<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement [_] Confidential, for use of
[X] Definitive proxy statement the Commission only
[_] Definitive additional materials (as permitted by
[_] Soliciting material pursuant to Rule 14a-6(c)(2))
Rule 14a-11(c) or Rule 14a-12
Data Measurement Corporation
------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Data Measurement Corporation
------------------------------------------------------------------------
(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), 14a-6(i)(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:
1,750,294 (sum of (i) 1,379,507 outstanding shares, (ii) 220,487 outstanding
- --------------------------------------------------------------------------------
options to purchase shares of Common Stock and (iii) 150,200 shares of Common
- --------------------------------------------------------------------------------
Stock issuable upon conversion of Convertible Subordinated Debentures due 1997.
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$18.625 for each share outstanding and each share issuable upon exercise of
the Convertible Subordinated Debentures due 1997 plus $18,625 for each option
outstanding less the exercise price.
(4) Proposed maximum aggregate value of transaction:
$31,323,648.51
- --------------------------------------------------------------------------------
(5) Total fee paid:
$6,265
- --------------------------------------------------------------------------------
[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:
$6,265
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14A
- --------------------------------------------------------------------------------
(3) Filing Party:
DATA MEASUREMENT
- --------------------------------------------------------------------------------
(4) Date Filed:
October 5, 1995
- --------------------------------------------------------------------------------
<PAGE>
DATA MEASUREMENT CORPORATION
15884 GAITHER DRIVE
GAITHERSBURG, MARYLAND 20877
November 15, 1995
Dear Stockholder:
You are invited to attend a Special Meeting of Stockholders of Data
Measurement Corporation ("DMC") to be held at the offices of DMC, 15884
Gaither Drive, Gaithersburg, Maryland 20877, on December 20, 1995 at 10:00
a.m. local time.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve the Amended and Restated Agreement and Plan of
Reorganization ("Plan of Reorganization") providing for the merger (the
"Merger") of DMC with a wholly owned subsidiary of Measurex Corporation, a
Delaware corporation ("Measurex"), upon which DMC will become a wholly owned
subsidiary of Measurex. Upon the consummation of the Merger, each share of
Common Stock outstanding immediately prior to the Merger will be converted
into the right to receive $18.625 in cash.
Ferris, Baker Watts, Incorporated, the investment banking firm retained by
the DMC Board of Directors in connection with the Merger, has rendered its
opinion dated as of the date of the Proxy Statement that the $18.625 per share
price payable to DMC's stockholders pursuant to the Merger is fair from a
financial point of view to the holders of Common Stock. A copy of the opinion
is attached to the enclosed Proxy Statement as Appendix B and should be read
in its entirety.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND THE TRANSACTIONS RELATED
THERETO AND HAS DETERMINED THAT THEY ARE FAIR TO AND IN THE BEST INTERESTS OF
DMC AND ITS STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE MERGER AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
In the materials accompanying this letter, you will find a Notice of Special
Meeting of Stockholders, a Proxy Statement relating to the actions to be taken
by DMC stockholders at the Special Meeting and a proxy card. The Proxy
Statement more fully describes the proposed Merger and includes information
about DMC and Measurex.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AND VOTED AT THE SPECIAL MEETING.
Sincerely,
Dominique Gignoux
President and Chief Executive
Officer
<PAGE>
DATA MEASUREMENT CORPORATION
15884 GAITHER DRIVE
GAITHERSBURG, MARYLAND 20877
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 20, 1995
----------------
Notice is hereby given that a Special Meeting of Stockholders of Data
Measurement Corporation ("DMC") will be held on December 20, 1995, at 10:00
a.m., local time, at the offices of DMC, 15884 Gaither Drive, Gaithersburg,
Maryland 20877 for the following purposes:
(1) to consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Reorganization, dated as of September
16, 1995 (the "Plan of Reorganization") by and among DMC, Measurex
Corporation, a Delaware corporation ("Measurex"), and MX Acquisition
Company, a Delaware corporation ("Merger Sub") pursuant to which, among
other things, (a) Merger Sub will be merged with and into DMC (the
"Merger"), following which DMC will become a wholly owned subsidiary of
Measurex, and (b) each share of DMC Common Stock outstanding
immediately prior to the Merger will be converted into the right to
receive $18.625 in cash; and
(2) if necessary, to adjourn the Special Meeting and to set a date to
reconvene such adjourned meeting.
Only stockholders of record at the close of business on November 1, 1995,
the record date with respect to this solicitation, are entitled to notice of
and to vote at the Special Meeting, or at any postponements or adjournments
thereof. The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting, in person or
by proxy, is required to approve the Plan of Reorganization and the Merger.
A summary of certain provisions of Section 262 of the Delaware General
Corporation Law pertaining to the rights of dissenting shareholders in
connection with the Merger is included in the accompanying Proxy Statement in
a section entitled "The Merger--Dissenter's Rights."
A complete list of stockholders entitled to vote at the Special Meeting will
be available for examination at DMC's principal executive offices, for any
purposes germane to the Special Meeting, during ordinary business hours, for a
period of at least 10 days prior to the Special Meeting.
IMPORTANT
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUT DELAY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS,
Dominique Gignoux
President and Chief Executive
Officer
Gaithersburg, Maryland
November 15, 1995
<PAGE>
SUMMARY OF PROXY STATEMENT
This Proxy Statement relates to the proposed merger (the "Merger") of MX
Acquisition Company, a Delaware corporation ("Merger Sub") and a wholly owned
subsidiary of Measurex Corporation, a Delaware corporation ("Measurex"), with
and into Data Measurement Corporation, a Delaware corporation ("DMC"). The
following is intended as a summary of the information contained in this Proxy
Statement, is not intended to be a complete statement of all material features
of the proposals to be voted on and is qualified in its entirety by the more
detailed information appearing elsewhere in this Proxy Statement or
incorporated herein by reference. Capitalized terms used but not defined in
this summary have the meaning given to them elsewhere in this Proxy Statement.
SPECIAL MEETING OF SHAREHOLDERS
DATE, TIME AND The Special Meeting will be held on December 20, 1995,
PLACE at 10:00 a.m., local time, at the offices of DMC, 15884
Gaither Drive, Gaithersburg, Maryland 20877.
RECORD DATE Only holders of record of shares of Common Stock at the
close of business on November 1, 1995 (the "Record
Date") are entitled to notice of and to vote at the
Special Meeting and at any postponements or
adjournments thereof.
PURPOSE OF THE The purpose of the Special Meeting is to consider and
MEETING vote upon a proposal to approve the Plan of
Reorganization and the transactions contemplated
thereby. The Plan of Reorganization provides that, at
the Effective Time, DMC will become a wholly owned
subsidiary of Measurex and each stockholder (other than
Measurex and its subsidiaries and any stockholder who
properly perfects dissenters' rights under Delaware
law) will be entitled to receive $18.625 in cash for
each share of Common Stock held by such stockholder.
OUTSTANDING SHARES At the close of business on the Record Date, there were
1,379,507 shares of Common Stock outstanding, and each
such share is entitled to one vote.
VOTE REQUIRED Approval of the Plan of Reorganization and the
transactions contemplated thereby requires the
affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at
the Special Meeting. Certain directors of DMC, holding
in the aggregate 272,550 shares of the Common Stock and
rights to acquire an additional 84,750 shares of Common
Stock, have entered into Voting and Stock Option
Agreements pursuant to which such stockholders will
vote in favor of the Merger. See "The Merger--Voting
and Stock Option Agreements."
THE MERGER
THE PARTIES
DMC DMC is in the business of designing, manufacturing,
marketing and servicing computerized instruments and
control systems that measure thickness and coating
weight, and control the manufacturing process
principally in metals
<PAGE>
industries throughout the world. DMC's Common Stock is
traded on NASDAQ National Market under the symbol on
"DMCB". The principal executive offices of DMC are
located at 15884 Gaither Drive, Gaithersburg, Maryland
20877, and the telephone number at that address is
(301) 948-2450.
Measurex Measurex and its subsidiaries are in the business of
supplying computer-integrated measurement, control and
information systems and services for continuous and
batch manufacturing processes. Measurex's Common Stock
is traded on the NYSE and the Pacific Stock Exchange
under the symbol "MX."
Merger Sub Merger Sub is a wholly owned subsidiary of Measurex.
Merger Sub has not conducted any prior business. The
principal executive offices of Measurex and Merger Sub
are located at One Results Way, Cupertino, California
95014, and the telephone number at that address is
(408) 255-1500.
THE MERGER
General Pursuant to the terms of the Plan of Reorganization, at
the Effective Time (i) Merger Sub will be merged with
and into DMC and will cease to exist as a separate
entity; (ii) DMC, as the surviving corporation in the
Merger (the "Surviving Corporation"), will become a
wholly owned subsidiary of Measurex; and (iii) each
outstanding share of Common Stock (other than shares
owned by DMC, Measurex and their subsidiaries and
shares as to which dissenters' rights are properly
perfected and not withdrawn) will be converted into the
right to receive $18.625 in cash, without interest (the
"Merger Consideration").
Background of the Early in 1995, Measurex contacted DMC for the purpose
Merger: DMC's of visiting DMC and seeing it operations. Several
Reasons for the discussions were held throughout the spring and summer
Merger of 1995 which, in August, led to Measurex making an
offer to acquire DMC for a price of $16 per share in
cash. After negotiation on August 31, 1995 this offer
was increased to $18.625 per share in cash, provided
that DMC would enter into an agreement not to solicit
competing acquisition proposals, while allowing DMC to
respond to unsolicited superior acquisition proposals.
Measurex insisted that certain of the directors enter
into voting and stock option agreements granting
Measurex the right to vote such directors' shares and
to acquire such shares for $18.625 per share. A
definitive agreement was negotiated by September 14,
1995 and the DMC Board approved the Plan of
Reorganization on September 16, 1995.
The DMC Board of Directors believes that the terms of
the Merger are fair to the stockholders and will result
in the stockholders obtaining the highest value for
their shares reasonably available. In reaching this
conclusion, the Board has considered a number of
factors relating to the business and prospects of DMC,
the industry it serves and its customers, the advice of
its advisors, and the terms of the Plan of
Reorganization. For a more detailed discussion of these
matters, see "The Merger--Background of the Merger;
DMC's Reasons for the Merger" and "--Opinion of
Financial Advisor to DMC."
2
<PAGE>
Recommendation of THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
DMC's Board of OF DMC VOTE IN FAVOR OF THE APPROVAL OF THE PLAN OF
Directors REORGANIZATION AND THE MERGER.
Principal Terms The terms of the Merger were arrived at by negotiation
between the representatives of DMC and Measurex and
include, in addition to the payment of the Merger
Consideration, certain Voting and Stock Option
Agreements with certain directors of DMC pursuant to
which such directors will vote in favor of approval of
the Plan of Reorganization. See "The Merger--Voting and
Stock Option Agreements."
Opinion of On September 15, 1995, Ferris, Baker Watts,
Financial Advisor Incorporated ("Ferris Baker") delivered its opinion to
the Board of Directors to the effect that as of such
date, the $18.625 per share price to be received by the
holders of shares of Common Stock pursuant to the Plan
of Reorganization was fair to DMC stockholders from a
financial point of view. Ferris Baker has subsequently
confirmed such opinion by delivery of their written
opinion, dated as of the date of this Proxy Statement,
to the effect that the consideration to be received by
the stockholders of DMC in the Merger is fair from a
financial point of view.
THE OPINION OF FERRIS BAKER RELATES ONLY TO WHETHER THE
CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF DMC
IS FAIR FROM A FINANCIAL POINT OF VIEW AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF DMC
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING TO CONSIDER THE MERGER.
Effective Time The Effective Time will be the time and date when a
Certificate of Merger and certain other documents are
filed by DMC and Merger Sub with, and accepted by, the
Secretary of State of the State of Delaware and the
Merger thereby becomes effective. Subject to the terms
and conditions of the Plan of Reorganization, it is
presently contemplated that the Effective Time will be
as soon as practicable after all of the conditions to
the Merger have been satisfied or waived and is
expected to be January 3, 1996. The parties have
reserved their right to cause the Merger to become
effective at an earlier time. See "The Merger--
Effective Time of the Merger" and "The Merger--
Regulatory Filings and Approvals."
Conditions to the The respective obligations of DMC and Measurex to
Merger consummate the Merger are subject to certain
conditions, including, among others, (i) the approval
of the Plan of Reorganization by the affirmative vote
of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Special Meeting
and (ii) the receipt of all necessary regulatory
approvals of the Merger. See "The Merger--Conditions to
the Merger."
Additional Agree- In the Plan of Reorganization, DMC has agreed, among
ments between DMC other things, that (i) DMC and each of its subsidiaries
and Measurex will conduct business only in the ordinary and usual
course and (ii) neither DMC nor any of its subsidiaries
nor any of their respective officers, directors,
employees or agents (the "Representatives") will, and
DMC will direct and use its best efforts to
3
<PAGE>
cause its Representatives not to, solicit, initiate, or
encourage, directly or indirectly, any acquisition
proposal or similar transaction involving DMC or any of
its subsidiaries, including a merger, business
combination, or offer to acquire, or acquisition of an
equity interest in, a substantial portion of the assets
of DMC or any of its subsidiaries (an "Acquisition
Proposal") or, except to the extent the Board of
Directors of DMC determines, after receiving the advice
of counsel, that such act may be legally required for
the discharge by the Board of its fiduciary duties,
engage in any negotiations concerning, or provide any
confidential information to, any entity or group
relating to an Acquisition Proposal. See "The Merger--
Conduct Pending the Merger" and "--Other Offers."
Termination and The Plan of Reorganization may be terminated at any
Amendment time prior to the Effective Time by mutual consent of
Measurex and DMC or by either Measurex or DMC if, among
other things, (i) the Merger has not become effective
on or before January 31, 1996, (ii) any governmental
entity, the consent of which is a condition to the
obligations of DMC and Measurex to consummate the
Merger, has determined not to grant its consent, (iii)
any court of competent jurisdiction issues an order,
judgment or decree (other than a temporary restraining
order) restraining, enjoining or otherwise prohibiting
the Merger and such order, judgment or decree has
become final, or (iv) the approval of the Merger by the
stockholders has not been obtained at the Special
Meeting. In addition, the Plan of Reorganization may be
terminated by Measurex if, among other things, (i)
there is an uncured material breach by DMC of any
representation, warranty, covenant or agreement of DMC
contained in the Plan of Reorganization, or (ii) the
Board of Directors of DMC withdraws or modifies in a
manner adverse to Measurex the Board's approval or
recommendation of the Merger in order to permit DMC to
enter into a definitive agreement in connection with a
more favorable Acquisition Proposal (a "Superior
Proposal").
DMC may terminate the Plan of Reorganization if (i)
there is an uncured material breach by Measurex of any
representation, warranty, covenant or agreement of
Measurex contained in the Plan of Reorganization, or
(ii) the Board of Directors of DMC withdraws or
modifies in a manner adverse to Measurex the Board's
approval or recommendation of the Merger in order to
permit DMC to enter into a definitive agreement in
connection with a Superior Proposal. The Plan of
Reorganization may only be amended by written agreement
of DMC and Measurex. See "The Merger--Termination" and
"--Amendment."
Termination Fee DMC has agreed to pay to Measurex in cash a termination
fee of $600,000 (the "Termination Fee") if the Plan of
Reorganization is terminated, and DMC is not otherwise
entitled to terminate the Plan of Reorganization under
certain provisions thereof, (i) by Measurex upon a
material uncured breach by DMC of any of its
representations, warranties, covenants or agreements or
(ii) by Measurex or DMC upon the withdrawal or
modification in a manner adverse to Measurex by the
Board of Directors of DMC of its approval or
recommendation of the transactions contemplated by the
Plan of Reorganization in order to permit DMC to
execute a definitive agreement in connection with a
Superior Proposal. In addition, Measurex has agreed to
reimburse DMC for its out of pocket costs if the Plan
of Reorganization is
4
<PAGE>
terminated by DMC upon a material uncured breach by
Measurex of any of its representations, warranties,
covenants or agreements, and Measurex is not otherwise
entitled to terminate the Plan of Reorganization under
certain provisions thereof. See "The Merger--Expenses
and Termination Fees".
Voting and Stock Concurrently with the execution of the Plan of
Option Agreements Reorganization, Measurex and certain stockholders (the
"Selling Stockholders") entered into Voting and Stock
Option Agreements with respect to all Common Stock
owned by them and all stock which they may acquire (the
"Option Stock"). Under the terms of the Voting and
Stock Option Agreements, the Selling Stockholders have
agreed to vote all of the Option Stock eligible to
vote, (i) in favor of approval and adoption of the Plan
of Reorganization and all related matters and
(ii) against any action or agreement in opposition to
the Plan of Reorganization and the Merger. To
facilitate this voting arrangement, the Selling
Stockholders have granted an irrevocable proxy to
Measurex to vote such shares in accordance with the
foregoing terms. The Voting and Stock Option Agreements
also restrict the Selling Stockholders' ability to
transfer shares of Common Stock or to otherwise take
specified steps that may be inconsistent with the
consummation of the Merger. The Selling Stockholders
have also given Measurex an option to purchase the
Option Stock at a price of $18.625. The Voting and
Stock Option Agreements will terminate upon the
termination of the Plan of Reorganization. A copy of
the form of the Voting and Stock Option Agreements is
attached hereto as a part of Appendix A and should be
read carefully and in its entirety. See "The Merger--
Voting and Stock Option Agreements."
Conflicts of Five of the eight members of the Board of Directors of
Interest DMC entered into Voting and Stock Option Agreements.
These are John Sanders, Ira Hunt and James Collins, who
are not officers of the Corporation, and Dominique
Gignoux, President and CEO, and Frederick S. Rolandi,
Vice President and CFO. See "The Merger--Voting and
Stock Option Agreements".
As a condition of the Merger, Dominique Gignoux will be
required to enter into a consulting and non-competition
agreement and Vice Presidents Stephen Outhwaite and
Thomas Armfield will be required to enter into
employment and non-competition agreements. These
agreements have not been negotiated and only
preliminary discussions have been held between Measurex
and Messrs. Gignoux, Outhwaite and Armfield. In
addition, Messrs. Rolandi and Armfield were granted
employment agreements by the Board of Directors of DMC
in early September 1995. These Agreements provide for
an employment term of one (1) year following any change
of control of DMC with their compensation to be at the
same level and with the same benefits as existing on
the date of the change of control.
Regulatory Filings Under the Hart-Scott-Rodino Antitrust Improvements Act
and Approvals of 1976, as amended (the "HSR Act"), and the rules
promulgated thereunder by the Federal Trade Commission
(the "FTC"), certain acquisition transactions,
including the Merger, may not be consummated until
specified waiting period requirements have been
satisfied. On September 26 and 27, 1995, the
Notification and Report Forms required pursuant to the
HSR Act were filed by Measurex and DMC with the
Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC for review in
connection with the Merger. The applicable waiting
periods expired at 11:59 p.m., Eastern
5
<PAGE>
Standard Time, on October 27, 1995, fulfiling the HSR
Act waiting period requirement. See "The Merger--
Regulatory Filings and Approvals."
Federal Income Tax In general, each stockholder, including stockholders
Consequences who exercise dissenters' rights, will recognize gain or
loss per share equal to the difference between the cash
received for the stockholder's shares and the
stockholder's tax basis per share in the Common Stock.
Such gain or loss generally will be treated as capital
gain or loss if a stockholder's shares of Common Stock
were held as capital assets at the time of the Merger.
Shares of Common Stock acquired through the exercise of
options and which have not been held for the requisite
holding periods will not be treated as capital assets
and gain on such shares will be subject to federal
income tax at ordinary income rates. THE FOREGOING TAX
DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED UPON PRESENT LAW. EACH STOCKHOLDER SHOULD
CAREFULLY REVIEW THE MORE DETAILED DESCRIPTION
CONTAINED IN "THE MERGER--FEDERAL INCOME TAX
CONSEQUENCES" AND CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN SUCH TAX LAWS.
SPECIAL RULES APPLY TO COMMON STOCK ACQUIRED PURSUANT
TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE
AS COMPENSATION.
Legal Proceedings On September 19, 1995 a stockholder of DMC filed a
lawsuit ("Litigation") alleging that the DMC Board of
Directors had breached its fiduciary duty to the DMC
stockholders and that the Merger Consideration is
inadequate. On October 31, 1995, the Litigation was
tentatively settled. As part of the settlement,
plaintiff's counsel has reviewed the preliminary proxy
statement and suggested changes which have been
incorporated herein. Also, as part of the settlement,
Ferris Baker will update its fairness opinion as of the
date of the Special Meeting. In the event there is a
change to the opinion of Ferris Baker, the Special
Meeting will be adjourned for at least 15 days and the
stockholders will be notified of such event, the date
of the postponed meeting and the procedure for revoking
proxies. See "Description of Data Measurement
Corporation--Legal Proceedings."
Dissenters' Rights Stockholders who vote against the Merger and who have
fully complied with the applicable provisions of
Section 262 of the Delaware General Corporation Law
("DGCL") may have the right to require the Surviving
Corporation to purchase the shares of Common Stock held
by them for cash at the fair value of those shares as
determined in accordance with the DGCL, excluding
appreciation or depreciation because of the Merger. See
"The Merger--Dissenters' Rights."
RECENT MARKET On September 15, 1995, the last full trading day prior
PRICE OF COMPANY to public announcement of the signing of the Plan of
COMMON STOCK Reorganization, the high and low sales prices per share
reported on the Nasdaq National Market for the Common
Stock were $18.75 and $17.50, respectively.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following sets forth selected summary consolidated financial data for the
periods and at the dates set forth below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $ 23,999 $ 17,549 $24,206 $20,221 $19,937 $20,143 $22,034
Income (loss) before
extraordinary item..... 1,380 463 820 124 517 27 (1,429)
Primary net income
(loss) before
extraordinary item per
share.................. 0.95 0.35 0.60 0.10 0.42 0.02 (1.18)
BALANCE SHEET DATA:
Total Assets............ 24,472 20,091 20,091 17,511 17,227 17,789 20,234
Long Term Debt.......... 3,272 3,569 3,569 8,125 8,474 526 1,404
Dividend Declared....... -- -- -- -- -- -- --
</TABLE>
7
<PAGE>
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by DMC
of proxies to be voted at a Special Meeting of the stockholders of DMC to be
held on December 20, 1995 (the "Special Meeting"). This Proxy Statement is
first being mailed to stockholders of DMC on or about November 15, 1995.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve the Amended and Restated Agreement and Plan of Reorganization by
and among DMC, Measurex and Merger Sub (the "Plan of Reorganization") pursuant
to which, among other things, (a) Merger Sub will be merged with and into DMC
(the "Merger") and (b) each share of outstanding Common Stock of DMC, $0.01
par value (the "Common Stock"), outstanding immediately prior to the Merger
will be converted into the right to receive $18.625 in cash. Upon the
consummation of the Merger, the separate existence of Merger Sub will cease,
all of the rights, privileges, powers, franchises, properties, assets,
liabilities and obligations of Merger Sub will be vested in DMC and DMC will
become a wholly owned subsidiary of Measurex. See "The Merger."
THE BOARD OF DIRECTORS OF DMC HAS DETERMINED THAT THE PLAN OF REORGANIZATION
AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO AND IN THE BEST
INTERESTS OF DMC AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS OF
DMC APPROVE THE PLAN OF REORGANIZATION AND THE MERGER.
VOTING AND PROXIES
DATE, TIME AND PLACE OF SPECIAL MEETING
The Special Meeting is scheduled to be held at 10:00 a.m. on Wednesday,
December 20, 1995 at the offices of DMC, 15884 Gaither Drive, Gaithersburg,
Maryland, 20877.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of shares of Common Stock at the close of business on
November 1, 1995 may vote at the Special Meeting or at any adjournments or
postponements thereof. As of November 1, 1995, there were 1,382,507 shares
issued and 1,379,507 shares outstanding of the Common Stock of DMC, the only
class of securities of DMC entitled to vote at the Special Meeting. Each
stockholder is entitled to one (1) vote for each share registered in the
stockholder's name on the Record Date. Cumulative voting is not permitted.
VOTING PROXIES
Many DMC stockholders may be unable to attend the Special Meeting.
Therefore, DMC's Board of Directors is soliciting proxies so that each
stockholder has the opportunity to vote on the proposals to be considered at
the Special Meeting. When a proxy card is returned properly signed and dated,
the shares represented thereby will be voted in accordance with the
instructions on the proxy card. However, if a stockholder does not return a
signed proxy card, his or her shares will not be voted by the proxies.
Stockholders are urged to mark the boxes on the proxy card to indicate how
their shares are to be voted. IF A STOCKHOLDER RETURNS A SIGNED PROXY CARD AND
A CHOICE IS NOT SPECIFIED, THE SHARES REPRESENTED BY THAT PROXY CARD WILL BE
VOTED IN FAVOR OF THE MERGER AND MAY ALSO BE VOTED IN THE PROXY HOLDER'S
DISCRETION TO ADJOURN THE SPECIAL MEETING AND TO SET A DATE TO RECONVENE SUCH
ADJOURNED MEETING.
DMC stockholders who execute proxies retain the right to revoke them at any
time before they are voted. Any proxy given by a stockholder may be revoked
(i) by duly executing and delivering a later proxy prior to the exercise of
such proxy, (ii) by giving notice of revocation in writing to the Secretary of
DMC prior to the meeting, at 15884 Gaither Drive, Gaithersburg, Maryland
20877, or (iii) by attending the Special Meeting and voting in person.
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STOCKHOLDER VOTE REQUIRED
A quorum for the transaction of business at the meeting consists of holders
of the majority of the outstanding shares of DMC's Common Stock, present in
person or by proxy. In the event that less than a majority of the outstanding
shares are present at the Special Meeting, either in person or by proxy, a
majority of the shares so represented may vote to adjourn the Special Meeting
from time to time without further notice, other than announcement at the
Special Meeting, until a quorum shall be present or represented.
The affirmative vote of holders of at least a majority of the outstanding
shares of DMC Common Stock as of the Record Date are required to approve and
adopt the Plan of Reorganization and the transactions contemplated thereby.
SOLICITATION OF PROXIES; EXPENSES
The cost of solicitation, including the cost of preparing and mailing the
Notice of the Special Meeting of Stockholders and this Proxy Statement, will
be paid by DMC. Solicitation will be made primarily by mailing this Proxy
Statement to all stockholders entitled to vote at the Special Meeting. Proxies
may be solicited by officers, but at no compensation in addition to their
regular compensation as officers. DMC may reimburse brokers, banks, and others
holding shares in their names for third parties, for the cost of forwarding
Proxy Statements to and obtaining proxies from third parties. DMC may, but has
not committed to, retain outside assistance to solicit proxies. It is
estimated that the cost of such assistance would not exceed $10,000, plus
expenses.
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THE MERGER
GENERAL
The Plan of Reorganization provides for the merger of a wholly owned
subsidiary of Measurex with and into DMC, with DMC to be the surviving
corporation of the Merger as a wholly owned subsidiary of Measurex. The
discussion in this Proxy Statement of the Merger and the description of the
principal terms of the Plan of Reorganization are subject to and qualified in
their entirety by reference to the Plan of Reorganization, a copy of which is
attached hereto as Appendix A, and incorporated herein by reference, and to
each of the other appendices to this Proxy Statement.
BACKGROUND OF THE MERGER; DMC'S REASONS FOR THE MERGER
The Board believes that the terms of the Merger are fair to the stockholders
and will result in the stockholders obtaining the highest value for their
shares reasonably available. In reaching this conclusion, the Board has
considered a number of factors relating to the business and prospects of DMC,
the industry it serves and its customers, the advice received from financial
and legal advisors, and the terms of the Plan of Reorganization, including,
the right of DMC to entertain Superior Proposals. The Board also monitored the
negotiations leading to the Merger Agreement and believes the process to have
been fair.
DMC's management and Board have long recognized that DMC's long term future
growth potential is limited by its heavy business concentration in the metals
industry. In the period 1989 to 1992 DMC's ability to respond to this issue
was limited by DMC's inability to obtain new financing because of the
uncertainties generated by its debt to the Federal Deposit Insurance
Corporation and losses incurred in prior years. Since 1992, DMC has enhanced
its balance sheet and has devoted its available resources to strengthening
DMC's position in its core business. While DMC's growth in the metals industry
can continue because of new and improved products and increased product demand
due to plant modernization and new mills in emerging markets, management and
the Board believe that DMC would need to make significant additional
investments in product development, service support and sales distribution to
expand beyond its present products and markets in order to maintain its rate
of growth in sales over the long term. Such additional investments could be
anticipated to have a moderating effect on continued growth in profitability.
DMC's products cover a range of applications, including measurement, display
and process controls used principally in connection with flat rolled products
in the metals industry, principally the steel industry. In recent years DMC
has seen its business expand worldwide, again, primarily in the steel
industry. DMC's market share and sales in the steel industry have increased
concurrently with the expansion of the worldwide steel industry. The steel
industry, however, has historically experienced cyclical production and
profitability causing capital purchases, including purchases of DMC's
products, to be postponed during downturns in the cycle. DMC's reliance on the
steel industry has been seen as a detriment to continued long term growth
because DMC's ability to fund investment in its own business has been
adversely influenced by this cyclicality.
For the last two years DMC's management and Board have been considering
DMC's strategic direction in light of the improvements in DMC's balance sheet
and earnings. During this time members of the Board had been discussing either
broadening DMC's product line in the metals industry or expanding outside the
steel industry so that DMC would be in a better position during cyclical
downturns in the steel industry. In 1994 the Board asked management to
consider any number of strategic alternatives, including making acquisitions,
forming joint ventures, merging or being acquired, with no single strategy
identified as preferable. At its meeting of August 2, 1994, the Board asked
management to actively seek the acquisition of, or merger with, a strategic
partner complimentary to the company. In order to support needed increases in
DMC's working capital and to prepare for a possible acquisition, the Board
also directed management to explore increasing its available lines of credit
and the possibility of a new stock offering to raise capital. During the
balance of 1994 and into 1995, management identified a number of smaller
companies and divisions of larger companies that either had market presence or
products that could help expand DMC's business. Management had contact with
two smaller
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companies concerning acquiring them and two larger companies about acquiring
either a division or product line from them. To date the companies contacted
have either rejected DMC's overtures or not responded and no contact has led
to any serious indications of interest or negotiations. DMC's management did
not discontinue these efforts, but after a firm offer was received from
Measurex on August 31, 1995, management concentrated its efforts on completing
the proposed Merger.
In early 1995, independent of DMC's effort, DMC was contacted by Measurex
for the purpose of visiting DMC and seeing its operations. Measurex had no
previous business relationship with DMC and DMC agreed to the visit since such
a visit could lead to discussion of mutually beneficial business
opportunities. Glenn R. Wienkoop, President of the Industrial Systems Division
of Measurex, visited DMC in March of 1995. The discussions at this meeting
were wide ranging and general in nature. These discussions focused on how DMC
and Measurex could collaborate or form alliances; however, integrating the two
companies was mentioned as a possibility. In April, Dominique Gignoux,
President and CEO of DMC, made a reciprocal visit to Measurex's main plant and
headquarters to further explore these possibilities.
In May of 1995 Lance M. Lissner, Vice President of Corporate Planning and
Development of Measurex, visited DMC and met with Mr. Gignoux and Frederick S.
Rolandi, Vice President of Finance and CFO of DMC, at which time DMC and
Measurex entered into a Confidentiality Agreement. At this meeting and at a
subsequent meeting in June involving the same individuals, DMC supplied
additional information to Measurex concerning the operations, personnel and
prospects of DMC. Telephone conversations between Mr. Rolandi and Mr. Lissner
continued through the summer of 1995 without Measurex making an actual offer,
but with discussions continuing concerning the operations, personnel and
prospects of DMC.
David A. Bossen, Chairman and CEO of Measurex, Mr. Lissner and Mr. Wienkoop
visited DMC on August 9, 1995 and met with Messrs. Gignoux and Rolandi. During
this meeting DMC supplied Measurex further information concerning DMC and its
business. At this time Measurex informally indicated that a reasonable price
for DMC was $10 to $12 per share on a fully diluted basis. Messrs. Gignoux and
Rolandi disagreed with Measurex's analysis and so informed Messrs. Bossen,
Wienkoop and Lissner.
On August 28, 1995, Measurex requested a meeting for August 30th. At that
meeting, which involved Messrs. Wienkoop, Lissner, Gignoux and Rolandi,
Measurex first made an acquisition proposal at a price of $16 per share in
cash. Messrs. Gignoux and Rolandi informed the Board of DMC of this offer
immediately, and on August 31, 1995 the Board authorized Messrs. Gignoux and
Rolandi to respond to this offer with a counter offer at a price in excess of
$18.50 per share, the highest price at which DMC had ever traded, and
indicated that the Board would favorably view an offer that would not preclude
consideration of Superior Proposals. The Board believed that these two factors
taken together would assure the Stockholders of DMC receiving fair value for
their shares. The Board also authorized two of the outside directors to
contact investment bankers regarding their availability to advise the Board on
the proposed transaction.
Based upon the directions of the Board, Messrs. Gignoux and Rolandi
continued the negotiations with Messrs. Wienkoop and Lissner during August 31,
1995. Late on August 31, 1995, Mr. Bossen joined Messrs. Wienkoop and Lissner
and agreed to raise Measurex's offer to $18.625 in cash, provided that the
directors of DMC would grant Measurex an option to purchase their shares of
DMC Common Stock and that DMC would enter into a non-solicitation agreement
during the time that due diligence could be conducted and that a definitive
agreement could be negotiated ("Offer"). Messrs. Gignoux and Rolandi indicated
to Measurex that they could recommend this Offer to the Board and the parties
set a tentative schedule for conducting due diligence and negotiating a
definitive agreement.
Messrs. Gignoux and Rolandi reported the outcome of the negotiation to the
Board at a meeting on September 1, 1995. The Board reviewed the Offer and
authorized management to enter into a Non-Solicitation Agreement expiring not
later than September 30, 1995 to allow the parties to negotiate a definitive
agreement subject to review by DMC's investment banker and approval of the
Board. DMC immediately contacted
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Ferris, Baker Watts, Incorporated ("Ferris Baker") based on the recommendation
of the Board and on September 7, 1995 DMC retained Ferris Baker to help the
Board evaluate the Offer. On September 11, 1995, Ferris Baker reported to
Messrs. Gignoux and Rolandi that based on their preliminary work, the proposed
consideration to be received by DMC's stockholders was fair from a financial
point of view. Ferris Baker also indicated that they could participate in the
negotiations in order to test whether the proposed Merger Consideration could
be increased. This information was communicated to members of the Board by Mr.
Gignoux by telephone. Bonnie Wachtel, a member of the DMC Board also requested
that she attend the negotiating session that had been set for the morning of
September 12, 1995.
Negotiation of the definitive agreement began on September 12, 1995. Mr.
Rolandi and Gregory J. Meurer of the law firm of Klaine, Wiley, Hoffmann &
Meurer, counsel to DMC, represented DMC throughout the negotiations and
Messrs. Wienkoop, Lissner, Charles Van Orden, Vice President and General
Counsel, and John W. Larson of the law firm of Brobeck, Phleger and Harrison,
counsel to Measurex, represented Measurex throughout the negotiations. Todd L.
Parchman, Senior Vice President, and Steven L. Shea, Vice President, of Ferris
Baker, and Ms. Wachtel joined DMC's negotiating team for the first round of
negotiations beginning on the morning of September 12, 1995.
Messrs. Parchman and Shea presented to the Measurex negotiators arguments
concerning the synergistic value of DMC to Measurex in an effort to increase
the Merger Consideration and to limit the possible cost to DMC of terminating
the proposed Merger if a Superior Proposal was presented to DMC. After some
hours of negotiation Measurex refused to increase the Merger Consideration,
but the parties were able to agree to modify the non-solicitation clause of
the proposed Plan of Reorganization to allow DMC to send a press release about
the transaction to anyone DMC chose and to put a definite limit on the
expenses and fees that DMC would have to pay to Measurex in the event that DMC
terminated the Plan of Reorganization in order to accept a Superior Proposal.
Messrs. Rolandi, Meurer, Parchman, and Shea and Ms. Wachtel reported the
progress of the negotiation to the Board at a meeting held the evening of
September 12, 1995. Mr. Parchman reported to the Board that based upon the
negotiation, Measurex would not consider raising the price and that Ferris
Baker was still of the opinion that the proposed consideration to be received
by DMC's stockholders as structured was fair from a financial point of view.
The Board questioned Messrs. Parchman and Shea extensively concerning the
basis of their opinion and questioned Messrs. Rolandi and Meurer concerning
the terms of the transaction. In order to allow time to complete the
negotiation of the definitive agreement, the Board set a meeting for the
morning of September 16, 1995 to consider whether to approve the Offer.
Messrs. Rolandi, Meurer, Wienkoop, Lissner, Van Orden, and Larson continued
to negotiate the definitive agreement on September 13 and 14, 1995. The text
of the definitive agreement as of September 14, 1995 (which was complete in
all material respects) and the analysis of the consideration proposed to be
paid in connection with the transaction, prepared by Ferris Baker, was
delivered to all members of the Board of Directors on September 15, 1995.
On September 16, 1995 a Board meeting was held with Messrs. Parchman, Shea
and Meurer available to answer questions. The Board discussed the terms of the
proposed transaction including those terms that had changed during the course
of the negotiation, and reviewed the terms of Ferris Baker's fairness opinion
and analysis. The Board then voted unanimously to approve the transaction and
to recommend that the stockholders approve the Plan of Reorganization and the
Merger.
In approving the Plan of Reorganization and making its recommendation to the
stockholders, the Board considered the following factors:
1. The fairness opinion and advice of Ferris Baker;
2. The cyclical nature of DMC's business in the steel industry;
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3. The historical price for DMC's Common Stock: first, that on the date
of Measurex's offer of $18.625 per share the offer was higher than DMC's
Common Stock had ever traded, second, that during the ten-day trading
period leading up to September 12, 1995, the average bid price was $15.17,
and third, that the price of DMC's shares since the beginning of 1995 had
experienced a substantial increase;
4. That at the time the Offer from Measurex was received, DMC had been
unable to begin any negotiations to acquire any other entity which would
help expand DMC's products or markets;
5. That, even if an acquisition by DMC could be negotiated, it was likely
that a stock offering would be needed to finance such an acquisition and
such an offering may have a dilutive effect; and
6. The fact that the terms of the Plan of Reorganization do not, in the
opinion of the Board, based upon the advice of Ferris Baker and legal
counsel, prohibit the Board from considering any Superior Proposal that may
be made to acquire DMC.
Prior to the date of this Proxy Statement, the Plan of Reorganization was
amended and restated to properly reflect the manner of payment of the Merger
Consideration in exchange for shares of Common Stock subject to conversion
under DMC's Convertible Subordinated Debentures due 1997.
OPINION OF FINANCIAL ADVISOR TO DMC
Prior to the meeting on September 16, 1995, the DMC Board of Directors
received and reviewed the written opinion of Ferris Baker dated September 15,
1995. The Ferris Baker opinion examined the proposed consideration to be
received by the stockholders pursuant to the Merger and determined that, taken
as a whole, the consideration was fair to the stockholders from a financial
point of view. This opinion was delivered to the Board of Directors in writing
in the form of a letter expressing the opinion of Ferris Baker. Ferris Baker
has reviewed and reissued its opinion dated as of the date of this Proxy
Statement.
The full text of the written opinion of Ferris Baker is attached to this
Proxy Statement in Appendix B and is incorporated herein by reference. The
summary of the Ferris Baker opinion set forth herein is qualified in its
entirety by reference to the full text of the opinion. THE STOCKHOLDERS ARE
URGED TO AND SHOULD READ SUCH OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with its opinion, Ferris Baker reviewed such information and
documents as they deemed appropriate, including, the Plan of Reorganization,
the Voting and Stock Option Agreements, DMC's Exchange Act filings from 1990
to the present, financial projections prepared by DMC management, records of
DMC Board and stockholder actions, corporate records, and such other documents
and materials as Ferris Baker considered relevant to a determination of the
value of DMC. Ferris Baker also personally interviewed members of the Board
and executive officers of DMC. In addition, Ferris Baker reviewed the reported
price and trading activity for the stock, compared certain financial and stock
market information for DMC with similar information for certain other
companies, the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in similar industries
specifically and in other industries generally and performed such other
studies and analyses as they considered necessary or appropriate.
Ferris Baker relied without independent verification upon the accuracy and
completeness of the financial and other information reviewed by them for the
purposes of their opinion. In addition, Ferris Baker has not made an
independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries and has not been furnished with any such
evaluation or appraisal.
The following is a summary of the financial analyses orally presented to the
Board on September 12, 1995 and used by Ferris Baker in connection with
providing their opinion to the Board on September 15, 1995. Ferris Baker used
substantially the same analyses in connection with providing the supplemental
letter confirming their written opinion, dated as of the date of this Proxy
Statement. Ferris Baker considered several
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valuation methods to evaluate the effect of the transaction on stockholders of
DMC including: 1) the discounted future free cash flow of DMC, 2) the earnings
and multiple comparisons to publicly traded companies engaged in similar
businesses; 3) the merger and acquisition activity of companies engaged in
similar businesses and 4) the control premiums paid by acquirors over the
market price of target companies prior to the takeover announcement date.
Discounted Future Free Cash Flows
This methodology is premised on the assumption that a buyer purchases a time
series of free cash flows that are generated by the assets of a business.
These free cash flows are then discounted to the present at the firm's
weighted average cost of capital. The weighted average cost of capital can be
described as the average price a company must pay to attract both debt and
equity to properly capitalize the firm's growth. It is this series of free
cash flows that, when discounted to the present, and after subtracting claims
by debt holders and others, represents the economic value of a firm to its
stockholders.
This valuation method indicated a per share value of $14.26 based on DMC
management's projections of future performance. DMC's projections were based
upon 9% growth in revenues--for 1996 compared to 1995 and thereafter in DMC's
core business; its Measurement of Instantaneous Profile gauge sales reaching
$10,000,000 in 1999 and increasing by 9% thereafter; and DMC maintaining its
gross and operating profit margins at 1995 levels; applying a weighted average
cost of capital of 13.3%. (These assumptions have been used by management in
its analysis and should not be relied upon to project actual future results of
DMC.) Ferris Baker also evaluated a less optimistic scenario which assumed
that future capital expenditures would be made in amounts sufficient to
maintain a ratio of fixed assets to revenue equal to historical levels. This
scenario resulted in a free cash flow valuation of $13.03 per share.
Publicly Traded Comparable Companies
Ferris Baker compared the acquisition value to the relative value of
publicly traded companies which can be considered comparable to DMC. Ferris
Baker's analysis centered on instrumentation companies which primarily sell to
the industrial sector. Since DMC is also the only company in this group with a
significant revenue concentration in the steel industry, Ferris Baker also
compared the value of the transaction valuation multiples to the valuation
multiples of the steel industry group.
The Merger Consideration compared favorably to instrumentation companies of
similar size and yielded valuations ranging from $15.72 to $20.09. The
publicly traded comparable companies included DSP Technology, Inc., Instron
Corporation, Isco, Inc., Medar, Inc., Modern Controls, Inc., Thermo Voltek
Corp., and Transmation, Inc. In addition, when comparing DMC to steel industry
companies, the proposed consideration multiples were substantially higher than
the valuation multiples achieved with respect to steel industry entities. The
steel industry valuation multiples compared to those for the proposed Merger
were as follows: 11:41 versus 23.59 for Price/Earning, 10.18 versus 20 for
Forward Price/Earning, 1.55 versus 3.19 for Price/Book Equity and 0.52 versus
1.3 for Price/Sales.
Comparable Sale Transactions
This method of valuation examines publicly available records for sale
transactions in DMC's industry. This method of valuation is often difficult to
perform due to the lack of publicly available financial data on the target
company. However, Ferris Baker compared this transaction to five acquisitions
of public manufacturing companies with revenues between $10 and $100 million
for the trailing twelve month period immediately prior to their acquisition.
These transactions were the acquisitions of Autotrol Corp., Aritech Corp.,
Laser Precision Corp., Trionex Corp., and Galveston-Houston Co. Ferris Baker
also compared the transaction value to the values paid by Thermo Electron
Corporation in connection with certain acquisitions, including FAG
Radiometrie, one of DMC's primary competitors. In both cases, the proposed
transaction is at a premium to these comparable transactions.
In reviewing comparable sale transactions in DMC's industry, and relying
upon similar measures of value as Ferris Baker examined in its comparable
company analysis, Ferris Baker arrived at comparable valuations for DMC
ranging from $14.24 per share to $16.04 per share. Additionally, in reviewing
the Thermo Electron
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Corporation transactions, the valuations based on a price to sales and price
to earnings evaluations yielded $12.20 and $12.71 valuations, respectively.
The proposed consideration with respect to the Merger generally indicated a
substantial premium over comparable recent merger and acquisition transactions
in DMC's industry.
Control Premium
The Control Premium Study is published quarterly by Houlihan Lokey Howard &
Zukin, Inc. and analyzes stock prices of target companies prior to takeover
announcements and adjusts for takeover speculation. Market data for the second
quarter of 1996 indicated that the median premium paid for all transactions
was 37.9% and mean premium paid was 39.9%. When transactions of less than $50
million were isolated, the average premium paid was 35.8%. The premium
contemplated in this transaction represents a 23% premium to the average bid
price of DMC's stock for the ten trading day period ending September 12, 1995.
The control premium contemplated herein may be understated because DMC's
Common Stock has periodically displayed stock prices indicative of takeover
speculation during 1995 after trading as low as $4.75 in the first quarter of
1995. Additonally, the Common Stock experienced a substantial run-up in price
on September 13th and 14th which appeared to represent takeover speculation.
The control premium valuation methodology arrived at valuations ranging from
a median of $20.92 to a mean of $21.22 per share. The proposed Merger
Consideration generally does not compare favorably to this measure. However,
Ferris Baker was substantially concerned that due to speculation in the stock,
the control premium determined according to this valuation method was
substantially understated.
Summary
The proposed consideration represents a 23% premium over the average bid
price for DMC's Common Stock for the ten-day trading period leading up to
September 12, 1995. Additionally, it represents a 30.6% premium over the value
of the company determined utilizing a methodology of discounting the estimated
future free cash flows of DMC when based on management's projections of
performance. When less optimistic assumptions are utilized in determining
DMC's value, the premium increases to 43%. Additionally, the transaction
compares quite favorably to comparable acquisitions of public manufacturing
companies and specifically compares favorably with respect to acquisition
prices paid by Thermo Electron Corporation, the other primary potentially
synergistic buyer for DMC.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Ferris Baker's opinion. In arriving at its fairness
determination, Ferris Baker considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is identical
to DMC or the contemplated transaction.
As described above, Ferris Baker's opinion to the Board of Directors was one
of many factors taken into consideration by the directors in making their
determination to approve the Plan of Reorganization. The foregoing summary
does not purport to be a complete description of the analyses performed by
Ferris Baker and is qualified by reference to the written opinion of Ferris
Baker set forth in Appendix B hereto.
Ferris Baker, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Ferris Baker is
familiar with DMC having provided market making and certain research services
to DMC from time to time.
The DMC Board of Directors selected Ferris Baker to act as its financial
advisor because Ferris Baker was already familiar with DMC, is a market maker
for DMC's common stock, provides investment research on DMC, and because
Ferris Baker has substantial experience in mergers and acquisitions and in
securities valuation generally.
THE OPINION OF FERRIS BAKER RELATES ONLY TO WHETHER THE CONSIDERATION TO BE
RECEIVED BY THE STOCKHOLDERS OF DMC IS FAIR FROM A FINANCIAL POINT OF VIEW AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF DMC AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE DMC MEETING TO CONSIDER THE MERGER.
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EFFECTIVE TIME OF THE MERGER
The Plan of Reorganization provides that Merger Sub will be merged with and
into DMC and that following the Merger, the separate existence of Merger Sub
shall cease and DMC will continue as the Surviving Corporation as a wholly
owned subsidiary of Measurex. The Merger will become effective upon the filing
of the Certificate of Merger contemplated by the Plan of Reorganization with
the Secretary of State of the State of Delaware (the "Effective Time") in
accordance with the Delaware General Corporation Law ("DGCL"). See "Terms of
the Merger--Conditions to the Merger." The effective date (the "Effective
Date") of the Merger will be as soon as practicable after all conditions to
the Merger have been fulfilled or waived, which is anticipated to be January
3, 1996. However, if all conditions of the Merger have been fulfilled or
waived prior to that time, the parties reserve their rights under the Plan of
Reorganization to cause the Effective Date to occur at an earlier time. The
Plan of Reorganization also provides that (i) the Certificate of Incorporation
of Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation; (ii) the Bylaws of Merger Sub shall be the Bylaws of the
Surviving Corporation; (iii) the directors of Merger Sub shall be the
directors of the Surviving Corporation; (iv) the officers of Merger Sub shall
be the officers of the Surviving Corporation; and (v) the Merger shall, from
and after the Effective Time, have all the effects provided by the DGCL.
CONVERSION AND CANCELLATION OF COMMON STOCK
Upon the consummation of the Merger, each then outstanding share of Common
Stock (other than shares owned by DMC, Measurex, or their respective
subsidiaries, and shares, if any, that are held by stockholders exercising
appraisal rights in accordance with the DGCL ("Dissenting Shares")), will be
converted into, and become exchangeable for $18.625 in cash (the "Merger
Consideration"). At the Effective Time, all such shares of Common Stock will
no longer be outstanding and will be canceled and retired and will cease to
exist, and each certificate representing any shares of Common Stock will
thereafter represent only the right to receive the Merger Consideration, or
the right, if any, to receive payment from the Surviving Corporation of the
"fair value" of such shares as determined in accordance with Section 262 of
the DGCL. See "--Dissenter's Rights."
OPTION PLANS AND DEBENTURES
Options. At the Effective Time, all options to purchase Common Stock under
the DMC 1985 Incentive Stock Option Plan, the DMC 1988 Stock Option Plan, the
DMC 1991 Stock Option Plan, 4,000 non-qualified options granted in 1995 and
the DMC Outside Directors Stock Option Plan (collectively, the "DMC Stock
Option Plans") will be deemed to be fully vested. Measurex will make available
to its exchange agent (the "Exchange Agent") amounts sufficient for the
Exchange Agent to pay each option holder cash equal to the difference between
the option exercise price and the Merger Consideration multiplied by the
number of shares of Common Stock subject to options held by such option
holder.
Debentures. Measurex will make available to the Exchange Agent amounts
sufficient for the Exchange Agent to pay each holder of DMC's Convertible
Subordinated Debentures due 1997, a price equal to the Merger Consideration
multiplied by the number of shares into which the debenture is convertible.
DMC's obligation to the Federal Deposit Insurance Corporation under the terms
of its Convertible Subordinated Debenture will remain an obligation of the
Surviving Corporation.
EXCHANGE PROCEDURES
Promptly after the Effective Time, the Exchange Agent appointed by Measurex
will mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of
Common Stock (the "Certificate" or "Certificates") which are being exchanged
for the Merger Consideration pursuant to the Plan of Reorganization, a letter
of transmittal with instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. After the Effective
Time, there will be no further registration of transfers on the stock transfer
books of DMC, as the Surviving Corporation, of shares of Common Stock.
CERTIFICATES SHOULD NOT BE SURRENDERED BY THE HOLDERS OF COMMON STOCK UNTIL
SUCH HOLDERS RECEIVE THE LETTER OF TRANSMITTAL.
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Upon the surrender of a Certificate to the Exchange Agent together with a
duly executed letter of transmittal, the holder of such Certificate will be
entitled to receive in exchange therefor an amount of cash equal to $18.625
multiplied by the number of shares of Common Stock represented by such
Certificate. In the event of a transfer of ownership of Common Stock which is
not registered on the transfer records of DMC, the appropriate amount of the
Merger Consideration may be delivered to a transferee if the Certificate
representing such Common Stock is presented to the Exchange Agent, together
with the related letter of transmittal, and accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
Until a Certificate representing Common Stock has been surrendered to the
Exchange Agent, each such Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration to which the stockholder is entitled under the Plan of
Reorganization.
CONDUCT PENDING THE MERGER
Under the terms of the Plan of Reorganization, and for the period from the
date of the Plan of Reorganization and continuing until the earlier of the
termination of the Plan of Reorganization or the Effective Time of the Merger,
DMC has agreed (except to the extent expressly contemplated by the Plan of
Reorganization or as consented to in writing), to carry on its and its
subsidiaries' business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to pay and to cause its
subsidiaries to pay debts and taxes when due, subject to good faith disputes
over such debts or taxes; to pay or perform other obligations when due; and to
use all reasonable commercial efforts consistent with past practice and
policies to preserve intact its and its subsidiaries' present business
organizations, keep available the services of its and its subsidiaries'
present officers and key employees and preserve its and its subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it or its subsidiaries, to the end
that its and its subsidiaries' goodwill and ongoing businesses shall be
unimpaired at the Effective Time of the Merger. DMC has also agreed to
promptly notify Measurex of any event or occurrence not in the ordinary course
of its or its subsidiaries' business, and of any event which could have a
material adverse effect on it and its subsidiaries, taken as a whole. In
addition, DMC has agreed that it will not, among other things do, cause or
permit any of the following, or allow, cause or permit any of its subsidiaries
to do, cause or permit any of the following, without the prior written consent
of Measurex: (a) cause or permit any amendments to its Certificate of
Incorporation or Bylaws; (b) issue, deliver, grant or sell or authorize or
propose the issuance, delivery or sale of, or purchase, or propose the
purchase of any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants, purchase rights,
conversion rights or other rights therefor outstanding as of the date of the
Plan of Reorganization; (c) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it or its subsidiaries; (d) except as otherwise
provided in the Plan of Reorganization, accelerate, amend or change the period
of exercisability or vesting of options or other rights granted under the DMC
Stock Option Plans or authorize cash payments in exchange for any options or
other rights granted under any of the DMC Stock Option Plans; (e) enter into
any material contract or commitment, or violate, amend or otherwise modify or
waive any of the terms of any of its material contracts, other than in the
ordinary course of business consistent with past practice; (f) transfer to any
person or entity any rights to its intellectual property other than in the
ordinary course of business consistent with past practice; (g) enter into or
amend any agreements pursuant to which any other party is granted exclusive
marketing or other exclusive rights of any type or scope with respect to any
of its products or intellectual property; (h) sell, lease, license, or
otherwise dispose of or encumber any of its properties or assets which are
material, individually or in the aggregate, to its and its
parent's/subsidiaries' business, taken
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as a whole, except in the ordinary course of business consistent with past
practice; (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, other than draws on existing lines of credit as
necessary for its operations in the ordinary course of business; (j) enter
into any operating lease in excess of $10,000; (k) pay, discharge, or satisfy
in an amount in excess of $10,000 in any one case or $50,000 in the aggregate,
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, other than the payment, discharge, or satisfaction of liabilities
reflected or reserved against in its financial statements; (l) make any
capital expenditures, capital additions or capital improvements except in the
ordinary course of business and consistent with past practice; (m) reduce the
amount of any insurance coverage provided by existing insurance policies; (n)
terminate or waive any right of substantial value, other than in the ordinary
course of business; (o) adopt or amend any employee benefit or stock purchase
or option plan, or hire any new director level or officer level employee, pay
any special bonus or special remuneration to any employee or director, or
increase the salaries or wage rates of its employees; (p) grant any severance
or termination pay (i) to any director or officer or (ii) to any other
employee except (A) payments made pursuant to standard written agreements in
effect on the date hereof or (B) grants which are made in the ordinary course
of business in accordance with its standard past practice; (q) commence a
lawsuit other than for the routine collection of bills, in such cases where it
in good faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided that it
consults with Measurex prior to the filing of such a suit; (r) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to its and its
parent's/subsidiaries' business, taken as a whole; (s) other than in the
ordinary course of business, make or change any material election in respect
of taxes, adopt or change any accounting method in respect of taxes, file any
material return or any amendment to a material return, enter into any closing
agreement, settle any claim or assessment in respect of taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of taxes; (t) DMC will give all notices and other
communications required to be given to the employees of DMC, any collective
bargaining unit representing any group of employees of DMC, and any applicable
government authority under the WARN Act, the National Labor Relations Act, the
Internal Revenue Code, COBRA, and other applicable law in connection with the
transactions provided for in the Plan of Reorganization; (u) revalue any of
its assets, including without limitation writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course
of business; or (v) take or agree in writing or otherwise to take, any of the
actions described in (a) through (u) above, or any action which would make any
of its representations or warranties contained in the Plan of Reorganization
untrue or incorrect or prevent it from performing or cause it not to perform
its covenants thereunder.
OTHER OFFERS
DMC has further agreed that, subject to a provision in the Plan of
Reorganization permitting DMC to consider and negotiate unsolicited written
proposals, DMC will not, directly or indirectly, through any officer,
director, employee, representative or agent of DMC or any of its subsidiaries,
(i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer
for a merger, consolidation, business combination, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving DMC or any of its
subsidiaries, other than the transactions contemplated by the Plan of
Reorganization (any of the foregoing inquiries or proposals being referred to
as an "Acquisition Proposal"), provided that DMC is permitted to send a copy
of the press release announcing the Plan of Reorganization to anyone, (ii)
engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal, or
(iii) agree to, approve or recommend any Acquisition Proposal; provided,
however, that nothing contained in the Plan of Reorganization prevents DMC or
its Board of Directors from (A) furnishing non-public information to, or
entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal, to DMC
or the stockholders of DMC, if and only to the extent that (1) the
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Board of Directors of DMC believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal would, if consummated,
result in a transaction more favorable to DMC's stockholders from a financial
point of view than the transaction contemplated by the Plan of Reorganization
(any such more favorable Acquisition Proposal being referred to as a "Superior
Proposal") and the Board of Directors of DMC determines in good faith after
consultation with outside legal counsel that such action is necessary for DMC
to comply with its fiduciary duties to stockholders under applicable law, and
(2) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Board of
Directors of DMC receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party than
those contained in the confidentiality agreement entered into between DMC and
Measurex; or (B) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal. DMC further agreed to cease and cause
to be terminated existing activities, discussions or negotiations with any
parties conducted previously with respect to any of the foregoing, although
there were no such discussions. DMC will (i) promptly notify Measurex after
receipt by it (or its advisors) of any Acquisition Proposal or any inquiries
indicating that any person is considering making or wishes to make an
Acquisition Proposal, (ii) promptly notify Measurex after receipt of any
request for nonpublic information relating to it or any of its subsidiaries or
for access to its or any of its subsidiaries' properties, books or records by
any person that may be considering making, or has made, an Acquisition
Proposal and (iii) subject to the fiduciary duties of its Board of Directors
under applicable law as advised by its outside counsel, keep Measurex advised
of the status and principal financial terms of any such Acquisition Proposal,
indication or request. It is not a breach of the Plan of Reorganization for
the DMC Board of Directors to accept, approve or recommend to the DMC
shareholders a Superior Proposal, if in connection with such action, DMC
terminates the Plan of Reorganization and promptly pays the Termination Fee to
Measurex as provided in the Plan of Reorganization. See "--Expenses and
Termination Fees."
CONFLICTS OF INTEREST
Board of Directors and Management. In considering the recommendation of the
Board of Directors of DMC with respect to the Merger, stockholders should be
aware that certain officers and directors of DMC have interests in connection
with the Merger.
Five of the eight members of the Board of Directors of DMC entered into
Voting and Stock Option Agreements with regard to only their personal holdings
of DMC Common Stock, which constitute 24.4% of the outstanding DMC Common
Stock, including certain rights to acquire DMC Common Stock pursuant to
options and convertible debentures. The directors entering into such
agreements were John Sanders, Ira Hunt and James Collins, who are not officers
of the Corporation, and Dominique Gignoux, President and CEO, and Frederick S.
Rolandi, Vice President and CFO. See "--Voting and Stock Option Agreements".
As a condition of the Merger, Dominique Gignoux will be required to enter
into a consulting and non-competition agreement and Vice Presidents Stephen
Outhwaite and Thomas Armfield will be required to enter into employment and
non-competition agreements. These agreements have not been negotiated and only
preliminary discussions have been held between Measurex and Messrs. Gignoux,
Outhwaite and Armfield concerning the terms of these agreements. In addition,
Messrs. Rolandi and Armfield were granted employment agreements by the Board
of Directors of DMC in early September 1995. These Agreements provide for an
employment term of one year following any change of control of DMC with their
compensation to be at the same level and with the same benefits as existing on
the date of the change of control.
Financial Advisors. Pursuant to a letter agreement dated September 7, 1995
(the "Engagement Letter"), DMC engaged Ferris Baker as its exclusive financial
advisor to advise the Board concerning the terms of the Offer, to assist the
Company in negotiating the Offer and to advise the Board concerning reasonably
available alternative transactions, if any. Pursuant to the terms of the
Engagement Letter, DMC has agreed to pay Ferris Baker a fee of $125,000. Under
the Engagement Letter, $25,000 was payable on the date the Engagement Letter
was executed, $50,000 was payable on the date Ferris Baker delivers the
fairness opinion, and $50,000 is payable
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on the date of the Special Meeting. DMC also agreed to reimburse Ferris Baker
for their reasonable out-of-pocket expenses, including the fees and
disbursements of their attorneys, and to indemnify Ferris Baker against
certain liabilities, including certain liabilities under the federal
securities laws.
CONDITIONS TO THE MERGER
Each party's respective obligation to effect the Merger is subject to the
following conditions: (a) the Plan of Reorganization and the Merger shall have
been approved and adopted by the holders of a majority of the shares of Common
Stock of DMC outstanding as of the Record Date set for the Special Meeting;
(b) there shall be no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger, nor shall there be any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing, nor shall there be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of
the Merger illegal; and (c) Measurex, DMC and Merger Sub and their respective
subsidiaries shall have timely obtained from each governmental entity all
approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated thereby,
including such approvals, waivers and consents as may be required under the
Exchange Act and under the HSR Act. The applicable waiting period under the
HSR Act expired on October 27, 1995.
The obligations of DMC to consummate and effect the Plan of Reorganization
and the Merger shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, unless waived by DMC: (a)
(i) the representations and warranties of Measurex and Merger Sub in the Plan
of Reorganization shall be true and correct on and as of the Effective Time as
though such representations and warranties were made on and as of such time
and (ii) Measurex and Merger Sub shall have performed and complied in all
material respects with all covenants, obligations and conditions of the Plan
of Reorganization required to be performed and complied with by them as of the
Effective Time; DMC shall have been provided with a certificate executed on
behalf of Measurex by its Chief Executive Officer and its Chief Financial
Officer confirming that this condition has been satisfied; and (b) prior to
the Special Meeting, Measurex shall have provided to DMC evidence reasonably
satisfactory to DMC that, prior to the Effective Date, Measurex will be able
to obtain financing adequate to pay the Merger Consideration and certain
amounts owed to financial institutions by DMC.
The obligations of Measurex and Merger Sub to consummate and effect the Plan
of Reorganization and the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, unless waived
by Measurex: (a) (i) the representations and warranties of DMC in the Plan of
Reorganization shall be true and correct on and as of the Effective Time as
though such representations and warranties were made on and as of such time
and (ii) DMC shall have performed and complied in all material respects with
all covenants, obligations and conditions of the Plan of Reorganization
required to be performed and complied with by it as of the Effective Time;
Measurex shall have been provided with a certificate executed on behalf of DMC
by its Chief Executive Officer and Chief Financial Officer confirming that
this condition has been satisfied; (b) Measurex shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under any
material contract of DMC or any of its subsidiaries; (c) no temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting Measurex's conduct or operation of the
business of DMC and its subsidiaries, following the Merger, shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental entity, domestic or foreign, seeking the
foregoing be pending; (d) Measurex shall have received a legal opinion from
Klaine, Wiley, Hoffmann & Meurer, legal counsel to DMC, in form and substance
reasonably satisfactory to Measurex; (e) there shall not have occurred any
material adverse change which constitutes a material adverse effect; (f)
Voting and Stock Option Agreements shall have been executed by a majority of
the directors of DMC and shall remain in full force and effect; (g)
Noncompetition Agreements in a form reasonably satisfactory to Measurex shall
have been entered into between DMC, Dominique Gignoux, Tom Armfield and Steve
Outhwaite;
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(h) DMC shall conduct a physical inventory count (and Measurex shall be
allowed to participate in this activity) and the additional inventory reserve
shall not exceed $1,500,000; and (i) DMC shall have provided a FIRPTA
certificate to Measurex.
TERMINATION
The Plan of Reorganization may be terminated at any time prior to the
Effective Time whether before or after the approval by the stockholders of
DMC, (a) by mutual consent of the Boards of Directors of Measurex, Merger Sub
and DMC; (b) by Measurex or DMC, if (i) the Effective Date shall not have
occurred on or before January 31, 1996; (ii) any governmental entity, the
consent of which is a condition to the obligations of Measurex and DMC to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent; or (iii) any court of competent jurisdiction shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final; (c) by Measurex or DMC, if, at the
Special Meeting (including any adjournment or postponement thereof), the
requisite vote of the stockholders of DMC shall not have been obtained; (d) by
Measurex, if (i) there has been a material breach by DMC of any
representation, warranty, covenant or agreement set forth in the Plan of
Reorganization, which breach has not been cured within ten business days
following receipt by DMC of notice of such breach; or (ii) the Board of
Directors of DMC shall have withdrawn or modified in a manner adverse to
Measurex its approval or recommendation of the transactions contemplated by
the Plan of Reorganization in order to permit DMC to execute a definitive
agreement providing for the transaction or transactions contemplated by a
Superior Proposal; (e) by DMC, if (i) there has been a material breach by
Measurex of any representation, warranty, covenant or agreement set forth in
the Plan of Reorganization, which breach has not been cured within ten
business days following receipt by Measurex of notice of such breach; or (ii)
the Board of Directors of DMC shall have withdrawn or modified in a manner
adverse to Measurex its approval or recommendations of the transactions
contemplated by this Agreement in order to permit DMC to execute a definitive
agreement providing for the transaction or transactions contemplated by a
Superior Proposal.
EXPENSES AND TERMINATION FEES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Plan of Reorganization and the transactions contemplated
thereby (including, without limitation, the fees and expenses of advisers,
accountants and legal counsel) will be paid by the party incurring such
expense, except as further described below. In the event that the Plan of
Reorganization is terminated (i) by Measurex upon a material uncured breach by
DMC of any of its representations, warranties, covenants or agreements or (ii)
by Measurex or DMC upon the withdrawal or modification in a manner adverse to
Measurex by the DMC Board of Directors of its approval or recommendation of
the transactions contemplated by the Plan of Reorganization in order to permit
DMC to execute a definitive agreement in connection with a Superior Proposal,
and, in the case of either (i) or (ii), DMC is not otherwise entitled to
terminate the Plan of Reorganization because (a) the Effective Date shall not
have occurred by January 31, 1996, (b) any governmental authority has
determined not to grant a required consent to the Merger, (c) a court of
competent jurisdiction has enjoined or otherwise prohibited the Merger by
final order, judgment or decree, or (d) upon a material uncured breach of the
Plan of Reorganization by Measurex, then DMC will pay to Measurex the sum of
$600,000. In the event that the Plan of Reorganization is terminated by DMC
upon a material uncured breach by Measurex of any of its representations,
warranties, covenants or agreements, and Measurex is not otherwise entitled to
terminate the Plan of Reorganization because (a) the Effective Date shall not
have occurred by January 31, 1996, (b) any governmental authority has
determined not to grant a required consent to the Merger, (c) a court of
competent jurisdiction has enjoined or otherwise prohibited the Merger by
final order, judgment or decree, or (d) upon a material uncured breach of the
Plan of Reorganization by DMC, then Measurex will reimburse DMC for out of
pocket costs for its financial advisors, legal counsel, accountants, printing
costs and filing fees incurred in connection with the Plan of Reorganization.
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AMENDMENT
The Plan of Reorganization may be amended by Measurex and DMC at any time
before or after approval by the DMC stockholders, except that, after approval
by the DMC stockholders, no amendment may be made which (i) alters or changes
the amount or kind of consideration to be received upon conversion of the
Common Stock, (ii) alters or changes any term of the Certificate of
Incorporation of the Surviving Corporation, or (iii) alters or changes any of
the terms and conditions of the Plan of Reorganization if such alteration or
change would adversely affect the holders of Common Stock.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations relevant to the Merger that are generally applicable to holders
of Common Stock. This discussion is based on currently existing provisions of
the Code, existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences to DMC's stockholders as described herein.
The receipt by the stockholders of cash, in the Merger or through the
exercise of dissenters' rights, for shares of Common Stock will be a taxable
transaction for federal income tax purposes. Each stockholder's gain or loss
per share will be equal to the difference between $18.625 and the
stockholder's tax basis per share in the Common Stock. If a stockholder holds
Common Stock as a capital asset, the gain or loss from the exchange will be a
capital gain or loss. This gain or loss will be long-term if the stockholder's
holding period is more than one year.
Shares of Common Stock which were acquired through the exercise of options
and which have not been held for a period of two years since the option was
granted and a period of one year since the option was exercised are not
treated as capital assets and gain on such shares will be subject to federal
income tax at ordinary income tax rates.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS
BASED UPON PRESENT LAW. EACH STOCKHOLDER SHOULD CONSULT SUCH STOCKHOLDER'S OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND
OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES IN SUCH TAX LAWS. SPECIAL
RULES APPLY TO COMMON STOCK RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION.
REGULATORY FILINGS AND APPROVALS
Under the HSR Act, and the rules promulgated thereunder by the FTC, certain
acquisition transactions, including the Merger, may not be consummated until
specified waiting period requirements have been satisfied. On September 26 and
27, 1995, the Notification and Report Forms required pursuant to the HSR Act
were filed by Measurex and DMC, respectively, with the Antitrust Division of
the Department of Justice and the FTC for review in connection with the
Merger. The applicable waiting periods expired at 11:59 p.m., Eastern Standard
Time, on October 27, 1995, and the waiting period requirement under the HSR
Act has been satisfied. However, at any time before or after the Effective
Time, the FTC, the Antitrust Division or others could take action under the
antitrust laws with respect to the Merger, including seeking to enjoin the
consummation of the Merger or seeking the divestiture by Measurex and Merger
Sub of all or any part of the stock or assets of DMC.
VOTING AND STOCK OPTION AGREEMENTS
Dominique Gignoux, Frederick Rolandi, Ira Hunt, John Sanders and James
Collins (the "Selling Stockholders"), each a member of the DMC Board of
Directors, have entered into Voting and Stock Option Agreements. As of
September 16, 1995, the Selling Stockholders owned 272,550 shares of Common
Stock,
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which represented 19.8% of DMC's issued and outstanding shares. The Selling
Stockholders also own rights ("Rights") to purchase Common Stock at varying
exercise or conversion prices, for the purchase of 84,750 additional shares of
Common Stock. The shares owned by Selling Shareholders would represent 24.4%
of DMC's Common Stock on a partially diluted basis (assuming exercise only of
the Selling Stockholders' Rights) and 19.1% of DMC's Common Stock on a fully
diluted basis (assuming exercise or conversion of all exercisable options and
convertible securities).
Each Selling Stockholder has agreed, for so long as the Voting and Stock
Option Agreements remain in effect, not to transfer, sell, exchange, pledge or
otherwise dispose of or encumber the Common Stock that they own, the Common
Stock they may acquire pursuant to exercise of the Rights, or any new shares
of Common Stock they acquire (collectively the "Option Stock"). Each Selling
Stockholder has granted Measurex an option to purchase all of the Selling
Stockholder's Option Stock at a price of $18.625 per share.
Each Selling Stockholder has agreed to vote such of its Option Stock as is
eligible to vote (i) in favor of approval of the Plan of Reorganization, the
Merger, and any matter that could reasonably be expected to facilitate the
Merger; and (ii) against approval of any proposal made in opposition to or in
competition with the consummation of the Merger and the Plan of
Reorganization, against any merger, consolidation, sale of substantial assets,
sale of shares of capital stock, reorganization, recapitalization or similar
transactions involving DMC or its subsidiaries, with any party other than
Measurex or one of its affiliates and against any liquidation or winding up of
DMC (each of the foregoing is referred to as an "Opposing Proposal").
Each Selling Stockholder has executed an Irrevocable Proxy with respect to
its Option Stock. Each of the members of the board of directors of Measurex is
appointed attorney and proxy of each Selling Stockholder to vote the Option
Stock at every annual, special or adjourned meeting of the stockholders of DMC
and in every written consent in lieu of such meeting: (a) in favor of approval
of the Plan of Reorganization and the Merger and (b) against approval of any
Opposing Proposal.
Except for actions taken by a Selling Stockholder solely in such Selling
Stockholder's capacity as a member of the Board of Directors of DMC, each
Selling Stockholder has agreed, for so long as the Voting and Stock Option
Agreements remain in effect, it will not, and will not permit any entity under
its control, to: (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act) with respect to any Opposing Proposal or otherwise encourage or assist
any party in taking or planning any action that would compete with, restrain
or otherwise serve to interfere with or inhibit the timely consummation of the
Merger in accordance with the terms of the Plan of Reorganization; (ii)
initiate a stockholders' vote or action by written consent of DMC stockholders
with respect to an Opposing Proposal; or (iii) become a member of a "group"
(as such term is used in Section 13(d) for the Exchange Act) with respect to
any voting securities of DMC with respect to an Opposing Proposal.
DISSENTER'S RIGHTS
If the Merger is consummated, dissenting holders of Common Stock will be
entitled to have the "fair value" (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) of their shares
("Dissenting Shares") at the Effective Time of the Merger judicially
determined and paid to them by complying with the provisions of Section 262 of
the DGCL.
THE FOLLOWING IS A BRIEF SUMMARY OF SECTION 262, WHICH SETS FORTH THE
PROCEDURES FOR DISSENTING FROM THE MERGER AND DEMANDING STATUTORY APPRAISAL
RIGHTS UNDER THE DGCL. THIS SUMMARY DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE PROVISIONS OF THE DGCL RELATING TO THE RIGHTS OF DMC
STOCKHOLDERS TO AN APPRAISAL OF THE VALUE OF THEIR SHARES AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262, A COPY OF WHICH IS
ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C AND IS INCORPORATED HEREIN BY
REFERENCE. FAILURE TO FOLLOW SUCH PROCEDURES EXACTLY COULD RESULT IN THE LOSS
OF APPRAISAL RIGHTS.
23
<PAGE>
DMC stockholders who desire to exercise their appraisal rights must satisfy
all of the conditions of Section 262. This Proxy Statement constitutes the
notice contemplated by Section 262(d)(1). It is anticipated that the Merger
will be consummated on or about January 3, 1996. DMC stockholders electing to
exercise their appraisal rights under Section 262 must not vote to approve the
Merger. If any DMC stockholder desires to exercise his or her appraisal
rights, a written demand for appraisal of shares must be filed with DMC on or
prior to the taking of the vote to approve the Merger at the Special Meeting
on December 20, 1995. This written demand for appraisal of shares must be in
addition to and separate from any vote by written consent abstaining from or
any vote against the Merger. Voting against, abstaining from voting or failing
to vote on the Merger proposal will not constitute a demand for appraisal
within the meaning of Section 262.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the stock
certificate. If the shares are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, such demand must be executed by or for
the fiduciary. If the shares are owned of record by or for more than one
person, as in a joint tenancy or tenancy in common, such demand must be
executed by or for all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute the demand for appraisal for a
stockholder of record. However, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, he is acting as
agent for the record owner.
A stockholder who elects to exercise appraisal rights must mail or deliver
his or her written demand to the President and Chief Executive Officer of DMC
at 15884 Gaither Drive, Gaithersburg, Maryland 20877. The written demand for
appraisal should specify the stockholder's name and mailing address, and that
the stockholder is thereby demanding appraisal of his or her shares.
Within 120 days after the Effective Time of the Merger, any stockholder who
has satisfied the requirements of Section 262 may deliver to DMC a written
demand for a statement listing the aggregate number of shares not voted in
favor of the Merger and with respect to which demands for appraisal have been
received and the aggregate number of shares of holders of such shares.
Within 120 days after the Effective Time of the Merger, either DMC or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the Dissenting Shares. DMC does not have any present
intention to file such a petition if demand for appraisal is made.
Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon DMC which shall, within 20 days after such service,
file in the office of the Register in Chancery in which the petition was
filed, a duly verified list containing the names and addresses of all DMC
stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by DMC. If
the petition shall be filed by DMC, the petition shall be accompanied by such
verified list. The Register in Chancery, if so ordered by the court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to DMC and to the stockholders shown upon the
list at the address therein stated, and notice shall also be given by one or
more publications at least one week before the day of the hearing in a
newspaper of general circulation published in the City of Wilmington,
Delaware, or such publication as the court deems advisable. The forms of the
notices by mail and by publication shall be approved by the court and the cost
thereof shall be borne by DMC.
If a petition for an appraisal is filed in a timely fashion, after a hearing
on such petition, the court will determine which DMC stockholders are entitled
to appraisal rights and will appraise the shares owned by such stockholders,
determining the fair value of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount determined to be the
fair value. In determining the fair value, the court is to take into account
all relevant factors, including the rate of interest which DMC would have had
to pay to borrow money during the pendency of the proceeding, and may rely
upon any techniques or methods which are generally considered acceptable in
24
<PAGE>
the financial community and otherwise admissible in court. In making this
determination of fair value the court would consider market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any
other relevant facts which could be ascertained as of the Effective Time of
the Merger. Any DMC stockholder who is entitled to appraisal rights will be
permitted to participate fully in all such proceedings.
DMC stockholders considering seeking appraisal of their shares should note
that the fair value of their shares determined under Section 262 could be
more, the same or less than the consideration they would receive pursuant to
the Plan of Reorganization if they did not seek appraisal of their shares. The
costs of the appraisal proceedings may be determined by the court and taxed
against the parties as the court deems equitable in the circumstances. Upon
application of a dissenting stockholder, the court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal. In the absence of such
a determination or assessment, each party bears his or her own expenses.
Any DMC stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the Effective Time of the Merger, be entitled to
vote for any purpose the shares subject to such demand or to receive payment
of dividends or other distributions on such shares, except for dividends or
distributions payable to stockholders of record at a date prior to the
Effective Time of the Merger.
At any time within 60 days after the Effective Time of the Merger, any DMC
stockholder shall have the right to withdraw his or her demand for appraisal
and to accept the terms offered in the Plan of Reorganization. After this
period the stockholder may withdraw his or her demand for appraisal and
receive payment for his or her shares as provided in the Plan of
Reorganization only with the consent of DMC. If no petition for appraisal is
filed with the court within 120 days after the Effective Time of the Merger,
stockholders' rights to appraisal will cease and stockholders will be entitled
to receive the Merger Consideration as provided in the Plan of Reorganization.
Inasmuch as DMC has no obligation to file such a petition, any stockholder who
desires such a petition to be filed is advised to file it on a timely basis.
No petition timely filed in the court demanding appraisal shall be dismissed
as to any stockholder without the approval of the court, and such approval may
be conditional upon such terms as the court deems just.
25
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and the notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere
herein. The statement of operations data for the years ended December 31,
1994, 1993, 1992, 1991 and 1990, and the balance sheet data at December 31,
1994 and 1993 are derived from, and are qualified by reference to, the audited
financial statements elsewhere in this Proxy Statement. The statement of
operations data for the periods ended September 30, 1995 and 1994 and the
balance sheet data at September 30, 1995 are derived from unaudited
consolidated financial statements that include, in the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The historical results
are not necessarily indicative of the results of operations to be expected in
the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDING
SEPTEMBER 30,
(UNAUDITED) YEAR ENDING DECEMBER 31,
-------------------- --------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $ 23,999 $ 17,549 $24,206 $20,221 $19,937 $20,143 $22,034
Costs and Expenses:
Cost of sales......... 17,368 13,522 18,204 15,132 14,434 14,912 17,906
% of Sales............ 72% 77% 75% 75% 72 % 74% 81 %
Selling, general and
administrative....... 4,210 3,194 4,559 4,400 4,217 4,240 4,646
% of Sales............ 18% 18% 19% 22% 21 % 21% 21 %
Interest Expense...... 462 301 410 399 614 886 964
% of Sales............ 2% 2% 2% 2% 3 % 4% 4 %
Loss (gain) on foreign
exchange............. (49) (6) 19 79 41 63 (59)
% of Sales............ -- -- -- -- -- -- --
Income (loss) before
provision (benefit) for
income taxes........... 2,008 538 1,014 211 630 42 (1,423)
% of Sales.............. 8% 3% 4% 1% 3 % -- (6)%
Provision (benefit) for
income taxes:
Current............... 414 11 280 (2) 263 34 8
% of Sales............ 2% -- 1% -- 1 % -- --
Deferred.............. 214 65 (86) 89 (150) (19) (2)
% of Sales............ 1% -- -- -- (1)% -- --
Income before extraordi-
nary item.............. 1,380 463 820 124 517 27 (1,429)
% of Sales.............. 6% 3% 3% 1% 3 % -- (6)%
Extraordinary item...... -- 4,012 4,012 -- -- -- --
% of Sales.............. -- 23% 17% -- -- -- --
Net Income (loss)....... $ 1,380 $ 4,475 $ 4,832 $ 124 $ 517 $ 27 $(1,429)
% of Sales.............. 6% 26% 20% 1% 3 % -- (6)%
========= ========= ======= ======= ======= ======= =======
Primary net income
(loss) per share before
extraordinary item..... $ 0.95 $ 0.35 $ 0.60 $ 0.10 $ 0.42 $ 0.02 $ (1.18)
========= ========= ======= ======= ======= ======= =======
Weighted average shares
outstanding (in thou-
sands)................. 1,461 1,339 1,371 1,286 1,246 1,208 1,208
========= ========= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Total Assets............ $ 24,472 $ 19,664 $20,091 $17,511 $17,227 $17,789 $20,234
========= ========= ======= ======= ======= ======= =======
Long-Term Debt.......... $ 3,272 $ 3,675 $ 3,569 $ 8,125 $ 8,474 $ 526 $ 1,404
========= ========= ======= ======= ======= ======= =======
Dividends Declared...... $ -- $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE PERIODS ENDING SEPTEMBER 30, 1995 AND 1994
Sales for the three and nine month periods ending September 30, 1995 were
$8,976,234 and $23,998,754 as compared to $6,121,236 and $17,548,521 in 1994,
respectively. These increases of 46.6% and 36.8% reflect an increased rate of
order input which began late in 1994 and has continued since that time. Order
backlog increased from $14,406,000 at December 31, 1994 to $19,073,000 at
March 31, 1995, stood at $19,172,000 on June 30, 1995, and was $20,859,000 on
September 30, 1995. The increases in bookings came from all parts of the
world.
Gross Margins were $2,342,743 or 26.1% of sales for the third quarter of
1995 compared with $1,362,125 or 22.3% of sales for the same period in 1994.
Year to date gross margins were $6,630,528 or 27.6% of sales in 1995 as
compared to $4,026,958 or 22.9% of sales for the same period in 1994. Gross
margins have increased in 1995 due to favorable changes in product mix and
from fewer discounts given during the cyclic upswing in order input.
Selling, general and administrative expenses were $1,340,961 or 14.9% of
sales for the third quarter of 1995, as compared to $1,128,122 or 18.4% of
sales in the same period in 1994. The increase resulted from commission
payments paid in connection with foreign orders. No costs associated with the
pending merger with Measurex Corporation were recognized during this period.
On a year to date basis, SG&A expenses were 17.5% of sales in 1995 as compared
to 18.2% during 1994.
Interest Expense was $187,568 or 2.1% of sales in the quarter ended
September 30, 1995 as compared to $99,788 or 1.6% of sales for the same period
in 1994. In the 1995 period, the Company recognized $75,000 of interest
expense as a result of an adjustment to the fair value of the convertible
subordinated debenture issued to the Federal Deposit Insurance Corporation in
connection with a debt restructuring which was concluded in October 1994. The
change in year to date interest expense also resulted from the same
transaction.
The Company recorded a minor gain on foreign exchange during the third
quarter of 1995 as compared to a gain of $14,644 or 0.2% of sales for the same
period in 1994. The gains in foreign exchange resulted from the weakening of
the U.S. Dollar versus major European currencies.
The Company's year to date effective tax rate was 31.3% in 1995 as compared
to 14.0% in 1994. In both 1995 and 1994, the Company was able to utilize tax
credits from certain foreign operations to reduce its effective tax rate.
COMPARISON OF 1994 TO 1993
Sales for 1994 were $24,206,165, a 19.8% increase over the prior year amount
of $20,211,006. Worldwide system sales increased by approximately $3,800,000
(29.7%) to $16,617,000 while sales of spare parts increased approximately
$400,000 (8.6%) to $5,052,000. Worldwide backlog at year end 1994 was
$14,406,000, a 23.4% increase over the prior year.
New orders received during 1994 amounted to $21,652,000, an increase of
27.8% over 1993 bookings. In actual dollar terms, orders from North America
were up 138%, to $8,860,000, in 1994 as compared to 1993:
<TABLE>
<CAPTION>
ORDERS RECEIVED BY
LOCATION OF END USER 1994 1993 1992
-------------------- ---- ---- ----
<S> <C> <C> <C>
Asia.................................................... 32% 46% 32%
North America........................................... 40 22 32
Europe.................................................. 23 16 32
Other................................................... 5 16 4
--- --- ---
Total................................................. 100% 100% 100%
=== === ===
</TABLE>
27
<PAGE>
Gross profit margins declined from 25.2% in 1993 to 24.8% in 1994. The large
increase in new system sales carrying lower margins combined with the
relatively smaller increase in spare parts sales carrying higher margins
accounted for this decline in overall margins. Selling, general and
administrative expenses increased only $159,000 in 1994 compared to 1993 and
decreased from 21.8% in 1993 to 18.8% in 1994 reflecting DMC's ability to
contain increases in these largely fixed expenses.
Interest expense, while essentially constant in actual terms, declined as a
percent of sales from 2.0% in 1993 to 1.7% in 1994. DMC recorded losses on
foreign exchange transactions of $78,794 in 1993 and $19,439 in 1994.
DMC's effective tax rate in 1994 was 19.1% as compared to 41.4% in 1993. The
reduction resulted from better utilization of net operating loss (NOL) carry
forwards in DMC's foreign subsidiaries.
DMC was not impacted by SFAS No. 106 ("Employers' Accounting for
Postretirement Benefits Other Than Pensions") as DMC does not have a liability
for such benefits. In addition, DMC was not impacted by SFAS No. 112
("Employers' Accounting for Postemployment Benefits") since DMC does not offer
benefits of this type to its employees.
COMPARISON OF 1993 TO 1992
During 1993 DMC's gross profit margins were adversely affected by a change
in sales mix and extremely aggressive price competition as compared to 1992.
The proportion of spare parts sales in 1993 declined to 22.8% of total sales
from 25.0% in 1992. Since gross profit on spares is approximately double the
gross profit on system sales, this decline resulted in a $200,000 reduction in
gross profit contribution. DMC believes, however, that future spare parts
sales will increase over time as a percentage of total sales as the installed
base of measuring systems grows.
Additionally, aggressive pricing by DMC's major North American and European
competitors resulted in a 2% decline in average selling prices for new
systems. This negatively impacted gross profits by $200,000.
Sales for 1993 were $20,211,006, a 1.4% increase over the prior year amount
of $19,937,493. Worldwide system sales increased by approximately $600,000
(4.6%) to $12,797,000 while sales of spare parts declined approximately
$400,000 (7.5%) to $4,610,000. Worldwide backlog at year end 1993 was
$11,675,000, an 18.8% increase over the prior year. A surge of new orders
during the fourth quarter resulted in year end work in process inventory
increasing $1,300,000 over 1992's ending amount.
New orders received during 1993 amounted to $16,943,000, an increase of 1.8%
over 1992 bookings.
Gross profit margins declined from 27.6% in 1992 to 25.2% in 1993 due to the
aforementioned changes in sales mix and competitive pricing pressures.
Selling, general and administrative expenses, as a percent of total sales,
increased from 21.1% in 1992 to 21.8% in 1993. This increase was primarily
attributable to higher foreign agent commission expenses which resulted from a
relatively higher proportion of foreign sales.
Interest expense declined by more than $200,000 to 2.0% of sales in 1993 as
compared to 3.1% in 1992. This was primarily a result of the FDIC debt
restructuring which was consummated as of September 30, 1992.
DMC recorded losses on foreign exchange transactions of $78,794 in 1993 and
$41,366 in 1992. The losses were attributed to the strengthening of the U.S.
Dollar versus major European currencies. In June 1993, DMC obtained a foreign
exchange facility with which to hedge these transactions but was unable to
fully utilize the facility in 1993 due to the uncertainty of the timing of its
foreign denominated collections.
DMC's effective tax rate was 41.4% as compared to 17.9% in 1992. This
difference is primarily due to large net operating loss (NOL) carryforwards
that significantly reduced the effective tax rate in 1992.
28
<PAGE>
COMPARISON OF 1992 TO 1991
Sales for 1992 declined by 1.0% to $19,937,493 as compared to $20,142,764 in
the prior year. The fall off in sales was primarily attributable to the
weakness of the British economy and its resulting impact on DMC's subsidiary
located in the United Kingdom. This decrease was only partially offset by
increases in sales in France and Germany; sales in the United States decreased
less than 0.1%. World-wide bookings of major systems for 1992 amounted to
$16,664,000--a 37% increase over the prior year. Year-end backlog was
$9,826,000--a 15% increase over the prior year. This also resulted in the
level of advance payments increasing from $580,607 at the end of 1991 to
$933,072 at the end of 1992. The allowance for doubtful accounts was $187,000
in 1992 compared to $443,000 in 1991, a decline of $256,000 which is
principally the result of accounts from prior years being written off. The
current reserve is adequate given the composition of accounts receivable at
the end of the year.
Gross margin increased to $5,503,283 or 27.6% of sales in 1992 versus
$5,230,723 or 26.0% of sales in 1991. DMC was able to continue to improve
margins as a result of better manufacturing cost controls and because
technical maturity in its products resulted in lower engineering costs.
Selling, general and administrative costs were relatively unchanged and
amounted to $4,217,244 or 21.2% of sales in 1992 as compared to $4,239,529 or
21.0% of sales in 1991.
Interest expense declined to $614,281 or 3.1% of sales from $885,998 or 4.4%
of sales in 1991. This reflects a decrease in total borrowings and the
favorable restructuring of DMC's FDIC debt which is more fully discussed in
the Liquidity and Capital Resources section.
DMC recorded losses on foreign exchange transactions of $41,366 in 1992 and
$63,044 in 1991. The losses were attributed to the strengthening of the U.S.
Dollar versus major European currencies. DMC did not have a foreign exchange
facility with which to hedge these transactions during 1992.
DMC's effective tax rate in 1992 was 17.9% as compared to 36.4% in 1991.
During 1992, DMC successfully restructured its FDIC debt and, as a result,
was able to substantially reschedule its debt obligations. See "--Liquidity
and Capital Resources".
LIQUIDITY AND CAPITAL RESOURCES
During 1992, 1993 and 1994, DMC's primary sources of liquidity were cash
flow from operations and short-term borrowings. On September 29, 1994, DMC
completed a refinancing of its long-term debt which resulted in an
extraordinary gain of $4,012,180. The new long-term financing allowed DMC to
fully repay an existing obligation in the amount of $2,821,845, plus accrued
interest, to the Federal Deposit Insurance Corporation as receiver of the
National Bank of Washington ("FDIC"). This payment completed and terminated
DMC's obligations under the Loan Modification Agreement between DMC and the
FDIC dated as of September 30, 1992 ("Agreement"). That Agreement had provided
for the division of DMC's debt to FDIC into a term loan and a contingent
liability (which was recorded on DMC's Balance Sheet as a Non-Interest Bearing
Long-Term Obligation). As a result of the refinancing, the term loan was paid
in full and the contingent liability was terminated.
Additionally, DMC issued to the FDIC a new Convertible Subordinated
Debenture due in 1999 ("Debenture") in the principal amount of $240,000 in
exchange for the Warrant ("Warrant") for 120,000 shares of DMC Common Stock
which was previously issued to the FDIC as part of the Agreement. The
Debenture bears no interest and may be converted into 120,000 shares of DMC
Common Stock at any time between October 1, 1996, and September 30, 1999, at
an exercise price of $2.00 per share. If FDIC chooses to convert the
Debenture, DMC has the right to redeem the Debenture for 65% of the market
value of the underlying Common Stock at the time of conversion, and DMC
intends to do so. DMC believes it will have the financial resources to effect
the cash redemption should conversion occur.
29
<PAGE>
Also, the FDIC has released all security interests it previously held on
DMC's inventory and fixed assets. Those assets have now been pledged to DMC's
bank as collateral for DMC's bank loans.
The new banking facility, which is in addition to DMC's existing bank
facilities, totaled $2,600,000 as of December 31, 1994, is repayable in
quarterly installments over a five-year period beginning on September 30,
1994, and ending June 30, 1999, and carries an interest rate of prime plus
1.5%. The bank loan agreement contains other terms and covenants typical of
term loans of this type. DMC does not believe that these conditions will
impair its ability to operate or expand its business.
In August 1992, DMC also restructured the long-term debt of its British
subsidiary by converting a mortgage note bearing an interest rate of 14% with
a three-year maturity to a ten-year note bearing an interest rate of 9.75%,
which is reset annually to LIBOR plus 4.0%. As of December 31, 1994, the
balance of this mortgage was $386,052.
In June 1992, the holders of DMC's $625,000 convertible subordinated
debentures agreed to extend the principal redemption date for five years to
September 30, 1997. The interest rate and conversion price remained unchanged
at 12% per annum and $2.50 per common share, respectively. During 1994, 1993
and 1992, one of the bondholders converted $80,000, $90,000 and $30,000,
respectively, worth of its debentures into 32,000, 36,000 and 12,000 shares,
respectively, of Common Stock.
In August 1994, DMC renewed a $2,000,000 banking facility from Chase
Manhattan Bank of Maryland. This facility comprises a $1,000,000 working
capital line, a $500,000 stand-by letter of credit line and a $500,000 foreign
currency trading line. The facility is secured by the inventory, fixed assets
and accounts receivable of the domestic operation and bears interest at the
rate of prime plus 0.75%. At December 31, 1994, borrowings against the working
capital line were $603,223. The facility expires in July 1996.
DMC's U.K. and German subsidiaries also have working capital facilities of
which $532,000 was unused at the end of 1994.
During 1995, DMC financed its operations from internally generated cash flow
and by use of its working capital facility. During the second quarter, DMC
renewed its working capital facility in the United States and the United
Kingdom and increased those lines by $1,000,000. A temporary increase of
$500,000 was obtained during the third quarter of 1995. At September 30, 1995,
DMC had approximately $450,000 of unused credit facilities available. DMC
expects that the funds provided by its operations and by its current working
capital facilities will enable it to finance its future operations.
DMC has no material commitments for capital expenditures.
INFLATION
For the past three years, inflation has not had a material effect on DMC's
business.
30
<PAGE>
MARKET PRICES OF COMMON STOCK; DIVIDENDS
Common Stock is traded in the over-the-counter market on the NASDAQ National
Market under the symbol "DMCB." The following table sets forth for the periods
indicated the high and low sale prices as reported by NASDAQ.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ----- -----
<S> <C> <C>
1994:
First quarter........................................... $ 4.75 $ 3.375
Second quarter.......................................... 4.625 3.50
Third quarter........................................... 6.50 3.75
Fourth quarter.......................................... 7.375 4.75
1995:
First quarter........................................... 11.5 4.75
Second quarter.......................................... 15.5 7.5
Third quarter........................................... 19.0 13.625
Fourth quarter (through November 9, 1995)............... 17.75 17.125
</TABLE>
On September 15, 1995, the last full trading day before the execution of the
Plan of Reorganization by Measurex and DMC, the closing sale price of DMC
Common Stock as reported by NASDAQ was $17.75 per share. On November 9, 1995,
the last trading day for which quotations were available at the time of
printing this Proxy Statement, the closing sale price of Common Stock as
reported by NASDAQ was $ 17.375 per share.
No cash dividends were paid during 1992, 1993, 1994 or 1995. DMC's current
loan agreements prohibit the payment of cash dividends without the lender's
consent.
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 30, 1995 by (i) each person who is
known by DMC to own beneficially more than 5% of the outstanding Common Stock,
(ii) each DMC director, (iii) each Named Executive Officer and (iv) all of
DMC's directors and executive officers as a group. All shares are subject to
the named person's sole voting and investment power except as otherwise
indicated.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------------ -------------------- -------------------
<S> <C> <C>
J. Thomas Armfield................ 22,834(2) 1.6%
Michael A. Besche................. 90,000(3) 6.1
James F. Collins.................. 4,750(4) 0.3
Dominique Gignoux................. 308,100(5) 21.8
Marshal Greenblatt................ 26,800(6) 1.9
Gregory A. Harrison............... 26,500(7) 1.9
Ira A. Hunt....................... 1,000(8) 0.1
S.J. Outhwaite.................... 33,000(9) 2.3
Frederick S. Rolandi.............. 23,500(10) 1.7
John D. Sanders................... 35,550(11) 2.5
Bonnie K. Wachtel................. 18,200(12) 1.5
All directors and all officers as
a group (12 persons)............. 514,234(13) 32.9
</TABLE>
- --------
(1) Includes total outstanding shares (1,379,507) plus shares subject to
exercise of presently exercisable options and warrants (220,487) and
shares subject to exercise upon conversion of Convertible Subordinated
Debentures (270,200), for a total of 1,870,194.
(2) Includes 22,834 shares issuable upon the exercise of options which expire
December 31, 1997.
31
<PAGE>
(3) Includes 90,000 shares issuable upon conversion of a Convertible
Subordinated Debenture owned by Besche Oil Company.
(4) Includes 2,250 shares issuable upon the exercise of options which expire
December 31, 1997.
(5) Includes 15,600 shares (.9 percent) owned by Mr. Gignoux's minor son,
15,000 shares issuable upon the exercise of options which expire December
31, 1997, and 20,000 shares subject to exercise upon conversion of
Convertible Subordinated Debentures.
(6) Includes 10,000 shares subject to exercise upon conversion of Convertible
Subordinated Debentures, 6,000 shares issuable upon the exercise of
options which expire December 31, 1997 and 2,600 shares held in
Mr. Greenblatt's profit sharing plan.
(7) Includes 2,500 shares issuable upon the exercise of options which expire
December 31, 1997.
(8) Includes 1,000 shares issuable upon the exercise of options which expire
December 31, 1997.
(9) Includes 33,000 shares issuable upon the exercise of options which expire
December 31, 1997.
(10) Includes 21,500 shares issuable upon the exercise of options which expire
December 31, 1997.
(11) Includes 5,000 shares subject to a warrant, 5,000 shares issuable upon
the exercise of options which expire December 31, 1997, and 15,000 shares
subject to exercise upon conversion of Convertible Subordinated
Debentures which are held in Mr. Sanders' profit sharing trust.
(12) Includes 6,000 shares issuable upon the exercise of options which expire
December 31,1997 and 5,200 shares subject to exercise of Convertible
Subordinated Debentures.
(13) Includes 131,084 shares subject to options and warrants. Includes 15,600
shares (.9 percent) owned for the benefit of members of directors'
immediate families and 50,200 shares subject to exercise upon conversion
of Convertible Subordinated Debentures.
32
<PAGE>
DESCRIPTION OF DATA MEASUREMENT CORPORATION
BUSINESS
DMC designs, manufactures, markets, and services computerized instruments
and control systems that measure thickness and coating weight, and control the
manufacturing process in primary products produced by the metals, plastics,
and paper industries throughout the world. DMC's instruments enable producers
of flat and rolled metal, plastics, rubber, paper, board, textiles, and
particle board to fabricate goods with close tolerances and without variations
in quality that impair the usefulness of products and waste raw materials.
Instrument systems of the type manufactured by DMC are typically installed as
part of the production line in industrial plants producing continuously-made
extruded or rolled products, such as steel plate, tin plate, galvanized
sheets, copper, aluminum sheets, and plastics produced in calenders. These
instruments provide continuous quality control capabilities that enable prompt
adjustments to be made in the manufacturing process, thereby permitting goods
to be produced within closer tolerances and with greater assurance of meeting
specifications. Savings of raw materials that result from manufacturing to
closer tolerances can be substantial. Moreover, the statistical record of the
measurements printed by the instrument increasingly is being required not only
by the producer of such products, but also by their users.
As part of the efforts to expand the line of products offered and to
increase the customer base, DMC's strategy in the mid-1980's was to acquire
other firms in the same general business. DMC typically sought to acquire
suitable businesses with compatible technological and commercial strength, and
which experienced financial difficulties as a result of management
deficiencies. Such acquisitions enabled DMC to enter new industry markets at a
substantially lower cost than through new entry, that is, without such
acquisitions. Recently, DMC has sought to expand by establishing a service and
sales presence in major steel producing areas around the world. DMC believes
that the creation of this local representation network will enable it to both
better defend its customer base in established markets and to more readily
penetrate new geographic markets.
DMC has had sales, service and manufacturing facilities in the U.K. since
1982. DMC has had sales and service operations in Germany since 1987. DMC's
sales and service operations in the remainder of Europe are directed by DMC
U.K.
In 1994 DMC established DMC Foreign Sales Corporation in St. Thomas, U.S.
Virgin Islands. This wholly owned subsidiary represents DMC in certain export
transactions.
Products. The equipment made by DMC covers a range of activities extending
from strictly measurement and display of data to control of a process. A
growing share of DMC's sales is in process control. Process control enables
the thickness of the rolled product, or applied coating, to be altered
automatically to preset targets as a result of the measurements taken by DMC's
instruments. DMC's products can be used with practically all materials made in
flat form on a continuous basis. DMC also makes pinhole detectors and some
laboratory versions of its on-line instruments.
a. Non-contact thickness gauges for production lines. DMC presently makes
two types of thickness gauges that measure either the total thickness of a
flat rolled product or the thickness of a coating applied to a flat rolled
product. These two types are distinguished by the method used by the sensor
making the measurements. These measuring systems typically range in price from
$30,000 to $750,000, with an average selling price of approximately $175,000.
In 1994 these items represented 66% of total sales.
Total Thickness Gauges. These gauges, also known as transmission gauges,
provide measurement of total thickness or weight per unit area of metals,
plastics, rubber, paper, board, textiles and carpet. The gauges consist of two
main parts, the sensor and the electronic processor. DMC's thickness gauges
operate without touching the material being measured and measure thickness
from 10 microns (0.0004 inches) up to 100 millimeters (4 inches), with an
accuracy of a fraction of one percent.
Transmission gauges operate by directing a beam of radiation through the
material being measured. The radiation beam is produced either by a
radioisotope (cesium, curium, krypton, promethium, strontium,
33
<PAGE>
americium, or cobalt) with fixed emission energy or by an x-ray tube with
variable emission energy. In either case, the gauge measures the intensities
of the radiation beam before and after passing through the material being
gauged. A micro-computer analyzes the detected radiation, calculates the
thickness of the material, and provides an instantaneous visual or printed
readout of the measurement.
Coating weight gauges. These non-contact gauges measure organic or metallic
coatings on metals using either a fluorescence or a backscatter principle.
For example, fluorescence gauges are used to measure the thickness of zinc,
tin, or chromium coatings on steel. Fluorescence gauges direct a radiation
beam at a given sample. Each of the elements encountered by such a beam emits
radiation at a characteristic energy level--a phenomenon known as x-ray
fluorescence.
Backscatter gauges use the reflection of a beam of radiation by an
underlying material (for example, steel) to measure the thickness of a coating
(for example, paint).
DMC's thickness gauges and coating weight gauges are offered for hot or cold
measurements, high speed production lines, and varying material sizes and
thicknesses. They are equipped with different radiation sources depending on
the thickness and type of material being gauged. Computer capacity and
performance vary among DMC's models. DMC often specially modifies its standard
thickness gauges to meet particular specifications and performance
requirements of customers. DMC's closed loop control systems are typically
based on the use of one or several gauges to control the thickness or coating
thickness of materials.
b. Pinhole detectors. DMC's line of pinhole detectors is designed to locate
minute holes in sheet materials, such as tin plate, tin-free steel, galvanized
steel, copper, brass, aluminum and opaque plastic. These detectors are
installed on the production line and, without interrupting the manufacturing
process, identify and locate pinholes and other through-the-strip flaws as
minute as 2.5 microns (0.0001 inches). In 1994, this line generated less than
2% of total sales.
A pinhole detector operates by projecting a beam from an ultraviolet light
source located above the strip of material through flaws in the material. An
ultraviolet filter collects the beam passing through a flaw and removes most
visible light. Photomultiplier tubes transform the light passing through the
filter into an electrical signal that is processed to produce a "pinhole"
signal. Interconnected digital computer equipment identifies, in visual or
printed readout form, the position and number of flaws in the material. The
computer may be integrated with various control units that cut or reject
defective material.
DMC's pinhole detectors offer various performance and sensitivity options
which may be selected by a customer depending upon the intended use of the
instrument. DMC's pinhole detectors typically range in price from $25,000 to
$75,000.
c. Laboratory gauges. DMC makes two measuring systems that are used in
laboratories and production facilities, but are not directly mounted on
production lines the Basis Weight and Caliper Profiler, and the Laboratory
Coating Weight Gauge. In 1994, this line generated less than 1% of total
sales.
Basis Weight and Caliper Profilers. This instrument provides fast and
accurate measurement of samples of paper, paperboard, plastic, and non-woven
fabrics. Such samples are fed into the unit for measurement and then are used
to test the accuracy of the instruments used in the production process.
Laboratory Coating Weight Gauges. This instrument is used in a laboratory to
monitor the thickness or coating weight of zinc or tin on steel. The
instrument inspects samples and records measurements of the material.
d. New Products. DMC has recently completed development of a new measuring
process whereby the entire width of the surface is measured instantaneously.
(DMC's traditional measurement systems measure only one spot at any one time.)
This system, which uses the trade name "MIP"--Measurement of Instantaneous
Profile--was jointly developed under an exclusive license agreement with
IRSID, the French national steel research institute. These gauges are
particularly useful for sensitive measurements at the edge of a steel strip.
In
34
<PAGE>
1994, DMC received two orders for MIP systems and expects to ship both systems
during the first half of 1995. The order value of each system ranges from
$600,000 to $900,000.
e. Spare Parts. DMC sells spare parts for all of the measurement systems it
manufactures. Spare parts sales typically bear higher gross profit margins
than do system sales. Customers generally procure a minimum complement of
spare parts, either at the time of the initial purchase of a gauging system,
or at the end of the warranty period--generally one year after delivery and
start up. Additionally, spare parts orders are received as the measurement
system ages. In 1994, spare parts sales accounted for 21% of total sales.
Service. DMC's instruments are usually covered by a one-year warranty
against defects in workmanship or components. DMC maintains worldwide product
liability insurance. No product liability claims have ever been brought
against DMC. Warranty services, in addition to services performed on a fee
basis such as commissioning of new equipment, training of equipment operators,
and post-warranty maintenance and repairs, are handled by personnel based
either at DMC's facilities in Gaithersburg, Michelstadt (Germany) or
Northfleet (United Kingdom), or at field offices currently located in Chicago,
Kaoshiung (Taiwan), Liege (Belgium), Pittsburgh, Pusan (South Korea), and
Gloucester (U.K.). DMC has also contracted with independent organizations to
provide service in Australia, India, Italy, Japan and the Republic of South
Africa and has a joint venture agreement with Anshan Steel to provide service
in China.
Raw Materials. DMC's products require a wide variety of components and
materials. DMC uses multiple vendors to supply its components and materials.
DMC believes that the sources and availability of its components and materials
are adequate.
Government Regulations and Licenses. The use of radioisotopes in equipment
manufactured by DMC is licensed by the State of Maryland, Department of Health
and Mental Hygiene, Division of Radiological Health. In the United Kingdom,
the use of radioisotopes in manufacturing is licensed by the Department of the
Environment and is under the control of the Health and Safety Executive. In
Germany, the use of radioisotopes is licensed by the Factory Inspectorate
under the control of the Staatliches Gewerbeaufsichtsamt, Wiesbaden. DMC does
not believe that there are any risks attendant to the manufacture or use of
DMC's equipment using radioisotopes and, accordingly, does not maintain
supplemental liability insurance against such risks.
Patents and Manufacturing Licenses. DMC is the assignee of six patents which
expire between 1998 and 2009. DMC has applied for patents on four other
measuring system inventions and expects these patents to be issued by 1996.
DMC has entered into a joint development and license agreement with IRSID, the
French national steel research institute, to develop an instantaneous profile
measurement system. The license agreement, which expires in 2001, grants DMC
exclusive, worldwide marketing rights.
Sales and Marketing. DMC's market is divided into two categories, direct
users and prime contractors, that is, mill manufacturers who subcontract the
gauge part of their orders. Sales to direct users have, in 1994, been made to
Inland Steel, Bethlehem Steel, Usinor British Steel, Kawasaki Steel, Nippon
Steel, Wuhan Iron and Steel, Posco, and Yieh United, among others. 1994 sales
to prime contractors in the construction of mills and plants include General
Electric, Mitsubishi, MDS, SMS, Jeumont-Schneider, Davy McKee and Hitachi,
among others.
DMC maintains sales offices in Maryland, Illinois, Pennsylvania, Northfleet
(U.K.), Michelstadt (Germany), Liege (Belgium), Beijing (PRC) and Paris
(France). DMC employs eight full-time salespeople to service major domestic
and foreign accounts. In addition, DMC has agency arrangements with technical
sales representatives in Australia, Brazil, Canada, India, Italy, Japan, South
Korea, the Philippines, Mexico, South Africa, Germany, Spain, Sweden, the
Netherlands, Taiwan, Thailand, Turkey and Venezuela.
Excluding intercompany transactions, export sales from the U.S. were
$12,004,000, $10,564,000 and $10,376,000 in 1994, 1993 and 1992, respectively.
Export sales from DMC (U.K.) Ltd. were $3,444,000, $2,100,000 and $2,890,000
in 1994, 1993 and 1992, respectively.
35
<PAGE>
Excluding intercompany transactions, shipments of new measurement systems to
DMC's major markets over the last three years were:
<TABLE>
<CAPTION>
THE AMERICAS ASIA EUROPE/AFRICA
------------ ---------- -------------
<S> <C> <C> <C>
1994............................... $6,295,000 $5,497,000 $4,825,000
1993............................... 4,817,000 5,210,000 2,765,000
1992............................... 3,018,000 2,367,000 6,844,000
</TABLE>
DMC does not believe it is dependent upon any single customer on a
continuing basis, although in any one year, one customer may account for a
material portion of DMC's sales. During 1994, 1993, and 1992, no single
customer accounted for 10% or more of sales.
DMC's business is not seasonal in nature, but is directly affected by
changes in capital expenditures by industry. Backlog of orders believed to be
firm as of December 31, 1994, 1993, and 1992 was approximately $14,406,000,
$11,675,000 and $9,826,000, respectively. Most orders on backlog are expected
to be shipped within one year.
DMC does not typically offer extended payment terms to customers. Long
collection times occur occasionally due to slowness of payment by some foreign
customers, retainages or receivables not due until the occurrence of certain
events such as the commissioning of equipment or the expiration of the
warranty period, and some customers' habit (contrary to the purchase order
contract) of delaying payment of invoices until the equipment is proven to
work to their satisfaction.
Competition. DMC's major market has been sales to the metals industries and
especially to the steel industry. DMC knows of no competitor that sells more
thickness measurement equipment to the steel industry than it sells. In
general, the industrial measurement and control instruments industry is highly
price competitive. DMC faces vigorous competition for sales of all products
from a number of firms, many of which are larger and have substantially
greater financial resources than DMC. They include Thermo Instrument Systems
(formerly FAG), Measurex, Accuray, Toshiba, Loral Control Systems, IMS and
Yokogawa.
In the opinion of DMC, its ability to obtain business is based on its
technical competence in the design, manufacture and performance of its
products, product quality, and in its ability to quickly service its
instruments in both domestic and foreign markets. DMC's worldwide network of
service centers allows it to have a service representative at most customers'
sites within 24 hours and at all sites within 48 hours; this is particularly
important in making direct sales to the end users of DMC's products.
Development and Engineering. DMC's technical competence is an important
factor in marketing. Most of DMC's development efforts are directed toward
product design, performance enhancements and standardization of products. DMC
is engaged in a continuing program to develop the hardware and software
necessary to further the use of computer techniques in its products.
Employees. At December 31, 1994, DMC employed 226 full-time employees, 204
of which were based in the U.S., 16 in the U.K., 3 in France, 2 in Germany and
1 in China. There are no collective bargaining agreements with any of DMC's
employees. DMC considers its relations with its employees to be good.
PROPERTIES
DMC leases 65,000 square feet of space in three locations in Gaithersburg,
Maryland, a suburb of Washington, D.C. DMC's leases, with options, extend
until November 2007. DMC's offices occupy 12,600 square feet, and the
remaining 52,400 square feet are dedicated to manufacturing activities. These
facilities includes testing and research laboratories, a complete machine
shop, welding and paint rooms, and assembly and general test areas. Raw
materials and work-in-process inventory are also stored at this facility as
well as at two smaller, off-site facilities. DMC believes that currently
leased space is adequate for business operations for the foreseeable future.
Monthly rent under these leases amounts to $46,100.
36
<PAGE>
DMC's wholly owned U.K. subsidiary owns a building and land in Northfleet,
Kent. Of the building's 13,500 square feet, offices occupy 5,000 square feet,
and 8,500 square feet are dedicated to manufacturing and engineering
activities. Raw materials and work-in-process are also stored at this
facility.
DMC's wholly owned German subsidiary has office space in Michelstadt that is
subleased, on a month-to-month basis, from DMC's German agent as part of the
agency agreement. Spare parts are also stored in the Michelstadt facility. DMC
believes that for the foreseeable future, this facility is adequate for
business operations.
DMC's China division leases a small office in Beijing under a lease expiring
in 1995 at $1,400 per month.
LEGAL PROCEDINGS
On September 19, 1995, a stockholder of DMC filed an action in the Delaware
Chancery Court against DMC, its officers and directors, and Measurex. The
plaintiff seeks to have the stockholders of DMC certified as a class and
himself as a class representative to act on behalf of all common stockholders
of DMC. The suit alleges among other things that (i) the Board of Directors of
DMC breached its fiduciary duties to the stockholders and (ii) the
consideration to be paid to the stockholders is inadequate and does not give
due consideration to the anticipated operating results, net asset value, cash
flow and profitability of DMC.
On September 22, 1995, plaintiff's counsel served requests for the
production of documents in this litigation. In early October, DMC began to
supply documents to plaintiff's counsel, which process is continuing.
Following meetings, discussions and negotiations among the parties and their
respective counsel, on October 31, 1995, counsel for the parties on behalf of
their clients entered into a memorandum of understanding setting forth the
terms of an agreement in principle to settle and terminate the litigation (the
"Proposed Settlement"). Under the Proposed Settlement, DMC agreed to (i) allow
plaintiff's counsel to review and suggest changes to the Proxy Statement
before it was finalized and (ii) obtain an update of the fairness opinion of
Ferris Baker both prior to the mailing of this Proxy Statement and at the time
of the Special Meeting. DMC also agreed that in the event there is a change in
the opinion of Ferris Baker on the date of the Special Meeting, DMC will
adjourn the meeting for at least 15 days, informing the stockholders of the
change in the Ferris Baker opinion and affording the stockholders the
opportunity to revoke proxies previously submitted. In exchange for DMC's
agreement, the plaintiff agreed not to take any action to enjoin or take other
legal action to prevent the stockholder vote on or consummation of the
proposed Merger; to release any and all claims against the defendants,
including all state and federal claims arising out of the events described in
the complaint; and to dismiss, with prejudice, the complaint to effect
termination of this litigation.
The Proposed Settlement is conditioned on (a) the parties' execution of a
definitive stipulation of settlement; (b) the plaintiff's completion of
certain discovery designed to confirm that the settlement is fair and
reasonable and in the best interests of the DMC stockholders; (c) the court's
certification of a class of DMC stockholders from the date of the announcement
of the proposed Merger through the Effective Date who do not exclude
themselves from the class, for purposes of settlement only; (d) the court's
preliminary and final approval of the Proposed Settlement; and (e) the entry
of a final judgment dismissing the litigation.
DMC, its officers, the members of its Board of Directors, and Measurex
denied, and continue to deny, that they committed any violations of law or
breaches of duty as alleged in the complaint, but entered into the memorandum
of understanding and contemplate entering into the stipulation of settlement
solely because the Proposed Settlement would eliminate the burden, risk and
expense of further litigation and would facilitate the consummation of the
proposed Merger. In agreeing to disclose additional information, DMC does not
admit the materiality of that information or that the materials previously
filed with the Securities and Exchange Commission were in any way deficient.
In connection with the Proposed Settlement, it is anticipated that counsel for
the plaintiff will apply to the court for an aggregate award of attorneys'
fees and expenses in an amount not to exceed $150,000. As a condition of
settlement, DMC has agreed to pay plaintiff's counsel the amount awarded by
the court. Before the Proposed Settlement is finally approved by the court,
notice of the proposed terms and conditions of the settlement will be mailed
to all members of any class certified by the court, who will be afforded an
opportunity to opt out of and object to the settlement.
37
<PAGE>
LEGAL MATTERS
Klaine, Wiley, Hoffmann & Meurer, Cincinnati, Ohio, is acting as counsel for
DMC in connection with certain legal matters relating to the Merger. Brobeck,
Phleger & Harrison, San Francisco, California, is acting as counsel for
Measurex in connection with certain legal matters relating to the Merger.
EXPERTS
The consolidated financial statements of DMC as of December 31, 1994 and
1993 and for each of the years in the three-year period ended December 31,
1994 have been audited by Deloitte & Touche L.L.P., independent certified
public accountants, as set forth in their report thereon included therein.
Such consolidated financial statements are included herein in reliance upon
such reports given upon the authority of such firms as experts in accounting
and auditing. The firm Deloitte & Touche L.L.P. served as independent
certified public accountants for DMC for the fiscal years ended December 31,
1994 and 1993. Representatives of Deloitte & Touche L.L.P. will be present at
the Special Meeting and will have the opportunity at such meeting to make a
statement if such representatives desire to do so. In addition, such
representatives will be available to respond to appropriate questions raised
at the meeting. The financial statements of DMC (UK) Limited as of December
31, 1994 and 1993 and for each of the three years in the period ended December
31, 1994 have been audited by Sinclairs, registered auditors, as set forth in
their report included herein.
The consolidated financial statements of Measurex for the years ended
December 31, 1994 and 1993 and for each of the years in the three-year period
ended December 31, 1994 incorporated by reference to Measurex's Annual Report
on Form 10-K for the year ended November 27, 1994 have been audited by Coopers
& Lybrand L.L.P., independent certified public accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements have been incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board knows of no
other matters which will be acted upon at Special Meeting other than the
approval of the Plan of Reorganization and the transactions contemplated
thereby or the adjournment of the Special Meeting to a later date.
1996 ANNUAL MEETING OF STOCKHOLDERS
DMC does not plan to hold an annual meeting of stockholders during 1996
unless the Merger is not consummated. If the Merger is not consummated,
Stockholder proposals must be received by the Secretary of DMC no later than
December 20, 1995 in order to be considered for inclusion in the proxy
materials for the Company's 1996 Annual Meeting of Stockholders.
By Order of the Board of Directors
Dominique Gignoux
President and Chief Executive
Officer
38
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report of Deloitte & Touche dated March 1, 1995.... F-2
Independent Auditors' Report of Sinclairs dated March 1, 1995............ F-3
Consolidated Balance Sheets dated December 31, 1994 and 1993............. F-4
Consolidated Statements of Operations for the years ended December 31,
1994, 1993 and 1992..................................................... F-5
Consolidated Statements of Stockholders Equity for the years ended
December 31, 1994, 1993 and 1992........................................ F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992..................................................... F-7
Notes to Consolidated Financial Statements for the years ended December
31, 1994, 1993 and 1992................................................. F-8
Consolidated Statements of Operations (unaudited) for the three months
and nine months ended September 30, 1995 and 1994....................... F-21
Consolidated Balance Sheets dated September 30, 1995 (unaudited) and
December 31, 1994....................................................... F-22
Statements of Cash Flows (unaudited) for the nine months ended September
30, 1995 and 1994....................................................... F-23
Notes to Consolidated Unaudited Financial Statements..................... F-24
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Data Measurement Corporation
Gaithersburg, Maryland
We have audited the accompanying consolidated balance sheets of Data
Measurement Corporation and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1994.
Our audits also included the financial statement schedule listed in the Index
at Item 14(a)(2). These financial statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedule based on our audits. We did not audit the financial statements of DMC
(U.K.) Limited (a consolidated subsidiary), which statements reflect total
assets constituting 20% and 18% of consolidated total assets as of December
31, 1994, and 1993, respectively, and total revenues constituting 19%, 11% and
14% of consolidated total revenues for the years ended December 31, 1994,
1993, and 1992, respectively. Such financial statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for DMC (U.K.) Limited, is based solely on the
report of such other auditors.
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 overall financial statement presentation. We
believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects,
the financial position of Data Measurement Corporation and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also, in our
opinion, based on our audits and (as to the amounts included for DMC (U.K.
Limited) the report of other auditors, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
Deloitte & Touche LLP
Washington, D.C.
March 1, 1995
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
DMC (UK) LIMITED
We have audited the accompanying Balance Sheets of DMC (UK) Limited as of
December 31, 1994 and 1993, and the related statements of Profit and Loss
Account and Cash Flow Statements for each of the three years in the period
ended December 31, 1994. 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 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 DMC (UK) Limited as of
December 31, 1994 and 1993, and the results of its Profit and Loss Account and
Cash Flow Statements for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
Sinclairs
SINCLAIRS REGISTERED AUDITORS
1 March 1995
F-3
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 583,384 $ 704,695
Restricted cash.................................... 102,000 34,000
Accounts Receivable:
Trade, less allowance for doubtful accounts of
$162,000 in 1994 and $184,000 in 1993............ 5,238,586 3,847,764
Unbilled accounts receivable...................... 1,544,737 1,007,674
Retainages........................................ 1,521,516 1,587,546
----------- -----------
Total accounts receivable....................... 8,304,839 6,442,984
Inventories:
Work-in-process.................................... 2,514,722 2,774,924
Material and parts................................. 6,695,087 5,354,370
----------- -----------
Total inventories............................... 9,209,809 8,129,294
Deferred income taxes............................... 188,266 172,240
Prepaid income taxes................................ -- 82,760
Other current assets................................ 316,743 321,892
----------- -----------
Total current assets............................ 18,705,041 15,887,865
Property and equipment, at cost:
Land............................................... 39,163 36,925
Building........................................... 493,952 465,731
Machinery and equipment............................ 1,763,373 1,637,562
Demonstration equipment............................ 1,048,997 1,038,382
Office furniture................................... 803,945 724,671
Leasehold improvements............................. 204,644 161,400
----------- -----------
4,354,074 4,064,671
Less accumulated depreciation and amortization..... 3,410,849 2,875,546
----------- -----------
Net property and equipment 943,225 1,189,125
Patents and licenses at cost, less accumulated amor-
tization of $114,683 in 1994 and $99,847 in 1993... 53,551 35,828
Goodwill, less accumulated amortization of $151,597
in 1994 and $141,996 in 1993....................... 388,954 398,555
----------- -----------
TOTAL ASSETS........................................ $20,090,771 $17,511,373
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks............................. $ 706,108 $ 487,397
Accounts payable................................... 2,347,210 1,399,832
Advance payments on contracts...................... 1,453,509 819,111
Accrued compensation............................... 683,753 724,655
Accrued warranty expense........................... 354,096 386,895
Accrued commission expense......................... 566,311 451,812
Accrued interest expense........................... 37,427 27,635
Other accrued liabilities.......................... 497,265 540,595
Income taxes payable............................... 197,498 50,513
Current portion of long-term debt.................. 569,999 382,654
----------- -----------
Total current liabilities....................... 7,413,176 5,271,099
Deferred income taxes............................... 65,824 136,000
Long-term debt...................................... 3,568,533 3,377,763
Non interest bearing long-term obligation........... -- 4,747,569
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 4,000,000 shares au-
thorized, 1,331,318 and 1,298,818 shares issued,
and 1,328,318 and 1,295,818 shares outstanding.... 13,313 12,988
Additional paid-in capital......................... 5,417,248 5,335,573
Retained earnings/(deficit)........................ 4,058,060 (774,016)
Currency translation adjustments................... (428,583) (578,803)
Treasury stock, 3,000 shares, at cost.............. (16,800) (16,800)
----------- -----------
Total stockholders' equity...................... 9,043,238 3,978,942
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $20,090,771 $17,511,373
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Sales.................................. $24,206,165 $20,221,006 $19,937,493
Costs and expenses:
Cost of sales......................... 18,204,143 15,132,816 14,434,210
Selling, general and administrative... 4,558,752 4,399,733 4,217,244
Interest expense...................... 410,056 398,662 614,281
Loss on foreign exchange.............. 19,439 78,794 41,366
----------- ----------- -----------
Total costs and expenses............... 23,192,390 20,010,005 19,307,101
----------- ----------- -----------
Income before provision (benefit) for
income taxes and extraordinary item... 1,013,775 211,001 630,392
Provision (benefit) for income taxes:
Current............................... 280,080 (1,765) 263,089
Deferred.............................. (86,201) 89,108 (150,186)
----------- ----------- -----------
193,879 87,343 112,903
----------- ----------- -----------
Income before extraordinary item....... 819,896 123,658 517,489
Extraordinary item--gain on
extinguishment of debt................ 4,012,180 -- --
----------- ----------- -----------
Net income............................. $ 4,832,076 $ 123,658 $ 517,489
=========== =========== ===========
Net income per share...................
Primary...............................
--Income before extraordinary item... $ 0.60 $ 0.10 $ 0.42
--Extraordinary item................. 2.93 -- --
--Net income......................... 3.53 0.10 0.42
Fully Diluted.........................
--Income before extraordinary item... $ 0.56 $ 0.10 $ 0.37
--Extraordinary item................. 2.58 -- --
--Net income......................... 3.14 0.10 0.37
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COMMON STOCK
$0.1 PAR VALUE ADDITIONAL CURRENCY
----------------- PAID-IN RETAINED TRANSLATION TREASURY
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS STOCK TOTAL
--------- ------- ---------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1992........ 1,211,085 $12,111 $5,117,118 $(1,415,163) $ 91,165 $(16,800) $3,788,431
Net income............. -- -- -- 517,489 -- -- 517,489
Conversion of deben-
tures................. 12,000 120 29,880 -- -- -- 30,000
Currency translation
adjustment............ -- -- -- -- (541,172) -- (541,172)
--------- ------- ---------- ----------- --------- -------- ----------
Balance,
December 31, 1992...... 1,223,085 12,231 5,146,996 (897,674) (450,007) (16,800) 3,794,748
Net income............. -- -- -- 123,658 -- -- 123,658
Exercise of options.... 39,733 397 98,935 -- -- -- 99,332
Conversion of deben-
tures................. 36,000 360 89,640 -- -- -- 90,000
Currency translation
adjustment............ -- -- -- -- (128,796) -- (128,796)
--------- ------- ---------- ----------- --------- -------- ----------
Balance,
December 31, 1993...... 1,298,818 12,988 5,335,573 (774,016) (578,803) (16,800) 3,978,942
Net income............. -- -- -- 4,832,076 -- -- 4,832,076
Exercise of options.... 500 5 1,995 -- -- -- 2,000
Conversion of deben-
tures................. 32,000 320 79,680 -- -- -- 80,000
Currency translation
adjustment............ -- -- -- -- 150,220 -- 150,220
--------- ------- ---------- ----------- --------- -------- ----------
Balance,
December 31, 1994...... 1,331,318 $13,313 $5,417,248 $4,058,060 $(428,583) $(16,800) $9,043,238
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................. $4,832,076 $ 123,658 $ 517,489
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation.............................. 474,747 379,093 519,387
Amortization.............................. 31,683 26,503 30,408
Deferred income taxes..................... (86,202) 89,108 (149,926)
Changes in assets and liabilities:
Accounts receivable...................... (2,391,773) 223,742 319,655
Inventories.............................. (945,911) (1,303,852) 171,086
Prepaid income taxes..................... 82,760 (82,760) --
Other current assets..................... 17,242 (8,285) 10,678
Patents and licenses..................... (32,050) (17,378) (19,094)
Accounts payable......................... 920,997 451,714 (397,781)
Advance payments on contracts............ 1,235,827 (98,441) 366,860
Accrued compensation..................... (51,412) 110,215 256,756
Other accrued liabilities................ 12,583 167,200 (222,430)
Current income taxes..................... 142,102 (182,897) 214,318
---------- ---------- ----------
Net cash provided by (used in) operating
activities................................ 4,242,669 (122,380) 1,617,406
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (191,273) (45,743) (282,685)
Proceeds (purchase) of short-term
investments.............................. -- 176,500 (176,500)
Change in restricted cash................. (68,000) (34,000) --
---------- ---------- ----------
Net cash (used in) provided by investing
activities............................... (259,273) 96,757 (459,185)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock........ 2,000 99,332 --
Payments on long-term debt................ (4,314,608) (282,774) (65,961)
Net borrowings (payments) on notes
payable.................................. 208,619 94,077 (413,744)
---------- ---------- ----------
Net cash used in financing activities..... (4,103,989) (89,365) (479,705)
---------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS.......................... (718) (53,492) (140,470)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................... (121,311) (168,480) 538,046
CASH AND CASH EQUIVALENTS, Beginning of
year...................................... 704,695 873,175 335,129
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, End of year..... $ 583,384 $ 704,695 $ 873,175
========== ========== ==========
Supplemental cash flow information:
Interest paid............................. $ 401,128 $ 404,013 $ 276,218
Income taxes paid......................... $ 54,560 $ 278,707 $ 45,495
Capitalized equipment leases.............. $ 73,030 $ -- $ --
Termination of Contingent Obligation...... $4,012,180 $ -- $ --
Line of credit borrowings coverted to
long-term debt........................... $ -- $ -- $7,749,659
Conversion of debentures to common stock.. $ 80,000 $ 90,000 $ 30,000
Capitalized demonstration equipment....... $ -- $ -- $ 230,292
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries, DMC (U.K.) Limited, DMC
Mess- & Regeltechnik GmbH, DMC France, S.A.R.L., DMC Foreign Sales Corporation
and Industrial Gauging Disc, Inc., a former interest charge domestic
international sales corporation ("DISC"). All intercompany transactions have
been eliminated.
Revenue Recognition
The Company manufactures gauging systems, pinhole detector, and other
industrial instruments pursuant to specific contract orders. Revenues related
to the production of these items are recognized either using the percentage of
completion method or upon completion and shipment of units to customers,
depending on the magnitude and duration of the contract. Revenues related to
the installation and service of equipment at customers' locations are
recognized when the installation or service work is performed.
Foreign Currency Translation
Gains or losses resulting from translating foreign currency financial
statements are accumulated in a separate component of stockholders' equity.
Gains or losses resulting from foreign exchange transactions (transactions
denominated in a currency other than the entity's local currency) are included
in determining net income.
Inventories
Material and parts inventory is stated at the lower of cost (first-in,
first-out basis) or market. Work-in-process inventory represents accumulated
labor, material, and factory overhead costs related to specific uncompleted
contracts. Provisions are made to reduce accumulated costs on uncompleted
contracts to net realizable value when losses are anticipated.
Depreciation
depreciation is computed on the straight-line method using the following
estimated useful lives:
<TABLE>
<S> <C>
Building....................................................... 50 years
Machinery and equipment........................................ 3-7 years
Demonstration equipment........................................ 3-10 years
Office furniture............................................... 5-7 years
Leasehold improvements......................................... 5-7 years
</TABLE>
Amortization
Patents and licenses are amortized on a straight-line basis over five-year
periods. Goodwill is amortized over a forty-year period.
Income Taxes
The Company provides for federal and state income taxes at the statutory
rates in effect on taxable income. Deferred income taxes result primarily from
the temporary differences in recognizing depreciation, vacation pay and
reserves.
F-8
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Income taxes have not been provided for the undistributed earnings of the
Company's subsidiary, DMC (U.K.) Ltd., because the Company intends to continue
these operations and reinvest the undistributed earnings indefinitely.
Undistributed earnings of the subsidiary amounted to $2,122,355 at December
31, 1994.
Net Income Per Share
Primary net income per share is based on the weighted average number of
common shares outstanding including common stock equivalents from dilutive
stock options and warrants. Common equivalent shares were computed using the
treasury stock method. The Company's convertible subordinated debentures (see
Note 2) are not common stock equivalents. Shares used in the primary net
income per share calculation were 1,371,622, 1,285,768 and 1,246,357 in 1994,
1993, and 1992, respectively. Fully diluted net income per share assumes the
conversion of the convertible subordinated debentures. Shares used in the
fully diluted net income per share computation were 1,558,022, 1,505,768 and
1,509,906 in 1994, 1993, and 1992, respectively.
Cash, Cash Equivalents and Restricted Cash
For purposes of the statements of cash flows, the Company considers all
temporary investments with an original maturity of three months or less to be
cash equivalents. Included in cash at December 31, 1994 and 1993, is
restricted cash in the amount of $102,000 and $34,000, respectively. These
amounts collateralize performance bonds established by the Company.
Short-Term Investments
The Company considers temporary investments with a maturity exceeding three
months but less than one year to be short-term investments.
Retainages and Unbilled Receivables
The Company expects to realize substantially all retainages and unbilled
receivables within one year. Unbilled receivables are generally billable upon
shipment.
Reclassifications
Certain reclassifications have been made to the 1993 consolidated financial
statements to conform with the 1994 presentation.
F-9
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
NOTE 2. FINANCING ARRANGEMENTS
Long-term debt and notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
---------- ----------
<S> <C> <C>
Non interest bearing long-term obligation, contingently
due 1997................................................ $ -- $4,747,569
5 year term loan, repayment based on quarterly domestic
after-tax cash flow through 1997, 9.0% interest......... -- 2,821,845
5 year term loan, repayment based on quarterly payments
through June 30, 1999 at prime plus 1.5% interest....... 2,600,000 --
Convertible subordinated debentures, due 1997, interest
rate of 12%............................................. 425,000 505,000
Convertible subordinated debentures, due 1999, interest
rate of 0%.............................................. 663,000 --
10 year real property mortgage, due 2002, interest rate
9.750%, reset annually at LIBOR plus 4.0%............... 385,692 427,797
Revolving credit lines, secured by current assets and net
fixed assets, interest rates from 9.25% to 9.75%........ 706,108 487,397
Various installment loan and capital lease obligations
(excluding interest) due in varying amounts through
1996, with interest from 8.6% to 13%, secured by
vehicles and other equipment............................ 64,840 5,775
---------- ----------
4,844,640 8,995,383
Less current portions:
Long-term debt.......................................... 569,999 382,654
Revolving credit lines.................................. 706,108 487,397
---------- ----------
$3,568,533 $8,125,332
========== ==========
</TABLE>
Estimated future maturities on long-term debt at December 31, 1994, were as
follows:
<TABLE>
<S> <C>
1995.......................................................... $ 570,000
1996.......................................................... 666,000
1997.......................................................... 1,088,000
1998.......................................................... 642,000
1999.......................................................... 1,005,000
2000 and thereafter........................................... 167,532
----------
$4,138,532
==========
</TABLE>
During 1990, the Company negotiated with its principal lender, National Bank
of Washington, for increases to the Company's line of credit. The Company
expected that such a credit facility could be put in place. However, in August
1990, the Federal Deposit Insurance Corporation (FDIC) seized the National
Bank of Washington and effectively closed out all lending activities.
The Company restructured its debt obligation with the FDIC effective
September 30, 1992. The restructuring modified the debt by converting the
principal and accrued interest obligation from a demand note to a $3,000,000
term note at 9.0% interest with quarterly repayments equal to 65% of the
after-tax free cash flow generated by the domestic operations of the Company
for five years. As part of the restructuring, the FDIC released the lien it
held on the Company's domestic inventory and fixed assets until the $3,000,000
obligation was repaid. In addition, the Company granted the FDIC warrants,
exercisable from April 1, 1997 through September 30, 1997, to purchase 120,000
common shares at $5.00 per share.
F-10
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
On September 29, 1994, the Company completed a refinancing of its long term
debt with the FDIC. The new long term financing allowed the Company to fully
repay its existing obligation in the amount of $2,821,845, plus accrued
interest. This payment completed and terminated the Company's obligations
under the Loan Modification Agreement between the Company and the FDIC dated
as of September 30, 1992. The debt forgiveness resulted in an extraordinary
gain of $4,012,180. Since the gain had been previously recognized by the
Company for tax purposes and since a valuation allowance had been recorded
against the deferred tax asset, it has no current income tax effect.
Additionally, the Company issued to the FDIC a new Convertible Subordinated
Debenture due in 1999 ("Debenture") in the principal amount of $240,000 in
exchange for the Warrant ("Warrant") for 120,000 shares of DMC common stock
which was previously issued to the FDIC as part of the Agreement. The
Debenture bears no interest and may be converted into 120,000 shares of DMC
common stock at any time between October 1, 1996 and September 30, 1999 at an
exercise price of $2.00 per share. If the FDIC chooses to convert the
Debenture, the Company has the right to redeem the Debenture for 65% of the
market value of the underlying common stock at the time of conversion. The
Company has determined that the fair market value of the debenture, under
these conversion terms, is $663,000. That amount has been recorded in the
accompanying consolidated balance sheet at December 31, 1994. It is DMC's
intention to redeem the Debenture for cash in the event the FDIC exercises its
right to convert the Debenture after October 1, 1996.
The new banking facility, which is in addition to the Company's existing
bank facilities, totalled $2,600,000 as of December 31, 1994, is repayable in
quarterly installments over a five year period beginning on September 30, 1994
and ending June 30, 1999 and carries an interest rate of prime plus 1.5%.
During 1990, the Board of Directors authorized the Company to sell $625,000
of convertible subordinated debentures to certain key investors and directors
of the Company. These debentures bear interest at 12%, were originally due
September 30, 1992, and were extended to September 30, 1997, under the same
terms, on June 30, 1992. The debentures are convertible to shares of the
Company's common stock at the conversion price of $2.50 per share, for a
maximum total conversion of 250,000 shares, of which 32,000 and 36,000 shares,
respectively, were converted in 1994 and 1993. The Company has the right to
call the debentures, subject to certain call premiums, beginning October 1,
1994; the Company has not called any debentures. The debentures are
subordinate to all of the Company's current and future borrowing from banks,
insurance companies, or other financial institutions regularly engaged in the
business of lending of money.
In August 1992, the Company restructured the long-term debt of its British
subsidiary by converting a mortgage note bearing an interest rate of 14% with
a three year maturity to a ten year mortgage note currently bearing an
interest rate of 9.750%. The interest rate is reset annually to LIBOR plus
4.0%.
In August 1994, the Company renewed its $2,000,000 banking facility from
Chase Manhattan Bank of Maryland. This facility comprises a $1,000,000 working
capital line, a $500,000 stand by letter of credit line and a $500,000 foreign
currency trading line. The facility is secured by the assets of the domestic
operations and bears interest at the rate of prime plus 0.75%. The facility
expires on July 31, 1995. At December 31, 1994 and 1993, borrowings against
the working capital line were $603,223 at 9.25% and $263,649 at 6.75%,
respectively.
The Company's wholly-owned United Kingdom subsidiary, DMC (U.K.) Ltd., has a
line of credit that provides for borrowing up to (Pounds)280,000 ($438,000 at
December 31, 1994). Under this line, borrowings denominated in pounds sterling
bear interest at 3.5% over the U.K. base rate. The facility expires in June
1995. At December 31, 1994 and 1993, total borrowings under this line amounted
to $102,883 at 9.75% and $223,748 at 9.0%, respectively. These borrowings are
secured by substantially all of DMC (U.K.) Ltd.'s assets.
F-11
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The Company's wholly-owned German subsidiary, DMC Mess- & Regeltechnik GmbH,
has a line of credit of $197,000. Borrowings under this line bear interest at
10.5%, and are secured by substantially all of this subsidiary's assets. There
were no borrowings against this line at December 31, 1994 and 1993,
respectively.
NOTE 3. INCOME TAXES
The provision (benefit) for income taxes is composed of the following:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal....................................... $136,000 $(55,228) $195,896
State......................................... 21,327 3,164 43,395
Foreign....................................... 122,453 50,299 23,798
-------- -------- --------
280,080 (1,765) 263,089
-------- -------- --------
Deferred:
Federal....................................... (75,928) 88,760 (119,361)
State......................................... (10,273) 348 (26,441)
Foreign....................................... -- -- (4,384)
-------- -------- --------
(86,201) 89,108 (150,186)
-------- -------- --------
$193,879 $ 87,343 $112,903
======== ======== ========
</TABLE>
The provision (benefit) for income taxes differs from that computed by
applying the statutory federal income tax rate to income (loss) before income
taxes due to the following:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- ------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Effect of tax loss carry forward...................... -- -- (106.1)
Difference in effective rates on earnings of foreign
subsidiaries......................................... (0.8) 1.5 4.4
State income taxes (benefit), net of federal income
tax benefit.......................................... 2.4 4.6 1.8
Debt restructuring.................................... -- -- 94.2
Valuation allowance adjustment........................ -- -- (17.2)
Other................................................. -- 1.3 6.8
Reversal of previously provided income tax............ (16.5) -- --
----- ---- ------
19.1% 41.4% 17.9%
===== ==== ======
</TABLE>
F-12
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The approximate tax effect of each type of temporary difference and
carryforward that gave rise to the Company's deferred tax assets
(liabilities), as of December 31, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- -----------
<S> <C> <C>
Accelerated depreciation.......................... $(33,000) $ (36,000)
Bad debt reserves................................. 21,000 46,000
Rent expense...................................... 5,000 4,000
Vacation expense.................................. 163,000 141,000
Commission Expense................................ 55,000 --
Warranty Expense.................................. 42,000 --
Inventory reserves................................ (8,000) --
Debt restructuring................................ -- 1898,000
Interest Expense OID.............................. (4,0000) --
DISC distributions................................ (39,000) (61,000)
Tax credit carryforward........................... 65,000
Other............................................. (80,000) (123,000)
Less: valuation allowance......................... -- (1,898,000)
-------- -----------
$122,000 $ 36,000
======== ===========
</TABLE>
As a result of the debt restructuring and resulting extraordinary gain in
1994, the Company reversed the valuation allowance of $1,898,000 recorded at
December 31, 1992, and therefore, the extraordinary gain had no income tax
effect.
NOTE 4. EMPLOYEE BENEFIT PLANS
The Company and DMC (U.K.) Ltd. maintain separate defined contribution
employee benefit plans. U.S. and U.K. employees over the age of 21 and with
more than 1 year of experience with the Company are eligible to participate.
Eligible employees can defer a portion of their total compensation through
contributions, a portion of which is matched by the Company. Participant
contributions are immediately 100% vested, while Company contributions vest
over four years.
Expense related to these employee benefit plans was $96,236 for 1994,
$73,844 for 1993, and $59,705 for 1992.
F-13
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
NOTE 5. COMMITMENTS
The Company is obligated under various operating and capital lease
agreements, primarily for office space, a manufacturing facility, and office
equipment through 1998. The Company entered into a lease for office and
manufacturing space in the United States during 1987 which, with options,
extends until November 2002 and contains an escalation clause related to
increases in the Consumer Price Index.
The following is a schedule by years of future minimum rental payments
required under operating and capital leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1994:
<TABLE>
<S> <C>
1995............................................................ $ 633,378
1996............................................................ 577,614
1997............................................................ 534,907
1998............................................................ 52,117
1999 and thereafter............................................. 28,800
----------
$1,826,816
==========
</TABLE>
Rental expense was $595,167 in 1994, $558,000 in 1993, and $516,000 in 1992.
NOTE 6. STOCKHOLDERS' EQUITY
Options
The Company adopted an Incentive Stock Option Plan ("ISO Plan") in 1985, and
established a non-qualified stock option policy ("Warrant Plan") in 1984. In
1988, the Company adopted the 1988 Stock Option Plan ("1988 Plan"). In 1992,
the Company adopted the 1991 Stock Option Plan ("1991 Plan") which was
intended to supersede and replace the shares granted under the previous plans.
As such, no grants were made under the old plans after the Shareholders
approved the 1991 Plan on June 6, 1992. During 1992, employees holding option
grants under the old plans were given a one time opportunity to transfer their
options to the 1991 Plan at a conversion price of the higher of the original
conversion price or $3.75. Consequently, 116,379 options were transferred to
the 1991 Plan. In 1992, the Company also adopted the Outside Directors Stock
Option Plan ("Directors Plan").
F-14
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The ISO Plan is administered by a Committee appointed by the Board of
Directors, which determines the officers and key employees to be granted
options on shares of the Company's common stock, at prices no lower than the
fair market value on the date of grant. As of December 31, 1994, there were
options outstanding to purchase 20,000 shares of common stock, with expiration
dates through December 31, 1997. At December 31, 1994, there were no shares
available for future grants of options under the ISO Plan.
The following table summarizes the activity under the ISO Plan:
<TABLE>
<CAPTION>
SHARES OPTION PRICE RANGE
------ ------------------
<S> <C> <C>
Options outstanding at January 1, 1992.......... 93,965 $2.50 - $8.00
Transferred to 1991 Plan........................ 59,499 5.00 - 8.00
Granted......................................... --
Canceled or terminated.......................... 3,533 6.00 - 7.87
Exercised....................................... --
------ -------------
Options outstanding at December 31, 1992........ 30,933 2.50 - 7.87
Granted......................................... -- --
Canceled or terminated.......................... 533 7.87 - 7.87
Exercised....................................... 10,400 2.50 - 2.50
------ -------------
Options outstanding at December 31, 1993........ 20,000 2.50 - 2.50
Granted......................................... -- --
Canceled or terminated.......................... -- --
Exercised....................................... -- --
------ -------------
Options outstanding at December 31, 1994........ 20,000 $2.50 - $2.50
====== =============
Options exercisable at December 31, 1994........ 20,000 $2.50 - $2.50
====== =============
</TABLE>
F-15
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The Warrant Plan is administered by the Board of Directors, which determines
those individuals to be granted options on shares of the Company's common
stock, at prices no lower than the fair market value on the date of grant. As
of December 31, 1994, there were options outstanding to purchase 15,500 shares
of common stock, with an expiration date of December 31, 1997. At December 31,
1994 there were no shares available for future grants of options under the
Warrant Plan.
The following table summarizes the activity under the Warrant Plan:
<TABLE>
<CAPTION>
SHARES OPTION PRICE RANGE
------ ------------------
<S> <C> <C>
Options outstanding at January 1, 1992.......... 76,680 $2.50 - $12.00
Transferred to 1991 Plan........................ 37,080 2.50 - 8.00
Granted......................................... 520 2.50 - 2.50
Canceled or terminated.......................... 400 6.00 - 12.00
Exercised....................................... --
------ --------------
Options outstanding at December 31, 1992........ 39,720 2.50 - 12.00
Granted......................................... --
Cancel or terminated............................ 720 2.50 - 12.00
Exercised....................................... 23,500 2.50 - 2.50
------ --------------
Options outstanding at December 31, 1993........ 15,500 2.50 - 6.00
Granted......................................... --
Canceled or terminated.......................... -- --
Exercised....................................... -- --
------ --------------
Options outstanding at December 31, 1994........ 15,500 $2.50 - $ 6.00
====== ==============
Options exercisable at December 31, 1994........ 15,500 $2.50 - $ 6.00
====== ==============
</TABLE>
The Company adopted the 1988 Stock Option Plan in September 1988. Of the
80,000 shares of common stock issuable under the 1988 Plan, there were options
under the plan outstanding to purchase 5,000 shares at December 31, 1994.
Options to purchase common stock granted under the 1988 Plan are not intended
to qualify as "incentive stock options" within the meaning of Section 422A of
the Internal Revenue Code. As of December 31, 1994, there were no shares
available for future grants of options under the 1988 Plan.
F-16
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The following table summarizes the activity under the 1988 Option Plan:
<TABLE>
<CAPTION>
SHARES OPTION PRICE RANGE
------ ------------------
<S> <C> <C>
Options outstanding at January 1, 1992.......... 28,300 $2.50 - $8.75
Transferred to 1991 Plan........................ 19,800 2.50 - 8.75
Granted......................................... 1,500 2.50 - 2.50
Canceled or terminated.......................... --
Exercised....................................... --
------ -------------
Options outstanding at December 31, 1992........ 10,000 2.50 - 2.50
Granted......................................... --
Canceled or terminated.......................... 1,667 2.50 - 2.50
Exercised....................................... 3,333 2.50 - 2.50
------ -------------
Options outstanding at December 31, 1993........ 5,000 2.50 - 2.50
Granted......................................... --
Canceled or terminated.......................... -- --
Exercised....................................... -- --
------ -------------
Options outstanding at December 31, 1994........ 5,000 $2.50 - $2.50
====== =============
Options exercisable at December 31, 1994........ 5,000 $2.50 - $2.50
====== =============
</TABLE>
At the 1992 Annual Meeting, the Shareholders approved the 1991 Stock Option
Plan and authorized 250,000 shares to replace shares issued under the old
plans. The 1991 Plan is administered by the Board of Directors, which
determines those individuals to be granted options on shares of the Company's
common stock, at prices no lower than the fair market value on the date of
grant. As of December 31, 1994, there were options outstanding to purchase
146,626 shares of common stock, with an expiration date of December 31, 1997.
At December 31, 1994 there were 102,874 shares available for future grants of
options under the 1991 Plan.
F-17
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The following table summarizes the activity under the 1991 Option Plan:
<TABLE>
<CAPTION>
SHARES OPTION PRICE RANGE
------- ------------------
<S> <C> <C>
Options outstanding at January 1, 1992........ --
Transferred from old plans.................... 116,379 $3.75 - $8.75
Granted....................................... 8,000 5.00 - 5.00
Canceled or terminated........................ --
Exercised..................................... --
------- -------------
Options outstanding at December 31, 1992...... 124,379 3,75 - 8.75
Granted....................................... 21,000 6.75 - 6.75
Canceled or terminated........................ 26,253 5.00 - 8.75
Exercised..................................... --
------- -------------
Options outstanding at December 31, 1993...... 119,126 3.75 - 8.75
Granted....................................... 28,000 3.50 - 5.37
Canceled or terminated........................ -- --
Exercised..................................... 500 4.00 - 4.00
------- -------------
Options outstanding at December 31, 1994...... 146,626 $3.50 - $8.75
======= =============
Options exercisable at December 31, 1994...... 121,287 $3.50 - $8.75
======= =============
</TABLE>
At the 1992 Annual Meeting, the Shareholders approved the Outside Directors
Stock Option Plan and authorized 50,000 shares for granting to non-employee
directors of the Company. The Directors Plan provides that, upon joining the
Board, each outside director is awarded 5,000 shares at a price equal to the
higher of $2.50 or the fair market value on the date of grant. As of December
31, 1994, there were options outstanding to purchase 28,750 shares of common
stock, with an expiration date of December 31, 1997. At December 31, 1994,
there were 18,750 shares available for future grants of options under the
Directors Plan.
F-18
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
The following table summarizes the activity under the Directors Plan:
<TABLE>
<CAPTION>
SHARES OPTION PRICE RANGE
------ ------------------
<S> <C> <C>
Options outstanding at January 1, 1992.......... --
Granted......................................... 25,000 $2.50 - $2.50
Canceled or terminated.......................... --
Exercised....................................... --
------ -------------
Options outstanding at December 31, 1992........ 25,000 2.50 - 2.50
Granted......................................... 5,000 6.00 - 6.00
Canceled or terminated.......................... 3,750 2.50 - 2.50
Exercised....................................... 2,500 2.50 - 2.50
------ -------------
Options outstanding at December 31, 1993........ 23,750 2.50 - 6.00
Granted......................................... 5,000 4.00 - 4.00
Canceled or terminated.......................... -- --
Exercised....................................... -- --
------ -------------
Options outstanding at December 31, 1994........ 28,750 $2.50 - $6.00
====== =============
Options exercisable at December 31, 1994........ 17,500 $2.50 - $6.00
====== =============
</TABLE>
F-19
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
NOTE 7. BUSINESS SEGMENT INFORMATION
Geographic area results were as follows (000's omitted):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------
UNITED UNITED
STATES KINGDOM GERMANY FRANCE ELIMINATIONS CONSOLIDATED
------- ------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers.............. $17,868 $4,658 $1,660 $ 20 $ -- $24,206
Intercompany sales...... 2,455 651 38 -- (3,144) --
------- ------ ------ ---- ------- -------
Total sales............. $20,323 $5,309 $1,698 $ 20 $(3,144) $24,206
======= ====== ====== ==== ======= =======
Pre tax income.......... $ 263 $ 392 $ 209 $150 $ -- $ 1,014
======= ====== ====== ==== ======= =======
Identifiable assets at
December 31............ $14,575 $4,339 $1,019 $158 $ -- $20,091
======= ====== ====== ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------
UNITED UNITED
STATES KINGDOM GERMANY FRANCE ELIMINATIONS CONSOLIDATED
------- ------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers.............. $16,458 $2,100 $1,411 $252 $ -- $20,221
Intercompany sales...... 817 1,184 89 164 (2,254) --
------- ------ ------ ---- ------- -------
Total sales............. $17,275 $3,284 $1,500 $416 $(2,254) $20,221
======= ====== ====== ==== ======= =======
Pre tax income.......... $ (106) $ 141 $ 178 $ (2) $ -- $ 211
======= ====== ====== ==== ======= =======
Identifiable assets at
December 31............ $13,286 $2,734 $1,242 $249 $ -- $17,511
======= ====== ====== ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------
UNITED UNITED
STATES KINGDOM GERMANY FRANCE ELIMINATIONS CONSOLIDATED
------- ------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers.............. $15,647 $ 2,890 $508 $892 $ -- $19,937
Intercompany sales...... 604 782 64 1 (1,450) --
------- ------- ---- ---- ------- -------
Total sales............. $16,251 $33,672 $572 $893 $(1,450) $19,937
======= ======= ==== ==== ======= =======
Pre tax income.......... $ 629 $ 74 $(70) $ (3) $ -- $ 630
======= ======= ==== ==== ======= =======
Identifiable assets at
December 31............ $12,840 $ 2,959 $808 $451 $ -- $17,058
======= ======= ==== ==== ======= =======
</TABLE>
Export sales to geographic areas outside the United States, excluding
intercompany transactions, were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
From the United States................................. $12,004 $10,564 $10,376
From DMC (U.K.) Limited in the United kingdom.......... 4,658 2,100 2,890
From DMC Mess - & Regeltechnik GmbH in West Germany.... 1,660 1,411 508
From DMC France, S.A.R.L. in France.................... 20 252 892
------- ------- -------
$18,342 $14,327 $14,666
======= ======= =======
</TABLE>
The Company does not believe it is dependent upon any single customer on a
continuing basis, although in any one year one customer may account for a
material portion of the Company's sales. During 1994, 1993 and 1992, no
customer accounted for 10% or more of sales.
F-20
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ------------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales....................... $8,976,234 $6,121,236 $23,998,754 $17,548,521
Cost and expenses:
Cost of sales.............. 6,633,491 4,759,111 17,368,226 13,521,563
Selling, general &
administration............ 1,340,091 1,128,122 4,209,958 3,193,998
Interest expense........... 187,568 99,788 461,412 301,383
Gain on foreign exchange... (106) (14,644) (49,272) (5,931)
---------- ---------- ----------- -----------
Costs and expenses.......... 8,161,914 5,972,377 21,990,324 17,011,013
---------- ---------- ----------- -----------
Income before provision for
income taxes............... 814,320 148,859 2,008,430 537,508
Provision for income taxes:
Current.................... 204,792 -- 414,471 11,426
Deferred................... 99,824 (10,121) 213,801 63,425
---------- ---------- ----------- -----------
Net income before
extraordinary item......... 509,704 158,980 1,380,158 462,657
---------- ---------- ----------- -----------
Extraordinary item.......... -- 4,012,180 -- 4,012,180
Net income after
extraordinary item......... $ 509,704 $4,171,160 $ 1,380,158 $ 4,474,837
========== ========== =========== ===========
Net Income per Share........
Primary
--Before Extraordinary
Item..................... $ 0.34 $ 0.12 $ 0.95 $ 0.35
--Extraordinary Item...... -- 2.95 -- 2.99
--After Extraordinary
Item..................... 0.34 3.07 0.95 3.34
Fully Diluted
--Before Extraordinary
Item..................... $ 0.31 $ 0.11 $ 0.82 $ 0.33
--Extraordinary Item...... -- 2.60 -- 2.60
--After Extraordinary
Item..................... 0.31 2.71 0.82 2.93
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................... $ 1,440,322 $ 685,384
Accounts Receivable:
Trade, less allowance for doubtful accounts of
$167,000 in 1995 & 180,000 in 1994............... 6,795,534 5,238,586
Unbilled accounts receivable...................... 744,906 1,544,737
Retainages........................................ 884,081 1,521,516
----------- -----------
Total Accounts Receivable........................ 8,424,521 8,304,839
Inventories:
Work-in-process................................... 4,046,138 2,514,722
Material and parts................................ 8,355,532 6,695,087
----------- -----------
Total inventories................................ 12,401,670 9,209,809
Deferred income taxes............................. 188,266 188,266
Other............................................. 436,922 316,743
----------- -----------
Total current assets............................. 22,891,701 18,705,041
Property and equipment, at cost:
Land.............................................. 39,575 39,163
Building.......................................... 499,155 493,952
Machinery and equipment........................... 1,852,425 1,763,373
Demonstration equipment........................... 1,297,086 1,048,997
Office furniture.................................. 951,305 803,945
Leasehold improvements............................ 261,255 204,644
----------- -----------
Total property and equipment..................... 4,900,801 4,354,074
Less accumulated depreciation and amortization.... 3,750,633 3,410,849
----------- -----------
Net property and equipment....................... 1,150,168 943,225
Patents and licenses at cost, less amortization of
$130,181 in 1995 and $102,635 in 1994............ 49,628 53,551
Goodwill.......................................... 380,179 388,954
----------- -----------
TOTAL ASSETS....................................... $24,471,676 $20,090,771
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank............................. $ 2,549,199 $ 706,108
Accounts payable.................................. 3,000,141 2,347,210
Advance payments on contracts..................... 1,069,398 1,453,509
Accrued compensation.............................. 873,062 683,753
Accrued warranty expense.......................... 471,464 354,096
Accrued commission expense........................ 719,884 566,311
Accrued interest expense.......................... 17,927 37,427
Other accrued liabilities......................... 639,692 497,265
Current income taxes.............................. 203,951 197,498
Current portion of long term debt................. 617,740 569,999
----------- -----------
Total current liabilities........................ 10,162,458 7,413,176
Deferred income taxes.............................. 277,620 65,824
Long term debt..................................... 3,272,234 3,568,533
Stockholders' equity:
Common stock, $.01 par value...................... 13,825 13,313
Additional paid in capital........................ 5,594,551 5,417,248
Retained earnings................................. 5,438,518 4,058,060
Currency translation adjustments.................. (270,730) (428,583)
Treasury stock, 3,000 shares, at cost............. (16,800) (16,800)
----------- -----------
Total stockholders' equity....................... 10,759,364 9,043,238
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $24,471,676 $20,090,771
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
DATA MEASUREMENT CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $1,380,458 $4,474,837
Adjustments to reconcile net earnings to net cash used
in operations:
Depreciation......................................... 345,105 397,100
Amortization......................................... 28,241 22,609
Changes in assets and liabilities:
Accounts receivable.................................. (1,741,974) (1,394,190)
Inventories.......................................... (3,162,997) (164,538)
Other current assets................................. (126,031) (26,584)
Patents and licenses................................. (10,114) (28,591)
Accounts payable..................................... 639,091 321,392
Advance payments on contracts........................ 1,253,092 708,201
Accrued compensation................................. 213,466 (12,892)
Other accrued liabilities............................ 376,273 (200,472)
Current income taxes................................. (1,211) 10,028
Deferred income taxes................................ 212,898 63,436
---------- ----------
Net cash provided by (or used in) operating
activities............................................ (593,703) 4,170,336
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................. (542,744) (127,703)
Net cash provided by (or used in) investing
activities........................................... (542,744) (127,703)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt........................... (203,746) (4,262,401)
Increase in notes payable............................. 1,842,493 707,873
Proceeds from sale of common stock.................... 128,315 0
---------- ----------
Net cash provided by (or used in) financing
activities........................................... 1,767,062 (3,554,528)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS........................................... 124,324 37,673
NET INCREASE IN CASH................................... 754,939 525,778
CASH, Beginning of period.............................. 685,384 738,696
---------- ----------
CASH, End of period.................................... $1,440,323 $1,264,474
========== ==========
Supplemental cash flow information:
Interest paid......................................... $ 330,912 $ 291,936
Income taxes paid..................................... $ 408,018 $ 1,540
Capitalized equipment leases.......................... $ 114,769 $ 73,030
Capitalized test equipment............................ $ 243,984 $ --
Conversion of Subordinated Debenture.................. $ 49,500 $ 80,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
DATA MEASUREMENT CORPORATION
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated unaudited financial statements contained herein have been
prepared from the books and records of the Company. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected
for the entire year.
The Company has 4,000,000 authorized shares of $.01 par value common stock
of which there were 1,382,507 shares issued and 1,379,507 shares outstanding
and 1,330,818 shares issued and 1,327,818 shares outstanding as of September
30, 1995 and 1994, respectively.
(2) NET INCOME PER SHARE CALCULATION
Primary income per share is based on the weighted average number of common
shares outstanding including common stock equivalents from dilutive stock
options and warrants. Common equivalent shares were computed using the
treasury stock method. The Company's convertible subordinated debentures are
not common stock equivalents. However, stock options having an exercise price
below the average market price of common stock during the period are common
stock equivalents and are assumed to have been exercised. Additionally, the
method assumes that the exercise proceeds are used by the Company to
repurchase common shares at the average market price. Under this method, the
average shares used in calculating primary earnings per share are 1,514,364
and 1,461,393 for the three and nine month periods ending September 30, 1995.
Fully diluted earnings per share have also been calculated using the
treasury stock method; in addition, however, the conversion of the convertible
subordinated debentures issued by the Company is also assumed. Average shares
used in calculating fully diluted earnings per share, therefore, are 1,684,353
and 1,710,824 for the three and nine month periods ending September 30, 1995.
(3) MERGER TRANSACTION
On September 16, 1995, the Company entered into a definitive agreement to
merge with Measurex Corporation. Measurex has agreed to pay $18.625, all cash,
for each of the Company's common shares. The transaction is subject to the
approval of a majority of Data Measurement's common shareholders. A final
proxy is expected to be mailed to the shareholders in November 1995 and a vote
of the shareholders is expected to occur in mid December 1995. Closing of the
merger, if approved, is expected in early January 1996.
F-24
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MEASUREX CORPORATION,
MX ACQUISITION COMPANY
AND
DATA MEASUREMENT CORPORATION
as of
September 16, 1995
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE MERGER..................................................... 1
1.1 The Merger...................................................... 1
1.2 Closing; Effective Time......................................... 1
1.3 Effect of the Merger............................................ 2
1.4 Certificate of Incorporation; Bylaws............................ 2
1.5 Directors and Officers.......................................... 2
1.6 Conversion and Cancellation of Shares........................... 2
1.7 Payment for DMC Stock, Stock Options and Debentures............. 4
1.8 Transfers....................................................... 5
1.9 Dissenters' Rights.............................................. 5
1.10 DMC Stock Option Plans and Debentures.......................... 5
1.11 Taking of Necessary Action; Further Action..................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF DMC......................... 6
2.1 Organization, Standing and Power................................ 7
2.2 Subsidiaries.................................................... 7
2.3 Capitalization.................................................. 7
2.4 Authority....................................................... 9
2.5 Noncontravention................................................ 9
2.6 SEC Documents; Financial Statements............................. 9
2.7 Absence of Certain Changes...................................... 10
2.8 Absence of Undisclosed Liabilities.............................. 11
2.9 Litigation...................................................... 11
2.10 Restrictions on Business Activities............................ 12
2.11 Governmental Authorization..................................... 12
2.12 Title to Property.............................................. 12
2.13 Intellectual Property.......................................... 12
2.14 Environmental Matters.......................................... 14
2.15 Radioactive Materials and X-Ray Sources........................ 15
2.16 Taxes.......................................................... 16
2.17 Employee Benefit Plans......................................... 17
2.18 Certain Agreements Affected by the Merger...................... 19
2.19 Product Warranty............................................... 19
2.20 Product Liability.............................................. 20
2.21 Employee Matters............................................... 20
2.22 Interested Party Transactions.................................. 20
2.23 Insurance...................................................... 20
2.24 Compliance with Laws........................................... 21
2.25 Inventory...................................................... 21
2.26 Accounts Receivable............................................ 21
2.27 Customers and Suppliers........................................ 21
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
2.28 Material Contracts............................................ 22
2.29 Minute Books.................................................. 22
2.30 Proxy Statement............................................... 23
2.31 Brokers' and Finders' Fees.................................... 23
2.32 Opinion of Financial Advisor.................................. 23
2.33 Vote Required................................................. 23
2.34 Board Approval................................................ 23
2.35 Section 203 Not Applicable.................................... 24
2.36 No Government Contracts....................................... 24
2.37 Backlog....................................................... 24
2.38 Right to Practice Under Instantaneous Profile Measurement
Licenses...................................................... 24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MEASUREX AND
MERGER SUB......................................................... 24
3.1 Organization, Standing and Power............................... 25
3.2 Authority...................................................... 25
3.3 Noncontravention............................................... 25
3.4 Board Approval................................................. 25
3.5 Financing...................................................... 25
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................... 26
4.1 Conduct of Business............................................ 26
4.2 No Solicitation................................................ 29
ARTICLE V ADDITIONAL AGREEMENTS......................................... 30
5.1 Proxy Statement................................................ 30
5.2 Meeting of Stockholders........................................ 30
5.3 Access to Information.......................................... 31
5.4 Confidentiality................................................ 31
5.5 Public Disclosure.............................................. 32
5.6 Consents; Cooperation.......................................... 32
5.7 FIRPTA......................................................... 32
5.8 FDA Filings.................................................... 33
5.9 Reasonable Efforts and Further Assurances...................... 33
5.10 Amendment of Certain Agreements............................... 33
5.11 Indemnification............................................... 33
5.12 Payment of Bank Loans......................................... 33
ARTICLE VI CONDITIONS TO THE MERGER..................................... 34
6.1 Conditions to Obligations of Each Party to Effect the Merger... 34
6.2 Additional Conditions to Obligations of DMC.................... 34
6.3 Additional Conditions to the Obligations of Measurex and
Merger Sub..................................................... 35
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................ 36
7.1 Termination..................................................... 36
7.2 Certain Actions Prior to Termination............................ 37
7.3 Effect of Termination........................................... 37
7.4 Expenses and Termination Fee.................................... 38
7.5 Amendment....................................................... 38
7.6 Extension; Waiver............................................... 38
ARTICLE VIII GENERAL PROVISIONS.......................................... 39
8.1 Survival........................................................ 39
8.2 Notices......................................................... 39
8.3 Interpretation.................................................. 40
8.4 Counterparts.................................................... 40
8.5 Entire Agreement; Nonassignability; Parties in Interest......... 40
8.6 Severability.................................................... 40
8.7 Remedies Cumulative............................................. 41
8.8 Governing Law................................................... 41
8.9 Rules of Construction........................................... 41
</TABLE>
EXHIBITS
Exhibit A - Voting and Stock Option Agreement
Exhibit B - Physical Inventory
A-4
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
entered into as of September 16, 1995, by and among MEASUREX CORPORATION, a
Delaware corporation ("Measurex"), MX ACQUISITION COMPANY, a Delaware
corporation and a wholly owned subsidiary of Measurex ("Merger Sub"), and DATA
MEASUREMENT CORPORATION, a Delaware corporation ("DMC").
RECITALS
The Boards of Directors of Measurex and DMC each believe it is in the
best interests of their respective corporations that Merger Sub merge with and
into DMC (the "Merger") upon the terms and subject to the conditions set forth
herein.
DMC, Measurex and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
Concurrent with the execution of this Agreement and as an inducement
to Measurex to enter into this Agreement, certain stockholders of DMC have
entered into a voting and stock option agreement dated as of the date hereof in
the form attached to this Agreement as Exhibit A (the "Voting and Option
Agreement") with respect to those shares of DMC Common Stock owned by such
stockholders.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
----------
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DGCL"), Merger
Sub shall be merged with and into DMC, the separate corporate existence of
Merger Sub shall cease and DMC shall continue as the surviving corporation. DMC
as the surviving corporation in the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at
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such other time as the parties hereto agree (the date on which the Closing shall
occur, the "Closing Date" or the "Effective Date"). The Closing shall take place
at the offices of Brobeck, Phleger & Harrison, Spear Street Tower, One Market,
San Francisco, CA, or at such other location as may be mutually agreed to by the
parties. In connection with the Closing, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger in form reasonably
satisfactory to the parties hereto (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in accordance with the relevant
provisions of the DGCL (the time of such filing, the "Effective Time".)
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of DMC and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of DMC and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended; provided, however, that Article I of the Certificate of Incorporation
of the Surviving Corporation shall be amended to read as follows: "The name of
the corporation is Measurex Data Measurement Corporation."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The directors and officers of Merger Sub
at the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
1.6 Conversion and Cancellation of Shares. By virtue of the Merger
and without any action on the part of Measurex, Merger Sub or DMC or the holders
of any of the following securities, the manner of converting and cancelling
shares in connection with the Merger shall be as follows:
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(a) Conversion of Shares. Each share of common stock, par value $.01
per share, of DMC ("DMC Common Stock") issued and outstanding immediately prior
to the Effective Time (other than shares of DMC Common Stock owned by Measurex,
Merger Sub or any other direct or indirect subsidiary of Measurex (collectively,
the "Measurex Companies") or shares of DMC Common Stock that are held by
stockholders duly exercising appraisal rights pursuant to Section 262 of the
DGCL ("Dissenting Shares")), shall be converted into, and become exchangeable
for $18.625 in cash (the "Cash Merger Consideration"). At the Effective Time,
all such shares of DMC Common Stock shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each certificate (each a
"Certificate") representing any of such shares shall thereafter represent only
the right to receive the Cash Merger Consideration into which such shares have
been converted pursuant to this Article I, or the right, if any, to receive
payment from the Surviving Corporation of the "fair value" of such shares as
determined in accordance with Section 262 of the DGCL.
(b) Cancellation of Shares. Each share of DMC Common Stock issued and
outstanding immediately prior to the Effective Time and owned by any of the
Measurex Companies, and each such share issued and held in DMC's treasury
immediately prior to Effective Time, shall, at the Effective Time and by virtue
of the Merger, and without any action on the part of the holder thereof, cease
to be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(c) Merger Sub Capital Stock. At the Effective Time, each share of
Common Stock, par value $.01 per share, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall
continue to be issued and shall be converted into one validly issued, fully paid
and non-assessable share of common stock of the Surviving Corporation. Each
stock certificate of Merger Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) Adjustments. If between the date of this Agreement and the
Effective Time the number of shares of DMC Common Stock shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, exchange of shares or the like, the amount of the Cash Merger
Consideration shall be correspondingly adjusted.
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1.7 Payment for DMC Stock, Stock Options and Debentures.
(a) At the Effective Time, Measurex shall make available or cause to
be made available to the party specified by Measurex as the exchange agent (the
``Exchange Agent'') amounts sufficient in the aggregate to provide all funds
necessary for the Exchange Agent to make payments pursuant to Section 1.6(a)
hereof to holders of DMC Common Stock who are to receive the Cash Merger
Consideration and amounts as necessary to make the payments specified in Section
1.10 (all such amounts collectively referred to as the "Merger Consideration.")
Measurex, at its sole option, may act as Exchange Agent. Promptly after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
person who was, at the Effective Time, a holder of record (other than holders
holding Shares that were cancelled under the terms of Section 1.6(b)) of DMC
Common Stock, stock options or debentures, a form (mutually agreed to by
Measurex and DMC) of letter of transmittal and instructions for use in effecting
the surrender of the Certificates or documents which, immediately prior to the
Effective Time, represented any of such DMC Common Stock, stock options or
debentures in exchange for payment of the Cash Merger Consideration in the case
of holders of DMC Common Stock and the amounts provided for in Section 1.10 in
the case of holders of DMC stock options or debentures. Upon surrender to the
Exchange Agent of such documents or Certificates, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and only upon such surrender, Measurex shall promptly cause to be paid
to the persons entitled thereto a check in the amount to which such persons are
entitled, after giving effect to any required tax withholdings.
(b) No interest will be paid or will accrue on the amount payable
hereunder. If payment is to be made to a person other than the registered
holder of the Certificate or document surrendered, it shall be a condition of
such payment that the Certificate or document so surrendered shall be properly
endorsed and otherwise in proper form for transfer, as determined by the
Exchange Agent or Measurex, and that the person requesting such payment shall
pay any transfer or other taxes required by reason of the payment to a person
other than the registered holder of the Certificate or document surrendered or
establish to the satisfaction of Measurex or the Exchange Agent that such tax
has been paid or is not payable. Three hundred and sixty days following the
Effective Time, Measurex shall be entitled to cause the Exchange Agent to
deliver to it any funds (including any interest received with respect thereto)
made available to the Exchange Agent which have not been disbursed to holders of
Certificates or documents formerly representing DMC Common Stock, stock options
or debentures outstanding on the Effective Time, and thereafter such holders
shall be entitled to look to Measurex only as general creditors thereof with
respect to the amounts payable upon due surrender of their Certificates or
documents. Notwithstanding the foregoing,
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neither the Exchange Agent nor any party hereto shall be liable to any holder of
Certificates or documents formerly representing DMC Common Stock, stock options
or debentures for any amount paid to a public official as required by any
applicable abandoned property, escheat or similar law.
(c) Except as otherwise provided in subsection (b) above, Measurex
shall pay all charges and expenses, including those of the Exchange Agent, in
connection with the foregoing.
1.8 Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of DMC of the shares of DMC Common Stock, stock
options or debentures that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates or documents are presented to
the Surviving Corporation, they shall be cancelled and exchanged for the
consideration to be paid upon the due surrender of and in respect of such
Certificates and documents pursuant to this Agreement in accordance with the
procedures set forth in this Article I.
1.9 Dissenters' Rights. Any stockholder of DMC who shall have
delivered a written demand for appraisal of such stockholder's shares of DMC
Common Stock, as provided in Section 262 of the DGCL (each a "Dissenting
Stockholder"), shall not be entitled to receive the Cash Merger Consideration
pursuant to this Article I, unless and until the holder thereof shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to dissent from the Merger under the DGCL, and shall be entitled to
receive only the payment provided by Section 262 of the DGCL with respect to
such shares. DMC shall give Measurex (i) prompt notice of any written demands
for appraisal of any Dissenting Shares, attempted withdrawals of such demands,
and any other instruments served pursuant to applicable law received by DMC
relating to stockholders' rights of appraisal and (ii) the opportunity to direct
all negotiations and proceedings with respect to demand for appraisal under the
DGCL. DMC shall not, except with the prior written consent of Measurex,
voluntarily make any payment with respect to any demands for appraisals of
Dissenting Shares, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
1.10 DMC Stock Option Plans and Debentures. At the Effective Time,
(i) the DMC 1985 Incentive Stock Option Plan (the "ISO Plan"), the DMC non-
qualified stock option plan (the "Warrant Plan'), the DMC 1988 Stock Option Plan
(the "1988 Plan"), the DMC 1991 Stock Option Plan (the "1991 Plan"), 4,000
unqualified options granted in 1995 (the "1995 Grant") and the DMC Outside
Directors Stock Option Plan (the "Directors Plan" and collectively with the ISO
Plan, the Warrant Plan, the 1988 Plan, the 1991 Plan, and the 1995 Grant, the
"DMC Stock Option Plans") and all options to purchase DMC Common Stock then
outstanding under the DMC Stock Option Plans shall be deemed fully vested and
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Measurex will make available to the Exchange Agent amounts sufficient for the
Exchange Agent to pay each option holder the difference between the option price
specified in the option agreement and the Cash Merger Consideration multiplied
by the unexercised options covered by such option agreement; and (ii) Measurex
will make available to the Exchange Agent amounts sufficient for the Exchange
Agent to pay each debenture holder who is entitled to convert the debenture as
of the date of this Agreement a price equal to the Cash Merger Consideration
multiplied by the number of shares that remain to be converted under such
debenture.
1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of DMC and Merger Sub, the officers and directors of DMC
and Merger Sub immediately prior to the Effective Time are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DMC
-------------------------------------
DMC hereby represents and warrants to Measurex and Merger Sub that the
statements contained in this Article II are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date,
except as set forth in the disclosure schedule delivered by DMC to Measurex on
the date hereof (the "DMC Disclosure Schedule"). The DMC Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this Article II.
In this Agreement, (a) any reference to "Material Adverse Effect"
shall mean any and all events, changes or effects that are adverse to the
condition (financial or otherwise), properties, assets, liabilities, business,
operations, results of operations or prospects of DMC and its subsidiaries,
taken as a whole, compared to those represented by DMC in any part of this
Agreement (without reference to any exception for a "Material Adverse Effect")
which adverse events, changes or effects in the aggregate could reasonably be
expected to cause Measurex to incur losses, liabilities or expenses exceeding
$500,000 if the Merger were consummated; (b) any reference to a party's
"knowledge" shall mean the actual knowledge of such party's executive officers
after due and diligent inquiry; and (c) any reference to the term "subsidiary"
means, with respect to any entity, any corporation of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly owned by such entity.
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2.1 Organization, Standing and Power. Each of DMC and the DMC
Subsidiaries (as defined in Section 2.2) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. Each of DMC and the DMC Subsidiaries has the corporate power and
authority, and has all necessary licenses and permits, to own its properties and
to carry on its business as now being conducted and as proposed to be conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Material Adverse Effect on DMC. DMC has delivered to Measurex a true and
correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of DMC and each of the DMC Subsidiaries, each as
amended to date. Neither DMC nor any of the DMC Subsidiaries is in violation of
any of the provisions of its respective Certificate of Incorporation or Bylaws
or equivalent organizational documents.
2.2 Subsidiaries. Except as disclosed in the DMC SEC Documents (as
defined in Section 2.6), DMC does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity. DMC is the owner of all
outstanding shares of capital stock of each of its subsidiaries (the "DMC
Subsidiaries" and each a "DMC Subsidiary") and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the
outstanding shares of capital stock of each DMC Subsidiary are owned by DMC free
and clear of all liens, charges, claims or encumbrances or rights of others.
2.3 Capitalization.
(a) Capital Stock. The authorized capital stock of DMC consists of
4,000,000 shares of DMC Common Stock, 1,379,507 of which were issued and
outstanding as of the close of business on September 16, 1995, and 3,000 of
which were issued and held as treasury stock as of such date by DMC. There are
no other outstanding shares of capital stock or voting securities other than
shares of DMC Common Stock issued after September 16, 1995 upon the exercise of
options under the DMC Stock Option Plans and the conversion of debentures
pursuant to the Convertible Debenture agreements as defined in this Section
2.3(a)(ii) and there are no outstanding commitments to issue any shares of
capital stock or voting securities after September 16, 1995 other than (i) upon
the exercise of options outstanding as of such date under the DMC Stock Option
Plans, and (ii) pursuant to the conversion of (A) DMC's convertible subordinated
debentures due 1997 (the "1997 Convertible Debentures") in an aggregate
principal amount as of September 16, 1995 of $375,500 and (B) DMC's convertible
subordinated debentures due 1999 (the "FDIC Debentures" and collectively with
the 1997 Convertible Debentures, the "Convertible Debentures") in an aggregate
principal amount as of September 16,
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1995 of $240,000. All outstanding shares of DMC Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof, and are not subject to preemptive rights or rights of
first refusal created by statute, the Certificate of Incorporation or Bylaws of
DMC or any agreement to which DMC is a party or by which it is bound.
(b) DMC Stock Option Plans. As of the close of business on September
16, 1995, there were (i) 15,000 shares of DMC Common Stock reserved for issuance
in respect of outstanding, unexercised options under the ISO Plan; (ii) 15,500
shares of DMC Common Stock reserved for issuance in respect of outstanding, non-
qualified stock options under the Warrant Plan; (iii) 5,000 shares of DMC Common
Stock reserved for issuance in respect of outstanding, unexercised options under
the 1988 Plan; (iv) 162,237 shares of DMC Common Stock reserved for issuance in
respect of outstanding, unexercised options under the 1991 Plan; (v) 18,750
shares of DMC Common Stock reserved for issuance in respect of outstanding,
unexercised options under the Directors Plan; and 4,000 shares reserved for
issuance in respect of outstanding options under the 1995 Grant. Since
September 16, 1995, DMC has not issued or granted additional options under the
DMC Stock Option Plans. The DMC Disclosure Schedule provides the name, exercise
price and number of unexercised shares as of the date of this Agreement.
(c) Debentures. As of the close of business on September 16, 1995,
there were (i) 150,200 shares of DMC Common Stock reserved for issuance upon the
exercise of the conversion right under the 1997 Convertible Debentures, and (ii)
120,000 shares of DMC Common Stock reserved for issuance upon the exercise of
the conversion right under the FDIC Debentures.
(d) Other Rights. Except as specified in this Section 2.3, there are
no other options, warrants, calls, rights, commitments or agreements of any
character to which DMC is a party or by which it is bound obligating DMC to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of DMC or obligating
DMC to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no contracts, commitments or agreements relating to
voting, purchase or sale of DMC's capital stock (i) between or among DMC and any
of its stockholders or (ii) to the knowledge of DMC, between or among any of
DMC's stockholders. True and complete copies of all agreements and instruments
relating to or issued under the DMC Stock Option Plans and the Convertible
Debentures have been made available to Measurex and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments, in any
case from the form made available to Measurex.
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2.4 Authority. DMC has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of DMC, subject only to the approval of the Merger
by holders of a majority of the outstanding shares of DMC Common Stock. This
Agreement has been duly executed and delivered by DMC and constitutes the valid
and binding obligation of DMC, enforceable against it in accordance with its
terms. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to DMC or any of the DMC Subsidiaries in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger as provided in Section 1.2, (ii) the filing with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers, Inc. (the "NASD") of the Proxy Statement relating to the DMC
Stockholders Meeting (as defined in Section 2.30), (iii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws and the securities laws
of any foreign country; (iv) such filings as may be required under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"); and (v)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on DMC, and
would not prevent, alter or materially delay any of the transactions
contemplated by this Agreement.
2.5 Noncontravention. The execution and delivery of this Agreement
by DMC does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or create in any party the right
to modification, termination, cancellation or acceleration of any obligation or
loss of any material benefit under (i) any provision of the Certificate of
Incorporation or Bylaws or other similar organizational document of DMC or any
of the DMC Subsidiaries or (ii) any Material Contract (as defined in Section
2.28) to which DMC and any of the DMC Subsidiaries is a party, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to DMC or any of the DMC Subsidiaries
or any of their properties or assets.
2.6 SEC Documents; Financial Statements. DMC has furnished to
Measurex a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement and other filing filed with the SEC
by
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DMC since December 31, 1990, and, prior to the Effective Time, DMC will have
furnished Measurex with true and complete copies of any additional documents
filed with the SEC by DMC prior to the Effective Time (collectively, the "DMC
SEC Documents"). In addition, DMC has made available to Measurex all exhibits to
the DMC SEC Documents filed prior to the date hereof, and will promptly make
available to Measurex all exhibits to any additional DMC SEC Documents filed
prior to the Effective Time. All documents required to be filed as exhibits to
the DMC SEC Documents have been so filed, and all material contracts so filed as
exhibits are in full force and effect, except those which have expired or
terminated in accordance with their terms, and neither DMC nor any of the DMC
Subsidiaries is in default thereunder. As of their respective filing dates, the
DMC SEC Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, and none of the DMC SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed DMC SEC Document. The financial statements of
DMC, including the notes thereto, included in the DMC SEC Documents (the "DMC
Financial Statements") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent throughout the periods indicated (except as may be indicated
in the notes thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The DMC
Financial Statements fairly present the consolidated financial condition and
operating results of DMC and the DMC Subsidiaries as of the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in DMC
accounting policies except as described in the notes to the DMC Financial
Statements.
2.7 Absence of Certain Changes. Since June 30, 1995, (the "DMC
Balance Sheet Date"), DMC has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect on DMC;
(ii) any acquisition, sale or transfer of any material asset of DMC or any of
the DMC Subsidiaries other than in the ordinary course of business and
consistent with past practice; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by DMC or any revaluation by DMC of any of its or any of the DMC
Subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the
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shares of DMC, or any direct or indirect redemption, purchase or other
acquisition by DMC of any of its shares of capital stock; (v) any Material
Contract entered into by DMC or any of the DMC Subsidiaries, other than in the
ordinary course of business and as provided to Measurex, or any material adverse
amendment or termination of, or default under, any Material Contract to which
DMC or any of the DMC Subsidiaries is a party or by which it is bound; (vi) any
increase in the compensation payable or to become payable by DMC to any of its
officers, directors, consultants or employees (except for salary or rate
increases granted to such persons in the ordinary course of business and
consistent with prior practice); (vii) any (A) grant of any severance or
termination pay to any director, officer or employee of DMC or any of the DMC
Subsidiaries, (B) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of DMC or any DMC Subsidiary, (C) any increase
in benefits payable under any existing severance or termination pay policies or
employment agreements, or (D) any increase in compensation, bonus or other
benefits payable to directors, officers or employees of DMC or any DMC
Subsidiary; or (viii) any negotiation or agreement by DMC or any of the DMC
Subsidiaries to do any of the things described in the preceding clauses (i)
through (vii) (other than negotiations with Measurex and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Absence of Undisclosed Liabilities. DMC has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in DMC's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 (the "DMC Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the DMC Balance
Sheet under generally accepted accounting principles, (iii) those incurred in
the ordinary course of business since the DMC Balance Sheet Date and consistent
with past practice; (iv) those incurred in connection with the execution of this
Agreement and the transactions contemplated hereby; and (v) those that could not
reasonably be expected to have a Material Adverse Effect.
2.9 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of DMC, threatened
against DMC or any of the DMC Subsidiaries or any of their respective properties
or any of their respective officers or directors (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on DMC. There is no judgment, decree or order against
DMC or any of the DMC Subsidiaries, or, to the knowledge of DMC, any of their
respective directors or officers (in their capacities as such), that could
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect.
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2.10 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon DMC or any of the DMC
Subsidiaries that could reasonably be expected to have a Material Adverse Effect
by prohibiting or impairing any current or future business practice of DMC or
any of the DMC Subsidiaries, any acquisition of property by DMC or any of the
DMC Subsidiaries or the conduct of business by DMC or any of the DMC
Subsidiaries as currently conducted or as proposed to be conducted by DMC or any
of the DMC Subsidiaries.
2.11 Governmental Authorization. DMC and each of the DMC
Subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which DMC or any of the DMC Subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of DMC's or any of the DMC Subsidiaries' business
or the holding of any such interest (herein collectively referred to as "DMC
Authorizations"), and all of such DMC Authorizations are in full force and
effect, except where the failure to obtain or have any of such DMC
Authorizations could not reasonably be expected to have a Material Adverse
Effect.
2.12 Title to Property. DMC and the DMC Subsidiaries have good and
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the DMC Balance Sheet or acquired
after the DMC Balance Sheet Date (except for intellectual property rights which
are governed by Section 2.13 below and except for properties, interests in
properties and assets sold or otherwise disposed of since the DMC Balance Sheet
Date in the ordinary course of business), free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i) the
lien of current taxes not yet due and payable and (ii) liens securing debt which
is reflected on the DMC Balance Sheet. The plants, property and equipment of
DMC and the DMC Subsidiaries that are used in the operations of their businesses
are in good operating condition and repair, ordinary wear and tear excepted.
All properties used in the operations of DMC and the DMC Subsidiaries are
reflected in the DMC Balance Sheet to the extent generally accepted accounting
principles require the same to be reflected. The DMC Disclosure Schedule
identifies each parcel of real property owned or leased by DMC or any of the DMC
Subsidiaries.
2.13 Intellectual Property.
(a) DMC and the DMC Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
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processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Intellectual Property") that are used or proposed to be used in the
business of DMC and the DMC Subsidiaries as currently conducted or as proposed
to be conducted by DMC and the DMC Subsidiaries.
(b) The DMC Disclosure Schedule lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, registered and unregistered copyrights, and maskworks, which DMC
uses in its business or the business of any DMC Subsidiary and included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements as to which DMC is a party and
pursuant to which any person is authorized to use any Intellectual Property, and
(iii) all licenses, sublicenses and other agreements as to which DMC is a party
and pursuant to which DMC is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any product produced
by DMC or any DMC Subsidiary, the absence of which could reasonably be expected
to have a Material Adverse Effect.
(c) There is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of DMC or any of the DMC
Subsidiaries, any trade secret, or any Intellectual Property right of any third
party to the extent licensed by or through DMC or any of the DMC Subsidiaries,
by any third party, including any employee or former employee of DMC or any of
the DMC Subsidiaries, which could reasonably be expected to have a Material
Adverse Effect. Neither DMC nor any of the DMC Subsidiaries has entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(d) DMC is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights, the
breach of which would have a Material Adverse Effect.
(e) All patents, registered trademarks, service marks and copyrights
held by DMC and the DMC Subsidiaries are valid and subsisting. DMC (i) has not
been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; (ii) has no
knowledge that the manufacturing, marketing, licensing or sale of its products
infringes any
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patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party, which such infringement would have a Material Adverse
Effect; and (iii) has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party.
(f) DMC has secured valid written assignments from all consultants and
employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that DMC does not already own by
operation of law.
(g) DMC has taken all necessary and appropriate steps to protect and
preserve the confidentiality of all Intellectual Property not otherwise
protected by patents, or patent applications or copyright ("Confidential
Information"). All Confidential Information is presently and as of the Closing
will be located at DMC's address as set forth in this Agreement. All use,
disclosure or appropriation of Confidential Information owned by DMC by or to a
third party has been pursuant to the terms of a written agreement between DMC
and such third party. All use, disclosure or appropriation of Confidential
Information not owned by DMC has been pursuant to the terms of a written
agreement between DMC and the owner of such Confidential Information, or is
otherwise lawful.
2.14 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state,
local or foreign laws, ordinances, codes, regulations, rules, policies and
orders that are intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting with respect
to, or list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are intended
to assure the safety of employees, workers or other persons, including the
public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws.
(iii) "Property" shall mean all real property leased or owned by DMC
or any DMC Subsidiary either currently or in the past.
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(iv) "Facilities" shall mean all buildings and improvements on the
Property of DMC or any DMC Subsidiary.
(b) Except for the purchase, storage, use or disposal of Hazardous
Materials in the ordinary course of business, all of which has been in
compliance with Environmental and Safety Laws, DMC represents and warrants as
follows: (i) no methylene chloride or asbestos is contained in or has been used
at or released from the Facilities; (ii) all hazardous substances and wastes
have been disposed of in accordance with all Environmental and Safety Laws;
(iii) DMC and the DMC Subsidiaries have received no notice (verbal or written)
of any noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or threatened relating to a violation of any Environmental and
Safety Laws; (v) neither DMC nor any DMC Subsidiary is a potentially responsible
party under the federal Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), or analogous state statute, arising out of events
occurring prior to the Closing Date; (vi) there have not been in the past, and
are not now, any Hazardous Materials on, under or migrating to or from the
Facilities or Property; (vii) there have not been in the past, and are not now,
any underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil wells; (viii) there are no polychlorinated biphenyls (PCBs) deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and DMC's and the DMC Subsidiaries' uses and activities therein have
at all times complied with all Environmental and Safety Laws; (xi) DMC and the
DMC Subsidiaries have all the permits and licenses required to be issued and are
in full compliance with the terms and conditions of those permits.
2.15 Radioactive Materials and X-Ray Sources.
(a) DMC and the DMC Subsidiaries have obtained and maintained in
accordance therewith all necessary permits and licenses from all governments and
regulatory agencies required for the purchase, transport, storage, use and
manufacture, distribution, sale or lease, licensing, maintenance and disposal of
radioactive materials and x-ray sources.
(b) DMC and the DMC Subsidiaries have not violated in any respect or
received a notice or charge asserting any violation of any federal, provincial,
state, local or foreign law respecting the use of radioactive materials or x-ray
sources.
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(c) The DMC Disclosure Schedule lists the ANSI Classification and the
ANSI Standard for each DMC radioisotope source holder containing an ionizing
radiation source. Each such product has been designed and manufactured to the
ANSI Classification and the ANSI Standard suitable according to industry
accepted practice for the required customer, environment and/or application.
Radioisotope source holder design drawings were prepared for each such product
and have been maintained by DMC and by the DMC Subsidiaries.
2.16 Taxes. DMC and each of the DMC Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which DMC
or any of the DMC Subsidiaries is or has been a member have timely filed all
material Tax Returns required to be filed by it, have paid all Taxes shown
thereon to be due and, to its knowledge, has provided adequate accruals in
accordance with generally accepted accounting principles in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax returns. Except as disclosed in the SEC Documents, (i) no
material claim for Taxes has become a lien against the property of DMC or any of
the DMC Subsidiaries or is being asserted against DMC or any of the DMC
Subsidiaries other than liens for Taxes not yet due and payable, (ii) no audit
of any Tax Return of DMC or any of the DMC Subsidiaries is being conducted by a
Tax authority, (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by DMC or any of the DMC Subsidiaries
and is currently in effect, and (iv) there is no agreement, contract or
arrangement to which DMC or any of the DMC Subsidiaries is a party that may
result in the payment of any amount that would not be deductible by reason of
Sections 280G, 162 or 404 of the Code. DMC has not been and will not be
required to include any material adjustment in Taxable income for any Tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
Neither DMC nor any of the DMC Subsidiaries is a party to any tax sharing or tax
allocation agreement nor does DMC or any of the DMC Subsidiaries owe any amount
under any such agreement. For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity responsible for the imposition of any such
tax (domestic or foreign), (ii) any liability for the payment of any amounts of
the type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express
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or implied obligation to indemnify any other person. As used herein, "Tax
Return" shall mean any return, statement, report or form (including, without
limitation,) estimated Tax returns and reports, withholding Tax returns and
reports and information reports and returns required to be filed with respect to
Taxes. DMC and each of the DMC Subsidiaries are in full compliance with all
terms and conditions of any Tax exemptions or other Tax-sparing agreement or
order of a foreign government and the consummation of the Merger shall not have
any adverse effect on the continued validity and effectiveness of any such Tax
exemptions or other Tax-sparing agreement or order.
2.17 Employee Benefit Plans.
(a) The DMC Disclosure Schedule lists, with respect to DMC, any DMC
Subsidiary and any trade or business (whether or not incorporated) which is
treated as a single employer with DMC (an "ERISA Affiliate") within the meaning
of Section 414(b), (c), (m) or (o) of the Code, (i) all material employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (ii) each loan to a non-officer
employee in excess of $10,000, loans to officers and directors and any stock
option, stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of DMC and that do not generally apply to all employees, and (v) any current or
former employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of DMC of greater than $10,000
remain for the benefit of, or relating to, any present or former employee,
consultant or director of DMC (together, the "DMC Employee Plans").
(b) DMC has furnished to Measurex a copy of each of the DMC Employee
Plans and related plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each DMC Employee Plan
which is subject to ERISA reporting requirements, provided copies of the Form
5500 reports filed for the last three plan years. Any DMC Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied to the
Internal Revenue Service for such a determination letter prior to the expiration
of
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the requisite period under applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such determination letter and to
make any amendments necessary to obtain a favorable determination. DMC has also
furnished Measurex with the most recent Internal Revenue Service determination
letter issued with respect to each such DMC Employee Plan, and nothing has
occurred since the issuance of each such letter which could reasonably be
expected to cause the loss of the tax-qualified status of any DMC Employee Plan
subject to Code Section 401(a).
(c) (i) None of the DMC Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, with respect to any DMC Employee Plan, which could
reasonably be expected to have a Material Adverse Effect; (iii) each DMC
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as could not reasonably be
expected to have a Material Adverse Effect, and DMC and each DMC Subsidiary or
ERISA Affiliate have performed all obligations required to be performed by them
under, are not in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the DMC Employee Plans,
except as could not reasonably be expected to have a Material Adverse Effect;
(iv) neither DMC nor any DMC Subsidiary or ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the DMC Employee Plans; (v) all material
contributions required to be made by DMC or any DMC Subsidiary or ERISA
Affiliate to any DMC Employee Plan have been made on or before their due dates
and a reasonable amount has been accrued for contributions to each DMC Employee
Plan for the current plan years; (vi) with respect to each DMC Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no DMC Employee Plan
is covered by, and neither DMC nor any DMC Subsidiary or ERISA Affiliate has
incurred or expects to incur any liability under Title IV of ERISA or Section
412 of the Code. With respect to each DMC Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
DMC has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such DMC
Employee Plan. No suit, administrative proceeding, action or other litigation
has been brought, or to the best knowledge of DMC is threatened, against or with
respect to any such DMC Employee Plan, including any
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audit or inquiry by the IRS or United States Department of Labor. Neither DMC
nor any DMC Subsidiary or other ERISA Affiliate is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each DMC Employee Plan, DMC and each of its United
States DMC Subsidiaries have complied with (i) the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the proposed regulations thereunder and
(ii) the applicable requirements of the Family Leave Act of 1993 and the
regulations thereunder, except to the extent that any such failure to comply
could not reasonably be expected to have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of DMC, any DMC Subsidiary or any other ERISA Affiliate to severance
benefits or any other payment, except as expressly provided in this Agreement,
or (ii) accelerate the time of any payments or the vesting of any options or
other benefits, or increase the amount of compensation due any such employee or
service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by DMC, any DMC Subsidiary or other ERISA
Affiliate relating to, or change in participation or coverage under, any DMC
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in DMC's financial statements.
2.18 Certain Agreements Affected by the Merger. Neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of DMC or any of its
subsidiaries, (ii) materially increase any benefits otherwise payable by DMC or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
2.19 Product Warranty. Except for the amount identified as warranty
reserve on the DMC Balance Sheet, each product manufactured, sold, leased, or
delivered by DMC or the DMC Subsidiaries has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
neither DMC nor any of the DMC Subsidiaries have liabilities (and there is no
basis for any present or future claim or demand against DMC or the DMC
Subsidiaries giving rise to any liability) for replacement or repair thereof
(including without limitations bringing the product into compliance with
performance
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guarantees), or other damages (including without limitation any refund to
customers and deduction of purchase price) and costs in connection therewith.
2.20 Product Liability. DMC and the DMC Subsidiaries have no
liability (and there is no basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against any
of them giving rise to any liability) arising out of any injury to persons or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by DMC or the DMC Subsidiaries, except
for such liabilities that could not reasonably be expected to have a Material
Adverse Effect. To the best knowledge of DMC, each of DMC's and the DMC
Subsidiaries' products meets all applicable product safety requirements.
2.21 Employee Matters. DMC and each of the DMC Subsidiaries are in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice. There
are no pending claims against DMC or any of the DMC Subsidiaries under any
workers compensation plan or policy or for long term disability. Neither DMC
nor any of the DMC Subsidiaries has any material obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder. There
are no controversies pending or, to the knowledge of DMC, threatened, between
DMC or any of the DMC Subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a Material Adverse
Effect on DMC. Neither DMC nor any of the DMC Subsidiaries is a party to any
collective bargaining agreement or other labor unions contract nor does DMC nor
any of the DMC Subsidiaries know of any activities or proceedings of any labor
union to organize any such employees.
2.22 Interested Party Transactions. Except as disclosed in the DMC
SEC Documents, neither DMC nor any of the DMC Subsidiaries is indebted to any
director, officer, employee or agent of DMC or any of the DMC Subsidiaries
(except for amounts due as normal salaries, bonuses or commissions and in
reimbursement of ordinary expenses), and no such person is indebted to DMC or
any of the DMC Subsidiaries (except for amounts due to normal advancements of
expenses), and there have been no other transactions of the type required to be
disclosed pursuant to Items 402 and 404 of Regulation S-K under the Securities
Act and the Exchange Act since December 31, 1994.
2.23 Insurance. DMC and each of the DMC Subsidiaries have policies
of insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of DMC and the DMC
Subsidiaries. There is no material claim pending under any of such policies
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or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and DMC and the DMC Subsidiaries are
otherwise in compliance with the terms of such policies and bonds. DMC has no
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.24 Compliance with Laws. Each of DMC and the DMC Subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on DMC.
2.25 Inventory. The inventories of DMC disclosed in the DMC Balance
Sheet and in any subsequently filed DMC SEC Documents are stated consistently
with the audited financial statements of DMC, such presentation is in accordance
with GAAP, and due provision was made to provide for all slow-moving, obsolete,
or unusable inventories to their estimated useful or scrap values and such
inventory reserves are adequate to provide for such slow-moving, obsolete or
unusable inventory and inventory shrinkage. Since June 30, 1995, due provision
was made on the books of DMC in the ordinary course of business consistent with
past practices to provide for all slow-moving, obsolete, or unusable inventories
to their estimated useful or scrap values and such inventory reserves are
adequate to provide for such slow-moving, obsolete or unusable inventory and
inventory shrinkage.
2.26 Accounts Receivable. The accounts receivable disclosed in the
DMC Balance Sheet and, with respect to accounts receivable created since the
date of the DMC Balance Sheet, disclosed in any subsequently filed DMC SEC
Documents, or as accrued on the books of DMC in the ordinary course of business
consistent with past practices in accordance with generally accepted accounting
principles since the last filed DMC SEC Documents, represent and will represent
bona fide claims against debtors for sales and other charges, are not subject to
discount except for normal cash and immaterial trade discounts, and the amount
carried for doubtful accounts and allowances disclosed in each of such DMC SEC
Documents or accrued on such books is sufficient to provide for any losses which
may be sustained on realization of the receivables.
2.27 Customers and Suppliers. As of the date hereof, no customer
which individually accounted for more than 5% of DMC's gross revenues during the
12-month period ending August 31, 1995, and no supplier of DMC material to its
business, has cancelled or otherwise terminated, or made any written threat to
DMC to cancel or otherwise terminate its relationship with DMC, or has at any
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time on or after June 30, 1995 decreased materially its services or supplies to
DMC in the case of any such supplier, or its usage of the services or products
of DMC in the case of such customer, and to DMC's knowledge, no such supplier or
customer intends to cancel or otherwise terminate its relationship with DMC or
to decrease materially its services or supplies to DMC or its usage of the
services or products of DMC, as the case may be. From and after the date
hereof, no customer which individually accounted for more than 5% of DMC's gross
revenues during the 12-month period ending August 31, 1995, has cancelled or
otherwise terminated, or made any written threat to DMC to cancel or otherwise
terminate, for any reason, including without limitation the consummation of the
transactions contemplated hereby, its relationship with DMC, and to DMC's
knowledge, no such customer intends to cancel or otherwise terminate its
relationship with DMC or to decrease materially its usage of the services or
products of DMC. DMC has not knowingly breached, so as to provide a benefit to
DMC that was not intended by the parties, any agreement with, or engaged in any
fraudulent conduct with respect to, any customer or supplier of DMC. No
supplier of materials to DMC is the sole source of supply of any material or
materials used in any DMC product.
2.28 Material Contracts. The DMC Disclosure Schedule lists each
contract or agreement to which DMC is a party (i) that is required to be filed
pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act (each of
which has been so filed as an Exhibit to the DMC SEC Documents), (ii) that
grants to a third party any commercial rights to exploit any of the Intellectual
Property except for licenses contained in purchase orders arising in the
ordinary course of business or (iii) the absence of which would have a Material
Adverse Effect (each, a "Material Contract''). Each Material Contract is in
full force and effect and is enforceable against the parties thereto (other than
DMC) in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally (including, without limitation, the effect of statutory and other law
regarding fraudulent conveyances, fraudulent transfers and preferential
transfers) and as may be limited by the exercise of judicial discretion and the
application of principles of equity, including, without limitation, requirements
of good faith, fair dealing, conscionability and materiality (regardless of
whether considered in a proceeding in equity or at law), and no condition or
state of facts exists that, with notice or the passage of time, or both, would
constitute a default by DMC or any third party under any Material Contract. DMC
has duly complied in all respects with the provision of each Material Contract
to which it is a party. Without limiting the foregoing, all technology and
know-how that were required to be transferred under the agreements with
Techmetal Promotion have been transferred to DMC.
2.29 Minute Books. The minute books of DMC and the DMC Subsidiaries
made available to Measurex contain a complete and accurate summary of all
meetings of directors and stockholders or actions by written consent since the
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time of incorporation of DMC and the respective DMC Subsidiaries through the
date of this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
2.30 Proxy Statement. The information supplied by DMC for inclusion
in the Proxy Statement to be sent to the stockholders of DMC in connection with
the meeting of DMC's stockholders to consider the Merger (the "DMC Stockholders
Meeting") shall not, on the date the Proxy Statement is first mailed to DMC's
stockholders, at the time of the DMC Stockholders Meeting and at the Effective
Time, contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the DMC Stockholders Meeting which has become
false or misleading. If at any time prior to the Effective Time any event or
information should be discovered by DMC which should be set forth in a
supplement to the Proxy Statement, DMC shall promptly inform Measurex and Merger
Sub and prepare and disseminate such supplement. The Proxy Statement shall
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder. Notwithstanding the foregoing,
DMC makes no representation, warranty or covenant with respect to any
information supplied by Measurex or Merger Sub which is contained in any of the
foregoing documents.
2.31 Brokers' and Finders' Fees. DMC has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.32 Opinion of Financial Advisor. DMC has been advised in writing
by Ferris, Baker Watts, Incorporated that in such financial advisor's opinion,
as of the date hereof, the consideration to be received by the stockholders of
DMC in the Merger is fair, from a financial point of view, to the stockholders
of DMC.
2.33 Vote Required. The affirmative vote of the holders of a
majority of the shares of DMC Common Stock outstanding on the record date set
for the DMC Stockholders Meeting is the only vote of the holders of any of DMC's
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.34 Board Approval. The Board of Directors of DMC has unanimously
(i) approved this Agreement and the Merger, (ii) determined that the Merger is
in the best interests of the stockholders of DMC and is on terms that are
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fair to such stockholders and (iii) recommended that the stockholders of DMC
approve this Agreement and the Merger.
2.35 Section 203 Not Applicable. The Board of Directors of DMC has
taken all actions (i) to ensure that the restrictions contained in Section 203
of DGCL applicable to a "business combination" (as defined in Section 203) will
not apply to the execution, delivery or performance of this Agreement or the
Voting and Option Agreements or the consummation of the Merger or the other
transactions contemplated by this Agreement and (ii) to recommend the
appointment of the directors of the Surviving Corporation as provided in this
Agreement.
2.36 No Government Contracts. None of DMC or the DMC Subsidiaries
have entered into any contracts to supply products, either as a prime contractor
or as a subcontractor, to the United States government or any agency or
instrumentality thereof.
2.37 Backlog. The value as determined by Measurex's Backlog
Corporate Instruction No. 511 rev. 2 of orders for products and services
received by DMC and the DMC Subsidiaries from customers but not shipped or
performed as of August 31, 1995 ("the Backlog") is $18,691,672. From August 31,
1995 through the date of this Agreement, none of the orders in the Backlog have
been cancelled.
2.38 Right to Practice Under Instantaneous Profile Measurement
Licenses. Excluding provisions restricting transfer and assignment, nothing in
DMC's agreements with Techmetal Promotion or the patents referenced in such
agreements shall prevent Surviving Corporation from designing, manufacturing or
selling products similar to the products made under the licenses granted in such
agreements which measure the transverse profile of a sheet by using x-rays and
any detector other than a detector which utilizes a linear array of photodiodes
which are sensitive to x-rays.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEASUREX AND MERGER SUB
---------------------------------------------------------
Measurex and Merger Sub hereby represent and warrant to DMC that the
statements contained in this Article III are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date,
except as set forth in the disclosure schedule delivered by Measurex to DMC on
the date hereof (the "Measurex Disclosure Schedule"). The Measurex Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Article III.
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3.1 Organization, Standing and Power. Each of Measurex and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of Delaware.
3.2 Authority. Each of Measurex and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Measurex and Merger
Sub. This Agreement has been duly executed and delivered by Measurex and Merger
Sub and constitutes the valid and binding obligation of each of Measurex and
Merger Sub, enforceable against each of them in accordance with its terms. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Measurex
or Merger Sub in connection with the execution and delivery of this Agreement by
Measurex and Merger Sub or the consummation by Measurex and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger as provided in Section 1.2, (ii) any filings as may be required under
applicable state securities laws and the securities laws of any foreign country,
(iii) such filings as may be required under HSR, and (iv) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not prevent, alter or materially delay any of the transactions
contemplated by this Agreement.
3.3 Noncontravention. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit
under any provision of the Certificate of Incorporation or Bylaws or other
similar organizational document of Measurex.
3.4 Board Approval. The Boards of Directors of Measurex and Merger
Sub have (i) determined that the Merger is in the best interests of their
stockholders and is on terms that are fair to such stockholders, and (ii)
approved this Agreement and the Merger.
3.5 Financing. Measurex represents that at Closing it will have
sources of financing adequate to pay the Merger Consideration and outstanding
amounts owing to financial institutions by DMC.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 Conduct of Business. During the period commencing on the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, DMC agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Measurex), to
carry on the businesses of DMC and the DMC Subsidiaries as in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted, to
pay and to cause the DMC Subsidiaries to pay debts and taxes when due (subject
to good faith disputes over such debts or taxes), to pay or perform other
obligations when due, and to use all reasonable commercial efforts consistent
with past practice and policies to preserve intact its and the DMC Subsidiaries'
present business organizations, keep available the services of its and the DMC
Subsidiaries' present officers and key employees and preserve its and the DMC
Subsidiaries' relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it or the DMC Subsidiaries,
to the end that its and the DMC Subsidiaries' goodwill and ongoing businesses
shall be unimpaired at the Effective Time. DMC agrees to promptly notify
Measurex of any event or occurrence not in the ordinary course of its or the DMC
Subsidiaries' business, and of any event which could have a Material Adverse
Effect on it. Without limiting the foregoing, except as expressly contemplated
by this Agreement, DMC shall not do, cause or permit any of the following, or
allow, cause or permit any of the DMC Subsidiaries to do, cause or permit any of
the following, without the prior written consent of Measurex.
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws or other similar organizational document;
(b) Issuance of Securities. Issue, deliver, grant or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its common stock
pursuant to the exercise of stock options, warrants, purchase rights, conversion
rights or other rights therefor outstanding as of the date of this Agreement;
(c) Dividends; Changes in Capital Stock. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former
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employees, directors and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination of service to it or
the DMC Subsidiaries;
(d) Stock Option Plans, Etc. Except as provided in Section 5.10,
accelerate, amend or change the period of exercisability or vesting of options
or other rights granted under its employee stock plans or director stock plans
or authorize cash payments in exchange for any options or other rights granted
under any of such plans;
(e) Material Contracts. Enter into any Material Contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(f) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or Intellectual
Property;
(h) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its and its parent's/subsidiaries' business, taken as a whole,
except in the ordinary course of business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, other than draws on existing lines of
credit as necessary for its operations in the ordinary course of business;
(j) Leases. Enter into any operating lease in excess of $10,000;
(k) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $10,000 in any one case or $50,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the DMC Financial Statements;
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(l) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(m) Insurance. Reduce the amount of any insurance coverage provided
by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend
any employee benefit or stock purchase or option plan, or hire any new director
level or officer level employee, pay any special bonus or special remuneration
to any employee or director, or increase the salaries or wage rates of its
employees;
(p) Severance Arrangements. Grant any severance or termination pay
(i) to any director or officer or (ii) to any other employee except (A) payments
made pursuant to standard written agreements in effect on the date hereof or (B)
grants which are made in the ordinary course of business in accordance with its
standard past practice;
(q) Lawsuits. Commence a lawsuit other than for the routine
collection of bills, in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Measurex prior to the
filing of such a suit;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its and its parent's/subsidiaries' business, taken as a whole;
(s) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Return or any amendment to a
material Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(t) Notices. DMC shall give all notices and other required to be
given to the employees of DMC, any collective bargaining unit representing any
group of employees of DMC, and any applicable government authority under the
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WARN Act, the National Labor Relations Act, the Internal Revenue Code, COBRA,
and other applicable law in connection with the transactions provided for in
this Agreement;
(u) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(v) Other. Take or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (u) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.2 No Solicitation. Subject to the provision contained in this
Section 4.2 permitting DMC to consider and negotiate unsolicited written
proposals as hereafter specifically provided, DMC shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
DMC or any of the DMC Subsidiaries, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, business combination, sale
of substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transactions involving DMC or
any of the DMC Subsidiaries, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), provided that DMC may send a copy of
the Press Release announcing this Agreement to anyone, (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to,
approve or recommend any Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent DMC or its Board of Directors from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal, to DMC or the stockholders of DMC, if and
only to the extent that (1) the Board of Directors of DMC believes in good faith
(after consultation with its financial advisor) that such Acquisition Proposal
would, if consummated, result in a transaction more favorable to DMC's
stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Acquisition Proposal being referred to
in this Agreement as a "Superior Proposal") and the Board of Directors of DMC
determines in good faith after consultation with outside legal counsel that such
action is necessary for DMC to comply with its fiduciary duties to stockholders
under applicable law, and (2) prior to furnishing such non-public information
to, or entering into discussions or negotiations with, such person or entity,
the Board of Directors of DMC receives from such person or entity an
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executed confidentiality agreement with terms no more favorable to such party
than those contained in the Confidentiality Agreement (as defined in Section
5.4); or (B) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal. DMC will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. DMC shall (i)
promptly notify Measurex after receipt by it (or its advisors) of any
Acquisition Proposal or any inquiries indicating that any person is considering
making or wishes to make an Acquisition Proposal, (ii) promptly notify Measurex
after receipt of any request for nonpublic information relating to it or any of
the DMC Subsidiaries or for access to its or any of the DMC Subsidiaries'
properties, books or records by any person that may be considering making, or
has made, an Acquisition Proposal and (iii) subject to the fiduciary duties of
its Board of Directors under applicable law as advised by its outside counsel,
keep Measurex advised of the status and principal financial terms of any such
Acquisition Proposal, indication or request.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 Proxy Statement. If required by applicable law, as promptly as
practicable after the execution of this Agreement, DMC and Measurex shall
prepare and DMC shall file with the SEC, preliminary proxy materials relating to
the approval of the Merger and the transactions contemplated hereby, and shall
use its best efforts to have the Proxy Statement cleared as promptly as
practicable by the SEC. Subject to the provisions of Section 4.2, the Proxy
Statement shall include the recommendation of the Board of Directors of DMC for
its stockholders to vote in favor of the Merger. Measurex and DMC shall
cooperate with each other in the preparation of the Proxy Statement, and DMC
shall notify Measurex of the receipt of any comments of the SEC with respect to
the Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to Measurex
promptly copies of all correspondence between DMC or any representative of DMC
and the SEC. Measurex and DMC agree to use their best efforts, after
consultation with each other, to respond promptly to all such comments of and
requests by the SEC and to cause the Proxy Statement and all required amendments
and supplements thereto to be mailed to the holders of DMC Common Stock entitled
to vote at the Stockholders Meeting at the earliest practicable time.
5.2 Meeting of Stockholders. DMC shall take all action necessary in
accordance with DGCL and its Certificate of Incorporation and Bylaws to convene
the DMC Stockholders Meeting as promptly as practicable, but in any event on or
prior to December 1, 1995. DMC shall consult with Measurex regarding the date
of the DMC Stockholders Meeting and use all reasonable efforts and shall not
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postpone or adjourn (other than for the absence of a quorum) the DMC
Stockholders Meeting without the consent of Measurex. Subject to the provisions
of Section 4.2, DMC shall use its best efforts to solicit from stockholders of
DMC proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required to effect the
Merger.
5.3 Access to Information.
(a) DMC shall afford Measurex and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of DMC's and the DMC Subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of DMC and the DMC
Subsidiaries as Measurex may reasonably request. DMC agrees to provide to
Measurex and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request and access to the workpapers
of the independent public accountants of DMC prepared in connection therewith.
(b) Subject to compliance with applicable law, from the date hereof
until the Effective Time, Measurex and DMC shall confer on a regular and
frequent basis with one or more representatives of the other party to report
material operational matters and the general status of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant
to this Section 5.3 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.4 Confidentiality. The parties acknowledge that Measurex and DMC
have previously executed a confidentiality agreement dated May 15, 1995 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms. In addition, Measurex and
DMC each agree that it shall keep, and shall use its reasonable efforts to cause
its directors, officers, employees, consultants, representatives and advisors
("Representatives") to agree to keep, all confidential or proprietary
information of Measurex or DMC confidential and shall not, except as otherwise
permitted hereby including as permitted by Section 4.2, disclose any such
information to any person other than its Representatives. For purposes of this
Section 5.4, the term "confidential or proprietary information" shall mean all
information which is disclosed to either DMC or Measurex, or their respective
Representatives, by the other, and which relates to matters such as trade
secrets, research and development activities, books and records, catalogues,
sample books, customer lists, suppliers, distribution channels, cost or price
information, private processes, formulae, functional specifications, blueprints,
know-how, data, improvements, discoveries,
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designs, inventions, techniques, marketing plans, strategies, forecasts, new
products, financial statements, identification of key employees and
manufacturing plans and operations; provided, however, that such definition
shall not include (i) information which is or becomes generally available to the
public, (ii) information which, in the opinion of counsel to DMC or Measurex, it
is required by law, court order, governmental order or decree to disclose, (iii)
information which was developed by or on behalf of DMC or Measurex, independent
from the information disclosed hereunder, (iv) information which was
subsequently made available to Measurex by a third party, or (v) information
already known by DMC or Measurex, as the case may be.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Measurex and DMC shall consult with each other before issuing any press release
or otherwise making any public statement or making any other public (or non-
confidential) disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement and the transactions contemplated hereby, and
neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or any listing
agreement with any national securities exchange or the NASD.
5.6 Consents; Cooperation. Each of Measurex, Merger Sub and DMC will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated hereby and shall promptly apply for or otherwise
seek, and take all reasonable actions to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, including
those required under HSR, and shall take all reasonable actions to obtain all
necessary consents, waivers and approvals under any of its Material Contracts in
connection with the Merger for the assignment thereof or otherwise. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law. Notwithstanding any provision to the contrary contained herein, no party
shall be required to litigate any issue in order to comply with this Section
5.6.
5.7 FIRPTA. DMC shall, prior to the Closing Date, provide Measurex
with a properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") Notification Letter, in form reasonably satisfactory to Measurex and
DMC, which states that shares of capital stock of DMC do not constitute "United
States real property interests" under Section 897(c) of the Code, for purposes
of satisfying Measurex's obligations under Treasury Regulation Section
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1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification
Letter, DMC shall have provided to Measurex, as agent for DMC, a form of notice
to the Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), in form reasonably satisfactory to Measurex
and DMC, along with written authorization for Measurex to deliver such notice
form to the Internal Revenue Service on behalf of DMC upon the Closing of the
Merger.
5.8 FDA Filings. Promptly DMC shall make all necessary filings with
the Food and Drug Administration concerning its x-ray products.
5.9 Reasonable Efforts and Further Assurances. Each of the parties
to this Agreement shall use all reasonable efforts and take all reasonable
actions to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each
party hereto, at the reasonable request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.10 Amendment of Certain Agreements. Promptly DMC shall cause the
DMC Stock Option Plans and the 1997 Debenture agreements to be amended so as to
enable the payment of cash consideration pursuant to Section 1.10.
5.11 Indemnification. For a period of three years after the
Effective Time, Measurex will cause the Surviving Corporation to have a
provision in its Certificate of Incorporation the same as Article 9 of the
Certificate of Incorporation of DMC as of the date of this Agreement.
5.12 Payment of Bank Loans. Promptly following the Effective Time,
Measurex shall pay the outstanding amounts owing to financial institutions by
DMC.
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ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the holders of a majority of the shares of DMC
Common Stock outstanding as of the record date set for the DMC Stockholders
Meeting.
(b) No Injunctions or Restraints; Illegality. There shall be no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger, nor shall
there be any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(c) Governmental Approval. Measurex, DMC and Merger Sub and their
respective subsidiaries shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Exchange Act and under HSR.
6.2 Additional Conditions to Obligations of DMC. The obligations of
DMC to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing, by
DMC:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Measurex and Merger Sub in this Agreement
shall be true and correct on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii)
Measurex and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time.
DMC shall have been provided with a certificate executed on behalf of Measurex
by its Chief
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Executive Officer and its Chief Financial Officer confirming that this
condition has been satisfied.
(b) Prior to the DMC Stockholders Meeting referred to in Section
6.1(a), Measurex shall have provided to DMC evidence reasonably satisfactory to
DMC that Measurex shall be able to fulfill the representation set forth in
Section 3.5.
6.3 Additional Conditions to the Obligations of Measurex and Merger
Sub. The obligations of Measurex and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Measurex:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of DMC in this Agreement shall be true and
correct on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) DMC shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Effective Time. Measurex shall have been provided with a certificate
executed on behalf of DMC by its Chief Executive Officer and Chief Financial
Officer confirming that this condition has been satisfied.
(b) Third Party Consents. Measurex shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under any
Material Contract of DMC or any of the DMC Subsidiaries.
(c) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting Measurex's conduct or operation of the
business of DMC and the DMC Subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(d) Legal Opinion. Measurex shall have received a legal opinion from
Klaine, Wiley, Hoffmann & Meurer, legal counsel to DMC, in form and substance
reasonably satisfactory to Measurex.
(e) No Material Adverse Changes. There shall not have occurred any
material adverse change which constitutes a Material Adverse Effect.
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(f) Voting and Option Agreement. Voting and Option Agreements shall
have been executed by a majority of the directors of DMC and shall remain in
full force and effect.
(g) FIRPTA Certificate. DMC shall have provided to Measurex the
documentation referred to in Section 5.7.
(h) Noncompetition Agreement. Noncompetition Agreements in a form
reasonably satisfactory to Measurex shall have been entered into between DMC,
Dominque Gignoux, Tom Armfield and Steve Outhwaite.
(i) Physical Inventory. DMC shall conduct a physical inventory count
(and Measurex shall be allowed to participate in this activity) and the
Additional Inventory Reserve, as defined in Exhibit B, Physical Inventory, shall
not exceed $1,500,000.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time whether before or after the approval by the stockholders
of DMC or Measurex:
(a) by mutual consent of the Boards of Directors of Measurex, Merger
Sub and DMC;
(b) by Measurex or DMC, if (i) the Effective Date shall not have
occurred on or before January 31, 1996; (ii) any Governmental Entity, the
consent of which is a condition to the obligations of Measurex and DMC to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent; or (iii) any court of competent jurisdiction shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final; provided, however, that the right to
terminate this Agreement pursuant to clause (i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Date to occur on or
before such date;
(c) by Measurex or DMC, if, at the meeting of DMC stockholders
(including any adjournment or postponement thereof) called pursuant to Section
5.2 hereof, the requisite vote of the stockholders of DMC shall not have been
obtained.
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(d) by Measurex, if (i) there has been a material breach by DMC of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten business days following receipt by
the breaching party of notice of such breach; or (ii) the Board of Directors of
DMC shall have withdrawn or modified in a manner adverse to Measurex its
approval or recommendation of the transactions contemplated by this Agreement in
order to permit DMC to execute a definitive agreement providing for the
transaction or transactions contemplated by a Superior Proposal; provided,
however, that the right to terminate this Agreement pursuant to this Section
7.1(d) shall not be available to Measurex if it, at such time, is in material
breach of any representation, warranty, covenant or agreement set forth in this
Agreement;
(e) by DMC, if (i) there has been a material breach by Measurex of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten business days following receipt by
the breaching party of notice of such breach; or (ii) subject to Section 7.2
hereof, the Board of Directors of DMC shall have withdrawn or modified in a
manner adverse to Measurex its approval or recommendation of the transactions
contemplated by this Agreement in order to permit DMC to execute a definitive
agreement providing for the transaction or transactions contemplated by a
Superior Proposal; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(e) shall not be available to DMC if DMC, at such
time, is in material breach of any representation, warranty, covenant or
agreement set forth in this Agreement.
7.2 Certain Actions Prior to Termination. DMC shall provide to
Measurex the notice required by Section 4.2 prior to any termination of this
Agreement pursuant to Section 7.1(e)(ii) advising Measurex that the Board of
Directors of DMC has received a Superior Proposal. At any time after the fourth
business day following such notice, DMC may terminate this Agreement as provided
in Section 7.1(e)(ii) only if the Board of Directors of DMC determines that such
Superior Proposal remains more favorable to its stockholders than the
transactions contemplated by this Agreement (which determination shall be made
in light of any revised proposal made by Measurex prior to the expiration of
such four-business day period).
7.3 Effect of Termination. In the event of termination of this
Agreement by Merger Sub, Measurex or DMC as provided in Section 7.1 hereof, and
except as set forth in Sections 5.4, 7.4 and this Section 7.3, this Agreement
shall forthwith become void and there shall be no liability on the part of
Merger Sub, Measurex or DMC or their respective officers or directors under this
Agreement, except to the extent that such termination results from the breach by
a party hereto of any of its representatives, warranties or covenants set forth
in this Agreement.
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<PAGE>
7.4 Expenses and Termination Fee.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such expense
except as set forth in Section 7.4(b).
(b) If this Agreement is terminated pursuant to Sections 7.1(d) or
7.1(e)(ii), and if DMC is not entitled to terminate this Agreement by reason of
Sections 7.1(b) or 7.1(e)(i), then, in addition to any other rights or remedies
that may be available, DMC shall promptly (and in any event within two days of
receipt by DMC of written notice from Measurex) pay Measurex (by wire transfer
of immediately available funds to an account designated by Measurex) the sum of
six hundred thousand dollars ($600,000). The termination of this Agreement
shall not be effective until receipt by Measurex of said amount.
(c) If this Agreement is terminated by DMC pursuant to Section
7.1(e)(i) and if Measurex is not entitled to terminate this Agreement pursuant
to Section 7.1(b) or 7.1(d)(i), then Measurex shall promptly reimburse DMC for
its out of pocket costs incurred by DMC in connection with this Agreement for
its financial advisors, legal counsel, accountants, printing costs and filing
fees.
7.5 Amendment. The boards of directors of the parties hereto may
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
DMC shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the DMC Common Stock, (ii) alter or change any term of
the Certificate of Incorporation of the Surviving Corporation to be effected by
the Merger, or (iii) alter or change any of the terms and conditions of the
Agreement if such alteration or change would adversely affect the holders of DMC
Common Stock.
7.6 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 Survival. The representations, warranties and agreements set
forth in this Agreement shall terminate at the Effective Time, except that the
agreements set forth in Article I, Section 5.4 (Confidentiality), 5.7 (FIRPTA),
5.9 (Reasonable Efforts and Further Assurances), 5.12 (Payment of Bank Loans),
7.4 (Expenses and Termination Fee), 7.5 (Amendment), and this Article VIII shall
survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
1. if to Measurex or Merger Sub, to:
One Results Way
Cupertino, CA 95014
Attention: Executive Vice President
and President Industrial
Systems Division
Facsimile No.: (408) 864-7506
Telephone No.: (408) 255-1500
with a copy to:
Vice President and General Counsel
Facsimile No.: (408) 864-7580
Telephone No.: (408) 255-1500
2. if to DMC, to:
P.O. Box 490
Gaithersburg, MD 20884
Attention: President and Chief
Executive Officer
Facsimile No.: (301) 670-0506
Telephone No.: (301) 948-2450
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<PAGE>
with a copy to:
Gregory J. Meurer
Klaine, Wiley, Hoffmann & Meurer
Suite 1850
105 East Fourth Street
Cincinnati, OH 45202
Facsimile No.: (513) 241-6754
Telephone No.: (513) 241-0202
8.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, and the DMC Disclosure Schedule (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, except for the Confidentiality
Agreement, which shall continue in full force and effect, and shall survive any
termination of this Agreement or the Closing, in accordance with its terms; (b)
are not intended to confer upon any other person any rights or remedies
hereunder, except as set forth herein; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.
8.6 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of
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<PAGE>
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, with regard to its
principles of conflicts of laws.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
IN WITNESS WHEREOF, Measurex, Merger Sub and DMC have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
MEASUREX CORPORATION
/s/ Glenn R. Wiencoop
By: _______________________________________
Glenn R. Wiencoop
Name: ________________________________
Executive Vice President
Title: _______________________________
MX ACQUISITION COMPANY
/s/ Lance M. Lissner
By: _______________________________________
Lance M. Lissner
Name: ________________________________
Vice President
Title: _______________________________
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<PAGE>
DATA MEASUREMENT CORPORATION
/s/ Dominique Gignoux
By: ____________________________________
Dominique Gignoux
Name: _____________________________
President
Title: ____________________________
A-46
<PAGE>
EXHIBIT A
---------
VOTING AND STOCK OPTION AGREEMENT
THIS VOTING AND STOCK OPTION AGREEMENT (this "Agreement"), is made and
entered into as of September 16, 1995, by and between __________________
("Grantor"), and MEASUREX CORPORATION, a Delaware corporation ("Measurex").
WHEREAS, Grantor is an officer, director or principal stockholder of
Data Measurement Corporation, a Delaware corporation ("DMC"); and
WHEREAS, Measurex and DMC propose to enter into an Agreement and Plan
of Reorganization and related agreements dated as of the date hereof (the
"Merger Agreement"; capitalized terms not defined herein shall have the meanings
set forth in the Merger Agreement), providing for, among other things, the
merger of a wholly owned subsidiary of Measurex with and into DMC (the "Merger")
upon the terms described therein; and
WHEREAS, as an inducement to Measurex's willingness to enter into the
Merger Agreement and as a condition to Measurex's obligation to effect the
Merger, Grantor has agreed to grant Measurex the Option described in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, Grantor and Measurex agree as follows:
1. Agreement to Retain Stock.
(a) Transfer and Encumbrance. Grantor agrees not to transfer, sell,
exchange, pledge or otherwise dispose of or encumber any shares of DMC Common
Stock owned by Grantor (the "Stock") or any New Stock (as defined in Section
1(b) below) or to make any offer or agreement relating thereto, at any time
prior to the Expiration Date (as defined in Section 1(c) below) except upon the
exercise of the Option (as defined below) by Measurex; provided, however, that
any pledge on or other encumbrance in respect of any of the Stock existing as of
the date hereof shall be permitted to remain in existence and shall not be
deemed a breach of this Section 1(a).
(b) New Stock. Grantor agrees that any shares of DMC Common Stock
that Grantor purchases or with respect to which Grantor otherwise acquires
record or beneficial ownership after the date of this Agreement and prior to the
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<PAGE>
Expiration Date ("New Stock") shall be subject to the terms and conditions of
this Agreement to the same extent as if they had originally constituted Stock.
Grantor is the holder of DMC stock options and/or convertible debentures, all of
which are fully exercisable or convertible into DMC Common Stock. In the event
Measurex gives Grantor notice of the exercise of its option under this Agreement
and requests Grantor to do so, Grantor will exercise his DMC stock options
and/or convert his convertible debentures and the stock he acquires will be
included in New Stock.
(c) Expiration Date. For purposes of this Agreement, "Expiration
Date" shall mean the earliest of (i) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the Merger
Agreement, (ii) the date on which the Merger Agreement is terminated pursuant to
Sections 7.1(a), (b) or (c) of the Merger Agreement or Measurex's failure to
transmit to the Exchange Agent the Merger Consideration in accordance with the
terms of the Merger Agreement or the failure of the Merger to be consummated for
reasons other than DMC's breach or default under the Merger Agreement on or
before January 31, 1996, (iii) sixty (60) days after termination of the Merger
Agreement for any other reason except for a termination following DMC's breach
or default under the Merger Agreement or (iv) six months after the date of this
Agreement.
2. Agreement to Vote Stock. At every meeting of the stockholders of
DMC called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of DMC with respect to any of the following, Grantor shall vote the Stock and
any New Stock: (i) in favor of approval of the Merger Agreement and the Merger
and any matter that could reasonably be expected to facilitate the Merger; and
(ii) against approval of any proposal made in opposition to or in competition
with the consummation of the Merger and the Merger Agreement, against any
merger, consolidation, sale of substantial assets, sale of shares of capital
stock, reorganization, recapitalization or similar transactions involving DMC or
its subsidiaries, with any party other than Measurex or one of its affiliates
and against any liquidation or winding up of DMC (each of the foregoing is
referred to as an "Opposing Proposal").
3. Irrevocable Proxy. In order to effect the intent of paragraph 2,
concurrently with the execution of this Agreement Grantor shall deliver to the
members of the Board of Directors of Measurex a proxy in the form attached
hereto as Annex A (the "Proxy"), which shall be irrevocable to the extent
provided by the General Corporation Law of the State of Delaware, covering the
Stock and New Stock.
4. No Proxy Solicitations. Except for actions taken by Grantor
solely in Grantor's capacity as a member of the Board of Directors of DMC, if
applicable, in order to comply with applicable law as advised in writing by
independent legal counsel, Grantor will not, and will not permit any entity
under Grantor's control, to:
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<PAGE>
(i) solicit proxies or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act) with respect to an
Opposing Proposal or otherwise encourage or assist any party in taking or
planning any action that would compete with, restrain or otherwise serve to
interfere with or inhibit the timely consummation of the Merger in accordance
with the terms of the Merger Agreement; (ii) initiate a stockholders' vote or
action by written consent of DMC stockholders with respect to an Opposing
Proposal; or (iii) become a member of a "group" (as such term is used in Section
13(d) of the Exchange Act) with respect to any voting securities of DMC with
respect to an Opposing Proposal.
5. Grant of Option. Subject to the terms and conditions set forth
herein, Grantor hereby grants to Measurex an irrevocable option (the "Option")
to purchase all of the Stock, constituting ______________ shares, owned by
Grantor as of the date hereof and any New Stock hereafter acquired by Grantor
(collectively, the "Option Stock"), at a purchase price of $18.625 per share of
Option Stock (the "Purchase Price").
6. Exercise of Option.
(a) Measurex may exercise the Option for all Option Stock at any time
prior to the Expiration Date.
(b) In the event Measurex wishes to exercise the Option, it shall send
to Grantor a written notice (the date of which being herein referred to as the
"Notice Date") specifying a place and date not earlier than three business days
nor later than 15 business days after the Notice Date for the closing of such
purchase (the "Closing Date"); provided that if the closing of the purchase and
sale pursuant to the Option (the "Closing") cannot be consummated by reason of
any applicable judgment, decree, order, law or regulation, the period of time
that otherwise would run pursuant to this sentence shall run instead from the
date on which such restriction on consummation has expired or been terminated;
and, provided further that, without limiting the foregoing, if prior
notification to or approval of any regulatory authority is required in
connection with such purchase, Measurex and, if applicable, Grantor shall
promptly file the required notice or application for approval and shall
expeditiously process the same (and Grantor shall cooperate with Measurex in the
filing of any such notice or application and the obtaining of any such
approval), and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (i) any
required notification period has expired or been terminated or (ii) such
approval has been obtained, and in either event, any requisite waiting period
has passed.
(c) Notwithstanding Section 7(b), in no event shall the Closing Date
be more than 12 months after the related Notice Date, and if the Closing Date
shall not have occurred within 12 months after the related Notice Date due to
the failure
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<PAGE>
to obtain any required approval, the Option and the exercise thereof effected on
the Notice Date shall be deemed to have expired.
7. Payment for and Delivery of Certificates.
(a) On the Closing Date, Measurex shall pay to Grantor by wire
transfer to a bank account designated by Grantor an amount equal to the Purchase
Price multiplied by the number of shares of Option Stock to be purchased on such
Closing Date.
(b) At the Closing, simultaneously with the delivery of funds as
provided in Section 7(a), Grantor shall deliver to Measurex a certificate or
certificates representing the Option Stock to be purchased at such Closing,
which Option Stock shall be fully paid and non-assessable and free and clear of
all liens, claims, charges, and encumbrances of any kind whatsoever, and
Measurex shall deliver to Grantor a certificate agreeing that Measurex shall not
offer to sell or otherwise dispose of such Option Stock in violation of
applicable law or this Agreement.
8. Adjustment upon Changes in Capitalization, Etc. In the event of
any change in DMC Common Stock by reason of a stock dividend, stock split,
recapitalization, combination, exchange of shares, or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price therefor, shall be adjusted appropriately, and proper provision shall be
made in the agreements governing such transaction, so that Measurex shall
receive upon exercise of the Option the same class and number of outstanding
shares or other securities or property that Measurex would have received in
respect of DMC Common Stock if the Option had been exercised immediately prior
to such event, or the record date therefor, as applicable.
9. Representations of Grantor. Grantor represents and warrants to
Measurex that:
(a) Grantor has full legal capacity to execute this Agreement, and
this Agreement will be binding upon the heirs, personal representatives,
successors and assigns of Grantor.
(b) Grantor is the lawful owner of the Option Stock, of record and
beneficially, free and clear of all liens, charges, pledges, security interests,
options, claims or other encumbrances, and has full right, power and authority
to sell, assign, transfer and deliver the Option Stock to be sold by Grantor to
Measurex upon exercise of the Option; and upon the delivery of such Option Stock
to Measurex hereunder, Measurex shall obtain good and valid title thereto free
and
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<PAGE>
clear of all liens, charges, pledges, security interests, options, claims or
other encumbrances.
(c) The execution, delivery and performance by Grantor of this
Agreement, and compliance by Grantor with the provisions hereof will not (i)
violate any provision of any current law, statute, rule or regulation applicable
to Grantor, or any ruling, writ, injunction, order or decree of any court,
administrative agency or other governmental body applicable to Grantor or (ii)
conflict with or result in a breach of any provisions or constitute (with due
notice or lapse of time or both) a default under any agreement, contract or
instrument to which Grantor is a party or by which Grantor or any of the Option
Stock is bound.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided in the Merger Agreement,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement: No Third-Party Beneficiary: Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
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<PAGE>
(f) Notices. All notices and other communications hereunder shall be
in writing and deemed given if delivered personally or by commercial delivery
service, sent by overnight courier, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following address (or at such other address for a party as
shall be specified by like notice):
If to Grantor to:
______________________
______________________
______________________
With a copy to:
______________________
______________________
______________________
If to Measurex to:
One Results Way
Cupertino, CA 95014
Attention: Executive Vice President and
President, Industrial Systems Division
Facsimile No.: (408) 864-7506
Telephone No.: (408) 255-1500
With a copy to:
Vice President and General Counsel
Facsimile No.: (408) 864-7580
Telephone No.: (408) 255-1500
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Measurex may assign this
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Agreement to a wholly owned subsidiary of Measurex. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Measurex, Grantor and Measurex shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have' for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Grantor and Measurex have caused this Agreement to be
signed as of the day and year first written above.
GRANTOR
-------------------------------
MEASUREX CORPORATION
By:____________________________
Name:__________________________
Title:_________________________
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<PAGE>
Annex A
-------
IRREVOCABLE PROXY
to Vote
DATA MEASUREMENT CORPORATION COMMON STOCK
The undersigned stockholder of Data Measurement Corporation, a Delaware
corporation ("DMC"), hereby irrevocably (to the full extent permitted by the
General Corporation Law of the State of Delaware (the "Law")), appoints the
members of the Board of Directors of Measurex Corporation, a Delaware
corporation ("Measurex"), and each of them, as the sole and exclusive attorneys
and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of DMC that now are or hereafter may be beneficially
owned or owned of record by the undersigned, and any and all other shares or
securities of DMC issued or issuable in respect thereof on or after the date
hereof (collectively, the "Stock") in accordance with the terms of this Proxy.
The Stock beneficially owned or owned of record by the undersigned stockholder
of DMC as of the date of this Proxy is listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior proxies given
by the undersigned with respect to such Stock are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the Stock
until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the extent permitted by the Law), is granted
pursuant to that certain Voting and Stock Option Agreement dated as of September
16, 1995, between Measurex and the undersigned stockholder of DMC (the "Voting
and Option Agreement"), and is granted in consideration of Measurex entering
into that certain Agreement and Plan of Reorganization dated as of September 16,
1995 (the "Merger Agreement"), among Measurex, Mx Acquisition Company and DMC.
The Merger Agreement provides for the merger (the Merger") of Merger Sub into
DMC, in accordance with the terms of the Merger Agreement. As used herein, the
term "Expiration Date" shall have the meaning set forth in Section 1(c) of the
Voting and Option Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Stock, and to
exercise all voting and other rights of the undersigned with respect to the
Stock (including, without limitation, the power to execute and deliver written
consents
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pursuant to the Law) at every annual, special or adjourned meeting of the
stockholders of DMC and in every written consent in lieu of such meeting: (a) in
favor of approval of the Merger Agreement and the Merger and any matter that
could reasonably be expected to facilitate the Merger, and (b) against approval
of any proposal made in opposition to or in competition with the consummation of
the Merger and the Merger Agreement, against any merger, consolidation, sale of
substantial assets, sale of shares of capital stock, reorganization,
recapitalization or similar transactions involving DMC or its subsidiaries, with
any party other than Measurex or one of its affiliates and against any
liquidation or winding up of DMC. The attorneys and proxies named above may not
exercise this Proxy on any other matter except as provided in clauses (a) and
(b) above. The undersigned stockholder may vote the Stock on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the successors
and assigns of the undersigned.
Dated: September 16, 1995 Signature of Grantor:_________________________
Name of Grantor:______________________________
Stock beneficially owned:
_________ shares of DMC Common Stock
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EXHIBIT B
---------
PHYSICAL INVENTORY
A physical count of DMC's and the DMC Subsidiaries' inventory, (the "DMC
Inventory") will be taken prior to the Closing Date in order to determine the
Additional Inventory Reserve as defined in this Exhibit. At the time of such
count inventory reserves will be established in the following manner. A reserve
will be established equal to the value of all items in the DMC Inventory (prior
to any reserves which may be reflected on the DMC Balance Sheet) which are
damaged to the point that they are not economically repairable or which are
obsolete (obsolete as it applies to an item in the DMC Inventory shall mean that
it could not reasonably be expected that such items could be used in a newly
manufactured product or as a part for service), (such items the "Damaged and
Obsolete Inventory," and the value of such reserve, the "Damaged and Obsolete
Inventory Reserve"). After the Damaged and Obsolete Inventory has been removed
from the DMC Inventory a reserve will be established equal to 50% of the value
of all items in remaining DMC Inventory (prior to any reserves which may be
reflected on the DMC Balance Sheet) which have had no use for the last twelve
months prior to the date of this Agreement, (such items the "Inactive
Inventory," and the value of such reserve the "Inactive Inventory Reserve").
After removing the Damaged and Obsolete Inventory and the Inactive Inventory
from the DMC Inventory a reserve will be established on the remaining DMC
Inventory items (such items the "Current Inventory" and the value of such
reserve the "Current Inventory Reserve") based upon the last twelve month's
usage of each item prior to the date of this Agreement or, for items introduced
into inventory for the first time within the last twelve months, the twelve
month forecasted usage for such recently introduced items, (the "Annual Usage").
For all items in the Current Inventory with quantities in excess of the Annual
Usage a reserve will be established equal to the sum of: 1) 25% of value of
such items in excess of the Annual Usage but less than twice the Annual Usage;
2) 50% of the value of such items in excess of two times the Annual Usage but
less than three times the Annual Usage; 3) 100% of the value of such items in
excess of three times the Annual Usage (all the above values prior to any
reserves which may be reflected on the DMC Balance Sheet). The sum of the
Damaged and Obsolete Inventory Reserve, the Inactive Inventory Reserve and the
Current Inventory Reserve less the inventory reserve as reported on the DMC
Balance Sheet shall equal to the Additional Inventory Reserve.
A-56
<PAGE>
Schedules
2.2 List of Subsidiaries
2.3(b) List of holders of unexercised options, exercise price and number of
shares
2.5(ii) Consents required under corporate instruments, material contracts or
laws
2.7(vii) List of all employees holding written Employment Agreements with the
Corporation
2.8 List and description of undisclosed liabilities
2.12 List of owned and leased real estate
2.13(b) List of intellectual property rights owned by the Corporation
2.13(e)(i) List of lawsuits involving claims of infringement of any
intellectual property rights by the Corporation
2.13(f) Description of procedures employed by the Corporation to safeguard
2.13(g) its intellectual property rights
2.15(a) Listing of variances from licensing requirements for radioactive
materials and x-ray sources
2.15(b) Investigations concerning possible violations respecting the use of
radioactive materials or X-ray sources
2.15(c) Disclosure re: ANSI standards respecting radioisotope source holders
2.16(ii) Disclosure of pending tax audits
2.31 Listing of advisory fees or charges incurred by Corporation with
respect to the Merger Agreement
The schedules described above have been omitted from this filing, but will be
provided to the Commission upon request.
A-57
<PAGE>
Appendix B
[LETTERHEAD OF FERRIS, BAKER WATTS, INCORPORATED APPEARS HERE]
November 15, 1995
The Board of Directors
Data Measurement Corporation
15884 Gaither Drive
Gaithersburg, MD 20847
Ladies and Gentlemen:
You have requested an opinion as to the fairness, from a financial point of
view, to the holders of the outstanding Common Stock of Data Measurement
Corporation (the "Company") of the proposed consideration offered by Measurex
Corporation ("Measurex") described in the Amended and Restated Agreement and
Plan of Reorganization dated as of September 16, 1995 between Measurex, MX
Acquisition Company and the Company (the "Agreement"). We were retained by the
Board of Directors of the Company to render an opinion and commenced out
investigation of the Company of September 8, 1995.
Pursuant to the Agreement, each shareholder of the Company will receive
$18.625 in cash for each share. The holders of the Company's options and
warrants will receive the difference between $18.625 and their per share
exercise price.
In connection with this opinion, we have reviewed, among other things, (i)
the Agreement, (ii) annual reports to shareholders and annual reports on Form
10-K of the Company for each of the five fiscal years ended December 31, 1994,
(iii) quarterly reports on Form 10-Q of the Company for the past five years, and
(iv) projected financial results for the years 1995 through 1999 which were
provided to us by management of the Company. We held discussions with the
members of the management of the Company regarding its past and current business
operations, financial condition and future prospects. We have reviewed the
reported price and trading activity for the shares of the Company; compared
certain financial and stock market information concerning the Company with
similar information for certain other measurement instrument companies, the
securities of which are publicly traded; reviewed and compared terms of this
transaction to the terms of recent industry combinations; and have performed
other such studies and analysis as we considered appropriate.
Currently, we make a market in the Company's common stock and we
periodically prepare research report on the Company. Ferris, Baker Watts,
Incorporated, its clients, its officers or its employees, in the normal course
of business, may have a position in the common stock of the Company.
<PAGE>
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information reviewed by us for purposes
of this opinion whether publicly available or provided to us by the Company, and
we have not assumed any responsibility for independent verification of such
information. We express no opinion as to the consideration to be received by
holders of shares who may perfect dissenters' statutory fair appraisal remedies.
Based upon the foregoing and based upon other such matters that we consider
relevant, it is our opinion that as of the date of this letter, the
consideration to be received by the stockholders of the Company pursuant to the
Agreement is fair from a financial point of view. Our opinion is based upon
economic, market and other conditions as in effect on, and the information made
available to us as of the date of this letter. Our opinion is directed to the
Board of Directors of the Company and does not constitute a recommendation to
any stockholder of the Company as to how the stockholder should vote at the
stockholder's meeting held in connection with the Agreement.
Very truly yours,
/s/ Ferris, Baker Watts
FERRIS, BAKER WATTS, INC.
B-2
<PAGE>
APPENDIX C
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER I. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Section 262 -- Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S) 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251, (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or
(S) 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title:
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger consolidation pursuant to (S)(S) 251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
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<PAGE>
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph: or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (S) 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
(S) 228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal rights
of the effective date of the merger or consolidation and that appraisal rights
are available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be sent
by certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the
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<PAGE>
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in the office of
the Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine
the stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted his certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings until it
is finally determined that his is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
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<PAGE>
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable stockholders of record at a date which
is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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<PAGE>
DATA MEASUREMENT CORPORATION
PROXY
Proxy for Special Meeting of Stockholders, December 15, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock acknowledges receipt of a copy of
the Notice of Special Meeting of Stockholders of Data Measurement Corporation
("Company") and the accompanying Proxy Statement dated _____________, 1995 and,
revoking any proxy heretofore given, hereby constitutes and appoints Dominique
Gignoux and Sam Clatworthy and each of them, with full power of substitution, as
attorneys and proxies to appear and vote all shares of Common Stock of the
Company standing in the name of the undersigned which the undersigned could vote
if personally present and acting at the Special Meeting of Stockholders of the
Company on December 15, 1995 at 10:00 a.m. EST, at the Company's Headquarters in
Gaithersburg, Maryland, and at any adjournments or postponements thereof, upon
the following items as set forth in the Notice of Special Meeting and Proxy
Statement and to vote according to their discretion on all other matters which
may be properly presented for action at the Special Meeting and any adjournments
or postponements thereof. All properly executed proxies will be voted as
indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF
REORGANIZATION AND THE MERGER. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED "FOR" THE APPROVAL OF
THE PLAN OF REORGANIZATION AND THE MERGER.
Whether or not you plan to attend this meeting, please sign and return this
proxy as promptly as possible in the enclosed post-paid envelope to American
Stock Transfer & Trust Company, 40 Wall Street--46th Floor, New York, New York
10005.
(To be Signed on Reverse Side)
================================================== Please mark your
votes as in this
X example.
==================================================
UNLESS OTHERWISE SPECIFIED,
THIS PROXY WILL BE VOTED
FOR THE FOLLOWING ITEMS:
FOR AGAINST ABSTAIN
1. Approval of the Plan ===== ========= =========
of Reorganization and
Merger. ===== ========= =========
FOR AGAINST ABSTAIN
2. In their discretion, ===== ========= =========
the Proxies are
authorized to vote upon ===== ========= =========
such other business as
may properly come
before the Special
Meeting, and any
adjournments or
postponements thereof.
We do __________ or do not _____________ expect to attend this Meeting.
NOTE: Please date and sign exactly as your name(s)
appear(s). When signing as an attorney, executor,
administrator, trustee, or guardian, please give full
title as such. If more than one trustee, all should
sign. All joint owners should sign. Only authorized
officers
