<PAGE>
SCHEDULE 14a
Poxy 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 the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PACIFIC SCIENTIFIC COMPANY
------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Comon Stock,
par value $1.00
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: 13,634,570
(includes 1,153,264 shares issuable upon exervcise of outstanding stock
options)
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $412,445,743
- --------------------------------------------------------------------------------
(5) Total fee paid: $82,490
/X/ Fee paid previously with preliminary materials.
/ / 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: $82,490
(2) Form, Schedule or Registration Statement No.: Schedule 14A-Preliminary
(3) Filing Party: Pacific Scientific Company
(4) Date Filed: February 12, 1998
<PAGE>
[LOGO]
February 26, 1998
Dear Pacific Scientific Stockholder:
You are cordially invited to attend the Special Meeting (the 'Special
Meeting') of Stockholders of Pacific Scientific Company (the 'Company') which
will be held at the Newport Center Conference Center, located at 610 Newport
Center Drive, Suite 130, Newport Beach, California on Friday, March 27, 1998 at
9:00 a.m. local time.
At the Special Meeting, holders of the Company's common stock, par value
$1.00 per share (the 'Shares') will be asked to consider and vote upon the
approval and adoption of an Agreement and Plan of Merger (the 'Merger
Agreement') and the merger (the 'Merger') of the Company with a subsidiary of
Danaher Corporation ('Danaher') contemplated thereby. If the Merger is
consummated, the Company will become a subsidiary of Danaher, and each Share
will be converted into the right to receive, without interest, $30.25 in cash
per share. Adoption of the Merger Agreement requires the affirmative vote of a
majority of the Shares entitled to vote at the Special Meeting.
THE SPECIAL MEETING WILL BE HELD ONLY IF DANAHER'S WHOLLY OWNED SUBSIDIARY
FAILS TO ACQUIRE AT LEAST 90% OF THE OUTSTANDING SHARES (INCLUDING THE
ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) IN ITS PENDING TENDER OFFER (THE
'OFFER') FOR THE SHARES. YOU HAVE ALREADY RECEIVED INFORMATION RELATING TO THE
OFFER, AND THE BOARD OF DIRECTORS ENCOURAGES YOU TO ACCEPT THE OFFER AND TENDER
YOUR SHARES. IF DANAHER'S SUBSIDIARY DOES ACQUIRE AT LEAST 90% OF THE
OUTSTANDING SHARES IN THE OFFER, NO SHAREHOLDER MEETING WILL BE REQUIRED UNDER
CALIFORNIA LAW TO APPROVE THE MERGER.
Regardless of whether the Special Meeting is held, shareholders (i) whose
Shares are not tendered, accepted for payment and paid pursuant to the terms of
the Offer; (ii) who do not vote in favor of the Merger Agreement and the Merger;
and (iii) who otherwise comply with the provisions of the California General
Corporation Law (the 'GCL') with respect to dissenters' rights of appraisal,
will be entitled to receive such consideration as may be determined under such
provisions.
Detailed information concerning the Merger is set forth in the accompanying
Proxy Statement. A copy of the Merger Agreement is included as Annex I to this
Proxy Statement. Provisions of the GCL relating to dissenters' rights of
appraisal are attached as Annex II to the Proxy Statement. In addition, the
opinion of BancAmerica Robertson Stephens, to the effect that, as of the date of
the Merger Agreement and subject to the assumptions made, matters considered and
limits set forth therein, that the consideration to be received by shareholders
of the Company pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view, is attached as Annex III to the Proxy Statement.
Shareholders are urged to read these materials carefully.
Whether or not you intend to attend the Special Meeting, you are requested
to complete, date, sign and promptly return your proxy card in the enclosed
envelope. If you attend the Special Meeting, you may vote in person even though
you have previously returned a proxy.
Please do not send in your share certificates at this time. If the Merger
is consummated, you will be sent a letter of transmittal for that purpose as
soon as reasonably practicable thereafter.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
On behalf of the Directors,
/s/ Lester Hill
---------------------
Chairman and Chief Executive Officer
<PAGE>
PACIFIC SCIENTIFIC COMPANY
620 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CALIFORNIA 92660
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 1998
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the 'Special
Meeting') of Pacific Scientific Company ('Pacific Scientific' or the
'Company')will be held at the Newport Center Conference Center, 610 Newport
Center Drive, Suite 130, Newport Beach, California, on Friday, March 27, 1998,
at 9:00 a.m., (local time) for the following purposes:
(1) To consider and act upon a proposal to approve and adopt the
Agreement and Plan of Merger (the 'Merger Agreement'), dated as of January
31, 1998, by and among the Company, DH Holdings Corp. ('Holdings'), a
Delaware corporation and a wholly owned subsidiary of Danaher Corporation,
a Delaware corporation ('Parent') and ACC Acquisition Corp., a California
corporation and an indirect wholly owned subsidiary of Parent (the
'Purchaser'), and the merger (the 'Merger') of the Purchaser with and into
the Company contemplated by the Merger Agreement.
(2) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
In the Merger, each share of the common stock, par value $1.00 per share (a
'Common Share'), of the Company (other than (i) any Common Shares held by
Holdings, the Purchaser, any wholly owned subsidiary of Holdings or the
Purchaser, in the treasury of the Company or by any wholly owned subsidiary of
the Company, which Common Shares, by virtue of the Merger and without any action
on the part of the holder thereof, shall be cancelled and retired and shall
cease to exist with no payment being made with respect thereto and (ii) any
Common Shares held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has perfected such holder's right to demand
cash payment for the fair market value of such holder's Shares in accordance
with Chapter 13 of the California General Corporation Law (the 'GCL')), shall be
canceled and retired and shall be converted into the right to receive $30.25 in
cash, payable to the holder thereof, without interest thereon, upon surrender of
the certificate formerly representing such Common Share. Holders of Common
Shares will have the right to exercise dissenters' appraisal rights under
applicable provisions of the GCL by following the procedures specified by the
GCL provisions attached as Appendix II to, and summarized under 'The
Merger--Stockholders' Appraisal Rights' in, the accompanying Proxy Statement.
Only shareholders of record at the close of business on February 25, 1998
will be entitled to notice of and to vote at the Special Meeting. All
shareholders of record are invited to attend the Special Meeting.
YOUR VOTE IS VERY IMPORTANT. THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE
AND MAIL THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE RETURN ENVELOPE
PROVIDED WHETHER OR NOT YOU HAVE PREVIOUSLY VOTED. This will not prevent you
from voting in person, should you so desire, but will help to secure a quorum
and avoid added solicitation costs. Your proxy may be revoked by you at any time
before it is voted.
By Order of the Board of Directors,
/s/ Lester Hill
--------------------------
Lester Hill
Chairman and Chief Executive Officer
Newport Beach, California
February 26, 1998
<PAGE>
PROXY STATEMENT OF PACIFIC SCIENTIFIC COMPANY
------------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FRIDAY, MARCH 27, 1998
------------------------
This Proxy Statement is being furnished by the Board of Directors of
Pacific Scientific Company, a California corporation ('Pacific Scientific' or
the 'Company'), to the holders of shares of common stock, par value $1.00 per
share, of the Company ('Common Shares' and, together with the associated
preferred share purchase rights, the 'Shares') in connection with the
solicitation of proxies by the Company's Board of Directors (the 'Company
Board') for use at a special meeting of shareholders to be held at the Newport
Center Conference Center, 610 Newport Center Drive, Suite 130, Newport Beach,
California, on Friday, March 27, 1998, at 9:00 a.m., (local time) (the 'Special
Meeting'). At the Special Meeting, shareholders of the Company will be asked to
(i) consider and act upon a proposal to approve and adopt the Agreement and Plan
of Merger (the 'Merger Agreement'), dated as of January 31, 1998, by and among
the Company, DH Holdings Corp. ('Holdings'), a Delaware corporation and a wholly
owned subsidiary of Danaher Corporation, a Delaware corporation ('Parent') and
ACC Acquisition Corp., a California corporation and an indirect wholly owned
subsidiary of Parent (the 'Purchaser'), and the merger (the 'Merger') of the
Purchaser with and into the Company contemplated by the Merger Agreement; and
(ii) transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
In accordance with California law and the Company's Bylaws, the Company
Board has fixed February 25, 1998 (the 'Record Date') as the date for
determining the shareholders of the Company entitled to receive notice of and to
vote at the Special Meeting. As of the Record Date, there were 12,508,868 Common
Shares issued and outstanding.
THE COMPANY BOARD HAS DETERMINED THE MERGER TO BE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER. See 'The Merger--
Background; Reasons for the Recommendation.' The Board of Directors of the
Purchaser, Holdings and Parent have approved and adopted the Merger, Agreement
and the Merger, and Holdings, as the sole stockholder of the Purchaser, has
approved and adopted the Merger Agreement and the Merger. Approval of the Merger
Agreement and the Merger by stockholders of Parent is not required.
This Proxy Statement is first being mailed to the Company's stockholders on
or about February 26, 1998.
------------------------
The date of this Proxy Statement is February 26, 1998
<PAGE>
SUMMARY
INTRODUCTION
This Proxy Statement is being furnished to holders of Common Shares in
connection with the Special Meeting. The Special Meeting will be held only if
the Purchaser fails to acquire at least 90% of the outstanding Common Shares
pursuant to the pending tender offer by Parent and the Purchaser for such Shares
(the 'Offer'). If the Purchaser acquires 90% of the outstanding Shares in the
Offer, the Merger contemplated by the Merger Agreement will, in accordance with
the provisions of the General Corporation Law of the State of California (the
'GCL'), be consummated without a shareholder vote, and the Special Meeting will
not be held.
For more information concerning the Offer and the Special Meeting, see 'The
Special Meeting-- Introduction.'
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held on Friday, March 27, 1998, at the Newport
Center Conference Center, 610 Newport Center Drive, Suite 130, Newport Beach,
California, at 9:00 a.m., local time. At The Special Meeting, Company
Stockholders will consider and vote upon a proposal to approve and adopt the
Merger Agreement and the Merger. See 'The Special Meeting.'
MERGER CONSIDERATION
In the Merger, each Share (other than (i) any Shares held by Holdings, the
Purchaser, any wholly owned subsidiary of Holdings or the Purchaser, in the
treasury of the Company or by any wholly owned subsidiary of the Company, which
Shares, by virtue of the Merger and without any action on the part of the holder
thereof, shall be canceled and retired and shall cease to exist with no payment
being made with respect thereto and (ii) any Dissenting Shares (as defined
herein)), shall be canceled and retired and shall be converted into the right to
receive $30.25 in cash (the 'Offer Price'), payable to the holder thereof,
without interest thereon, upon surrender of the certificate formerly
representing such Share.
RECORD DATE; REQUIRED VOTE
The close of business on February 25, 1998 has been fixed as the record
date (the 'Record Date') for determining the holder of Shares who are entitled
to notice of and to vote at the Special Meeting. Adoption of the Merger
Agreement and the Merger requires the affirmative vote of a majority of Shares
entitled to vote at the Special Meeting.
See 'The Special Meeting--Record Date; Shares Entitled Vote; Vote
Required.'
EFFECTIVE TIME AND CONDITIONS TO THE MERGER
The Merger will become effective when the Company files an appropriate
Agreement of Merger with an officer's certificate of each of Purchaser and the
Company, or (if the Company has acquired 90% of the Shares in the Offer) a
certificate of ownership, with the Secretary of State of California, and all
such others and further actions as may be required by law to make the Merger
effective have been taken (the 'Effective Time'). Consummation of the Merger is
subject to the satisfaction or waiver of certain conditions. See 'The Merger--
Merger Conditions.'
TERMINATION
Under certain circumstances, if the Merger Agreement is terminated; the
Company could be required to pay Holdings up to $15 million in termination fees
and an additional $2 million for reimbursement of expenses. See 'The
Merger--Termination' and '--Fees and Expenses.'
FINANCING
The Purchaser plans to obtain all funds needed for the Merger through a
capital contribution from Parent and Parent intends to obtain the funds for its
capital contribution through certain lines of credit. See 'The Merger--
Financing of the Merger.'
<PAGE>
BACKGROUND
On December 15, 1997, Kollmorgen Corporation ('Kollmorgen') commenced an
unsolicited tender offer for a majority of the Shares for $20.50 in cash (the
'Kollmorgen Tender Offer') and a second step merger (the 'Kollmorgen Merger') of
the Company into a Kollmorgen subsidiary in which the Company's stockholders
would receive, for each Share, Kollmorgen stock with a value of $20.50, subject
to certain conditions that could render the value of such stock less than or
greater than $20.50. During the period following commencement of the Kollmorgen
Tender Offer, the Board, together with the Company's management and its legal
and financial advisors, continued to evaluate the Company's strategic
alternatives and began to contact, on a confidential basis, third parties who
might have an interest in pursuing a transaction with the Company. On January
31, 1998, the Company entered into the Merger Agreement. For information with
respect to the background of the Merger Agreement and the Merger, see 'The
Merger--Background; Reasons for the Recommendation.'
RECOMMENDATION OF THE COMPANY BOARD
The Company Board has unanimously determined that the consideration to be
paid for each Share in the Offer and the Merger is fair to the stockholders of
the Company and that the Offer and the Merger are otherwise in the best
interests of the Company and its shareholders, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and recommends that all holders of Shares vote FOR approval and
adoption of the Merger Agreement and the Merger. For more information with
respect to the recommendation of the Company Board, see 'The
Merger--Recommendation of the Company Board' and '--Background Reasons for the
Recommendation.'
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
BancAmerica Roberston Stephens, the Company's financial advisors ('BARS'),
have delivered a written opinion to the Company Board, dated January 31, 1998,
to the effect that, as of such date, and based upon the assumptions made,
matters considered and limits of review set forth therein, the consideration to
be received pursuant to the Offer and the Merger by the holders of Shares, other
than Holdings, the Purchaser, any affiliates of Holdings or the Purchaser and
any holders of Dissenting Shares, is fair to such holders from a financial point
of view. For a detailed discussion of BARS' fairness opinion, see 'The
Merger--Opinion of the Company's Financial Advisor.' The full text of BARS'
fairness opinion is attached as Annex III hereto, and shareholders are urged to
read such opinion in its entirety.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For information concerning the federal income tax consequences of the
Merger to holders of Shares, see, 'The Merger--Certain Federal Income Tax
Considerations.'
INTERESTS OF CERTAIN PERSONS
Certain officers and directors of the Company may have interests in
connection with the Merger that are different from those of the Company's other
stockholders, and which could present potential conflicts of interests. See 'The
Merger--Interests of Certain Persons in the Merger.'
APPRAISAL RIGHTS
Regardless of whether the Special Meeting is held, shareholders (i) whose
Shares are not tendered, accepted for payment and paid pursuant to the terms of
the Offer; (ii) who do not vote in favor of the Merger Agreement and the Merger;
and (iii) who otherwise comply with the provisions of the GCL with respect to
dissenters' rights of appraisal, will be entitled to receive such consideration
as may be determined under such provisions. See 'The Merger--Appraisal Rights'
and Annex II.
ii
<PAGE>
THE SPECIAL MEETING
INTRODUCTION
This Proxy Statement is being furnished to the holders of Common Shares in
connection with the Special Meeting. The Special Meeting will be held only if
the Purchaser fails to acquire at least 90% of the outstanding Shares pursuant
to the Offer. If the Purchaser acquires 90% of the outstanding Shares in the
Offer, the Merger contemplated by the Merger Agreement will, in accordance with
the provisions of the GCL, be consummated without a shareholder vote, and the
Special Meeting will not be held. Shareholders are being mailed this Proxy
Statement at the present time so that, in the event that the Purchaser fails to
acquire 90% of the outstanding Shares in the Offer, the Special Meeting may be
held as promptly as possible.
The Merger Agreement contemplated a two-step transaction in which,
following consummation of the Offer, the Merger would occur. Under the GCL, if
the Purchaser acquired at least 90% of the outstanding Shares pursuant to the
Offer, the Merger could occur without a shareholder vote. The GCL also provides,
however, that the Merger may not be accomplished for cash paid to the remaining
shareholders of the Company if, following consummation of the Offer, the
Purchaser or its affiliates directly or indirectly own more than 50% but less
than 90% of the outstanding Shares, unless either all of the remaining
shareholders consent to the Merger or the Commissioner of Corporations of the
State of California approves, after a hearing, the terms and conditions of the
Merger and the fairness thereof.
Accordingly, the Merger Agreement provides that the Purchaser may not
consummate the Offer unless at least 90% of the outstanding Shares have been
tendered in the Offer and the Purchaser has accepted for payment and paid for
such Shares. If the foregoing condition is not met, the Merger Agreement
provides that the Offer will be terminated and that the Merger Agreement and the
Merger will be submitted to the Company's stockholders for approval at the
Special Meeting.
SPECIAL MEETING
This Proxy Statement is being furnished to Company shareholders in
connection with the solicitation by the Company Board of proxies for use at the
Special Meeting to be held on Friday, March 27, 1998, at the Newport Center
Conference Center, 610 Newport Center Drive, Suite 130, Newport Beach,
California, at 9:00 a.m., local time.
At the Special Meeting, Company stockholders will consider and vote upon a
proposal to approve and adopt the Merger Agreement and the Merger. See 'The
Merger Agreement.'
Holders of Common Shares will have the right to exercise dissenters'
appraisal rights under applicable provisions of the GCL by following the
procedures specified by the GCL provisions attached as Appendix II hereto and
summarized under 'The Merger--Appraisal Rights.'
THE COMPANY BOARD HAS DETERMINED THE MERGER TO BE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND
ADOPTED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE MERGER. See 'The
Merger--Background; Reasons for the Recommendation.' The Board of Directors of
the Purchaser and Holdings have approved and adopted the Merger Agreement and
the Merger and Holdings, as the sole stockholder of the Purchaser, has approved
and adopted the Merger Agreement and the Merger. Approval of the Merger
Agreement and the Merger by stockholders of Holdings is not required.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on February 25, 1998 has been fixed as the Record
Date for determining the holders of Common Shares who are entitled to notice of
and to vote at the Special Meeting. As of the Record Date, there were 12,508,868
Common Shares outstanding and entitled to vote. The presence in person or by
proxy of the holders of Common Shares representing a majority of the Common
Shares outstanding and entitled to vote is necessary to constitute a quorum for
the transaction of business at the Special Meeting. The affirmative vote of
Common Shares representing a majority of the Common Shares outstanding and
entitled to vote in person or represented by proxy at the Special Meeting is
required for approval and adoption of the Merger Agreement and
<PAGE>
the Merger. Each Common Share outstanding on the Record Date is entitled to one
vote on all matters to be voted on at the Special Meeting.
Abstentions and broker non-votes will have the practical effect of voting
against the approval and adoption of the Merger Agreement and the Merger since
they represent one less vote for such approval and adoption.
PROXIES; PROXY SOLICITATION
All Common Shares represented at the Special Meeting by properly executed
proxies received prior to or at the Special Meeting, and not revoked, will be
voted at the Special Meeting in accordance with the instructions thereon. IF NO
INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FOR THE ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER. The Company does not know of any matters other than as
described in the Notice of Special Meeting which are to come before the Special
Meeting. If any other matter or matters are properly presented for action at the
Special Meeting, the persons named in the enclosed form of proxy and acting
thereunder will have the discretion to vote on such matters in accordance with
their best judgment, unless such authorization is withheld.
A proxy given pursuant to this solicitation may be properly revoked by the
person giving it any time before it is voted. Proxies may be revoked by (i)
delivering to the Secretary of the Company at or before the Special Meeting a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same Shares and delivering it to
the Secretary of the Company at or before the Special Meeting, or (iii)
attending the Special Meeting and voting in person (although attendance at the
Special Meeting will not in and of itself constitute revocation of a proxy).
The cost of preparing, assembling and mailing this proxy material will be
borne by the Company. The Company may solicit proxies otherwise than by use of
the mail, in that certain officers and regular employees of the Company, without
additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies. The Company has retained MacKenzie Partners, Inc.
to assist in the solicitation of proxies in favor of the Merger at a customary
fee not expected to exceed $7,500, plus reimbursement of out-of-pocket expenses.
Such assistance may take the form of personal, telephone or written solicitation
or any combination thereof. The Company will also request persons, firms and
corporations holding Common Shares in their names, or in the names of their
nominees, which Common Shares are beneficially owned by others, to send the
proxy material to and obtain proxies from such beneficial owners and will
reimburse such record holders for their reasonable expenses in so doing.
2
<PAGE>
THE COMPANIES
DANAHER CORPORATION
Parent is a Delaware corporation which operates a variety of businesses
through two business segments: Tools and Components and Process/Environmental
Controls. The Tools and Components segment is one of the largest domestic
producers and distributors of general purpose mechanics' hand tools and
automotive specialty tools. Other products manufactured by this segment include
tool boxes and storage devices, diesel engine retarders, wheel service
equipment, drill chucks, custom designed headed tools and components, hardware
and components for the power generation and transmission industries, high
quality precision socket screws, fasteners, and high quality miniature precision
parts. The companies in the Process Environmental segment produce and sell
underground storage tank leak detection systems and temperature, level and
position sensing devices, power switches and controls, telecommunication line
products, power protection products, liquid flow measuring devices and
electronic and mechanical counting and controlling devices.
Approximately 39.4% of the outstanding common stock of Parent is
beneficially owned by Steven M. Rales and Mitchell P. Rales. The aggregate
holdings for Steven and Mitchell Rales include shares of Parent common stock
owned by Equity Group Holdings L.L.C. ('EGH') and Equity Group Holding II L.L.C.
('EGH II'), of which Steven and Mitchell Rales are the only members, along with
other shares of common stock of Parent which are owned directly or through the
Danaher Corporation 401(k) Plan by such individuals. Steven and Mitchell Rales
are directors and executive officers of Parent. EGH and EGH II are principally
engaged in the business of investing in the common stock of Parent. The offices
of Steven M. Rales, Mitchell P. Rales, EGH and EGH II are located at 1250 24th
Street, N.W., Suite 800, Washington, D.C. 20037.
DH HOLDINGS CORP. AND PURCHASER
Holdings, a Delaware corporation and a direct wholly owned subsidiary of
Parent, owns all outstanding shares of the Purchaser and is the holding company
for a majority of Parent's operating subsidiaries. The Purchaser is a newly
incorporated California corporation and a wholly owned subsidiary of Holdings
which to date has not conducted any business other than in connection with the
Offer and the Merger Agreement. None of Parent, Purchaser, Holdings, or their
affiliates own any securities of the Company.
The principal executive offices of Parent, the Purchaser and Holdings are
located at 1250 24th Street, N.W., Suite 800, Washington, D.C. 20037.
PACIFIC SCIENTIFIC COMPANY
The Company manufactures and sells the products of two segments--electrical
equipment and safety equipment. The electrical equipment segment produces:
electric motors and generators and related motion control devices such as
controllers and drivers, electronic instruments for particle measurement, and
electromechanical and electronic controls for use mainly by electric utilities,
including the controls for street and highway lighting. The safety equipment
segment produces: fire detection and suppression equipment, personnel safety
restraints, mechanical and electromechanical flight control components and
pyrotechnics. This segment also provides service for products already delivered
to customers. These products are used mainly in commercial and military aircraft
and vehicles, but are also used in a variety of other commercial and industrial
applications. The Company is a California corporation with its principal
executive offices located at 620 Newport Center Drive, Suite 700, Newport Beach,
California 92660. The telephone number at such address is (714) 720-1714.
THE MERGER
BACKGROUND; REASONS FOR THE RECOMMENDATION
On December 9, 1997, the Company received a written proposal from
Kollmorgen for a business combination between Kollmorgen and the Company in
which Kollmorgen proposed that the Company's shareholders would receive
consideration of $20.50 per share, half in cash and the balance in Kollmorgen
stock
3
<PAGE>
(without specifying the basis on which such stock would be valued), and related
matters. At a meeting of the Company Board on December 12, 1997, the Company
Board authorized Lester Hill, Chairman and Chief Executive Officer of the
Company, to inform Kollmorgen that the Company would respond to Kollmorgen's
proposal after having had the chance to fully consider the matter. On December
15, 1997, Kollmorgen commenced the Kollmorgen Tender Offer and the Kollmorgen
Merger of the Company into a Kollmorgen subsidiary in which the Company's
shareholders would receive, for each Share, Kollmorgen stock with a value of
$20.50, subject to certain conditions that could render the value of such stock
less than or greater than $20.50. Kollmorgen also filed with the Commission on
such date a Consent Solicitation Statement/Preliminary Prospectus (the
'Kollmorgen Solicitation') seeking consents from Company shareholders to call a
special meeting of the Company's shareholders for the purpose of, among other
things, removing all of the members of the Company Board and replacing them with
nominees selected by Kollmorgen. On December 15, 1997, the Company engaged BARS
as its investment banker.
On December 17 and 21, 1997, the Company Board met to consider the
Kollmorgen Tender Offer and related matters. At those meetings, the Company
Board considered the Company's business, financial condition, results of
operations, current business strategy and future prospects, recent and
historical market prices for the Shares, the terms of the Kollmorgen Tender
Offer and the Kollmorgen Merger, strategic and other potential alternatives to
the Kollmorgen Tender Offer and the Kollmorgen Merger, and other matters,
including information presented by the Company's management, BARS and the
Company's legal advisors. At its December 21st meeting, the Company Board
unanimously (i) determined to redeem the preferred share purchase rights then
issued and outstanding under the Company's then-existing preferred share
purchase rights plan and simultaneously adopted a new preferred share purchase
rights plan and declared a dividend distribution of new preferred share purchase
rights (the 'Rights') thereunder; (ii) declined to render the then-existing
rights or the Rights applicable to the Kollmorgen Tender Offer or the Kollmorgen
Merger; and (iii) declined to recommend the Kollmorgen Tender Offer or the
Kollmorgen Merger or to approve the Kollmorgen Merger. The Company Board also
unanimously recommended that shareholders decline to deliver consents to
Kollmorgen in connection with the Kollmorgen Solicitation. Thereafter, the
Company solicited revocations from its shareholders of consents given to
Kollmorgen pursuant to the Kollmorgen Solicitation.
During the period following commencement of the Kollmorgen Tender Offer,
the Board, together with the Company's management and its legal and financial
advisors, continued to evaluate the Company's strategic alternatives. A variety
of third parties contacted members of the Company's management and BARS to
express an interest in the possibility of pursuing a transaction with the
Company were the CompanyBoard to entertain such a possibility. As part of the
Board's evaluation process, BARS was directed to contact, on a confidential
basis, third parties who might have an interest in pursuing a transaction with
the Company. Beginning on January 5, 1998, BARS, on behalf of the Company,
arranged for more than 40 parties, including (on January 9, 1998) Parent, to
execute customary confidentiality agreements. These agreements, which were
substantially similar, included covenants on the part of such third parties to
maintain confidentiality of information such parties received regarding the
Company, as well as customary 'standstill' provisions pursuant to which the
parties agreed not to acquire or agree, offer, seek or propose to acquire
ownership of any of the Company's securities, assets or businesses, seek or
propose to influence management or control of the Company or enter into
arrangements with third parties to do any of the foregoing, unless requested to
do so by the Company Board. Thereafter, BARS began distributing confidential
information regarding the Company to each of the parties that had executed a
confidentiality agreement. During this period, management and members of the
Company Board consulted frequently with one another and with the Company's legal
and financial advisors concerning Kollmorgen's actions and developments in the
Company Board's evaluation process.
On January 8, 1998, Kollmorgen announced that it had received consents from
holders of in excess of 10% of the outstanding Common Shares to call a special
meeting. On January 12, 1998, the Company Board met and called a special meeting
for February 13, 1998 for the purpose of considering and acting upon
Kollmorgen's proposals to, among other things, remove the existing Company Board
from office and replace it with Kollmorgen nominees. At its January 12 meeting,
the Company Board unanimously resolved to recommend that the Company's
shareholders reject Kollmorgen's proposals, and thereafter circulated proxy
materials to the Company's shareholders urging shareholders to vote against
Kollmorgen's proposals at the February 13 meeting.
4
<PAGE>
During the period following BARS' distribution of confidential information
to third parties, BARS responded to questions and provided additional
information to various of the parties to which it previously had provided
information, in order to assist such parties in their review of the Company. The
Company, through BARS, also received oral preliminary indications of interest
from certain of these parties as to the price levels such parties would be
willing to consider in an acquisition transaction involving the Company. During
the week of January 11, 1998 and the beginning of the week of January 18, 1998,
some of the parties to whom BARS had been providing information, including
Parent, expressed a desire to perform more detailed due diligence on, and meet
with members of management of, the Company, with a view toward quickly reaching
an agreement to acquire the Company. During the week of January 18, 1998,
representatives of BARS and members of the Company's management met with
representatives of certain of the parties, including Parent, that had expressed
a serious interest in pursuing a transaction with the Company and provided such
parties with access to management and visits to Company facilities. On January
23, 1998, Gideon Argov, Chairman and Chief Executive Officer of Kollmorgen,
called Mr. Hill to request that representatives of Kollmorgen be permitted to
enter into discussions with the Company and to receive information from the
Company. Mr. Hill stated that it was not in the interest of the Company's
shareholders to agree to such a request unless and until Kollmorgen terminated
the Kollmorgen Tender Offer and the proposed Kollmorgen Merger and executed a
confidentiality agreement, with customary standstill provisions, on the same
basis as other parties had agreed to execute, so that Kollmorgen's participation
in the Company's exploration of strategic alternatives would be on an equal
footing with other parties. Mr. Argov stated that Kollmorgen would not agree to
such conditions.
Over the weekend of January 23 and during the week of January 25, 1998, the
Company's management and BARS continued to have discussions and due diligence
meetings with several parties. On January 28, 1998, the Company's counsel
delivered to attorneys to several parties a proposed form of merger agreement.
Beginning on January 30, 1998, the Company's legal advisors, with the assistance
of management and the Company's financial advisors, discussed and negotiated the
form of contract with such parties. Also on January 30, Kollmorgen increased the
cash and stock price of its unsolicited tender offer and merger to $23.75 per
share. Later in the day on January 30, BARS indicated to interested parties that
the Company Board was scheduled to meet on the next day to consider approving a
merger transaction and that such parties should make their best and final offer
in terms of price and contractual terms prior to such meeting.
On January 31, 1998, following continued discussions and negotiations, the
Company Board received the parties' final offers, each of which contemplated
all-cash tender offers followed by a cash merger. At the meeting of the Company
Board, the Company Board received the opinion of BARS, that as of such date, and
based on the assumptions made, matters considered and limits of review set forth
therein, the consideration to be received by the holders of the Shares, other
than Holdings, Purchaser, any affiliates of Holdings or Purchaser and any holder
of Dissenting Shares (the 'Holders'), in the Offer and the Merger is fair to the
Holders, from a financial point of view. After discussion and analysis, the
Company Board unanimously approved and adopted the Merger Agreement with
Holdings, which, at $30.25 per share, represented the highest cash price any
bidder offered. The Company Board also unanimously recommended that stockholders
accept the Offer and tender their shares pursuant thereto and vote in favor of
approval and adoption of the Merger Agreement and the Merger, to the extent
required by applicable law.
On February 2, 1998, Kollmorgen terminated the Kollmorgen Tender Offer. On
February 6, 1998, Parent and the Purchaser commenced the Offer.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares tender their shares pursuant to the
Offer and, if required, to vote their Shares in favor of approval and adoption
of the Merger Agreement and the Merger at the Special Meeting, the Board
considered a number of factors, including the following:
(i) the Company Board's familiarity with, and information provided by the
Company's management as to, the business, financial condition,
results of operations, current business strategy and future prospects
of the Company, the nature of the markets in which the Company
operates, the Company's position in such markets, the historical and
current market prices for the Common Shares, including the
information provided by BARS as to the Company's strategic and other
alternatives;
5
<PAGE>
(ii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash
tender offer followed by a merger for the same consideration and (y)
the fact that financing is not a condition to the Offer and the
Merger, thereby enabling stockholders to obtain cash for their shares
quickly if the Minimum Condition is met;
(iii) that the per share price contemplated by the Merger Agreement, at
$30.25, represented a significant premium to the price contemplated
by the Kollmorgen Tender Offer and to the trading prices of the
Common Shares prior to the announcement of the Kollmorgen Tender
Offer, and represented the highest cash price any potential acquiror
was willing to offer;
(iv) that, unlike the unsolicited Kollmorgen transaction, which
contemplated mixed cash/stock consideration, the Merger provided
certainty of value through its all-cash structure;
(v) the process engaged in by the Company's management and financial
advisors, which included discussions with a significant number of
potential acquirors, as a result of which the Company Board had what
it believed to be an accurate sense of the values that could be
achieved in a third party transaction;
(vi) that were the Company not to pursue execution of the Merger
Agreement, Kollmorgen had publicly stated that if Kollmorgen
succeeded in removing the Company Board at the special meeting called
for February 13, 1998 as a result of the Kollmorgen Solicitation,
Kollmorgen's nominees to the Company Board would pursue the
Kollmorgen transaction, which contemplated a price inferior to that
contemplated by the Merger Agreement;
(vii) the presentation of BARS at the January 31, 1998 Company Board
meeting and the opinion of BARS to the effect that, as of such date,
and based on the assumptions made, matters considered and limits of
review set forth therein, the consideration to be received by the
Holders, of Shares in the Offer and the Merger is fair to the
Holders, from a financial point of view (A COPY OF THE BARS OPINION
IS ATTACHED AS ANNEX III TO THIS PROXY STATEMENT AND IS INCORPORATED
HEREIN BY REFERENCE AND SHAREHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY);
(viii) that the Merger Agreement permits the Company to furnish nonpublic
information to, and to participate in negotiations with, any third
party that has submitted an unsolicited written acquisition proposal
to the Company, if the Company Board determines in good faith that
taking such action is necessary in the exercise of its fiduciary
obligations under applicable law; and
(ix) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay termination
fees to Parent and reimburse Parent for its actual expenses incurred
in connection with the transaction, and the Company Board's belief
that such fees and expense reimbursement provisions would not deter a
higher offer.
The foregoing discussion addresses the material information and factors
considered by the Company Board in its consideration of the Offer. In view of
the variety of factors and the amount of information considered, the Company
Board did not find it practicable to provide specific assessments of, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. The determination to recommend that shareholders
accept the Offer was made after consideration of all of the factors taken as a
whole. In addition, individual members of the Company Board may have given
different weights to different factors.
6
<PAGE>
RECOMMENDATION OF THE COMPANY BOARD
The Company Board has unanimously determined that the consideration to be
paid for each Share in the Offer and the Merger is fair to the stockholders of
the Company and that the Offer and the Merger are otherwise in the best
interests of the Company and its stockholders, has approved and adopted the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and recommends that all holders of Shares vote such shares FOR
approval and adoption of the Merger Agreement and the Merger.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
On December 15, 1997, the Company and BARS executed an engagement letter
(the 'Engagement Letter') pursuant to which BARS was formally engaged as a
financial advisor to Pacific Scientific with respect to the unsolicited tender
offer of Kollmorgen and other matters arising in connection therewith.
On January 31, 1998, at a meeting of the Company Board held to evaluate the
proposed Merger, BARS delivered to the Company Board its oral opinion, which
opinion was subsequently confirmed in a written opinion dated January 31, 1998
(the 'BARS Opinion'), that as of such date and based on the assumptions made,
matters considered and limits of review set forth therein, the consideration
(the 'Consideration') to be received by the Holders, in the Offer and the Merger
is fair to the Holders from a financial point of view. No limitations were
imposed by the Company Board on BARS with respect to the investigations made or
procedures followed by it in furnishing its opinion. The Consideration was
determined through negotiations between the Company Board and the Board of
Directors of Parent; although BARS did assist the Company Board in those
negotiations, it was not asked by, and did not recommend to, the Company that
any specific consideration constituted the appropriate consideration for the
Offer and the Merger. In furnishing its opinion, BARS was not engaged as an
agent or fiduciary of Pacific Scientific's shareholders or any other person.
THE FULL TEXT OF THE BARS OPINION, WHICH SETS FORTH, AMONG OTHER THINGS,
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED HERETO AS ANNEX III AND IS INCORPORATED HEREIN BY
REFERENCE. SHAREHOLDERS OF THE COMPANY ARE URGED TO READ THE BARS OPINION IN ITS
ENTIRETY. THE BARS OPINION WAS PROVIDED AT THE REQUEST OF AND FOR THE USE OF THE
COMPANY BOARD AND WAS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS IN THE OFFER AND THE
MERGER AND WAS NOT INTENDED TO BE AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY SHAREHOLDER OF PACIFIC SCIENTIFIC AS TO WHETHER SUCH SHAREHOLDER SHOULD
TENDER COMMON SHARES PURSUANT TO THE OFFER OR HOW ANY SHAREHOLDER SHOULD VOTE
UPON OR TAKE ANY OTHER ACTION WITH RESPECT TO THE OFFER OR THE MERGER. BARS DOES
NOT EXPRESS ANY OPINION REGARDING THE FUTURE VALUE OF THE SHARES, NOR DOES IT
EXPRESS ANY OPINION REGARDING THE FAIRNESS OF THE OFFER OR THE MERGER TO PARENT,
PURCHASER OR THEIR AFFILIATES. THE BARS OPINION DOES NOT ADDRESS THE RELATIVE
MERITS OF THE OFFER AND THE MERGER AND ANY OTHER TRANSACTIONS OR BUSINESS
STRATEGIES DISCUSSED BY THE COMPANY BOARD AS ALTERNATIVES TO THE MERGER
AGREEMENT OR THE UNDERLYING BUSINESS DECISION OF THE COMPANY BOARD TO PROCEED
WITH OR EFFECT THE OFFER AND THE MERGER. THE SUMMARY OF THE BARS OPINION SET
FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE BARS OPINION.
In connection with arriving at its opinion, BARS among other things, (i)
reviewed certain financial information furnished to it by Pacific Scientific,
including certain internal financial analyses, forecasts and projections
prepared by the management of Pacific Scientific; (ii) reviewed certain publicly
available information relating to Pacific Scientific; (iii) held discussions
with the management of Pacific Scientific concerning the businesses, past and
current operations, financial condition and future prospects of Pacific
Scientific; (iv) reviewed the Merger Agreement; (v) reviewed the share price and
trading history of the Common Shares; (vi) reviewed the valuations of publicly
traded companies that it deemed comparable to Pacific Scientific; (vii) compared
the financial terms of the Offer and the Merger with other transactions that it
deemed relevant; and (viii) made such other studies and inquiries, and reviewed
such other data, as it deemed relevant.
7
<PAGE>
In connection with rendering its opinion, BARS has assumed and relied upon,
without independent verification, the accuracy and completeness of all
information reviewed by it in connection with its engagement by Pacific
Scientific with respect to the Offer and the Merger and BARS has relied upon the
assurances of the management of Pacific Scientific that they are not aware of
any facts that would make such information inaccurate or misleading.
Furthermore, BARS did not obtain any independent evaluation or appraisal of any
of the properties, assets or liabilities (contingent or otherwise) of Pacific
Scientific, nor was it furnished with any such evaluation or appraisal. With
respect to the financial forecasts and projections (and the assumptions and
bases therefor) of Pacific Scientific which BARS has reviewed, upon the advice
of Pacific Scientific, BARS has assumed that such forecasts and projections were
reasonably prepared in good faith on the basis of reasonable assumptions and
reflect the best currently available estimates and judgments of the management
of Pacific Scientific as to the future financial performance of Pacific
Scientific, and BARS has further assumed that such forecasts and projections
will be realized in the amounts and in the time periods currently estimated by
the management of Pacific Scientific, BARS has assumed that the Offer and the
Merger will be consummated upon the terms set forth in the Merger Agreement
without material alteration thereof. BARS relied as to all legal matters
relevant to rendering its opinion on the advice of counsel.
The BARS Opinion was necessarily based on market, economic and other
conditions as in effect on, and information made available to BARS as of, the
date thereof. It should be understood that subsequent developments may affect
the conclusion expressed in the BARS Opinion and that BARS disclaims any
undertaking or obligation to advise any person of any change in any fact or
matter affecting the opinion which may come or be brought to its attention after
the date thereof.
Summary of the Analyses
The following is a summary of the material financial and comparative
analyses performed by BARS in connection with rendering the BARS Opinion:
Comparable Company Analysis. Using publicly available information,
BARS analyzed (the 'Comparable Company Analysis') , among other things, the
market values plus net debt (the 'Total Capitalization') and trading
multiples of Pacific Scientific and selected publicly traded companies
which were either (i) conglomerates which BARS deemed comparable to Pacific
Scientific (the 'Conglomerates'): A. O. Smith Corp., Aeroquip-Vickers Inc.,
American Precision Industries, Inc., Ametek Inc., Crane Co., Danaher
Corporation, Emerson Electric Co., Esterline Technologies Corporation,
Kuhlman Corporation and Sundstrand Corporation; or (ii) in certain industry
groups which BARS deemed comparable to the business segments in which
Pacific Scientific operates (the 'Comparable Industries'). The Comparable
Industries and related companies were (i) the motion control industry (the
'MC Industry'): Baldor Electric Company, Franklin Electric Co., Inc.,
Kollmorgen Corporation and Magnetek, Inc.; (ii) the analytical instruments
industry (the 'AI Industry'): Dionex Corporation, Hach Company, IDEXX
Laboratories Inc., Industrial Scientific Corp., Molecular Devices Corp.,
The Perkin-Elmer Corporation, Thermedics Inc., Thermo Instrument Systems
Inc., Thermo Optek Corporation, TSI Incorporated and Waters Corporation;
(iii) the outdoor lighting controls and electric power distribution
industry (the 'OLC Industry'): The Genlyte Group Incorporated, Hubbell
Incorporated, Scientific Technologies Inc. and Woodhead Industries Inc.;
(iv) the aviation components and parts manufacturing industry (the 'ACP
Industry'): BE Aerospace, Inc., CPI Aerostructures Inc., Cade Industries
Inc., Ducommun Incorporated and Whittaker Corporation; and (v) the
pyrotechnic and propellant devices and systems industry (the 'PPD
Industry'): Hi-Shear Technology Co., OEA Inc., Primex Technologies Inc.,
Safety Components International, Inc., Special Devices Incorporated and
Thiokol Corporation. BARS compared Total Capitalization values as multiples
of, among other things, latest twelve months ('LTM') earnings before
interest and taxes ('EBIT'); (ii) LTM earnings before interest, taxes,
depreciation and amortization ('EBITDA'), and (iii) LTM sales. BARS also
compared the stock trading price to net income multiples of Pacific
Scientific and each of the companies in the Comparable Industries and
Conglomerates groups. All
8
<PAGE>
multiples were based on closing stock prices as of January 29, 1998. This
analysis yielded the following multiple ranges and means (each of which is
a harmonic mean):
<TABLE>
<CAPTION>
TOTAL CAPITALIZATION TO
------------------------------------------------------------
LTM EBIT LTM EBITDA LTM SALES
------------------ ------------------ ------------------
GROUP MIN. MEAN MAX. MIN. MEAN MAX. MIN. MEAN MAX.
- --------------------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conglomerates................................ 7.1 x 11.4x 15.9x 5.0 x 8.4 x 11.8x 0.7 x 1.2 x 2.3 x
MC Industry.................................. 10.2 12.0 15.2 6.8 8.9 11.1 0.7 1.0 1.5
AI Industry.................................. 9.2 13.9 21.9 7.4 11.6 19.4 1.2 2.0 4.3
OLC Industry................................. 8.1 10.7 15.5 5.9 8.6 14.2 0.6 1.3 3.2
ACP Industry................................. 9.8 11.9 16.9 7.6 8.7 9.8 1.2 1.7 2.8
PPD Industry................................. 9.1 13.8 33.8 5.2 8.9 26.2 0.4 1.1 3.1
</TABLE>
<TABLE>
<CAPTION>
TRADING PRICE TO NET INCOME
------------------------------------------------------------
LTM NEXT YEAR 2ND YEAR
------------------ ------------------ ------------------
GROUP MIN. MEAN MAX. MIN. MEAN MAX. MIN. MEAN MAX.
- --------------------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conglomerates................................ 11.5x 18.2x 25.7x 10.9x 16.3x 23.8x 13.0x 13.2x 19.6x
MC Industry.................................. 17.9 19.0 21.1 13.3 16.1 18.4 9.8 11.5 14.0
AI Industry.................................. 14.4 18.4 27.0 13.6 18.3 25.5 12.3 15.1 20.6
OLC Industry................................. 13.4 17.6 25.0 14.6 16.8 19.7 13.0 13.0 13.0
ACP Industry................................. 16.9 20.1 25.9 8.5 12.5 17.4 11.9 11.9 11.9
PPD Industry................................. 15.7 20.8 43.3 9.9 13.3 16.3 11.0 11.9 12.9
</TABLE>
Utilizing this methodology, BARS derived estimated values of $16.52 to
$25.73 per fully diluted Common Share.
Acquisitions Analysis. Utilizing the same analysis as the Comparable
Company Analysis, but applying a control premium of 25%--40% to the values
derived in such analysis, BARS derived estimated values of $20.65 to $36.02 per
fully diluted Common Share.
Precedent Acquisition Analysis. Using publicly available information, BARS
analyzed the consideration offered plus net debt assumed (the 'Total
Consideration') and implied transaction value multiples paid or proposed to be
paid in selected transactions (i) involving conglomerates (none of which were
the Conglomerates) which BARS deemed comparable to Pacific Scientific and (ii)
in each of the Comparable Industries (collectively, the 'Comparable
Transactions'). The Comparable Transactions were: (i) comparable conglomerate
transactions: Imo Industries, Inc./Constellation Capital Partners LLC
(07/25/97), Core Industries, Inc./United Dominion Industries Ltd. (06/16/97),
Dynamics Corporation of America/CTS Corporation (05/12/96), Teledyne,
Inc./Allegheny Ludlum Corporation (04/02/96) and CBI Industries, Inc./Praxair,
Inc. (10/27/95); (ii) MC Industry transactions: Marathon Electric Manufacturing
Corp./Regal-Beloit Corporation (02/26/97), Electrical Engineering & Mfg. Co.
(Datron Incorporated)/Vickers Inc. (Trinova Corporation) (11/12/96), Stature
Electric Inc./Owosso Corporation (10/23/95), Reliance Electric Company/Rockwell
International Corporation. (10/20/94), Harowe Servo Controls Inc./American
Precision Industries Inc. (06/30/94), Powertec Industrial Corp./Pacific
Scientific Company (08/02/93) and Onan Corporation/Cummins Engine Company, Inc.
(06/11/92), (iii) AI Industry transactions: PerSeptive Biosystems Inc./The
Perkin-Elmer Corporation (08/25/97), Laboratory Products Group (Life Sciences
International PLC)/ThermoQuest Corp. (07/30/97), Neslab Instruments Inc. (Life
Sciences International PLC)/ThermoSpectra Corp. (07/15/97), Gatan International
Inc./Roper Industries Inc. (05/16/96), TA Instruments Inc./ Waters Corp.
(03/28/96), Andros Incorporated/Genstar Capital Partners II L.P. (02/15/96),
Semiconductor Systems Inc./FSI International Inc. (02/05/96), Met One
Inc./Pacific Scientific Company (01/30/96), Particle Measuring Systems
Inc./Fairey Group PLC (01/18/96), EJ Systems Inc./Aetrium Inc. (01/02/96), Data
Measurement Corp./Measurex Corporation (09/16/95), Megatest Corp./Teradyne Inc.
(09/06/95), J&W Scientific Inc. (Fisons PLC)/Investor Group (08/29/95), Orion
Laboratory (Analytics Technology Inc.)/Thermedics Inc. (Thermo Electron
Corporation) (07/20/95), EPRO Corp./Credence Systems Corp. (02/06/95) and Sci.
Instruments Div. (Fisons PLC)/Thermo Instrument Systems Inc. (02/02/95); (iv)
OLC Industry transactions: Ruud Lighting Inc./Advanced Lighting Technologies,
Inc. (09/18/97), Valmont Electric, Inc. (Valmont Industries, Inc.)/Chicago
Miniature Lamp (01/06/97), Amerace Corp. (Eagle Industries, Inc.)/Thomas & Betts
Corporation (11/02/95), American Electronic Components Inc./Echlin Inc.
(10/09/95) and Joslyn Corporation/Danaher Corporation (07/10/95); (v) ACP
Industry transactions: Aerocom Industries Inc./Unique Mobility Inc. (12/09/97),
Audio International Inc./DeCrane Aircraft Holdings Inc. (11/03/97), Kolar
Machine Inc./CPI Aerostructures Inc. (10/14/97), J.C. Carter Co. Inc./Argo-Tech
Corporation (09/27/97),
9
<PAGE>
Buderus Sell GMBH (Aircraft Div. of Buderus AG)/Britax International PLC
(06/16/97), Technical Products Group Inc./Lunn Industries Inc. (05/20/97),
Electrical Engineering & Mfg. Co. (Datron Incorporated)/Vickers Inc. (Trinova
Incorporated) (11/12/96), Aero-Design Technology Inc./MAG Aerospace Industries
Inc. (11/07/96), Pneumo Abex Corp. (Power Control Technologies)/Parker Hannifin
Corporation (01/15/96), Precision Aerotech Inc./Vernitron Corp. (12/18/96),
Burns Aerospace Corp. (Eagle Industries, Inc.)/BE Aerospace Inc. (11/27/95) and
Electronics Division--TransTechnology Corporation/Elecysis Inc. (08/22/95); and
(vi) PPD Industry transactions: AECI Explosives Ltd. (ICI)/AECI Ltd. (12/12/97),
Valentec International Corp./Safety Components International Inc. (05/28/97),
Morton Automotive Safety Products (Morton International)/Autoliv AB (09/30/96),
Phoenix Airbag GMBH/Safety Components International Inc. (05/10/96) and Astra
UPC Corp./Alliant Techsystems (06/21/93). BARS compared, among other things, the
Total Consideration in the Comparable Transactions as a multiple of LTM EBIT,
LTM EDITDA and projected sales and also compared the equity value represented by
the Comparable Transactions to LTM net income. This analysis yielded the
following multiple ranges and means (each of which is a harmonic mean):
<TABLE>
<CAPTION>
TOTAL TOTAL
EQUITY VALUE TO CONSIDERATION TO CONSIDERATION TO
LTM NET INCOME LTM EBIT LTM EBITDA
------------------ ------------------ ------------------
GROUP MIN. MEAN MAX. MIN. MEAN MAX. MIN. MEAN MAX.
- --------------------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conglomerates................................ 13.2x 18.7x 28.3x 10.9x 12.9x 18.0x 7.7 x 9.5 x 15.9x
MC Industry.................................. 13.7 17.9 29.2 8.9 10.2 13.6 7.2 8.1 10.0
AI Industry.................................. 7.7 11.6 30.0 5.0 8.4 24.1 4.6 7.0 18.2
OLC Industry................................. 25.7 28.7 34.9 8.2 12.9 16.2 10.9 13.4 22.8
ACP Industry................................. 3.6 6.6 12.7 5.5 9.1 20.0 3.2 5.9 13.4
PPD Industry................................. 11.4 12.8 14.7 5.6 7.2 9.9 3.8 5.1 7.7
</TABLE>
The comparison of Total Consideration to next twelve month sales yielded
for the conglomerate Comparable Transactions minimum, mean and maximum multiples
of 0.9x, 1.0x, and 1.1x, respectively. All multiples for the Comparable
Transactions were based on public information available at the time of the
announcement, without taking into account differing market and other conditions
during the period in which the Comparable Transactions occurred. Utilizing this
methodology, BARS derived estimated values of $17.17 to $24.98 per fully diluted
Common Share.
No company, transaction or business compared in the Comparable Company
Analysis, the Acquisition Analysis or the Precedent Transaction Analysis is
identical to Pacific Scientific or the Offer and the Merger. Accordingly, an
analysis of the results of the foregoing is not simply mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading and other values of the Comparable Companies or
Comparable Transactions to which they are being compared.
Discounted Cash Flow Analysis. BARS performed a discounted cash flow
analysis based on Pacific Scientific management's projected free cash flow of
Pacific Scientific for the fiscal years 1998 through 2002 using discount rates
ranging from 13% to 15%. BARS then added to the present value of the cash flows
the terminal value of Pacific Scientific in the fiscal year ending December 31,
2002, discounted back at the same discount rate. The terminal value was computed
by multiplying Pacific Scientific's projected EBITDA in fiscal year 2002 by
terminal multiples ranging from 5x to 6x. The range of terminal multiples
selected reflect BARS' judgment as to an appropriate range of multiples at the
end of the referenced period. Utilizing this methodology, BARS derived estimated
values of $28.09 to $35.44 per fully diluted Common Share.
After-Tax Breakup Value. BARS analyzed the value of the fully diluted
Common Shares in the event the various segments of Pacific Scientific were sold
separately. Utilizing the information derived from Acquisition Valuation of the
six business segments of Pacific Scientific (Automation Technology Group;
Instruments Group; Fisher Pierce; Electro Kinetics Division; Civil Aviation
Safety Systems; and Electro Dynamics Division), and applying it to the LTM
EBITDA of such segments before corporate overhead, BARS assumed $20.0 million in
liquidation expenses, a $173.0 million tax basis in the segments' assets and a
30.0% tax rate on gains on the disposition of the segments, to derive estimated
values of $25.04 to $34.68 per fully diluted Common Share.
While the foregoing summary describes all material analyses and factors
that BARS considered in rendering the BARS Opinion, it is not a comprehensive
description of all analyses and factors considered by BARS. The preparation of a
fairness opinion is a complex process that involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular
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circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. BARS believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete and misleading view of the evaluation process underlying
the BARS Opinion. Several analytical methodologies were employed and no one
method of analysis should be regarded as critical to the overall conclusion
reached by BARS. Each analytical technique has inherent strengths and
weaknesses, and the nature of the available information may further affect the
value of particular techniques. The conclusions reached by BARS are based on all
analyses and factors taken as a whole and also on the application of BARS' own
experience and judgment. Such conclusions may involve significant elements of
subjective judgment and qualitative analysis. BARS therefore gives no opinion as
to the value or merit standing alone of any one or more parts of the analysis it
performed. In performing its analyses, BARS considered general economic, market
and financial conditions and other matters, many of which are beyond the control
of Pacific Scientific. The analyses performed by BARS are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by such analyses. Accordingly, analyses
relating to the value of a business do not purport to be appraisals or to
reflect the prices at which the business actually may be sold in the future, and
such estimates are inherently subject to uncertainty. Furthermore, no opinion is
being expressed as to the prices at which Common Shares may trade at any future
time.
Pursuant to the Engagement Letter, the Company has agreed to pay BARS as
follows: (i) a retainer fee of $250,000, paid to BARS on acceptance of the
Engagement Letter; (ii) an advisory fee of $1 million (the 'Advisory Fee') of
which one-half would be payable on June 15, 1998 and one-half on December 15,
1998; (iii) a fee of $250,000 in respect of, and due upon, the provision of a
fairness opinion to the Company Board, and $100,000 in respect of any subsequent
fairness opinion provided in respect of an alternative transaction; (iv) if
during the term of BARS' engagement under the Engagement Letter, or within 18
months after the termination of BARS' engagement thereunder, a Sale Transaction
(as defined below) occurs, then Pacific Scientific shall pay to BARS a fee of
$1.5 million plus four percent (4%) of the aggregate transaction value (as
defined below) thereof in excess of the 'aggregate transaction value' implied by
a per share transaction price of $20.50 per fully diluted Common Share; (v) if
during the term of the engagement under the Engagement Letter, a Divestiture (as
defined below) occurs, other than one described in (iv) above, then Pacific
Scientific shall pay to BARS a fee equal to one and one-half percent (1.5%) of
the aggregate transaction value of each such transaction, subject (except in
limited circumstances) to a minimum fee of $500,000 per transaction. The
retainer fee and opinion fees will be credited against the second installment of
the advisory fee, and all of such fees will be credited against any Sale
Transaction fee. Following payment of a Sale Transaction fee, no future advisory
fees will be payable. If during the term of the engagement under the Engagement
Letter, or until 18 months after the date of termination of BARS' engagement
thereunder, in the event that a transaction other than a Sale Transaction or
Divestiture is completed, and Pacific Scientific retains an advisor or financing
agent in connection with such transaction, Pacific Scientific agrees to retain
BARS, or an affiliate of BARS, and will pay BARS or such affiliate a mutually
acceptable fee based on industry standards. A 'Sale Transaction' will be deemed
to occur in the event that, directly or indirectly, in one or a series of
related transactions, any merger involving a change in control of Pacific
Scientific is effected, any sale or transfer of all or substantially all of the
business, properties or assets of Pacific Scientific is completed, or there
shall occur an acquisition by a person or a 'group' of persons (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of
beneficial ownership of any class or capital stock of Pacific Scientific
constituting more than 50% of the outstanding shares of such class of capital
stock (or rights to acquire the same), by way of tender or exchange offer, open
market purchase, negotiated purchase or otherwise. 'Aggregate transaction value'
is defined to include, without limitation, all cash, security and notes paid by
the acquiring entity plus funded debt assumed, and in the case of consummation
of a Sale Transaction, shall be deemed for purposes of calculating such fee to
have acquired all of the equity of Pacific Scientific and assumed all of its
funded debt. A 'Divestiture' will be deemed to occur in the event that a
divestiture of one or more segments or businesses of Pacific Scientific, or an
acquisition of another entity by Pacific Scientific, is completed.
If the transactions subject to the Merger Agreement are consummated, BARS
will receive aggregate fees of $6.8 million, of which $600,000 has been paid to
date, including $100,000 paid in connection with the BARS Opinion.
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Pacific Scientific has also agreed to reimburse BARS for its reasonable
expenses (including, without limitation, professional and legal fees and
disbursements), up to $50,000, incurred in connection with its engagement with
respect to the services to be rendered by it, and to indemnify BARS and certain
related persons against certain liabilities in connection with its engagement,
including certain liabilities under the federal securities laws.
BARS was retained based on BARS' experience as a financial advisor in
connection with mergers and acquisitions and in securities valuations generally.
BARS is a nationally recognized investment banking firm. As part of its
investment banking business, BARS is frequently engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and other purposes. BARS may actively trade the equity securities of
Pacific Scientific for its own account and for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
FINANCING OF THE MERGER
The total amount of funds required by the Purchaser to purchase all of the
Shares pursuant to the Offer and the Merger, to repay outstanding indebtedness
of the Company and to pay related fees and expenses is approximately $460
million. The Purchaser plans to obtain all funds needed for the Offer and the
Merger through a capital contribution from Parent.
Parent intends to obtain the funds for its capital contribution through its
existing Credit Agreement, dated as of September 7, 1990, as amended, among
Parent and the banks listed therein (the 'Credit Facility'), and through a
committed credit line to be provided by the Bank of Nova Scotia (the 'Committed
Line'). The Credit Facility provides for revolving credit of up to $250 million
for general corporate purposes through September 30, 2001. At present, there is
no outstanding indebtedness under the Credit Facility. Loans under the Credit
Facility bear interest at one of the following rates, as selected by Parent on
the date of borrowing: (i) the Base Rate (as defined in the Credit Facility);
(ii) the Adjusted CD Rate (as defined in the Credit Facility); or (iii) the
Eurodollar Rate (as defined in the Credit Facility) plus, in the case of (ii)
and (iii), a margin ranging from 1/8 of one percent to 3/8 of one percent) based
on the leverage ratio of Parent at the end of the fiscal quarter most recently
then ended. As of the date hereof, the applicable margin would be 1/8 of one
percent, which margin is expected to increase to 1/4 of one percent based on the
pro forma capitalization of Parent after the Offer and the Merger. The effective
interest rate as of the date hereof would be approximately 6.0%. The Credit
Facility contains covenants and restrictions on the payment of dividends. The
members of the bank group providing the Credit Facility are Bankers Trust
Company, Bank of America Illinois, the First National Bank of Chicago, The Chase
Manhattan Bank (National Association), Bank of Nova Scotia, Industrial Bank of
Japan, Bank of Tokyo, NationsBank Corporation, Dresdner Bank Aktiengesellschaft,
The Fuji Bank, SunTrust Bank, The Northern Trust Company, Sumitomo Bank,
Wachovia Bank of Georgia, and Sanwa Bank. The Committed Line provides for credit
of up to $250 million through a date 364 days following execution of final
credit documentation, under substantially the same terms and conditions as the
Credit Facility.
The foregoing summary of the Credit Facility and the Committed Line is
qualified in its entirety by reference to the Credit Facility and the Committed
Line, which are filed as exhibits to Parent's and the Purchaser's Tender Offer
Statement on Schedule 14D-1 (the 'Schedule 14D-1').
Although no definitive plan or arrangement for repayment of borrowings
under the Credit Facility or Committed Line has been made, Parent anticipates
such borrowings will be repaid with internally generated funds (including, if
the Merger is accomplished, those of the Company) and from other sources which
may include the proceeds of future bank refinancings or the public or private
sale of debt or equity securities. No decision has been made concerning the
method Parent will use to repay the borrowings under the Credit Facility. Such
decision will be made based on Parent's review from time to time of the
advisability of particular actions, as well as prevailing interest rates,
financial and other economic conditions and such other factors as Parent may
deem appropriate.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements. The Company entered into an Employment Agreement
dated as of February 17, 1997 with Mr. Hill, (the 'Hill Employment Agreement').
The Hill Employment Agreement is for a term ending on December 31, 2000 (which
automatically extends for one additional year if notice is not given by Mr. Hill
or the Company to the other that such term shall not be so extended), unless
further extended or sooner terminated as provided therein. The compensation
payable to Mr. Hill thereunder consists of (i) $325,000 annually; (ii) a
performance bonus payable within ninety days after the end of the fiscal year of
the Company in an amount to be determined by the Company Board, which amount is
designed to equal 75% of Mr. Hill's then current base salary if targeted
performance is achieved; (iii) the grant of a nonstatutory stock option to
purchase 250,000 shares of Common Stock; and (iv) certain medical insurance and
other benefits, including a special supplemental retirement plan. On June 18,
1997, the Company Board authorized the Company to enter into certain employment
agreements (the 'Additional Employment Agreement' and, collectively with the
Hill Employment Agreement, the 'Employment Agreements') with David L.
Schlotterbeck and Winston E. Hickman, who are, respectively, President and
Senior Vice President and Chief Financial Officer of the Company.
The Additional Employment Agreements are for a term ending on December 31,
2000 (which automatically extends for one additional year if notice is not given
by the Company or the employee that such term shall not be extended), unless
further extended or sooner terminated as provided in such agreement. The
compensation payable to Mr. Schlotterbeck and Mr. Hickman is comprised of (i)
$260,000 annually and $186,000 annually, respectively; (ii) a performance bonus
payable within ninety days after the end of the fiscal year of the Company and
in an amount as determined by the Chief Executive Officer of the Company
pursuant to such Additional Employment Agreements, which amount is designed to
equal 50% and 35% respectively, of the executive's then current base salary if
targeted performance is achieved; (iii) the grant of a nonstatutory stock option
to purchase, with respect to Mr. Schlotterbeck, 150,000 Common Shares, and with
respect to Mr. Hickman, 50,000 Common Shares; and (iv) certain medical insurance
and other benefits.
Each of the Employment Agreements is terminable for (i) 'Cause,' as such
term is defined in such Agreements, (ii) death, (iii) disability, (iv) other
than for Cause, or (v) upon resignation for 'Good Reason,' as such term is
defined in such Employment Agreements. Upon termination for Cause, death or
disability, the executive is entitled to receive only the portion of salary that
has been earned up to the date of termination (including compensation for any
accrued and unused vacation, reimbursement for business expenses, applicable
life insurance proceeds, or applicable benefits) (the 'Minimum Payment'). Upon
termination for Good Reason, or other than for Cause, death or disability, the
executive shall receive the Minimum Payment and a severance payment of 24, 18
and 12 months of then-current salary of Messrs. Hill, Schlotterbeck and Hickman,
respectively, payable, at the option of the executive in either (i) a lump sum
within thirty days after the date of termination, or (ii) in semi-monthly
installments over the applicable period after the date of termination. Pursuant
to the Employment Agreements, upon termination within one year following a
Change of Control of the Company (as such term is defined below), or in the
event the Company, following a Change of Control of the Company, delivers notice
to the executive that it is not extending the term of such executive's
employment for one year, then the Company shall be obligated to pay the
executive the items enumerated in the preceding sentence.
In lieu of receiving 1997 bonuses which would normally be payable during
the first 90 days of 1998, the Company will pay Messrs. Hill, Schlotterbeck and
Hickman bonuses in 1998 in the amounts of $290,000, $245,000 and $85,000. To the
extent such amounts exceed the bonuses which would otherwise be payable in 1998,
such excess shall reduce future bonuses and/or severance payments otherwise
payable to such executives.
Stock Option Agreements. Pursuant to the Hill Employment Agreement, Mr.
Hill has entered into a Nonstatutory Stock Option Agreement with the Company
dated as of February 18, 1997 (the 'Hill Stock Option Agreement') pursuant to
which the Company granted to Mr. Hill an option (the 'Hill Option') to purchase
250,000 Common Shares (subject to adjustment in certain circumstances) at an
exercise price of $12.625 per share. The Hill Option is not intended to qualify
as an incentive stock option under the Internal Revenue Code of 1996, as amended
(the 'Code'), and was not issued under the Company's existing stock option plan.
The Hill Option becomes exercisable in cumulative increments of 50,000 shares on
February 18 in each of 1997, 1998, 1999, 2000 and 2001. The Hill Option expires
on February 18, 2007. Pursuant to the Employment Agreements as described above,
Mr. Schlotterbeck and Mr. Hickman have entered into Nonstatutory Stock Option
Agreements with the Company as of July 7, 1997 (together with the Hill Option
Agreement, the 'Stock Option
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Agreements'). Pursuant to the Stock Option Agreements the Company granted Mr.
Schlotterbeck and Mr. Hickman Options to purchase with respect to Mr.
Schlotterbeck up to 150,000 shares of Common Stock, and with respect to Mr.
Hickman, 50,000 Common Shares (subject to adjustments in certain circumstances),
at a price of $13.94 per share. The Options are not intended to qualify as
incentive stock options under the Code and were issued outside the Company Stock
Option Plan. The Options become exercisable in cumulative increments of, in the
case of Mr. Schlotterbeck, 37,000 shares, and in the case of Mr. Hickman, 12,500
shares, on each of July 7, 1998, July 7, 1999, July 7, 2000 and July 7, 2001.
The Options expire on July 7, 2007. Notwithstanding the foregoing, upon a Change
of Control of the Company, the Options automatically become fully exercisable as
to all shares subject thereto.
For the purposes of the Employment Agreements and the Stock Option
Agreements, 'Change of Control' of the Company shall be deemed to have occurred
if (i) the shareholders of the Company approve a definitive agreement to sell,
transfer, or otherwise dispose of all or substantially all of the Company's
assets and properties; (ii) any 'person' (as such term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the 'Exchange
Act')) is or becomes the 'beneficial owner' (as defined in Rule 13d-3 of the
Exchange Act, directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following shall not
constitute a 'Change in Control' of the Company: (a) any acquisition directly
from the Company (excluding any acquisition resulting from the exercise of a
conversion or exchange privilege in respect of outstanding convertible or
exchangeable securities); (b) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; (iii) the shareholders of the Company approve the
dissolution or liquidation of the Company; or (iv) the shareholders of the
Company approve a definitive agreement to merge or consolidate the Company with
or into another entity or entities, the result of which merger or consolidation
is that less than 50% of the outstanding voting securities of the surviving or
resulting entity are, or are to be, owned by holders of the Company's common
stock immediately prior to the merger. Either of the Offer or the Merger, if
consummated, would constitute a Change of Control for the foregoing purpose.
Severance Plan. On December 21, 1997, the Company adopted the 1997 Pacific
Scientific Company Change of Control Severance Plan (the 'Severance Plan') to
establish its severance policies and commitments in the change in control
context. The Severance Plan was adopted to guarantee severance benefits to key
employees in the event of their termination following a change of control. The
Severance Plan explicitly precludes any provision from taking effect to the
extent that it would prevent a business transaction from qualifying for pooling
of interests accounting. Similarly, the Severance Plan generally prohibits
payments that the Company believes will be subject to golden parachute tax
penalties or that would be nondeductible under the deduction limit on
nonperformance-based compensation under Section 162(m) of the Code. Although the
Company believes that the benefits provided to Messrs. Hill, Schlotterbeck and
Hickman will not constitute excess parachute payments, the Company has agreed to
indemnify such individuals from any taxes, penalties and costs in the event it
is ultimately determined that such benefits constitute excess parachute
payments.
Subject to the foregoing, the Severance Plan authorizes the Company's
Executive Committee to extend participation selectively to the Company's
corporate officers and corporate staff, to its group and division presidents, to
persons who directly report to division presidents, to other comparable
employees and to other key employees. The Company's Executive Committee has thus
far extended severance benefits to 51 individuals. Pursuant to those benefits,
in the event a 'change in control' occurs and a participant is terminated by the
Company (or its successor) without cause or resigns for 'good reason' (as
defined under the Severance Plan), within two years from the date of such event,
the individual would receive a lump sum severance benefit of from 12 to 130
weeks of salary and target bonus, depending on the individual's position (130
weeks in the case of Messrs. Hill, Schlotterbeck and Hickman and from 52 to 104
weeks in the case of other executive officers), and would receive group
insurance benefit continuation for an equivalent period. The severance benefits
provided to Messrs. Hill, Schlotterbeck and Hickman in their respective
Employment Agreements do not add to their benefits under the Severance Plan. In
no event, however, would participants receive less than one month of severance
for each year of service to the Company (subject to an 18 month cap).
For the purpose of the Severance Plan, a 'change of control' includes each
of the following: (i) consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of substantially all the assets of another entity, in
each case,
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unless, following such transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Common Shares and the Company's outstanding voting securities immediately prior
to such transaction beneficially own, directly or indirectly, more than 60%,
respectively, of the then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities, as the case may be, of
the surviving entity in such transaction in substantially the same proportions
as their ownership, immediately prior to such transaction of the
then-outstanding shares of common stock and then-outstanding voting securities,
as the case may be, (B) no individual, entity or group (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such transaction) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then-outstanding shares of common stock of the corporation
resulting from such transaction or the combined voting power of the outstanding
securities of such corporation except to the extent that such ownership existed
prior to such transaction, and (C) at least a majority of the members of the
Company Board resulting from such transaction were members of the Company Board
at the time of the execution of the initial agreement, or of the action of the
Company Board, providing for such transaction; (ii) the acquisition by any
individual, entity or group of 20% or more of either the outstanding Common
Shares or the combined voting power of the outstanding voting securities of the
Company (in either case other than acquisitions by the Company, directly from
the Company and by employee benefit plans of the Company or any entity
controlled thereby; (iii) individuals who, as of December 21, 1997, constitute
the Company Board (the 'Incumbent Board') cease for any reason to constituted at
least a majority of the Company Board (except that any individual becoming a
director subsequent to such date whose election, or nomination for election by
the shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest, including a contest for the removal of directors and certain
other contests); (iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; and (v) the Company Board adopts a
resolution to the effect that, for purposes of the Severance Plan, a change in
control has occurred. Either of the Offer or the Merger, if consummated, would
constitute a change of control for the foregoing purpose.
The Severance Plan will expire on December 31, 2002, unless terminated
sooner, which the Company can do prior to a change in control, other than in
anticipation of a change in control.
As of the date of this Proxy Statement, the Executive Committee of the
Company Board has designated each of the Company's executive officers, among
others, as participants in the Severance Plan.
Option Plan Amendments. On December 21, 1997, the Company amended its
existing stock option plans (and all outstanding options issued pursuant to
those plans) such that in the event of a change in control (within the meaning
of the Severance Plan), all outstanding options will be immediately exercisable
by the holder thereof as to all shares subject thereto, subject to the Severance
Plan's pooling and golden parachute limitations. See 'Certain Stock Ownership
Information' below for information respecting participation in such plan by
certain officers and directors of the Company. On the same date, the Company
entered into amendments to the Stock Option Agreements with Messrs. Hill,
Hickman and Schlotterbeck, respectively, providing for comparable amendments
giving them the benefit of such amendments to the extent such amendments are
more favorable than the existing provisions with respect to a change of control
of the Company.
Indemnification Agreements. On December 21, 1997, the Company Board
approved indemnification agreements between the Company and each of the
Company's directors and Messrs. Schlotterbeck and Hickman. The Company agreed to
indemnify and advance expenses to the individual indemnitees pursuant to terms
of the agreements and to the fullest extent permitted by law in effect on the
date of the agreement and to such greater extent as applicable law may from time
to time permit. In the event there is a change of control of the Company, the
indemnitees would be presumed to be entitled to indemnification under the
agreements if they submit a request for indemnification in accordance with the
agreement. The indemnitee's rights to be indemnified and to receive the
advancement of expenses as provided for in the agreements are not exclusive of
any other rights such persons may be entitled to under applicable law, the
Company's Articles of Incorporation or the Company Bylaws, any other agreement,
a vote of the shareholders, a resolution of the directors or otherwise.
Certain Stock Ownership Information. In addition to the information set
forth in elsewhere in this Proxy Statement or in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (including the schedules
thereto) dated February 6, 1998 and previously sent to the Company's
shareholders, which information
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is incorporated herein by reference, the following sets forth certain
information regarding securities of the Company owned beneficially or of record
by the Company's directors, executive officers and affiliates:
As of the date of this Statement, William T. Fejes, Senior Vice
President of the Company, is the holder of options to purchase (i) 800
Common Shares at an exercise price of $9.0625 per share which is fully
exercisable; (ii) 3,600 Common Shares at an exercise price of $13.8125 per
share which is exercisable as to 2,700 shares and becomes exercisable as to
the remaining shares in 1998; (iii) 5,000 Common Shares at an exercise
price of $16.75 which is exercisable as to 2,500 shares and becomes
exercisable as to an additional 1,250 shares in each of 1998 and 1999; and
(iv) 8,000 Common Shares at an exercise price of $20.875 per share which is
exercisable as to 2,000 shares and becomes exercisable as to an additional
2,000 shares in each of 1998, 1999 and 2000.
As of the date of this Statement, Steven Breitzka, a Vice President of
the Company, beneficially owns 2,484 Common Shares. Mr. Breitzka is also
the holder of options to purchase (i) 6,150 and 5,000 Common Shares at
exercise prices of $7.5625 and $9.0625 per share, respectively, each of
which is fully exercisable; (ii) 6,000 Common Shares at an exercise price
of $13.8125 per share which is exercisable as to 4,500 shares and becomes
exercisable as to the remaining shares in 1998; (iii) 4,000 Common Shares
at an exercise price of $16.75 per share which is exercisable as to 2,000
shares and becomes exercisable as to an additional 1,000 shares in each of
1998 and 1999; and (iv) 4,000 Common Shares at an exercise price of $20.875
per share which is exercisable as to 1,000 shares and becomes exercisable
as to an additional 1,000 shares in each of 1998, 1999 and 2000.
On May 29, 1997, each of the members of the Company Board (other than
Mr. Hill) was granted an option to purchase 3,000 Common Shares at an
exercise price of $13.00 which is fully exercisable, and on April 23, 1997
Messrs. Fejes and Breitzka, and Messrs. Richard Knoblock and Steven Yasbek,
Vice Presidents of the Company, were granted options to purchase 5,000,
8,000, 8,000 and 14,000 Common Shares, respectively, at an exercise price
of $11.75 per share, each of which becomes exercisable in four equal
increments in each of 1998, 1999, 2000 and 2001. On May 29, 1997, Messrs.
Fejes, Breitzka and Knoblock were granted options to purchase 3,000, 1,000
and 2,000 Common Shares, respectively, at an exercise price of $13.00 per
share, each of which becomes exercisable in four equal increments in each
of 1998, 1999, 2000 and 2001.
APPRAISAL RIGHTS
Record holders of Common Shares will have the right to dissent with respect
to the Merger and, subject to certain conditions, receive a cash payment equal
to the fair market of their shares under the GCL, but, except in the case of
shares which are restricted by the Company, or applicable law or regulation as
to transfer, only if demand for payment is made with respect to five percent or
more of the outstanding Common Shares. In order to perfect his or her
dissenter's rights, a record holder of Common Shares must (i) vote his or her
dissenting shares against the Merger, (ii) make written demand to purchase his
or her dissenting shares upon the Company not later than the date of the Special
Meeting, (iii) submit the stock certificates representing his or her dissenting
shares to the Company or its transfer agent, for notation that they represent
dissenting shares, within 30 days after the mailing by the Company to
shareholders who voted against the Merger of a notice stating that the Merger
Agreement has been approved and adopted by the shareholders (the 'Approval
Notice'), and (iv) file an action in court within six months after the date on
which notice stating that the Merger Agreement has been approved and adopted by
the shareholders is mailed to Pacific Scientific shareholders who voted against
the Merger Agreement, but only if the Company and the shareholder are unable to
reach agreement on the price to be paid for the dissenting shares, all as more
particularly described below. If demands for payment referred to in clause (ii)
above are not filed with respect to five percent or more of the outstanding
Common Shares, no shareholder of Pacific Scientific, other than a holder of
shares which are restricted by the Company, or applicable law or regulation as
to transfer, will have dissenters' rights, even if all of the above conditions
are otherwise satisfied.
Dissenters' rights cannot be validly exercised by persons other than the
record holders of Common Shares, regardless of the beneficial ownership thereof.
Persons who are beneficial owners of Common Shares but whose shares are held of
record by another person, such as a broker, a bank or a nominee, should instruct
the record holder to follow the procedure outlined below if they wish to dissent
from the Merger with respect to any or all of their shares.
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Under Sections 1300 to 1312 of the GCL, any shareholder of record of
Pacific Scientific who votes any and all of his or her shares against the Merger
and who intends to enforce his or her dissenter's rights must, on or before the
date of the Special Meeting, which is to be held on Friday, March 27, 1998,
submit to Pacific Scientific at its principal executive offices, 620 Newport
Center Drive, Suite 700, Newport Beach, California 92660 Attention: Corporate
Secretary or Pacific Scientific's transfer agent, ChaseMellon Shareholder
Services LLC, 400 South Hope Street, 4th Floor, Los Angeles, CA, 90071.
Attention: Corporate Secretary, a written demand that Pacific Scientific
purchase for cash some or all of his or her shares voted against the Merger,
which demand shall state the number and class of shares which he or she demands
that Pacific Scientific purchase and the amount which the shareholder claims to
be the fair market value of those shares as of January 30, 1998, the first
business day before the announcement of the terms of the proposed Merger,
excluding any appreciation or depreciation in consequence of the proposed
Merger.
Dissenters' rights may not be perfected with respect to any shares unless
such shares are voted against the Merger. A record shareholder may vote part of
the shares which he or she is entitled to vote in favor of or in abstention with
respect to the Merger without jeopardizing dissenter's rights as to shares voted
against the Merger, however, if a record shareholder votes part of the shares he
or she is entitled to vote in favor of the Merger and fails to specify the
number of shares he or she is voting in favor of the Merger, it is conclusively
presumed under the GCL that his or her approving vote is with respect to all
shares which he or she is entitled to vote. A vote to abstain will not
constitute a vote against the Merger for purposes of dissenters' rights.
Further, voting against the Merger will not of itself, absent compliance with
the provisions summarized herein, satisfy the requirements of the GCL for
exercise of dissenters' rights.
If any shareholder of Pacific Scientific has a right to require Pacific
Scientific to purchase his or her shares for cash under the provisions of the
GCL, the Company will mail to each such shareholder an Approval Notice within
ten (10) days after approval of the Merger, stating the price determined by
Pacific Scientific to represent the fair market value of the dissenting shares
and briefly describing the procedure to be followed if the shareholder desires
to exercise his or her dissenters' rights.
A dissenting shareholder must, within 30 days after the Company mails to
him or her the Approval Notice, submit to the Company or its transfer agent at
the addresses set forth above certificates representing the dissenting shares
which he or she demands that the Company purchase so that such certificates may
be stamped or endorsed with a statement that the shares are dissenting shares or
exchanged for certificates of appropriate denomination so stamped or endorsed.
The Approval Notice will specify the date by which the submission of
certificates for endorsement must be made to the Company and a submission made
after such date will not be effective for any purpose.
If the Company and a dissenting shareholder agree that the shares are
dissenting shares entitled to receive payment therefor and agree upon the price
of such shares, the Company, upon surrender of the certificates evidencing such
shares, will make payment of such amount (plus interest thereon from the date of
such agreement) within 30 days after such agreement. Any agreement fixing the
fair market value of any dissenting shares between a dissenting shareholder and
the Company shall be filed with the Secretary of the Company.
If the Company denies that the shares are dissenting shares entitled to
receive payment therefor, or the Company and the dissenting shareholder fail to
agree respecting the fair market value of the shares, the dissenting shareholder
may, within six months after the date on which the Approval Notice was mailed to
the shareholder, but not thereafter, file a complaint in the Superior Court of
the County of Los Angeles, State of California, requesting that the Court
determine whether the shares are dissenting shares and/or the fair market value
of such dissenting shares. The costs of the action will be assessed or
apportioned as the Court considers equitable, but, if the fair market value is
determined to exceed the price offered to the shareholder by the Company, the
Company will be required to pay the costs of the action and may be required to
pay counsel fees.
A dissenting shareholder may not withdraw his or her dissent or demand for
payment without the consent of the Company Board. The rights of dissenting
shareholders to demand payment terminate if, among other things, the Merger is
abandoned or if the shares are transferred prior to submission for endorsement
as dissenting shares.
The foregoing is a brief summary of the rights of dissenting shareholders,
does not purport to be a complete statement thereof and is qualified in its
entirety by reference to the applicable statutory provisions of the GCL which
are set forth in Annex II hereto.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.
The following is a summary of certain United States federal income tax
consequences of the Merger to beneficial owners of Shares whose Shares are
converted to cash in the Merger. The discussion is for general information only
and does not purport to consider all aspects of federal income taxation that
might be relevant to beneficial owners of Shares. The discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended (the
'Code'), existing regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change. The
discussion applies only to beneficial owners of Shares in whose hands Shares are
capital assets within the meaning of Section 1221 of the Code, and may not apply
to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to certain types of beneficial owners of Shares
(such as insurance companies, tax-exempt organizations and broker-dealers) who
may be subject to special rules. This discussion does not discuss the federal
income tax consequences to a beneficial owner of Shares who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF
SHARES SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Merger will be a taxable
transaction for federal income tax purposes, and may also be a taxable
transaction under applicable state, local, foreign income or other tax laws. In
general, for federal income tax purposes, a beneficial owner of Shares will
recognize capital gain or loss equal to the difference between the beneficial
owner's adjusted tax basis in the Shares converted to cash in the Merger and the
amount of cash received therefore. Gain or loss must be determined separately
for each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) converted to cash in the Merger.
Under recently enacted changes to the Code, net capital gain recognized by
individuals, estates and trusts from the sale of property held more than 18
months will generally be taxed at a maximum rate of 20% for federal income tax
purposes (or 10% if the capital gain would be taxed at only a 15% rate if it
were treated as ordinary income). Net capital gain from the sale of property
held for more than one year but not more than 18 months is taxed at a maximum
rate of 28%. There are limitations on the deductibility of capital losses.
Payments in connection with the Merger may be subject to 'backup
withholding' at a rate of 31%, unless a beneficial owner of Shares (i) is a
corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (ii) provides a correct TIN to the payor, and
otherwise complies with applicable requirements of the backup withholding rules.
A beneficial owner who does not provide a correct TIN may be subject to
penalties imposed by the IRS. Any amount paid as backup withholding does not
constitute an additional tax and will be creditable against the beneficial
owner's federal income tax liability. Each beneficial owner of Shares should
consult with his or her own tax advisor as to his or her qualification of
exemption from backup withholding and the procedure for obtaining such
exemption. Those who convert their Shares into cash in the Merger may prevent
backup withholding by completing a Substitute Form W-9 and submitting it to the
disbursing agent for the Merger.
The Company will be entitled to deduct and withhold from the consideration
otherwise payable pursuant to the Merger Agreement to any holder of Shares such
amounts as the Company is required to deduct and withhold with respect to the
making of such payment. To the extent that amounts are so withheld by the
Company, such withheld amounts shall be treated for all purposes of the Merger
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Company.
ACCOUNTING TREATMENT.
The Merger will be accounted for as a purchase for financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities of
Pacific Scientific will be recorded at their fair values at the Effective Time,
with the difference between such fair value and the value of the consideration
paid in the Merger allocated to goodwill.
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THE MERGER AGREEMENT
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW SETS FORTH THE
MATERIAL TERMS OF THE MERGER AGREEMENT, BUT SUCH DESCRIPTION DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY TO THE MERGER AGREEMENT, A COPY OF
WHICH IS ATTACHED AS APPENDIX I TO THIS PROXY STATEMENT AND IS INCORPORATED
HEREIN BY REFERENCE.
THE MERGER; EFFECTIVE TIME OF THE MERGER.
The Merger Agreement provides that, subject to the terms and conditions
thereof, and in accordance with California law, the Purchaser will be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of the Purchaser will cease and the Company will continue as the
Surviving Corporation. The time the Merger becomes effective is referred to as
the 'Effective Time.'
CONVERSION OF SHARES.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (other than Shares held by Holdings, the Purchaser, any
wholly owned subsidiary of Holdings or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company, which Shares, by
virtue of the Merger and without any action on the part of the holder thereof,
will be canceled and retired and will cease to exist with no payment being made
with respect thereto, and shareholders who perfect their dissenters' rights
under California law) will be converted into the right to receive in cash the
Offer Price. At the Effective Time, each issued and outstanding share of the
Purchaser will be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $1.00 per share, of the Company
continuing as the surviving Corporation (The 'Surviving Corporation').
Pursuant to the Merger Agreement, immediately following the Effective Time,
each holder of an outstanding Option granted under any stock option or similar
plan (each, a 'Stock Plan'), whether or not fully exercisable, will be entitled
to receive in settlement of such Option a cash payment from the Company equal to
the product of (i) the total number of Shares previously subject to such Option
and (ii) the excess of the Offer Price over the exercise price per Share subject
to such Option, subject to any required withholding of taxes.
DISSENTING SHARES.
If the Merger is consummated, Shares outstanding immediately prior to the
Effective Time and held by a shareholder who has not voted in favor of the
Merger and who has perfected such shareholder's right to demand cash payment for
the fair market value of such holder's Shares in accordance with Chapter 13 of
the GCL will not be converted into a right to receive the Offer Price, unless
such shareholder fails to perfect or withdraws or otherwise loses such
shareholder's right to a determination of the fair market value of such
shareholder's Shares under the GCL, in which case such Shares will be treated as
if they have been converted as of the Effective Time into a right to receive the
Offer Price. The Company has agreed to give Holdings prompt notice of any
dissenting shareholders and Holdings will have the right to participate in all
negotiations and proceedings with respect to such demands. See 'The
Merger--Appraisal Rights.'
BOARD REPRESENTATION.
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares representing at least such number of Shares as shall
satisify the Minimum Condition, and from time to time thereafter, Holdings shall
be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as is equal to the number of directors which
is the product of (a) the total number of directors on the Company Board (giving
effect to the directors elected pursuant to this sentence) multiplied by (b) the
percentage that the aggregate number of Shares beneficially owned by Holdings or
its affiliates bears to the total number of Shares then outstanding on a fully
diluted basis. Notwithstanding the foregoing, the Company, Holdings and the
Purchaser have agreed that, until the Effective Time, the Company Board shall
have at least two directors (the 'Independent Directors') who are not officers,
directors or designees of the Purchaser or any of its affiliates; provided,
however, that, in such event, if the number of Independent Directors shall be
reduced below two, the remaining Independent Director shall be entitled to
designate a person to fill such vacancy who shall not be an officer, director or
designee of the Purchaser or any of its affiliates and who shall be deemed to be
an Independent Director for purposes of the Merger Agreement.
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THE RIGHTS AGREEMENT.
The Company has distributed one Right for each outstanding Share pursuant
to the Rights Agreement. The Company has represented in the Merger Agreement
that it has taken all action which may be necessary under the Rights Agreement
and has, on January 31, 1998, amended the Rights Agreement, so that the
execution of the Merger Agreement, the making of the Offer, the acquisition of
Shares pursuant to the Offer and the consummation of the Merger will not cause
(i) any Rights issued pursuant to the Rights Agreement to become exercisable or
to separate from the stock certificates to which they are attached, (ii)
Holdings, the Purchaser, or any of their affiliates to become an Acquiring
Person (as defined in the Rights Agreement), or (iii) trigger other provisions
of the Rights Agreement, including giving rise to a Distribution Date (as
defined in the Rights Agreement).
REPRESENTATIONS AND WARRANTIES.
Pursuant to the Merger Agreement, the Company has made customary
representations and warranties to Holdings and the Purchaser with respect to,
among other things, its organization and subsidiaries, capitalization,
authority, the absence of violations, financial statements, public filings,
compliance with law, litigation, information in the proxy statement, employee
benefit plans, tax matters, intellectual property, contracts, the absence of any
material adverse effects on the Company since December 27, 1996, the Rights
Agreement and the opinion of its financial advisor. Holdings and the Purchaser
have made customary representations and warranties to the Company with respect
to, among other things, its organization, authority, the absence of violations,
information in the proxy statement and financing.
COVENANTS.
The Merger Agreement contains certain covenants of the Company, Holdings
and the Purchaser in contemplation of the Merger, including, without limitation,
access by Holdings and the Purchaser to information concerning the Company, use
of reasonable best efforts to consummate the Merger, use of reasonable best
efforts to obtain all consents necessary for the consummation of the Merger, and
notification of the other parties of certain matters.
CONDUCT OF BUSINESS OF THE COMPANY.
Pursuant to the Merger Agreement, the Company agreed that, except with the
prior written consent of Holdings, during the period from the date of the Merger
Agreement to the Effective Time, the Company and each of its subsidiaries will
conduct its operations according to its ordinary and usual course of business
and consistent with past practice and will use reasonable efforts to preserve
intact the business organization of the Company and each of its subsidiaries, to
keep available the services of its and their present officers and key employees,
and to preserve the good will of those having business relationships with it.
The Company has also agreed that except as (a) otherwise expressly provided in
the Merger Agreement, (b) required by law, (c) previously disclosed to Parent in
the Company's 1998 operating budget, or (d) set forth on the Company's
disclosure schedule, prior to the Effective Time, the Company and its
subsidiaries will not, without the prior written consent of Holdings:
(i) except with respect to annual bonuses made in the ordinary course
of business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, pension, retirement, employment or
other employee benefit agreement, trust, plan or other arrangement for the
benefit or welfare of any director, officer or employee of the Company or
any of its subsidiaries or increase in any manner the compensation or
fringe benefits of any director, officer or employee of the Company or any
of its subsidiaries or pay any benefit not required by any existing
agreement or place any assets in any trust for the benefit of any director,
officer or employee of the Company or any of its subsidiaries (in each
case, except with respect to employees, non-executive officers and
directors in the ordinary course of business consistent with past
practice);
(ii) incur any indebtedness for borrowed money (other than under
existing lines of credit) or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into any 'keep well'
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, or make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or indirect wholly owned subsidiary of the Company;
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(iii) expend funds for capital expenditures in excess of $4,000,000
per fiscal quarter, including amounts reflected in the Company's 1998
operating budget;
(iv) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets other
than immaterial properties or assets (or immaterial portions of properties
or assets), except in the ordinary course of business consistent with past
practice;
(v) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except (A) as
contemplated by the Rights Agreement, (B) for dividends paid by
subsidiaries to the Company with respect to capital stock and (C) for
regular quarterly dividends not to exceed $.03 per quarter), (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(vi) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock or
the capital stock of any of its subsidiaries, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or
any other securities or equity equivalents (including without limitation
stock appreciation rights) (other than issuances upon exercise of Options
outstanding on the date of the Merger Agreement pursuant to the Stock Plans
or the Rights Agreement);
(vii) amend its Restated Articles of Incorporation, By-Laws or
equivalent organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the Company;
(viii) make or agree to make any acquisition of assets which is
material to the Company and its subsidiaries, taken as a whole, except for
(x) purchases of inventory, supplies and material in the ordinary course of
business or (y) pursuant to purchase orders entered into in the ordinary
course of business which do not call for payments in excess of $1,000,000
per annum;
(ix) settle or compromise any shareholder derivative suits arising out
of the transactions contemplated by the Merger Agreement or any other
litigation (whether or not commenced prior to the date of the Merger
Agreement) or settle, pay or compromise any claims not required to be paid,
individually in an amount in excess of $1,000,000, other than in
consultation and cooperation with Holdings, and, with respect to any such
settlement, with the prior written consent of Holdings, which consent shall
not be unreasonably withheld;
(x) make any material tax election or settle or compromise any
material tax liability (whether with respect to amount or timing); or
(xi) except in the ordinary course of business, modify, amend or
terminate any material contract or waive or release or assign any material
rights or claims.
OPTIONS; STOCK PLANS.
Pursuant to the Merger Agreement, immediately following the Effective Time,
(a) each outstanding Option whether or not fully exercisable, to purchase Shares
granted under any Stock Plan will be entitled to receive in settlement of such
Option, a cash payment from the Company equal to the product of (i) the total
number of Shares previously subject to such Option and (ii) the excess of the
Offer Price over the exercise price per Common Share subject to such Option,
subject to any required withholding of taxes.
EMPLOYEE BENEFITS.
Holdings has agreed to cause the Surviving Corporation to honor the
employment, severance and bonus arrangements to which the Company is a party.
Holdings has also agreed that for a period of two years following the Effective
Time, the Surviving Corporation will provide employees of the Company and its
subsidiaries compensation and employee benefit and welfare plans which are not
materially less favorable in the aggregate to such employee than those generally
in effect on the date of the Merger Agreement with respect to similarly situated
employees of the Company.
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NO SOLICITATION.
Pursuant to the Merger Agreement, the Company has agreed that it will cause
its subsidiaries and its and their officers, directors, employees, investment
bankers, attorneys and other agents and representatives to, immediately cease
any existing discussions or negotiations with any person other than Holdings or
the Purchaser (a 'Third Party') with respect to any Acquisition Transaction (as
hereinafter defined). The Company has also agreed that it will not, and will
cause its subsidiaries and its and their officers, directors, employees,
investment bankers, attorneys and other agents and representatives not to,
directly or indirectly, (w) solicit, initiate, continue, facilitate or encourage
(including by way of furnishing or disclosing non-public information) any
inquiries, proposals or offers from any Third Party with respect to, or that
could reasonably be expected to lead to, any acquisition or purchase of a
material portion of the assets (other than in the ordinary course of business)
or business of, or any significant equity interest in (including by way of a
tender offer), or any merger, consolidation or business combination with, or any
recapitalization or restructuring, or any similar transaction involving, the
Company or any of its subsidiaries (the foregoing being referred to collectively
as an 'Acquisition Transaction') or (x) negotiate, explore or otherwise
communicate in any way with any Third Party with respect to any Acquisition
Transaction; or (y) enter into, approve or recommend any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the Offer and/or the Merger or any other transaction contemplated
thereby; or (z), withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to Holdings, the approval or recommendation by the Company's
Board of Directors of the Offer, the Merger or the Merger Agreement; provided,
however, that nothing in the Merger Agreement will prevent the Company Board
from taking, and disclosing to the Company's shareholders, a position
contemplated by Rules 14d-9 and l4e-2 promulgated under the Exchange Act with
respect to any tender offer. The Company has agreed to promptly notify Holdings
of the receipt of any proposal relating to an Acquisition Transaction.
Notwithstanding anything to the contrary in the foregoing, the Company may, in
response to an unsolicited written proposal with respect to an Acquisition
Transaction involving the acquisition of all of the Shares (or all or
substantially all of the assets of Company and its subsidiaries) from a Third
Party, (i) furnish or disclose non-public information to such Third party and
(ii) negotiate, explore or otherwise communicate with such Third Party, in each
case only if (a) after being advised by (x) its outside counsel with respect to
its fiduciary obligations and (y) its financial advisors with respect to the
financial terms of any such proposed Acquisition Transaction, the Company Board
determines in good faith by a majority vote that taking such action is necessary
in the exercise of its fiduciary obligations under applicable law (the proposal
with respect to an Acquisition Transaction meeting the requirements of this
clause (a), a 'Superior Proposal'), and (b) prior to furnishing or disclosing
any non-public information to, or entering into discussions or negotiations
with, such Third Party, the Company receives from such Third Party an executed
confidentiality agreement (which the Company is expressly permitted to negotiate
with such party) with terms no less favorable in the aggregate to Company than
those contained in the Confidentiality Agreement but which confidentiality
agreement shall not provide for any exclusive right to negotiate with the
Company or any payments by the Company and need not contain any 'stand-still' or
similar provisions. In addition, the Company's Board of Directors may approve or
recommend (and, in connection therewith withdraw or modify its approval or
recommendation of the Offer, the Merger Agreement or the Merger) a Superior
Proposal and may terminate the Merger Agreement solely to enter into a
definitive agreement with respect to a Superior Proposal; provided, however,
that Company may not, and will cause its affiliates not to, enter into a
definitive agreement with respect to a Superior Proposal unless the Company
concurrently terminates the Merger Agreement in accordance with the terms
thereof and pays any amounts required under the Merger Agreement, as described
under 'Fees and Expenses' below.
The Merger Agreement provides that the Company will promptly (but in any
event within one business day of Company becoming aware of same) advise Holdings
of the receipt by the Company, any of its subsidiaries or any of Company's
bankers, attorneys or other agents or representatives of any written inquires or
proposals relating to an Acquisition Transaction and any actions taken pursuant
to provisions of the Merger Agreement described in the immediately preceding
paragraph and the Company will promptly (but in any event within one business
day of the Company becoming aware of same) provide Parent with a copy of any
such written inquiry or proposal. The Company will keep Holdings reasonably
informed of the status and content of and material developments (including the
calling of meetings of the Company's Board of Directors to take action with
respect to such Acquisition Transaction) with respect to any discussions
regarding any Acquisition Transaction with a Third Party. The Company agrees
that it will not enter into any agreement with respect to a Superior Proposal
unless and until Holdings has been given notice of the identity of the parties
making such Superior Proposal, the material terms thereof and material
developments referred to in the preceding sentence at least two business days
prior to the entering into such agreement.
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INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
Pursuant to the Merger Agreement, from and after the Effective Time,
Holdings has agreed, and will cause the Surviving Corporation to, indemnify the
present and former officers, directors, employees and agents of the Company and
its subsidiaries (the 'Indemnified Parties') against all losses, claims,
damages, expenses or liabilities arising out of or related to actions or alleged
actions or omissions occurring at or prior to the Effective Time to the full
extent permitted under California law or, if greater, in the Company's Restated
Articles of Incorporation and By-Laws and agreements (including indemnification
agreements to which directors or officers of the Company or its subsidiaries are
parties) between the Company or one of its subsidiaries and such employee, in
effect on the date of the Merger Agreement and identified to Purchaser by the
Company (to the extent consistent with applicable law), which provisions and
agreements will survive the Merger and continue in full force and effect. If
such Indemnified Party becomes involved in any action or proceeding, Holdings
has agreed to advance reasonable legal and other expenses as incurred by an
Indemnified Party, provided, however, Holdings will not, in connection with one
action or separate but substantially similar actions arising out of the same
general allegations, be liable for fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) at any time for all
Indemnified Parties, except in certain circumstances. Parent will be entitled to
participate in the defense of any such action or proceeding. In addition,
pursuant to the Merger Agreement, Holdings has agreed to maintain the current
policies for officers and director liability insurance for not less than six
years from the Effective Time.
MERGER CONDITIONS.
In the event the Offer is consummated, the obligations of the parties to
consummate the Merger would be subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (i) the shareholders of the
Company having duly approved the transactions contemplated by the Merger
Agreement, if required by applicable law or the Restated Certificate of
Incorporation of the Company; (ii) no statute, rule, regulation, executive
order, decree or injunction having been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or other governmental entity
which prohibits the consummation of the Merger; provided, however, that the
Company, Holdings and the Purchaser will use their reasonable best efforts to
have any such order, decree or injunction vacated; or (iv) any waiting period
(any extension thereof) under the HSR Act applicable to the Merger having
expired or terminated.
If the Offer has not been consummated, the obligations of Holdings to
consummate the Merger pursuant to a one-step transaction are subject to the
satisfaction, at or before the Effective Time, of the conditions described in
the immediately preceding paragraph and the following additional conditions: (i)
the representations and warranties of the Company set forth in the Merger
Agreement being true and correct in all respects in each case as of the date of
the Merger Agreement and as of the closing date of the Merger (the 'Closing
Date') as though made on and as of the Closing Date; provided, however, that,
with respect to representations and warranties other than those with respect to
the Company's capitalization and subsidiaries and the Company's authority to
enter in the Merger Agreement and the transactions contemplated thereby and
representations and warranties otherwise qualified by material adverse effect,
such representations and warranties and statements will be deemed to be true and
correct in all respects unless the failure or failures of such representations
and warranties and statements to be so true and correct, individually or in the
aggregate would result in a material adverse effect on the Company; (ii) the
Company having performed the obligations required to be performed by it under
the Merger Agreement at or prior to the Closing Date, except for such failures
to perform as have not had or would not, individually or in the aggregate, have
a material adverse effect on the Company or materially adversely affect the
ability of the Company to consummate the transactions contemplated by the Merger
Agreement; and (iii) Holdings having received evidence, in form and substance
reasonably satisfactory to it, that all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and other
third parties relating to the Merger have been obtained.
If the Offer has not been consummated, the obligations of the Company to
effect the Merger pursuant to a one-step transaction are subject to the
satisfaction, at or before the Effective Time, of the conditions in the first
paragraph of this subsection and the following additional conditions: (i) the
representations and warranties of Holdings and the Purchaser set forth in the
Merger Agreement being true and correct in all respects in each case as of the
date of the Merger Agreement and as of the Closing Date as though made on and as
of the Closing Date; provided, however, that, with respect to representations
and warranties other than those with respect to Holdings'
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and the Purchaser's authority to enter into the Merger Agreement and the
transactions contemplated thereby, and representations and warranties otherwise
qualified by material adverse effect on Holdings, such representations and
warranties will be deemed to be true and correct in all respects unless the
failure or failures of such representations and warranties and statements to be
so true and correct, individually or in the aggregate would result in a material
adverse effect on Holdings; and (ii) each of Holdings and the Purchaser having
performed the obligations required to be performed by it under the Merger
Agreement at or prior to the Closing Date, except for such failures to perform
as have not had or would not reasonably be expected individually or in the
aggregate, to have a material adverse effect on Holdings or adversely affect the
ability of Holdings or the Purchaser to consummate the transactions contemplated
by the Merger Agreement.
TERMINATION.
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether or not approval thereof by the
shareholders has been obtained:
(a) by the mutual written consent of Parent and the Company, by action
of their respective Board of Directors;
(b) by the Company if the Company is not in material breach of any of
its representations, warranties, covenants or agreements contained in the
Merger Agreement and if (i) Holdings or the Purchaser fails to commence the
Offer, or (ii) (x) at or any time following the initial Expiration Date as
it may be extended pursuant to the terms of the Merger Agreement, the
Minimum Condition shall have been satisfied and all other conditions to the
Offer shall have been satisfied or waived in accordance with the terms
hereof and (y) Holdings or the Purchaser shall not have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the
terms of the Merger Agreement;
(c) by Parent or the Company if the Merger shall not have been
consummated on or before June 30, 1998; provided, however, that neither
Holdings nor the Company may terminate the Merger Agreement as described in
this clause (c) if such party shall have materially breached the Merger
Agreement; and provided, further, that Holdings may not terminate the
Merger Agreement as described in this clause (c) if the Offer shall have
theretofore been consummated;
(d) by Holdings or the Company if any court of competent jurisdiction
in the United States or other United States governmental entity has issued
an order, decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided, however, that
the party seeking to terminate the Merger Agreement shall have used its
reasonable best efforts to remove or lift such order, decree, ruling or
other action;
(e) by the Company if, prior to the acceptance for payment of Shares
pursuant to the Offer, (i) there shall have occurred, on the part of
Holdings or Purchaser, a material breach of any representation or warranty,
covenant or agreement contained in the Merger Agreement which is not
curable or (ii) the Company (A) to the extent permitted by the provisions
of the Merger Agreement described under 'No Solicitation' above, enters
into a definitive agreement with respect to a Superior Proposal and (B)
concurrently pays any termination fee and agrees to pay any other amounts
required under the Merger Agreement, as described under 'Fees and Expenses'
below;
(f) by Parent if the Company breaches its covenant not to amend the
Rights Agreement or redeem the Rights, provided, however, that such breach
occurs prior to the time that designees of Holdings constitute a majority
of the Company's Board of Directors; or
(g) by Holdings, prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have occurred, on the part of the Company, a
breach of any representation, warranty, covenant or agreement contained in
the Merger Agreement which (except in the case of a breach of certain of
the representations and warranties) individually or in the aggregate if not
cured would be reasonably likely to have a material adverse effect on the
Company and which is not curable or (ii) the Company Board shall have
withdrawn or modified (including by amendment of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9) in a manner
adverse to the Purchaser its approval or recommendation of the Offer, the
Merger Agreement or the Merger, shall have approved or recommended a
Superior Proposal, or shall have resolved to effect any of the foregoing.
24
<PAGE>
FEES AND EXPENSES.
The Merger Agreement provides that whether or not the Merger is
consummated, except as otherwise provided below, all costs and expenses incurred
in connection with the Offer, the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses.
In the event the Merger Agreement is terminated as described in clause
(e)(ii), (f) or (g)(ii) under 'Termination' above, then the Company will
promptly pay the documented fees and expenses of Holdings and the Purchaser
related to the Merger Agreement, the transactions contemplated thereby and any
related financing (subject to a maximum of $2.0 million) and in the event the
Merger Agreement is terminated as described in clause (e)(ii) or (g)(ii) under
'Termination' above, then the Company will promptly pay Holdings a termination
fee of $15 million (the 'Termination Fee'); provided that in no event shall more
than one Termination Fee be paid by the Company.
The Merger Agreement also provides that in the event that (i) any person
shall have publicly disclosed a proposal regarding an Acquisition Transaction
and (ii) following such disclosure (and provided that neither Holdings nor the
Purchaser is in any material breach of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement), either (x) June 30,
1998 occurs without the Minimum Condition being satisfied (other than as a
result of a material breach thereof by Holding or the Purchaser that has not
been cured) or the requisite shareholder approval of the Merger being obtained
or (y) if the Merger Agreement is terminated as described in clause (f) or
(g)(ii) under 'Termination' above, and (iii) not later than six months after any
such termination the Company shall have entered into an agreement for an
Acquisition Transaction, or an Acquisition Transaction shall have been
consummated, then the Company will promptly, but in no event later than
immediately prior to, and as a condition of, entering into such definitive
agreement, or, if there is no such definitive agreement then immediately upon
consummation of the Acquisition Transaction, pay Parent a Termination Fee of $15
million.
EXTENSION; WAIVER.
Subject to the terms of the Merger Agreement, at any time prior to the
Effective Time, the parties may (i) extend the time for the performance of any
of the obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties contained in the Merger Agreement or in any
other document delivered pursuant to the Merger Agreement by the other, or (iii)
waive compliance by the other with any of the agreements or conditions.
PRICE RANGE OF SHARES; DIVIDENDS
The Shares trade on the NYSE under the symbol 'PSX.' The following table
sets forth, for the fiscal quarters indicated, the high and low sales price per
Share on the NYSE, as well as dividends paid. All prices set forth below are as
reported in published financial sources:
<TABLE>
<CAPTION>
MARKET PRICE
------------------
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter........................................................ $24.875 $18.750 $ .03
Second Quarter....................................................... 22.375 15.250 .03
Third Quarter........................................................ 16.500 11.000 .03
Fourth Quarter....................................................... 12.750 10.250 .03
YEAR ENDED DECEMBER 31, 1997:
First Quarter........................................................ $14.000 $11.125 $ .03
Second Quarter....................................................... 14.625 11.125 .03
Third Quarter........................................................ 17.875 13.250 .03
Fourth Quarter....................................................... 17.375 13.500 .03
YEAR ENDED DECEMBER 31, 1998:
First Quarter (through February 25, 1998)............................ $30.062 $30.062 --
</TABLE>
On January 30, 1998, the last full trading day prior to the announcement of
the terms of the Merger Agreement, the reported closing sales price per Share on
the NYSE was $25.125. On February 5, 1998, the last full trading day prior to
the commencement of the Offer, the reported closing sales price per Share on the
NYSE was $29.938. On February 25, the last full trading day prior to the mailing
of this Proxy Statement, the reported
25
<PAGE>
closing sales price per share on the NYSE was $30.062 SHAREHOLDERS ARE URGED TO
OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 6, 1998 regarding
the beneficial ownership of the Company's Common Stock by each person known to
the Company to beneficially own more than five percent (5%) of the Common Stock
and by the Company's directors, the named executive officers and by all
directors and executive officers as a group, together with the percentage of the
outstanding Common Shares which such ownership represents. Unless otherwise
indicated, the beneficial ownership consists of sole voting and investment power
with respect to the shares indicated, except to the extent that authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
- ------------------------------------- -------------------------- ----------
<S> <C> <C>
Walter F. Beran...................... 6,000 *
Ralph O. Briscoe..................... 20,000 *
Lester Hill.......................... 100,000 *
Ralph D. Ketchum..................... 11,500 *
William A. Preston................... 13,000 *
Millard H. Pryor, Jr................. 7,000 *
David L. Schlotterbeck............... -- *
Richard V. Plat...................... 264,778 2.1%
William R. Fejes..................... 10,000 *
Richard G. Knoblock.................. 18,300 *
Edgar S. Brower(3)................... 116,000 *
Mellon Bank Corporation(4) .......... 648,994 5.2%
One Mellon Bank Center
Pittsburgh, PA 15258
Dimensional Fund Advisors Inc.(5) ... 750,700 6.1%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
Mario J. Gabelli et al. ............. 1,234,200 9.9%
One Corporate Center
Rye, NY 10580
All Directors and Current Executive 472,712 3.7%
Officers as a Group (13 persons)...
</TABLE>
- ------------------
* Represents less than 1%.
(1) Information with respect to beneficial ownership is based upon the Company's
stock records and data supplied to the Company by the individuals and
entities listed.
(2) Includes certain shares which the following have the right to acquire within
60 days of January 31, 1998 through the exercise of stock options to
purchase Common Shares: Messrs. Beran, Briscoe, Ketchum, Preston and Pryor,
3,000 shares each; Mr. Hill, 100,000 shares; Mr. Plat, 105,500 shares; Mr.
Fejes, 10,000 shares; Mr. Knoblock, 18,300 shares; Mr. Brower, 15,000 shares
and all directors and current executive officers as a group, 268,450 shares.
In the event of a change of control (as defined in the relevant plan and
related documents) of the Company, outstanding options granted to employees
shall vest and become immediately exercisable, subject to certain
limitations.
(3) Mr. Brower resigned as a director and the Company's Chief Executive Officer
on February 19, 1997.
(4) Based on information contained in a Schedule 13G filed with the SEC on
January 27, 1998. Represents shares owned by Mellon Bank Corporation and its
direct and indirect subsidiaries in their various fiduciary capacities.
(5) Based on information continued in a Schedule 13G filed with the SEC on
February 6, 1998. Dimensional Fund Advisors Inc. ('DFA') disclaims
beneficial owernship of all such Shares, which, according to the Schedule
13G, are owned by clients of DFA.
(Footnotes continued on next page)
26
<PAGE>
(Footnotes continued from previous page)
(6) Based on information in a Schedule 13D filed with the SEC on February 12,
1998, as amended February 18, 1998, which reports ownership interests of
various entities associated with Mr. Gabelli.
SELECTED CONSOLIDATED FINANCIAL INFORMATION; PROJECTIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Net Sales............................................. $310,460 $292,263 $284,663 $247,683 $206,609
Cost of Sales......................................... 210,468 198,348 185,169 164,941 140,463
-------- -------- -------- -------- --------
Gross Profit.......................................... 99,992 94,015 99,494 87,742 66,146
Selling & Administration.............................. 65,600 59,790 58,894 51,967 44,569
Research & Development................................ 12,284 14,281 14,811 11,793 9,911
Loss on Sale of Automation Intelligence............... 4,892 0 0 0 0
-------- -------- -------- -------- --------
Operating Income...................................... 17,216 19,944 25,969 18,982 11,666
Interest & Other...................................... 1,578 2,845 3,235 2,240 525
-------- -------- -------- -------- --------
Income before Income Taxes............................ 15,638 17,099 22,754 16,742 11,141
Income Taxes.......................................... (6,359) (6,766) (8,352) (6,481) (3,858)
-------- -------- -------- -------- --------
Income from Continuing Operations..................... $ 9,279 $ 10,333 $ 14,402 $ 10,261 $ 7,283
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Discontinued Operations--Net (Loss)................... (13,563) (10,164) (1,852) 0 0
-------- -------- -------- -------- --------
Net Income (Loss)..................................... $ (4,284) $ 169 $ 12,750 $ 10,261 $ 7,283
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
PER SHARE DATA:
Net Income (Loss) per Share--Basic.................... ($ 0.35) $ 0.01 $ 1.06 $ 0.87 $ 0.62
Net Income (Loss) per Share--Diluted.................. ($ 0.34) $ 0.01 $ 1.02 $ 0.84 $ 0.61
Cash Dividends per Share.............................. $ 0.12 $ 0.12 $ 0.12 $ 0.06 $ 0.06
BALANCE SHEET DATA:
Total Assets.......................................... $204,501 $228,091 $225,018 $180,635 $168,588
Long-Term Debt........................................ 62,902 83,108 63,719 42,936 44,840
Capital Leases........................................ 0 0 0 0 0
Common Stock Outstanding at Par Value................. 12,481 12,195 12,071 11,922 5,398
</TABLE>
Other Financial Information. During the course of the discussions between
Parent and the Company that led to the execution of the Merger Agreement, the
Company provided Parent with certain information about the Company and its
financial performance which was not publicly available. The information provided
included financial projections for the Company as an independent company (i.e.,
without regard to the impact to the Company of a transaction with Parent), which
included the following: projections of revenue, earnings before income and taxes
('EBIT') and net income of approximately $353.0 million, $31.7 million and $17.1
million, respectively, for fiscal 1998, and projections of revenue, EBIT and net
income of approximately $413.9 million, $43.4 million and $25.1 million,
respectively, for fiscal 1999. The foregoing information was prepared by the
Company solely for internal use and not for publication or with a view to
complying with the published guidelines of the SEC regarding projections or with
the guidelines established by the American Institute of Certified Public
Accountants and are included in this Proxy Statement only because they were
furnished to Parent. The foregoing information is 'forward-looking' and
inherently subject to significant uncertainties and contingencies, many of which
are beyond the control of the Company, including industry performance, general
business and economic conditions, changing competition, adverse changes in
applicable laws, regulations or rules governing environmental, tax or accounting
matters and other matters. One cannot predict whether the assumptions made in
preparing the foregoing information will be accurate, and actual results may be
materially higher or lower than those contained described above. The inclusion
of this information should not be regarded as an indication that Parent, the
Purchaser, the Company or anyone who received this information considered it a
reliable predictor of future events, and this information should not be relied
on as such. None of Parent, the Purchaser or the Company assumes any
responsibility for the validity, reasonableness, accuracy or completeness of the
projections and the Company has made no representation to Parent or the
Purchaser regarding the financial information described above.
27
<PAGE>
SHAREHOLDER PROPOSALS FOR 1998 PROXY MATERIALS
The Company Board will make provision for presentation of proposals by
shareholders at the 1998 annual meeting of shareholders provided such proposals
are submitted in accordance with the Bylaws of the Company by eligible
shareholders. In order for any such proposals to be included in the proxy
materials for consideration at the 1998 annual meeting, the proposals, which
must comply with relevant SEC regulations, must have been received no later than
November 13, 1997.
The Company Board has selected Deloitte & Touche LLP as the Company's
independent public accountants for the current fiscal year. Representatives of
that firm are expected to be present at the Special Meeting and will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
AVAILABLE INFORMATION; DEREGISTRATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
documents and information with the Commission. The Company's officers, directors
and principal stockholders are also presently subject to certain filing
requirements, as well as certain trading restrictions, imposed under the
Exchange Act. Such reports, proxy statements and other documents and information
are available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 or at its regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
from the Public References Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet
'website' that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov. The Common Shares are listed on the NYSE, and reports,
proxy statements and other information concerning the Company may be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
This Proxy Statement incorporates documents by reference with respect to
the Company that are not presented or delivered herein. Copies of these
documents are available without charge to any person to whom this Proxy
Statement is delivered upon written or oral request to: Pacific Scientific
Company, 620 Newport Center Drive, Suite 700, Newport Beach, California 92660,
Attention: Secretary.
After the Effective Time, the Common Stock will crease to be traded on the
NYSE and registration of the Common Stock under the Exchange Act will terminate
and the Company will cease filing reports with the SEC. Moreover, the Company
will be relieved of the obligation to comply with the proxy rules of Regulation
14A under Section 14 of the Exchange Act, and its officers, Directors and more
than 10 percent stockholders will be relieved of the reporting requirements
under, and the 'short-swing' profit recapture provision of, Section 16 of the
Exchange Act, unless a public offering of securities of the Company is effected
in connection with the financing of the Merger. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OF THE PURCHASER AND THE SURVIVING CORPORATION DESCRIBED HEREIN.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by this reference.
I. Annual Report on Form 10-K for the year ended December 27, 1996;
II. Quarterly Reports on Form 10-Q for the periods ended March 28,
1997, June 27, 1997 and September 26, 1997;
III. Current Reports on Form 8-K dated April 9, 1997, December 15,
1997, December 19, 1997, December 21, 1997, as amended, January
31, 1998 and February 25, 1998; and
IV. Form 8-A dated December 22, 1997, as amended.
28
<PAGE>
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting shall be deemed to be incorporated by reference herein and
to be a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so modified
or superseded. All information appearing in this Proxy Statement is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT
OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH MATTERS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS
PROXY STATEMENT OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute 'forward-looking statements'
as that term is defined under the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from those contemplated or projected, forecast estimated or budgeted in or
expressed or implied by such forward-looking statements. Such factors include,
among others, general economic and business conditions; industry trends;
overseas expansion; the loss of major customers or suppliers; the timing of
orders received from customers; cost and availability of raw materials; changes
in business strategy or development plans; availability and quality of
management; and availability, terms and deployment of capital.
OTHER BUSINESS
The management of the Company is not aware of any other matters to be
brought before the Special Meeting. However, if any other matters are properly
brought before the Special Meeting, including proposals to adjourn or postpone
the Special Meeting, the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
29
<PAGE>
ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DH HOLDINGS CORP.
ACC ACQUISITION CORP.
AND
PACIFIC SCIENTIFIC COMPANY
DATED AS OF
JANUARY 31, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1.1 The Offer............................................................................... 1
SECTION 1.2 Company Actions......................................................................... 2
SECTION 1.3 Directors............................................................................... 3
</TABLE>
ARTICLE II
THE MERGER
<TABLE>
<S> <C> <C>
SECTION 2.1 The Merger.............................................................................. 4
SECTION 2.2 Effective Time.......................................................................... 4
SECTION 2.3 Effects of the Merger................................................................... 4
SECTION 2.4 Articles of Incorporation and By-Laws of the Surviving Corporation...................... 4
SECTION 2.5 Directors............................................................................... 4
SECTION 2.6 Officers................................................................................ 4
SECTION 2.7 Conversion of Common Shares............................................................. 4
SECTION 2.8 Conversion of Purchaser Common Stock.................................................... 5
SECTION 2.9 Options; Stock Plans.................................................................... 5
SECTION 2.10 Stockholders' Meeting................................................................... 5
SECTION 2.11 Merger Without Meeting of Stockholders.................................................. 5
</TABLE>
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
<TABLE>
<S> <C> <C>
SECTION 3.1 Dissenting Shares....................................................................... 6
SECTION 3.2 Payment for Common Shares............................................................... 6
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C> <C>
SECTION 4.1 Organization and Qualification; Subsidiaries............................................ 7
SECTION 4.2 Capitalization; Subsidiaries............................................................ 7
SECTION 4.3 Authority Relative to this Agreement.................................................... 8
SECTION 4.4 No Violation............................................................................ 8
SECTION 4.5 SEC Reports and Financial Statements.................................................... 9
SECTION 4.6 Compliance with Applicable Laws......................................................... 9
SECTION 4.7 Change of Control....................................................................... 9
SECTION 4.8 Litigation.............................................................................. 10
SECTION 4.9 Information............................................................................. 10
SECTION 4.10 Employee Benefit Plans.................................................................. 10
SECTION 4.11 Taxes................................................................................... 11
SECTION 4.12 Intellectual Property................................................................... 12
SECTION 4.13 Contracts............................................................................... 12
SECTION 4.14 Voting Requirements..................................................................... 12
SECTION 4.15 Absence of Certain Changes.............................................................. 12
SECTION 4.16 Rights Agreement........................................................................ 13
SECTION 4.17 Brokers................................................................................. 13
SECTION 4.18 Opinion of Investment Banker............................................................ 13
</TABLE>
I-i
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
<TABLE>
<S> <C> <C>
SECTION 5.1 Organization and Qualification.......................................................... 13
SECTION 5.2 Authority Relative to this Agreement.................................................... 13
SECTION 5.3 No Violation............................................................................ 14
SECTION 5.4 Information............................................................................. 14
SECTION 5.5 Financing............................................................................... 14
</TABLE>
ARTICLE VI
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 6.1 Conduct of Business of the Company...................................................... 14
SECTION 6.2 Access to Information................................................................... 16
SECTION 6.3 Efforts................................................................................. 16
SECTION 6.4 Public Announcements.................................................................... 17
SECTION 6.5 Employee Benefit Arrangements........................................................... 17
SECTION 6.6 Indemnification; Directors' and Officers' Insurance..................................... 17
SECTION 6.7 Notification of Certain Matters......................................................... 18
SECTION 6.8 Rights Agreement........................................................................ 18
SECTION 6.9 State Takeover Laws..................................................................... 18
SECTION 6.10 No Solicitation......................................................................... 18
SECTION 6.11 Parent Agreement........................................................................ 20
</TABLE>
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
<TABLE>
<S> <C> <C>
SECTION 7.1 Conditions.............................................................................. 20
SECTION 7.2 Conditions to the Obligations of Parent................................................. 20
SECTION 7.3 Conditions to Obligation of the Company................................................. 21
</TABLE>
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
<TABLE>
<S> <C> <C>
SECTION 8.1 Termination............................................................................. 21
SECTION 8.2 Effect of Termination................................................................... 22
SECTION 8.3 Fees and Expenses....................................................................... 22
SECTION 8.4 Amendment............................................................................... 23
SECTION 8.5 Extension; Waiver....................................................................... 23
</TABLE>
ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C> <C>
SECTION 9.1 Non-Survival of Representations and Warranties.......................................... 23
SECTION 9.2 Entire Agreement; Assignment............................................................ 23
SECTION 9.3 Validity................................................................................ 23
SECTION 9.4 Notices................................................................................. 23
SECTION 9.5 Governing Law........................................................................... 24
SECTION 9.6 Descriptive Headings.................................................................... 24
SECTION 9.7 Counterparts............................................................................ 24
SECTION 9.8 Parties in Interest..................................................................... 24
SECTION 9.9 Certain Definitions..................................................................... 24
SECTION 9.10 Specific Performance.................................................................... 25
</TABLE>
I-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this 'AGREEMENT'), dated as of January 31,
1998, by and among DH Holdings Corp., a Delaware corporation ('PARENT'), ACC
Acquisition Corp., a California corporation and a wholly owned subsidiary of
Parent (the 'PURCHASER'), and Pacific Scientific Company, a California
corporation (the 'COMPANY').
WHEREAS, the respective Boards of Directors of Parent, the Purchaser and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a
tender offer (the 'OFFER') to purchase all of the outstanding shares of the
Company's common stock, par value $1.00 per share (the 'COMMON SHARES')
(including the associated preferred share purchase rights (the 'RIGHTS') issued
pursuant to the Rights Agreement, dated as of December 31, 1997, between the
Company and ChaseMellon Shareholder Services, LLC, as Rights Agent (the 'RIGHTS
AGREEMENT'), which Rights together with the Common Shares are hereinafter
referred to as the 'SHARES')), at a price per Share of $30.25 net to the seller
in cash (the 'OFFER PRICE');
WHEREAS, the Board of Directors of the Company (the 'COMPANY BOARD') has,
in light of and subject to the terms and conditions set forth herein, (i)
determined that (A) the consideration to be paid for each Share in the Offer and
the Merger (as hereinafter defined) is fair to the stockholders of the Company,
and (B) the Offer and the Merger are otherwise in the best interests of the
Company and its stockholders, and (ii) resolved to approve and adopt this
Agreement and the transactions contemplated hereby and to recommend acceptance
of the Offer and approval and adoption by the stockholders of the Company of
this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the merger of the Purchaser with and into the Company, as
set forth below (the 'MERGER'), in accordance with the California General
Corporation Law (the 'CGCL') and upon the terms and subject to the conditions
set forth in this Agreement, whereby each of the issued and outstanding Common
Shares not owned directly or indirectly by Parent, the Purchaser or the Company
will be converted into the right to receive $30.25 in cash (the 'MERGER PRICE');
and
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger, and also to prescribe various conditions to the Offer and
the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and for
other good and valuable consideration, intending to be legally bound hereby,
Parent, the Purchaser and the Company agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII and none of the events set forth in Annex I hereto
(the 'TENDER OFFER CONDITIONS') shall have occurred, as promptly as practicable,
but in no event later than the fifth business day from the date of this
Agreement, Parent shall cause the Purchaser to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended, including the
rules and regulations promulgated thereunder (the 'EXCHANGE ACT')) an offer to
purchase all outstanding Shares at the Offer Price, shall, after affording the
Company a reasonable opportunity to review and comment thereon, file all
necessary documents with the Securities and Exchange Commission (the 'SEC') in
connection with the Offer (the 'OFFER DOCUMENTS'), and shall use reasonable best
efforts to consummate the Offer, subject to the terms and conditions thereof.
The obligation of the Purchaser to accept for payment or pay for any Shares
tendered pursuant thereto will be subject only to the satisfaction of the
conditions set forth in Annex I hereto.
(b) Without the prior written consent of the Company, the Purchaser shall
not decrease the Offer Price or change the form of consideration payable in the
Offer, decrease the number of Shares sought to be purchased in the Offer, impose
additional conditions to the Offer or amend any other term of the Offer in any
manner adverse
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to the holders of Common Shares. The Offer shall remain open until the date that
is 20 business days (as such term is defined in Rule 14d-1(c)(6) under the
Exchange Act) after the commencement of the Offer (the 'EXPIRATION DATE'),
unless the Purchaser shall have extended the period of time for which the Offer
is open pursuant to, and in accordance with, the two succeeding sentences or as
may be required by applicable law, in which event the term 'EXPIRATION DATE'
shall mean the latest time and date as the Offer, as so extended, may expire.
Subject to the terms of the Offer and this Agreement and the satisfaction of all
the Tender Offer Conditions as of any Expiration Date, the Purchaser shall
accept for payment and pay for all Shares validly tendered and not withdrawn
pursuant to the Offer as promptly as practicable after such Expiration Date;
provided that, (i) if on any scheduled Expiration Date of the Offer all of the
Tender Offer Conditions (other than the Minimum Condition (as defined in Annex
I) shall not have been satisfied or waived, the Offer may, but need not, be
extended from time to time without the consent of the Company for such period of
time as is reasonably expected by the Purchaser to be necessary to satisfy the
unsatisfied conditions; provided further that the Offer may be extended by the
Purchaser without the consent of the Company for any period required by any
rule, regulation, interpretation or position of the SEC or the staff thereof
applicable to the Offer, and (ii) if all of the Tender Offer Conditions are
satisfied but less than 90% of the outstanding Common Shares have been validly
tendered and not withdrawn in the Offer, the Purchaser shall be required to
extend the Offer for one additional business day (or such longer time as may be
agreed to by the Purchaser and the Company (an 'OFFER EXTENSION'). If, following
such Offer Extension, the Minimum Condition has not been satisfied, the
Purchaser shall effect successive additional Offer Extensions (which Offer
Extensions shall each be for one business day unless the Purchaser and the
Company shall agree to a longer period) until the earlier to occur of (i) the
close of business on the business day immediately prior to the Special Meeting
(as defined herein) and (ii) such time as the Minimum Condition has been
satisfied, after which time the Purchaser may not extend the Offer for any
reason. Without the prior written consent of the Company, the Purchaser shall
not waive the Minimum Condition or accept for payment or pay for any Shares in
the Offer if, as a result, Purchaser would acquire less than the number of
Shares necessary to satisfy the Minimum Condition. It is agreed that the Tender
Offer Conditions are solely for the benefit of the Purchaser and may be asserted
by the Purchaser regardless of the circumstances giving rise to any such
condition (but not including any action or inaction by the Purchaser) or may
(except as otherwise specifically provided in this Agreement), but need not, be
waived by the Purchaser, in whole or in part at any time and from time to time,
in its sole discretion.
(c) Parent and the Purchaser represent that the Offer Documents will comply
in all material respects with the provisions of applicable federal securities
laws, and, on the date filed with the SEC and on the date first published, sent
or given to the Company's stockholders, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
supplied by the Company in writing for inclusion in the Offer Documents. The
Company shall provide the Purchaser and Parent with such information as may be
reasonably requested in connection with the preparation of the Offer Documents.
Each of Parent and the Purchaser, on the one hand, and the Company, on the other
hand, agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that it shall have become incomplete, false
or misleading in any material respect and the Purchaser further agrees to take
all steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to stockholders of the Company, in each
case, as and to the extent required by applicable federal securities laws.
SECTION 1.2 Company Actions.
(a) The Company shall, after affording Parent a reasonable opportunity to
review and comment thereon (including any supplements or amendments thereto),
file with the SEC and mail to the holders of Common Shares, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the 'SCHEDULE 14D-9') reflecting the
recommendation of the Company Board that holders of Shares tender their Shares
pursuant to the Offer and shall disseminate the Schedule 14D-9 as required by
Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set
forth, and the Company hereby represents, that the Company Board, at a meeting
duly called and held, has (i) determined by unanimous vote of its directors that
each of the transactions contemplated hereby, including each of the Offer and
the Merger, is fair to and in the best interests of the Company and its
stockholders, (ii) approved the Offer and adopted this Agreement in accordance
with the CGCL and pursuant to Article Five of the Restated Certificate of
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Incorporation of the Company, and (iii) recommended acceptance of the Offer and
approval of this Agreement by the Company's stockholders (if such approval is
required by applicable law); provided, however, that such recommendation and
approval may be withdrawn, modified or amended only in accordance with Section
6.10. The Company further represents that, prior to the execution hereof,
BancAmerica Robertson Stephens (the 'INVESTMENT BANKER'), has delivered to the
Company Board its written opinion that, as of the date hereof, the consideration
to be received by the holders of Common Shares (other than Parent or any of its
affiliates or holders of Dissenting Shares) pursuant to the Offer and the Merger
is fair to the Company's stockholders from a financial point of view. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company Board described in this Section 1.2(a).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Each of
the Company, on the one hand, and Parent and the Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Shares, in each case, as and to the extent
required by applicable federal securities laws.
(c) In connection with the Offer, the Company shall furnish the Purchaser
with mailing labels, security position listings, any available non-objecting
beneficial owner lists and any available listing or computer list containing the
names and addresses of the record holders of the Common Shares as of the most
recent practicable date and shall furnish the Purchaser with such additional
available information (including, but not limited to, updated lists of holders
of Common Shares and their addresses, mailing labels and lists of security
positions and non-objecting beneficial owner lists) and such other assistance as
the Purchaser or its agents may reasonably request in communicating the Offer to
the Company's record and beneficial stockholders. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent, the Purchaser and their affiliates, associates, agents and advisors,
shall keep such information confidential and use the information contained in
any such labels, listings and files only in connection with the Offer and the
Merger and, should the Offer terminate or if this Agreement shall be terminated,
will deliver to the Company all copies of such information then in their
possession.
SECTION 1.3 Directors.
(a) Subject to compliance with applicable law, promptly upon the payment by
the Purchaser for Shares pursuant to the Offer representing at least such number
of Shares as shall satisfy the Minimum Condition, and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors on the Company Board (determined after
giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Common Shares beneficially owned by
Parent or its affiliates bears to the total number of Common Shares then
outstanding on a fully diluted basis, and the Company shall, upon request of
Parent, promptly take all actions necessary to cause Parent's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors; provided, however, that prior to the Effective Time (as
hereinafter defined), the Company Board shall always have at least two members
who are neither officers, directors or designees of the Purchaser or any of its
affiliates ('PURCHASER INSIDERS'). If the number of directors who are not
Purchaser Insiders is reduced below two prior to the Effective Time, the
remaining director who is not a Purchaser Insider shall be entitled to designate
an individual to fill such vacancy who is not a Purchaser Insider and who shall
be a director not deemed to be a Purchaser Insider for all purposes of this
Agreement.
(b) The Company's obligations to appoint Parent's designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. The Company shall take all actions required pursuant to such Section
and Rule in order to fulfill its obligations under this Section 1.3 and shall
include in the
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Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Parent will supply in a timely manner any
information with respect to itself and its officers, directors and affiliates
required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees pursuant to
this Section 1.3 and prior to the Effective Time, any amendment or termination
of this Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or the
Purchaser or waiver of any of the Company's rights hereunder, will require the
concurrence of a majority of the directors of the Company then in office who are
not Purchaser Insiders (or, in the case where there are two or fewer directors
who are not Purchaser Insiders, the concurrence of one director who is not a
Purchaser Insider).
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the CGCL, at the Effective Time the Purchaser
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the 'SURVIVING CORPORATION').
SECTION 2.2 Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Sections 7.1(a) and 7.1(b), but subject
to Sections 7.1(c) and 7.1(d) and, if applicable, Sections 7.2 and 7.3, the
Company shall duly file with the Secretary of State of California, in the manner
required by the CGCL, an appropriate Agreement of Merger with an officer's
certificate of each of Purchaser and the Company, and the parties shall take
such other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applicable
law is referred to herein as the 'EFFECTIVE TIME.'
SECTION 2.3 Effects of the Merger. The Merger shall have the effects set
forth in the CGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and the Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the
Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.4 Articles of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Restated Articles of Incorporation of the Company shall, at the
Effective Time, be amended to be identical to the Articles of Incorporation of
the Purchaser as in effect immediately prior to the Effective Time, and shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and hereof and applicable law.
(b) The By-Laws of the Company shall, at the Effective Time, be amended to
be identical to the By-Laws of Purchaser as in effect immediately prior to the
Effective Time, and shall be the By-Laws of the Surviving Corporation until
amended, subject to the provisions of Section 6.6 of this Agreement, in
accordance with the provisions thereof and applicable law.
SECTION 2.5 Directors. Subject to applicable law, the directors of the
Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 2.6 Officers. Except as set forth on Schedule 2.6 to this
Agreement, the officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
SECTION 2.7 Conversion of Common Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders thereof, each
Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder
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thereof, shall be cancelled and retired and shall cease to exist with no payment
being made with respect thereto and (ii) Dissenting Shares (as hereinafter
defined)), shall be cancelled and retired and shall be converted into the right
to receive the Merger Price in cash, payable to the holder thereof, without
interest thereon, upon surrender of the certificate formerly representing such
Common Share.
SECTION 2.8 Conversion of Purchaser Common Stock. At the Effective Time,
each share of common stock of the Purchaser issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become one
validly issued, fully paid and non-assessable share of common stock, par value
$1.00 per share, of the Surviving Corporation.
SECTION 2.9 Options; Stock Plans. Immediately following the Effective
Time, each holder of a then-outstanding employee or director stock option,
whether or not fully exercisable, to purchase Common Shares (an 'OPTION')
granted under any stock option or similar plan or separate option agreement of
the Company (such plans and agreements, collectively, the 'STOCK PLANS') will be
entitled to receive in settlement of such Option a cash payment from the Company
equal to the product of (i) the total number of Common Shares previously subject
to such Option and (ii) the excess of the Merger Price over the exercise price
per Common Share subject to such Option, subject to any required withholding of
taxes. If necessary or appropriate, the Company will, upon the request of
Parent, use reasonable efforts to obtain the written acknowledgment of each
employee holding an Option that the payment of the amount of cash referred to
above will satisfy in full the Company's obligation to such employee pursuant to
such Option and take such other action as is necessary to effect the provisions
of this Section 2.9.
SECTION 2.10 Stockholders' Meeting.
(a) In order to consummate the Merger, the Company, acting through the
Company Board, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the 'SPECIAL MEETING') as soon as practicable following
the date hereof for the purpose of considering and taking action upon this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use its reasonable efforts (A) to obtain
and furnish the information required to be included by the SEC in a
definitive proxy statement (the 'PROXY STATEMENT') and, after consultation
with Parent, to respond promptly to any comments made by the SEC with
respect to the preliminary proxy statement and cause the Proxy Statement to
be mailed to its stockholders and (B) to obtain the necessary approvals of
the Merger and this Agreement by its stockholders; and
(iii) subject to the terms of Section 6.10, include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the adoption and approval of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Common Shares then owned by it, the Purchaser or any of its other subsidiaries
in favor of the approval of the Merger and of this Agreement.
(c) The Company shall prepare and file with the SEC the preliminary proxy
statement referred to in Section 2.10(a)(ii) as soon as practicable after the
date hereof, and if the Minimum Condition has not been satisfied on or prior to
the initial Expiration Date (prior to any extension of the Offer), the Company
shall, as soon as practicable following such initial Expiration Date, mail the
Proxy Statement to its stockholders for the purpose of obtaining the necessary
approvals of the Merger and this Agreement, unless the Minimum Condition is
satisfied subsequent to such initial Expiration Date and prior to the earliest
practicable date upon which the Company can mail the Proxy Statement.
SECTION 2.11 Merger Without Meeting of Stockholders. Notwithstanding
Section 2.10, in the event that Parent, the Purchaser or any other subsidiary of
Parent shall acquire at least 90% of the outstanding Common Shares pursuant to
the Offer or otherwise, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Common Shares by
the Purchaser pursuant to the Offer without a meeting of stockholders of the
Company, in accordance with Section 1110 of the CGCL.
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ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding Section 2.7, Common Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
perfected such holder's right to demand cash payment for the fair market value
of such holder's Shares in accordance with Chapter 13 of the CGCL ('DISSENTING
SHARES') shall not be converted into a right to receive the Merger Price, unless
such holder fails to perfect or withdraws or otherwise loses such holder's right
to a determination of the fair market value of such holder's Shares under the
CGCL. If after the Effective Time such holder fails to perfect or withdraws or
loses such holder's right to a determination of the fair market value of such
holder's Shares under the CGCL, such Common Shares shall be treated as if they
had been converted as of the Effective Time into a right to receive the Merger
Price. The Company shall give Parent prompt notice of any demands received by
the Company for a determination of the fair market value of such holder's Shares
under the CGCL, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands. As soon as
practicable after the approval of the Merger by the Company's shareholders
(including, without limitation, by written consent thereto), to the extent
required by the CGCL, and in any event not later than ten (10) days following
such approval, Parent shall mail to each shareholder of the Company who is
entitled to such notice pursuant to Chapter 13 of the CGCL, a notice of such
approval of the Merger, such notification to include the information and
materials required by Section 1301(a) of the CGCL (including, without
limitation, the price determined by Parent to represent the fair market value of
any Dissenting Shares).
SECTION 3.2 Payment for Common Shares.
(a) From and after the Effective Time, such bank or trust company as shall
be mutually acceptable to Parent and the Company shall act as paying agent (the
'PAYING AGENT') in effecting the payment of the Merger Price in respect of
certificates (the 'CERTIFICATES') that, prior to the Effective Time, represented
Common Shares entitled to payment of the Merger Price pursuant to Section 2.7.
At or prior to the Effective Time, Parent or the Purchaser shall deposit, or
Parent shall otherwise take all steps necessary to cause to be deposited, with
the Paying Agent the aggregate Merger Price to which holders of Common Shares
shall be entitled at the Effective Time pursuant to Section 2.7, assuming for
such purpose that there will be no Dissenting Shares.
(b) Promptly after the Effective Time, Parent shall cause the Paying Agent
to mail to each record holder of Certificates that immediately prior to the
Effective Time represented Common Shares a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, the Paying Agent shall pay the holder of such Certificate the
Merger Price multiplied by the number of Common Shares formerly represented by
such Certificate, in consideration therefor, and such Certificate shall
forthwith be canceled. Until so surrendered, each such Certificate (other than
Certificates representing Common Shares held by Parent or the Purchaser, any
wholly owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company or Dissenting Shares)
shall represent solely the right to receive the aggregate Merger Price relating
thereto. No interest or dividends shall be paid or accrued on the Merger Price.
If the Merger Price (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing Common
Shares surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Price that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Common Shares shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of the Merger Price to
a person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Paying Agent that such tax has been
paid or is not applicable.
(c) The Purchaser or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Common Shares such amounts as the Purchaser or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the United States Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder (the 'CODE'), or any provision of United States state
or local or foreign tax law. To the extent that amounts are so
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deducted or withheld, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Common Shares in respect
of which such deduction and withholding was made.
(d) Promptly following the date which is 120 days after the Effective Time,
the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Common Share
may surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price relating thereto, without any
interest or dividends thereon.
(e) Neither the Company, the Purchaser, Parent, nor the Surviving
Corporation shall be liable to any holder of Common Shares for any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
canceled in return for the payment of the aggregate Merger Price relating
thereto, as provided in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as follows:
SECTION 4.1 Organization and Qualification; Subsidiaries. The Company and
each of its Significant Subsidiaries (as hereinafter defined) is a corporation
duly organized, validly existing and in good standing under the laws of its
state or jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification and where failure to
be in good standing or to so qualify would have a Material Adverse Effect on the
Company. Each of the Company and its Significant Subsidiaries has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect. The term 'MATERIAL ADVERSE EFFECT ON THE COMPANY,' as
used in this Agreement, means any change in or effect on the business, financial
condition or results of operations of the Company or any of its subsidiaries
that would, individually or in the aggregate, reasonably be expected to be
materially adverse to the Company and its subsidiaries taken as a whole. The
Company has heretofore made available to Parent and the Purchaser a complete and
correct copy of its Restated Articles of Incorporation and By-Laws, each as
amended to the date hereof, and of the Articles of Incorporation and By-Laws or
equivalent organizational documents, each as amended to the date hereof, of the
Significant Subsidiaries. Such Articles of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither the Company nor
any Significant Subsidiary is in violation of any provision of its Articles of
Incorporation, By-Laws or equivalent organizational documents. A 'SIGNIFICANT
SUBSIDIARY' means (i) a subsidiary or other person in which the Company has an
investment of $10,000,000 or more or (ii) a subsidiary of any person that
constitutes a significant subsidiary of such person within the meaning of Rule
1-02(v) of Regulation S-X. Section 4.1 of the disclosure schedule delivered to
Parent by the Company on the date hereof (the 'Company Disclosure Schedule')
contains a complete list as of the date hereof of each Significant Subsidiary of
the Company and sets forth with respect to each of the Company's Significant
Subsidiaries its name and jurisdiction of organization and, with respect to each
Significant Subsidiary of the Company that is not wholly owned by the Company or
another wholly owned subsidiary of the Company, the percentage of shares of
capital stock or share capital owned by the Company or a wholly owned subsidiary
of the Company.
SECTION 4.2 Capitalization; Subsidiaries. The authorized capital stock of
the Company consists of 30,000,000 Common Shares and 2,000,000 shares of
preferred stock, par value $1.00 per share ('PREFERRED STOCK'), of which 500,000
shares are designated Series B Junior Participating Preferred Stock, par value
$1.00 per share ('JUNIOR PREFERRED STOCK'). As of the close of business on
January 30, 1998, 12,481,306 Common
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Shares were issued and outstanding, all of which are entitled to vote on this
Agreement, and no Common Shares were held in treasury. The Company has no shares
of Preferred Stock issued and outstanding. As of the date hereof, except for (i)
1,153,264 Common Shares reserved for issuance pursuant to outstanding Options
granted under the Stock Plans and (ii) 500,000 shares of Junior Preferred Stock
reserved for issuance upon exercise of the Rights, there are not now, and at the
Effective Time there will not be, any existing options, warrants, calls,
subscriptions, or other rights, or other agreements or commitments, obligating
the Company to issue, transfer or sell any shares of capital stock of the
Company or any of its subsidiaries or any Voting Debt (as defined below) of, or
other equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity interest or
obligating the Company or any of its subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Since January 30, 1998, the Company has not issued
any shares of its capital stock, except pursuant to Options outstanding on such
date. All issued and outstanding Common Shares are and all Common Shares which
may be issued pursuant to the exercise of outstanding Options will be, when
issued in accordance with the respective terms thereof, validly issued, fully
paid, nonassessable and free of preemptive rights. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ('VOTING DEBT') of the Company
or any of its subsidiaries issued and outstanding. All of the outstanding shares
of capital stock of each of the Company's Significant Subsidiaries have been
validly issued and are fully paid and non-assessable and, except as set forth on
Section 4.2 of the Company Disclosure Schedule, are owned by either the Company
or a wholly owned Significant Subsidiary free and clear of all liens, charges,
claims or encumbrances. There are no outstanding options, warrants, calls,
subscriptions, or other rights, or other agreements or commitments, obligating
any subsidiary of the Company to issue, transfer or sell any shares of its
capital stock, Voting Debt or other equity interest in, or securities
convertible into or exchangeable for such shares, Voting Debt or equity
interests or obligating any Significant Subsidiary to grant, or enter into any
such option, warrant, call, subscription or other right, agreement, arrangement
or commitment. Except as contemplated by the Offer and the Merger contemplated
by this Agreement, there are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Common Shares or the capital stock of the Company or any of its
subsidiaries.
SECTION 4.3 Authority Relative to this Agreement.
(a) The Company has the requisite corporate power and authority to execute
and deliver this Agreement and, except for the approval of this Agreement by the
shareholders of the Company with respect to the Merger, to the extent required
by applicable law, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval of this Agreement by the shareholders of
the Company with respect to the Merger, to the extent required by applicable
law). This Agreement has been duly and validly executed and delivered by the
Company, and, assuming this Agreement constitutes a valid and binding obligation
of each of Parent and the Purchaser, this Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) Except as set forth on Section 4.3 of the Company Disclosure Schedule,
other than in connection with, or in compliance with, the provisions of the CGCL
with respect to the transactions contemplated hereby, the Exchange Act, the
securities laws of the various states and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the 'HSR ACT'), no authorization, consent
or approval of, or filing with, any Governmental Entity (as hereinafter defined)
is necessary for the consummation by the Company of the transactions
contemplated by this Agreement other than authorizations, consents and approvals
the failure to obtain, or filings the failure to make, which would not,
individually in the aggregate, have a Material Adverse Effect on the Company. As
used in this Agreement, the term 'GOVERNMENTAL ENTITY' means any government or
subdivision thereof, domestic, foreign or supranational or any administrative,
governmental or regulatory authority, agency, commission, tribunal or body,
domestic, foreign or supranational.
SECTION 4.4 No Violation. Neither the execution or delivery of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) constitute a breach or violation of any provision
of the Restated Articles of Incorporation or By-Laws of the Company or the
comparable
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organizational document of any of the Significant Subsidiaries, (ii) except as
set forth on Section 4.4 of the Company Disclosure Schedule, constitute a
breach, violation or default (or any event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument to which the Company or any of its
subsidiaries is a party or by which they or any of their respective properties
or assets are bound, or (iii) conflict with or violate any statute, ordinance,
rule, regulation, order, judgment or decree applicable to the Company or its
subsidiaries, or by which any of them or any of their respective properties or
assets may be bound or affected, other than, in the case of the foregoing
clauses (ii) or (iii), conflicts, breaches, violations, defaults, terminations,
accelerations or creation of liens and encumbrances which, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
SECTION 4.5 SEC Reports and Financial Statements. Since January 1, 1996,
the Company has filed all forms, reports and documents ('SEC REPORTS') with the
SEC required to be filed by it pursuant to the federal securities laws and the
SEC rules and regulations thereunder. Copies of all such SEC Reports have been
made available to Parent by the Company. None of such SEC Reports (as of their
respective filing dates) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited and unaudited consolidated financial
statements of the Company included in the SEC Reports have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as otherwise stated in such financial statements, including the
related notes), comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and fairly present the financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited financial statements, to year-end audit
adjustments. The Company and its subsidiaries have no liabilities or obligations
of any nature (whether absolute, accrued, contingent, unmatured, unaccrued,
unliquidated, unasserted, conditional or otherwise), except for liabilities or
obligations (i) disclosed in the Company Disclosure Schedule or reflected or
reserved against on the balance sheet as at September 27, 1997 (including the
notes thereto and the other disclosure made in the Company's Form 10-Q for the
quarter ended September 27, 1997) included in the SEC Reports, or (ii) incurred
in the ordinary course of business consistent with past practice since such
date, in each case of clauses (i) and (ii) which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
SECTION 4.6 Compliance with Applicable Laws. Except as set forth on
Section 4.6 of the Company Disclosure Schedule, (i) the Company and its
subsidiaries hold all material permits, licenses and approvals of all
Governmental Entities and (ii) the Company and its subsidiaries are in
compliance with, and their respective business operations are being conducted in
compliance with, all laws, ordinances, orders and regulations of any
Governmental Entity, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
SECTION 4.7 Change of Control. Except as set forth on Section 4.7 of the
Company Disclosure Schedule or as provided in Section 2.9, the transactions
contemplated by this Agreement will not constitute a 'change of control' under,
require the consent from or the giving of notice to a third party pursuant to,
permit a third party to terminate or accelerate vesting or repurchase rights, or
create any other detriment under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
except where the adverse consequences resulting from such change of control or
where the failure to obtain such consents or provide such notices would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
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SECTION 4.8 Litigation. Except as set forth on Section 4.8 of the Company
Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
the Company or any of its subsidiaries, individually or in the aggregate, which
would have a Material Adverse Effect on the Company or would reasonably be
expected to prevent or materially delay the consummation of the transactions
contemplated by this Agreement. Except as disclosed in the SEC Reports filed
prior to the date of this Agreement, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, would have a Material Adverse Effect on
the Company or would reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated hereby.
SECTION 4.9 Information. None of the information supplied by the Company
in writing (other than projections of future financial performance) specifically
for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the
Proxy Statement, or (iii) any other document to be filed with the SEC or any
other Governmental Entity in connection with the transactions contemplated by
this Agreement (the 'OTHER FILINGS') will, at the respective times filed with
the SEC or other Governmental Entity and, in addition, in the case of the Proxy
Statement, at the date it or any amendment or supplement is mailed to
stockholders, at the time of the Special Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or the Purchaser
in writing specifically for inclusion in the Proxy Statement. Notwithstanding
the foregoing, no representation is made by the Company with respect to (i) any
forward-looking information which may have been supplied by the Company, whether
or not included by Parent or the Purchaser in any Offer Document or in the Proxy
Statement or (ii) statements made in any of the foregoing documents based upon
information supplied by Parent or the Purchaser.
SECTION 4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Company Disclosure Schedule includes a complete
list of all material employee benefit plans and programs providing benefits to
any employee or former employee of the Company and its subsidiaries sponsored or
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute ('PLANS').
Without limiting the generality of the foregoing, the term 'Plans' includes all
employee welfare benefit plans within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ('ERISA'), and all employee pension benefit plans within the meaning
of Section 3(2) of ERISA.
(b) With respect to each Plan, the Company has made available to Parent (to
the extent requested) a true, correct and complete copy of: (i) all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan description,
if any; (iv) the most recent annual financial report, if any; (v) the most
recent actuarial report, if any; and (vi) the most recent determination letter
from the United States Internal Revenue Service (the 'IRS'), if any.
(c) Except as set forth in Section 4.10(c) of the Company Disclosure
Schedule, the Company and each of its subsidiaries has complied, and is now in
compliance, in all material respects with all provisions of ERISA, the Code and
all laws and regulations applicable to the Plans. Except as set forth in Section
4.10(c) of the Company Disclosure Schedule, with respect to each Plan that is
intended to be a 'qualified plan' within the meaning of Section 401(a) of the
Code ('QUALIFIED PLANS'), the IRS has issued a favorable determination letter.
(d) All contributions required to be made to any Plan by applicable law or
regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Plan,
have been timely made or paid in full or, to the extent not required to be made
or paid, have been fully reflected in the financial statements of the Company
included in the SEC Reports to the extent required under generally accepted
accounting principles.
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(e) Except as set forth on Section 4.10(e) of the Company Disclosure
Schedule, no Plan is subject to Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code. Without limiting the generality of the foregoing, except as
set forth on Section 4.10(e) of the Company Disclosure Schedule, no Plan is a
'multiemployer plan' within the meaning of Section 4001(a)(3) of ERISA (a
'MULTIEMPLOYER PLAN') or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA and which is subject to Title IV of ERISA (a 'MULTIPLE EMPLOYER
PLAN').
(f) There does not now exist, nor do any circumstances exist that would
reasonably be expected to result in, any liability under (i) Title IV of ERISA,
(ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of Section 601 et seq. of ERISA and section
4980B of the Code, or (v) corresponding or similar provisions of foreign laws or
regulations, other than a liability that arises solely out of, or relate solely
to, the Plans, that would be a liability of the Company or any of its
subsidiaries following the Effective Time. Without limiting the generality of
the foregoing, (i) none of the Company, its subsidiaries nor any ERISA Affiliate
of the Company or any of its subsidiaries has engaged in any transaction
described in Section 4069 or Section 4204 or 4212 of ERISA, (ii) no liability
under Title IV or a violation of Section 302 of ERISA has been incurred by the
Company that has not been satisfied in full, and no condition exists that
presents a material risk to the Company of incurring any such liability, other
than liability for premiums due to the Pension Benefit Guaranty Corporation
(which premiums have been paid when due) and for contributions due to a pension
plan (which contributions have been paid through the end of 1997), and (iii) no
Plan or any trust established thereunder has incurred any 'accumulated funding
deficiency' (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
Plan ended prior to the Effective Time. An 'ERISA AFFILIATE' means any entity,
trade or business that is a member of a group described in Section 414(b), (c),
(m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the Company
or any of its subsidiaries, or that is a member of the same 'controlled group'
as the Company or any of its subsidiaries, pursuant to Section 4001(a)(14) of
ERISA.
(g) There are no pending, threatened or anticipated claims by or on behalf
of any Plan, by any employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for benefits).
SECTION 4.11 Taxes.
(a) The Company and each of its subsidiaries has (i) timely filed all
income Tax Returns (as hereinafter defined), and all other material Tax Returns
required to be filed by or with respect to it, and all such Tax Returns are
true, correct and complete, and (ii) paid or caused to be paid all Taxes (as
hereinafter defined) shown as due and payable on such Tax Returns or otherwise
due and payable, in the case of Taxes for which no Tax Returns are required or
otherwise due and payable, and (iii) made adequate provision in the Company's
financial statements for payment of all Taxes anticipated to be payable in
respect of all taxable periods or portions thereof ending on or before the date
hereof, except where the failures to so file or pay or make adequate provision
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Return of the Company or
any of its subsidiaries. Except as set forth on Section 4.11 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries (i) has
been a member of a group filing consolidated returns for federal income tax
purposes (except for the group of which the Company is the common parent), or
(ii) is a party to a Tax sharing or Tax indemnity agreement or any other
agreement of a similar nature that remains in effect. There is no audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Company or any of its
subsidiaries which would, individually or in the aggregate, have a Material
Adverse Effect on the Company. There are no Tax liens upon any of the assets or
property of the Company or its subsidiaries, except liens for current Taxes not
yet due and payable. As soon as practicable after the public announcement of the
execution of this Agreement, the Company will provide Parent with written
schedules with respect to income taxes of (i) the taxable years of the Company
or any of its subsidiaries as to which the respective statutes of limitations
with respect to Taxes have not expired and (ii) with respect to such taxable
years, those years for which examinations have been completed, those years for
which examinations are presently being conducted, those years for which
examinations have not been initiated and those years for which required Tax
Returns have not yet been filed.
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(b) For purposes of this Agreement, the term 'TAXES' means all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto. For purposes of this
Agreement, the term 'TAX RETURN' means any report, return or other information
or document required to be supplied to a taxing authority in connection with
Taxes.
SECTION 4.12 Intellectual Property.
(a) Except as would not, individually and in the aggregate, have a Material
Adverse Effect on the Company or as set forth in Section 4.12 of the Company
Disclosure Schedule, (i) the Company and each of its subsidiaries owns, has the
right to acquire or is licensed or otherwise has the right to use (in each case,
free and clear of any liens or encumbrances of any kind), all Intellectual
Property (as defined below) used in or necessary for the conduct of its business
as currently conducted, (ii) no claims are pending or, to the knowledge of the
Company, threatened, that the Company or any of its subsidiaries is infringing
on or otherwise violating the rights of any person with regard to any
Intellectual Property, and (iii) to the knowledge of the Company, no person is
infringing on or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by and/or licensed
to the Company or its subsidiaries.
(b) For purposes of this Agreement, 'INTELLECTUAL PROPERTY' shall mean
patents, copyrights, trademarks (registered or unregistered), service marks,
brand names, trade dress, trade names, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing; and trade secrets and rights in any
jurisdiction to limit the use or disclosure thereof by any person.
SECTION 4.13 Contracts. Each material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their properties or assets may be bound (the 'MATERIAL CONTRACTS') is valid
and binding and in full force and effect, except where failure to be valid and
binding and in full force and effect would not have a Material Adverse Effect on
the Company, and there are no defaults by the Company or any of its subsidiaries
or, to the Company's knowledge, any other party thereto, thereunder, except
those defaults that would not have a Material Adverse Effect on the Company.
SECTION 4.14 Voting Requirements. Assuming that neither Parent nor the
Purchaser directly or indirectly beneficially owns any Common Shares other than
shares acquired pursuant to and in accordance with the terms of the Offer, the
affirmative vote of the holders of a majority of the outstanding Common Shares
approving the Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary in connection with this Agreement.
SECTION 4.15 Absence of Certain Changes. Except as disclosed in the SEC
Reports filed prior to the date of this Agreement, there has not been, since
December 27, 1996, any Material Adverse Effect on the Company or any event that
is reasonably expected to have a Material Adverse Effect. Except as disclosed in
the SEC Reports filed prior to the date of this Agreement or as set forth in
Section 4.15 of the Company Disclosure Schedule, since December 27, 1996, the
Company and its subsidiaries have conducted their businesses only in the
ordinary course of business consistent with past practices and there has not
been, directly or indirectly:
(i) any payment or granting by the Company or any of its subsidiaries
of any increase in compensation to any director or executive officer of the
Company or, except in the ordinary course of business and consistent with
past practice or as required under employment agreements in effect as of or
prior to the date of this Agreement, any employee of the Company or its
subsidiaries;
(ii) any granting by the Company or any of its subsidiaries to any
such director, executive officer or employee of any increase in severance
or termination pay, except as required under employment, severance or
termination agreements or plans in effect as of the date of this Agreement;
(iii) any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such director or
executive officer, or, except in the ordinary course of business consistent
with past practice, employee;
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(iv) except in the ordinary course of business and consistent with
past practice or as required under employment agreements in effect as of or
prior to the date of this Agreement, any material adoption or material
increase in payments to or benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan for or with any employees of the Company or any of
its subsidiaries;
(v) any change in accounting methods, principles or practices by the
Company or any of its Subsidiaries materially affecting their assets,
liabilities or business, except insofar as may have been required by change
in generally accepted accounting principles; or
(vi) any agreement to do any of the things described in the preceding
clauses (i) through (v).
SECTION 4.16 Rights Agreement. The Company and the Company Board have
authorized all necessary action to amend the Rights Agreement (without redeeming
the Rights) so that none of the execution or delivery of this Agreement, the
making of the Offer, the acquisition of Shares pursuant to the Offer or the
consummation of the Merger will (i) cause any Rights issued pursuant to the
Rights Agreement to become exercisable or to separate from the stock
certificates to which they are attached, (ii) cause Parent, the Purchaser or any
of their Affiliates to be an Acquiring Person (as each such term is defined in
the Rights Agreement), or (iii) trigger other provisions of the Rights
Agreement, including giving rise to a Distribution Date (as such term is defined
in the Rights Agreement), and such amendment shall be in full force and effect
from and after the date hereof.
SECTION 4.17 Brokers. Except for the engagement of the Investment Bankers,
none of the Company, any of its subsidiaries, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
SECTION 4.18 Opinion of Investment Banker. The Company has received the
written opinion of the Investment Banker to the effect that, as of the date
hereof, the consideration to be received by the holders of Common Shares (other
than Parent or any of its affiliates or holders of Dissenting Shares) pursuant
to the Offer and the Merger is fair to the Company's stockholders from a
financial point of view.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
SECTION 5.1 Organization and Qualification. Each of Parent and the
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its state or jurisdiction of incorporation and is in good
standing as a foreign corporation in each other jurisdiction where the
properties owned, leased or operated, or the business conducted, by it require
such qualification and where failure to be in good standing or to so qualify
would have a Material Adverse Effect on Parent. The term 'MATERIAL ADVERSE
EFFECT ON PARENT', as used in this Agreement, means any change in or effect on
the business, financial condition or results of operations of Parent or any of
its subsidiaries that would, individually or in the aggregate, be materially
adverse to Parent and its subsidiaries taken as a whole. The Purchaser is a
wholly owned subsidiary of Parent formed solely for the purpose of executing
this Agreement and consummating the transactions contemplated hereby, and has
not, since its formation, conducted any operations or owned any material assets.
Parent is a wholly owned subsidiary of Danaher Corporation, a Delaware
corporation ('DANAHER'). Parent is the holding company for the majority of
Danaher's operating subsidiaries and its holdings represent more than 50% of the
assets, sales, and profits of Danaher. Parent is not an operating company.
SECTION 5.2 Authority Relative to this Agreement.
(a) Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver 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 and validly
authorized by the Board of Directors of each of Parent and the Purchaser and no
other corporate proceedings on the part of
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Parent or the Purchaser are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and, assuming
this Agreement constitutes a valid and binding obligation of the Company, this
Agreement constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in accordance
with its terms.
(b) Other than in connection with, or in compliance with, the provisions of
the CGCL with respect to the transactions contemplated hereby, the Exchange Act,
the securities laws of the various states and the HSR Act, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by Parent or the Purchaser of the transactions contemplated by
this Agreement other than authorizations, consents and approvals the failure to
obtain, or filings the failure to make, which would not, in the aggregate, have
a Material Adverse Effect on Parent.
SECTION 5.3 No Violation. Neither the execution or delivery of this
Agreement by either Parent or the Purchaser nor the consummation by either
Parent or the Purchaser of the transactions contemplated hereby will (i)
constitute a breach or violation of any provision of the Certificate of
Incorporation or By-Laws of either Parent or the Purchaser or (ii) constitute a
breach, violation or default (or any event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien or
encumbrance upon any of the properties or assets of Parent, the Purchaser or any
of their respective subsidiaries under, any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument to which Parent,
the Purchaser or any of their respective subsidiaries is a party or by which
they or any of their respective properties or assets are bound, other than
breaches, violations, defaults, terminations, accelerations or creation of liens
and encumbrances which, in the aggregate would not have a Material Adverse
Effect on Parent.
SECTION 5.4 Information. None of the information supplied by Parent or the
Purchaser in writing (other than projections of future financial performance)
specifically for inclusion or incorporation by reference in (i) the Schedule
14D-9, (ii) the Proxy Statement, or (iii) the Other Filings will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to stockholders, at the time of the Special Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, no representation is
made by the Parent or the Purchaser with respect to statements made in any of
the foregoing documents based upon information supplied by the Company.
SECTION 5.5 Financing. Parent and the Purchaser have on the date hereof
and will have at the time of acceptance for payment and purchase of Shares
pursuant to the Offer and at the Effective Time, the funds necessary to
consummate the Offer and the Merger and the transactions contemplated thereby on
a timely basis in accordance with this Agreement.
ARTICLE VI
COVENANTS
SECTION 6.1 Conduct of Business of the Company. Except as contemplated by
this Agreement or as expressly agreed to in writing by Parent, during the period
from the date of this Agreement to the Effective Time, the Company will, and
will cause each of its subsidiaries to, conduct its operations according to its
ordinary and usual course of business and consistent with past practice and will
use its reasonable efforts, and will cause each of its subsidiaries to use its
reasonable efforts, to preserve intact the business organization of the Company
and each of its subsidiaries, to keep available the services of its and their
present officers and key employees, and to preserve the good will of those
having business relationships with it. Without limiting the generality of the
foregoing, and except as (w) otherwise expressly provided in this Agreement, (x)
required by law, (y) previously disclosed to Parent in the Company's 1998
operating budget, or (z) set forth on Section 6.1 of the Company Disclosure
Schedule, prior to the Effective Time, the Company will not, and will cause its
subsidiaries not to, without the prior written consent of Parent (which consent
shall not be unreasonably withheld):
(i) except with respect to annual bonuses made in the ordinary course
of business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance,
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termination, stock option, stock appreciation right, pension, retirement,
employment or other employee benefit agreement, trust, plan or other
arrangement for the benefit or welfare of any director, officer or employee
of the Company or any of its subsidiaries or increase in any manner the
compensation or fringe benefits of any director, officer or employee of the
Company or any of its subsidiaries or pay any benefit not required by any
existing agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its subsidiaries (in
each case, except with respect to employees, non-executive officers and
directors in the ordinary course of business consistent with past
practice);
(ii) incur any indebtedness for borrowed money (other than under
existing lines of credit) or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into any 'keep well'
or other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, or make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or indirect wholly owned subsidiary of the Company;
(iii) expend funds for capital expenditures in excess of $4,000,000
per fiscal quarter, including amounts reflected in the Company's 1998
operating budget;
(iv) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets other
than immaterial properties or assets (or immaterial portions of properties
or assets), except in the ordinary course of business consistent with past
practice;
(v) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except (A) as
contemplated by the Rights Agreement, (B) for dividends paid by
subsidiaries to the Company with respect to capital stock and (C) for
regular quarterly dividends not to exceed $.03 per quarter), (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(vi) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock or
the capital stock of any of its subsidiaries, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or
any other securities or equity equivalents (including without limitation
stock appreciation rights) (other than issuances upon exercise of Options
outstanding on the date hereof pursuant to the Stock Plans or the Rights
Agreement);
(vii) amend its Restated Articles of Incorporation, By-Laws or
equivalent organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the Company;
(viii) make or agree to make any acquisition of assets which is
material to the Company and its subsidiaries, taken as a whole, except for
(x) purchases of inventory, supplies and material in the ordinary course of
business or (y) pursuant to purchase orders entered into in the ordinary
course of business which do not call for payments in excess of $1,000,000
per annum;
(ix) settle or compromise any shareholder derivative suits arising out
of the transactions contemplated hereby or any other litigation (whether or
not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid, individually in an amount in
excess of $1,000,000, other than in consultation and cooperation with
Parent, and, with respect to any such settlement, with the prior written
consent of Parent, which consent shall not be unreasonably withheld;
(x) make any material Tax election or settle or compromise any
material Tax liability (whether with respect to amount or timing); or
(xi) except in the ordinary course of business, modify, amend or
terminate any Material Contract or waive or release or assign any material
rights or claims.
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SECTION 6.2 Access to Information. From the date of this Agreement until
the Effective Time, the Company will, and will cause its subsidiaries, and each
of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the 'COMPANY REPRESENTATIVES') to, give Parent
and the Purchaser and their respective officers, employees, counsel, advisors
and representatives (collectively, the 'PARENT REPRESENTATIVES') reasonable
access, upon reasonable notice and during normal business hours, to the offices
and other facilities and to the books and records of the Company and its
subsidiaries and will cause the Company Representatives and the Company's
subsidiaries to furnish Parent, the Purchaser and the Parent Representatives
with such financial and operating data and such other information with respect
to the business and operations of the Company and its subsidiaries as Parent and
the Purchaser may from time to time reasonably request. Parent and the Purchaser
agree that any information furnished pursuant to this Section 6.2 will be
subject to the provisions of the letter agreement dated January 9, 1998 between
Parent and the Company the ('CONFIDENTIALITY AGREEMENT').
SECTION 6.3 Efforts.
(a) Subject to the terms and conditions herein provided for, and subject to
Section 6.10 hereof, each of the parties hereto agrees to use its reasonable
best efforts to take, or cause to be taken, all appropriate action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable best efforts to
obtain all necessary opinions, waivers, consents and approvals and effect all
necessary registrations and filings. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action. Without limiting the foregoing,
each of the Company, Parent and the Purchaser shall, and the Company shall cause
each of its subsidiaries to, make all necessary filings with Governmental
Entities as promptly as practicable in order to facilitate prompt consummation
of the transactions contemplated by the Offer and this Agreement. In addition,
each of Parent, the Purchaser and the Company will use its reasonable best
efforts (including, without limitation, payment of any required fees) and will
cooperate fully with each other to (i) comply as promptly as practicable with
all governmental requirements applicable to the transactions contemplated by the
Offer and this Agreement, including the making of all filings necessary or
proper under applicable laws and regulations to consummate and make effective
the transactions contemplated by the Offer and this Agreement, including, but
not limited to, cooperation in the preparation and filing of the Offer
Documents, the Schedule 14D-9 and any actions or filings related thereto, the
Proxy Statement or other foreign filings and any amendments to any thereof, and
(ii) obtain promptly all consents, waivers, approvals, authorizations or permits
of, or registrations or filings with or notifications to (any of the foregoing
being a 'CONSENT'), any Governmental Entity necessary for the consummation of
the transactions contemplated by the Offer and this Agreement. Subject to the
Confidentiality Agreement, Parent and the Company shall furnish to one and other
(and to the Purchaser) such necessary information and reasonable assistance as
Parent, the Purchaser or the Company may reasonably request in connection with
the foregoing. In addition, if at any time prior to the Effective Time any event
or circumstance relating to either the Company or Parent or the Purchaser or any
of their respective subsidiaries, should be discovered by the Company or Parent,
as the case may be, and which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance.
(b) Without limiting Section 6.3(a), Parent, the Purchaser and the Company
shall each (i) promptly make or cause to be made the filings required of such
party under the HSR Act with respect to the Offer and the Merger; (ii) take any
and all steps necessary to avoid or eliminate each and every impediment under
any antitrust, competition, or trade regulation law that may be asserted by any
Governmental Entity with respect to the Offer or the Merger so as to enable
consummation thereof to occur as soon as reasonably possible, including without
limitation, proposing, negotiating, committing to and effecting, by consent
decree, hold separate order, or otherwise, the sale, divestiture or disposition
of such assets or businesses of Parent, the Purchaser or the Company as may be
required in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying
consummation of the Offer or the Merger; and (iii) use its best efforts to avoid
the entry of, or to have vacated or terminated, any decree, order, or judgment
that would restrain, prevent or delay the consummation of the Offer or the
Merger, including without limitation defending through litigation on the merits
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any claim asserted in any court by any party. Each party hereto shall promptly
notify the other parties of any communication to that party from any
Governmental Entity and permit the other parties to review in advance any
proposed communication to any Governmental Entity. Parent and the Company shall
not (and shall cause their respective affiliates and representatives not to)
agree to participate in any meeting with any Governmental Entity in respect of
any filings, investigation or other inquiry unless it consults with the other
party in advance and, to the extent permitted by such Governmental Entity, gives
the other party the opportunity to attend and participate thereat. Subject to
the Confidentiality Agreement, each of the parties hereto will coordinate and
cooperate fully with the other parties hereto in exchanging such information and
providing such assistance as such other parties may reasonably request in
connection with the foregoing and in seeking early termination of any applicable
waiting periods under the HSR Act or in connection with other Consents. Each of
the Company, Parent and the Purchaser agrees to respond promptly to and comply
fully with any request for additional information or documents under the HSR
Act. Subject to the Confidentiality Agreement, the Company will provide Parent
and the Purchaser, and Parent and the Purchaser will provide the Company, with
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or any of its representatives,
on the one hand, and any Governmental Entity or members of its staff, on the
other hand, with respect to this Agreement and the transactions contemplated
hereby.
SECTION 6.4 Public Announcements. The Company, on the one hand, and
Parent and the Purchaser, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Offer, the Merger and the other transactions
contemplated hereby, agree to provide to the other party for review a copy of
any such press release or statement, and shall not issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable law or any listing agreement with a securities exchange.
SECTION 6.5 Employee Benefit Arrangements.
(a) Parent agrees that the Company will honor, and, from and after the
Effective Time, Parent will cause the Surviving Corporation to honor, in
accordance with their respective terms as in effect on the date hereof, the
employment, severance and bonus agreements and arrangements to which the Company
is a party which are set forth on Sections 4.7 and 6.5 of the Company Disclosure
Schedule.
(b) Parent agrees that (i) for a period of two years following the
Effective Time, the Surviving Corporation shall provide employees of the Company
and its subsidiaries (A) compensation (including bonus and incentive awards)
programs and plans and (B) employee benefit and welfare plans, programs,
contracts, agreements and policies (including insurance and pension plans),
fringe benefits and vacation policies which are not materially less favorable in
the aggregate to such employee than those generally in effect on the date of
this Agreement with respect to similarly situated employees of the Company.
While nothing in the foregoing sentence shall require Parent or the Surviving
Corporation to maintain any stock option or other stock incentive plan using
Company Shares following the Effective Time, it is understood that if Parent or
the Purchaser or any affiliate of Parent maintains a stock option or other stock
incentive plan, employees of the Company shall be considered for participation
in such plan or plans following the Effective Time on a basis no less favorable
than the participation of employees of Parent and its affiliates with comparable
positions.
SECTION 6.6 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
subsidiaries (the 'INDEMNIFIED PARTIES') against all losses, claims, damages,
expenses or liabilities arising out of or related to actions or omissions or
alleged actions or omissions occurring at or prior to the Effective Time (i) to
the full extent permitted by California law or, if the protections afforded
thereby to an Indemnified Person are greater, (ii) to the same extent and on the
same terms and conditions (including with respect to advancement of expenses)
provided for in the Company's Restated Articles of Incorporation and By-Laws and
agreements (including indemnification agreements to which directors or officers
of the Company or its subsidiaries are parties) in effect at the date hereof and
identified in Section 6.6 of the Company Disclosure Schedule (to the extent
consistent with applicable law), which provisions and agreements will survive
the Merger and continue in full force and effect after the Effective Time.
Without limiting the foregoing, (i) Parent shall, and shall cause the Surviving
Corporation to, periodically advance reasonable legal and other expenses
(including of
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counsel selected by the Indemnified Party and reasonably acceptable to Parent)
as incurred by an Indemnified Party with respect to the foregoing to the full
extent permitted under applicable law, and (ii) any determination required to be
made with respect to whether an Indemnified Party shall be entitled to
indemnification shall, if requested by such Indemnified Party, be made by
independent legal counsel selected by the Surviving Corporation and reasonably
satisfactory to such Indemnified Party. Notwithstanding the foregoing, Parent
shall not, in connection with any one action or proceeding for which it is
obligated to indemnify the Indemnified Parties hereunder or separate but
substantially similar actions or proceedings arising out of the same general
allegations be liable for fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for all Indemnified
Parties (except in the event that one or more of the Indemnified Parties shall
have an actual or potential conflict of interest that would make it reasonably
advisable to retain separate counsel). Parent shall be entitled to participate
in the defense of any such action or proceeding and counsel selected by the
Indemnified Party shall, to the extent consistent with their professional
responsibilities, cooperate with Parent and any counsel designated by Parent.
(b) Parent agrees that the Company, and, from and after the Effective Time,
the Surviving Corporation, shall cause to be maintained in effect for not less
than six years from the Effective Time the current policies of the directors'
and officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor other policies of at least the
same coverage amounts and which contain terms and conditions not less
advantageous to the beneficiaries of the current policies and provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time; and provided, further, that the
Surviving Corporation shall not be required to pay an annual premium in excess
of 250% of the last annual premium paid by the Company prior to the date hereof
and if the Surviving Corporation is unable to obtain the insurance required by
this Section 6.6(b) it shall obtain as much comparable insurance as possible for
an annual premium equal to such maximum amount.
(c) Parent shall guarantee the obligations of the Surviving Corporation
under this Section 6.6.
(d) This Section 6.6 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
Parent and the Surviving Corporation, and shall be enforceable by the
Indemnified Parties.
SECTION 6.7 Notification of Certain Matters. Parent and the Company shall
promptly notify each other of (i) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (A) to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (B) to cause
any covenant, condition or agreement under this Agreement not to be complied
with or satisfied and (ii) any failure of the Company, Parent or Purchaser, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder. Each of the Company,
Parent and the Purchaser shall give prompt notice to the other parties hereof of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
SECTION 6.8 Rights Agreement. Subject to the provisions of Sections 4.16
and 6.10, the Company covenants and agrees that it will not (i) redeem the
Rights, (ii) amend the Rights Agreement, or (iii) take any action which would
allow any Person (as defined in the Rights Agreement) other than Parent or the
Purchaser to acquire beneficial ownership of 10% or more of the Common Shares
without causing a Distribution Date (as such term is defined in the Rights
Agreement) to occur.
SECTION 6.9 State Takeover Laws. The Company shall, upon the request of
the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
SECTION 6.10 No Solicitation. (a) The Company represents and warrants to,
and covenants and agrees with, Parent and Purchaser that neither the Company nor
any of its subsidiaries has any agreement, arrangement or understanding with any
potential third party acquiror that, directly or indirectly, would be violated,
or require any payments, by reason of the execution, delivery and/or
consummation of this Agreement. The Company shall,
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and it shall cause its subsidiaries and its and their officers, directors,
employees, investment bankers, attorneys and other agents and representatives
to, immediately cease any existing discussions or negotiations with any person
other than Parent or Purchaser (a 'THIRD PARTY') heretofore conducted with
respect to any Acquisition Transaction (as hereinafter defined). The Company
shall not, and it shall cause its subsidiaries and its and their officers,
directors, employees, investment bankers, attorneys and other agents and
representatives not to, directly or indirectly, (w) solicit, initiate, continue,
facilitate or encourage (including by way of furnishing or disclosing non-public
information) any inquiries, proposals or offers from any Third Party with
respect to, or that could reasonably be expected to lead to, any acquisition or
purchase of a material portion of the assets (other than in the ordinary course
of business) or business of, or any significant equity interest in (including by
way of a tender offer), or any merger, consolidation or business combination
with, or any recapitalization or restructuring, or any similar transaction
involving, the Company or any of its subsidiaries (the foregoing being referred
to collectively as an 'ACQUISITION TRANSACTION'), or (x) negotiate, explore or
otherwise communicate in any way with any Third Party with respect to any
Acquisition Transaction, (y) enter into, approve or recommend any agreement,
arrangement or understanding requiring the Company to abandon, terminate or fail
to consummate the Offer and/or the Merger or any other transaction contemplated
hereby, or (z) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to Parent, the approval or recommendation by the Company Board
of the Offer, the Merger or this Agreement; provided, however, that nothing
herein shall prevent the Company Board from taking, and disclosing to the
Company's shareholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer. The Company
will promptly notify Parent of the receipt of any proposal relating to an
Acquisition Transaction. Notwithstanding anything to the contrary in the
foregoing, the Company may, in response to an unsolicited written proposal with
respect to an Acquisition Transaction involving the acquisition of all of the
Shares (or all or substantially all of the assets of the Company and its
subsidiaries) from a Third Party (i) furnish or disclose non-public information
to such Third Party and (ii) negotiate, explore or otherwise communicate with
such Third Party, in each case only if (a) after being advised (x) by its
outside counsel with respect to its fiduciary obligations and (y) its financial
advisor with respect to the financial terms of any such proposed Acquisition
Transaction, the Board of Directors of the Company determines in good faith by a
majority vote that taking such action is necessary in the exercise of its
fiduciary obligations under applicable law (the proposal with respect to an
Acquisition Transaction meeting the requirements of this clause (a), a 'SUPERIOR
PROPOSAL') and (b) prior to furnishing or disclosing any non-public information
to, or entering into discussions or negotiations with, such Third Party, the
Company receives from such Third Party an executed confidentiality agreement
(which the Company is hereby expressly permitted to negotiate with such party)
with terms no less favorable in the aggregate to Company than those contained in
the Confidentiality Agreement, but which confidentiality agreement shall not
provide for any exclusive right to negotiate with the Company or any payments by
the Company and need not contain any 'STANDSTILL' or similar provisions. In
addition, the Company Board may approve or recommend (and, in connection
therewith withdraw or modify its approval or recommendation of the Offer, this
Agreement or the Merger) a Superior Proposal and may terminate this Agreement
solely to enter into a definitive agreement with respect to a Superior Proposal
provided, however, that Company shall not, and shall cause its affiliates not
to, enter into a definitive agreement with respect to a Superior Proposal unless
the Company concurrently terminates this Agreement in accordance with the terms
hereof and pays any Termination Fee required under Section 8.3(b) and agrees to
pay any other amounts required under such Section 8.3(b).
(b) The Company shall promptly (but in any event within one business day of
the Company becoming aware of same) advise Parent of the receipt by the Company,
any of its subsidiaries or any of the Company's bankers, attorneys or other
agents or representatives of any written inquiries or proposals relating to an
Acquisition Transaction and any actions taken pursuant to Section 6.10(a), and
shall promptly (but in any event within one business day of the Company becoming
aware of same) provide Parent with a copy of any such written inquiry or
proposal. The Company shall keep Parent reasonably informed of the status and
content of and material developments (including the calling of meetings of the
Company Board to take action with respect to such Acquisition Transaction) with
respect to any discussions regarding any Acquisition Transaction with a Third
Party. The Company agrees that it will not enter into any agreement with respect
to a Superior Proposal unless and until Parent has been given notice of the
identity of the parties making such Superior Proposal, the material terms
thereof and material developments referred to in the preceding sentence at least
two business days prior to the entering into such agreement.
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SECTION 6.11 Parent Agreements. Whenever this Agreement requires the
Purchaser to take any action, such requirement will be deemed to include an
undertaking on the part of Parent to cause the Purchaser to take such action,
and Parent agrees to cause the Purchaser to otherwise comply with all of its
obligations under this Agreement. Parent hereby covenants and agrees to duly
incorporate the Purchaser under the laws of the State of California before the
close of business, Los Angeles time, on Tuesday, February 3, 1998. Parent
further agrees to cause the Purchaser, on or before February 3, 1998, to execute
a written instrument reasonably acceptable to the Company pursuant to which the
Purchaser agrees to be bound by the provisions hereby and to perform all of its
obligations hereunder as though it were a party hereto, it being understood that
any actions contemplated hereby (and representations and warranties made herein)
which are to be taken (or made) by the Purchaser shall not be taken (or made)
prior to the time the Purchaser executes such written instrument. The Company
and Parent agree that upon execution of such written instrument by the
Purchaser, the Purchaser, shall for all purposes be considered a party to this
Agreement, and the Company and Parent further agree that, notwithstanding the
fact that the Purchaser will not have executed this Agreement on the date
hereof, this Agreement is for all purposes a valid and binding agreement of each
of the Company and Parent.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company shall have
duly approved the transactions contemplated by this Agreement, if required
by applicable law or the Restated Certificate of Incorporation of the
Company.
(b) Purchase of Common Shares. If, and only if, the Minimum Condition
shall have been satisfied prior to the Expiration Date, the Purchaser shall
have accepted for payment and paid for Common Shares in an amount
sufficient to meet the Minimum Condition and otherwise pursuant to the
Offer in accordance with the terms hereof; provided, however, that this
condition shall be deemed to be satisfied with respect to the obligation of
Parent and the Purchaser to effect the Merger if the Purchaser fails to
accept for payment or pay for Common Shares pursuant to the Offer in
violation of the terms of the Offer or of this Agreement.
(c) Injunctions; Illegality. No statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or other Governmental
Entity which prohibits the consummation of the Merger; provided, however,
that the Company, Parent and the Purchaser shall use their reasonable best
efforts to have any such order, decree or injunction vacated.
(d) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or terminated.
SECTION 7.2 Conditions to Obligations of Parent. In the event the Offer
shall not have been consummated, the obligations of Parent to effect the Merger
shall be further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct in all respects in each case as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date;
provided, however, that, with respect to representations and warranties
other than Sections 4.2 and 4.3 or the first sentence of Section 4.15 and
representations and warranties otherwise qualified by Material Adverse
Effect on the Company, for purposes of this Section 7.2, such
representations and warranties and statements shall be deemed to be true
and correct in all respects unless the failure or failures of such
representations and warranties and statements to be so true and correct,
individually or in the aggregate, would result in a Material Adverse Effect
with respect to the Company. Parent shall have received a certificate
signed on behalf of the Company by the chief financial officer of the
Company to the effect set forth in this paragraph.
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(b) Performance of Obligations of the Company. The Company shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date, except for such failures to
perform as have not had or would not, individually or in the aggregate,
have a Material Adverse Effect on the Company or materially adversely
affect the ability of the Company to consummate the transactions
contemplated hereby.
(c) Consents, etc. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties set forth in Section 4.3
of the Company Disclosure Schedule shall have been obtained.
SECTION 7.3 Conditions to Obligation of the Company. In the event the
Offer shall not have been consummated, the obligation of the Company to effect
the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and the Purchaser set forth in this Agreement shall be
true and correct in all respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date, provided, that, for purposes of this Section 7.3, with
respect to representations and warranties other than Section 5.2 and the
representations and warranties otherwise qualified by Material Adverse
Effect on Parent, such representations and warranties shall be deemed to be
true and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or
in the aggregate, would result in a Material Adverse Effect on Parent. The
Company shall have received certificates signed on behalf of Parent,
respectively, by the chief executive officer of Parent and the Purchaser,
respectively, to the effect set forth in this paragraph.
(b) Performance of Obligations of Parent and the Purchaser. Each of
Parent and the Purchaser shall have performed the obligations required to
be performed by it under this Agreement at or prior to the Closing Date
(except for such failures to perform as have not had or could not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect on Parent or adversely affect the ability of Parent
or the Purchaser to consummate the transactions herein contemplated or
perform its obligations hereunder).
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company (with any
termination by Parent also being an effective termination by the Purchaser):
(a) by the mutual written consent of Parent and the Company, by action
of their respective Boards of Directors;
(b) by the Company if the Company is not in material breach of any of
its representations, warranties, covenants or agreements contained in this
Agreement and if (i) Parent or the Purchaser fails to commence the Offer as
provided in Section 1.1, or (ii)(x) at or at any time following the initial
Expiration Date as it may be extended pursuant to the terms hereof, the
Minimum Condition shall have been satisfied and all other conditions to the
Offer shall have been satisfied or waived in accordance with the terms
hereof and (y) Parent or the Purchaser shall not have accepted for payment
and paid for Common Shares pursuant to the Offer in accordance with the
terms hereof and thereof;
(c) by Parent or the Company if the Merger shall not have been
consummated on or before June 30, 1998; provided, however, that neither
Parent nor the Company may terminate this Agreement pursuant to this
Section 8.1(c) if such party shall have materially breached this Agreement;
and provided, further, that Parent may not terminate this Agreement
pursuant to this Section 8.1(c) if the Offer shall have theretofore been
consummated;
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(d) by Parent or the Company if any court of competent jurisdiction in
the United States or other United States Governmental Entity has issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided, however, that
the party seeking to terminate this Agreement shall have used its
reasonable best efforts to remove or lift such order, decree, ruling or
other action;
(e) by the Company if, prior to the acceptance for payment of Common
Shares pursuant to the Offer,(i) there shall have occurred, on the part of
Parent or Purchaser, a material breach of any representation or warranty,
covenant or agreement contained in this Agreement which is not curable or
(ii) the Company (A) to the extent permitted by Section 6.10, enters into a
definitive agreement with respect to a Superior Proposal and (B)
concurrently pays any Termination Fee and the other amounts required under
Section 8.3(b);
(f) by Parent if the Company breaches its covenant in Section 6.8,
provided, however, that such breach occurs prior to the time that designees
of Parent constitute a majority of the Company Board pursuant to Section
1.3; or
(g) by Parent, prior to the purchase of Common Shares pursuant to the
Offer, if (i) there shall have occurred, on the part of the Company, a
breach of any representation, warranty, covenant or agreement contained in
this Agreement which (except in the case of a breach of the representations
and warranties in Section 4.2, Section 4.3 or the first sentence of Section
4.15) individually, or in the aggregate if not cured would be reasonably
likely to have a Material Adverse Effect on the Company and which is not
curable or (ii) the Company Board shall have withdrawn or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to the
Purchaser its approval or recommendation of the Offer, this Agreement or
the Merger, shall have approved or recommended Superior Proposal, or shall
have resolved to effect any of the foregoing.
SECTION 8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provisions of the last
sentence of Section 6.2 and the provisions of this Section 8.2 and Section 8.3,
which shall survive any such termination. Nothing contained in this Section 8.2
shall relieve any party from liability for any breach of this Agreement.
SECTION 8.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
the Offer, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(e)(ii), 8.1(f) or 8.1(g)(ii), then the Company shall promptly pay all
documented fees and expenses of Parent and the Purchaser related to this
Agreement, the transactions contemplated hereby and any related financing
(subject to a maximum of $2.0 million), and in the event this Agreement is
terminated pursuant to 8.1(e) (ii) or 8.1(g)(ii), then the Company shall
promptly pay Parent a termination fee of $15 million (the 'TERMINATION FEE'),
provided that in no event shall more than one Termination Fee be payable by the
Company.
(c) in the event that (i) any person shall have publicly disclosed a
proposal regarding an Acquisition Transaction and (ii) following such disclosure
(and provided that neither Parent nor the Purchaser is in material breach of any
of its representations, warranties, covenants or agreements contained in this
Agreement), either (x) June 30, 1998 occurs without (A) the Minimum Condition
being satisfied (other than as a result of a material breach hereof by Parent or
the Purchaser that has not been cured) or (B) the Company's stockholders having
approved and adopted the Merger Agreement or (y) the Agreement is terminated
pursuant to Sections 8.1(f) or 8.1(g)(ii), and (iii) not later than six months
after any such termination the Company shall have entered into an agreement for
an Acquisition Transaction, or an Acquisition Transaction shall have been
consummated, then the Company shall promptly, but in no event later than
immediately prior to, and as a condition of, entering into such definitive
agreement, or, if there is no such definitive agreement then immediately upon
consummation of the Acquisition Transaction, pay Parent a Termination Fee of $15
million which amount shall be payable by wire transfer of same day funds to an
account designated by the Parent.
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(d) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees)
incurred in connection with such action.
SECTION 8.4 Amendment. Subject to Section 1.3(c), this Agreement may be
amended by the Company, Parent and the Purchaser at any time before or after any
approval of this Agreement by the stockholders of the Company but, after any
such approval, no amendment shall be made which decreases the Merger Price or
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 8.5 Extension; Waiver. Subject to Section 1.3(c), at any time
prior to the Effective Time, Parent and the Purchaser, on the one hand, and the
Company, on the other hand, may (i) extend the time for the performance of any
of the obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties contained herein of the other or in any
document, certificate or writing delivered pursuant hereto by the other, or
(iii) waive compliance by the other with any of the agreements or conditions.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 2.9, Section 3.2, the last sentence of Section 6.2, Section 6.5 and
Section 6.6 shall survive the Effective Time indefinitely (except to the extent
a shorter period of time is explicitly specified therein).
SECTION 9.2 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments referred to
herein) and the Confidentiality Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other party (except
that Parent may assign its rights and the Purchaser may assign its rights,
interest and obligations to any affiliate or direct or indirect subsidiary of
Parent without the consent of the Company provided that no such assignment shall
relieve Parent of any liability for any breach by such assignee). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.3 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
SECTION 9.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or telecopier to the
respective parties as follows:
If to Parent or the Purchaser:
DH Holdings Corp.
1250 24th Street, N.W.
Washington, D.C. 20037
Attention: General Counsel
Telecopier Number: (202) 828-0860
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with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Eric J. Friedman, Esq.
Telecopier Number: (212) 735-2000
If to the Company:
Pacific Scientific Company
620 Newport Center Drive
Newport Beach, California 92660
Attention: Lester Hill
Telecopier Number: (714) 720-1083
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopier Number: (212) 403-2000
and a copy to:
Paul, Hastings, Janofsky & Walker LLP
695 Town Center Drive, 17th Floor
Costa Mesa, California 92816
Attention: William J. Simpson, Esq.
Telecopier Number: (714) 979-1921
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.6 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.8 Parties in Interest. Except with respect to Sections 2.9, 6.5
and 6. 6 (which are intended to be for the benefit of the persons identified
therein, and may be enforced by such persons), this Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.9 Certain Definitions. As used in this Agreement:
(a) the term 'AFFILIATE,' as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, 'CONTROL'
(including, with correlative meanings, the terms 'CONTROLLING,' 'CONTROLLED BY'
and 'UNDER COMMON CONTROL WITH'), as applied to any person, means the
possession, directly or indirectly, of the power to
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direct or cause the direction of the management and policies of that person,
whether through the ownership of voting securities, by contract or otherwise;
(b) the term 'PERSON' or 'PERSON' shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
'group' as such term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term 'SUBSIDIARY' or 'SUBSIDIARIES' means, with respect to Parent,
the Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Parent, the Company or such other person, as the
case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, stock or other equity interests the holders of
which are generally entitled to more than 50% of the vote for the election of
the board of directors or other governing body of such corporation or other
legal entity.
SECTION 9.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
DH HOLDINGS CORP.
By: /s/ Patrick W. Allender
----------------------------
Name: Patrick W. Allender
Title: Vice President
ACC ACQUISITION CORP.
By: /s/ Patrick W. Allender
----------------------------
Name: Patrick W. Allender
Title:
PACIFIC SCIENTIFIC COMPANY
By: /s/ Lester Hill
----------------------------
Name: Lester Hill
Title: Chairman and Chief
Executive Officer
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ANNEX I
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c)
promulgated under the Exchange Act, pay for any tendered Shares and may
terminate or, subject to the terms of the Merger Agreement, amend the Offer, if
(i) there shall not be validly tendered and not properly withdrawn prior to the
Expiration Date that number of Shares which represents at least 90% of the total
number of outstanding Shares on the date of purchase (not taking into account
the Rights) (the 'MINIMUM CONDITION'), (ii) any applicable waiting period under
the HSR Act or under any applicable foreign statutes or regulations shall not
have expired or been terminated prior to the Expiration Date, or (iii) at any
time on or after the date of the Merger Agreement and prior to the time of
acceptance for payment or payment for any Shares, any of the following events
shall occur:
(a) an order shall have been entered in any action or proceeding
before any United States federal or state court or governmental agency or
other United States regulatory or administrative agency or commission (an
'ORDER'), or a preliminary or permanent injunction by a United States court
of competent jurisdiction shall have been issued and remain in effect (an
'INJUNCTION'), which, in either case, would have the effect of (i) making
the purchase of, or payment for, some or all of the Shares pursuant to the
Offer or Merger Agreement illegal, (ii) otherwise preventing consummation
of the Offer or Merger, or (iii) imposing material limitations on the
ability of the Purchaser or Parent effectively to exercise full rights of
ownership of the Shares, including the right to vote the Shares purchased
by it on all matters properly presented to the shareholders of the Company;
provided, however, that in order to invoke this condition, Parent and the
Purchaser shall have used their best efforts to prevent such Order or
Injunction or ameliorate the effects thereof; and provided, further, that,
if the Order or Injunction is a temporary restraining order or preliminary
injunction of a court of competent jurisdiction, the Purchaser may not, by
virtue of this condition alone amend or terminate the Offer, but may only
extend the Offer and thereby postpone acceptance for payment or purchase of
Shares; or
(b) there shall have been any United States or foreign federal or
state statute, rule or regulation enacted or promulgated after the date of
the Offer that would reasonably be expected to result in any of the
material adverse consequences referred to in paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) the
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States (other than in
connection with actual or potential United States military activities in
the Republic of Iraq as have been generally discussed in print and other
news media during the four weeks preceding the date hereof), (iv) any
limitation by any United States Governmental Entity on the extension of
credit generally to banks and other financial institutions, or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(d) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements contained
in the Merger Agreement or any of the representations and warranties of the
Company set forth in the Merger Agreement that are (i) qualified as to
materiality or Material Adverse Effect or (ii) are set forth in Sections
4.2 and 4.3 or the first sentence of Section 4.15 of the Merger Agreement
shall not be true and correct or any such representations and warranties
that are not so qualified as to materiality or Material Adverse Effect
shall not be true in any material respect, in each case as if made at such
time or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) the Company Board shall have publicly withdrawn or modified in any
manner adverse to the Purchaser its recommendation that shareholders accept
the Offer.
The foregoing conditions (including those set forth in clauses (i) and (ii)
of the initial paragraph) are for the benefit of Parent and the Purchaser and
may be asserted by Parent or the Purchaser regardless of the
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circumstances giving rise to any such conditions and, except for the Minimum
Condition, which may not be waived without the prior written consent of the
Company, may be waived by Parent or the Purchaser, in whole or in part, at any
time and from time to time, in their reasonable discretion, in each case,
subject to the terms of the Merger Agreement. The failure by Parent or the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term 'MERGER
AGREEMENT' shall be deemed to refer to the Agreement to which this Annex I is
appended.
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ANNEX II
CHAPTER 13 OF THE GENERAL CORPORATION LAW OF
THE STATE OF CALIFORNIA
DISSENTERS' RIGHTS
LEGISLATIVE COMMITTEE COMMENT
(1975)--ASSEMBLY
[CORRECTED]
Dissenters' rights are generally eliminated for shares having a highly
liquid public market (i.e., listed on the New York or American stock exchange or
included on the OTC margin stock list published by the Federal Reserve Board).
However, dissenters' rights will exist with respect to such shares if they are
subject to certain restrictions upon transfer or a substantial proportion (5%)
of the holders of a particular class of shares demand appraisal rights.
If dissenters' rights exist due to these exceptions, the holder is
generally required to vote against the reorganization and demand payment in cash
for the fair market value of his shares not later than the shareholder meeting
at which the reorganization is approved. The new law also requires the
corporation to include in the notice of such meeting a statement of the possible
existence of a procedure for perfecting dissenters' rights.
The fair market value of the shares is determined as of the day before the
first announcement of the terms of the proposed merger. If an appraisal action
is initiated in court by a dissenter and the appraised price exceeds 125% of the
fair market value of the shares as determined by the corporation, the
corporation may be required to pay all of the costs of the action, including
attorney's and other fees.
The provisions regulating corporate repurchases of its own shares apply to
the purchase of dissenting shares is prevented thereunder, the holder of such
shares becomes a creditor of the corporation but subordinated to all other
creditors of the corporation.
SECTION 1300 REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, 'dissenting shares' means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (B) listed on the list of OTC margin stocks issued by the
Board of Governors of the Federal Reserve System, and the notice of meeting
of shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
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(2) Which were outstanding on that date for the termination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter,'dissenting shareholder' means the recordholder
of dissenting shares and includes a transferee of record.
(Amended by Stats.1990, c. 1018 (A.B.2259), Section 2; Stats.1993, c. 543
(A.B.2063), Section 13.)
SECTION 1301 NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section l52)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1976, c. 641, Section 21.6, eff. Jan. 1, 1977; Stats.1980, c. 501,
p. 1052, Section 5; Stats.1980, c. 1155, p. 3831, Section 1.)
SECTION 1302 SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the
number of shares which the shareholder demands that the corporation purchase.
Upon subsequent transfers of the dissenting shares on the books of the
corporation, the new certificates,
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initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1986, c. 766, Section 23.)
SECTION 1303 PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1980, c. 501, p. 1053, Section 6, Stats.1986, c. 766, Section 24.)
SECTION 1304 ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market of the dissenting shares is in issue,
the court shall determine, or shall appoint one or more impartial appraisers to
determine, the fair market value of the shares.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1305 REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which
any dissenting shareholder who is a party, or who has intervened, is entitled
to require the corporation to purchase, with interest thereon at the legal
rate from the date on which judgment was entered.
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(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1976, c. 641, Section 22, eff. Jan. 1, 1977; Stats.1977, c. 235, p. 1068,
Section 16; Stats.1986, c. 766, Section 25.)
SECTION 1306 PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders to dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1307 DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares of (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1308 RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1309 TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which
notice of the approval by the outstanding shares or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
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(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1310 SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977.)
SECTION 1311 EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1988, c. 919, Section 8.)
SECTION 1312 RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attach the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attach the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
(Added by Stats.1975, c. 682, Section 7, eff. Jan. 1, 1977. Amended by
Stats.1976, c. 641, Section 22.5, eff. Jan. 1, 1977; Stats.1988, c. 919,
Section 9.)
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ANNEX III
BancAmerica
ROBERTSON STEPHENS
January 31, 1998
PERSONAL & CONFIDENTIAL
Board of Directors
Pacific Scientific Company
620 Newport Center Drive
Newport Beach, CA 92660-8007
Members of the Board:
You have asked our opinion with respect to the fairness to the Holders of
Pacific Scientific Company Common Stock (as defined below), from a financial
point of view and as of the date hereof, of the consideration to be received
pursuant to an Agreement and Plan of Merger (the 'Merger Agreement') among DH
Holdings Corporation ('Parent'), ACC Acquisition Corporation ('Purchaser') and
Pacific Scientific Company ('Pacific Scientific'). The Merger Agreement provides
(i) for Parent to make a cash tender offer (the 'Offer') for all of the
outstanding shares of common stock of Pacific Scientific together with the
associated preferred stock purchase rights (such common stock, together with
such rights, the 'Pacific Scientific Common Stock') at a price of $30.25 per
share, net to the seller in cash and (ii) for the merger of Pacific Scientific
and Purchaser pursuant to which Pacific Scientific will become a wholly-owned
subsidiary of Parent (the 'Merger'). In the Merger, each outstanding share of
Pacific Scientific Common Stock (other than certain shares to be cancelled
pursuant to the Merger Agreement and shares held by shareholders who properly
exercise dissenters' rights ('Dissenting Shares')) will be converted into the
right to receive $30.25 in cash. The 'Holders of Pacific Scientific Common
Stock' shall include all holders of Pacific Scientific Common Stock except for
Parent, Purchaser, any affiliates of Parent or Purchaser and any holders of
Dissenting Shares. The terms and conditions of the Offer and the Merger are set
out more fully in the Merger Agreement.
For purposes of this opinion we have, among other things, (i) reviewed certain
financial information furnished to us by Pacific Scientific, including certain
internal financial analyses, forecasts and projections prepared by the
management of Pacific Scientific; (ii) reviewed certain publicly available
information relating to Pacific Scientific; (iii) held discussions with the
management of Pacific Scientific concerning the businesses, past and current
operations, financial condition and future prospects of Pacific Scientific; (iv)
reviewed the Merger Agreement; (v) reviewed the share price and trading history
of the Pacific Scientific Common Stock; (vi) reviewed the valuations of publicly
traded companies that we deemed comparable to Pacific Scientific; (vii) compared
the financial terms of the Offer and the Merger with other transactions that we
deemed relevant; and (viii) made such other studies and inquiries, and reviewed
such other data, as we deemed relevant.
In connection with rendering our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness of all
information reviewed by us in connection with our engagement by Pacific
Scientific with respect to the Offer and the Merger and have relied upon the
assurances of the management of Pacific Scientific that they are not aware of
any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain any independent evaluation or appraisal of any of
the properties, assets or liabilities (contingent or otherwise) of Pacific
Scientific, nor were we furnished with any such evaluation or appraisal. With
respect to the financial forecasts and projections (and the assumptions and
bases therefor) of Pacific Scientific which we have
555 CALIFORNIA STREET SAN FRANCISCO 94104 415-781-9700
INVESTMENT BANKERS MEMBER OF ALL MAJOR EXCHANGES
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reviewed, upon the advice of Pacific Scientific, we have assumed that such
forecasts and projections have been reasonably prepared in good faith on the
basis of reasonable assumptions and reflect the best currently available
estimates and judgments of the management of Pacific Scientific as to the future
financial performance of Pacific Scientific, and we have further assumed that
such forecasts and projections will be realized in the amounts and in the time
periods currently estimated by the management of Pacific Scientific. We have
assumed that the Offer and the Merger will be consummated upon the terms set
forth in the Merger Agreement without material alteration thereof. We have
relied as to all legal matters relevant to rendering our opinion on the advice
of counsel.
While we believe that our review, as described herein, is an adequate basis for
the opinion that we express, this opinion is necessarily based upon market,
economic and other conditions as in effect on, and information made available to
us as of, the date hereof. You should understand that subsequent developments
may affect the conclusion expressed in this opinion and that we disclaim any
undertaking or obligation to advise you or any person of any change in any fact
or matter affecting this opinion which may come or be brought to our attention
after the date of this opinion.
We may, from time to time, trade in the securities of Pacific Scientific for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or a short position in such securities. We are acting as
financial advisor to Pacific Scientific in connection with the Offer and the
Merger and will receive, and have already received, fees in connection with the
rendering of this opinion and rendering such services and Pacific Scientific has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion or such services.
Our opinion is rendered at the request of and for the use of the Board of
Directors of Pacific Scientific. Our opinion is not intended to be and does not
constitute a recommendation to any shareholder of Pacific Scientific as to
whether such shareholder should tender shares of Pacific Scientific Common Stock
pursuant to the Offer or how any shareholder should vote upon or take any other
action with respect to the Offer or the Merger. We do not express any opinion
regarding the future value of the shares of Pacific Scientific Common Stock, nor
do we express any opinion regarding the fairness of the Offer or the Merger to
Parent or Purchaser. Our opinion may be included in a proxy statement or
solicitation/recommendation statement of Pacific Scientific distributed in
connection with the Offer or the Merger, provided that this opinion is
reproduced in full and any description of, or reference to, this opinion therein
is in a form and substance acceptable to us and our legal counsel. Except as
provided in the previous sentence, this opinion shall not be reproduced,
summarized, described or referred to, or furnished to any party, without our
prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion, as
investment bankers, that, as of the date hereof, the consideration to be
received by Holders of Pacific Scientific Common Stock in the Offer and the
Merger is fair to such holders from a financial point of view.
Very truly yours,
BANCAMERICA ROBERTSON STEPHENS
/s/
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Authorized Signatory
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