subject to its fiduciary duties, recommend without
qualification of any nature that F&P's shareholders vote to approve and
adopt this Agreement, the Plan of Merger and the Merger and any other
matters to be submitted to F&P's shareholders in connection therewith as to
which Buyer has no reasonable objection. The Board of Directors of F&P
shall, subject to its fiduciary duties, use its reasonable best efforts to
solicit and secure from shareholders of F&P such approval and adoption,
which efforts may include without limitation causing F&P to solicit
shareholder proxies therefor and to advise Buyer upon its request from time
to time as to the status of the shareholder vote then tabulated.
(b) Promptly following the date of this Agreement, F&P shall prepare
and file with the SEC under the Exchange Act and the rules and regulations
promulgated by the SEC thereunder, a preliminary draft of the Proxy
Statement. F&P, Buyer and Acquisition shall cooperate fully with each other
in the preparation and filing of the Proxy Statement and any amendments and
supplements thereto. The Proxy Statement shall not be filed, and no
amendment or supplement thereto shall be made by F&P, without Buyer's prior
approval which shall not be unreasonably delayed or withheld and no
communication with the SEC shall be had, without prior consultation with
Buyer and Acquisition and their counsel. F&P will use its best efforts to
have any review of the Proxy Statement conducted by the SEC promptly. As
soon as reasonably practicable following the date of this Agreement, F&P
shall cause to be mailed a definitive Proxy Statement to its shareholders
entitled to vote at the Meeting promptly following completion of any review
by, or in the absence of such review, the termination of any applicable
waiting period of, the SEC.
SECTION 3.02. Conduct of F&P's Business. F&P (for purposes of the rest of
this Section 3.02, references to F&P shall be deemed to refer to F&P and the F&P
Subsidiaries) covenants and agrees that, from the date of this Agreement to the
Effective Time, unless Buyer or Acquisition shall otherwise agree in writing or
as otherwise expressly contemplated by this Agreement:
(a) F&P shall not directly or indirectly do any of the following: (i)
issue, sell, pledge, dispose of or encumber any assets of F&P other than in
the ordinary course of its business consistent with past practice, (ii)
amend or propose to amend its Articles of Incorporation or Bylaws, (iii)
split, combine or reclassify any outstanding shares of its capital stock,
or declare, set aside or pay any dividend, other than an intercompany
dividend by any F&P Subsidiary payable in cash (provided such intercompany
dividend has no adverse tax consequences to either the payor or recipient
of any such dividend), stock, property or otherwise with respect to such
shares, (iv) redeem, purchase, acquire or offer to acquire any shares of
its capital stock or (v) enter into any agreement with respect to any of
the matters set forth in this Section 3.02(a);
(b) F&P shall not (i), except in connection with the exercise of any
Company Stock Options or Company Warrants (each as defined in the Plan of
Merger), issue, sell, pledge or dispose of, or
A-7
<PAGE>
agree to issue, sell, pledge or dispose of, any additional shares of, or
securities convertible or exchangeable for, or any options, warrants or
rights of any kind to acquire any shares of, its capital stock of any class
or other property or assets whether pursuant to any rights agreement, stock
plan or otherwise, (ii) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof, (iii) incur any indebtedness for borrowed
money or issue any debt securities, except in the ordinary course of its
business consistent with past practice under the credit facilities listed
on Schedule 2.01(n) hereto, (iv) enter into any new Material Contract or
modify any existing Material Contract in any material respect except in the
ordinary course of its business consistent with past practice, (v)
terminate, modify, assign, waive, release or relinquish any material
contract rights or amend any material rights or claims not in the ordinary
course of its business consistent with past practice or except as expressly
provided herein or (vi) dissolve or otherwise alter its corporate
existence;
(c) F&P shall not grant any increase in the salary or other
compensation of its employees or grant any bonus to any employee, except in
the ordinary course of its business consistent with past practice. F&P
shall not enter into any employment agreement or make any loan to or enter
into any material transaction of any other nature with any officer or other
executive employee of F&P;
(d) F&P shall not take any action to institute any new severance or
termination pay practices with respect to any directors, officers or
employees of F&P or to increase the benefits payable under its severance or
termination pay practices;
(e) F&P shall not hire any new employees except for employees having
an annualized salary of less than $100,000 who are terminable at will;
(f) F&P shall not adopt or amend, in any respect, except as may be
required by applicable law or regulation, any bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund, plan or arrangement for the benefit or welfare of any directors,
officers or employees, except in the ordinary course of its business
consistent with past practice;
(g) F&P shall not mortgage, pledge or otherwise subject to any lien,
security interest, encumbrance or charge of any nature, any of its property
or assets, or become committed so to do, or permit or suffer any of such
property or assets to become subject to any mortgage, pledge, lien,
security interest, encumbrance or charge of any nature, other than liens of
current taxes not yet due and payable, or become committed to do so;
(h) F&P shall use its reasonable best efforts to maintain its
relationships with its suppliers and customers and, if and as requested by
Buyer or Acquisition, (i) F&P shall make reasonable arrangements as
reasonably requested by Buyer or Acquisition for representatives of Buyer
or Acquisition to meet with customers and suppliers of F&P (if Buyer shall
give F&P reasonable notice of such meetings) and (ii) F&P shall schedule,
and the management of F&P shall participate in, meetings of representatives
of Buyer or Acquisition with employees of F&P;
(i) F&P shall not make any new commitments for capital expenditures in
excess of $100,000 individually or $500,000 in the aggregate, except for
expenditures for maintenance of capital assets in the ordinary course of
its business consistent with past practice;
(j) F&P shall maintain all of the assets used or useful to the
business of F&P in good repair, order and condition, maintain in full force
and effect all franchises, licenses, permits, consents, approvals, rights,
waivers and other authorizations, governmental or otherwise, currently in
effect and maintain in full force all policies of insurance or satisfactory
substitute insurance policies insuring against the risks, damages and
losses covered by the insurance policies currently in force, in each case
consistent with its past practice.
(k) F&P shall not otherwise conduct its business except in the
ordinary course consistent with past practice; and
A-8
<PAGE>
(l) F&P shall obtain agreements in form and substance reasonably
satisfactory to Buyer from holders of all Company Stock Options and holders
of all Company Warrants to cancel such options and warrants in accordance
with section 3(d) of the Plan of Merger, and (ii) an agreement in form and
substance reasonably satisfactory to Buyer from Mr. E. Joseph Hochreiter
('Hochreiter') waiving any and all rights Hochreiter has or may have, by
virtue of the transactions contemplated hereby, to receive the 'severance
payment' defined in section 11(b) of that certain Employment Agreement,
dated October 23, 1991, by and between F&P and Hochreiter.
SECTION 3.03. Other Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including without limitation using its reasonable best efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, including without limitation filings required under
the HSR Act, its counterpart provisions under German law, and under the Exchange
Act.
SECTION 3.04. Inquiries and Negotiations. F&P shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore in respect of the acquisition of all or any
substantial part of the business and properties of F&P, whether by sale of
assets or shares of capital stock of F&P, or by merger, consolidation,
recapitalization, liquidation or similar transaction including F&P
(collectively, an 'Acquisition Transaction'). F&P shall not, and shall not
permit its officers, employees, representatives or agents to, directly or
indirectly, (a) solicit or initiate discussions or negotiations with, or provide
any nonpublic information to, any person other than Buyer or its affiliates
concerning an Acquisition Transaction, or (b) otherwise solicit, initiate or
encourage inquiries or the submission of any proposal contemplating an
Acquisition Transaction. F&P shall promptly communicate to Buyer the terms of
any inquiry or proposal which it may receive in respect of an Acquisition
Transaction. F&P's notification under this Section 3.04 shall include the
identity of the person making such proposal or any other such information with
respect thereto as Buyer may reasonably request. Nothing contained in this
Agreement shall be construed to prohibit F&P from (a), if advised in writing by
counsel to be required by fiduciary obligations under applicable law, providing
non-public information to, and participating in negotiations with, a person who
has made a bona fide offer to effect an Acquisition Transaction for an all cash
purchase price in excess of the Merger Price and (b) accepting an offer for an
Acquisition Transaction which the Board of Directors of F&P, on the advice in
writing of its investment banker, believes is more favorable to F&P or to its
shareholders than the Merger contemplated hereby.
SECTION 3.05. Notification of Certain Matters. F&P shall give prompt
notice to Buyer and Acquisition, and Buyer and Acquisition shall give prompt
notice to F&P, of (i) the occurrence, or failure to occur, of any event which
such party believes would likely cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time and (ii) any
material failure of F&P, Buyer or Acquisition, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
SECTION 3.06. Access to Information.
(a) F&P shall, shall cause its officers, directors and employees to,
and shall use its reasonable best efforts to cause its representatives and
agents (including without limitation its attorneys and accountants) to,
afford, from the date of this Agreement to the Effective Time, the
officers, employees and agents of Buyer and Acquisition complete access at
all reasonable times to its officers, employees, agents, properties, books,
records, work papers, and shall furnish Buyer and Acquisition all
financial, operating and other data and information as Buyer or
Acquisition, through its officers, employees or agents, may reasonably
request.
(b) If this Agreement is terminated, the parties hereto shall comply
with the terms of the letter agreement dated October 8, 1993 between F&P
and Finmeccanica S.p.A. regarding
A-9
<PAGE>
confidentiality of all proprietary information of F&P and Buyer and its
affiliates, including without limitation the return of all materials
provided by the other party or certification of their destruction.
SECTION 3.07. Public Announcements. Neither F&P, Buyer nor Acquisition
shall make, issue or release any oral or written public announcement or
statement concerning, or acknowledgment of the existence of, or reveal the
terms, conditions or status of, the transactions contemplated by this Agreement,
or make any other communication to its shareholders or the investing public,
directly or indirectly (including without limitation press releases and
statements to securities analysts), without first making a good faith attempt to
obtain the prior approval of, or concurrence in, the contents of such
announcement, acknowledgment or statement by the other of them, which approval
or concurrence shall not be unreasonably withheld or delayed.
SECTION 3.08. Indemnification; Director's and Officer's Insurance. After
the Effective Time, the Surviving Corporation shall indemnify and hold harmless
(and shall also advance expenses as incurred to the fullest extent permitted
under applicable law to) each person who is now, or has been prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of F&P
or any of the F&P Subsidiaries (the 'Indemnified Parties') against (i) all
losses, claims, damages, costs, expenses (including without limitation counsel
fees and expenses), settlement payments or liabilities arising out of or in
connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on, or arising in whole or in part out of, the fact
that such person is or was an officer or director of F&P or any of the F&P
Subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time and whether or not asserted or claimed prior to
or at or after the Effective Time ('Indemnified Liabilities') and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement, any Other F&P Agreement or the
transactions contemplated hereby or thereby, in each case to the fullest extent
required or permitted under applicable law or under the Surviving Corporation's
Articles of Incorporation or Bylaws (which in relevant part are and shall remain
identical to F&P's Articles of Incorporation and Bylaws) or any indemnification
agreements in effect on the date hereof (to the extent consistent with
applicable law). Any determination required to be made with respect to whether
an Indemnified Party's conduct complies with the standards set forth under
applicable law or the Surviving Corporation's Articles of Incorporation or
Bylaws shall be made by a person, mutually acceptable to F&P and the Indemnified
Party, who shall have been a director or executive officer of a corporation
whose shares of common stock were listed during at least one year of such
service on the New York Stock Exchange or the American Stock Exchange or quoted
on the National Association of Securities Dealers Automated Quotations System.
The parties hereto intend, to the extent not prohibited by applicable law, that
the indemnification provided for in this Section 3.08 shall apply without
limitation to negligent acts or omissions by an Indemnified Party. The Surviving
Corporation's Articles of Incorporation and Bylaws shall not be amended in a
manner that adversely affects the rights of any Indemnified Party thereunder or
under this Section 3.08, unless otherwise required by applicable law. To the
extent available on terms satisfactory to the Surviving Corporation, the
Surviving Corporation shall maintain, for not less than ten years after the
Effective Time, director's and officer's liability insurance covering each
indemnified person on terms not materially less favorable than the insurance
maintained in effect by F&P on the date hereof in terms of coverage (including
without limitation types of claims, time period of claims, exclusions and
persons covered), amounts and deductibles (but in no event shall the coverage be
less than that being maintained for the benefit of the officers and directors of
Buyer). Buyer hereby guarantees the payment and performance of the Surviving
Corporation's obligations in this Section 3.08. Each Indemnified Party is
intended to be a third party beneficiary of this Section 3.08 and may
specifically enforce its terms. This Section 3.08 shall not limit or otherwise
adversely affect any rights any Indemnified Party may have under any agreement
with F&P or under F&P's Articles of Incorporation or Bylaws.
SECTION 3.09. Foreign Subsidiaries. Following approval of this Agreement
by the shareholders of F&P and immediately prior to the Effective Time, Buyer
shall have the right to cause such of its affiliates as it shall select to
purchase the non-United States F&P Subsidiaries and, if Buyer
A-10
<PAGE>
so elects, F&P shall sell or otherwise cause such F&P Subsidiaries to be sold to
such affiliates of Buyer on such terms and in such manner as Buyer shall select
provided that (a) such purchase and sale transactions do not have an adverse
effect on F&P, and (b) no such transaction will be deemed to constitute a breach
of any representation, warranty, or covenant of F&P herein contained.
SECTION 3.10. Buyer Loan to F&P.
(a) Not later than April 20, 1994, Buyer will loan to F&P the sum of
$5.3 million, said loan to be made on the terms of this Section 3.10. F&P
will use the loan solely to pay the amount payable by F&P under Section
5.05 of the Merger Agreement with Moorco International Inc. ('Moorco') and
said amount will be paid by F&P to Moorco immediately on receipt of this
loan from Buyer.
(b) F&P's obligations to repay the loan will be evidenced by a
promissory note ('Note') in form and substance reasonably satisfactory to
Buyer and F&P. The Note will be delivered against receipt of the loan and
will be payable on the Due Date (as herein defined). Interest will accrue
on the Note from the date of the loan until the Note is paid in full at the
annual rate of 9 1/2 percent. At Buyer's election, F&P's obligations to pay
the Note will be secured by a perfected security interest in all of F&P's
U.S. assets, said interest to be granted pursuant to one or more security
agreements prepared by and in form and substance reasonably satisfactory to
Buyer and to be executed by F&P and delivered to Buyer on the date of the
loan. Buyer acknowledges that both the Note and the security interests to
be granted in it will, in all respects, be subordinated to the right of all
other secured lenders to F&P. Prior to Buyer making the loan, F&P will
obtain the consent of Bank of America Business Credit and any other parties
whose consent is required for the transactions contemplated by this Section
3.10.
(c) If this Agreement is terminated by F&P or Buyer pursuant to
Sections 5.01, 5.02, 5.03 or 5.04, then the Due Date will be ten business
days after the date of such termination, provided if this Agreement is
terminated as a result of conditions or circumstances beyond F&P's control
or pursuant to Section 5.03(a) hereof, then the Note will be due and
payable in three annual equal installments on April 13, 1995, 1996 and 1997
and accrued interest will be payable with each annual installment, and
provided further that for purposes of the foregoing the condition set forth
in Section 4.01(a) hereof shall be deemed to be within F&P's control and as
a result termination of this Agreement because of the failure of this
condition to be satisfied will not extend the Due Date beyond ten business
days after termination. If this Agreement is not terminated, then the Due
Date will be such date after the Effective Time as Buyer may select.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.01. Conditions to the Merger Relating to Buyer and
Acquisition. The obligation of Buyer and Acquisition to effect the Merger is
subject to the satisfaction prior to the Effective Time of the following
conditions:
(a) Shareholder Approval and Dissenters Rights. This Agreement, the
Plan of Merger and the Merger shall have been approved and adopted by the
requisite vote of the holders of the outstanding F&P Common Stock in
accordance with the BCL and F&P's Articles of Incorporation and Bylaws. The
aggregate number of Dissenting Shares (as defined in the Plan of Merger)
shall not exceed 10% of the outstanding shares of F&P Common Stock.
(b) No Injunction. No order, decree, ruling or other action of a
court or governmental agency of competent jurisdiction, restraining,
enjoining or otherwise prohibiting the Merger, shall be in effect.
(c) HSR Act. The waiting periods under the HSR Act and its
counterpart provisions under German law shall have terminated or early
termination thereof shall have been granted, or all approvals required in
connection therewith, if any, shall have been obtained.
A-11
<PAGE>
(d) Truth of Representations and Warranties and Absence of Material
Adverse Change. The representations and warranties of F&P herein shall be
true in all material respects at and as of the Closing Date (except to the
extent that such representation and warranty speaks as of another date) and
no material adverse change shall have occurred to the business, financial
condition, property or prospects of F&P taken as a whole since the date of
the Financial Statements provided that the matters identified on Schedule
4.01(d) hereto shall not be included in any determination of a material
adverse change.
(e) In a manner reasonably satisfactory to the parties:
(1) Jay H. Tolson and E. Joseph Hochreiter ('Tolson and
Hochreiter') will expressly indemnify F&P, Buyer and Acquisition from
any and all liability arising out of and/or related to the issuance of
the common stock purchase warrants, which indemnity will be secured by
the deposit of $10,000,000 received by them in the Merger into an
interest bearing escrow account at Mellon Bank, N.A. to be invested in
U.S. Treasury obligations having maturities of not more than 5 years;
(2) Tolson and Hochreiter expressly shall waive any indemnities
running to them from F&P, by contract (including without limitation
Section 3.08 hereof), charter, by-law or otherwise for any liability
arising out of or connected with the issuance of the warrants;
(3) Buyer shall agree that F&P shall pay the reasonable defense
costs and expenditures incurred in connection with the defense of any
claim or action relating to said warrants up to the $500,000
self-insured retention under F&P's present directors and officers'
liability insurance policy and will work with Tolson and Hochreiter on a
best efforts basis to secure coverage for any additional expenditures
from the directors and officers' insurance carrier.
(f) Foreign Subsidiaries. F&P shall have complied in all material
respects with its covenants in Section 3.09 hereof.
SECTION 4.02. Conditions to the Merger Relating to F&P. The obligation of
F&P to effect the Merger is subject to the satisfaction prior to the Effective
Time of the following conditions:
(a) Shareholder Approval. This Agreement, the Plan of Merger and the
Merger shall have been approved and adopted by the requisite vote of the
holders of the outstanding F&P Common Stock in accordance with the BCL and
F&P's Articles of Incorporation and Bylaws.
(b) No Injunction. No order, decree, ruling or other action of a
court of competent jurisdiction, restraining, enjoining or otherwise
prohibiting the Merger, shall be in effect.
(c) HSR Act. The waiting period under the HSR Act and its counterpart
provisions under German law shall have terminated or early termination
thereof shall have been granted, or all approvals required in connection
therewith, if any, shall have been obtained.
ARTICLE V
TERMINATION AND ABANDONMENT
SECTION 5.01. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by holders of shares of Company Capital
Stock, by the mutual consent of the F&P, Buyer and Acquisition, by action of
their respective Boards of Directors.
SECTION 5.02. Termination by F&P, Buyer or Acquisition. This Agreement may
be terminated and the Merger may be abandoned by action of either the Board of
Directors of the F&P or the Boards of Directors of Buyer and Acquisition if (a)
the Merger shall not have been consummated on or before six months after the
date hereof, or such later date as may be mutually agreed to by the parties
hereto (but only if the party seeking to terminate this Agreement is not
otherwise in breach in any material respect of any of its obligations hereunder)
or (b) any court or governmental agency of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action restraining,
A-12
<PAGE>
enjoining or otherwise prohibiting the Merger and such order, decree, ruling, or
other action shall have become final and nonappealable.
SECTION 5.03. Termination by F&P. This Agreement may be terminated and the
Merger may be abandoned by action of the Board of Directors of F&P if (a) Buyer
or Acquisition shall have failed to comply in any material respect with any of
the covenants or agreements contained in this Agreement to be complied with or
performed by it at or prior to the Effective Time and such failure has not been
cured within 30 days after receipt of notice thereof, or (b) the Board of
Directors of F&P shall have withdrawn or modified in a manner adverse to Buyer
or Acquisition its approval or recommendation of the Merger in order to approve
an Acquisition Transaction with any third party.
SECTION 5.04. Termination by Buyer and Acquisition. This Agreement may be
terminated and the Merger may be abandoned by action of the Boards of Directors
of Buyer and Acquisition if (a) F&P shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement to
be complied with or performed by it at or prior to the Effective Time and such
failure has not been cured within 30 days after receipt of notice thereof, (b)
any condition to the Merger as set out in Section 4.01 has not been satisfied
for any reason or (c) the Board of Directors of F&P shall not recommend to its
shareholders the approval of this Agreement, or shall withdraw or modify in a
manner adverse to Buyer or Acquisition its approval or recommendation of the
Merger, or shall take any other action to facilitate an Acquisition Transaction
with any third party.
SECTION 5.05. Effect of Termination. Except as provided in Section 3.06(b)
hereof with respect to information obtained in connection with the transactions
contemplated hereby, in the event of the termination of this Agreement and the
abandonment of the Merger, this Agreement shall thereafter become void and have
no effect, and except as provided in Section 3.10 hereof no party thereto shall
have any liability to any other party hereto or its shareholders or directors or
officers in respect thereof, and each party shall be responsible for its own
expenses, except that nothing herein shall relieve any party from liability for
any willful breach thereof. Notwithstanding the foregoing, in the event that F&P
terminates this Agreement pursuant to clause (b) in Section 5.03 hereof, or
Buyer and Acquisition terminate this Agreement pursuant to clause (c) of Section
5.04 hereof, then F&P shall, within ten business days following the termination
of this Agreement, pay Buyer a termination fee payable in cash of three percent
of aggregate consideration called for by the Merger which, for purposes hereof,
is defined to be the aggregate Merger Price plus the indebtedness of F&P set
forth in the Financial Statements. Except as provided in the immediately
preceding sentence, and whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
SECTION 5.06. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; except
that after approval of the Merger by the shareholders of F&P, no amendment may
be made which decreases the amount of cash to which the shareholders of F&P are
entitled pursuant to this Agreement or otherwise materially adversely affects
the shareholders of F&P without the further approval of a majority of the votes
cast by the shareholders of F&P.
SECTION 5.07. Waiver. Any time prior to the Effective Time, any party
hereto may (a) in the case of the Buyer or Acquisition, extend the time for the
performance of any of the obligations or other acts of F&P or, subject to the
provisions contained in Section 5.06 hereof, waive compliance with any of the
agreements of F&P or with any conditions to the respective obligations of Buyer
or Acquisition, or (b) in the case of F&P, extend the time for the performance
of any of the obligations or other acts of Buyer or Acquisition, or waive
compliance with any conditions to its own obligations. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party by a duly authorized
officer.
A-13
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by facsimile
transmission, registered or certified mail, postage prepaid, or Federal Express
or similar overnight delivery addressed, in the case of F&P, to it at
Fischer & Porter Company
125 East County Line Road
Warminster, PA 18974
Attention: Mr. Jay H. Tolson
Chairman and Chief Executive Officer
Facsimile No. 215-674-6622
with a required copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
Attention: Timothy Maxwell, Esq.
Facsimile No. 215-963-5299
or, in the case of Buyer and Acquisition, to them at:
Elsag Bailey Process Automation
29801 Euclid Avenue
Wickliffe, Ohio 44092
Attention: Mark V. Santo, Esquire
Facsimile No. 216-585-7578
with a required copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, OH 44114
Attention: John P. Dunn, Esquire
Facsimile No. 216-579-0212
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
SECTION 6.02. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.03. Headings. The headings herein are for convenience of
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions of this Agreement.
SECTION 6.04. No Survival of Representations or Warranties. None of the
representations or warranties included or provided for herein or in any schedule
or certificate or other document delivered pursuant to this Agreement shall
survive consummation of the Merger.
SECTION 6.05. Entire Agreement. This Agreement, which includes the Exhibit
and Schedules hereto, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties, with
respect to the subject matter of this Agreement.
SECTION 6.06. Cooperation. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, such action, to execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional documents
and instruments and to do, or cause to be done, all things necessary, proper or
A-14
<PAGE>
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this Agreement.
SECTION 6.07. No Rights; Etc. Nothing in this Agreement express or implied
is intended to confer upon any other person, other than the Indemnified Parties,
any rights or remedies under or by reason of this Agreement.
SECTION 6.08. No Assignment. This Agreement shall not be assigned, by
operation of law or otherwise.
SECTION 6.09. Governing Law. This Agreement shall be governed in all
respects, including without limitation validity, interpretation and effect, by
the laws of the Commonwealth of Pennsylvania, applicable to contracts made and
to be performed in the Commonwealth.
SECTION 6.10. Consent to Jurisdiction; Etc. Each of the parties hereto
irrevocably and unconditionally (a) agrees that any suit, action or other legal
proceeding ('Suit') arising out of this Agreement may be brought and adjudicated
in the United States District Court for the Eastern District of Pennsylvania,
or, if such court will not accept jurisdiction, in any court of competent civil
jurisdiction sitting in Montgomery County, Pennsylvania, (b) submits to the
non-exclusive jurisdiction of any such court for the purposes of any such Suit
and (c) waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that it is not subject to the jurisdiction
of the above courts, that such Suit is brought in an inconvenient forum or that
the venue of such Suit is improper. Each of the parties hereto also irrevocably
and unconditionally consents to the service of any process, pleadings, notices
or other papers in a manner permitted by the notice provisions of Section 6.01
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
FISCHER & PORTER COMPANY
By /s/__Jay H. Tolson_______________________
As its Chairman and
Chief Executive Officer
ELSAG BAILEY PROCESS AUTOMATION N.V.
By /s/__Vincenzo Cannatelli_________________
As its Managing Director
EBPA ACQUISITION, INC.
By /s/__Vincenzo Cannatelli_________________
As its President
A-15
<PAGE>
EXHIBIT A
PLAN OF MERGER
MERGING
EBPA ACQUISITION, INC.
(A PENNSYLVANIA CORPORATION)
WITH AND INTO
FISCHER & PORTER COMPANY
(A PENNSYLVANIA CORPORATION)
BACKGROUND
FISCHER & PORTER COMPANY, a Pennsylvania corporation ('F&P'), ELSAG
BAILEY PROCESS AUTOMATION N.V., a Dutch corporation ('Buyer'), and
EBPA ACQUISITION, INC., a Pennsylvania corporation and an indirect
wholly-owned subsidiary of Buyer ('Acquisition'), are parties to an
Agreement and Plan of Reorganization, dated as of April 13, 1994 (the
'Merger Agreement'), providing for the merger (the 'Merger') of
Acquisition with and into F&P upon the terms and conditions set forth
in this Plan of Merger and pursuant to the Pennsylvania Business
Corporation Law of 1988 (the 'BCL'). Acquisition and F&P are sometimes
hereinafter together referred to as the 'Constituent Corporations'.
Terms used herein that are not defined herein shall have the meaning
ascribed thereto in the Merger Agreement.
TERMS AND CONDITIONS
1. Merger. The Constituent Corporations shall effect the Merger upon the
terms and subject to the conditions set forth in this Plan of Merger.
(a) The Merger. At the Effective Time (as hereinafter defined),
Acquisition shall be merged with and into F&P pursuant to this Plan of
Merger, the separate corporate existence of Acquisition shall cease (except
as it may be continued by operation of law) and F&P shall continue as the
surviving corporation under the corporate name 'Fischer & Porter Company',
all upon the terms and subject to the conditions provided for in this Plan
of Merger and pursuant to the BCL. F&P, as it exists from and after the
Effective Time, is sometimes hereinafter referred to as the 'Surviving
Corporation'.
(b) Effect of the Merger. The Merger shall have the effect provided
therefor by the BCL; including, without limitation, that all the property,
real, personal and mixed, and franchises of each of the Constituent
Corporations, and all debts due on whatever account to either of them,
including subscriptions for shares and other choses in action belonging to
either of them, shall be deemed to be transferred to and vested in the
Surviving Corporation without further action; and title to any real estate,
or any interest therein, vested in either of the Constituent Corporations
shall not revert or be in any way impaired by reason of the Merger; and the
Surviving Corporation shall thenceforth be responsible for all the
liabilities of each of the Constituent Corporations; but liens upon the
property of Constituent Corporations shall not be impaired by the Merger
and any claim existing or action or proceeding pending by or against either
of the Constituent Corporations may be prosecuted to judgment as if the
Merger had not taken place or the Surviving Corporation may be proceeded
against or substituted in its place.
(c) Consummation of the Merger. On the Closing Date, Articles of
Merger shall be filed with the Secretary of the Commonwealth of
Pennsylvania in accordance with the provisions of the BCL, and the Merger
shall become effective upon such filing or at such later time on the
Closing Date as may be specified in the filing with the Secretary of the
Commonwealth of Pennsylvania (the 'Effective Time').
A-16
<PAGE>
2. Articles of Incorporation; Bylaws; Directors and Officers. The Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
shall be the Articles of Incorporation of Acquisition until thereafter amended
in accordance with the provisions therein and as provided by the BCL. The Bylaws
of the Surviving Corporation from and after the Effective Time shall be the
Bylaws of F&P as in effect immediately prior to the Effective Time, continuing
until thereafter amended in accordance with their terms and the Articles of
Incorporation of the Surviving Corporation and as provided by the BCL. The
initial directors of the Surviving Corporation shall be the directors of
Acquisition immediately prior to the Effective Time, in each case until their
successors are elected and qualified, and the initial officers of the Surviving
Corporation shall be the officers of F&P immediately prior to the Effective
Time, in each case until their successors are duly elected and qualified.
3. Conversion and Cancellation of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Acquisition, F&P or
any holder of any shares of capital stock of F&P:
(a) Conversion of Subsidiary Common Stock. Each share of Common
Stock, par value $.01 per share, of Acquisition shall be converted into a
share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock. Each share of F&P common stock,
par value $1.00 per share (the 'F&P Common Stock') that may be held in the
treasury of F&P shall be canceled and retired and no capital stock of the
Surviving Corporation, cash or other consideration shall be paid or
delivered in exchange therefor.
(c) Conversion of F&P Common Stock. Except for any Dissenting Shares
(as hereinafter defined), each remaining outstanding share of F&P Common
Stock shall be converted into the right to receive cash, without interest,
in the amount of $24.25 (the 'Merger Price') per share.
(d) Cancellation of Stock Options and Warrants. Immediately prior to
the Effective Time, each option to purchase shares of F&P Common Stock
(individually, a 'F&P Stock Option' and collectively, the 'F&P Stock
Options') issued pursuant to F&P's Nonqualified Stock Option Plan, its
Nonqualified Stock Option Plan (1991) or its 1982 Incentive Stock Option
Plan (collectively, the 'F&P Stock Option Plans'), and each outstanding
warrant to purchase shares of F&P Common Stock (individually, a 'F&P
Warrant' and collectively, the 'F&P Warrants'), which is then outstanding,
whether or not then vested or exercisable, shall become exercisable in
full, shall be canceled, and the holder thereof shall be entitled to
receive from F&P immediately prior to the Effective Time an amount equal to
the excess, if any, of (i) the Merger Price multiplied by the number of
shares of F&P Common Stock subject to the F&P Stock Option or F&P Warrant,
over (ii) the exercise price of the F&P Stock Option or F&P Warrant
multiplied by the number of shares of F&P Common Stock subject thereto. The
funds required to make such payments shall be made available to F&P by
Acquisition immediately prior to the Effective Time. Appropriate
arrangements shall be made for reduction of the amount to be paid to each
holder of canceled F&P Stock Options for any applicable withholding taxes
or other amounts required by law to be paid or withheld, either through
reducing the amount paid to, or by obtaining a cash payment from, such
holder. Prior to the Effective Time, the Board of Directors of F&P shall
take such action as may be required under the F&P Stock Option Plans, the
governing option agreements and warrant agreements or otherwise to
effectuate the foregoing.
(e) Dissenting Shares. Notwithstanding anything herein to the
contrary, shares of F&P Common Stock that are outstanding immediately prior
to the Effective Time and that are held by shareholders, if any, who are
entitled to assert a right to dissent from the Merger and who demand and
validly perfect their rights to receive the 'fair value' of their shares
with respect to the Merger under Section 1574 of the BCL (the 'Dissenting
Shares') shall not be converted into or be exchangeable for the right to
receive the Merger Price, but the holders of such shares of F&P Common
Stock shall be entitled solely to payment of the 'fair value' of such
shares in accordance with the provisions of the BCL; except that (i) if
such demand to receive 'fair Value' shall be withdrawn upon the consent of
the Surviving Corporation, (ii) if this Plan of Merger shall
A-17
<PAGE>
be terminated, or the Merger shall not be consummated, (iii) if no demand
or petition for the determination of 'fair value' by a court shall have
been made or filed within the time provided in the provisions of the BCL or
(iv) if a court of competent jurisdiction shall determine that such holder
of Dissenting Shares is not entitled to the relief provided by the
provisions of the BCL, then the right of such holder of Dissenting Shares
to be paid the 'fair value' of his shares of F&P Common Stock shall cease
and with respect to clauses (i), (iii) and (iv) above such Dissenting
Shares shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
amount into which such shares would have been converted in the Merger in
accordance with Section 3(c) hereof, without any interest thereon, and with
respect to clause (ii) above the status of such shareholder shall be
restored retroactively without prejudice to any corporate proceeding which
may have been taken during the interim.
(f) No Convertible Securities. At the Effective Time, there shall not
be any securities, rights, warrants, options or other instruments
originally issued by F&P which, after consummation of the Merger, would be
convertible into or exercisable for securities of the Surviving
Corporation.
4. Merger Payment Procedure.
(a) Merger Paying Agent. Acquisition and F&P agree that Chemical Bank
or another bank or trust company reasonably acceptable to Acquisition and
F&P shall be designated by Acquisition as the paying agent for the Merger
(the 'Merger Paying Agent'). The Surviving Corporation shall deposit with
the Merger Paying Agent at the Effective Time such funds as are required
for the conversion of shares of F&P Common Stock pursuant to Section 3(c)
hereof (the 'Payment Fund').
(b) Payment Procedure. As soon as practicable after the Effective
Time, the Surviving Corporation shall cause the Merger Paying Agent to
distribute to holders of F&P Common Stock so converted, upon surrender to
the Merger Paying Agent of one or more certificates for such shares of F&P
Common Stock for cancellation and a properly completed letter of
transmittal, a bank check for the cash being paid in respect of the
aggregate number of shares of F&P Common Stock previously represented by
the stock certificates surrendered. If for any reason (including without
limitation losses) the Payment Fund is inadequate to pay the amounts to
which the holders of shares of F&P Common Stock shall be entitled under
Section 3(c) hereof, the Surviving Corporation shall be liable for the
payment thereof. In no event shall the holder of any surrendered
certificates for shares of F&P Common Stock be entitled to receive interest
on any of the funds to be received in the Merger. If a check is to be sent
to a person other than the person in whose name the certificates for shares
of F&P Common Stock surrendered for conversion are registered, it shall be
a condition of the payment that the certificate so surrendered shall be
properly endorsed and the signatures thereon properly guaranteed and
otherwise in proper form for transfer and that the person requesting such
payment shall pay to the Merger Paying Agent any transfer or other taxes
required by reason of the delivery of such check to a person other than the
registered holder of the certificate surrendered, or shall establish to the
satisfaction of the Merger Paying Agent that such tax has been paid or is
not applicable. Notwithstanding the foregoing, neither the Merger Paying
Agent nor either party to this Plan of Merger shall be liable to a holder
of shares of F&P Common Stock for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar laws.
(c) No Further Ownership Rights. The cash paid, issued and
distributed upon the surrender of certificates representing shares of F&P
Common Stock in accordance with the terms of this Plan of Merger shall be
deemed to have been paid in full satisfaction of all rights pertaining to
such shares of F&P Common Stock.
(d) Return of Payment Funds. Any cash delivered or made available to
the Merger Paying Agent pursuant to this Section 4, and not exchanged
pursuant to this Section 4 for certificates representing shares of F&P
Common Stock within six months after the Effective Time, shall be returned
by the Merger Paying Agent to the Surviving Corporation which shall
thereafter act as
A-18
<PAGE>
paying agent subject to the rights of holders of unsurrendered certificates
representing shares of F&P Common Stock hereunder.
(e) Closing of Stock Transfer Books. At the Effective Time, the stock
transfer books of F&P shall be closed and no transfer of shares of F&P
Common Stock shall thereafter be made.
5. Termination. This Plan of Merger may be terminated at any time on or
before the Effective Time by agreement of the Boards of Directors of the
Constituent Corporations. This Plan of Merger shall be automatically terminated
if F&P, Buyer or Acquisition validly terminate the Merger Agreement.
6. Amendment. This Plan of Merger may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; except
that after approval of the Merger by the shareholders of F&P, no amendment may
be made which decreases the amount of cash to which the shareholders of F&P are
entitled pursuant to this Plan of Merger or otherwise materially adversely
affects the shareholders of F&P without the further approval of a majority of
the votes cast by the shareholders of F&P.
7. Waiver. Any time prior to the Effective Time, either party hereto may
(a) in the case of Acquisition, extend the time for the performance of any of
the obligations or other acts of F&P or, subject to the provisions contained in
Section 6 hereof, waive compliance with any of the agreements of F&P or with any
conditions to its own obligations or (b) in the case of F&P, extend the time for
the performance of any of the obligations or other acts of Acquisition, or waive
compliance with any conditions to its own obligations. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party by a duly authorized
officer.
8. Further Assurances. If at any time the Surviving Corporation, or its
successors or assigns, shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable to (a) vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
rights, title or interest in, to or under any of the rights, properties or
assets of the Constituent Corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or (b)
otherwise carry out the purposes of this Plan of Merger, each Constituent
Corporation and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such proper deeds, assignments and assurances in law and to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Plan; and the proper officers and directors of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take any and all such action.
A-19
<PAGE>
ANNEX B
OPINION OF CS FIRST BOSTON CORPORATION
April 13, 1994
Board of Directors
Fischer & Porter Company
125 East County Line Road
Warminster, PA 18974
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
shareholders of Fischer & Porter Company (the 'Company') from a financial point
of view of the consideration to be received by such shareholders pursuant to the
terms of the Agreement and Plan of Reorganization, dated as of April 13, 1994
(the 'Reorganization Agreement'), among the Company, Elsag Bailey Process
Automation N.V. (the 'Acquiror'), and EBPA Acquisition, Inc. ('the Sub'). The
Reorganization Agreement provides for the merger of the Company with the Sub
pursuant to which the Company will become a wholly owned subsidiary of the
Acquiror and each outstanding share of the Company's Common Stock, par value
$1.00 per share, will be converted into the right to receive $24.25 in cash (the
'Transaction').
In arriving at our opinion, we have reviewed the Reorganization Agreement
and certain publicly-available business and financial information relating to
the Company. We have also reviewed certain other information, including
financial forecasts, provided to us by the Company, and have met with the
management of the Company to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company and we have compared that data with similar data for other publicly-held
companies in businesses similar to those of the Company and we have considered
the financial terms of certain other business combinations which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which we
deemed relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecasts, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
future financial performance of the Company. In addition, we have not made an
independent evaluation or appraisal of the assets of the Company, nor have we
been furnished with any such appraisals.
We have acted as financial advisor to the Board of Directors in connection
with the Transaction and will receive a fee for our services which is primarily
contingent on the closing of the Transaction.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors only and may be published in its entirety in the proxy statement to be
distributed to shareholders of the Company in connection with the Transaction so
long as we give our prior written consent to any summary of, excerpt from or
reference to such opinion. This letter is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes without CS First Boston's prior
written consent.
B-1
<PAGE>
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the shareholders of the Company
pursuant to the Transaction is fair to such shareholders from a financial point
of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
By: /s/__J. CRAIG OXMAN_______________
J. Craig Oxman
Managing Director
B-2
<PAGE>
ANNEX C
SUBCHAPTER 15D OF THE PENNSYLVANIA BUSINESS CORPORATION LAW
DISSENTERS RIGHTS
Section
1571. Application and effect of subchapter.
1572. Definitions.
1573. Record and beneficial holders and owners.
1574. Notice of intention to dissent.
1575. Notice to demand payment.
1576. Failure to comply with notice to demand payment, etc.
1577. Release of restrictions or payment for shares.
1578. Estimate by dissenter of fair value of shares.
1579. Valuation proceedings generally.
1580. Costs and expenses of valuation proceedings.
SECTION 1571. APPLICATION AND EFFECT OF SUBCHAPTER.
(a) General rule. -- Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special
treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions. --
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
C-1
<PAGE>
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any
such shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted
solely into shares of the acquiring, surviving, new or other corporation
or solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles,
the plan or the terms of the transaction entitle all shareholders of the
class to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of
the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of optional dissenters rights. -- The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights. -- Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights under
this subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes. -- The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. -- This subchapter may not
be relaxed by any provision of the articles.
(g) Cross references. -- See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
SECTION 1572. DEFINITIONS.
The following words and phrases when used in this subchapter shall have
the meanings given to them in this section unless the context clearly
indicates otherwise:
'Corporation.' The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation
C-2
<PAGE>
for the purposes of this subchapter. The successor corporation in a
division shall have sole responsibility for payments to dissenters and
other liabilities under this subchapter except as otherwise provided in the
plan of division.
'Dissenter.' A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed
every act required up to the time involved for the assertion of those
rights.
'Fair value.' The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking
into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the corporate action.
'Interest.' Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all
of the circumstances, taking into account all relevant factors including
the average rate currently paid by the corporation on its principal bank
loans.
SECTION 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS.
(a) Record holders of shares. -- A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares
beneficially owned by any one person and discloses the name and address of the
person or persons on whose behalf he dissents. In that event, his rights shall
be determined as if the shares as to which he has dissented and his other shares
were registered in the names of different shareholders.
(b) Beneficial owners of shares. -- A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
SECTION 1574. NOTICE OF INTENTION TO DISSENT.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
SECTION 1575. NOTICE TO DEMAND PAYMENT.
(a) General rule. -- If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
C-3
<PAGE>
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. -- The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
SECTION 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(a) Effect of failure of shareholder to act. -- A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. -- If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms
of section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. -- The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
SECTION 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.
(a) Failure to effectuate corporate action. -- Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. -- When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of fair value of shares. -- Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. -- If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation,
C-4
<PAGE>
together with the name of the original dissenting holder or owner of such
shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
SECTION 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.
(a) General rule. -- If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect of failure to file estimate. -- Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
SECTION 1579. VALUATION PROCEEDINGS GENERALLY.
(a) General rule. -- Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. -- All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. -- The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. -- Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. -- If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
C-5
<PAGE>
SECTION 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS.
(a) General rule. -- The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. -- Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters. -- If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
C-6
<PAGE>
ANNEX D
September 30, 1993
Special Committee of the Board of Directors
Fischer & Porter Company
125 E. County Line Road
Warminster, PA 18974-4995
Attn: Robert G. Williams, Chairman
Dear Sirs & Madam:
We understand that Fischer & Porter Company (F&P) intends to effect a
transaction (the 'Transaction') in which (a) all of its Class B Capital Stock
('Class B') would be converted into Common Stock and (b) holders of Class B
would receive two warrants (the 'Warrants') for each share of Class B. Each
Warrant would entitle the holder to purchase one share of Common Stock at $8.625
per share (subject to customary anti-dilution provisions) and would expire in 18
months (subject to extension under certain conditions). You have provided us
with the Conversion Agreement and the Warrant Agreement in substantially final
form (the 'Agreements'), which set forth the terms of the Transaction, including
certain restrictions with respect to the sale of the Warrants and the shares
issuable upon exercise thereof, and on the voting rights of such share.
You have asked for our opinions as to the fairness of the Transaction, from
a financial point of view, to the public shareholders of F&P.
In arriving at our opinion, we have:
(1) reviewed the Agreements;
(2) reviewed the Annual Report to Shareholders and Annual Report on
Form 10-K of F&P for the year ended December 31, 1992, its
Quarterly Reports on Form 10-Q for the periods ended March 31 and
June 30, 1993, and its proxy statement dated April 5, 1993;
(3) reviewed the historical stock prices and trading volume of the
Common Shares from 1991 to date;
(4) considered the market valuation of warrants;
(5) considered the dilutive effect of the Warrants under various
hypothesis;
(6) reviewed certain other transactions with respect to high vote
shares; and
(7) conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent investigation, the accuracy and completeness of information reviewed
by us. We have not performed or obtained any appraisals of the assets of F&P,
nor have we performed any analysis or valuation of the stock of F&P or of F&P as
a whole.
Based on and subject to the foregoing, it is our opinion that the
Transaction is fair, from a financial point of view, the public Common
Shareholders of F&P.
Sincerely yours,
BEAR, STEARNS & CO. INC.
By: /s/__G. E. MATTHEWS______________
Managing Director
D-1
<PAGE>
THIS REPORT IS BEING FILED PURSUANT TO
INSTRUCTION 2 TO ITEM 13 OF SCHEDULE 14A
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders and The Board of Directors,
Fischer & Porter Company:
We have audited the accompanying consolidated balance sheets of Fischer &
Porter Company (a Pennsylvania corporation) and subsidiaries as of 31 December
1993, 1992 and 1991, and the related consolidated statements of income,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fischer & Porter Company and
subsidiaries as of 31 December 1993, 1992 and 1991, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 4 to the consolidated financial statements,
effective 1 January 1993, the Company changed its method of accounting for
income taxes. Also, as discussed in Note 7, effective 1 January 1991, the
Company changed its method of accounting for postretirement benefits other than
pensions.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a)2 of
the Form 10-K are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN & CO.
Philadelphia, Pa.,
28 March 1994
