<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
PALL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NEW YORK 3599 11-1541330
(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer
incorporation or organization) Code Number) Identification Number)
</TABLE>
<TABLE>
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PETER SCHWARTZMAN, SECRETARY
PALL CORPORATION
2200 NORTHERN BOULEVARD 2200 NORTHERN BOULEVARD
EAST HILLS, N.Y. 11548 EAST HILLS, N.Y. 11548
(516) 484-5400 (516) 484-5400
(Address, including zip code, and telephone number, including (Name, address, including zip code, and telephone number,
area code, of registrant's principal executive offices) including area code, of agent for service)
</TABLE>
COPIES TO:
HEYWOOD SHELLEY, ESQ. Christopher B. Noyes, Esq.
Carter, Ledyard & Milburn Godfrey & Kahn, S.C.
2 Wall Street 780 N. Water Street
New York, N.Y. 10005 Milwaukee, Wisconsin 53202-3590
212-732-3200 414-273-3500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Merger described herein.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS A COMPLIANCE
WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Proposed
maximum Proposed maximum
TITLE OF EACH CLASS Amount to be offering price aggregate offering Amount of
OF SECURITIES TO BE REGISTERED registered per unit price registration fee
------------------------------ ---------- -------- ----- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per share 11,323,938 shares(1) $ 24.383004 $ 276,111,631 (2) $ 83,670.20
Options to purchase Common Stock ..... 698,144 options(3) --(4) -- (4) -- (4)
Common Share Purchase Rights ......... 11,323,938 rights --(5) -- (5) -- (5)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the maximum number of shares of common stock of Pall
Corporation ("Pall Shares") which may be issued in and in connection
with the merger and related transactions described herein. Includes
124,142 Pall Shares which may be issued in connection with or after the
merger as a result of the exercise of currently outstanding warrants to
purchase the common stock of Gelman Sciences Inc. ("Gelman"), and
698,144 Pall Shares which may be issued in connection with or after the
Merger as a result of the exercise of currently outstanding employee
and director stock options to purchase Gelman common stock or the
exercise of Pall options issued in exchange therefor (see footnote
(3)).
<PAGE> 2
(2) Pursuant to Rule 457(f)(1) under the Securities Act of 1933, the
proposed maximum aggregate offering price is equal to 8,679,344 (the
maximum number of shares of Gelman common stock to be converted in the
merger and upon exercise of the warrants and options referred to in
footnote (1)), multiplied by the average ($31.8125) of the high and low
prices of a share of Gelman common stock for American Stock Exchange
composite transactions on November 29, 1996.
(3) Based upon the maximum number of options to purchase Pall Shares which
may be issued in exchange for the currently outstanding Gelman stock
options referred to in footnote (1).
(4) Pursuant to the last sentence of Rule 457(g), no separate registration
fee is required.
(5) The Rights will be attached to and transferable only with the Pall
Shares being registered herein. The value, if any, attributable to the
Rights to be offered is reflected in the proposed maximum offering
price of such Pall Shares.
-----------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 3
GELMAN SCIENCES INC.
600 South Wagner Road
Ann Arbor, Michigan 48103
, 1996
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders
of Gelman Sciences Inc. ("Gelman") to be held at _________________, New York, on
_________, 1997 at 11:00 a.m., local time.
At this important meeting, you will be asked to approve and adopt the
Agreement and Plan of Reorganization and Merger (the "Merger Agreement")
providing for the merger (the "Merger") of Gelman with a subsidiary of Pall
Corporation, a New York corporation ("Pall"). Pursuant to the Merger Agreement,
each outstanding share of common stock of Gelman (a "Gelman Share") will be
converted into the right to receive shares of common stock of Pall ("Pall
Shares"). Pall Shares are traded on the New York Stock Exchange (the "NYSE")
under the symbol "PLL" and on the London Stock Exchange. The number of Pall
Shares to be received for each Gelman Share in the Merger will be determined by
a formula based on the "Average Trading Price" of a Pall Share. The "Average
Trading Price" means the average of the closing sales prices of a Pall Share for
NYSE composite transactions during the 30 NYSE trading days preceding the third
trading day before the Special Meeting. If the Average Trading Price is between
$25.29 and $27.96, Gelman shareholders will receive for each Gelman Share a
number of Pall Shares (between 1.1804 and 1.3047 Pall Shares) having a value of
$33 based on the Average Trading Price. If the Average Trading Price is $27.96
or more, Gelman shareholders will receive 1.1804 Pall Shares for each Gelman
Share. If the Average Trading Price is $25.29 or less, Gelman shareholders will
receive 1.3047 Pall Shares for each Gelman Share. Cash will be paid in lieu of
fractional Pall Shares. The Gelman Board of Directors will have the right to
terminate the Merger Agreement if the Average Trading Price is less than $21.
Cleary Gull Reiland & McDevitt Inc., Gelman's financial advisor
("Cleary Gull"), has delivered to the Board of Directors its opinion dated
___________, 1996, to the effect that, based upon and subject to certain
assumptions made, matters considered and limitations on the review undertaken,
as of the date of such opinion, the consideration to be received by the holders
of Gelman Shares pursuant to the Merger Agreement is fair, from a financial
point of view, to such holders. The opinion of Cleary Gull is included in the
attached Proxy Statement-Prospectus as Exhibit B and should be carefully read in
its entirety by all stockholders.
If the Gelman stockholders approve and adopt the Merger Agreement, your
investment in Gelman will become an investment in Pall. Pall designs, engineers,
manufactures and markets an extensive range of filtration products and systems
worldwide. The Board of Directors of Gelman believes that the proposed
transaction offers a unique opportunity to combine two leading filtration
companies with strong market shares and customer relationships in their
respective markets into a combined company with the product base, financial
strength and global market reach to compete in the international marketplace for
filtration products. The Board of Directors of Gelman believes that there are
significant opportunities for each company to utilize the products, technology,
customer
<PAGE> 4
relationships and distribution channels of the other to further develop market
opportunities. In addition, there should be opportunities for the combined
company to achieve operating synergies relating to corporate overhead.
THE BOARD OF DIRECTORS OF GELMAN HAS UNANIMOUSLY CONCLUDED THAT THE
TERMS OF THE MERGER AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF GELMAN'S
STOCKHOLDERS. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
MERGER AGREEMENT.
The accompanying Proxy Statement-Prospectus describes the Merger
Agreement and related proposed transactions more fully, and you are urged to
give it your careful consideration.
It is very important that your shares be represented at the Special
Meeting, whether or not you plan to attend and regardless of the number of
shares you hold. Therefore, please sign, date and return your proxy card as soon
as possible, whether or not you plan to attend the Special Meeting. A
postage-paid return envelope is enclosed for your convenience. Returning your
proxy card will not prevent you from voting your shares in person if you
subsequently choose to attend the Special Meeting.
PLEASE DO NOT SEND ANY GELMAN STOCK CERTIFICATES AT THIS TIME.
Immediately after the Merger is consummated, you will be sent instructions for
exchanging your Gelman stock certificates for Pall stock certificates.
Thank you for your consideration and continued support.
Sincerely,
Charles Gelman
Chairman and Chief Executive Officer
-ii-
<PAGE> 5
GELMAN SCIENCES INC.
600 South Wagner Road
Ann Arbor, Michigan 48103
-----------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________, 1997
-----------
A Special Meeting of Stockholders of Gelman Sciences Inc., a Michigan
corporation ("Gelman"), will be held at ___________________, New York, on
__________, 1997, at 11:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Reorganization and Merger dated October 27, 1996, between
Pall Corporation, a New York corporation, Pall Acquisition Corporation, a
Michigan corporation which is a wholly-owned subsidiary of Pall, and Gelman; and
2. To transact such other business related to the approval of the
Merger Agreement as may properly come before the Special Meeting and any
adjournment thereof.
Only stockholders of record of Gelman common stock at the close of
business on _______, 1996, will be entitled to notice of and to vote at the
Special Meeting and any adjournment or postponement thereof.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage if mailed in the United
States. If you attend the Special Meeting and wish to vote your shares in
person, your doing so will effectively revoke any proxy which you previously
delivered.
By Order of the Board of Directors,
Ann Arbor, Michigan Edward J. Levitt
___________ , 1996 Secretary
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING.
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<PAGE> 6
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE> 7
SUBJECT TO COMPLETION, DATED DECEMBER 6, 1996
GELMAN SCIENCES INC.
PROXY STATEMENT
-----------
PALL CORPORATION
PROSPECTUS
This Proxy Statement-Prospectus is being furnished to the holders of
the common stock, par value $.10 per share (the "Gelman Shares"), of Gelman
Sciences Inc., a Michigan corporation ("Gelman"), in connection with the
solicitation of proxies by the Board of Directors of Gelman for use at a Special
Meeting of Stockholders of Gelman to be held at _________________, New York, on
__________, 1997, at 11:00 a.m., local time, and at any and all adjournments or
postponements thereof (the "Special Meeting").
The Special Meeting has been called to consider a proposed merger (the
"Merger") of Pall Acquisition Corporation ("Sub"), a wholly-owned Michigan
subsidiary of Pall Corporation, a New York corporation ("Pall"), into Gelman
pursuant to an Agreement and Plan of Reorganization and Merger dated October 27,
1996 (the "Merger Agreement") among Pall, Sub and Gelman. Consummation of the
Merger is subject to certain conditions, including the approval and adoption of
the Merger Agreement at the Special Meeting by the holders of a majority of the
outstanding Gelman Shares. Upon consummation of the Merger, Gelman would become
a wholly-owned subsidiary of Pall.
Pursuant to the Merger Agreement, each outstanding Gelman Share would
be converted into the right to receive shares of the common stock, par value
$.10 per share, of Pall ("Pall Shares"). Pall Shares are traded on the New York
Stock Exchange ("NYSE") under the symbol "PLL". The number of Pall Shares to be
received for each Gelman Share in the Merger (the "Exchange Ratio") will be
determined by a formula based on the "Average Trading Price" of a Pall Share.
The "Average Trading Price" means the average of the closing sales prices of a
Pall Share for NYSE composite transactions during the 30 NYSE trading days
preceding the third trading day before the Special Meeting. If the Average
Trading Price is between $25.29 and $27.96, Gelman shareholders will receive for
each Gelman Share a number of Pall Shares (between 1.1804 and 1.3047 Pall
Shares) having a value of $33 based on the Average Trading Price. If the Average
Trading Price is $27.96 or more, Gelman shareholders will receive 1.1804 Pall
Shares for each Gelman Share. If the Average Trading Price is $25.29 or less,
Gelman shareholders will receive 1.3047 Pall Shares for each Gelman Share. Cash
will be paid in lieu of fractional Pall Shares. The Gelman Board of Directors
will have the right to terminate the Merger Agreement if the Average Trading
Price is less than $21.
<PAGE> 8
All information contained in this Proxy Statement-Prospectus with
respect to Gelman has been provided by Gelman, and all information contained in
this Proxy Statement-Prospectus with respect to Pall and Sub has been provided
by Pall.
Pall has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933 (the
"Registration Statement") with respect to the issuance of (i) up to 10,625,794
Pall Shares pursuant to the Merger and upon exercise after the Merger of certain
warrants to purchase Gelman Shares, (ii) options to purchase Pall Shares (the
"Pall Options") being offered in exchange for certain outstanding options to
purchase Gelman Shares, (iii) up to 698,144 Pall Shares issuable upon exercise
of the Pall Options, and (iv) Common Share Purchase Rights of Pall (the
"Rights"), which will be attached to and transferable only with the Pall Shares
referred to in clauses (i) and (iii). See "Description of Pall Shares -- Common
Share Purchase Rights." This Proxy Statement-Prospectus constitutes the
prospectus of Pall filed as part of the Registration Statement.
On ______, 1996, the closing sale price of a Pall Share for NYSE
composite transactions was $____, and the closing sale price of a Gelman Share
(symbol "GSC") for American Stock Exchange ("ASE") composite transactions was
$_____.
THIS PROXY STATEMENT-PROSPECTUS IS DATED ______, 1996 AND, WITH THE
ACCOMPANYING FORM OF PROXY, IS FIRST BEING DISTRIBUTED TO STOCKHOLDERS OF GELMAN
ON OR ABOUT ________, 1996.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 9
AVAILABLE INFORMATION
As permitted by the rules and regulations of the Commission, this Proxy
Statement-Prospectus omits certain information contained in the Registration
Statement. In addition, Pall and Gelman are each subject to the informational
and reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith file reports, proxy statements
and other information with the Commission. The Registration Statement, as well
as such reports, proxy statements and other information, can be inspected and
copied at the Commission's public reference facilities at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Room 1300, 13th
floor, New York, New York 10048, and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can
also be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, as well as
from the Commission's Website at http://www.sec.gov. In addition, such material
with respect to Pall is available for inspection at the library of the NYSE, 20
Broad Street, New York, New York, and such material with respect to Gelman is
available for inspection at the library of the ASE, 86 Trinity Place, New York,
New York.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Pall
and Gelman pursuant to the Exchange Act are hereby incorporated by reference in
this Proxy Statement-Prospectus:
(1) Pall's Annual Report on Form 10-K for the fiscal year ended
August 3, 1996, including Amendment No. 1 thereto dated
October 30, 1996;
(2) The descriptions of the Pall Shares and the Rights contained
in the Company's Registration Statements on Form 8-A, both
dated September 10, 1992, for the registration of the Pall
Shares and the Rights pursuant to Section 12(b) of the
Exchange Act, and any updates of such descriptions contained
in any registration statement, report or amendment thereto of
Pall hereafter filed under the Exchange Act; and
(3) Gelman's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996.
All documents filed by Pall and Gelman pursuant to Sections 13(a),
13(c), 14 or 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 respective dates of filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus 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
3
<PAGE> 10
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-Prospectus is qualified in its entirety by the
information and consolidated financial statements (including notes thereto)
appearing in the documents incorporated herein by reference, except to the
extent set forth in the immediately preceding statement.
AS NOTED ABOVE, THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS
BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF
SUCH DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS OR HEREIN) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF GELMAN
SHARES, TO WHOM THIS PROXY STATEMENT-PROSPECTUS IS DELIVERED UPON HIS OR HER
WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
PALL DOCUMENTS GELMAN DOCUMENTS
-------------- ----------------
PALL CORPORATION GEORGE UVEGES
INVESTOR COMMUNICATIONS MANAGER CHIEF FINANCIAL OFFICER
25 HARBOR PARK DRIVE GELMAN SCIENCES INC.
PORT WASHINGTON, NY 11050-4630 600 SOUTH WAGNER ROAD
TELEPHONE: (800) 205-7255 ANN ARBOR, MI 48103-9019
TELEPHONE: (313) 665-0651
IN ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS PRIOR TO THE DATE OF
THE SPECIAL MEETING, ANY REQUEST FOR DOCUMENTS SHOULD BE MADE BY __________,
1997.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT-PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PALL, GELMAN
OR ANY OTHER PERSON. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
ASSETS, PROPERTIES OR AFFAIRS OF PALL OR GELMAN SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE DATE OF THE DOCUMENT THAT INCLUDES
THE INFORMATION INCORPORATED BY REFERENCE.
4
<PAGE> 11
TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................. 3
SUMMARY..................................................................................... 7
MARKET PRICES FOR PALL SHARES AND GELMAN SHARES............................................. 22
THE SPECIAL MEETING......................................................................... 22
Record Date, Voting Rights, Voting at the Meeting.................................. 23
Solicitation of Proxies............................................................ 23
Voting of Proxies.................................................................. 24
THE MERGER.................................................................................. 25
Background of the Merger........................................................... 25
Gelman's Reasons for the Merger; Recommendation of Gelman's Board of Directors..... 29
Opinion of Gelman's Financial Advisor.............................................. 31
Pall's Reasons for the Merger...................................................... 37
Regulatory Approvals............................................................... 38
Accounting Treatment............................................................... 39
No Appraisal Rights................................................................ 39
Surrender of Gelman Share Certificates............................................. 39
Resales of Pall Shares by Affiliates of Gelman..................................... 39
OFFER TO EXCHANGE OPTIONS................................................................... 41
Pall Options....................................................................... 41
Exchange Agreements................................................................ 41
Federal Income Tax Consequences.................................................... 42
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................................................. 45
Employment Agreements and Related Matters.......................................... 45
Indemnification.................................................................... 46
Stock Options and Warrants......................................................... 46
THE MERGER AGREEMENT........................................................................ 49
Effect of the Merger on Gelman Shares.............................................. 49
Conditions to the Merger........................................................... 50
Representations and Warranties..................................................... 53
Certain Covenants.................................................................. 53
Additional Agreements.............................................................. 56
Termination, Amendment and Waiver.................................................. 59
PRO FORMA FINANCIAL DATA.................................................................... 60
CERTAIN TAX CONSEQUENCES.................................................................... 67
General .......................................................................... 67
Federal Income Tax Consequences of the Merger...................................... 67
</TABLE>
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<TABLE>
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DESCRIPTION OF PALL SHARES.................................................................. 68
Voting Rights...................................................................... 68
Classification of the Board........................................................ 68
Fair Price Provisions.............................................................. 68
Common Share Purchase Rights....................................................... 69
COMPARISON OF THE RIGHTS OF HOLDERS OF
GELMAN SHARES AND HOLDERS OF PALL SHARES................................................. 72
Shares .......................................................................... 72
Appointment and Removal of Directors............................................... 73
Special Meetings .................................................................. 73
Shareholder Approvals.............................................................. 73
Books and Records; Inspection; Information......................................... 74
Dividends and Distributions........................................................ 75
Minority Shareholder Remedies...................................................... 75
Dissenters' Rights................................................................. 76
Indemnification of Directors, Officers and Employees .............................. 77
Anti-Takeover Provisions .......................................................... 80
STOCKHOLDER PROPOSALS....................................................................... 82
LEGAL MATTERS............................................................................... 82
EXPERTS..................................................................................... 82
EXHIBIT A - Agreement and Plan of Reorganization and Merger................................. A-1
EXHIBIT B - Opinion of Cleary Gull Reiland & McDevitt Inc................................... B-1
EXHIBIT C - Form of Exchange Agreement...................................................... C-1
</TABLE>
6
<PAGE> 13
SUMMARY
The following is a summary of certain information contained in this
Proxy Statement-Prospectus. This summary does not contain a complete statement
of all material information relating to the Merger and the Merger Agreement and
is qualified in all respects by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus or in the documents
incorporated by reference herein. Gelman stockholders and holders of Gelman
options are urged to read and consider carefully all of the information
contained or incorporated by reference in this Proxy Statement-Prospectus,
including the Exhibits. All information herein gives effect to the two
three-for-two stock splits of Gelman Shares effected on December 28, 1993, and
August 12, 1994.
THE COMPANIES
Pall..................... Pall, a New York corporation organized in 1946, is a
leading worldwide supplier of fine filters, mainly
made by Pall using its high-quality filter media, and
other fluid clarification equipment for the removal
of solid, liquid and gaseous contaminants from a wide
variety of liquids and gases. Pall's principal
products are sold to the aeropower, fluid processing
and healthcare industries. Pall supplies aeropower
filtration products to the commercial and military
aircraft market, including power generation plants
and manufacturers of aluminum, steel, paper,
automobiles, injection-molded parts and mobile
equipment such as trucks and earthmoving machinery.
These filtration products remove particulates and
water from hydraulic and lubrication fluids and
systems, thereby extending their useful lives,
minimizing waste for disposal and increasing overall
productivity. Pall's fluid processing products are
used to remove microscopic and larger contaminants by
producers of oil and gas, electricity, chemicals,
plastics, semiconductors, photographic film, magnetic
storage devices, thin film rigid discs, ink jet
printers, computer terminals and disc drives. Pall's
healthcare filters protect patients receiving blood
transfusions and undergoing open-heart surgery, organ
transplants, intravenous feeding and breathing
therapy. These filters are used extensively in
hospitals and in blood centers to protect from
particulates, bacteria, and viral and foreign
leukocyte contamination. Manufacturers of
pharmaceuticals, biopharmaceuticals, blood
fractions, therapeutic biologicals and food and
beverages, as well as producers of diagnostic tests
and users of laboratory-scale filtration devices,
purchase Pall's filtration systems, validation
services and proprietary membranes.
7
<PAGE> 14
Pall's business is described in greater detail in its
fiscal 1996 Annual Report to Shareholders, a copy of
which is being delivered with this Proxy
Statement-Prospectus but is not incorporated by
reference in this Proxy Statement-Prospectus. Pall's
principal executive offices are located at 2200
Northern Boulevard, East Hills, New York 11548;
telephone (516) 484-5400.
Gelman................... Gelman, a Michigan corporation organized in 1959,
designs, manufactures and markets a broad line of
specialty microfiltration products for the separation
and purification of liquids and gases. Gelman's core
technologies are the manufacturing of microporous
membranes which serve as a barrier, filter or
separator of microscopic particles, and the packaging
and sealing of these membranes into microfiltration
products. Gelman's products include syringe, capsule
and cartridge filters, microporous membranes and
other microfiltration products. Microfiltration
products with healthcare applications account for
over 60% of Gelman's sales. These products are sold
worldwide to scientific and industrial laboratories,
and manufacturers of products used by biotechnology,
pharmaceutical and healthcare companies for use in
the research, development and manufacturing of new
drugs and vaccines and their administration to
patients. Gelman's management believes that Gelman
offers a greater variety of membranes and
microfiltration products in its markets than any
other manufacturer and that it has built significant
recognition among its customers, particularly in
scientific and industrial laboratories. Nearly all of
Gelman's microfiltration products are disposable, and
many are used in high volume applications requiring
regular replacement.
Gelman's principal executive offices are located at
600 South Wagner Road, Ann Arbor, Michigan
48103-9019; telephone (313) 665-0651.
8
<PAGE> 15
THE SPECIAL MEETING
Date, Time and Place..... A special meeting of the stockholders of Gelman will
be held at ________________, New York, on _________,
1997, at 11:00 a.m., local time (the "Special
Meeting").
Purpose of the Meeting... At the Special Meeting, the holders of Gelman Shares
will consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Reorganization and
Merger made on October 27, 1996, by and among Pall,
Sub and Gelman (the "Merger Agreement"), a copy of
which is attached as Exhibit A to this Proxy
Statement-Prospectus. As a result of the Merger,
Gelman would become a wholly-owned subsidiary of
Pall. Stockholders of Gelman will also transact such
other business related to the approval of the Merger
Agreement as may properly come before the Special
Meeting.
Record Date.............. Only Gelman stockholders of record at the close of
business on ________, 1996 (the "Record Date") will
be entitled to notice of and to vote at the Special
Meeting. On the Record Date, there were ________
Gelman Shares outstanding held by approximately
______ holders of record. See "The Special Meeting --
Record Date, Voting Rights, Voting at the Meeting."
Required Vote............ The Merger requires the affirmative vote of the
holders of a majority of the Gelman Shares
outstanding and entitled to vote thereon. As of the
Record Date, directors and executive officers of
Gelman and their affiliates beneficially owned
approximately 15% of the outstanding Gelman Shares
and they have all advised Gelman that they intend to
vote in favor of approval and adoption of the Merger
Agreement. See "The Special Meeting -- Record Date,
Voting Rights, Voting at the Meeting."
Revocability of Proxies.. Any proxy given pursuant to this solicitation may be
revoked by (i) filing (including by telegram or
facsimile) with the Secretary of Gelman, before the
taking of the vote at the Special Meeting, a written
notice of revocation bearing a later date than the
date of the proxy or a later-dated proxy relating to
the same shares, or (ii) attending the Special
Meeting and voting in person. See "The Special
Meeting -- Voting of Proxies."
No Appraisal Rights...... Gelman stockholders will not be entitled to any
appraisal rights under Michigan law in connection
with the Merger. See "The Merger -- No Appraisal
Rights."
9
<PAGE> 16
THE MERGER
Effective Time of the
Merger................ If the Merger Agreement is approved and adopted by
the requisite vote of Gelman stockholders, and the
other conditions to the Merger are satisfied or
(where permissible) waived, the Merger will be
consummated and become effective upon the filing of a
certificate of merger with the Department of Commerce
of the State of Michigan (the time of such filing
being the "Effective Time") in accordance with the
Business Corporation Act of the State of Michigan.
The Effective Time is expected to occur as promptly
as practicable after the Merger Agreement is approved
and adopted at the Special Meeting or, if later, the
date on which Pall and Gelman have the right under
the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") to consummate the Merger.
Merger Terms............. In the Merger, each holder of Gelman Shares will be
entitled to receive Pall Shares in the following
ratio (the "Exchange Ratio"): (i) if the "Average
Trading Price" of a Pall Share, as defined below, is
$27.96 or more, the Exchange Ratio will be 1.1804
Pall Shares for each Gelman Share, (ii) if the
Average Trading Price of a Pall Share is less than
$27.96 but more than $25.29, the Exchange Ratio will
be a number of Pall Shares for each Gelman Share
equal to $33 divided by the Average Trading Price
(i.e., Pall Shares having a value of $33, based on
the Average Trading Price); and (iii) if the Average
Trading Price of a Pall Share is $25.29 or less, the
Exchange Ratio will be 1.3047 Pall Shares for each
Gelman Share. "Average Trading Price" is defined as
the average of the closing sales prices of a Pall
Share for New York Stock Exchange ("NYSE") composite
transactions during the period of 30 "trading days"
(a "trading day" is a day on which the NYSE is open
for business) preceding the third trading day
immediately before the date of the Special Meeting.
The Board of Directors of Gelman has the right to
terminate the Merger Agreement if the Average Trading
Price is less than $21. Cash will be paid in lieu of
fractional Pall Shares, equal to the product of the
fractional share interest to which a Gelman
stockholder would otherwise be entitled, multiplied
by the closing sale price of a Pall Share for NYSE
composite transactions on the last trading day
immediately preceding the date of the Effective Time.
10
<PAGE> 17
Offer to Exchange
Options............... Stock options held by employees and directors to
purchase a maximum aggregate of 535,100 Gelman Shares
are currently outstanding (the "Gelman Options").
Pursuant to the Merger Agreement, Pall is offering to
the holders of Gelman Options, contingent upon the
effectiveness of the Merger, the right to exchange
each Gelman Option for an option issued by Pall (a
"Pall Option") to purchase a number of Pall Shares
equal to the number of Gelman Shares which could be
acquired upon exercise of such Gelman Option
multiplied by the Exchange Ratio, at an exercise
price per Pall Share equal to the per share exercise
price of such Gelman Option divided by the Exchange
Ratio and rounded to the nearest whole cent. Prior to
the approval and adoption of the Merger Agreement,
holders of Gelman Options will be sent an Exchange
Agreement in substantially the form attached as
Exhibit C to this Proxy Statement-Prospectus pursuant
to which Gelman will seek the consent of each such
holder, contingent upon the consummation of the
Merger, to the exchange of Gelman Options for Pall
Options on substantially the same terms. Each holder
of Gelman Options desiring so to exchange must sign
and return an Exchange Agreement to Gelman. It is a
condition to Pall's obligation to consummate the
Merger that the number of Gelman Shares covered by
Gelman Options which are not exercised or converted
into Pall Options before the Effective Time shall not
exceed 128,458 Gelman Shares. Upon consummation of
the Merger, holders of Gelman Options who have
executed Exchange Agreements must return the executed
original of their Gelman Option agreements to Pall in
order to receive a Pall Option, the form of which is
Schedule B to the Exchange Agreement. An exchange of
a Gelman Option for a Pall Option will not be a
taxable event. See "Offer to Exchange Options" and
"The Merger Agreement -- Additional Agreements."
Gelman's Reasons for the
Merger;
Recommendation of the
Board of Directors of
Gelman................ On October 27, 1996, the Board of Directors of Gelman
unanimously approved the Merger Agreement and the
Merger as being in the best interests of Gelman and
the Gelman stockholders and adopted a resolution
recommending that Gelman stockholders vote in favor
of approval and adoption of the Merger Agreement. In
approving the Merger Agreement and making such
recommendation, Gelman's Board of Directors
considered a number of factors, including but not
11
<PAGE> 18
limited to the following: (i) the liquidity of the
Pall Shares received by Gelman stockholders in the
Merger; (ii) the lack of price volatility of the Pall
Shares; (iii) the impact Pall's capital resources
will have on Gelman's research and product
development activities; (iv) the strong sales
position of Pall outside the U.S. and the expectation
that Pall will be able to expand overseas sales of
Gelman's products; (v) the consolidation of the
filtration industry, and the greater likelihood that
companies with full product lines will prosper; (vi)
the likelihood that the Merger would be consummated;
(vii) the fact that the Merger Agreement requires
Pall to pay a $10 million fee if the HSR Act waiting
period shall not have expired or been terminated on
or prior to October 15, 1997; and (viii) the fact
that the Merger Agreement permits the Gelman Board of
Directors to terminate the Merger Agreement if the
Average Trading Price of a Pall Share is less than
$21. See "The Merger -- Gelman's Reasons for the
Merger; Recommendation of Gelman's Board of
Directors."
Opinion of Gelman's
Financial Advisor..... Cleary Gull Reiland & McDevitt Inc. ("Cleary Gull"),
the financial advisor to Gelman, has delivered to the
Board of Directors of Gelman its written opinion
dated October 27, 1996 to the effect that, as of the
date of such opinion, the consideration to be
received by the Gelman stockholders pursuant to the
Merger Agreement is fair, from a financial point of
view, to the Gelman stockholders. The full text of
the October 27, 1996 opinion of Cleary Gull, which
sets forth the assumptions made, procedures followed,
matters considered and limitations on the review
undertaken, is attached as Exhibit B to this Proxy
Statement Prospectus. STOCKHOLDERS OF GELMAN ARE
URGED TO READ SUCH OPINION CAREFULLY AND IN ITS
ENTIRETY. See "The Merger -- Opinion of Gelman's
Financial Advisor." It is a condition to Gelman's
obligation to effect the Merger that Gelman shall
have received an opinion from Cleary Gull, dated on
or about the date on which this Proxy
Statement-Prospectus is to be mailed to the Gelman
stockholders, to the effect that the consideration to
be received by the Gelman stockholders pursuant to
the Merger Agreement is fair, from a financial point
of view, to the Gelman stockholders. See "The Merger
Agreement -- Conditions to the Merger."
Pall's Reasons for the
Merger................ Pall desires to expand into the laboratory area,
which Pall management has targeted as its fourth
major product area. Gelman has an established
presence in the laboratory product area for
12
<PAGE> 19
filtration and separation products, including small
volume filters for use in research, sample
preparation in clinical and industrial laboratories,
new drug development, environmental testing and other
applications, which complement and broaden Pall's
smaller and more specialized laboratory product area.
Pall believes that Gelman's strengths are
complementary to Pall's and not overlapping and that
Pall will realize substantial efficiencies and
significant cost savings from the Merger. Gelman's
distribution strength to laboratories will also
enhance distribution of Pall's membranes for
diagnostics and molecular biology. Management expects
Pall's global distribution system to hospitals and
blood centers to broaden sales of Gelman's medical
filtration products, which are distinct from Pall's
filtration products. Gelman's process filter products
fit well into Pall's product area. See "The Merger --
Pall's Reasons for the Merger."
Interests of Certain Persons
in the Merger......... In considering the recommendation of Gelman's Board
of Directors with respect to the Merger Agreement,
Gelman stockholders should be aware that certain
executive officers and directors of Gelman have
interests in the Merger that are in addition to the
interests of Gelman stockholders. These interests
include the following: (i) each of the executive
officers and directors of Gelman currently holds
Gelman Options, which may be exchanged for Pall
Options, or holds warrants to purchase Gelman Shares
which, by their terms, will be converted to warrants
to purchase Pall Shares, adjusted to give effect to
the Merger; (ii) the consummation of the Merger will
accelerate the vesting of Gelman Options to acquire
an aggregate of 151,625 Gelman Shares held by certain
employees of Gelman, including Charles Gelman,
Chairman and Chief Executive Officer, and Kim A.
Davis, President and Chief Operating Officer, at
exercise prices ranging from $17.75 to $27.00 per
Gelman Share, and (iii) upon the consummation of the
Merger, under agreements with Gelman, Messrs. Gelman
and Davis will receive substantial "change of
control" payments and will continue as employees of
Gelman (with reduced responsibilities for Mr. Gelman)
for terms of five years and not less than three years
respectively. See "Interests of Certain Persons in
the Merger." The Board of Directors of Gelman was
aware of these interests and took them into account
in approving the Merger Agreement.
Surrender of Gelman
Share Certificates.... If the Merger is consummated, a letter of transmittal
will be mailed or delivered to each Gelman
stockholder of record promptly after the Effective
Time. After receipt of such letter of transmittal,
each
13
<PAGE> 20
holder of certificates formerly representing Gelman
Shares should surrender such certificates pursuant to
and in accordance with the instructions in such
letter of transmittal, and each holder will receive
in exchange therefor certificates evidencing the
whole number of Pall Shares to which such holder is
entitled and cash in lieu of a fractional Pall Share.
Such letter of transmittal will be accompanied by
instructions specifying other details of the
exchange. GELMAN STOCKHOLDERS SHOULD NOT SEND IN
THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF
TRANSMITTAL. See "The Merger -- Surrender of Gelman
Share Certificates."
Conditions to the Merger;
Termination.......... The obligations of Pall and Gelman to effect the
Merger are subject to the satisfaction or waiver of
certain conditions set forth in the Merger Agreement,
including the approval and adoption of the Merger
Agreement by the holders of a majority of the
outstanding Gelman Shares. The Merger Agreement may
be terminated by mutual consent of Pall and Gelman at
any time prior to the Merger, whether before or after
approval and adoption of the Merger Agreement by the
stockholders of Gelman. The Merger Agreement may be
terminated by Gelman if, among other things, (i) the
Merger is not completed by October 15, 1997, other
than on account of delay or default on the part of
Gelman, or (ii) the Board of Directors of Gelman
determines in good faith that an "Acquisition
Transaction" other than the Merger would be more
favorable to Gelman's stockholders from a financial
point of view than the Merger, the Board concludes in
good faith that termination of the Merger Agreement
and entering into an agreement for such Acquisition
Transaction is necessary in order for the Board to
act in a manner consistent with its fiduciary
obligations under applicable law, and Gelman pays
Pall a $5 million termination fee, or (iii) the
Gelman stockholders do not vote to approve and adopt
the Merger Agreement, or (iv) the waiting period
under the HSR Act shall not have expired or been
terminated on or before October 15, 1997 and Gelman
has cooperated in the HSR Act filing, in which event
Pall is obligated to pay Gelman $10 million in lieu
of any other payments or penalties or the
reimbursement of expenses incurred by Gelman, or (v)
the Average Trading Price is less than $21. The
Merger Agreement may be terminated by Pall if, among
other things, (i) the Merger is not completed by
October 15, 1997, other than on account of delay or
default on the part of Pall, or (ii) the Gelman
stockholders do not vote to approve and adopt the
Merger Agreement. See "The
14
<PAGE> 21
Merger Agreement -- Conditions to the Merger" and "--
Termination, Amendment and Waiver."
Certain U.S. Federal Income
Tax Consequences......... It is expected that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax
purposes. Accordingly, subject to certain exceptions,
no gain or loss should be recognized by Gelman
stockholders for U.S. federal income tax purposes
upon the conversion of Gelman Shares into Pall Shares
by reason of the Merger (except to the very limited
extent such holders receive cash in lieu of
fractional Pall Shares). Consummation of the Merger
is conditioned upon Gelman's receipt of a
satisfactory opinion from its counsel, Godfrey &
Kahn, S.C., to the effect, generally, that the Merger
will qualify as a tax-free reorganization for U.S.
federal income tax purposes. Gelman stockholders are
urged to consult their own tax advisors as to the
specific tax consequences to them of the Merger. See
"Certain Tax Consequences." The tax consequences to
the holders of Gelman Options of exchanging them for
Pall Options are described under "Offer to Exchange
Options -- Federal Income Tax Consequences."
Accounting Treatment..... The Merger is intended to qualify as a pooling of
interests for accounting and financial reporting
purposes. See "The Merger -- Accounting Treatment."
It is a condition to Pall's obligation to effect the
Merger that it receive an opinion from Coopers &
Lybrand L.L.P., Gelman's independent public
accountants, that neither Gelman nor any of its
affiliates has taken or agreed to take any action
that would affect the ability of Pall to account for
the Merger as a pooling of interests. See "The Merger
Agreement -- Conditions to the Merger."
Regulatory Matters....... On November 15, 1996, Pall and Gelman filed
pre-merger notification and report forms with the
Federal Trade Commission (the "FTC") and the
Department of Justice pursuant to the HSR Act, and
the required waiting period will expire on December
13, 1996, unless terminated at an earlier date or
unless Pall or Gelman shall previously have received
a request for additional information. No other
material federal or state regulatory requirements
remain to be complied with, and no other federal or
state regulatory approval must be obtained, in
connection with the Merger. See "The Merger --
Regulatory Approvals."
15
<PAGE> 22
Comparison of Stockholder
Rights............... Differences between the corporation laws of Michigan
(where Gelman is incorporated) and New York (where
Pall is incorporated), and between the articles of
incorporation and the by-laws of Gelman (the "Gelman
Articles" and the "Gelman By-Laws", respectively) and
the certificate of incorporation and the by-laws of
Pall (the "Pall Certificate" and the "Pall By-Laws",
respectively), will result in several significant
changes in the rights of stockholders of Gelman by
reason of the Merger. See "Comparison of the Rights
of Holders of Gelman Shares and Holders of Pall
Shares" for a discussion of these changes.
SUMMARY PRO FORMA FINANCIAL AND MARKET DATA
The following tables present selected data for Pall and Gelman on an
historical basis, for Pall and Gelman on a pro forma basis assuming the Merger
had been effective during the periods presented, and for Gelman on a pro forma
equivalent share basis. The pro forma equivalent data for Gelman Shares give
effect to the exchange of 1.2394 Pall Shares for each outstanding Gelman Share
in the Merger (the "Pro Forma Exchange Ratio"), which is the Exchange Ratio that
would apply if the Average Trading Price were $26.625, the midpoint between the
range of $25.29 and $27.96 in the Exchange Ratio formula. These data are not
necessarily indicative of the results of the future operations of Pall after the
Merger or the actual results that would have occurred had the Merger been
consummated prior to the periods indicated.
The Merger will be accounted for under the pooling-of-interests
accounting method and the pro forma Pall data are derived in accordance with
such method. The following information is based upon the historical financial
statements of Pall and Gelman and the related notes incorporated by reference
into this Proxy Statement-Prospectus, and upon the pro forma financial
statements appearing elsewhere herein. This information should be read in
conjunction with such historical and pro forma financial statements and the
related notes thereto.
<TABLE>
<S> <C>
Pro forma results of operations (in thousands):
Net sales for fiscal year:
1996 .............................................. $1,072,433
1995 .............................................. 926,326
1994 .............................................. 795,811
Net earnings for fiscal year:
1996 .............................................. 143,115
1995 .............................................. 125,789
1994 .............................................. 104,329
Pro forma financial position at August 3, 1996 (in thousands):
Total assets........................................... 1,294,915
Long-term debt, net of current portion................. 54,416
Shareholders' equity................................... 817,737
</TABLE>
16
<PAGE> 23
<TABLE>
<CAPTION>
PRO FORMA GELMAN
PALL GELMAN PALL AND PRO FORMA
HISTORICAL HISTORICAL GELMAN EQUIVALENT
---------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Book value per share at end of fiscal 1996 (a) .... $6.37 $8.15 $6.51 $8.07
Cash dividends per share for fiscal year: (b)
1996 ........................................... 0.47 -- 0.43 0.53
1995 ........................................... 0.41 -- 0.38 0.47
1994 ........................................... 0.36 -- 0.33 0.41
Net income per share before extraordinary items and
cumulative effect of an accounting change for
fiscal year: (c)
1996 ........................................... 1.21 0.53 1.14 1.41
1995 ........................................... 1.04 0.92 1.01 1.25
1994 ........................................... 0.86 0.78 0.84 1.04
</TABLE>
- -------------------
(a) Based on actual and pro forma shares outstanding.
(b) Based on actual dividends declared by Pall and actual and pro forma
shares outstanding at time of declaration.
(c) Based on average actual and pro forma shares and equivalent shares
outstanding for each period.
The following table sets forth the closing sales prices of a Pall Share
for NYSE composite transactions, and the closing sales prices of a Gelman Share
for ASE composite transactions and on a Gelman Share equivalent basis at an
Exchange Ratio calculated in accordance with the Merger Agreement, on October
25, 1996, the last trading day prior to the public announcement of the general
terms of the proposed Merger, and on ___________, 1996.
<TABLE>
<CAPTION>
GELMAN
PALL GELMAN SHARE
SHARE SHARE EQUIVALENT
----- ----- ----------
<S> <C> <C> <C>
Closing Sales Prices:
October 25, 1996 ............ $26.375 $29.875 $ 33.00
__________, 1996 ............ $ $ $
</TABLE>
SELECTED FINANCIAL INFORMATION
Set forth below is selected historical financial information of Pall
and Gelman. This information is based upon the consolidated financial statements
of Pall and Gelman which are incorporated by reference in this Proxy
Statement-Prospectus. All of the following information should be read in
conjunction with such historical financial statements and the notes thereto.
17
<PAGE> 24
PALL CORPORATION
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------------------
AUGUST 1, JULY 31, JULY 30, JULY 29, AUGUST 3,
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF EARNINGS DATA:
<S> <C> <C> <C> <C> <C>
Net sales .................................... $ 685,068 $ 687,222 $ 700,848 $ 822,823 $ 960,376
Cost of sales ................................ 262,076 249,629 257,624 305,287 372,864
Selling, general and administrative expenses 253,030 262,598 261,289 301,686 338,726
Research and development ..................... 34,787 40,036 41,283 45,142 47,514
Interest expense, net ........................ 5,284 3,970 1,858 3,004 3,418
Restructuring and other charges .............. 3,690(1) 26,710(3) 3,696(4) -- --
----------- ----------- ----------- ----------- -----------
Total costs and expenses ..................... 558,867 582,943 565,750 655,119 762,522
Earnings before income taxes and
cumulative effect of an accounting change.. 126,201 104,279 135,098 167,704 197,854
Income taxes ................................. (35,968) (25,967) (36,176) (48,488) (59,356)
----------- ----------- ----------- ----------- -----------
Earnings before cumulative effect of an
accounting change ......................... 90,233 78,312 98,922 119,216 138,498
Cumulative effect of an accounting change .... 2,475(2) -- -- (780)(5) --
----------- ----------- ----------- ----------- -----------
Net earnings ................................. $ 92,708 $ 78,312 $ 98,922 $ 118,436 $ 138,498
=========== =========== =========== =========== ===========
PER SHARE DATA:
Earnings before cumulative effect of an
accounting change .......................... $ 0.77 $ 0.68 $ 0.86 $ 1.04 $ 1.21
Cumulative effect of an accounting change .... 0.02 -- -- (0.01) --
----------- ----------- ----------- ----------- -----------
Net earnings ................................. $ 0.79 $ 0.68 $ 0.86 $ 1.03 $ 1.21
=========== =========== =========== =========== ===========
Average number of shares outstanding ......... 116,928 115,856 115,678 115,184 114,839
BALANCE SHEET DATA (AT THE END OF EACH
PERIOD):
Working capital .............................. $ 223,333 $ 192,528 $ 213,586 $ 237,034 $ 250,984
Total assets ................................. 912,876 902,273 959,579 1,074,922 1,184,958
Long-term debt, including current portion .... 69,390 41,456 56,916 78,308 63,875
Stockholders' equity ......................... 545,595 542,878 587,206 651,799 732,300
</TABLE>
18
<PAGE> 25
- -------------------
(1) Represents a charge from the settlement of certain promissory notes
received in connection with the sale of the air dryer business in a
leveraged buyout reported in fiscal 1988.
(2) Represents an increase in earnings as a result of adopting Financial
Accounting Standards Board Statement No. 109 (Accounting for Income
Taxes) in the first quarter of fiscal 1992.
(3) Represents principally the cost of downsizing and further integrating
the military portion of the Aeropower business with the Industrial
Fluid Power business.
(4) Represents principally the cost of restructuring the German operations
and writing off a bad debt in its Aerospace operations.
(5) Represents a decrease in earnings as a result of adopting Financial
Accounting Standards Board Statement No. 112 (Employers' Accounting for
Post employment Benefits) in the first quarter of fiscal 1995.
19
<PAGE> 26
GELMAN SCIENCES INC.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
-------------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF EARNINGS DATA:
<S> <C> <C> <C> <C> <C>
Net sales .................................. $ 81,460 $ 86,209 $ 94,963 $ 103,503 $ 112,057
Cost of sales .............................. 42,961 43,664 47,253 50,070 56,864
Selling, general and administrative expenses 28,750 31,125 33,607 36,634 39,645
Research and development ................... 3,242 4,139 4,877 5,498 6,258
Interest expense, net ...................... 2,590 2,006 1,689 1,314 607
Pollution-related expense .................. 4,988(1) 543 -- -- 2,800
--------- --------- --------- --------- ---------
Total costs and expenses ................... 82,531 81,477 87,426 93,516 106,174
(Loss) earnings before income taxes
and extraordinary loss .................. (1,071) 4,732 7,537 9,987 5,883
Income tax benefit (provision) ............ 212 (2,030) (2,600) (3,365) (1,547)
--------- --------- --------- --------- ---------
(Loss) earnings before extraordinary loss .. (859) 2,702 4,937 6,622 4,336
Extraordinary loss ......................... (352) -- (183) -- --
--------- --------- --------- --------- ---------
Net (loss) earnings ........................ $ (1,211) $ 2,702 $ 4,754 $ 6,622 $ 4,336
========= ========= ========= ========= =========
PER SHARE DATA:
(Loss) earnings before extraordinary loss .. $ (0.15) $ 0.47 $ 0.78 $ 0.92 $ 0.53
Extraordinary loss ......................... (0.06) -- (0.03) -- --
--------- --------- --------- --------- ---------
Net (loss) earnings per share .............. $ (0.21) $ 0.47(2) $ 0.75 $ 0.92 $ 0.53
========= ========= ========= ========= =========
Average number of common shares and ........ 5,662 5,751 6,307 7,235 8,255
common share equivalents outstanding (3)
BALANCE SHEET DATA (AT THE END OF EACH
PERIOD):
Working capital ............................ $ 8,547 $ 20,882 $ 25,404 $ 33,653 $ 39,759
Total assets ............................... 61,530 63,495 71,687 81,781 88,220
Long-term debt, including current portion .. 25,624 25,269 25,198 7,385 7,867
Stockholders' equity ....................... 19,651 22,256 30,435 58,773 64,688
</TABLE>
20
<PAGE> 27
- -----------------
(1) Includes a $4.0 million charge for settlement of environmental lawsuits
and costs of a remediation plan initiated in fiscal 1992 as part of
such settlement.
(2) Fully diluted earnings per share for fiscal 1993 were $.45 based on the
weighted average number of common and common equivalent shares
outstanding of 5,952,710. The computation for fully diluted earnings
per share was equal to primary earnings per share for fiscal 1992,
1994, 1995 and 1996.
(3) Includes common stock equivalents (stock options and warrants)
outstanding during the period.
21
<PAGE> 28
MARKET PRICES FOR PALL SHARES AND GELMAN SHARES
Pall Shares are traded on the NYSE (under the symbol "PLL") and the
London Stock Exchange. Gelman Shares are traded on the ASE (under the symbol
"GSC"). The following table sets forth, for the calendar quarters indicated, the
high and low sales prices of a Pall Share for NYSE composite transactions, and
the high and low sales prices of a Gelman Share for ASE composite transactions:
<TABLE>
<CAPTION>
Pall Shares Gelman Shares
High Low High Low
<S> <C> <C> <C> <C>
CALENDAR YEAR
1994:
Fourth Quarter............................................ $19 3/4 $16 5/8 $15 7/8 $12 1/2
1995:
First Quarter............................................. 21 3/4 18 3/8 17 3/8 11 5/8
Second Quarter............................................ 24 20 3/8 19 5/8 16 3/4
Third Quarter............................................. 23 7/8 20 1/8 22 18 5/8
Fourth Quarter............................................ 27 7/8 21 7/8 25 1/4 20 7/8
1996:
First Quarter............................................. 29 3/8 23 1/4 26 1/2 20 1/2
Second Quarter............................................ 29 1/4 22 7/8 27 1/4 21 3/4
Third Quarter............................................. 28 1/4 19 5/8 30 1/2 19
Fourth Quarter (through December _, 1996).................
</TABLE>
On __________, 1996, the closing sales prices of a Pall Share and a Gelman
Share were $_____ and $______, respectively.
THE SPECIAL MEETING
This Proxy Statement-Prospectus is being furnished to Gelman
stockholders in connection with the solicitation of proxies by the Board of
Directors of Gelman for use at the Special Meeting of Stockholders to be held on
__________, 1997, at ____________, New York, commencing at 11:00 a.m., local
time, and at any adjournment or postponement thereof.
At the Special Meeting, Gelman stockholders will consider and vote on:
(1) A proposal to approve and adopt the Merger Agreement; and
(2) Such other business related to the approval of the Merger Agreement
as may properly come before the Special Meeting.
22
<PAGE> 29
RECORD DATE, VOTING RIGHTS, VOTING AT THE MEETING
The Board of Directors of Gelman has fixed ________, 1996, as the
Record Date for determination of Gelman stockholders entitled to notice of and
to vote at the Special Meeting. Each holder of record of Gelman Shares on the
Record Date is entitled to cast one vote per share, in person or by a properly
executed proxy, at the Special Meeting. As of the Record Date, there were
_________ Gelman Shares outstanding and entitled to vote which were held by
approximately ______ holders of record.
Pursuant to the Gelman Articles and the Gelman By-Laws and applicable
law, the affirmative vote of the holders of a majority of the Gelman Shares
outstanding and entitled to vote thereon is required to approve and adopt the
Merger Agreement. Thus, the failure of a registered stockholder to vote, or a
vote to abstain, will have the same legal effect as a vote against the approval
and adoption of the Merger Agreement. As of the Record Date, the directors and
executive officers of Gelman and their affiliates beneficially owned
approximately 15% of the outstanding Gelman Shares and each such person has
advised Gelman that he or she intends to vote in favor of the Merger Agreement.
Gelman Shares held of record by a broker which are present at the
Special Meeting in person or by proxy will be counted for purposes of
determining a quorum. However, brokers who hold Gelman Shares as nominees will
not have discretionary authority to vote such shares for or against approval and
adoption of the Merger Agreement, in the absence of instructions from the
beneficial owners. Votes which are not cast for this reason ("broker non-votes")
will not be counted in favor of the Merger Agreement. Since the approval and
adoption of the Merger Agreement requires the affirmative vote of a majority of
the outstanding Gelman Shares, broker non-votes will have the same effect as
votes against such approval and adoption.
SOLICITATION OF PROXIES
The expenses of the solicitation of proxies for the Special Meeting
will be borne by Gelman, other than the cost of printing, filing and
distributing this Proxy Statement-Prospectus and the forms of proxy, which will
be borne by Pall. In addition to solicitation by mail, proxies may be solicited
by directors, officers and employees of Gelman in person or by telephone,
telegram or other means of communication. These persons will receive no
additional compensation for solicitation of proxies, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Arrangements will also be made by Gelman with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares held of record by such custodians, nominees and fiduciaries, and
Gelman will reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
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VOTING OF PROXIES
Gelman Shares represented at the Special Meeting by properly executed,
delivered and unrevoked proxies will be voted at such meeting in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
such proxies will be voted FOR approval and adoption of the Merger Agreement.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such meeting to another time or place (including, without limitation,
for the purpose of soliciting additional proxies), the persons named in the
enclosed form of proxy, and acting thereunder, will have discretion to vote on
such matters in accordance with their best judgment (unless authorization to use
such discretion is withheld). Gelman is not aware of any other matters expected
to be presented at the Special Meeting.
A stockholder who has given a proxy pursuant to this solicitation may
revoke it at any time before it is exercised at the Special Meeting. Proxies may
be revoked by (i) filing with the Secretary of Gelman (including by telegram or
facsimile), before the taking of the vote at the Special Meeting, a written
notice of revocation bearing a later date than the date of the proxy or by
giving notice of revocation in open meeting, (ii) duly executing a later-dated
proxy relating to the same shares and delivering it (including by telegram or
facsimile) to the Secretary of Gelman before the taking of the vote at the
relevant meeting, or (iii) attending the Special Meeting and voting in person.
In order to vote in person at the Special Meeting, Gelman stockholders must
attend the meeting and cast their votes in accordance with the voting procedures
established for such meeting. Attendance at the Special Meeting will not in and
of itself constitute a revocation of a proxy. Any written notice of revocation
or subsequent proxy must be sent to: Gelman Sciences Inc., 600 South Wagner
Road, Ann Arbor, Michigan 48103-9019, fax (313) 913-6114, Attention: Secretary.
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THE MERGER
BACKGROUND OF THE MERGER
The following is a summary of the events leading up to the execution of
the Merger Agreement.
In October 1995, senior management of Gelman met with representatives
of Cleary Gull to discuss various alternatives to enhance stockholder value,
including the possibility of an alliance with another company. Over the next
several months, Charles Gelman, Chairman and Chief Executive Officer of Gelman,
and Kim A. Davis, President and Chief Operating Officer of Gelman, discussed
with Cleary Gull strategic alternatives available to Gelman, valuation issues,
possible forms of business combinations and the types of companies which might
be interested in a strategic alliance with Gelman. In May 1996, the Gelman Board
of Directors appointed a Strategic Planning Committee of directors, consisting
of Messrs. Gelman, Davis, Charles Newman and John A. Geishecker, Jr. to evaluate
alternatives to enhance long-term stockholder value, including a possible
alliance with another company. Beginning in late May, Cleary Gull identified a
group of companies that were likely to have an interest in a business
combination with Gelman and had preliminary discussions with these companies to
determine whether they did have any such interest. The companies identified
included Pall and Memtec Limited, a New South Wales, Australia corporation
("Memtec").
The first meeting between Gelman and Pall took place on June 12th and
included Messrs. Gelman and Davis and representatives of Cleary Gull on behalf
of Gelman, and, on behalf of Pall, Messrs. Eric Krasnoff, Chairman and Chief
Executive Officer, and Jeremy Hayward-Surry, President and Chief Financial
Officer, and representatives of Dillon, Read & Co. Inc. ("Dillon Read"), Pall's
financial advisor. At that meeting, the Gelman representatives presented an
overview of Gelman's business and preliminary valuation expectations.
In late June and early July, Gelman's representatives requested Pall,
Memtec and other potential merger partners to make offers to acquire Gelman, by
way of a tax-free merger. Gelman received proposals from Pall, Memtec and other
companies during the second week of July.
On July 12th, the Board of Directors of Gelman, Cleary Gull and
Gelman's legal counsel met to discuss the written offers which had been received
by Gelman, including the offers made by Pall and Memtec. Cleary Gull and
Gelman's legal counsel provided a detailed review of each of the offers
received, including the proposed exchange ratios, covenants, termination
provisions and break-up fees. Cleary Gull analyzed the benefits, synergies,
risks and opportunities presented by each of the offers. After extensive
discussions, Gelman's Board of Directors unanimously authorized negotiations
with several of the prospective merger partners, including Pall and Memtec. Over
the period July 12th through July 18th, further negotiations between Gelman and
each of Pall and Memtec took place. As a result of these negotiations, a revised
offer was made by Memtec.
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At a special meeting of Gelman's Board of Directors held on July 18th,
Cleary Gull and Gelman's legal counsel reviewed in detail the terms of the offer
made by Memtec, which contemplated a tax-free transaction to be accounted for as
a pooling of interests and included a proposed exchange ratio. After
considerable discussion, the Board of Directors unanimously approved the merger
contemplated by the letter of intent with Memtec as being in the best long-term
interests of Gelman's stockholders. On July 22nd, the Memtec Board of Directors
approved the execution of the letter of intent and a public announcement of the
proposed transaction with Memtec was made.
Between July 22nd and August 29th, representatives of Memtec and Gelman
conducted due diligence investigations of the other's respective businesses and
affairs and negotiated the terms of a definitive merger agreement (the "Memtec
Merger Agreement") and ancillary agreements. As a result of these negotiations,
the parties agreed to a fixed exchange ratio of 1.05 Memtec American Depositary
Shares ("Memtec ADSs") for each Gelman Share (a per share equivalent value for
each Gelman Share of $34.65, based on the closing bid price of a Memtec ADS on
August 29th). On August 30th, the Memtec Merger Agreement was executed by Gelman
and Memtec, and a public announcement of the proposed transaction was made.
Among other things, the Memtec Merger Agreement gave the Gelman Board of
Directors the right to terminate the Memtec Merger Agreement if the average
trading price of a Memtec ADS prior to the Gelman stockholders' meeting
scheduled to approve the Memtec Merger Agreement was less than $27.00 per share.
On September 16th, Mr. Krasnoff wrote to Mr. Gelman as follows: "I was
disappointed to learn that you had entered into a definitive merger agreement
with Memtec Ltd. I believe Pall has the potential to provide greater near-term
and long-term value to Gelman's shareholders. Should your agreement with Memtec
provide an opportunity to renew discussions, we request that you allow Pall to
present our case to your Board. You have my assurance that we would respond
expeditiously should such an opportunity present itself."
On October 5th and 6th, Mr. Gelman spoke to other members of the
Strategic Planning Committee and certain other directors of Gelman concerning a
possible transaction with Pall, in view of the significant decline in the value
of Memtec ADSs since the signing of the letter of intent and of the Memtec
Merger Agreement.
On October 7th, the Gelman Board of Directors, Cleary Gull and Gelman's
legal counsel met to discuss the advisability of pursuing a transaction with
Pall in light of the recent trading prices for Memtec ADSs, which were less than
$27.00 per share and resulted in a per share equivalent value for a Gelman Share
of less than $28.50. After considerable discussion, the Board concluded that it
would be appropriate, in the exercise of its fiduciary duties to the Gelman
stockholders, to determine Pall's interest in pursuing a transaction with Gelman
(while continuing to take all steps necessary to complete the merger with Memtec
in the event that an agreement could not be reached with Pall.) Accordingly, on
October 7th, a representative of Cleary Gull contacted a representative of Pall
to determine whether Pall continued to be interested in a transaction with
Gelman. Cleary Gull advised
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Pall that an offer received from Pall to acquire Gelman could be considered by
Gelman's Board of Directors without violating the terms of the Memtec Merger
Agreement.
The Memtec Merger Agreement allowed Gelman to discuss and negotiate a
transaction with Pall, provided that Gelman kept Memtec informed of discussions
or negotiations with Pall relating to such a transaction, and provided to Memtec
copies of all information provided to Pall. The Memtec Merger Agreement also
allowed Gelman to terminate the Memtec Merger Agreement and to sign an agreement
to be acquired by another company if (a) the Board of Directors determined in
good faith that the proposed transaction with the other company would be more
favorable to Gelman stockholders from a financial point of view than the
transaction with Memtec, (b) the Board of Directors concluded in good faith that
such action was necessary in order for the Board to act in a manner consistent
with its fiduciary duties to stockholders, and (c) Gelman paid Memtec a
termination fee of $3 million.
Pall indicated a willingness to renew discussions with Gelman and an
exploratory meeting involving management of and the professional advisors to
both companies was held on October 10th at Pall's offices in Port Washington,
New York. Pursuant to the Memtec Merger Agreement, Gelman had notified Memtec on
the previous day that such discussions were to be held. As required by the rules
of the Australian Stock Exchange, Memtec issued a press release announcing that
it had been informed that discussions between Gelman and Pall were being held.
In a subsequent press release, the Chairman of Memtec announced that Memtec
would not increase the value of its offer for the Gelman Shares.
Beginning at the October 10th meeting and over the course of the
following two weeks, intensive negotiations took place between Pall and Gelman
and their respective financial and legal advisors. In addition, representatives
of Pall and Gelman, including senior management of each company, conducted
legal, financial, accounting and management due diligence investigations of the
other's respective businesses and affairs. A negotiated draft of a proposed
merger agreement with Pall was reviewed in detail by the Gelman Board of
Directors at a meeting held on October 18th. At the meeting, the Board also
considered a presentation made by Cleary Gull comparing the Memtec and Pall
merger agreements and the historical and projected price performance of the
Memtec ADSs and the Pall Shares. After considerable discussion, the Board
authorized management of Gelman, Cleary Gull and its legal counsel to continue
to pursue a possible transaction with Pall while continuing to take all actions
necessary to complete the merger with Memtec.
On October 18th, the Pall Board of Directors met and considered a
possible acquisition of Gelman by Pall. At the meeting, representatives of
Dillon Read reported on their firm's valuation of Gelman. The Pall Board then
unanimously authorized Mr. Krasnoff to negotiate and execute a merger agreement
with Gelman. Thereupon, on the same day, Pall submitted an offer to acquire
Gelman for Pall Shares valued at approximately $32.00 per Gelman Share. On
October 22nd, Gelman rejected that offer. On October 23rd, Pall submitted a
revised offer which provided for a floating exchange ratio so as to provide
$33.00 worth of Pall Shares for each Gelman Share should
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Pall Shares trade at an average price of between $25.29 and $27.96 per share for
the 30 trading days preceding the third trading day before Gelman's stockholder
vote on the transaction. If such average price for such period were $25.29 or
less or $27.96 or more, the exchange ratio would be fixed at 1.3047 or 1.1804,
respectively. In addition, Pall indicated its willingness to pay a $10 million
breakup fee to Gelman if the merger could not be completed because the waiting
period under the HSR Act had not expired or been terminated prior to October 15,
1997.
The Gelman Board of Directors met on October 23rd and October 24th to
consider the status of negotiations with Pall and the merger with Memtec. At
each of these meetings, the Gelman Board of Directors authorized continued
negotiations with Pall to determine whether a transaction which would be more
favorable to Gelman stockholders than the Memtec merger could be obtained.
Over the next 48 hours, Gelman and Pall continued to negotiate several
key terms of a proposed merger agreement, including a termination provision
should the Pall Shares trade below a certain level and contingencies associated
with the failure of the waiting period under the HSR Act to expire or be
terminated. On October 25th, Pall indicated its willingness to provide Gelman
the right to terminate the merger agreement if Pall's average stock price, over
the 30-trading day period referred to above, was less than $21.
On October 27th, the Gelman Board of Directors met by telephone
conference to discuss the proposed merger with Pall. At the meeting, management
of Gelman, Cleary Gull and Gelman's legal counsel discussed the terms of the
proposed Merger Agreement and related agreements, and the benefits to Gelman
stockholders of the Merger. Gelman's management and legal counsel reported the
results of their management, financial, accounting and legal due diligence with
respect to Pall and commented on the due diligence performed by Pall with
respect to Gelman. Cleary Gull reviewed with the Board its financial analysis of
the Merger and delivered its oral opinion, which was confirmed by its written
opinion dated October 27, 1996, to the effect that, based upon and subject to
certain matters stated therein, as of the date of such opinion, the
consideration to be received by the Gelman stockholders pursuant to the Merger
Agreement was fair, from a financial point of view, to such holders. See "The
Merger -- Opinion of Gelman's Financial Advisor." In addition, the Gelman Board
of Directors determined, after consultation with Cleary Gull, that the Merger
with Pall was more favorable to Gelman's stockholders from a financial point of
view than the proposed merger with Memtec, and Gelman's counsel advised the
Gelman Board of Directors that approving the Merger Agreement was necessary in
order for the Board to act in a manner that was consistent with its fiduciary
obligations to Gelman's stockholders.
The Gelman Board of Directors then reviewed and fully discussed the
Merger Agreement and related agreements and unanimously approved the Merger
Agreement and recommended that the stockholders of Gelman approve and adopt the
Merger Agreement, subject to such revisions and further negotiations as the
senior management of Gelman may approve. In a separate resolution, the Gelman
Board unanimously approved (with Messrs. Gelman and Davis abstaining) proposed
forms of new employment agreements with Messrs. Gelman and Davis. See "Interests
of Certain Persons in the Merger -- Employment Agreements and Related Matters."
Finally, the Board of Directors
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unanimously authorized the termination of the Memtec Merger Agreement pursuant
to its terms and the payment of the $3 million termination fee due Memtec under
the Memtec Merger Agreement. See "-- Gelman's Reasons for the Merger;
Recommendation of Gelman's Board of Directors" and "-- Opinion of Gelman's
Financial Advisor."
The Gelman Board met in the evening on Sunday, October 27th; shortly
after midnight, the Merger Agreement was executed by Gelman and Pall and a
public announcement of the Merger was made the following morning.
GELMAN'S REASONS FOR THE MERGER; RECOMMENDATION OF GELMAN'S BOARD OF DIRECTORS
As described above under "Background of the Merger", the terms of the
Merger Agreement, including the Exchange Ratio, were determined through
negotiations between Gelman and Pall following extensive discussions, financial
analysis and due diligence. Gelman's Board of Directors believes that the terms
of the Merger Agreement and the transactions contemplated thereby are fair to,
and in the best interests of, Gelman and its stockholders and has unanimously
approved the Merger Agreement and recommends the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the stockholders
of Gelman.
The Board of Directors of Gelman believes that the Merger offers a
unique opportunity to combine two successful and financially sound companies
into a single entity with the product base, financial strength and global market
reach to compete in today's international marketplace. In particular, the Board
of Directors of Gelman believes that the following benefits will result from the
Merger:
Liquidity - Pall has approximately 115,272,000 shares outstanding
(approximately 125,672,000 shares after giving effect to the Merger) and average
daily trading volume on the NYSE of approximately 280,000 shares. Pall's market
capitalization and trading volume will provide Gelman's stockholders with an
opportunity to trade Pall Shares they receive in the Merger without significant
liquidity or regulatory constraints.
Minimal Price Volatility - The trading prices of Pall Shares have been
stable over the last several years due to the relatively consistent price
earnings multiple and the fact that Pall's historical financial results have
generally been in line with analysts' estimates of financial performance. This
lack of price volatility affords Gelman's stockholders a more stable trading
market for Pall Shares and reduces their risk of a substantial decline in the
value of their investment if Gelman were not to perform as expected.
Capital Resources - Pall has significantly greater capital resources
and access to capital and a larger research and development budget than Gelman
does on a stand-alone basis. Gelman's ability to utilize Pall's capital and
research and development capabilities will expand its opportunities for research
and product development, sales growth and new product introductions.
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Greater Global Reach - Gelman is a leading supplier in the laboratory
and health care markets, while Pall is a major supplier to the aeropower and
fluid processing markets. Gelman's sales are approximately 60% in the U.S. and
40% elsewhere, while Pall's sales are approximately 35% in the U.S. and 65%
foreign. The combination will expand the growth opportunities for Gelman in
international markets.
Industry Consolidation - The Gelman Board of Directors recognized that
the present and anticipated environment for the filtration industry and the
potential for further consolidation within the industry could adversely affect
Gelman's competitive position.
In reaching its decision to approve the Merger Agreement and the
transactions contemplated thereby, Gelman's Board of Directors considered a
number of factors, including:
(i) information concerning the financial performance and
condition, business operations and prospects of each of Gelman and Pall
and Gelman's projected future value and prospects as a stand-alone
entity and on a combined basis with Pall;
(ii) current industry, economic and market conditions which
have encouraged filtration companies to have broader product lines and
greater financial resources in order to better compete in the global
filtration marketplace;
(iii) the enhancement of the strategic and market position of
the combined companies beyond that achievable by Gelman on a
stand-alone basis;
(iv) the structure of the transaction and terms of the Merger
Agreement, including the Exchange Ratio and the right of the Gelman
Board of Directors to terminate the Merger Agreement if the Average
Trading Price of a Pall Share is less than $21 at any time prior to the
Merger, which terms were the result of arms-length negotiations between
Gelman and Pall;
(v) the financial analysis and the opinion of Cleary Gull as
described below;
(vi) the fact that the Merger would provide the stockholders
of Gelman with a significant premium over the market price immediately
prior to Gelman's announcement on July 16, 1996, that it was
considering strategic alternatives to enhance shareholder value;
(vii) the terms of the Merger Agreement that permit Gelman's
Board of Directors, in the exercise of its fiduciary duties and subject
to certain conditions, to respond to unsolicited inquiries regarding
potential business combination transactions. Gelman's Board of
Directors noted that, in specified events, Gelman would have certain
rights of termination as a result of which Gelman would be obligated to
pay Pall a fee of $5 million, which, in the view of Gelman's Board of
Directors, would not unreasonably impede any interested third party
from proposing a superior transaction;
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(viii) the terms of the Merger Agreement that require Pall to
pay a fee of $10 million in the event the waiting period under the HSR
Act shall not have expired or been terminated on or prior to October
15, 1997;
(ix) the expectation that the Merger will afford Gelman's
stockholders the opportunity to receive Pall Shares in a transaction
that is non-taxable for federal income tax purposes;
(x) the results of Gelman's legal, financial, accounting and
management due diligence investigations of Pall; and
(xi) the likelihood that the Merger will be consummated.
The foregoing discussion of the information and factors considered is
not intended to be exhaustive but includes the material factors considered and
given weight by the Gelman Board of Directors. In addition, in reaching the
determination that the Merger is fair to and in the best interests of Gelman's
stockholders, in view of the wide variety of factors considered in connection
with its evaluation of the proposed Merger, Gelman's Board of Directors
considered the factors above as a whole and did not find it practical to
quantify or otherwise attempt to assign specific or relative weights to such
factors, and the individual directors may have given differing weights to
different factors.
THE GELMAN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, BELIEVES THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE
BEST INTERESTS OF, GELMAN AND ITS STOCKHOLDERS, AND RECOMMENDS A VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE STOCKHOLDERS OF GELMAN.
OPINION OF GELMAN'S FINANCIAL ADVISOR
Gelman engaged Cleary Gull to act as its financial advisor in
connection with the transactions contemplated by the Merger Agreement and to
render a fairness opinion. Cleary Gull delivered to the Gelman Board of
Directors its written fairness opinion dated October 27, 1996 to the effect
that, as of the date of such opinion, the consideration to be received by the
Gelman stockholders pursuant to the Merger Agreement is fair, from a financial
point of view, to the Gelman stockholders.
The full text of Cleary Gull's fairness opinion, which sets forth the
assumptions made, procedures followed, matters considered and limits on the
review undertaken, is attached hereto as Exhibit B to this Proxy
Statement-Prospectus. Cleary Gull's opinion is directed only to the fairness,
from a financial point of view, to the holders of Gelman Shares of the
consideration to be received by such holders pursuant to the Merger Agreement
and does not constitute a recommendation to any holder of Gelman Shares as to
how such stockholder should vote with respect to the Merger Agreement. The
summary of Cleary Gull's opinion set forth below is qualified in its entirety by
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reference to the full text of such opinion attached hereto as Exhibit B.
STOCKHOLDERS OF GELMAN ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
In arriving at its opinion, Cleary Gull reviewed, analyzed and
considered such financial and other factors as it deemed appropriate under the
circumstances, including among others, the following: (i) certain publicly
available business and historical financial information relating to Gelman and
Pall; (ii) certain other internal information, primarily financial in nature,
concerning the business and operations of Gelman and Pall furnished to Cleary
Gull by Gelman and Pall, respectively, for purposes of its analysis; (iii) the
business prospects of Gelman and Pall; (iv) certain publicly available
information concerning the estimates of the future operating and financial
performance of Gelman and Pall prepared by industry experts unaffiliated with
either Gelman or Pall ("Analysts' Estimates"); (v) the historical and current
stock market data for Gelman Shares, for Pall Shares and for certain other
companies that Cleary Gull believed to be generally comparable to Gelman or
Pall; (vi) publicly available financial information with respect to certain
other companies that Cleary Gull believed to be generally comparable to Gelman
or Pall; (vii) the financial impact of the Merger on Pall's future earnings per
share; (viii) an unleveraged after-tax discounted cash flow analysis of both
Gelman and Pall; (ix) an analysis of Gelman's percentage contribution to the
operating results for Pall compared to the implied percentage ownership interest
of holders of Gelman Shares in Pall after giving effect to the Merger; (x) a
comparison of the purchase price premium to be paid for the Gelman Shares based
on the Exchange Ratio to certain other similar-sized mergers; (xi) certain
publicly available information concerning the nature and terms of certain other
transactions that Cleary Gull believed to be relevant on a comparative basis;
(xii) an historical comparison of Gelman's and Pall's stock market prices; and
(xiii) the terms of the Merger Agreement. Cleary Gull also met with certain
officers and employees of Gelman and Pall to discuss the foregoing, as well as
other matters Cleary Gull believed relevant to its inquiry.
In preparing its opinion, Cleary Gull relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to Cleary Gull by or on behalf of Gelman and Pall, and
Cleary Gull did not independently verify such information. Cleary Gull assumed
that the financial forecasts examined by it were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
management of Gelman and Pall as to the future performance of Gelman and Pall.
Cleary Gull also assumed that (i) certain strategic and operating benefits
contemplated by the management of Gelman and Pall will be realized as a result
of the Merger, and (ii) all material liabilities (contingent or otherwise, known
or unknown) of Gelman and Pall are as set forth in the consolidated financial
statements of Gelman and Pall, respectively, or were disclosed to Cleary Gull.
Cleary Gull did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Gelman and Pall, nor was Cleary Gull
furnished with any such evaluations or appraisals. Cleary Gull did not make any
physical inspection of the properties or assets of Gelman or Pall. Cleary Gull's
fairness opinion is based upon economic, monetary and market conditions existing
on the date thereof. Furthermore, Cleary Gull expressed no opinion as to the
price or trading range at which Pall Shares will trade after the Effective Time.
Cleary Gull's fairness opinion does not address the relative merits of the
Merger or the decision of the Gelman Board of Directors to proceed with the
Merger. The Exchange Ratio
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was determined by Gelman and Pall in arm's-length negotiations. Cleary Gull did
not, and was not requested to, make any recommendations as to the form or amount
of consideration to be paid pursuant to the Merger Agreement. Gelman did not
place any limitations upon Cleary Gull with respect to the procedures followed
or factors considered in rendering its opinion. Cleary Gull assumed that the
Merger will be treated as a pooling of interests for financial reporting
purposes and as a tax-free reorganization for federal income tax purposes.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative methods of financial
analyses and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. Accordingly, Cleary Gull believes that its analyses must
be considered as a whole and that considering any portion of such analyses and
of the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying Cleary Gull's
opinion. In its analyses, Cleary Gull made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Gelman and Pall. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the value
of businesses do not purport to be appraisals or to reflect the prices at which
businesses may actually be sold. Cleary Gull's opinion and financial analyses
were only one of many factors considered by the Gelman Board of Directors in its
evaluation of the Merger and should not be viewed as determinative of the views
of the Gelman Board of Directors or management with respect to the Exchange
Ratio or the proposed Merger.
In connection with its presentation to Gelman's Board of Directors on
October 27, 1996, Cleary Gull advised Gelman's Board of Directors that, in
evaluating the consideration to be received pursuant to the Merger Agreement by
the holders of Gelman Shares, Cleary Gull had performed a variety of financial
analyses with respect to Gelman and Pall. Certain of these financial analyses
are summarized below.
Analysis of Selected Publicly Traded Companies Comparable to Pall.
Using publicly available information, Cleary Gull analyzed, among other things,
the trading multiples of Pall and selected publicly traded filtration companies,
including Calgon Carbon Corporation; Culligan Water Technologies, Inc.; Ionics,
Incorporated; Memtec; Millipore Corporation; Osmonics, Inc., and United States
Filter Corporation (the "Public Comparables"). Cleary Gull compared, with
respect to each of the Public Comparables and Pall, equity market capitalization
as a multiple of net income for the latest 12 months ("LTM") and estimated
calendar 1996 and 1997 net income, and the equity market capitalization plus
total debt less cash and cash equivalents (the "Adjusted Market Value") as a
multiple of LTM net revenue, LTM earnings before interest and taxes ("EBIT") and
LTM earnings before interest, taxes, depreciation and amortization ("EBITDA").
In addition, Cleary Gull compared the ratio of (a) the result obtained by
dividing the stock market price per share by the earnings per share ("EPS")
estimate for calendar 1996 (the "Calendar 1996 P/E Ratio") to (b) the EPS growth
rate between calendar 1996 and 1997 multiplied by 100 (the "PEG Ratio"). Net
income
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projections for the Public Comparables were based on either Analysts' Estimates
or I / B / E / S and future net income for Pall was based on Analysts'
Estimates. All trading multiples were based on closing stock prices as of
October 23, 1996 (the "Pricing Date").
Cleary Gull compared the trading multiples of the Public Comparables to
the trading multiples for Pall. Cleary Gull noted that as of the Pricing Date,
Pall's Calendar 1996 P/E Ratio and the ratio of the Pall Share price as of the
Pricing Date to its EPS estimate for calendar 1997 were 20.6x and 18.0x
respectively, compared to a range of 16.9x to 40.2x and 15.3x to 28.5x,
respectively, for the Public Comparables. Cleary Gull also calculated the
multiples of Pall's Adjusted Market Value to LTM net revenue, LTM EBIT and LTM
EBITDA. Cleary Gull noted that Pall Shares traded at 3.29x their LTM net
revenue, 15.7x their LTM EBIT and 12.4x their LTM EBITDA compared to a range of
1.36x to 3.04x, 11.6x to 38.5x and 7.4x to 22.8x, respectively, for the Public
Comparables. Cleary Gull also noted that Pall's PEG Ratio as of the Pricing Date
was 140.1% as compared to a range of 43.4% to 188.1% for the Public Comparables.
This analysis indicated that the derived multiples based on the price of a Pall
Share on the Pricing Date were within the range of multiples for the Public
Comparables, except in the case of the net revenue multiple, which was slightly
above the high end of the range.
Pall Historical Latest Twelve Month Price/Earnings Ratio Analysis.
Cleary Gull calculated the ratio of the price of a Pall Share to Pall's LTM EPS
as of that particular date (the "LTM P/E Ratio") for the period from October 23,
1993 to the Pricing Date. The range of Pall's LTM P/E Ratio over the period
reviewed was 16.3x to 30.5x. Cleary Gull noted that as of the Pricing Date,
Pall's LTM P/E Ratio of 22.0x was within this range. Cleary Gull also noted that
Pall's LTM P/E Ratio as of the Pricing Date was not at an historical high and in
fact was equal to the median LTM P/E Ratio over the period analyzed.
Earnings Dilution Analysis. Cleary Gull analyzed the potential pro
forma effect of the Merger on Pall's EPS for the fiscal years ending July 31,
1997 and July 31, 1998. In performing this analysis, Cleary Gull assumed (i) the
issuance of 1.2394 Pall Shares for each outstanding Gelman Share; (ii) the
Merger would be accounted for under the pooling-of-interests method of
accounting; and (iii) certain synergies would be achieved as a result of the
Merger. Cleary Gull combined Gelman's future operating results with the
corresponding future operating results of Pall. Cleary Gull then divided the pro
forma operating results by the pro forma shares outstanding. Cleary Gull
compared the pro forma EPS to Pall's stand-alone EPS to determine the impact on
Pall's EPS. This analysis suggested that the Merger would not be dilutive to
Pall's EPS for the fiscal years ending July 31, 1997 and July 31, 1998.
Discounted Cash Flow Analysis of Pall. Cleary Gull analyzed Pall's
fully diluted per share value based on an unleveraged discounted cash flow
analysis of the five-year financial performance of Pall. The annual after-tax
cash flows for the five-year period were based on a financial plan provided by
Pall's management. The discounted cash flow analysis determined the discounted
present value of the unleveraged after-tax cash flows generated over the
five-year period and then added a terminal value based on a range of EBIT
multiples from 13.0x to 17.0x. The unleveraged
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after-tax cash flows and terminal value were discounted using a range of
discount rates from 12.0% to 20.0%. Cleary Gull derived the range of EBIT
multiples and discount rates on the basis of multiples of EBIT and estimated
risk adjusted costs of capital for the Public Comparables. Based on this
analysis, Cleary Gull derived an equity value range for Pall of $24.18 to $32.25
per fully diluted Pall Share. Cleary Gull noted that the market price of $26.625
per Pall Share (the "Pall Market Price") on the Pricing Date was within the
indicated range.
Pall Common Stock Trading Analysis. Cleary Gull analyzed the closing
sale prices of the Pall Shares on the NYSE over the 52-week period ending on the
Pricing Date. The high and low closing sale prices for a Pall Share for the
preceding 52-week period were $29.125 and $20.375, respectively. Cleary Gull
also reviewed a trading price/trading volume analysis of the Pall Shares over
the 52-week period ending on the Pricing Date which indicated that over this
time period more than 50% of the Pall Shares traded during this time period
traded in the marketplace at a price equal to or greater than $26.00 per share
and 94% of the Pall Shares traded during this time period traded in the market
place at a price equal to or greater than $23.00 per share.
Pall Share Trading Volume Analysis. Cleary Gull analyzed the historical
daily trading volume of the Pall Shares over various periods so that the Gelman
Board of Directors could consider the opportunity for those Gelman stockholders
who, after the Merger, choose to sell all or a portion of their Pall Shares to
achieve complete or partial liquidity for their holdings. The 30, 60, 90, and
360 day average daily trading volume of Pall Shares was approximately 324,000;
282,000; 316,000 and 287,000, respectively. For Gelman, the 30, 60, 90, and 360
day average daily trading volume was approximately 15,000; 17,000; 14,000 and
11,000, respectively. Cleary Gull noted that Pall's average daily trading volume
was significantly higher than the average daily trading volume for Gelman Shares
over the same periods.
Analysis of Selected Publicly Traded Companies Comparable to Gelman.
Cleary Gull compared the trading multiples for Gelman assuming a stock market
price of $33 per share (the "Implied Purchase Price") based on the Pall Market
Price multiplied by the Exchange Ratio to the trading multiples for the Public
Comparables. Gelman's Adjusted Market Value as a multiple of LTM net revenue,
LTM EBIT and LTM EBITDA based on the Implied Purchase Price was 2.40x, 22.5x and
16.2x, respectively, as compared to a median of 2.40x, 17.9x and 13.2x,
respectively, for the Public Comparables. Gelman's equity market capitalization
based on the Implied Purchase Price as a multiple of estimated 1996 and
estimated 1997 calendar net income was 31.4x and 26.7x, respectively, as
compared to a median of 27.3x and 19.8x, respectively, for the Public
Comparables. This analysis indicated that the trading multiples for Gelman based
on the Implied Purchase Price were generally above the median for the Public
Comparables.
Discounted Cash Flow Analysis of Gelman. Cleary Gull analyzed Gelman's
fully diluted per share value based on an unleveraged discounted cash flow
analysis of the future financial performance of Gelman. Such financial
performance was based on a five-year financial plan provided by Gelman's
management. The discounted cash flow analysis determined the discounted present
value of the unleveraged after-tax cash flows generated over the five-year
period and then
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added a terminal value based on a range of EBIT multiples from 11.0x to 15.0x.
The unleveraged after-tax cash flows and terminal value were discounted using a
range of discount rates from 14.0% to 22.0%. Cleary Gull derived the range of
EBIT multiples and discount rates on the basis of multiples of EBIT and
estimated risk adjusted costs of capital for the Public Comparables. Based on
this analysis, Cleary Gull derived an equity value range for Gelman of $22.20 to
$29.38 per fully diluted share. Cleary Gull noted that the Implied Purchase
Price was higher than the price range indicated by the unleveraged after-tax
discounted cash flow analysis.
A second unleveraged discounted cash flow analysis of the future
financial performance of Gelman was also analyzed by Cleary Gull. Such financial
performance was based on the same five-year financial plan for Gelman; however,
$2.5 million of synergies were included in the first year and $3.75 million of
synergies included in each of the following years. Similar EBIT multiples and
discount rates were utilized. Based on this analysis, Cleary Gull derived an
equity value range for Gelman of $25.02 to $33.07 per fully diluted share.
Cleary Gull noted that the Implied Purchase Price was also within the calculated
equity value range after giving Gelman some credit for the anticipated synergies
from the Merger.
Contribution Analysis. Cleary Gull reviewed certain financial
information (including LTM net revenue and projected fiscal year 1996, 1997 and
1998 EBIT and net income) for Gelman and Pall and for Pall after giving effect
to the Merger. Based on such review and assuming that each Gelman Share will be
converted into 1.2394 Pall Shares, Cleary Gull analyzed the contribution of
Gelman to Pall after giving effect to the Merger and compared the contribution
to the Gelman stockholders' pro forma ownership. Such analysis indicated that
the implied percentage ownership interest of the Gelman stockholders in Pall on
a pro forma basis would be greater than Gelman's contribution to the pro forma
operating results.
Analysis of Selected Comparable Transactions. Cleary Gull reviewed nine
transactions involving the acquisition or proposed acquisition of companies in
businesses similar to Gelman's. Cleary Gull calculated the multiples of Adjusted
Market Value to LTM net revenues and LTM EBITDA (the "Acquisition Multiples")
for each of these transactions. Cleary Gull compared the multiples based on the
Implied Purchase Price to the Acquisition Multiples. Gelman's Adjusted Market
Value as a multiple of LTM net revenue and LTM EBITDA based on the Implied
Purchase Price was 2.40x and 16.2x, respectively, as compared to a range of
0.27x to 2.49x and 6.4x to 14.5x, respectively, for the comparable transactions.
This analysis indicated that the multiples for Gelman based on the Implied
Purchase Price were within or above the range for the selected comparable
transactions.
Exchange Ratio Profile. Cleary Gull analyzed the historical ratio of
the market price of Gelman Shares to the market price of Pall Shares during the
period from July 16, 1995 to July 16, 1996. This analysis implied an exchange
ratio ranging from a high of 1.07 Pall Shares for each Gelman Share to a low of
0.79 of a Pall Share for each Gelman Share, with a median during the period of
0.91 of a Pall Share for each Gelman Share. Cleary Gull noted that the median
historical exchange ratio was less than the Exchange Ratio based on the Pall
Market Price. Cleary Gull also
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calculated the ratio of the Gelman Share price on July 16, 1996 ($19.25 per
share) with and without a 31% premium to the Pall Share price on the same date
($20.375 per share). The calculation implied an exchange ratio of 1.23x and
0.95x, respectively, of Pall Shares for each Gelman Share. Cleary Gull also
performed an analysis of the historical ratio of the market price of Gelman
Shares plus a 31% premium to the market price of Pall Shares during the same
period. This analysis implied an exchange ratio ranging from a high of 1.40 Pall
Shares for each Gelman Share to a low of 1.03 Pall Shares for each Gelman Share.
Cleary Gull noted that the Exchange Ratio, based on the Pall Market Price, fell
within this range.
Cleary Gull was selected by Gelman as its financial advisor in
connection with the Merger because of Cleary Gull's reputation and expertise as
an investment banking firm and its expertise and familiarity with the
filtration/separation industry. Cleary Gull, as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, underwritings of
equities, private placements and valuations for estate, corporate and other
purposes.
Pursuant to an engagement letter between Cleary Gull and Gelman, Gelman
paid Cleary Gull a non-refundable fee of $100,000 upon signing of the letter of
intent with Memtec (the "Signing Fee"). In addition, upon consummation of the
Merger, Cleary Gull will be paid a fee equal to 0.7% times the total number of
Gelman Shares exchanged in the Merger (including shares resulting from exercised
options and warrants) times the per share equivalent price of a Gelman Share
less the Signing Fee. If the per share equivalent price of a Gelman Share is
$33, the additional fee to be paid to Cleary Gull upon consummation of the
Merger would be approximately $1,760,000 (based on the number of shares
outstanding on the record date). In connection with the termination of the
Memtec Merger Agreement and the execution of the Merger Agreement, Gelman will
pay Cleary Gull an advance of $750,000 against the fee due upon consummation of
the Merger. Gelman has also agreed to reimburse Cleary Gull for its reasonable
out-of-pocket expenses up to $50,000 and to indemnify it against certain
expenses and liabilities in connection with its services as financial advisor,
including those arising under federal securities laws.
In the ordinary course of its business, Cleary Gull actively trades the
equity securities of Gelman and Pall for Cleary Gull's own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities. In March 1995, Cleary Gull was the managing
underwriter of a public offering of 1,437,500 Gelman Shares for which Cleary
Gull received customary compensation.
PALL'S REASONS FOR THE MERGER
Pall's business strategy is to provide filtration products at every
stage of a product's life cycle, from filters used for new product development
in the laboratory on through production and end use of the product. In order to
carry out this strategy, Pall must have greater presence in the laboratory area.
Management believes that Gelman's products and distribution network will provide
Pall with ready access to the laboratory product area. Gelman has a strong,
established presence in
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the laboratory product area for filtration and separation products, including
small volume filters for use in research and clinical and industrial
laboratories for sample preparation, new drug development, environmental testing
and other applications, which complement and broaden Pall's smaller and more
specialized laboratory product line. Gelman's distribution strength to
laboratories will also enhance distribution of Pall's membranes for diagnostics
and molecular biology. Management also expects Pall's global distribution system
to hospitals and blood centers to broaden sales of Gelman's custom designed
medical filtration products, which are distinct from Pall's filtration products.
Gelman's process filter products fit well into Pall's product line.
REGULATORY APPROVALS
The Merger may not be consummated until certain information has been
furnished to the Department of Justice and the Federal Trade Commission (the
"FTC") pursuant to the HSR Act and certain waiting period requirements
thereunder have been satisfied. Pall and Gelman filed the required information
and materials with the Department of Justice and the FTC with respect to the
Merger on November 15, 1996, and the required waiting period will expire on
December 13, 1996, unless terminated at an earlier date or unless Pall or Gelman
shall previously have received a request for additional information.
At any time before or after the Effective Time, the Department of
Justice or the FTC or a private person or entity could seek under the antitrust
laws, among other things, to enjoin the Merger or to cause Pall to divest
itself, in whole or in part, of Gelman or of other businesses conducted by Pall.
In addition, to the extent applicable, filings must also be made with the
appropriate governmental authorities having jurisdiction over antitrust matters
in the jurisdictions other than the United States where Pall and/or Gelman
conduct business. Based on information available to them, management of Pall and
Gelman believe that the Merger can be effected in compliance with all applicable
antitrust laws. However, there can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or that, if such a challenge is
made, Pall and Gelman will prevail. The obligations of Pall and Gelman to
consummate the Merger are subject to the condition that there be no preliminary
or permanent injunction or other order by any federal or state court which
prevents the consummation of the Merger. Each party has agreed to use
commercially reasonable efforts to have any such injunction or order lifted.
Pall and Gelman are not aware of any license or regulatory permit which
is material to the business of Gelman and which is likely to be adversely
affected by Merger, or of any approval or other action by any state, federal or
foreign government or governmental agency (other than the FTC and the Department
of Justice pursuant to the HSR Act) that would be required prior to the Merger.
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ACCOUNTING TREATMENT
The Merger is expected to be accounted for by the pooling-of-interests
method of accounting. Under this method of accounting, the recorded assets and
liabilities of Pall and Gelman will be carried forward at their recorded amounts
to Pall after the Merger, income of Pall after the Merger will include the
income of Pall and Gelman for the entire fiscal year in which the Merger occurs,
and the reported income of Pall and Gelman for prior periods will be combined
and restated as income of Pall after the Merger. It is a condition to Pall's
obligation to effect the Merger that it receive an opinion from Coopers &
Lybrand L.L.P., Gelman's independent public accountants, that neither Gelman nor
any of its affiliates has taken or agreed to take any action that would affect
the ability of Pall to account for the Merger as a pooling of interests. See
"-Resales of Pall Shares by Affiliates of Gelman" and "The Merger Agreement
- -Conditions to the Merger."
NO APPRAISAL RIGHTS
Under Section 450.1762(2)(a) of the Michigan Business Corporation Act,
holders of Gelman Shares have no appraisal or dissenters' rights with respect to
the Merger inasmuch as the Gelman Shares were listed on a national securities
exchange (the ASE) on the Record Date.
SURRENDER OF GELMAN SHARE CERTIFICATES
Promptly after the Effective Time, a letter of transmittal containing
notice of the Merger and instructions with respect to the surrender of
certificates previously representing Gelman Shares will be sent to each record
holder of Gelman Shares as of the Effective Time. The letter of transmittal will
set forth the procedure for surrendering such certificates for exchange to
Wachovia Bank of North Carolina, N.A. as Exchange Agent. From and after the
Effective Time, each such Gelman stock certificate will evidence only the right
to receive (without interest) the number of Pall Shares fixed by the Exchange
Ratio for each Gelman Share evidenced by such certificate. Until such Gelman
stock certificates have been surrendered and exchanged, the holders thereof will
not be entitled to any of the rights of Pall shareholders, including the right
to receive any dividends or other distributions made on the Pall Shares issuable
to them under the Merger Agreement. Dividends and other distributions payable on
the Pall Shares prior to the exchange of certificates by any holder of Gelman
Shares, together with any cash payment in lieu of a fractional Pall Share, will
be remitted to such holder, without interest, at the time that his or her Gelman
stock certificates are surrendered for exchange.
RESALES OF PALL SHARES BY AFFILIATES OF GELMAN
None of the Pall Shares received by the Gelman stockholders in
connection with the Merger will be subject to restrictions on resale or other
transfer by them under the Securities Act of 1933 (the "Securities Act"), except
that Pall Shares received by persons who are deemed to be "affiliates" (as such
term is defined in Rule 144 under the Securities Act) of Gelman prior to the
Merger may be resold by them only pursuant to an effective registration
statement under the Securities Act or in
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transactions exempt from the registration requirements under the Securities Act
by virtue of, for example, Rule 145 under the Securities Act. In general, under
Rule 145, an affiliate of Gelman, together with certain members of his or her
immediate family, would be entitled, for a period of two years after the
Effective Time, to sell Pall Shares received in the Merger only through
unsolicited "brokers' transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144. Rule 145 would only be available
for resales of Pall Shares by affiliates of Gelman at a time when Pall has filed
with the Commission all periodic reports required to be filed by it under the
Exchange Act (e.g., Forms 10-K and 10-Q). After two years from the Effective
Time, affiliates of Gelman who are not affiliates of Pall would be able to sell
freely the Pall Shares received by them in the Merger, subject only to the
above-mentioned periodic reports requirement, which would continue to apply
until three years after the Effective Time, at which time former affiliates of
Gelman would be able to sell such Pall Shares without any restrictions.
Pursuant to the Merger Agreement, Gelman has identified to Pall all
persons who may be deemed affiliates of Gelman for purposes of Rule 145,
including all directors and executive officers of Gelman, and has advised such
persons of the resale restrictions imposed by applicable securities laws,
including the Commission's Accounting Series Release No.135 ("ASR 135"). Under
generally accepted accounting principles, it is a general condition to the use
of pooling-of-interests accounting for a business combination that such
combination represent a sharing of rights and risks among the stockholders of
the combining entities. ASR 135 and related interpretations of the Commission
staff provide, in general, that this risk-sharing condition will be deemed to be
satisfied if no affiliate of either entity in a business combination sells
(whether privately or publicly), or in any way reduces his risk relative to, any
common shares received in such business combination (or common shares held by an
affiliate of the issuing entity at the time when the combination is effected)
until such time as financial results covering at least 30 days of
post-combination operations have been published. An agreement entered into
before the end of such period which requires the sale of shares after such
period would preclude pooling treatment, as would any agreement to reduce the
risk borne by an affiliate stockholder subsequent to the combination.
The Commission staff has interpreted ASR 135 to permit certain de
minimis sales by affiliates. To be minimis, (i) the sales by an affiliate must
not be greater than 10 percent of that affiliate's pre-combination (or
equivalent post-combination) shares, and (ii) the aggregate sales by all
affiliates of a combining entity must not exceed the equivalent of one percent
of that entity's precombination outstanding shares.
Pursuant to the Merger Agreement, Pall and Gelman have obtained
agreements from their respective directors, executive officers and other
affiliates that they will comply with the provisions of ASR 135 and related
interpretations of the Commission staff. Pall agreed in the Merger Agreement to
publish post-Merger combined financial results sufficient to satisfy ASR 135
within 20 days of the end of the first full 30-day period following the closing
of the Merger.
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OFFER TO EXCHANGE OPTIONS
Pursuant to the Merger Agreement and contingent upon the effectiveness
of the Merger, Pall is offering each holder of "options" to purchase Gelman
Shares ("Gelman Options") the opportunity to exchange each of his or her Gelman
Options for an option to purchase Pall Shares ("Pall Options"). As of the Record
Date, there were Gelman Options outstanding to purchase an aggregate of ______
Gelman Shares at a weighted average exercise price of $____ per share.
PALL OPTIONS
Each Pall Option will be on substantially the same substantive terms
and conditions as the Gelman Option for which it is being exchanged (e.g., each
Pall Option will have the same vesting schedule and expiration date as the
Gelman Option for which it is exchanged except that Messrs. Gelman and Davis
have agreed to accept Pall Options having a shorter term than their Gelman
Options -- see "Interests of Certain Persons in the Merger"). The form of Pall
Option is attached as Schedule B to Exhibit C to this Proxy
Statement-Prospectus, and the following description is qualified in its entirety
by reference thereto.
The exercise price per Pall Share issuable upon exercise of a Pall
Option will be determined by dividing the exercise price per Gelman Share
issuable upon exercise of the related Gelman Option by the Exchange Ratio. The
number of Pall Shares issuable on exercise of a Pall Option will be determined
by multiplying the number of Gelman Shares that could have been acquired upon
exercise of the related Gelman Option by the Exchange Ratio.
The Pall Options will be administered by the Compensation Committee of
Pall's Board of Directors (the "Committee"). The exercise price payable upon
exercise of a Pall Option must be paid in cash or, with the consent of the
Committee, by delivery of Pall Shares having a value equal to the exercise
price, or partly in cash and partly by delivery of Pall Shares.
A Pall Option is not intended to be an incentive stock option within
the meaning of Section 422 of the Internal Revenue Code unless the Gelman Option
for which such Pall Option is exchanged states that it is intended to be an
incentive stock option, in whole or in part, in which event the Pall Option
issued in exchange will include the same statement of intention.
The Registration Statement of which this Proxy Statement-Prospectus is
a part includes the Pall Options and the Pall Shares issuable on exercise of the
Pall Options.
EXCHANGE AGREEMENTS
Prior to the consummation of the Merger, Pall and Gelman will request
each holder of an outstanding Gelman Option to enter into an Exchange Agreement
substantially in the form attached hereto as Exhibit C. Schedule A to the
Exchange Agreement will be completed with the appropriate information determined
by reference to the existing Gelman Option in exchange for
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which the Pall Option is being issued. Pall and Gelman will seek to obtain
executed Exchange Agreements from all holders of outstanding Gelman Options
prior to the Effective Time. Holders of Gelman Options who enter into Exchange
Agreements will be required to surrender their Gelman Option agreements in order
to receive the Pall Option or Options issuable in exchange therefor.
It is a condition to the obligation of Pall to consummate the Merger
that the number of Gelman Shares covered by Gelman Options which are not
exercised or converted into Pall Options before the Effective Time shall not
exceed 128,458 Gelman Shares. Messrs. Gelman and Davis have agreed to exchange
their Gelman Options for Pall Options. See "Interests of Certain Persons in the
Merger -- Stock Options and Warrants."
Holders of Gelman Options who do not exchange their Gelman Options for
Pall Options will continue to hold Gelman Options. If Gelman Shares are issued
pursuant to such options after consummation of the Merger, it is Pall's
intention to take steps permitted under the Michigan Business Corporation Act to
cash out any such minority holding.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
considerations relating to Pall Options issued by Pall in exchange for Gelman
Options granted in consideration of services rendered or to be rendered by the
optionee to Gelman or its subsidiaries. This summary does not purport to be a
complete description of such considerations, and each optionee is advised to
consult his own tax adviser before consenting to an exchange of options,
exercising an option or disposing of shares acquired pursuant to the exercise of
options.
Exchange of Options. An exchange of outstanding Gelman Options for Pall
Options will not be a taxable event for United States federal income tax
purposes.
Nonqualified Options. Most outstanding Gelman Options are not
"incentive stock options" as defined in Section 422 of the Code ("Incentive
Options"). Pall Options issued in exchange for such options will likewise be
nonqualified stock options ("Nonqualified Options"). Upon exercise of such an
option, the optionee recognizes ordinary income in an amount equal to the
excess, if any, of the fair market value of the shares on the date of exercise
over the exercise price. If the optionee is an employee of Gelman or a
subsidiary at the time of option grant, such ordinary income is classified as
taxable wages subject to federal and state income tax withholding and social
security withholding, which withholding taxes are due and payable at the time
the option is exercised. Upon request by Pall, upon exercise of a Nonqualified
Option, the optionee will be required to pay to Pall an amount equal to 28% of
such ordinary income for federal income tax withholding purposes and, where
applicable, an appropriate percentage for state and local income tax withholding
purposes, to cover the amount of income tax withholding which Pall is required
to make.
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If, with the consent of the Committee, an optionee pays the option
exercise price by delivering Pall Shares already owned by such optionee, such
delivery would constitute a non-taxable exchange by the optionee. The optionee
would recognize ordinary income in an amount equal to the fair market value of
the additional shares received (i.e., above the number of shares delivered).
Optionees are especially urged to consult their own tax advisers before paying
the exercise price of an option by delivering Pall Shares already owned.
Pall is entitled to an income tax deduction in the same amount that,
and for Pall's taxable year in which, the optionee recognizes ordinary income
from the exercise of a Nonqualified Option.
Upon a sale of shares purchased on the exercise of a Nonqualified
Option, the optionee will recognize short-term or long-term capital gain or
loss, depending on whether the shares are held for more than one year after the
date of exercise. Such gain or loss will be measured by the difference between
the selling price of the shares and the market price of the shares on the date
of exercise.
Incentive Options. A small number of Gelman Options are intended to
qualify as Incentive Options. In general, to the extent that the terms of the
Pall Options granted in exchange therefor are not superior, from the optionee's
viewpoint, to such Gelman Options, such Pall Options should likewise qualify as
Incentive Options. However, if the vesting of a Gelman Option is accelerated by
the Merger and as a result options having a fair market value (at the date of
grant) of more than $100,000 first become exercisable in the year of such
accelerated vesting, the option will not receive Incentive Option tax treatment
with respect to the excess over said $100,000 amount.
In general, the optionee under an Incentive Option does not recognize
any income at either the time the option is granted or at the time it is
exercised (although the exercise of an Incentive Option can have "alternative
minimum tax" consequences to the optionee as described below under the caption "
- -- Alternative Minimum Tax"). If an optionee holds shares purchased upon
exercise of an Incentive Option for at least (i) two years after the date such
option has been granted to the optionee and (ii) one year after the date such
shares are transferred to the optionee, then any gain or loss in respect of a
subsequent disposition of such shares will generally be treated as a long-term
capital gain or loss. In the event that the optionee disposes of shares
purchased upon exercise of an Incentive Option (for this purpose a disposition
includes a sale, exchange, gift or certain other transfers of legal title but
not a mere pledge) before the end of such two- and one-year periods (any such
disposition being herein referred to as a "disqualifying disposition"), then the
excess, if any, of the aggregate fair market value of such shares on the date on
which the option was exercised over the aggregate exercise price of such shares
will be treated as ordinary income to the optionee in the year of the
disqualifying disposition, unless such disqualifying disposition is a sale or
exchange for less than the fair market value of such shares on the date of
exercise of the option, in which case the amount that will be so treated as
ordinary income will be limited to the excess, if any, of the aggregate amount
realized upon such sale or exchange over the aggregate exercise price of the
shares so sold or exchanged.
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In the event that a disqualifying disposition is a sale or exchange for
more than the fair market value of such shares on the date of exercise of the
Incentive Option, the excess of the aggregate amount realized upon such sale or
exchange over the aggregate fair market value of such shares on the date of
exercise will be treated as a capital gain. Such gain will be treated as
long-term capital gain if the shares have been held for more than one year at
the time of the disqualifying disposition and otherwise will be treated as
short-term capital gain. In the event that a disqualifying disposition is a sale
or exchange for less than the aggregate exercise price of such shares, no
ordinary income will be realized by the optionee, and the difference between the
aggregate amount realized upon such sale or exchange and such aggregate exercise
price will be treated as a long-term or short-term capital loss, depending upon
whether such shares have or have not been held for more than one year at the
time of such sale or exchange.
The rules described above relating to disqualifying dispositions may
not apply to certain transfers -- for example, transfers by bequest or incident
to divorce.
Pall will not be entitled to any federal income tax deduction with
respect to the grant or exercise of an Incentive Option, but may be entitled,
in the year of a disqualifying disposition, to a deduction equal to the amount,
if any, that the optionee must treat as ordinary income.
If, with the consent of the Committee, an optionee pays the option
exercise price by delivering Pall Shares already owned by such optionee, such
delivery would constitute a non-taxable exchange by the optionee and would not
affect the Incentive Option status of the Common Stock issued upon exercise of
the option. However, if the Pall Shares delivered in payment had previously been
acquired upon exercise of an Incentive Option and were not subsequently held for
the requisite one- and two-year periods, the delivery of such shares in payment
of the exercise price of an option would constitute a disqualifying disposition
of the shares so delivered. Optionees are especially urged to consult their own
tax advisers before paying the exercise price of an Incentive Option by
delivering Pall Shares already owned.
In the event an optionee exercises an Incentive Option more than three
months (one year if the optionee is disabled) after employment terminates, the
tax treatment with respect to the option is the same as for a Nonqualified
Option (discussed above).
Alternative Minimum Tax. The Code imposes an alternative minimum tax
determined by applying a special tax rate to the excess, if any, of an
individual's "alternative minimum taxable income" over a specified exemption
amount. Alternative minimum taxable income includes the amount by which the fair
market value of shares obtained through exercise of an Incentive Option exceeds
the exercise price. In addition, the basis of any shares acquired through the
exercise of an Incentive Option for determining gain or loss for purposes of the
alternative minimum tax will be the shares' fair market value at exercise. In
the event of a disqualifying disposition of the shares in the year the Incentive
Option is exercised, the amount includible as alternative minimum taxable income
is limited to the excess of the sales price over the exercise price.
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<PAGE> 51
INTERESTS OF CERTAIN PERSONS IN THE MERGER
EMPLOYMENT AGREEMENTS AND RELATED MATTERS
Under the existing employment agreements between Gelman and each of
Messrs. Gelman, Davis and George Uveges (Gelman's Vice President and Chief
Financial Officer), the Merger will result in a "change of control" of Gelman.
Accordingly, under such agreements, Messrs. Gelman, Davis and Uveges would be
entitled to receive certain payments if their employment were to be terminated
(including by voluntary resignation) within one year of the Effective Time. The
payments would consist of up to five years' base salary (one year's salary for
Mr. Uveges) and, if certain performance goals were being met, an incentive bonus
for each year of base salary paid equal to the incentive bonus that would have
been paid in the year of termination. In addition, unvested stock option awards
immediately vest in full upon a change of control.
In light of the existing employment agreement between Gelman and Mr.
Gelman, Mr. Gelman will receive a "change of control" payment at the Effective
Time equal to the sum of $2,000,000 plus the amount of any related "parachute
payment" excise tax due in respect of this payment ("Tax Reimbursement"), under
an employment agreement entered into between Gelman and Mr. Gelman and approved
by Pall (the "Gelman Employment Agreement"). Under that agreement, Mr. Gelman
would continue as an employee of Gelman, with reduced responsibilities, for a
period of five years, during which time he would receive an annual salary of
$150,000, an annual expense allowance in the same amount and the use of an
office, clerical and staff support and certain insurance and other fringe
benefits. Mr. Gelman will have the title of Chairman of Technical Research. The
Gelman Employment Agreement will only become effective and the "change of
control" payment will only be made if the Merger is consummated.
In light of the existing employment agreement between Gelman and Mr.
Davis, Mr. Davis will receive a "change of control" payment at the Effective
Time equal to the sum of $924,386 plus the amount of any Tax Reimbursement,
under an employment agreement entered into between Pall, Gelman and Mr. Davis
(the "Davis Employment Agreement"). Under that agreement, Mr. Davis would
continue as President and Chief Operating Officer of Gelman for not less than
three years after the Merger, would receive an annual base salary of not less
than $325,000 and would be eligible for an annual bonus of up to 75% of his
annual base salary if certain performance goals for Gelman are achieved. For
the fiscal years ended on or about July 31, 1997, 1998 and 1999, the annual
bonus would be 75% of base salary without reference to performance goals. Mr.
Davis would also have certain insurance and other fringe benefits. The Davis
Employment Agreement will only become effective and the "change of control"
payment will only be made if the Merger is consummated.
Messrs. Gelman and Davis have each agreed, in their new employment
agreements just described, to exchange their Gelman Options for Pall Options
expiring not more than five years from
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<PAGE> 52
the closing of the Merger notwithstanding that the unexpired terms of their
existing Gelman Options range from about six and a half to about nine and a half
years.
INDEMNIFICATION
The Merger Agreement provides that from and after the Effective Time
Gelman (as the surviving corporation in the Merger with Sub) will continue to
observe any indemnification provisions currently existing in the Gelman Articles
or Gelman By-Laws, or in indemnification agreements for the benefit of any
individuals who served as directors or officers of Gelman at any time prior to
the Effective Time. The Merger Agreement further requires Pall, from and after
the Effective Time, to indemnify, defend and hold harmless each individual who
has served at any time prior to the Effective Time as an officer, director,
employee or fiduciary of Gelman or any of its subsidiaries against (i) all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of Pall, or in connection with any
claim, action, suit, proceeding or investigation based on or arising out of the
fact that such person is or was a director, officer, employee or fiduciary of
Gelman or any of its subsidiaries, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after the Effective Time, and (ii) all such liabilities based
on, or arising from, the Merger Agreement or transactions contemplated thereby,
in each case to the full extent permitted under the Michigan Business
Corporation Act.
STOCK OPTIONS AND WARRANTS
The Merger will result in the acceleration of vesting of certain Gelman
Options held by executive officers of Gelman. Options with respect to 37,500,
82,500, 20,000 and 11,625 Gelman Shares held by Messrs. Gelman, Davis, Uveges
and another employee of Gelman, respectively, will vest as a result of such
acceleration.
The executive officers and directors of Gelman are currently the
holders of Gelman Options to purchase an aggregate of 393,487 Gelman Shares at
prices ranging from $3.39 to $27.75 per share, and will have the right to
exchange their Gelman Options for Pall Options. (Messrs. Gelman and Davis have
agreed to do so.) See "Offer to Exchange Options." The following table sets
forth information as to the Gelman Options currently held by the executive
officers and directors of Gelman, and the Pall Options which may be received by
them. The information on the Pall Options below assumes that 1.2394 Pall Shares
are issued for each Gelman Share (the Pro Forma Exchange Ratio).
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<PAGE> 53
<TABLE>
<CAPTION>
GELMAN OPTIONS PALL OPTIONS
-------------- -------------------------------------------
NO. OF NO. OF
GELMAN EXERCISE PALL EXERCISE EXPIRATION
SHARES PRICE SHARES PRICE DATE
------ ----- ------ ----- ----
<S> <C> <C> <C> <C> <C>
Charles Gelman....................... 18,750 $ 10.92 23,239 $ 8.81 (a)
50,000 18.88 61,970 15.23 (a)
Kim A. Davis......................... 56,250 6.61 69,716 5.33 (a)
56,250 10.92 69,716 8.81 (a)
50,000 17.75 61,970 14.32 (a)
45,000 27.00 55,773 21.78 (a)
Anthony P. Kelly..................... 10,000 3.78 12,394 3.05 December 16, 1997
2,700 3.45 3,346 2.78 September 19, 2000
11,250 7.11 13,943 5.74 July 29, 2003
3,750 10.92 4,648 8.81 June 17, 2004
12,500 21.00 15,493 16.94 September 20, 2005
15,000 23.88 18,591 19.27 December 14, 2005
Edward J. Levitt .................... 3,375 4.45 4,183 3.59 April 3, 1999
700 3.45 868 2.78 September 19, 2000
2,250 3.67 2,789 2.96 September 24, 2002
400 26.13 496 21.08 April 2, 2006
Karen A. Radtke ..................... 4,000 18.88 4,958 15.23 June 5, 2005
Charles J. Robrecht ................. 563 3.39 698 2.74 January 20, 2002
2,813 4.55 3,486 3.67 December 1, 2002
5,625 14.88 6,972 12.01 December 15, 2004
750 26.13 930 21.08 April 2, 2006
Mark A. Sutter ...................... 1,062 3.39 1,316 2.74 January 20, 2002
5,062 3.67 6,274 2.96 September 24, 2002
8,437 4.55 10,457 3.67 December 1, 2002
5,000 14.88 6,197 12.01 December 15, 2004
George Uveges ....................... 20,000 22.875 24,788 18.46 August 21, 2006
Saul H. Hymans....................... 1,000 27.75 1,239 22.39 July 31, 2006
Nina I. McClelland................... 1,000 27.75 1,239 22.39 July 31, 2006
</TABLE>
- ----------------
(a) The expiration date of the Pall Options issued to Messrs. Gelman
and Davis will be the fifth anniversary of the closing of the Merger.
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<PAGE> 54
In addition, certain non-employee directors of Gelman are currently the
holders of warrants to purchase Gelman Shares (the "Gelman Warrants"). At the
Effective Time, the Gelman Warrants will automatically, in accordance with their
terms, be converted into warrants to purchase Pall Shares (the "Pall Warrants").
See "The Merger Agreement -- Effect of the Merger on Gelman Shares." The
following table sets forth information as to the Gelman Warrants currently held
by the non-employee directors of Gelman, and the Pall Warrants which will be
received by them upon the effectiveness of the Merger. The information on the
Pall Warrants below assumes that 1.2394 Pall Shares are issued for each Gelman
Share (the Pro Forma Exchange Ratio). The Pall Warrants in the table will expire
90 days after the date on which the persons listed cease to be directors of
Gelman. It is expected that all such persons will resign as directors as of the
Effective Time.
<TABLE>
<CAPTION>
GELMAN WARRANTS PALL WARRANTS
--------------------------- ---------------------------
NO. OF NO. OF
GELMAN EXERCISE PALL EXERCISE
SHARES PRICE SHARES PRICE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Robert Collins............................ 9,000 $10.92 11,155 $8.81
John A Geishecker, Jr..................... 11,250 4.05 13,943 3.27
28,350 3.78 35,137 3.05
4,500 10.92 5,577 8.81
Saul H. Hymans............................ 4,500 10.92 5,577 8.81
Nina I. McClelland........................ 4,050 4.45 5,020 3.59
4,500 10.92 5,577 8.81
Charles Newman............................ 4,500 3.33 5,577 2.69
4,500 10.92 5,577 8.81
</TABLE>
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<PAGE> 55
THE MERGER AGREEMENT
The following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is attached as Exhibit A to this Proxy Statement-Prospectus and is incorporated
herein by this reference. Certain defined terms used in this section shall have
the meanings given in the Merger Agreement. See the Glossary of Defined Terms
following the Table of Contents of the Merger Agreement.
EFFECT OF THE MERGER ON GELMAN SHARES
At the Effective Time, Sub will be merged with and into Gelman, which
thereupon will become a wholly-owned subsidiary of Pall. Each Gelman Share
issued and outstanding immediately prior to the Merger will be converted into
the right to receive between 1.1804 and 1.3047 Pall Shares, as determined by the
Exchange Ratio formula described on the cover page of this Proxy Statement-
Prospectus. The number of Pall Shares to be issued in the Merger to Gelman
stockholders will not be determinable until the close of trading on the NYSE on
the fourth trading day immediately preceding the date of the Special Meeting.
No fractional Pall Shares will be issued in the Merger. Each Gelman
stockholder who otherwise would be entitled to a fractional Pall Share (after
aggregating all fractional Pall Shares to be received by such stockholder) will
be entitled to receive an amount in cash (without interest) determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the closing sale price of a Pall Share as reported for NYSE
composite transactions on the last trading day immediately preceding the date of
the Effective Time.
As a result of the Merger, the Gelman Shares will be delisted from the
ASE, the registration of the Gelman Shares under the Exchange Act will
terminate, Gelman will cease to file periodic reports with the Commission, and
Gelman will be relieved of the obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act.
As of the Record Date, Gelman had outstanding Gelman Warrants to
acquire an aggregate of 95,150 Gelman Shares at exercise prices per share
ranging from $3.33 to $22.65. See "Interests of Certain Persons in the Merger --
Stock Options and Warrants." Pursuant to their respective terms, each of the
Gelman Warrants is currently exercisable with the exception of a warrant for
20,000 shares sold to a former attorney for Gelman. In connection with the
Merger, each of the Gelman Warrants which remains unexercised at the Effective
Time will be automatically converted in accordance with its terms into a Pall
Warrant to purchase a number of Pall Shares equal to the number of Gelman Shares
issuable upon the exercise of the related Gelman Warrant multiplied by the
Exchange Ratio, at an exercise price per Pall Share equal to the exercise price
per Gelman Share of the related Gelman Warrant divided by the Exchange Ratio.
In addition, in connection with the Merger, Pall is offering Pall
Options in exchange for all outstanding Gelman Options. See "Offer to Exchange
Options."
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<PAGE> 56
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligation
Unless waived by Pall and Gelman, their respective obligations to
effect the Merger are subject to the following conditions:
Stockholder Approval. The Merger Agreement and the transactions
contemplated therein shall have been approved and adopted by the requisite vote
of the stockholders of Gelman under applicable law.
NYSE Listing. The Pall Shares issuable in the Merger shall have been
authorized for listing on the NYSE.
Other Approvals. The waiting period applicable to the consummation of
the Merger under the HSR Act and other applicable antitrust regulations of
applicable jurisdictions shall have expired or been terminated and all other
material governmental waivers, consents, orders and approvals legally required
for the consummation of the Merger and the transactions contemplated thereby
shall have been obtained and be in effect at the Effective Time. See "The Merger
- -- Regulatory Approvals."
The Registration Statement. No stop order suspending the effectiveness
of the Registration Statement under the Securities Act shall have been issued
and remain in effect and no proceedings for that purpose shall have been
instituted or, to the knowledge of Pall and Gelman, threatened by the Commission
or any state regulatory authorities.
No Injunctions or Restraints. No preliminary or permanent injunction or
other order or decree by any federal or state court which prevents the
consummation of the Merger shall have been issued and remain in effect.
No Actions. No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal.
Additional Conditions to Pall's Obligation
The obligation of Pall to effect the Merger is subject to the
fulfillment of certain additional conditions unless waived by Pall, including
the following:
Performance of Obligations and Representations and Warranties of
Gelman. Gelman shall have performed in all material respects its agreements
contained in the Merger Agreement required to be performed on or prior to the
date of the closing of the transactions contemplated by the Merger Agreement
(the "Closing Date"), and the representations and warranties of Gelman contained
in the
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<PAGE> 57
Merger Agreement shall be true and correct in all material respects on and as of
the date made and on and as of the Closing Date as if then made, except for
those representations and warranties which address matters only as of a
particular date.
Legal Opinion. Pall shall have received an opinion from Godfrey & Kahn,
S.C., independent counsel to Gelman, dated as of the Effective Time, reasonably
satisfactory to Pall and addressing various legal matters related to the Merger.
Affiliate Agreements. Pall shall have received agreements from the
affiliates of Gelman, including Gelman's directors and executive officers, with
respect to their compliance with ASR 135.
See "The Merger -- Resales of Pall Shares by Affiliates of Gelman."
No Material Changes. After the date of the Merger Agreement, there
shall have been no changes that constitute, and no event or events shall have
occurred which have resulted in or constitute, a material adverse change in the
business, operations, properties, assets, condition (financial or other) or
results of operations of Gelman and its subsidiaries taken as a whole, other
than changes or events involving the financial performance of Gelman or changes
or events involving the financial condition of Gelman resulting solely from
changes in the financial performance of Gelman.
Governmental Waivers and Consents; Legislation. All governmental
waivers, consents, orders and approvals required to be obtained and all filings
required to be made by Gelman for the consummation by Gelman of the Merger and
the transactions contemplated in the Merger Agreement shall have been obtained
and made (except where the lack of such item would not have a material adverse
effect), and no governmental authority shall have promulgated any statute, rule
or regulation which, when taken together with all such promulgations, would
materially impair the value to Pall of the Merger. See "The Merger -- Regulatory
Approvals."
Consents of Lenders and Lessors. All required consents and approvals of
lenders who have advanced $5 million or more to Gelman and lessors of material
leases or other material contracts of Gelman shall have been obtained and be in
effect at the Effective Time.
Pooling-of-Interests Accounting. Coopers & Lybrand L.L.P., the
independent public accountants for Gelman, shall have delivered a letter stating
that in their opinion neither Gelman nor any of its affiliates has taken or
agreed to take any action that would affect adversely Pall's ability to account
for the Merger as a pooling of interests.
Gelman Options. Gelman Options shall have been exercised or the holders
thereof have agreed to exchange them for Pall Options so that the number of
Gelman Shares covered by Gelman Options after the closing of the Merger shall
not exceed 128,458. See "Offer to Exchange Options."
Gelman's Sales. Gelman's consolidated gross sales for the period
commencing August 1, 1996 and ending sixty (60) days prior to the scheduled date
of the Special Meeting shall be not less
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<PAGE> 58
than Gelman's consolidated gross sales for the similar period during fiscal year
1996, in each case determined in accordance with generally accepted accounting
principles.
Additional Conditions to Gelman's Obligation
The obligation of Gelman to effect the Merger is subject to the
fulfillment of certain additional conditions unless waived by Gelman, including
the following:
Performance of Obligations and Representations and Warranties of Pall
and Sub. Pall and Sub shall have performed in all material respects their
agreements contained in the Merger Agreement required to be performed on or
prior to the Closing Date, and the representations and warranties of Pall and
Sub contained in the Merger Agreement shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date as if made
at and as of such date, except for those representations and warranties which
address matters only as of a particular date.
Legal Opinions. Gelman shall have received an opinion from Godfrey &
Kahn, S.C., independent counsel to Gelman, in form and substance reasonably
satisfactory to Gelman, to the effect that (i) the Merger will be treated for
United States federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) Pall, Sub and Gelman will each be a party to the reorganization within the
meaning of Section 368(b) of the Code, and (iii) the stockholders of Gelman will
not recognize gain or loss as a result of the Merger, except to the extent such
stockholders receive any cash in lieu of a fractional Pall Share. In addition,
Gelman shall have received an opinion from Carter, Ledyard & Milburn,
independent counsel to Pall and Sub, dated the Effective Time, reasonably
satisfactory to Gelman and addressing various legal matters related to the
Merger.
No Material Changes. After the date of the Merger Agreement, there
shall have been no changes that constitute, and no event or events shall have
occurred which have resulted in or constitute, a material adverse change in the
business, operations, properties, assets, condition (financial or other) or
results of operations of Pall and its subsidiaries, taken as a whole.
Governmental Waivers and Consents. All governmental waivers, consents,
orders and approvals legally required and all filings required to be made by
Pall or Sub for the consummation of the Merger and the transactions contemplated
by the Merger Agreement shall have been obtained and made (except where the lack
of such an item would not have a material adverse effect). No governmental
authority shall have promulgated any statute, rule or regulation which, when
taken together with all such promulgations, would materially impair the value to
Gelman of the Merger.
Fairness Opinion. Gelman shall have received from Cleary Gull an
opinion, reasonably acceptable to Gelman, dated on or about the date on which
this Proxy Statement-Prospectus is first distributed to the stockholders of
Gelman, to the effect that the consideration to be received by the stockholders
of Gelman in the Merger is fair, from a financial point of view, to such
holders.
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<PAGE> 59
Consents of Lenders and Lessors. All required consents and approvals of
lenders who have advanced $5 million or more to Pall and lessors of material
leases or other material contracts of Pall shall have been obtained and be in
effect at the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Pall, Sub and Gelman relating to, among other things, (i) organization
and qualification to do business, (ii) capitalization, (iii) subsidiaries, (iv)
authority to enter into the Merger Agreement, non-contravention of laws or
governing documents and regulatory approvals, (v) reports and financial
statements, (vi) absence of undisclosed liabilities, (vii) absence of certain
changes or events, (viii) litigation, (ix) the Registration Statement and this
Proxy Statement-Prospectus, (x) violations of law, (xi) compliance with
agreements, (xii) taxes, (xiii) employee benefit plans and ERISA matters, (xiv)
labor controversies, (xv) environmental matters, (xvi) title to assets, (xvii)
stockholders' approvals, (xviii) trademarks and intellectual property, (xix)
material agreements, (xx) pooling of interests matters, (xxi) insurance, (xxii)
the absence of certain transactions with affiliates, and (xxiii) brokers and
finders.
CERTAIN COVENANTS
During the period from the date of the Merger Agreement and continuing
until the Closing Date or earlier termination of the Merger Agreement, Gelman
has agreed, among other things, that it will, and that it will cause its
subsidiaries to:
Ordinary Course. Conduct their respective businesses in the ordinary
and usual course of business and consistent with past practice.
Changes in Stock. Not (i) amend or propose to amend their respective
articles of incorporation or by-laws, (ii) split, combine or reclassify their
outstanding capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions by a wholly-owned subsidiary of Gelman.
Issuance of Securities. Not issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire, any shares of their capital stock of
any class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that Gelman may issue shares upon exercise of Gelman
Options and Gelman Warrants outstanding on the date of the Merger Agreement.
Other Conduct. Not (i) incur or become contingently liable with respect
to any material indebtedness for borrowed money other than borrowings specified
in the Merger Agreement, (ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options, warrants or rights to
acquire any of its capital stock or any security convertible into or
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<PAGE> 60
exchangeable for its capital stock, (iii) take any action which would jeopardize
the accounting treatment of the Merger as a pooling of interests, (iv) take or
fail to take any action, which action or failure would cause Gelman or its
stockholders (except to the extent that any stockholders receive cash in lieu of
fractional Pall Shares) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger, (v) make any acquisition
of any assets or businesses and expenditures for fixed or capital assets other
than those itemized in the Merger Agreement or expenditures in the ordinary
course of business which, in such cases of $100,000 or more, shall be on terms
reasonably acceptable to Pall, (vi) sell, pledge, dispose of or encumber any
assets or businesses other than sales in the ordinary course of business which,
in such cases involving $100,000 or more, shall be on terms reasonably
acceptable to Pall, or (vii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
Preservation of Goodwill. Use all commercially reasonable efforts to
preserve intact their respective business organizations and goodwill, keep
available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with customers, vendors and
others having business relationships with them and not engage in any action,
directly or indirectly, with the intent to adversely impact the transactions
contemplated by the Merger Agreement.
Communication with Pall. Confer on a regular and frequent basis with
one or more representatives of Pall to report operational matters of materiality
and the general status of ongoing operations.
No Changes in Employment Agreements. Not enter into or amend any
employment, severance, or special pay arrangement with respect to termination of
employment or other similar arrangements or agreements with any directors,
officers or key employees, except in the ordinary course and consistent with
past practice which in cases involving $50,000 or more shall be on terms
acceptable to Pall.
No Changes in Compensation Agreements. Not adopt, enter into or amend
any bonus, profit-sharing, compensation, stock option, pension, retirement,
deferred compensation, health care or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any employee or
retiree, except as required to comply with changes in applicable law, and except
for increases in wages in the ordinary course and consistent with past practice
for non-executive employees.
During the period from the date of the Merger Agreement and continuing
until the Closing Date or earlier termination of the Merger Agreement, Pall has
agreed, among other things, that it will, and that it will cause its
subsidiaries, including Sub to:
Changes in Stock. Not split, combine or reclassify their outstanding
capital stock in a manner that would reduce the value of the Merger
consideration to be received by the Gelman stockholders, unless the Merger
consideration is adjusted to avoid such reduction in value.
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<PAGE> 61
Preservation of Goodwill. Use all commercially reasonable efforts to
preserve intact their respective business organizations and goodwill, keep
available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with customers, vendors and
others having business relationships with them and not engage in any action,
directly or indirectly, with the intent to adversely impact the transactions
contemplated by the Merger Agreement.
Communication with Gelman. Confer on a regular and frequent basis with
one or more representatives of Gelman to report operational matters of
materiality and the general status of ongoing operations, but Pall is not
required to disclose any confidential or proprietary information.
No Solicitation. The Merger Agreement provides that after the date of
the Merger Agreement and prior to the Effective Time or earlier termination of
the Merger Agreement, Gelman shall not, and shall not permit any of its
subsidiaries or advisors (including Cleary Gull) to, initiate, solicit, or seek,
directly or indirectly, negotiate or cooperate in any inquiries or make or
implement any proposal or offer to acquire all or any substantial part of the
business and properties of Gelman and its subsidiaries or more than fifty
percent (50%) of the capital stock of Gelman and its subsidiaries, whether by
merger, purchase of assets, tender offer or otherwise, whether for cash,
securities or any other consideration or combination thereof (any such
transactions being referred to herein as "Acquisition Transactions"), except for
the Merger or any related transactions.
Notwithstanding any other provision in the Merger Agreement, in
response to an unsolicited proposal or inquiry (or a proposal or inquiry arising
from a general solicitation prior to July 22, 1996) with respect to an
Acquisition Transaction, (i) Gelman may engage in discussions or negotiations
regarding such proposal or inquiry with a third party who seeks to initiate such
discussions or negotiations and may furnish to such third party information
concerning Gelman and its business, properties and assets, and (ii) if such
Acquisition Transaction is a tender offer subject to the provisions of Section
14(d) under the Exchange Act, Gelman's Board of Directors may take and disclose
to Gelman's stockholders a position contemplated by Section 14e-2(a) under the
Exchange Act.
In the event Gelman shall determine to provide any information or
negotiate as described above, or shall receive any offer of the type referred to
above, it shall (i) immediately provide Pall with a copy of all information
provided to the third party, (ii) inform Pall that information is to be
provided, that negotiations are to take place or that an offer has been
received, as the case may be, and (iii) furnish to Pall the identity of the
entity receiving such information or the proponent of such offer, if applicable,
and if an offer has been received, unless the Gelman Board of Directors
concludes that such disclosure is inconsistent with its fiduciary duties under
applicable law, a description of the material terms thereof.
Gelman may terminate the Merger Agreement, withdraw, modify or not
recommend the approval of the Merger to the Gelman stockholders and enter into a
definitive agreement for an Acquisition Transaction if, but only if, (i) Gelman
shall have determined in good faith after
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<PAGE> 62
consultation with the independent financial advisors of Gelman that such
Acquisition Transaction would be more favorable to Gelman's stockholders from a
financial point of view than the Merger, and (ii) the Gelman Board of Directors
shall conclude in good faith after consultation with its legal counsel that such
action is necessary in order for the Gelman Board of Directors to act in a
manner that is consistent with its fiduciary obligations under applicable law.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, Pall, Sub and Gelman have made the
following additional agreements:
Financial Reports and Access to Information. Each party shall furnish
promptly to one another a copy of each report and other document filed or
received by any of them pursuant to the requirements of federal and state
securities laws or which may have a material effect on their respective
businesses, properties or personnel. In addition, each party will afford the
others access to their respective accountant's work papers, senior management,
books, contracts and other information as a party may reasonably request in
connection with the filings and opinions contemplated in the Merger Agreement.
Stockholder Meeting. Gelman will submit the Merger Agreement for the
approval of its stockholders in accordance with applicable law or listing
requirements and, subject to the fiduciary duties of its Board of Directors
under applicable law, shall use its commercially reasonable efforts to obtain
stockholder approval and adoption.
Affiliate Agreements. Gelman will, within thirty (30) days after the
date of the Merger Agreement, deliver to Pall a letter identifying all persons
who may be deemed Affiliates of Gelman under Rule 145 of the Securities Act,
including, without limitation, all directors and executive officers of Gelman,
and Gelman shall advise the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. Parent and Gelman will use
commercially reasonable efforts to obtain from all directors, executive officers
and affiliates an agreement to comply with applicable securities law
requirements. See "The Merger -- Resales of Pall Shares by Affiliates of
Gelman."
Stock Exchange Listing. At or before the Effective Time, Pall will use
its commercially reasonable efforts to effect the listing on the NYSE of the
Pall Shares issuable in the Merger.
Expenses and Fees. Pall and Gelman each shall bear its own expenses
incurred in connection with the Merger, except (i) Pall shall pay and be
responsible for all fees and expenses incurred in connection with the printing,
filing and mailing of this Proxy Statement-Prospectus and with all HSR Act
filings and any other filings required by antitrust regulations of other foreign
jurisdictions; (ii) if Gelman fails to fulfill its obligations described above
under "-- No Solicitation," or terminates the Merger Agreement in the exercise
of the fiduciary obligations of the Gelman Board of Directors with respect to an
Acquisition Transaction, Gelman shall pay Pall the sum of $5 million
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<PAGE> 63
in lieu of any other payments or penalties or the reimbursement of expenses
incurred by Pall; and (iii) if the HSR Act waiting period shall not have expired
or been terminated on or before October 15, 1997, assuming that Gelman has
cooperated in the HSR Act filing, Pall shall pay Gelman the sum of $10 million
in lieu of any other payments or penalties or the reimbursement of expenses
incurred by Gelman.
Agreement to Cooperate. Each party will use all reasonable efforts to
take or cause to be taken all actions necessary to consummate and make effective
the transactions contemplated by the Merger Agreement.
Public Statements. The parties (i) shall consult with each other prior
to issuing any press release or any written public statement with respect to the
Merger Agreement or the transactions contemplated thereby, and (ii) shall not
issue any such press release or written public statement prior to such
consultation, except as may be required by law or applicable listing
requirements.
Options and Warrants. As of the Effective Time, each Gelman Option as
to which an Exchange Agreement has been signed shall be exchangeable for a Pall
Option (see "Offer to Exchange Options"), and all the Gelman Warrants shall
automatically be converted into Pall Warrants (see "-- Effect of the Merger on
Gelman Shares").
Employee Benefit Plans. Pall agrees to provide benefit plans of general
applicability which will be made available to employees of Gelman at the
Effective Time and for at least two years thereafter, the terms of which shall
be at least as favorable as those found in Gelman's plans in effect for the
benefit of such employees prior to the Effective Time except to the extent that
Pall determines that modifications are necessary to insure that such plans
maintain their tax-qualified and tax-exempt status, to comply with other legal
requirements. Pall also agrees to give such employees credit for all eligibility
and vesting they have accrued during their respective terms of employment with
Gelman.
Notification. Each of Gelman, Pall and Sub agrees to give prompt notice
to each other of, and to use its reasonable best efforts to prevent or promptly
remedy, (i) the occurrence or failure to occur or the impending or threatened
occurrence or failure to occur, of any event which occurrence or failure to
occur would be likely to cause any of its representations or warranties in the
Merger Agreement to be untrue or inaccurate in any material respect at any time
from the date of the Merger Agreement to the Effective Time and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under the Merger Agreement.
Directors' and Officers' Indemnification. Gelman, as the surviving
corporation of the Merger (the "Surviving Corporation"), shall observe any
indemnification provisions now existing in the Gelman Articles, Gelman By-Laws
or in certain indemnification agreements identified pursuant to the Merger
Agreement for the benefit of any individual who served as a director or officer
of Gelman at any time prior to the Effective Time.
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<PAGE> 64
Commencing at the Effective Time, Pall shall indemnify, defend and hold
harmless each individual who served as a director, officer, employee or
fiduciary of Gelman or any of its subsidiaries (the "Indemnified Parties") at
any time prior to the Effective Time from and against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer, employee
or fiduciary of Gelman or any of its subsidiaries, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after the Effective Time ("Indemnified
Liabilities"), and (ii) all Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to the Merger Agreement
or the transactions contemplated thereby, in each case to the full extent a
corporation is permitted under the MBCA to indemnify its own directors,
officers, employees and fiduciaries, as the case may be (and the Surviving
Corporation shall pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law). Without limiting the foregoing, in the event that any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Party
(whether arising before or after the Effective Time), (x) the Indemnified
Parties may retain counsel satisfactory to them and Gelman (or them and the
Surviving Corporation after the Effective Time), (y) Gelman (or after the
Effective Time, the Surviving Corporation) shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (z) Gelman (or after the Effective Time, the
Surviving Corporation) will use all commercially reasonable efforts to assist in
the vigorous defense of any such matter, provided that neither Gelman nor the
Surviving Corporation shall be liable for any settlement of any claim effected
without its written consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification, upon learning
of any such claim, action, suit, proceeding or investigation, shall notify
Gelman or, after the Effective Time, the Surviving Corporation (but the failure
so to notify an Indemnifying Party shall not relieve it from any liability which
it may have under the Merger Agreement except to the extent such failure
prejudices such party). The Indemnified Parties as a group may retain only one
law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
Tax-Free Treatment of Merger. Pall and Gelman shall each use its
commercially reasonable efforts to cause the Merger to be treated as a tax-free
reorganization for federal, state and foreign income tax purposes.
Post-Closing Combined Financial Results. Pall shall publish 30 days'
post-Merger combined financial results of Pall and Gelman for the first full
30-day period following the closing of the Merger, within 20 days of the end of
such period, in a form sufficient to satisfy the applicable pooling-of-interests
accounting requirements for resale of Pall Shares by affiliates of Gelman. See
"The Merger -- Resales of Pall Shares by Affiliates of Gelman."
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TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated by the mutual consent of the
parties, or at any time prior to the Closing Date, whether before or after
approval of the Merger Agreement by the stockholders of Gelman, as follows:
(i) by Gelman (A) if the Merger is not consummated by October
15, 1997, other than on account of delay or default on the part of
Gelman; (B) if the Merger is enjoined by a final, unappealable court
order of a U.S. court having jurisdiction not entered at the request or
with the support of Gelman or any of its affiliates or associates; (C)
if Gelman determines to enter into a qualifying Acquisition Transaction
and Gelman has paid Pall $5 million in lieu of any other payments or
penalties or the reimbursement of expenses incurred by Pall; (D) if
Pall has breached any representation, warranty or covenant in any
material respect and does not cure such default in all material
respects within 30 days after written notice is given to Pall by
Gelman; (E) if the Average Trading Price is less than $21.00 per share;
or (F) if the Gelman stockholders' vote is not sufficient to approve
the transactions contemplated by the Merger Agreement; or
(ii) by Pall (W) if the Merger is not completed by October 15,
1997, other than on account of delay or default on the part of Pall;
(X) if the Merger is enjoined by a final, unappealable court order of a
U.S. court having jurisdiction not entered at the request or with the
support of Pall or any of its affiliates or associates; (Y) if Gelman
has breached any representation, warranty or covenant in any material
respect, and does not cure such default in all material respects within
30 days after written notice is given to Gelman by Pall; or (Z) if
Gelman's stockholders' vote is not sufficient to approve the
transactions contemplated by the Merger Agreement.
The Merger Agreement may not be amended except by action taken by the
parties' respective Boards of Directors or duly authorized committees thereof
and then only by an instrument in writing signed on behalf of each of the
parties to the Merger Agreement and in compliance with applicable law.
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PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined condensed financial
statements give effect to the Merger as of August 3, 1996 on a
pooling-of-interests basis. The pro forma combined consolidated balance sheet
combines the consolidated balance sheet of Pall at August 3, 1996 with the
consolidated balance sheet of Gelman at July 31, 1996. The pro forma combined
condensed statements of operations for the fiscal years ended July 30, 1994,
July 29, 1995 and August 3, 1996 combine Pall's historical consolidated
statement of operations for each of the three years then ended with Gelman's
historical statement of operations for each of the three years in the period
ended July 31, 1996.
The pro forma combined condensed statements of operations are not
necessarily indicative of the operating results which would have been achieved
had Pall and Gelman been combined during such periods and should not be
construed as representative of future operations.
These pro forma combined condensed financial statements should be read
in conjunction with the historical consolidated financial statements and the
notes thereto of Pall and Gelman which are incorporated by reference in this
Proxy Statement-Prospectus.
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PALL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF AUGUST 3, 1996
-----------------------------------------------------------------
HISTORICAL
------------------------ PRO FORMA PRO FORMA
PALL GELMAN ADJUSTMENTS COMBINED
---------- ------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 34,528 $ 9,590 $ 18,913(5)(6) $ 63,031
Short-term investments....................... 71,450 - 71,450
Accounts receivable, net..................... 242,157 26,442 268,599
Inventories.................................. 193,764 11,751 2,824(4) 208,339
Deferred income taxes........................ 15,995 2,185 18,180
Prepaids and other current assets............ 23,311 2,020 25,331
---------- ------- --------- ----------
Total current assets........................... 581,205 51,988 21,737 654,930
Property, plant and equipment.................. 754,213 75,267 829,480
Less: Accumulated depreciation and
amortization................................ 290,308 41,143 331,451
---------- ------- --------- ----------
Property, plant and equipment, net............. 463,905 34,124 498,029
Other assets................................... 139,848 2,108 141,956
---------- ------- --------- ----------
Total assets $1,184,958 $88,220 $ 21,737 $1,294,915
========== ======= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................ $139,957 $ - $139,957
Accounts payable............................. 61,071 4,989 66,060
Accrued liabilities.......................... 76,198 7,077 83,275
Income taxes................................. 21,699 - $ 988(4) 22,687
Current portion of long-term debt............ 17,163 163 17,326
Dividends payable............................ 14,133 - 14,133
---------- ------- --------- ----------
Total current liabilities...................... 330,221 12,229 988 343,438
Long-term debt, net of current portion......... 46,712 7,704 54,416
</TABLE>
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<TABLE>
<CAPTION>
As of August 3, 1996
--------------------------------------------------------------
Historical
------------------- Pro Forma Pro Forma
Pall Gelman Adjustments Combined
---- ------ ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Deferred income taxes........................ 15,995 2,185 18,180
Deferred income taxes.......................... 36,134 1,249 37,383
Other non-current liabilities.................. 39,591 2,350 41,941
---------- ------- ------- ----------
Total liabilities.............................. 452,658 23,532 988 477,178
Stockholders' equity:
Share capital................................ 65,504 37,629 2,520(6) 105,653
Retained earnings............................ 727,814 28,050 3,109(4)(5) 758,973
Treasury stock............................... (50,410) - 15,120 (35,290)
Foreign currency translation adjustment...... 2,901 (841) 2,060
Minimum pension liability adjustment......... (4,629) - (4,629)
Stock option loans........................... (8,652) (150) (8,802)
Cumulative unrealized losses on (228)
---------- ------- ------- ----------
investments.............................. (228) -
---------- ------- ------- ----------
Total stockholders' equity..................... 732,300 64,688 20,749 817,737
---------- ------- ------- ----------
Total liabilities and stockholders' equity..... $1,184,958 $ 88,220 $21,737 $1,294,915
========== ======== ======= ==========
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.
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<PAGE> 69
PALL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED AUGUST 3, 1996
-----------------------------------------------------------------
HISTORICAL
--------------------- PRO FORMA PRO FORMA
PALL GELMAN ADJUSTMENTS COMBINED
-------- ---------- ------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales......................................... $960,376 $ 112,057 $1,072,433
Cost of sales..................................... 372,864 56,864 $ 137 (4) 429,865
Selling, general and administrative expenses...... 338,726 39,645 (570)(5) 377,801
Research and development.......................... 47,514 6,258 53,772
Interest expense, net............................. 3,418 607 4,025
Pollution-related expense......................... -- 2,800 2,800
-------- ---------- ------- ---------
Total costs and expenses.......................... 762,522 106,174 (433) 868,263
-------- ---------- ------- ---------
Earnings before income taxes...................... 197,854 5,883 433 204,170
Income taxes..................................... (59,356) (1,547) (152)(4)( 5) (61,055)
-------- ---------- ------- ---------
Net earnings...................................... $138,498 $ 4,336 $ 281 $ 143,115
======== ========== ======= =========
EARNINGS PER SHARE:
Net earnings per share............................ $ 1.21 $ 0.53 $ 1.14
Average number of shares outstanding.............. 114,839 8,255 2,696(1)(6) 125,790
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.
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<PAGE> 70
PALL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JULY 29, 1995
----------------------------------------------------------------
HISTORICAL
------------------------ PRO FORMA PRO FORMA
PALL GELMAN ADJUSTMENTS COMBINED
-------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales........................................ $822,823 $ 103,503 $ 926,326
Cost of sales.................................... 305,287 50,070 $ (405) (4) 354,952
Selling, general and administrative expenses..... 301,686 36,634 (720) (5) 337,600
Research and development......................... 45,142 5,498 50,640
Interest expense, net............................ 3,004 1,314 4,318
-------- --------- -------- ---------
Total costs and expenses......................... 655,119 93,516 (1,125) 747,510
-------- --------- -------- ---------
Earnings before income taxes, and
cumulative effect of an accounting change..... 167,704 9,987 1,125 178,816
Income taxes.................................... (48,488) (3,365) (394) (4)(5) (52,247)
-------- --------- -------- ---------
Earnings before cumulative effect of an
accounting change............................. 119,216 6,622 731 126,569
Cumulative effect of an accounting change........ (780) -- (780)
-------- --------- -------- ---------
Net earnings..................................... $118,436 $ 6,622 $ 731 $ 125,789
======== ========= ======== =========
EARNINGS PER SHARE:
Earnings before cumulative effect of an
accounting change............................. $ 1.04 $ 0.92 $ 1.01
Cumulative effect of an accounting change........ (0.01) -- (0.01)
-------- --------- ---------
Net earnings per share........................... $ 1.03 $ 0.92 $ 1.00
Average number of shares outstanding............. 115,184 7,235 2,452 (1)(6) 124,871
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.
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<PAGE> 71
PALL CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JULY 30, 1994
-----------------------------------------------------------------------
HISTORICAL
------------------------- PRO FORMA PRO FORMA
PALL GELMAN ADJUSTMENTS COMBINED
--------- -------- --------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales........................................ $ 700,848 $ 94,963 $ 795,811
Cost of sales.................................... 257,624 47,253 $ (336) (4) 304,541
Selling, general and administrative expenses..... 261,289 33,607 (668) (5) 294,228
Research and development......................... 41,283 4,877 46,160
Interest expense, net............................ 1,858 1,689 3,547
Restructuring and other charges.................. 3,696 -- 3,696
--------- -------- --------- ----------
Total costs and expenses......................... 565,750 87,426 (1,004) 652,172
--------- -------- --------- ----------
Earnings before income taxes and extraordinary
loss......................................... 135,098 7,537 1,004 143,639
Income taxes..................................... (36,176) (2,600) (351) (4)(5) (39,127)
--------- -------- --------- ----------
Earnings before extraordinary loss............... 98,922 4,937 653 104,512
Extraordinary loss............................... -- (183) (183)
--------- -------- --------- ----------
Net earnings..................................... $ 98,922 $ 4,754 $ 653 $ 104,329
========= ======== ========= ==========
EARNINGS PER SHARE:
Earnings before extraordinary loss............... $ 0.86 $ 0.78 $ 0.84
Extraordinary loss............................... -- (0.03) --
--------- -------- ----------
Net earnings per share........................... $ 0.86 $ 0.75 $ 0.84
========= ======== ==========
Average number of shares outstanding............. 115,678 6,307 2,230 (1)(6) 124,215
</TABLE>
SEE NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.
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<PAGE> 72
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. The pro forma combined condensed financial statements reflect an
exchange ratio of 1.2394 Pall Shares for each Gelman Share (the Pro
Forma Exchange Ratio). The actual number of Pall Shares to be issued
will be determined by (i) the number of Gelman Shares outstanding at
the Effective Time, and (ii) the Average Trading Price of a Pall Share,
as set forth in the Merger Agreement. Certain amounts in the historical
financial statements of Gelman and Pall have been reclassified in these
financial statements.
2. On a combined basis, there were no material transactions between Pall
and Gelman for the periods presented.
3. It is expected that the combined company will incur charges to
operations, currently estimated to be about $15 million (including the
$3 million termination fee paid to Memtec) to reflect transaction fees
and costs incident to the Merger and payments due under employment
agreements with the executive officers of Gelman. See "Interests of
Certain Persons in the Merger." The estimated charge is not reflected
in the pro forma combined financial statements. Savings from the Merger
are expected to be in the range of $8 million to $10 million per annum,
consisting of reductions in salaries, benefits and manufacturing costs.
Such projected savings are not reflected in the pro forma combined
financial statements. These amounts are preliminary and, therefore, are
subject to change.
4. Pro forma adjustments have been made to conform the inventory
accounting policies of Pall and Gelman. The impact of converting from
the LIFO method of accounting for inventory to the FIFO method and the
related income tax computed at the federal statutory rate is reflected
in the respective statements of operations and the balance sheet.
5. The pro forma combined condensed statements of operations have been
adjusted for the following items and the related income tax computed at
the federal statutory rate, which are directly attributable to the
Merger and are expected to have a continuing impact on the merged
operations: (a) elimination of Gelman's specific public company costs,
including shareholder reporting, share registry and directors' fees,
and (b) the employment agreements which were negotiated in conjunction
with the Merger. See "Interests of Certain Persons in the Merger."
Except as described above, the pro forma combined condensed financial
statements do not reflect cost savings and synergies that are expected
to result from the Merger. Although savings from synergies are
expected, there can be no assurance any such savings will be realized.
6. The pro forma combined condensed financial statements for the periods
presented reflect a sale of 720,000 Pall Shares from treasury prior to
the Merger, as a condition to qualifying for pooling-of-interests
accounting.
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CERTAIN TAX CONSEQUENCES
GENERAL
The following discussion of certain U.S. federal income tax
consequences of the Merger is included for general information purposes only and
does not purport to be a complete description of all potential tax consequences
affecting the decision whether to vote to approve and adopt the Merger
Agreement. The discussion applies only to Gelman stockholders who hold their
Gelman Shares as "capital assets" within the meaning of Section 1221 of the Code
and does not address all potential tax effects that may be relevant to Gelman
stockholders subject to special federal income tax treatment, including foreign
persons, insurance companies, tax-exempt organizations, retirement plans and
persons who acquired their Gelman Shares pursuant to the exercise of employee
stock options or otherwise as compensation. The following discussion does not
address the effect of applicable state, local or foreign tax laws.
This summary is based on the Code, regulations and rulings in effect at
the date of this Proxy Statement- Prospectus, administrative rulings and
practice and judicial precedent, all of which are subject to change. Any such
change, which may or may not be retroactive, could alter the tax consequences
discussed herein. This discussion is also based on certain representations made
by Pall, Gelman and certain Gelman stockholders. If any of these representations
is inaccurate, the tax consequences of the Merger could differ from those
described herein.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Gelman believes, based on the advice of Godfrey & Kahn, S.C., which in
turn, is based on certain representations made by Pall, Gelman, and certain
Gelman stockholders, that the Merger will constitute a reorganization under
Section 368(a) of the Code. Based on that conclusion, Gelman further believes
that for federal income tax purposes:
(1) No gain or loss will be recognized with respect to the Pall Shares
received in the Merger;
(2) The tax basis of the Pall Shares received by any Gelman stockholder
in the Merger will be equal to the tax basis of the Gelman Shares exchanged
therefor, reduced by any amount of basis allocable to fractional share interests
for which cash is received;
(3) The holding period of the Pall Shares received by Gelman
stockholders in the Merger will include the holding period of the Gelman Shares
exchanged therefor; and
(4) The receipt of cash in lieu of a fractional Pall Share by any
Gelman stockholder pursuant to the Merger Agreement will result in taxable
capital gain or loss to such stockholder based on the difference between the
amount of cash received by such stockholder and such stockholder's basis in such
fractional share.
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DESCRIPTION OF PALL SHARES
The authorized capital stock of Pall consists of 500,000,000 shares of
Common Stock, par value $0.10 per share (the "Pall Shares"), of which ___ Pall
Shares were issued and outstanding on the Record Date. The rights of the holders
of Pall Shares are governed by the Business Corporation Law of the State of New
York (the "NYBCL") and the Pall Certificate and By-Laws.
Holders of Pall Shares are entitled to receive dividends when and as
declared by Pall's Board of Directors out of funds legally available therefor.
In the event of the liquidation, dissolution or winding up of Pall, holders of
Pall Shares would be entitled to share ratably in all corporate assets available
for distribution to shareholders. The holders of Pall Shares are not subject to
further calls or assessments by Pall and have no preemptive, subscription or
conversion rights. The Pall Shares are not redeemable.
VOTING RIGHTS
The holders of Pall Shares are entitled to one vote per share on all
matters submitted to shareholders, and the holders of a majority of the
outstanding shares constitute a quorum at any meeting of shareholders.
Directors of Pall are elected by a plurality of the votes cast at a
meeting of shareholders. The Pall Shares do not have cumulative voting rights;
therefore, the holders of a majority of the outstanding shares of Pall Shares
can elect all directors of Pall.
In general, shareholder action other than the election of directors
must be authorized by a majority of the votes cast at a meeting of shareholders.
However, the NYBCL provides that certain extraordinary matters, such as a merger
or consolidation in which Pall is a constituent corporation, a sale or other
disposition of all or substantially all of Pall's assets, and the dissolution of
Pall, would require the vote of the holders of two-thirds of all outstanding
shares. Most amendments to the Pall Certificate require the vote of the holders
of a majority of all outstanding shares.
CLASSIFICATION OF THE BOARD
The Pall By-Laws provide that the Board of Directors (currently
comprised of twelve persons) shall be divided into three classes of directors
serving staggered three-year terms, such classes being as nearly equal in number
as possible. As a result, one-third of Pall's Board of Directors is elected each
year.
FAIR PRICE PROVISIONS
The Pall Certificate contains provisions designed to assure fair
treatment for all shareholders of Pall in certain "Business Combinations"
involving a "Related Party," defined as either the beneficial owner of 20% of
more of the securities entitled to vote in the election of Pall's directors,
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or an affiliate of Pall who was the beneficial owner of 20% or more of such
securities at any time within the preceding five years. "Business Combination"
is defined broadly to include (i) any merger or consolidation of Pall or any of
its subsidiaries into or with a Related Person or its affiliates, (ii) any sale
or other disposition of more than 5% in value of the consolidated assets of Pall
and its subsidiaries to a Related Person or its affiliates, or more than 5% of
the assets of a Related Person to Pall or its subsidiaries, (iii) certain
issuances and transfers by Pall or its subsidiaries of their respective
securities to a Related Person, and (iv) any reclassification of securities,
recapitalization, reorganization or similar transaction which has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity security of Pall or its subsidiaries which is
directly or indirectly owned by a Related Person.
Any Business Combination is subject to the prior approval of the
holders of not less than 85% of all outstanding Pall Shares unless certain fair
price and procedural requirements are met. Approval by the holders of not less
than 85% of the outstanding Pall Shares is also required to amend or repeal the
provisions in the Pall Certificate relating to Business Combinations, unless at
least 75% of certain "continuing" directors of Pall shall recommend such
amendment or repeal, in which case the approval of only the holders of a
majority of the outstanding Pall Shares would be required under the NYBCL to
amend or repeal such provisions.
In addition, under Section 912 of the NYBCL, Pall may not engage in a
"business combination" (the statutory definition of which is similar to that in
the Pall Certificate) with an "interested shareholder" (the statutory definition
of which is similar to the definition of "Related Party" in the Pall
Certificate) for a period of five years after the interested shareholder becomes
such, unless the business combination or the purchase of stock by means of which
the interested shareholder becomes such is approved by Pall's Board of Directors
in advance of such stock purchase. After the five-year period, an interested
shareholder may engage in a business combination with Pall only if (i) the
business combination is approved after the five-year period by the affirmative
vote of the holders of a majority of the outstanding Pall Shares not
beneficially owned by the interested shareholder and its affiliates and
associates, or (ii) the value of the aggregate consideration to be paid by the
interested shareholder in connection with the business combination satisfies
certain formulas specified in the statute, and the interested shareholder, after
becoming such, has not acquired any additional shares of Pall Stock, except as
provided in the statute. See "Comparison of the Rights of Holders of Gelman
Shares and Holders of Pall Shares -- Anti-Takeover Provisions."
COMMON SHARE PURCHASE RIGHTS
On November 17, 1989, the Pall Board of Directors, pursuant to a
favorable advisory vote of Pall's shareholders, adopted a Shareholders Rights
Plan and pursuant thereto declared a dividend of one Common Share Purchase Right
(a "Right") for each outstanding Pall Share. The dividend distribution was made
to the holders of record of Pall Shares outstanding on December 1, 1989, and is
being made with respect to all Pall Shares issued thereafter (including the Pall
Shares issuable in the Merger) until the earliest to occur of the Distribution
Date (as defined below), the date on which
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the Rights are redeemed, and the expiration date of the Rights (December 1,
1999, unless the expiration date is extended).
The "Distribution Date" is defined as the earlier to occur of (i) 10
days following a public announcement that a person or group of affiliated or
associated persons (other than Pall, any subsidiary of Pall, any employee
benefit plan of Pall or of any subsidiary of Pall, or any entity holding Pall
Shares for or pursuant to the terms of such plan) has acquired beneficial
ownership of 20% of more of the outstanding Pall Shares (such person or group
being defined as the "Acquiring Person"), or (ii) 10 business days (or later
date as may be determined by action of Pall's Board prior to such time as any
person or group becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group (other than Pall, any subsidiary of Pall, any employee benefit plan of
Pall or of any subsidiary of Pall, or any entity holding Pall Shares for or
pursuant to the terms of such plan) of 20% or more such outstanding Pall Shares.
Until the Distribution Date, the Rights (i) will not be exercisable,
(ii) will be evidenced by the certificates for the Pall Shares registered in the
names of the holders thereof and not by separate Rights certificates, and (iii)
will be transferable with and only with the Pall Shares, and one Right will be
associated with each Pall Share, subject to adjustments in certain events. Each
Right, when it becomes exercisable, will entitle the registered holder to
purchase from Pall one Pall Share at a price of $60, which price reflects stock
splits declared from November 17, 1989, through the date of this Proxy
Statement-Prospectus, and is subject to further adjustment in certain events
(the "Purchase Price"). As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Rights Certificates") will be
mailed to holders of record of the Pall Shares as of the close of business on
the Distribution Date and such separate Right Certificates alone will evidence
the Rights.
In the event that Pall is acquired by any person in a merger or other
business combination transaction, or 50% or more of its consolidated assets or
earning power are sold, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that (i)
any person becomes an Acquiring Person, or (ii) during such time as there is an
Acquiring Person, there shall be a reclassification of securities or a
recapitalization or a reorganization of Pall or other transaction or series of
transactions involving Pall which has the effect of increasing by more than 1%
the proportionate share of the outstanding shares of any class of equity
securities of Pall or any of its subsidiaries beneficially owned by the
Acquiring Person, proper provision shall be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Pall Stock (or other securities, cash or property)
having a market value of two times the exercise price of the Right.
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At any time after any person becomes an Acquiring Person and prior to
the acquisition by a person or group (other than Pall, any employee benefit plan
of Pall or of any subsidiary of Pall, or any entity holding Pall Shares for or
pursuant to the terms of such plan) of beneficial ownership of 50% or more of
the outstanding Pall Shares (other than Pall Shares into which nonvoting
securities of Pall beneficially owned by such person or group can be converted),
the Board of Directors of Pall may exchange the Rights (other than Rights owned
by such person or group which will have become void), in whole or in part, at an
exchange ratio of one Pall Share per Right (subject to adjustment).
At any time prior to such time as any person or group becomes an
Acquiring Person, the Board of Directors of Pall may redeem the Rights in whole,
but not in part, at a price of one-third of a cent per Right, which price
reflects stock splits declared from November 17, 1989, through the date of this
Proxy Statement-Prospectus and is subject to further adjustment in certain
events (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of
Pall without the consent of the holders of the Rights, except that from and
after such time as any person becomes an Acquiring Person, no such amendment may
adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Pall, including, without limitation, the right to
vote or to receive dividends.
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COMPARISON OF THE RIGHTS OF HOLDERS OF
GELMAN SHARES AND HOLDERS OF PALL SHARES
Upon consummation of the Merger, the stockholders of Gelman, a Michigan
corporation, will become shareholders of Pall, a New York corporation. Michigan
corporations are governed by the Michigan Business Corporation Act (the "MBCA")
and New York corporations are governed by the New York Business Corporation Law
(the "NYBCL").
Differences between the MBCA and the NYBCL, and between the Gelman
Articles, and By-Laws and the Pall Certificate and By-Laws, will result in
several changes in the rights of stockholders of Gelman when they become
shareholders of Pall pursuant to the Merger. The more significant of such
changes are set forth below. For information as to where the governing
instruments of Gelman and Pall may be obtained, see "Available Information." The
discussion below is not meant to be relied upon as an exhaustive list or a
detailed description of the differences.
Pursuant to Section 14 of the Exchange Act and the rules promulgated
thereunder (the "Proxy Rules"), Gelman and Pall are required to comply with
certain notice and disclosure requirements relating to the solicitation of
proxies in respect of stockholder meetings. As an issuer with securities listed
on the ASE and registered under Section 12 of the Exchange Act, Gelman is
required under the Exchange Act to publicly file with the Commission and the ASE
an annual report and other information. As an issuer with securities listed on
the NYSE and registered under Section 12 of the Exchange Act, Pall is required
under the Exchange Act to publicly file with the Commission and the NYSE an
annual report and other information.
SHARES
GELMAN
The Gelman Shares consist of a single class having equal rights,
privileges and power. The holder of each outstanding Gelman Share has one vote
per share with respect to all matters submitted to a vote of shareholders.
The number of authorized shares may be increased or decreased by the
affirmative vote of the holders of a majority of the Gelman Shares.
PALL
The Pall Common Stock consists of a single class having equal rights,
privileges and power. The holder of each outstanding Pall Share has one vote per
share with respect to all matters submitted to a vote of shareholders.
The number of authorized shares may be increased or decreased by the
affirmative vote of the holders of a majority of the outstanding Pall Shares.
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APPOINTMENT AND REMOVAL OF DIRECTORS
GELMAN
The Directors are divided into three classes and are elected to
three-year terms. Directors are elected at the annual stockholders' meeting,
except that vacancies may be filled by the affirmative vote of a majority of the
remaining directors. A director or the entire Board may be removed only for
cause by a vote of the shareholders (i.e., by a majority of the votes cast).
PALL
The Directors are divided into three classes and are also elected for
three-year terms. Directors are elected at the annual shareholders' meeting,
except that vacancies may be filled by the affirmative vote of a majority of the
remaining directors. A director or the entire Board may be removed only for
cause by a vote of the shareholders (i.e., by a majority of votes cast at a
meeting at which a quorum is present).
SPECIAL MEETINGS
GELMAN
Special meetings of the stockholders, for any purpose, (a) may be
called by the Chairman of the Board or the Board of Directors, (b) shall be
called by the President or Secretary upon written request (stating the purpose
for which the meeting is to be called) of the holders of a majority of all the
Gelman Shares entitled to vote at the meeting, and (c) upon application of the
holders of not less than 10% of all Gelman Shares entitled to vote at a meeting,
the circuit court, for good cause shown, may order a special meeting of
stockholders.
PALL
The Pall By-Laws provide that special meetings of the shareholders, for
any purpose, (i) may be called by the President (or, in case of the absence or
disability of the President, by any Vice President), (ii) must be called by the
President upon written request of a majority of the Directors then in office,
and (iii) must be called by the President upon written request of the holders of
50% of the issued and outstanding Pall Shares. At any special meeting only such
business may be transacted which is related to the purpose or purposes set forth
in the required notice of meeting.
SHAREHOLDER APPROVALS
GELMAN
Under Michigan law, an amendment to the articles of incorporation
requires an affirmative vote of a majority of the outstanding stock entitled to
vote thereon, and a majority of the outstanding
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stock of each class entitled to vote as a class thereon. Whether or not entitled
by the articles of incorporation, the holders of the outstanding shares of a
class are entitled to vote on a proposed amendment if the amendment would
increase or decrease the aggregate number of authorized shares of such class or
alter or change the powers, preferences or special rights of such class so as to
affect the class adversely.
Under the MBCA, the Gelman Articles and the Gelman By-Laws, the Gelman
By-Laws may be amended by the affirmative vote thereon or by a majority of the
Board of Directors then in office. The stockholders may specify particular
provisions of the Gelman By-Laws which may not be altered or repealed by the
Board of Directors.
PALL
Under the NYBCL, an amendment to the Pall Certificate requires an
affirmative vote of a majority of the outstanding stock entitled to vote as a
class thereon. Whether or not entitled by the Pall Certificate, the holders of
the outstanding shares of a class are entitled to vote on a proposed amendment
if the amendment would increase or decrease the aggregate number of authorized
shares of such class or alter or change the powers, preferences or special
rights of such class so as to affect the class adversely.
Under the NYBCL and the Pall By-Laws, the Pall By-Laws may be amended
by the affirmative vote thereon of the holders of a majority of all outstanding
shares entitled to vote thereon, or by a majority of the Board of Directors then
in office. The Pall By-Laws provide that the provisions of the By-Laws relating
to (i) the calling of special meetings of shareholders, (ii) the giving of
notice of shareholder meetings and (iii) shareholder meeting quorums may only be
amended by the shareholders and not by the Board of Directors. The provision of
the Pall By-Laws limiting the Board's ability to alter or repeal various By-Law
provisions may only be amended by the Board of Directors to the extent that the
sole effect of such amendment is to add to the list of By-Law provisions which
may only be amended by shareholders.
BOOKS AND RECORDS; INSPECTION; INFORMATION
GELMAN
Under the MBCA, any person who is a stockholder of record has the right
to examine, for any purpose reasonably related to his or her interest as a
stockholder, a list of the corporation's stockholders and its other books and
records. Stockholders are also entitled to receive, upon written request: (i) a
balance sheet of the corporation at the end of the preceding fiscal year, (ii)
an income statement for the fiscal year, and (iii) if prepared by the
corporation, its statement of source and application of funds for the fiscal
year.
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PALL
Under the NYBCL, any person who is a shareholder of record for at least
six months immediately preceding his demand, or who is authorized in writing by
holders of at least five percent of any class of outstanding shares, has the
right during usual business hours to examine Pall's minutes of shareholders
meetings and a list of the corporation's shareholders, and to make extracts
therefrom. Subject to the same qualifications, shareholders are also entitled to
receive, upon written request an annual balance sheet and profit and loss
statement for the preceding fiscal year, and if any interim balance sheet or
profit and loss statement has been distributed to Pall's stockholders or
otherwise has been made available to the public, the most recent such interim
balance sheet or profit and loss statement.
DIVIDENDS AND DISTRIBUTIONS
GELMAN
Under the MBCA, no distribution to a stockholder (i.e., a dividend,
repurchase of stock or other payment to a stockholder in his or her capacity as
such) may be made if, after giving effect to the distribution, the corporation
would not be able to pay its debts as they become due in the usual course of
business, or the corporation's total assets would be less than the sum of its
total liabilities plus, unless the articles permit otherwise, the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights that are superior to those
receiving the distribution.
PALL
Under the NYBCL, a corporation may declare and pay dividends, or make
other distributions in cash or its bonds or its property, on its outstanding
shares except when the corporation is insolvent or would thereby be made
insolvent, or when the declaration, payment or distribution would be contrary to
any restrictions contained in the certificate of incorporation. The Pall
Certificate does not contain restrictions on the payment of dividends. In
general, dividends may be declared or paid and other distributions may be made
out of surplus only, defined in the NYBCL as the excess of a corporation's
assets over its stated capital. Thus, the net assets of the corporation
remaining after such declaration, payment or distribution shall at least equal
the amount of its stated capital which cannot be less than the aggregate par
value of all issued shares.
MINORITY SHAREHOLDER REMEDIES
GELMAN
The MBCA provides that a stockholder of a corporation may commence and
maintain a derivative proceeding (i.e., a lawsuit brought in the right of the
corporation to recover damages or other relief for the benefit of the
corporation) only if (i) the stockholder was a stockholder of the
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corporation at the time of the act or omission complained of (or is a successor
by operation of law to one who was a stockholder at that time); (ii) the
stockholder fairly and adequately represents the interests of the corporation in
enforcing the corporation's right; (iii) the stockholder continues to be a
stockholder until the time of judgment, unless the failure to continue to be a
stockholder is the result of corporate action in which he did not acquiesce and
the derivative proceeding was commenced prior to the termination of his status
as a stockholder; (iv) and, prior to commencing the proceeding, the stockholder
has made a written demand upon the corporation to take suitable action and
certain other conditions concerning such demand have been satisfied.
PALL
The NYBCL provides that a shareholder may commence and maintain a
derivative proceeding (i.e., a lawsuit brought in the right of a corporation to
procure a judgment in its favor) if the shareholder (i) is a shareholder at the
time of bringing the action, and (ii) was a shareholder at the time of the
transaction that is the subject of the action or that his shares or interest
therein devolved upon him by operation of law. The complaint must set forth with
particularity the shareholder's attempts to secure the initiation of such action
by the Board of Directors or the reasons for not making such effort.
DISSENTERS' RIGHTS
GELMAN
The MBCA does not grant dissenter's rights to a corporation's
stockholders (i.e., the right to receive a cash payment of the fair value of
shares determined by judicial appraisal) in the case of a stockholder-approved
merger when the shares of such corporation are listed on a national securities
exchange on the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders at which the
corporate action is to be acted upon. Holders of Gelman Shares have no
dissenter's rights with respect to the Merger, inasmuch as the Gelman Shares
were listed on the ASE on the Record Date.
PALL
The NYBCL grants dissenters' rights to shareholders (i.e., the right to
cash payment of the fair value of one's shares determined by judicial appraisal)
in the case of a merger or consolidation, a sale of all or substantially all of
the corporation's assets, and (in the case of a shareholder whose shares are
adversely affected thereby) certain amendments to the certificate of
incorporation. Further, the NYBCL provides a procedure for the corporation to
make a written offer prior to the commencement of litigation (the "Offer") to
each dissenting shareholder to pay cash for his or her shares at a specified,
uniform price which the corporation considers to be their fair value. If the
effective date of the corporate action dissented from has occurred, the Offer
must be accompanied by an 80% advance payment of the Offer price to each
dissenting shareholder who has submitted his or her stock certificates. If the
effective date has not yet
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occurred, such advance payment shall be sent forthwith upon its occurrence. If
the corporation and a dissenting shareholder agree upon a price to be paid for
such dissenting shareholder's shares within 30 days after the making of the
Offer, payment in full must be made by the corporation within 60 days of the
date on which the Offer was made or within 60 days of the effective date,
whichever is later. If any dissenting shareholder fails to agree with the
corporation during the aforesaid 30-day period, or if an Offer is not made
within a specified period of time, only then may a proceeding for judicial
appraisal be commenced.
In determining "fair value," the NYBCL does not exclude any element of
value arising from the accomplishment or expectation of the transaction in
question but mandates that the court should consider the nature of the
transaction and its effect on the corporation and its shareholders and the
concepts and methods of valuation then customary in the relevant financial and
securities markets.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
GELMAN
The MBCA generally provides that a corporation may, and in certain
circumstances, must, indemnify any person who is or was threatened with any
action, suit or proceeding by reason of the fact that he or she is or was a
director, officer, employee or agent of such corporation for expenses, judgments
or settlements actually and reasonably incurred by such person in connection
with suits and other legal actions or proceedings if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal actions
or proceeding, had no reasonable cause to believe their conduct was unlawful.
Unless indemnification is ordered by a court, the determination of whether a
director, officer, employee or agent has met the applicable standard of conduct
is made (i) by a majority vote of a quorum of the board consisting of directors
who are not parties or threatened to be made parties to the action, suit or
proceeding, (ii) if a quorum cannot be obtained under (i), by majority vote of a
committee duly designated by the board and consisting solely of two or more
directors not at the time parties or threatened to be made parties to the
action, suit or proceeding, (iii) by independent legal counsel in a written
opinion, (iv) by all independent directors who are not parties or threatened to
be made parties to the action, suit or proceeding, or (v) by the stockholders
(but shares held by directors, officers, employees or agents who are parties or
threatened to be made parties to the action, suit or proceeding may not be
voted). The MBCA also permits a corporation to advance expenses to directors,
officers and others upon a determination of eligibility, so long as the
requesting party undertakes to repay the amounts advanced if it is ultimately
determined that the party was not entitled to be indemnified. The aforementioned
provisions relating to indemnification and advancement of expenses are not
exclusive and a corporation may provide additional rights to those seeking
indemnification or advancement of expenses. The Gelman By-Laws provide that
Gelman shall indemnify directors and officers, and may indemnify employees and
agents, to the fullest extent authorized under the MBCA.
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The MBCA also permits a corporation to include in its articles of
incorporation a provision that would eliminate a director's monetary liability
for breaches of his or her fiduciary duty in a lawsuit by or on behalf of the
corporation or in an action by stockholders of the corporation, provided that
such provision may not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or stock purchases or redemptions,
or (iv) for any transaction from which the director derived an improper personal
benefit. The Gelman Articles contain such a provision providing for the
limitation of liability of directors for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by the MBCA.
PALL
The NYBCL permits a corporation to indemnify its directors and
officers for judgments, fines and other expenses incurred by them in connection
with an action or proceeding other than an action by or in the right of the
corporation (a "derivative action"). In connection with any pending, threatened
or completed derivative action, the NYBCL permits such indemnification only
against amounts paid in settlement and reasonable expenses incurred.
Indemnification is permitted only if the director or officer has acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of the corporation and, with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Furthermore, the
NYBCL provides that expenses incurred in defending any action or proceeding may
be paid by the corporation in advance of the final disposition upon receipt of
an undertaking by or on behalf of the director or officer to repay the amount if
its ultimately determined that he or she is not entitled to be indemnified by
the corporation.
The statutory provisions for indemnification and advancement of
expenses are not exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be otherwise entitled, provided
that such rights are contained in the certificate of incorporation or by-laws
or, when authorized thereby, in a resolution of directors or shareholders or an
agreement providing for indemnification.
The Pall By-Laws provide in effect that the corporation shall, to the
fullest extent permitted under the NYBCL, indemnify any person made or
threatened to be made a party to any action or proceeding, whether civil or
criminal and whether or not a derivative action, by reason of the fact that such
person is or was a director or officer of the corporation or served, at the
corporation's request, any other corporation or other enterprise in any
capacity. Indemnity shall be against judgments, fines, amounts paid in
settlement, and expenses, including attorneys' fees, actually and necessarily
incurred as a result of such action or proceeding. The NYBCL and the Pall
By-Laws provide further that no indemnification may be made to or on behalf of
any director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active or deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained
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in fact a financial profit or other advantage to which he was not legally
entitled. In addition, under the Pall By-Laws indemnification is not mandatory
in connection with the settlement of any pending or threatened action or
proceeding, or any other disposition thereof except a final adjudication, unless
Pall has consented to such settlement or other disposition.
The principal effects of the indemnification provisions of the Pall
By-Laws are:
(1) To provide for mandatory indemnification of directors
and officers. In the absence of such by-law provisions, indemnification under
New York law would be in the corporation's discretion unless a director or
officer were successful, on the merits or otherwise, in the defense of the
action or proceeding.
(2) To provide for mandatory reimbursement of expenses,
including attorneys' fees, incurred by a director or officer in defending an
action or proceeding, upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount to the corporation to the extent that
such director or officer is ultimately found not to be entitled to
indemnification. In the absence of such by-law provisions, advances for expenses
would be in the corporation's discretion.
(3) To provide directors and officers with greater rights
to indemnity in derivative actions. In the absence of such by-law provisions,
indemnification could not be made in respect of (i) a threatened derivative
action, or a pending derivative action which is settled or otherwise disposed
of, or (ii) any claim, issue or matter as to which a director or officer shall
have been adjudged liable to the corporation, unless or only to the extent that
a court determines upon application that, in view of all the circumstances of
the case, the director or officer is fairly and reasonably entitled to indemnity
for such portion of the settlement amount and expenses as the court deems
proper.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors or officers, Pall is aware that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. Under certain
circumstances, Pall might be required to submit to a court the question of
whether indemnification is permissible before it could indemnify directors for
such liabilities.
The NYBCL permits a corporation to purchase and maintain insurance on
behalf of any director or officer of the corporation against any liability
asserted against him and incurred by him in such capacity, whether or not the
corporation would have the power to indemnify him against such liability. The
directors and officers of Pall are currently covered as insureds under
directors' and officers' liability insurance. Such insurance, subject to annual
renewal and certain rights of the insurer to terminate, provides an aggregate
maximum coverage of $15,000,000 for each loss and for each policy year for its
directors and officers and those of its subsidiaries against claims made during
the policy period.
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ANTI-TAKEOVER PROVISIONS
GELMAN
Chapters 7A and 7B of the MBCA affect attempts to acquire control of
Michigan corporations. In general, under Chapter 7A, "business combinations"
(defined to include, among other transactions, certain mergers, dispositions of
assets or shares and recapitalizations) between covered Michigan business
corporations or their subsidiaries and an "interested shareholder" (defined as
the direct or indirect beneficial owner of at least 10% of the voting power of a
covered corporation's outstanding shares) can be consummated only if approved by
at least 90% of the votes of each class of the corporation's shares entitled to
vote and by at least two-thirds of such voting shares not held by the interested
shareholder or such shareholder's affiliates, unless five years have elapsed
after the person involved became an "interested shareholder" and unless certain
price and other conditions are satisfied. The Board may exempt "business
combinations" with a particular "interested shareholder" by resolution adopted
prior to the time the "interested shareholder" attained the status.
In general, under Chapter 7B of the MBCA, an entity that acquires
"Control Shares" of a corporation may vote the Control Shares on any matter only
if a majority of all shares, and of all non-"Interested Shares," of each class
of shares entitled to vote as a class, approve such voting rights. Interested
Shares are shares owned by officers, employees or directors of the corporation
and the entity making the Control Shares acquisition. Control Shares are shares
that, when added to shares already owned by an entity, would give the entity
voting power in the election of directors over any of three thresholds:
one-fifth, one-third and a majority. The effect of the statute is to condition
the acquisition of voting control of a corporation on the approval of a majority
of the pre-existing disinterested shareholders. The Board of Directors has the
option of choosing to amend the corporation's by-laws before a Control Share
acquisition occurs to provide that Chapter 7B does not apply to the corporation.
PALL
The NYBCL includes a "business combination" type of takeover statute.
Business combination statutes generally prohibit a target corporation from
engaging in any "business combination" with an "interested shareholder" of the
target corporation for a set period of time following the date on which the
interested shareholder became such. An interested shareholder is typically
defined as the direct or indirect beneficial owner of a specified percentage of
the target corporation's outstanding shares. Business combination statutes are
intended primarily to prevent highly leveraged takeover bids in which the
target's assets are to be used as collateral for the interested shareholder's
debt financing of the takeover. Such takeover bids usually depend on the prompt
consummation of a merger or business combination, or the prompt sale of
corporate assets, after the acquisition of control of the target corporation.
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The business combination provisions of the NYBCL (in Section 912) are
summarized above under the caption "Description of Pall Shares -- Fair Price
Provisions."
The New York business combination statute provides only limited
regulation of certain self-dealing transactions between a corporation and
certain larger shareholders. Moreover, wholly apart from the exceptions
mentioned above, there are a number of additional methods whereby even an
interested shareholder can benefit from a merger or sale of a corporation's
assets during the first five years after becoming an interested shareholder. For
example, a shareholder, prior to becoming an interested shareholder, may solicit
proxies or shareholder consents to change the composition of the board of
directors, and the new board which the shareholder has elected or helped to
elect may approve a business combination with the shareholder without the
statutory delay. Also, an interested shareholder may simply acquire control of
the corporation, remove the incumbent board and thereafter sell assets to third
parties or even liquidate the corporation, provided that any dividends or
liquidating distributions are made to all remaining shareholders pro rata, thus
giving minority shareholders the opportunity to realize their fair share of the
true value of the assets of the corporation.
It should be noted that the New York business combination statute (i)
does not prohibit tender offers or in any way regulate when, how, at what price
or by whom they may be made, (ii) does not in any way delay the purchase of
shares in tender offers, (iii) does not interfere with the right of a
shareholder, whether "interested" or not, to mount a proxy contest or remove
incumbent management, (iv) does not prevent a shareholder from buying sufficient
stock to replace existing management immediately and (v) unlike certain other
anti-takeover statutes (e.g., Indiana's) does not eliminate or delay a
shareholder's right to vote on the election of directors or on any other
corporate matters except certain defined self-dealing transactions.
In addition to a business combination statute, the NYBCL includes a
"greenmail" type of anti-takeover provision, designed to prevent a corporation
from buying at a premium price a corporate raider's interest in the corporation.
Pall may not purchase or agree to purchase more than 10% of its stock from a
shareholder for more than the market value thereof (as defined) unless such
purchase or agreement to purchase is approved by the affirmative vote of the
Board of Directors followed by the affirmative vote of the holders of a majority
of all outstanding shares entitled to vote thereon, or such greater percentage
as the corporation's certificate of incorporation may require. The foregoing
prohibition does not apply when the resident domestic corporation offers to
purchase shares from all holders of its stock, or with respect to stock which
the holder has owned beneficially for more than two years.
Federal legislation may have reduced the need for greenmail statutes,
by imposing a 50% nondeductible excise tax on any person who realizes gain from
the receipt of "greenmail" upon the sale of stock to the issuer thereof, whether
or not such gain is recognized for federal income tax purposes. A shareholder
receives greenmail with respect to any stock which he has held for less than two
years if (i) the shareholder, or someone acting in concert with or related to
the shareholder, made or threatened to make a public tender offer with respect
to such stock within
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the two-year period before the sale to the issuer, and (ii) the shareholder
receives consideration for the stock pursuant to an offer that was not made on
the same terms to all shareholders of the issuer.
In addition, the division of Pall's Board of Directors into three
classes (see "-- Classification of the Board" above) may be deemed to be an
anti-takeover provision, since it would generally prevent a person who gains
voting control of Pall from electing a majority of the Board of Directors for up
to two years.
STOCKHOLDER PROPOSALS
If the Merger is not effected, it is presently anticipated that Gelman
will hold its 1997 Annual Meeting of Stockholders sometime in December 1997.
Proposals of stockholders intended to be presented for action at the 1997 Annual
Meeting would have to be received at Gelman's principal executive offices not
later than September 26, 1997 to be considered for inclusion in Gelman's proxy
statement and form of proxy relating to that meeting. The terms and conditions
of Rule 14a-8 under the Exchange Act would apply to any such proposal.
LEGAL MATTERS
Certain legal matters in connection with the Merger will be passed upon
for Pall by Carter, Ledyard & Milburn, New York, N.Y. Certain legal matters in
connection with the Merger will be passed upon for Gelman by Godfrey & Kahn,
S.C., Milwaukee, Wisconsin. Heywood Shelley, a member of the firm of Carter,
Ledyard & Milburn, is a director of Pall, owns 3,500 Pall Shares and has options
exercisable within 60 days of the date hereof to purchase 33,333 Pall Shares.
EXPERTS
The consolidated financial statements of Pall Corporation and
subsidiaries incorporated in this Proxy Statement-Prospectus by reference to the
Annual Report on Form 10-K of Pall Corporation for the fiscal year ended August
3, 1996 have been so incorporated in reliance on the report of KPMG Peat Marwick
LLP, independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements and schedule of Gelman as of July
31, 1996 and 1995 and for each of the three years in the period ended July 31,
1996, incorporated in this Proxy Statement-Prospectus by reference to the Annual
Report on Form 10-K of Gelman for the fiscal year ended July 31, 1996, have been
so incorporated in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
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EXHIBIT A
AGREEMENT AND PLAN
OF REORGANIZATION AND
MERGER
BY AND AMONG
PALL CORPORATION,
PALL ACQUISITION
CORPORATION,
AND
GELMAN SCIENCES INC.
<PAGE> 90
TABLE OF CONTENTS
PAGE
----
SUMMARY OF TRANSACTION .............................................. A-1
ARTICLE I THE MERGER ...................................... A-1
Section 1.1 The Merger ...................................... A-1
Section 1.2 Effective Time of the Merger .................... A-2
ARTICLE II THE SURVIVING CORPORATION ....................... A-2
Section 2.1 Articles of Incorporation ....................... A-2
Section 2.2 By-Laws ......................................... A-2
Section 2.3 Effect of the Merger ............................ A-2
Section 2.4 Directors ....................................... A-2
Section 2.5 Officers ........................................ A-3
ARTICLE III CONVERSION OF SHARES ............................ A-3
Section 3.1 Conversion of Company Shares in the Merger ...... A-3
Section 3.2 Consideration ................................... A-4
Section 3.3 Exchange of Certificates ........................ A-5
Section 3.4 No Fractional Securities ........................ A-7
Section 3.5 Closing ......................................... A-7
Section 3.6 Closing of the Company's Transfer Books ......... A-7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUBSIDIARY ...................................... A-7
Section 4.1 Organization and Qualifications ................. A-8
Section 4.2 Capitalization .................................. A-8
Section 4.3 Subsidiaries .................................... A-9
Section 4.4 Authority; Non-Contravention; Approvals ......... A-9
Section 4.5 Securities Reports and Financial Statements ..... A-11
Section 4.6 Absence of Undisclosed Liabilities .............. A-11
Section 4.7 Absence of Certain Changes or Events ............ A-11
Section 4.8 Absence of Litigation ........................... A-12
Section 4.9 Registration Statement and Proxy Statement ...... A-12
Section 4.10 No Violation of Law ............................. A-12
A-i
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PAGE
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Section 4.11 Compliance with Agreements ....................... A-13
Section 4.12 Taxes ............................................ A-13
Section 4.13 Employee Benefit Plans; ERISA .................... A-14
Section 4.14 Labor Controversies .............................. A-15
Section 4.15 Environmental Matters ............................ A-16
Section 4.16 Title to Assets .................................. A-18
Section 4.17 Trademarks and Intellectual Property Compliance .. A-18
Section 4.18 Material Agreements .............................. A-18
Section 4.19 Insurance ........................................ A-18
Section 4.20 Brokers and Finders .............................. A-19
Section 4.21 Certain Transactions ............................. A-19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE
COMPANY .......................................... A-19
Section 5.1 Organization and Qualification ................... A-19
Section 5.2 Capitalization ................................... A-20
Section 5.3 Subsidiaries ..................................... A-20
Section 5.4 Authority; Non-Contravention; Approvals .......... A-21
Section 5.5 Securities Reports and Financial Statements ...... A-22
Section 5.6 Absence of Undisclosed Liabilities ............... A-23
Section 5.7 Absence of Certain Changes or Events ............. A-23
Section 5.8 Absence of Litigation ............................ A-23
Section 5.9 Registration Statement and Proxy Statement ....... A-24
Section 5.10 No Violation of Law .............................. A-24
Section 5.11 Compliance with Agreements ....................... A-24
Section 5.12 Taxes ............................................ A-25
Section 5.13 Employee Benefit Plans; ERISA .................... A-25
Section 5.14 Labor Controversies .............................. A-28
Section 5.15 Environmental Matters ............................ A-28
Section 5.16 Title to Assets .................................. A-29
Section 5.17 Company Stockholders' Approval ................... A-29
Section 5.18 Trademarks and Intellectual Property Compliance .. A-29
Section 5.19 Material Agreements .............................. A-30
Section 5.20 Insurance ........................................ A-30
Section 5.21 Brokers and Finders .............................. A-30
Section 5.22 Certain Transactions ............................. A-30
Section 5.23 Opinion of Financial Advisor ..................... A-31
Section 5.24 Pooling Matters .................................. A-31
Section 5.25 Stock Appreciation Rights ........................ A-31
Section 5.26 Memtec Agreement ................................. A-31
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER ......................... A-31
Section 6.1 Conduct of Business by the Company Pending the Merger .......... A-31
Section 6.2 Conduct of Business by Parent Pending the Merger ............... A-33
Section 6.3 Control of the Company's Operations ............................ A-34
Section 6.4 Control of Parent's Operations ................................. A-34
Section 6.5 Acquisition Transactions ....................................... A-34
ARTICLE VII ADDITIONAL AGREEMENTS .......................................... A-35
Section 7.1 Access to Information .......................................... A-35
Section 7.2 Stockholders' Approval ......................................... A-36
Section 7.3 Affiliates of the Company ...................................... A-36
Section 7.4 Exchange Listing ............................................... A-36
Section 7.5 Expenses and Fees .............................................. A-37
Section 7.6 Agreement to Cooperate ......................................... A-37
Section 7.7 Public Statements .............................................. A-38
Section 7.8 Options and Warrants; Benefit Plans ............................ A-38
Section 7.9 Notification of Certain Matters ................................ A-40
Section 7.10 Directors' and Officers' Indemnification ....................... A-40
Section 7.11 Joint Proxy Statement/Prospectus and Registration Statement .... A-41
Section 7.12 Tax-Free Treatment of Merger ................................... A-41
Section 7.13 Early Publication .............................................. A-41
ARTICLE VIII CONDITIONS ..................................................... A-42
Section 8.1 Conditions to Each Party's Obligation to Effect of Merger ...... A-42
Section 8.2 Additional Conditions to Obligation of the Company to
Effect the Merger .............................................. A-43
Section 8.3 Additional Conditions to Obligations of Parent and Subsidiary to
Effect the Merger .............................................. A-44
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER .............................. A-46
Section 9.1 Termination .................................................... A-46
</TABLE>
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Section 9.2 Effect of the Termination ........................ A-47
Section 9.3 Amendment ........................................ A-47
Section 9.4 Waiver ........................................... A-47
ARTICLE X GENERAL PROVISIONS ............................... A-47
Section 10.1 Non-Survival of Representations and Warranties ... A-47
Section 10.2 Notices .......................................... A-48
Section 10.3 Interpretation ................................... A-48
Section 10.4 Miscellaneous .................................... A-49
Section 10.5 Counterparts ..................................... A-49
Section 10.6 Parties In Interest .............................. A-49
Section 10.7 Exhibits and Schedules ........................... A-49
Section 10.8 Severability ..................................... A-49
Section 10.9 Definition of Knowledge .......................... A-49
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LIST OF SCHEDULES
SCHEDULE 6.1 Capital Expenditures
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<PAGE> 95
GLOSSARY OF DEFINED TERMS
"Acquisition Transactions" is defined in Section 6.5(a)
"Affiliate Agreements" is defined in Section 7.3
"Agreement" is defined in the Preamble on Page 1
"APB 16" is defined in the third Whereas Clause on Page 1
"ASR 135" is defined in Section 7.3
"change in control" is defined in Section 5.13(c)
"Closing" is defined in Section 3.5
"Closing Date" is defined in Section 3.5
"Code" is defined in the third Whereas Clause on Page 1
"Company" is defined in the Preamble on Page 1
"Company Affiliated Transaction" is defined in Section 5.22
"Company Certificates" is defined in Section 3.3(d)
"Company Common Stock" is defined in Section 3.1
"Company Disclosure Letter" is defined in the first paragraph of Article V
"Company Financial Statements" is defined in Section 5.5
"Company Material Adverse Effect" is defined in Section 5.1
"Company Options" is defined in Section 7.8(a)
"Company Permits" is defined in Section 5.10
"Company Plans" is defined in Section 5.13(a)
"Company Required Statutory Approvals" is defined in Section 5.4(c)
"Company SEC Reports" is defined in Section 5.5
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"Company Stockholders' Approval" is defined in Section 7.2
"Company Warrants" is defined in Section 7.8(a)
"controlled group" is defined in Section 5.13(c)
"Effective Time" is defined in Section 1.2
"employee stock ownership plan" is defined in Section 5.13(f)
"Environmental Law" is defined in Section 4.15(b)
"ERISA" is defined in Section 4.13(a)
"Exchange Act" is defined in Section 4.5
"Exchange Agent" is defined in Section 3.3(a)
"Exchanged Options" is defined in Section 7.8(a)
"Exchanged Warrants" is defined in Section 7.8(a)
"Exchange Ratio" is defined in Section 3.2(a)
"fiduciaries" is defined in Section 4.13(c) and 5.13(d)
"Fractional Share Payment" is defined in Section 3.4
"FTC" is defined in Section 7.6(b)
"Hazardous Substance" is defined in Section 4.15(c)
"HRS Act" is defined in Section 4.4(c)
"Indemnified Liabilities" is defined in Section 7.10(b)
"Indemnified Parties" is defined in Section 7.10(b)
"Intellectual Property Rights" is defined in Section 4.17
"IRS" is defined in Section 4.12
"ISO" is defined in Section 5.13(i)
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<PAGE> 97
"Joint Proxy Statement/Prospectus" is defined in Section 4.9
"MBCA" is defined in Section 1.1
"Merger" is defined in the first Whereas Clause on Page 1
"Merger Consideration" is defined in Section 3.2(a)
"Merger Filing" is defined in Section 1.2
"Non-Converting Share" is defined in Section 3.1(b)
"Parent Average Trading Price" is defined in Section 3.2(b)
"Parent" is defined in the Preamble on Page 1
"Parent Affiliated Transaction" is defined in Section 4.21
"Parent Common Stock" is defined in Section 3.1(b)
"Parent Disclosure Letter" is defined in the first paragraph of Article IV
"Parent Financial Statements" is defined in Section 4.5
"Parent Material Adverse Effect" is defined in Section 4.1
"Parent Permits" is defined in Section 4.10
"Parent Plans" is defined in Section 4.13(a)
"Parent Required Statutory Approvals" is defined in Section 4.4(c)
"Parent SEC Reports" is defined in Section 4.5
"pooling of interests" is defined in the third
"Whereas" clause on page 1
"Proxy Statement" is defined in Section 4.9
"Registration Statement" is defined in Section 4.9
"Rule 145" is defined in Section 7.3
"S-8" is defined in Section 7.8(a)
A-viii
<PAGE> 98
"SEC" is defined in Section 7.8(a)
"Securities Act" is defined in Section 4.4(c)
"Subsidiary" is defined in the Preamble on Page 1
"subsidiary" is defined in Section 4.3
"Subsidiary Common Stock" is defined in Section 3.1(d)
"Surviving Corporation" is defined in Section 1.1
"Tax Return" is defined in Section 4.12(c)
"Taxes" is defined in Section 4.12(b)
"Trading Days" is defined in Section 3.2(b)
"to the Company's knowledge" is defined in Section 10.9
"to the Parent's knowledge" is defined in Section 10.9
"withdrawal liability" is defined in Sections 4.13(c) and 5.13(d)
A-ix
<PAGE> 99
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, made on October
27, 1996 (the "Agreement"), by and among PALL CORPORATION, a New York
corporation ("Parent"), PALL ACQUISITION CORPORATION, a Michigan corporation and
a wholly-owned, direct subsidiary of Parent ("Subsidiary"), and GELMAN SCIENCES
INC., a Michigan corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent and the Company
have each determined that the merger of Subsidiary with and into the Company
(the "Merger") is consistent with and in furtherance of the long-term business
strategy of Parent and the Company and is in the best interests of Parent and
the Company and their respective stockholders;
WHEREAS, the respective Boards of Directors of Parent, Subsidiary and
the Company have each approved the Merger, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Parent, Subsidiary and the Company intend that the Merger
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code") and be treated as a
pooling of interests under Accounting Principles Board Opinion No. 16 ("APB16");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2) in
accordance with the Michigan Business Corporation Act (the "MBCA"), Subsidiary
shall be merged with and into the Company and the separate corporate existence
of Subsidiary shall thereupon cease. The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation." The Surviving Corporation will be governed by the laws
of the State of Michigan as a direct subsidiary of Parent, wholly-owned except
to the extent that the holders of Company Options and Company Warrants (as
hereinafter defined)
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have declined to exchange the same for Exchanged Options or Exchanged Warrants
(as hereinafter defined) and have thereafter exercised such options or warrants.
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in a
Certificate of Merger, consistent with the terms of this Agreement, to be filed
with the Department of Commerce of the State of Michigan in accordance with the
MBCA (the "Merger Filing"). The Merger Filing shall be made simultaneously with
or as soon as practicable after the Closing (as defined in Section 3.5) of the
transactions contemplated by this Agreement.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. ARTICLES OF INCORPORATION. The Articles of Incorporation
of the Surviving Corporation shall be amended and restated at and as of the
Effective Time to read as did the Articles of Incorporation of the Subsidiary
immediately prior to the Effective Time (except that the name of the Surviving
Corporation shall be such name, including the name "Gelman", as Parent shall
specify), until duly amended further in accordance with the terms thereof and
the MBCA.
SECTION 2.2. BY-LAWS. The By-laws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the By-Laws
of the Subsidiary immediately prior to the Effective Time (except that the name
of the Surviving Corporation shall be such name, including the name "Gelman", as
Parent shall specify), until duly amended further in accordance with the terms
thereof, the Articles of Incorporation of the Surviving Corporation and the
MBCA.
SECTION 2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the MBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Subsidiary and the
Company shall vest in the Surviving Corporation, all debts, liabilities and
duties of Subsidiary and the Company shall become the debts, liabilities and
duties of the Surviving Corporation in the same manner as if the Surviving
Corporation had itself incurred them, and the separate corporate existence of
the Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth herein.
SECTION 2.4. DIRECTORS. From and after the Effective Time, Eric
Krasnoff, Jeremy Hayward-Surry and Mary Ann Bartlett shall serve as the initial
directors of the Surviving Corporation to hold office in accordance with the
Articles of Incorporation and By-laws of the Surviving Corporation, until their
successors are duly elected or appointed.
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SECTION 2.5. OFFICERS. From and after the Effective Time, the following
individuals shall serve as the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed:
Chairman and CEO: Eric Krasnoff
President and COO: Kim A. Davis
Vice President: Samuel Wortham
Secretary: Mary Ann Bartlett
Treasurer: Jeremy Hayward-Surry
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. CONVERSION OF COMPANY SHARES IN THE MERGER. Subject to
Section 3.4 regarding fractional shares, at the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any shares of the
Company's common stock, par value $0.10 per share ("Company Common Stock"):
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than Company Common Stock held in
treasury by the Company or any subsidiary of the Company, shall be converted in
accordance with Section 3.3 into the right to receive the Merger Consideration
(as defined in Section 3.2).
(b) Each share of Company Common Stock held in treasury by the Company
or any subsidiary of the Company (each a "Non-Converting Share") immediately
prior to the Effective Time, if any, shall be canceled and extinguished without
conversion thereof into Common Stock (par value $0.10 per share) of Parent
("Parent Common Stock") or payment therefor.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent as sole stockholder of Subsidiary, all of the
issued and outstanding shares of common stock, no par value, of Subsidiary
("Subsidiary Common Stock") shall be converted into the same number of shares of
Common Stock, par value $0.10 per share, of the Surviving Corporation as are
converted into the right to receive the Merger Consideration pursuant to Section
3.1(a) hereof.
(d) No share of Company Common Stock shall be deemed to be outstanding
or to have any rights other than those set forth in this Section 3.1 after the
Effective Time.
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SECTION 3.2. CONSIDERATION.
(a) The consideration to be issued to each holder of Company Common
Stock in the Merger ("Merger Consideration") will be that number of shares of
Parent Common Stock which is determined by multiplying the Exchange Ratio by the
number of shares of Company Common Stock held by such holder of Company Common
Stock on the Closing Date (as defined in Section 3.5). The "Exchange Ratio"
shall equal the number of shares of Parent Common Stock (together with one right
appurtenant to each such share under Parent's Shareholder Rights Plan dated
December 1, 1989) for each share of Company Common Stock determined as follows:
(i) if the Parent Average Trading Price is $27.96 per share or
more, the Exchange Ratio shall be 1.1804 shares of Parent Common Stock
for each share of Company Common Stock;
(ii) if the Parent Average Trading Price is less than $27.96
per share but more than $25.29 per share, the Exchange Ratio shall be a
number of shares of Parent Common Stock for each share of Company
Common Stock equal to $33.00 divided by the Parent Average Trading
Price;
(iii) if the Parent Average Trading Price is $25.29 per share
or less, the Exchange Ratio shall be 1.3047 shares of Parent Common
Stock for each share of Company Common Stock, provided, however, that
if the Parent Average Trading Price is less than $21.00 per share, the
Company shall have the right to terminate this Agreement pursuant to
Section 9.1(a)(vi).
(b) For purposes hereof, the "Parent Average Trading Price" shall mean
the average of the closing sales prices of a share of Parent Common Stock, as
reported by New York Stock Exchange Consolidated Transactions, during the 30
"Trading Days" (which term shall mean a day on which the New York Stock Exchange
is open for business) preceding the third Trading Day before the meeting of the
Company's stockholders at which Company Stockholders' Approval is sought.
(c) No fractional shares of Parent Common Stock shall be issued, and,
in lieu thereof, a Fractional Share Payment shall be made (as defined in Section
3.4).
(d) The Merger Consideration shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock split or other
change (other than pursuant to exercises of outstanding options) in the number
of shares of Parent Common Stock or Company Common Stock outstanding occurring
after the date hereof and prior to Closing.
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SECTION 3.3. EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, all outstanding Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate representing
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive in exchange therefor, upon surrender
thereof to a bank or trust company designated by Parent and acceptable to the
Company (the "Exchange Agent"), a certificate or certificates representing the
number of whole shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.1 plus the Fractional Share Payment. Notwithstanding any
other provision of this Agreement, until holders or transferees of certificates
theretofore representing shares of Company Common Stock have surrendered them
for exchange as provided herein, no dividends or other distributions declared or
made after the Effective Time with respect to Parent Common Stock with a record
date after the Effective Time shall be paid with respect to any Parent Common
Stock represented by such certificates and no Fractional Share Payment shall be
made. Upon surrender of a certificate which immediately prior to the Effective
Time represented shares of Company Common Stock, there shall be paid to the
holder of such certificate by Parent, without interest, (i) promptly, the amount
of any Fractional Share Payment with respect to a fractional share of Parent
Common Stock to which such holder is entitled, (ii) except as provided in (iii),
below, the amount of dividends or other distributions (without interest) with a
record date after the Effective Time which theretofore became payable with
respect to whole shares of Parent Common Stock, and (iii) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of Parent Common
Stock.
(b) If any certificate for shares of Parent Common Stock are to be
issued in a name other than that in which the certificate for shares of Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and the person requesting
such exchange shall have paid to Parent or the Exchange Agent any applicable
transfer or other taxes required by reason of such issuance.
(c) As of the Effective Time, Parent shall deposit, or cause to be
deposited, with the Exchange Agent certificates representing the number of
shares of Parent Common Stock required to effect the exchanges referred to in
paragraph (a) above, and cash, for purposes of the Fractional Share Payment.
Parent shall thereafter from time to time deposit, or cause to be deposited,
with the Exchange Agent cash, for payment of any dividend or distributions in
respect of such shares of Parent Common Stock with a record date after the
Effective Time.
(d) As soon as reasonably practicable after the Effective Time, the
Parent or the Surviving Corporation shall cause the Exchange Agent to mail to
each holder of record as of the Effective Time of a certificate or certificates
that immediately prior to the Effective Time
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represented outstanding shares of Company Common Stock (the "Company
Certificates"), whose shares were converted into the right to receive shares of
Parent Common Stock (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates to the
Exchange Agent), and (ii) instructions for use in effecting the surrender of the
Company Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Company Certificate for cancellation to the
Exchange Agent, together with a duly executed letter of transmittal, the holder
of such Company Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1, and the Company Certificates so surrendered shall be canceled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any shares of
Parent Common Stock or dividends or distributions thereon delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(e) Promptly following the date which is six (6) months after the
Effective Time, the Parent or the Surviving Corporation shall cause the Exchange
Agent to deliver to Parent all certificates (including certificates representing
shares of Parent Common Stock), property and other documents in its possession
relating to the transactions described in this Agreement. Thereafter, each
holder of a Company Certificate may surrender such Company Certificate to the
Parent and (subject to applicable abandoned property, escheat and similar laws)
receive in exchange therefor the shares of Parent Common Stock to which such
person is entitled, any dividends or distributions with respect to shares of
Parent Common Stock and any Fractional Share Payment, in each case without any
interest thereon. Notwithstanding the foregoing, none of the Exchange Agent,
Parent, Subsidiary, or the Surviving Corporation shall be liable to a holder of
Company Common Stock for any shares of Parent Common Stock delivered to a public
official pursuant to applicable abandoned property, escheat and similar laws.
(f) In the event any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed, and the
posting of a bond by such person in such amount as Parent may direct as
indemnity against any claim that may be made against it or the Exchange Agent
with respect to such Company Certificate, the Exchange Agent, Parent or the
Surviving Corporation, as the case may be, shall issue in exchange for such
lost, stolen or destroyed Company Certificate, certificates representing the
proper number of shares of Parent Common Stock deliverable in respect thereof
determined in accordance with this Section 3.3, and cash, for the Fractional
Share Payment and any other dividends or distributions in respect of shares of
Parent Common Stock with a record date after the Effective Time.
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SECTION 3.4. NO FRACTIONAL SECURITIES. No certificates representing
fractional shares of Parent Common Stock shall be issued in the Merger and no
stock dividend, stock split or interest shall relate to any fractional security,
and such fractional share interests shall not entitle the owner thereof to vote
or to any other rights of a security holder. In lieu of any such fractional
shares, each holder of Company Common Stock, who would otherwise have been
entitled to receive a fractional share of Parent Common Stock upon surrender of
Company Certificates for exchange pursuant to this Article III, shall be
entitled to receive from the Exchange Agent a cash payment (the "Fractional
Share Payment") equal to the product of (i) the fractional share interest to
which such holder would otherwise be entitled multiplied by (ii) the closing
sale price of a share of Parent Common Stock as reported by New York Stock
Exchange Composite Transactions on the last trading day immediately preceding
the Effective Time.
SECTION 3.5. CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Carter,
Ledyard, Milburn, 2 Wall Street, New York, New York 10005 on the day of the
Company's Stockholders' Approval as such term is defined in Section 7.2, below,
or at such other time and place as Parent and the Company shall agree upon (the
date on which the Closing occurs is referred to in this Agreement as the
"Closing Date").
SECTION 3.6. CLOSING OF THE COMPANYS TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time shall thereafter be made. From and after the Effective Time, the
holders of Company Certificates evidencing ownership of shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights as stockholders of the Company, except as otherwise provided herein
or by law. If, after the Effective Time, subject to the terms and conditions of
this Agreement, Company Certificates formerly representing Company Common Stock
are presented to the Exchange Agent, Parent or Surviving Corporation, as the
case may be, they shall be canceled and exchanged for certificates representing
shares of Parent Common Stock and cash, for the Fractional Share Payment and any
other dividends or distributions in respect of shares of Parent Common Stock
with a record date after the Effective Time in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Except as set forth in the disclosure letter delivered to the Company
by Parent and the Subsidiary at or prior to the execution hereof (the "Parent
Disclosure Letter"), Parent and Subsidiary each represent and warrant to the
Company as of the date hereof as follows:
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SECTION 4.1. ORGANIZATION AND QUALIFICATIONS. Parent and Subsidiary are
corporations duly organized, validly existing and in good standing under the
laws of the States of New York and Michigan, respectively, and each has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and Subsidiary is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a material adverse effect on
the business, operations, properties, assets, condition (financial or other) or
results of operations of Parent, Subsidiary and Parent's other subsidiaries,
taken as a whole (a "Parent Material Adverse Effect"). True, accurate and
complete copies of Parent's Articles of Incorporation and By-Laws, as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to the Company. (Whenever herein reference is made to a delivery
having been made to the Company, such delivery obligation shall be deemed to
have been satisfied by delivering to Godfrey & Kahn, the Company's counsel.)
Neither Parent nor Subsidiary is in violation of any of the provisions of their
respective Articles of Incorporation, By-Laws and/or other organizational
documents.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 500,000,000
shares of Parent Common Stock, par value $0.10 per share, of which 115,116,755
shares were outstanding as of October 10, 1996. All of the issued and
outstanding shares of Parent Common Stock are, and all shares of Parent Common
Stock to be issued in connection with the Merger shall be, when issued, duly
authorized and validly issued, nonassessable and free of preemptive rights
granted by Parent or by applicable law.
(b) The authorized capital stock of Subsidiary consists of 60,000
shares of Subsidiary Common Stock, no par value of which 1,000 shares are issued
and outstanding and owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in
Section 4.5) and except as provided for in or contemplated by this Agreement, as
of the date hereof, there are (i) no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating Parent, Subsidiary or any other
subsidiary of Parent to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of Parent Common Stock or obligating Parent,
Subsidiary or any other subsidiary of Parent to grant, extend or enter into any
such agreement or commitment, and (ii) no voting trusts, proxies or other
agreements or understandings to which Parent, Subsidiary or any other subsidiary
of Parent is a party or is bound with respect to the voting of any shares of
Parent Common Stock and, to the knowledge of Parent, there are no such trusts,
proxies, agreements or understandings by, between or among any of Parent's
stockholders with respect to any shares of Parent Common Stock.
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SECTION 4.3. SUBSIDIARIES. Each direct and indirect subsidiary of
Parent, domestic or foreign, including Subsidiary, is duly organized, validly
existing and in good standing, under the laws of its state, country or other
jurisdiction of incorporation or organization and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted except where any failure
would not have a Parent Material Adverse Effect. Each subsidiary of Parent,
including Subsidiary, is qualified to do business and is in good standing, in
each jurisdiction, domestic or foreign, in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Parent Material Adverse Effect. As used in this
Agreement, the term "subsidiary" shall mean, when used with reference to Parent
or the Company, any corporation, partnership, joint venture or other entity
which Parent or the Company, as applicable, directly or indirectly, controls or
of which Parent or the Company, as applicable, (either acting alone or together
with its other subsidiaries) owns, directly or indirectly, 50% or more of the
stock or other voting interests, the holders of which are entitled to vote for
the election of a majority of the board of directors or any similar governing
body of such corporation, partnership, joint venture or other entity.
SECTION 4.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Subsidiary each have full corporate power and authority
to enter into this Agreement and, subject to the Parent Required Statutory
Approvals (as defined in Section 4.4(c)), to consummate the transactions
contemplated hereby. This Agreement has been approved by the Boards of Directors
of Parent and Subsidiary and by the sole stockholder of Subsidiary, and no other
corporate proceedings on the part of Parent or Subsidiary are necessary to
authorize the execution and delivery of this Agreement or the consummation by
Parent and Subsidiary of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Subsidiary, and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent and
Subsidiary, enforceable against each of them in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally, and (ii) general equitable
principles. Without limiting the foregoing, each of the covenants and
obligations of Parent set forth in Sections 6.2, 7.1, 7.3, 7.5, 7.6, 7.7, 7.9
and 7.11 is valid, legally binding and enforceable notwithstanding the absence
of approval of the Merger by the stockholders of Parent.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary does not, and the performance of this Agreement and the transactions
contemplated hereby by Parent and Subsidiary shall not, violate, conflict with
or result in a breach of any provision of, or constitute a default (or an 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
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required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Parent or any of its subsidiaries,
including Subsidiary, under, any of the terms, conditions or provisions of (i)
the respective Articles of Incorporation, By-Laws and/or other organizational
documents of Parent, Subsidiary or any of Parent's other subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority, domestic or
foreign, applicable to Parent, Subsidiary or any of Parent's other subsidiaries
or any of their respective properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which Parent, Subsidiary or any of Parent's other subsidiaries is now a party or
by which Parent, Subsidiary or any of Parent's other subsidiaries or any of
their respective properties or assets may be bound. The consummation by Parent
and Subsidiary of the transactions contemplated hereby will not result in any
violation, conflict, breach, termination, acceleration or creation of liens
under any of the terms, conditions or provisions described in clauses (i)
through (iii) of the preceding sentence, subject (x) in the case of the terms,
conditions or provisions described in clause (ii) above, to obtaining (prior to
the Effective Time) the Parent Required Statutory Approvals, and (y) in the case
of the terms, conditions or provisions described in clause (iii) above, to
obtaining (prior to the Effective Time) consents required from lenders, lessors
or other third parties. Excluded from the foregoing sentences of this paragraph
(b) are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests, charges or encumbrances
that would not, in the aggregate, have a Parent Material Adverse Effect.
(c) Except for (i) the filings by Parent and the Company required by
the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Registration Statement (as defined in Section 4.9)
with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities and any other required filings in other
jurisdictions to register or exempt the shares of Parent Common Stock issuable
pursuant hereto, (iii) the making of the Merger Filing with the Department of
Commerce of the State of Michigan in connection with the Merger, and (iv) any
other notifications required under anti-trust regulations of applicable
jurisdictions (the filings and approvals referred to in clauses (i) through (iv)
above are collectively referred to as the "Parent Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority, domestic or foreign, is necessary for the execution and delivery of
this Agreement by Parent or Subsidiary or the consummation by Parent or
Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a Parent Material Adverse Effect, or affect Subsidiary's ability
to consummate the Merger.
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SECTION 4.5. SECURITIES REPORTS AND FINANCIAL STATEMENTS. Parent has
filed with the SEC all forms, statements (including proxy statements), reports
and documents (including all exhibits, amendments and supplements thereto)
required to be filed by it prior to the date hereof under each of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act and
the respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder (collectively,
the "Parent SEC Reports"). As of their respective dates, the Parent SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
consolidated financial statements of Parent included in such reports
(collectively, the "Parent Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Parent and its 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 interim
financial statements, to normal year- end and audit adjustments and any other
adjustments described therein.
SECTION 4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the Parent SEC Reports, neither Parent nor any of its subsidiaries had at August
3, 1996, nor has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Parent Financial Statements or reflected in the notes thereto, or
(ii) which were incurred after August 3, 1996 and will not have a Parent
Material Adverse Effect; (b) liabilities, obligations or contingencies which (i)
would not, in the aggregate, have a Parent Material Adverse Effect, or (ii) have
been discharged or paid in full prior to the date hereof; and (c) liabilities
and obligations which are of a nature not required to be reflected in the
consolidated financial statements of Parent and its subsidiaries prepared in
accordance with generally accepted accounting principles consistently applied.
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Parent SEC Reports, since August 3, 1996, there has not been (a) any
change in the financial condition, results of operations or business of Parent
or any of its subsidiaries having, in the aggregate, a Parent Material Adverse
Effect; (b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of Parent or any of its subsidiaries
having, in the aggregate, a Parent Material Adverse Effect; (c) any change by
Parent in its accounting methods, principles or practices; (d) any revaluation
by Parent of any of its material assets in any material respect; (e) any entry
by Parent or any of its subsidiaries into any commitment or transactions
material to Parent and its subsidiaries, taken as a whole, other than this
Agreement; or (f) any declaration, setting aside or payment of any dividends or
distributions in respect of Parent Common Stock or any redemption, purchase or
other acquisition of any of its securities or any of the securities of any
subsidiary of Parent except for a regular quarterly cash dividend of Parent
declared October 18, 1996 in the amount of 12 1/4 cents per share.
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SECTION 4.8. ABSENCE OF LITIGATION. Except as disclosed in the Parent
SEC Reports which, individually or in the aggregate, will not have a Parent
Material Adverse Effect, taken as a whole, (a) there is no claim of any kind,
suit, action, proceeding, litigation, arbitration, investigation or controversy
affecting Parent or any of its subsidiaries pending or, to the knowledge of
Parent, threatened; and (b) neither Parent nor any of its subsidiaries is
subject to any continuing order of, or written agreement or memorandum of
understanding with, or continuing material investigation by, any governmental
entity or authority, or any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator.
SECTION 4.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by Parent for inclusion in (a) the
Registration Statement on Form S-4 to be filed under the Securities Act with the
SEC by Parent and the Company in connection with the Merger for the purpose of
registering the Parent Common Stock and Exchanged Options and Exchanged Warrants
to be issued in connection with the Merger (the "Registration Statement"), or
(b) the proxy statement to be distributed in connection with the Company's
meeting of stockholders to vote upon this Agreement and the transactions
contemplated hereby (the "Proxy Statement" and, together with the prospectus
included in the Registration Statement, the "Joint Proxy Statement/Prospectus")
will, in the case of the Proxy Statement or any amendments thereof or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, at the time of the meeting of stockholders of
the Company to be held in connection with the transactions contemplated by this
Agreement, and at the Effective Time, or, in the case of the Registration
Statement, as amended or supplemented, at the time it is declared effective by
the SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Registration Statement and Joint Proxy Statement/Prospectus
shall comply in all material respects as to form and substance with the
requirements of the Securities Act, the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent with respect to information supplied by the Company for inclusion
therein.
SECTION 4.10. NO VIOLATIONS OF LAW. Except as disclosed in the Parent
SEC Reports, neither Parent nor any of its subsidiaries is in violation of, or
has been given notice or been charged with any violation of, any domestic or
foreign law, statute, order, rule, regulation, ordinance, or judgment,
including, without limitation, any applicable environmental law, ordinance or
regulation of any governmental or regulatory body or authority, foreign or
domestic, except for violations which, in the aggregate, could not reasonably be
expected to have a Parent Material Adverse Effect. Parent and its subsidiaries
have all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted (collectively, the "Parent Permits"), except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which, alone or in the
aggregate, would not have a Parent Material Adverse Effect. Parent and its
subsidiaries are not in violation of the terms of any Parent Permit, except for
delays in filing reports or violations which, alone or in the aggregate, would
not have a Parent Material Adverse Effect.
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SECTION 4.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Parent SEC Reports, Parent and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
action by a third party, could result in a default under (a) the Articles of
Incorporation or By-Laws of Parent or the Articles/Certificate of Incorporation
or By-Laws of any of its subsidiaries; or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which Parent or any of its subsidiaries is a
party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults would have, in the aggregate, a
Parent Material Adverse Effect.
SECTION 4.12. TAXES.
(a) Except as disclosed in the Parent SEC Reports, Parent and its
subsidiaries have (i) duly filed with the appropriate governmental authorities
all Tax Returns (as defined in Section 4.12(c)) required to be filed by them for
all periods ending on or prior to the date hereof, and such Tax Returns are
true, correct and complete in all material respects, and (ii) duly paid in full
all Taxes (as defined in Section 4.12(b)) due in connection with or with respect
to the filing of such Tax Returns and have paid all other Taxes as are due,
except such as are being contested in good faith by appropriate proceedings and
with respect to which Parent is maintaining reserves adequate for their payment.
Except as disclosed in the Parent SEC Reports, neither the Internal Revenue
Service (the "IRS") nor any other governmental entity or taxing authority or
agency is now asserting, either through audits, administrative proceedings,
court proceedings or otherwise, or, to the best of Parent's knowledge,
threatening to assert against Parent or any of its subsidiaries any deficiency
or claim for additional Taxes. Except as disclosed in the Parent SEC Reports,
neither Parent nor any of its subsidiaries has been granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. Except as disclosed in the Parent SEC Reports, there are
no tax liens on any assets of Parent or any of its subsidiaries. Except as
disclosed in the Parent SEC Reports, neither Parent nor any of its subsidiaries
has received a ruling or entered into an agreement with the IRS or any other
governmental entity or taxing authority or agency that would have a Parent
Material Adverse Effect, taken as a whole, after the Effective Time. The
accruals and reserves for Taxes reflected in the Parent balance sheet reflected
in the latest Parent SEC Report are adequate to cover all Taxes accruable
through the date thereof (including Taxes being contested) in accordance with
generally accepted accounting principles.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, including, without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service, service use,
license, payroll, franchise, transfer and recording taxes, fees and charges,
windfall profits, severance, customs, import, export, employment or similar
taxes, charges, fees, levies or other assessments imposed by the United States,
or any state, local or foreign government or subdivision or agency thereof,
whether computed on a
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separate, consolidated, unitary, combined or any other basis, and such terms
shall include any interest, fines, penalties or additional amounts and any
interest in respect of any additions, fines or penalties attributable or imposed
or with respect to any such taxes, charges, fees, levels or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean
any return, report or other document or information required to be supplied to a
taxing authority in connection with Taxes.
SECTION 4.13. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as set forth in or referred to in the Parent SEC Reports, as
of the date hereof, Parent and its subsidiaries do not maintain or contribute to
or have any obligation or liability to or under any material employee benefit
plans, programs, arrangements or practices (such plans, programs, arrangements
or practices of Parent and its subsidiaries being referred to as the "Parent
Plans"), including employee benefit plans within the meaning set forth in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other similar material arrangements for the provision of benefits.
Neither Parent nor its subsidiaries has any obligation to create any additional
such plan or to amend any such plan so as to increase benefits thereunder,
except as required under the terms of the Parent Plans, under existing
collective bargaining agreements or to comply with applicable law, and except as
provided in Section 7.8(b) or elsewhere in this Agreement.
(b) Prior to the Closing, upon request by the Company, Parent will
furnish or make available to the Company a complete and accurate copy of each
Parent Plan (or a description of such Parent Plans, if the plans are not in
writing) and a complete and accurate copy of each material document prepared in
connection with each such Parent Plan, including, without limitation and where
applicable, a copy of (i) each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed IRS Form 5500 and related schedules, (iv) the most recently
issued IRS determination letter for each such Parent Plan, (v) the most recently
prepared actuarial report and financial statement in connection with each such
Parent Plan, and (vi) any other related documents as Company may reasonably
request.
(c) Each Parent Plan has been operated in all respects in accordance
with the requirements of all applicable laws and all persons who participate in
the operation of such Parent Plans and all Parent Plan "fiduciaries" (within the
meaning of Section 3(21) of ERISA) have acted in accordance with the provisions
of all applicable laws, except where violations of such applicable laws would
not, individually or in the aggregate, have a Parent Material Adverse Effect,
taken as a whole. Parent and its subsidiaries have performed all obligations
required to be performed by any of them under, are not in any respect in default
under or in violation of, and Parent has no knowledge of any default or
violation by any party to, any Parent Plan, except where such failures, defaults
or violations would not, individually or in
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the aggregate, have a Parent Material Adverse Effect, taken as a whole. No legal
action, suit or claim is pending or, to the knowledge of Parent, threatened with
respect to any Parent Plan (other than claims for benefits in the ordinary
course) and, to the knowledge of Parent, no fact or event exists that could give
rise to any such action, suit or claim. Neither Parent nor any of its
subsidiaries has incurred any material liability to the Pension Benefit Guaranty
Corporation (other than premiums payable to the Pension Benefit Guaranty
Corporation in the ordinary course) or any material "withdrawal liability"
within the meaning of Section 4201 of ERISA.
(d) Each Parent Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified, and each trust
established in connection with any Parent Plan that is intended to be exempt
from federal income taxation under Section 501(a) of the Code is so exempt, and
no fact or event has occurred since the date of such determination letter from
the IRS to adversely affect the qualified status of any such Parent Plan or the
exempt status of any such trust.
(e) To Parent's knowledge, there has been no non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Parent Plan. Parent and each of its subsidiaries has
not incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code and, to the knowledge of Parent, no fact or event exists that
could give rise to any such liability except for liability which, singly or in
the aggregate, could not reasonably be expected to cause a Parent Material
Adverse Effect. All contributions, premiums or payments required to be made with
respect to any Parent Plan have been made on or before their due dates except
for any such contributions, premiums or payments the non-payment of which
collectively would not result in a Parent Material Adverse Effect so long as
late payment doesn't result in Parent Material Adverse Effect.
SECTION 4.14. LABOR CONTROVERSIES. Except as set forth in the Parent
SEC Reports, (a) there are no material controversies pending or, to the
knowledge of Parent, threatened between Parent or its subsidiaries and any
representatives of any of their employees; (b) to the knowledge of Parent, there
are no material organizational efforts presently being made or threatened
involving any of the presently unorganized employees of Parent or its
subsidiaries; (c) Parent and its subsidiaries have, to the knowledge of Parent,
complied in all material respects with all laws, foreign or domestic, relating
to the employment of labor, including, without limitation, any provisions
thereof relating to wages, hours, collective bargaining, civil rights,
administration of leave and rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the payment of social security and similar taxes;
and (d) no person has, to the knowledge of Parent, asserted that Parent or any
of its subsidiaries is liable in any material amount for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing, except
for such controversies, organizational efforts, non-compliance and liabilities
which, singly or in the aggregate, could not reasonably be expected to cause a
Parent Material Adverse Effect.
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SECTION 4.15. ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Parent Disclosure Letter delivered to
the Company by the Parent and the Subsidiary at or prior to the execution
hereof, (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as defined in
Section 4.15(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) none of the properties owned
or leased by Parent or any of its subsidiaries contain any Hazardous Substance
(as defined in Section 4.15(c)) as a result of any activity of Parent or any of
its subsidiaries or otherwise in amounts exceeding the levels permitted by all
applicable Environmental Laws, (iii) neither Parent nor any of its subsidiaries
has received any formal or informal notices, demand letters or requests for
information from any federal, state, local or foreign governmental entity or
third party indicating that Parent or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened against Parent or any of its subsidiaries
relating to any violation, or alleged violation, of any Environmental Law, (v)
no reports or notices have been submitted to or filed, or are required to be
submitted or filed, by Parent or any of its subsidiaries concerning the release
of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law on or from any
properties owned by Parent or any of its subsidiaries as a result of any
activity of Parent or any of its subsidiaries during the time such properties
were owned, leased or operated by Parent or any of its subsidiaries, or as a
result of any other cause, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses regarding
compliance or noncompliance with any applicable Environmental Law arranged for,
conducted by or which are or were in the possession of, or the existence of
which is known to, Parent or its subsidiaries relating to the activities of
Parent or its subsidiaries, or conditions on any property owned, leased or
operated by Parent or its subsidiaries, (viii) there are no underground storage
tanks on, in or under any properties owned by Parent or any of its subsidiaries
and no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
Parent or any of its subsidiaries, (ix) there is no asbestos or asbestos
containing material present in any of the properties owned by Parent and its
subsidiaries and no asbestos has been removed from any of such properties during
the times such properties were owned, leased or operated by Parent or any of its
subsidiaries, and (x) neither Parent, its subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that, singly or in the aggregate, would not reasonably
be expected to have a Parent Material Adverse Effect.
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(b) For purposes of this Agreement, "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction, requirement or agreement with any governmental entity
relating to (i) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource) or to human health or safety, or (ii) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect as of the date hereof. The
term Environmental Law includes, without limitation, (x) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect as of the date hereof, or any state counterpart thereof
(and including any state, local or foreign law relating to the subjects set
forth in the foregoing clauses (i) and (ii)), and (y) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries, damages or penalties due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance presently listed, defined, designated or classified as hazardous,
toxic, radioactive, or dangerous, or otherwise regulated under any Environmental
Law. Hazardous Substance includes any substance to which exposure is regulated
by any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
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SECTION 4.16. TITLE TO ASSETS. Parent and each of its subsidiaries has
good and marketable title to all their respective properties and assets, real
and personal, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except (a) liens for Taxes not yet due
and payable; (b) such imperfections in title and assessments and encumbrances,
if any, as are not material in character, amount or extent and do not materially
and adversely affect the value or interfere with the present use of the property
subject thereto or affected thereby, or otherwise materially impair the Parent's
present business operations; (c) as disclosed in the Parent SEC Reports; or (d)
mortgages incurred in the ordinary course of business, and except for such
matters which, singly or in the aggregate, could not reasonably be expected to
cause a Parent Material Adverse Effect. All leases under which Parent leases any
material real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both
would become a default other than defaults under such leases which in the
aggregate will not cause a Parent Material Adverse Effect.
SECTION 4.17. TRADEMARKS AND INTELLECTUAL PROPERTY COMPLIANCE. Parent
and its subsidiaries own or have the right to use all of their patents,
trademarks (registered or unregistered), trade names, service marks, copyrights,
other proprietary intellectual property rights, applications therefor and
licenses or other rights in respect thereof (collectively, "Intellectual
Property Rights") without any conflict with the rights of others, except for
such conflicts that have not had and are not reasonably likely to have a Parent
Material Adverse Effect, and the consummation of the transactions contemplated
hereby will not alter or impair such rights in any material respect. To the
knowledge of Parent, no claims are pending by any person with respect to the
ownership, validity, enforceability or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which claims could reasonably be expected to have a Parent Material
Adverse Effect. To Parent's knowledge, none of its or its subsidiaries' key
technical personnel is in violation of any term of any employment agreement,
patent disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with it or its subsidiaries or any other party
the result of which has had or is reasonably likely to have a Parent Material
Adverse Effect.
SECTION 4.18. MATERIAL AGREEMENTS. Except for this Agreement, Parent
has no material contracts which are required to be filed as exhibits to the
Parent SEC Reports which have not been so filed.
SECTION 4.19. INSURANCE. Except to the extent there would be no Parent
Material Adverse Effect, to Parent's knowledge, all of Parent's and its
subsidiaries' liability, theft, life, health, fire, title, worker's compensation
and other forms of insurance, surety bonds and umbrella policies, insuring
Parent and its subsidiaries and their directors, officers, employees,
independent contractors, properties, assets and businesses, are valid and in
full force and effect (without any premium past due or pending notice of
cancellation) and are, in the reasonable
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judgment of Parent, adequate for the business of Parent and its subsidiaries as
now conducted, and there are no claims, singly or in the aggregate, in excess of
the limitations of coverage set forth in such policies. Neither Parent nor any
of its subsidiaries has knowledge of any fact indicating that such policies will
not continue to be available to Parent and its subsidiaries upon substantially
similar terms subsequent to the Effective Time. The provision and/or reserves in
the Parent Financial Statements are adequate for any and all self insurance
programs maintained by Parent or its subsidiaries.
SECTION 4.20. BROKERS AND FINDERS. Neither the Parent nor any of its
officers, directors or employees has employed any investment banker, broker or
finder other than Dillon Read & Co. Inc. or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees, commissions or
finder's fees in connection with the transactions contemplated hereby other than
to Dillon, Read & Co. Inc.
SECTION 4.21. CERTAIN TRANSACTIONS. Since July 31, 1995 none of the
officers or directors of the Parent, the Subsidiary or of any of the Parent's
other subsidiaries and, to Parent's knowledge, none of their employees or the
employees of any of its subsidiaries is a party to any transaction with it or
any of its subsidiaries (other than for services as an employee, officer or
director and other than transactions between it and one or more of its direct or
indirect wholly owned subsidiaries or between such subsidiaries), including
without limitation, any contract, agreement or other arrangement (i) providing
for the furnishing of services to or by, (ii) providing for rental of real or
personal property to or from, or (iii) otherwise requiring payments to or from,
any such officer, director, affiliate or employee, any member of the family of
any such officer, director or employee or any corporation, partnership, trust or
other entity in which any such officer, director or employee has a substantial
interest or which is an affiliate of such officer, director or employee (a
"Parent Affiliated Transaction") other than transactions which, singly or in the
aggregate, would not have a Parent Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered by the Company
at or prior to the execution hereof to Parent (the "Company Disclosure Letter"),
the Company represents and warrants to Parent as of the date hereof as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan and has the requisite corporate power and authority to
own, lease and operate its assets and properties and to carry on its business as
it is now being conducted. The Company is qualified to do business and is in
good standing, where applicable, in each jurisdiction in
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which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing will not, when taken together
with all other such failures, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole (a "Company
Material Adverse Effect"). True, accurate and complete copies of the Company's
Articles of Incorporation and By-Laws, in each case as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Parent. The Company is not in violation of any of the provisions of its Articles
of Incorporation or By-Laws.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 15,000,000
shares of Company Common Stock and 500,000 shares of preferred stock. As of the
date hereof, 8,043,574 shares of Company Common Stock and no shares of preferred
stock were issued and outstanding. All of the issued and outstanding shares of
the Company's capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights granted by the Company
or by applicable law.
(b) Except as disclosed in the Company SEC Reports (as defined in
Section 5.5), as of the date hereof, there are (i) no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement and also including
any rights plan or other anti-takeover agreement, obligating the Company or any
subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant, extend or
enter into any such agreement or commitment, and (ii) no voting trusts, proxies
or other agreements or understandings to which the Company or any subsidiary of
the Company is a party or is bound with respect to the voting of any shares of
capital stock of the Company and, to the knowledge of the Company, there are no
such trusts, proxies, agreements or understandings by, between or among any of
the Company's stockholders with respect to Company Common Stock.
SECTION 5.3. SUBSIDIARIES. Each direct and indirect subsidiary of the
Company is duly organized, validly existing and in good standing, under the laws
of its jurisdiction of incorporation or organization and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted except
where any failure would not have a Company Material Adverse Effect. Each
subsidiary of the Company is qualified to do business, and is in good standing,
in each jurisdiction in which the properties owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not have
a Company Material Adverse Effect. All of the outstanding shares of capital
stock of each corporate subsidiary of the Company have been
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duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights and are beneficially owned directly or indirectly by the
Company, free and clear of any liens, claims or encumbrances. There are no
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions or arrangements
relating to the issuance, sale, voting, transfer, ownership or other rights with
respect to any shares of capital stock of any subsidiary of the Company,
including any right of conversion or exchange under any outstanding security,
instrument or agreement.
SECTION 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to enter into
this Agreement and, subject to the Company Stockholders' Approval (as defined in
Section 7.2 and the Company Required Statutory Approvals (as defined in Section
5.4(c)), to consummate the transactions contemplated hereby. This Agreement has
been approved by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or, except for the Company Stockholders'
Approval, the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by Parent,
constitutes a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles. Without limiting the
foregoing, each of the covenants and obligations of the Company set forth in
Sections 6.1, 6.5, 7.1, 7.2, 7.3, 7.5, 7.6, 7.7, 7.9 and 7.11 is valid, legally
binding and enforceable notwithstanding the absence of the Company Stockholders'
Approval.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement and the transactions contemplated
hereby by the Company shall not, violate, conflict with or result in a breach of
any provision of, or constitute a default (or an 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 a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective Articles of Incorporation or By-Laws of the
Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company or any of its subsidiaries is now a party or by which
the Company or any of its subsidiaries or any of their respective properties or
assets
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may be bound. The consummation by the Company of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or creation of liens under any of the terms, conditions or
provisions described in clauses (i) through (iii) of the preceding sentence,
subject (x) in the case of the terms, conditions or provisions described in
clause (ii) above, to obtaining (prior to the Effective Time) the Company
Required Statutory Approvals and the Company Stockholders' Approval, and (y) in
the case of the terms, conditions or provisions described in clause (iii) above,
to obtaining (prior to the Effective Time) consents required from lenders,
lessors or other third parties. Excluded from the foregoing sentences of this
paragraph (b), insofar as they apply to the terms, conditions or provisions
described in clauses (ii) and (iii) of the first sentence of this paragraph (b),
are such violations, conflicts, breaches, defaults, terminations, accelerations
or creations of liens, security interests, charges or encumbrances that would
not, in the aggregate, have a Company Material Adverse Effect.
(c) Except for (i) the filings by the Company required by the HSR Act
and any other notifications required under anti-trust regulations of applicable
jurisdictions, (ii) the filing of the Registration Statement with the SEC
pursuant to the Exchange Act and the declaration of the effectiveness thereof by
the SEC and filings with various state blue sky authorities, and (iii) the
making of the Merger Filing with the Department of Commerce of the State of
Michigan in connection with the Merger (the filings and approvals referred to in
clauses (i) through (iii) above are collectively referred to as the "Company
Required Statutory Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, other than such declarations, filings, registrations,
notices, authorizations, consents or approvals which, if not made or obtained,
as the case may be, would not, in the aggregate, have a Company Material Adverse
Effect.
SECTION 5.5. SECURITIES REPORTS AND FINANCIAL STATEMENTS. The Company
has filed with the SEC all forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required to be filed by it
under each of the Securities Act, the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder (collectively, the "Company SEC Reports").
As of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of the Company included in such reports (collectively, the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
the Company and its 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 interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
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SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the Company SEC Reports, neither the Company nor any of its subsidiaries had at
July 31, 1996, nor has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto,
or (ii) which were incurred after July 31, 1996 and were incurred in the
ordinary course of business and consistent with past practices; (b) liabilities,
obligations or contingencies which (i) would not, in the aggregate, have a
Company Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof; and (c) liabilities and obligations which are of a
nature not required to be reflected in the consolidated financial statements of
the Company and its subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied and which were incurred in the normal
course of business.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Company SEC Reports, since July 31, 1996, the Company and its
subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and since July 31, 1996, there has not
been (a) any change in the financial condition, results of operations or
business of the Company or any of its subsidiaries having, in the aggregate, a
Company Material Adverse Effect; (b) any damage, destruction or loss (whether or
not covered by insurance) with respect to any assets of the Company or any of
its subsidiaries having, in the aggregate, a Company Material Adverse Effect;
(c) any change by the Company in its accounting methods, principles or
practices; (d) any revaluation by the Company of any of its material assets in
any material respect; (e) any entry by the Company or any of its subsidiaries
into any commitment or transactions material to the Company and its
subsidiaries, taken as a whole; or (f) any declaration, setting aside or payment
of any dividends or distributions in respect of shares of Company Common Stock
or any redemption, purchase or other acquisition of any of its securities or any
of the securities of any subsidiary of the Company.
SECTION 5.8. ABSENCE OF LITIGATION. Except as disclosed in the Company
SEC Reports which, individually or in the aggregate, will not have a Company
Material Adverse Effect, taken as a whole, (a) there is no claim of any kind,
suit, action, proceeding, litigation, arbitration, investigation or controversy
affecting the Company or any of its subsidiaries pending or, to the knowledge of
the Company, threatened; and (b) neither the Company nor any of its subsidiaries
is subject to any continuing order of, or written agreement or memorandum of
understanding with, or continuing material investigation by, any governmental
entity or authority, or any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator.
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SECTION 5.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by the Company or its subsidiaries for
inclusion in (a) the Registration Statement, or (b) the Proxy Statement will, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, at the time of the meeting of stockholders of the Company
to be held in connection with the transactions contemplated by this Agreement,
and at the Effective Time, or, in the case of the Registration Statement, as
amended or supplemented, at the time it is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Registration Statement and Joint Proxy Statement/Prospectus will
comply in all material respects as to form and substance with the requirements
of the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to information supplied by Parent for inclusion therein.
SECTION 5.10. NO VIOLATION OF LAW. Except as disclosed in the Company
SEC Reports, neither the Company nor any of its subsidiaries is in violation of
or has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment including, without
limitation, any applicable environmental law, ordinance or regulation of any
governmental or regulatory body or authority, except for violations which, in
the aggregate, could not reasonably be expected to have a Company Material
Adverse Effect. The Company and its subsidiaries have all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct their businesses as presently
conducted (collectively, the "Company Permits"), except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
Company Material Adverse Effect. The Company and its subsidiaries are not in
violation of the terms of any Company Permit, except for delays in filing
reports or violations which, alone or in the aggregate, would not have a Company
Material Adverse Effect.
SECTION 5.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
action by a third party, could result in a default under (a) the respective
Articles of Incorporation or By-Laws of the Company or any of its subsidiaries;
or (b) any contract, commitment, agreement, indenture, mortgage, loan agreement,
note, lease, bond, license, approval or other instrument to which the Company or
any of its subsidiaries is a party or by which any of them is bound or to which
any of their property is subject, which breaches, violations and defaults, in
the case of clause (b) of this Section 5.11, would have, in the aggregate, a
Company Material Adverse Effect.
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SECTION 5.12. TAXES. The Company and its subsidiaries have (i) duly
filed with the appropriate governmental authorities all Tax Returns required to
be filed by them for all periods ending on or prior to the date hereof, and such
Tax Returns are true, correct and complete in all material respects, and (ii)
duly paid in full all Taxes due in connection with or with respect to the filing
of such Tax Returns and have paid all other Taxes as are due, except such as are
being contested in good faith by appropriate government proceedings and with
respect to which the Company is maintaining reserves adequate for their payment.
Neither the IRS nor any other governmental entity or taxing authority or agency
is now asserting, either through audits, administrative proceedings, court
proceedings or otherwise, or, to the best of the Company's knowledge,
threatening to assert against the Company or any of its subsidiaries any
deficiency or claim for additional Taxes. Neither the Company nor any of its
subsidiaries has been granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax. There
are no tax liens on any assets of the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries has received a ruling or entered
into an agreement with the IRS or any other governmental entity or taxing
authority or agency that would have a Company Material Adverse Effect, taken as
a whole, after the Effective Time. The accruals and reserves for Taxes reflected
in the Company balance sheet reflected in the latest Company SEC Report are
adequate to cover all Taxes accruable through the date thereof (including Taxes
being contested) in accordance with generally accepted accounting principles.
Except for the Company's and its subsidiaries' intercompany tax allocation
agreements, no agreements relating to allocating or sharing of Taxes exist among
the Company and its subsidiaries and no tax indemnities given by the Company or
its subsidiaries in connection with a sale of stock or assets remain in effect.
Neither the Company nor any of its subsidiaries is required to include in income
either (i) any material amount in respect of any adjustment under Section 481 of
the Code, or (ii) any material installment sale gain. Neither the Company nor
any of its subsidiaries has made an election under Section 341(f) of the Code.
SECTION 5.13. EMPLOYEE BENEFITS PLANS; ERISA.
(a) Except as set forth in the Company SEC Reports, as of the date
hereof, the Company and its subsidiaries do not maintain or contribute to or
have any obligation or liability to or under any material employee benefit
plans, programs, arrangements and practices (such plans, programs, arrangements
and practices of the Company and its subsidiaries being referred to as the
"Company Plans"), including employee benefit plans within the meaning set forth
in Section 3(3) of ERISA, or other similar material arrangements for the
provision of benefits. Neither the Company nor its subsidiaries has any
obligation to create any additional such plan or to amend any such plan so as to
increase benefits thereunder, except as required under the terms of the Company
Plans, under existing collective bargaining agreements or to comply with
applicable law.
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(b) The Company has furnished or made available to Parent a complete
and accurate copy of each Company Plan (or a description of such Company Plans,
if the plans are not in writing) and a complete and accurate copy of each
material document prepared in connection with each such Company Plan, including,
without limitation and where applicable, a copy of (i) each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed IRS Form 5500 and related
schedules, (iv) the most recently issued IRS determination letter for each such
Company Plan, (v) the most recently prepared actuarial report and financial
statement in connection with each such Company Plan and (vi) any other related
documents as the Parent may reasonably request.
(c) No member of the Company's "controlled group," within the meaning
of Section 4001(a)(14) of ERISA, maintains or contributes to, or within the five
(5) years preceding the Effective Time has maintained or contributed to, an
employee pension benefit plan subject to Title IV of ERISA. None of the Company
Plans obligates the Company or any of its subsidiaries to pay material
separation, severance, termination or similar-type benefits solely as a result
of any transaction contemplated by this Agreement or as a result of a "change in
control," within the meaning of such term under Section 280G of the Code. None
of the Company Plans provides for or promises retiree medical, disability or
life insurance benefits to any current or former employee, officer or director
of the Company or any of its subsidiaries except as otherwise required with
respect to health plan coverage in Section 4980B oF the Code. Each of the
Company Plans is subject only to the laws of the United States or a political
subdivision thereof.
(d) Each Company Plan has been operated in all respects in accordance
with the requirements of all applicable laws and all persons who participate in
the operation of such Company Plans and all Company Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have acted in accordance with the
provisions of all applicable laws, except where violations of such applicable
laws would not, individually or in the aggregate, have a Company Material
Adverse Effect, taken as a whole. The Company and its subsidiaries have
performed all obligations required to be performed by any of them under, are not
in any respect in default under or in violation of, and the Company has no
knowledge of any default or violation by any party to, any Company Plan, except
where such failures, defaults or violations would not, individually or in the
aggregate, have a Company Material Adverse Effect, taken as a whole. No legal
action, suit or claim is pending or, to the knowledge of the Company, threatened
with respect to any Company Plan (other than claims for benefits in the ordinary
course) and, to the knowledge of the Company, no fact or event exists that could
give rise to any such action, suit or claim. Neither the Company nor any of its
subsidiaries has incurred any material liability to the Pension Benefit Guaranty
Corporation (other than premiums payable to the Pension Benefit Guaranty
Corporation in the ordinary course) or any material "withdrawal liability"
within the meaning of Section 4201 of ERISA.
(e) Each Company Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has received a favorable
determination letter from the
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IRS that it is so qualified, and each trust established in connection with any
Company Plan that is intended to be exempt from federal income taxation under
Section 501(a) of the Code is so exempt, and, to the knowledge of the Company,
no fact or event has occurred since the date of such determination letter from
the IRS to adversely affect the qualified status of any such Company Plan or the
exempt status of any such trust. No trust maintained or contributed to by the
Company or any of its subsidiaries is intended to be qualified as a voluntary
employees' beneficiary association or is intended to be exempt from federal
income taxation under Section 501(c)(9) of the Code.
(f) Any Company Plan that is intended to be an employee stock ownership
plan qualifies as an "employee stock ownership plan" within the meaning of
Section 4975(e)(7) of the Code and Section 407(d)(6) of ERISA, and any loan to
such plan satisfies the requirements for treatment of the Loan as an "exempt"
loan under Section 4975(d)(3) of the Code and Section 408(b)(3) of ERISA.
(g) To the Company's knowledge, there has been no non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Company Plan. The Company and each of its subsidiaries
has not incurred any liability for any excise tax arising under Section 4972 or
4980B of the Code and, to the knowledge of the Company, no fact or event exists
that could give rise to any such liability except for liability which singly or
in the aggregate could not reasonably be expected to cause a Company Adverse
Effect.
(h) All contributions, premiums or payments required to be made with
respect to any Company Plan have been made on or before their due dates.
(i) The Company Disclosure Letter sets forth a true and complete list
of each current or former employee, officer or director of the Company or any of
its subsidiaries who holds any option to purchase Company Common Stock as of the
date of this Agreement, together with the number of shares of Company Common
Stock subject to such option, the date of grant of such option, the option price
of such option, whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO") and the
expiration date of such option. The Company Disclosure Letter also sets forth
the total number of such ISOs and such non-qualified options.
(j) Neither the Company nor any of its subsidiaries is a party to any
employment, severance, consulting or other similar contracts with any employees,
consultants, officers or directors of the Company or any of its subsidiaries
other than such contracts that are disclosed in the Company SEC Reports. Neither
the Company nor any of its subsidiaries is a party to any collective bargaining
agreements.
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SECTION 5.14. LABOR CONTROVERSIES. Except as set forth in the Company
SEC Reports, (a) there are no material controversies pending or, to the
knowledge of the Company, threatened between the Company or its subsidiaries and
any representatives of any of their employees; (b) to the knowledge of the
Company, there are no material organizational efforts presently being made or
threatened involving any of the presently unorganized employees of the Company
or its subsidiaries; (c) the Company and its subsidiaries have, to the knowledge
of the Company, complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, civil rights, administration of
leave and rights under the Consolidated Omnibus Budget Reconciliation Act of
1985 and the payment of social security and similar taxes; and (d) no person
has, to the knowledge of the Company, asserted that the Company or any of its
subsidiaries is liable in any material amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing, except for
such controversies, organizational efforts, non-compliance and liabilities
which, singly or in the aggregate, could not reasonably be expected to cause a
Company Material Adverse Effect.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth in the Company
Disclosure Letter, (i) the Company and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned or leased by the Company
or any of its subsidiaries contain any Hazardous Substance as a result of any
activity of the Company or any of its subsidiaries or otherwise in amounts
exceeding the levels permitted by all applicable Environmental Laws, (iii)
neither the Company nor any of its subsidiaries has received any formal or
informal notices, demand letters or requests for information from any federal,
state, local or foreign governmental entity or third party indicating that the
Company or any of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened
against the Company or any of its subsidiaries relating to any violation, or
alleged violation, of any Environmental Law, (v) no reports or notices have been
submitted to or filed, or are required to be submitted or filed, by the Company
or any of its subsidiaries concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has been disposed of, released or transported in violation of any
applicable Environmental Law on or from any properties owned by the Company or
any of its subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were owned, leased or operated by
the Company or any of its subsidiaries, or as a result of any other cause, (vii)
there have been no environmental investigations, studies, audits, tests, reviews
or other analyses regarding compliance or noncompliance with any applicable
Environmental Law arranged for, conducted by or which are or were in possession
of or the existence of which is known to the Company or its subsidiaries
relating to the activities of the Company or its subsidiaries, or conditions on
any property owned, leased or operated by
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Parent or its subsidiaries, (viii) there are no underground storage tanks on, in
or under any properties owned by the Company or any of its subsidiaries and no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by the
Company or any of its subsidiaries, (ix) there is no asbestos or asbestos
containing material present in any of the properties owned by the Company and
its subsidiaries and no asbestos has been removed from any of such properties
during the time such properties were owned, leased or operated by the Company or
any of its subsidiaries, and (x) neither the Company, its subsidiaries nor any
of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that, singly, or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 5.16. TITLE TO ASSETS. The Company and each of its subsidiaries
has good and marketable title to all their respective properties and assets,
real and personal, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except (a) liens for Taxes not yet due
and payable; (b) such imperfections in title and easements and encumbrances, if
any, as are not material in character, amount or extent and do not materially
and adversely affect the value or interfere with the present use of the property
subject thereto or affected thereby, or otherwise materially impair the
Company's present business operations; (c) as disclosed in the Company SEC
Reports; or (d) mortgages incurred in the ordinary course of business, and
except for such matters which, singly or in the aggregate, could not reasonably
be expected to cause a Company Material Adverse Effect. All leases under which
the Company leases any material real or personal property (copies of which have
been made available to Parent) are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both
would become a default other than defaults under such leases which in the
aggregate will not have a Company Material Adverse Effect.
SECTION 5.17. COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote is necessary to approve the transactions contemplated by this
Agreement.
SECTION 5.18. TRADEMARKS AND INTELLECTUAL PROPERTY COMPLIANCE. The
Company and its subsidiaries own or have the right to use all of their
Intellectual Property Rights without any conflict with the rights of others,
except for such conflicts that have not had and are not reasonably likely to
have a Company Material Adverse Effect, and the consummation of the transactions
contemplated hereby will not alter or impair such rights in any material
respect. To the knowledge of the Company, no claims are pending by any person
with respect to the ownership, validity, enforceability or use of any such
Intellectual
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Property Rights challenging or questioning the validity or effectiveness of any
of the foregoing which claims could reasonably be expected to have a Company
Material Adverse Effect. To the Company's knowledge, none of it or its
subsidiaries' key technical personnel is in violation of any term of any
employment agreement, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with it or its
subsidiaries or any other party the result of which has had or is reasonably
likely to have a Company Material Adverse Effect.
SECTION 5.19. MATERIAL AGREEMENTS. Except as set forth in the Company
Disclosure Letter, the Company has no material contracts which are required to
be filed as exhibits to the Company SEC Reports which have not been so filed,
and complete copies of the contracts identified in the Company Disclosure Letter
have been furnished to Parent.
SECTION 5.20. INSURANCE. Except to the extent there would be no Company
Material Adverse Effect, to the Company's knowledge, all of the Company's and
its subsidiaries' liability, theft, life, health, fire, title, worker's
compensation and other forms of insurance, surety bonds and umbrella policies,
insuring the Company and its subsidiaries and their directors, officers,
employees, independent contractors, properties, assets and businesses, are valid
and in full force and effect (without any premium past due or pending notice of
cancellation) and are, in the reasonable judgment of the Company, adequate for
the business of the Company and its subsidiaries as now conducted, and there are
no claims, singly or in the aggregate, in excess of the limitations of coverage
set forth in such policies. Neither the Company nor any of its subsidiaries has
knowledge of any fact indicating that such policies will not continue to be
available to the Company and its subsidiaries upon substantially similar terms
subsequent to the Effective Time. The provision and/or reserves in the Company
Financial Statements are adequate for any and all self-insurance programs
maintained by the Company or its subsidiaries.
SECTION 5.21. BROKERS AND FINDERS. Neither the Company nor any of its
officers, directors or employees has employed any investment banker, broker or
finder or incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees, commissions or finder's fees in connection with
the transactions contemplated hereby, except that the Company has retained
Cleary Gull Reiland & McDevitt Inc. as its financial advisor.
SECTION 5.22. CERTAIN TRANSACTIONS. Since July 1, 1996, none of the
officers or directors of the Company or of any of its subsidiaries, and, to the
Company's knowledge, none of their employees or the employees of any of its
subsidiaries is a party to any transaction with it or any of its subsidiaries
(other than for services as an employee, officer or director and other than
transactions between it and one or more of its direct or indirect wholly owned
subsidiaries or between such subsidiaries), including without limitation, any
contract, agreement or other arrangement (i) providing for the furnishing of
services to or by, (ii) providing for rental of real or personal property to or
from, or (iii) otherwise requiring payments to or from, any such officer,
director, affiliate or employee, any member of the
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family of any such officer, director or employee or any corporation,
partnership, trust or other entity in which any such officer, director or
employee has a substantial interest or which is an affiliate of such officer,
director or employee (a "Company Affiliated Transaction"). Since July 31, 1995
and until July 1, 1996, none of the officers or directors of the Company or any
of its subsidiaries and, to the Company's knowledge, none of their employees or
the employees of any of its subsidiaries is a party to a Company Affiliated
Transaction other than transactions which would not have a Company Material
Adverse Effect.
SECTION 5.23. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Cleary Gull Reiland & McDevitt Inc., its financial advisor, dated
the date hereof, to the effect that, as of such date, the transactions
contemplated hereby are fair to its stockholders from a financial point of view,
a copy of which has been delivered to the other parties hereto.
SECTION 5.24. POOLING MATTERS. To the Company's knowledge and based in
part upon consultation with its independent accountants, neither the Company nor
any of its affiliates has taken or agreed to take any action that would affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling of interests.
SECTION 5.25. STOCK APPRECIATION RIGHTS. All stock appreciation rights
heretofore granted have been exercised or surrendered so that as of the date
hereof no stock appreciation rights are outstanding.
SECTION 5.26. MEMTEC AGREEMENT. Prior to the execution of this
Agreement, the Company has terminated the Agreement and Plan of Reorganization
and Merger dated as of August 30, 1996 to which the Company and Memtec Limited
are parties, such termination having been made under Section 6.5(d) of said
Agreement and Plan of Reorganization by sending to Memtec Limited a notice of
termination.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as otherwise contemplated by this Agreement, after the date hereof and
prior to the Closing Date or earlier termination of this Agreement, unless
Parent shall otherwise agree in writing, the Company shall, and shall cause its
subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
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(b) not (i) amend or propose to amend their respective Articles of
Incorporation or By-Laws, (ii) split, combine or reclassify their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, except for the payment of
dividends or distributions by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of or otherwise cause to become outstanding, any additional
shares of, or any options, warrants or rights of any kind to acquire any shares
of their capital stock of any class or any debt or equity securities convertible
into or exchangeable for such capital stock, except that the Company may issue
shares upon the exercise of Company Options and Company Warrants outstanding on
the date hereof;
(d) not (i) incur or become contingently liable with respect to any
material indebtedness for borrowed money other than (x) borrowings in the
ordinary course of business, or (y) borrowings to refinance existing
indebtedness, in the ordinary course of business, (ii) redeem, purchase, acquire
or offer to purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) take any action
which would jeopardize the treatment of the Merger as a pooling of interests
under APB 16, (iv) take or fail to take any action which action or failure would
cause the Company or its stockholders (except to the extent that any
stockholders receive cash in lieu of fractional shares) to recognize gain or
loss for federal income tax purposes as a result of the consummation of the
Merger, (v) make any acquisition of any assets or businesses and expenditures
for fixed or capital assets other than expenditures set forth on attached
Schedule 6.1 or expenditures in the ordinary course of business which, in such
cases of $100,000 or more, shall be on terms reasonably acceptable to Parent,
(vi) sell, pledge, dispose of or encumber any assets or businesses other than
sales in the ordinary course of business which, in such cases involving $100,000
or more, shall be on terms reasonably acceptable to Parent, or (vii) enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use all commercially reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers and key employees, and preserve the goodwill
and business relationships with customers, vendors and others having business
relationships with them and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by this
Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of Parent to report operational matters of materiality and the
general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any
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directors, officers or key employees, except in the ordinary course and
consistent with past practice which, in cases involving $50,000 or more, shall
be on terms reasonably acceptable to Parent;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree except as
required to comply with changes in applicable law or increases in wages in the
ordinary course and consistent with past practice for non-executive employees;
(i) maintain with adequately capitalized insurance companies insurance
coverage for its assets and its businesses in such amounts and against such
risks and losses as are consistent with past practice; and
(j) not enter into any arrangement or transaction of the type described
in Section 5.22.
Section 6.2. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. Except
as otherwise contemplated by this Agreement, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless the Company
shall otherwise agree in writing, Parent shall, and shall cause it subsidiaries,
including Subsidiary, to:
(a) not split, combine or reclassify their outstanding capital stock in
a manner which would reduce the value of the Merger Consideration, unless
appropriate adjustment is made to the Merger Consideration to avoid such
reduction in value;
(b) use all commercially reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers and key employees and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by this
Agreement;
(c) confer on a regular and frequent basis with one or more
representatives of the Company to report operational matters of materiality and
the general status of ongoing operations but Parent shall not be required to
disclose any confidential or proprietary information in such conferences;
(d) maintain with adequately capitalized insurance companies insurance
coverage for its assets and its businesses in such amounts and against such
risks and losses as are consistent with past practice; and
(e) not enter into any arrangement or transaction of the type described
in Section 4.21 which would have a Parent Material Adverse Effect.
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SECTION 6.3. CONTROL OF THE COMPANYS OPERATIONS. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with and subject to the
terms and conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4. CONTROL OF PARENTS OPERATIONS. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with and subject to the terms
and conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.5. ACQUISITION TRANSACTIONS.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its subsidiaries or advisors, including but not limited to Cleary Gulf
Reiland & McDevitt Inc., to (i) initiate, solicit or seek, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its stockholders)
to acquire all or any substantial part of the business and properties of the
Company and its subsidiaries or more than fifty percent (50%) of the capital
stock of the Company and its subsidiaries, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof except for the transaction contemplated
herein (any such transactions being referred to herein as "Acquisition
Transactions"), (ii) engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Transaction, or (iii) otherwise cooperate in any
effort or attempt to make, implement or accept an Acquisition Transaction.
(b) Notwithstanding any other provision of this Agreement, in response
to an unsolicited proposal or inquiry (or a proposal or inquiry arising from a
general solicitation prior to July 22, 1996) with respect to an Acquisition
Transaction, (i) the Company may engage in discussions or negotiations regarding
such proposal or inquiry with a third party who seeks to initiate such
discussions or negotiations and furnish to such third party information
concerning the Company and its business, properties and assets, and (ii) if such
Acquisition Transaction is a tender offer subject to the provisions of Section
14(d) under the Exchange Act, the Company's Board of Directors may take and
disclose to the Company's stockholders a position contemplated by Rule 14e-2(a)
under the Exchange Act.
(c) In the event the Company shall determine to provide any information
or negotiate as described in paragraph (b), above, or shall receive any offer of
the type referred to in paragraph (b), above, it shall (i) immediately provide
Parent with a copy of all information provided to the third party, (ii) inform
Parent that information is to be provided, that negotiations are to take place
or that an offer has been received, as the case may be, and (iii)
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furnish to Parent the identity of the person receiving such information or the
proponent of such offer, if applicable, and, if an offer has been received,
unless the Board of Directors of the Company concludes that such disclosure is
inconsistent with its fiduciary duties under applicable law, a description of
the material terms thereof.
(d) The Company may terminate this Agreement, withdraw, modify or not
make its recommendations referred to in Section 7.2, and enter into a definitive
agreement for an Acquisition Transaction if, but only if, (i) the Board of
Directors of the Company shall have determined in good faith after consultation
with the independent financial advisors of the Company that such Acquisition
Transaction would be more favorable to the Company's stockholders from a
financial point of view than the Merger, and (ii) the Board of Directors of the
Company shall conclude in good faith after consultation with its legal counsel
that such action is necessary in order for the Board of Directors of the Company
to act in a manner that is consistent with its fiduciary obligations under
applicable law.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS TO INFORMATION. From and after the date hereof,
each party shall furnish promptly to one another a copy of each report and other
document filed or received by any of them pursuant to the requirements of
federal or state securities laws or which may have a material effect on their
respective businesses, properties or personnel, and work papers of their
respective accountants and other information or copies of such documentation and
access to senior management personnel as reasonably deemed necessary by the
requesting party's respective accountants, legal counsel or financial advisors
to complete the Joint Proxy Statement/Prospectus and Registration Statement, the
HSR Act filing and similar filings with other foreign governments or the
opinions or letters referred to in Sections 8.2(b), 8.2(c), 8.2(g), 8.3(b) and
8.3(g), below. Parent and its subsidiaries shall hold and shall use their
commercially reasonable efforts to cause the Parent's representatives to hold,
and the Company and its subsidiaries shall hold and shall use their commercially
reasonable efforts to cause the Company's representatives to hold, in strict
confidence all non-public documents and information furnished to Parent and
Subsidiary or to the Company, as the case may be, in connection with the
transactions contemplated by this Agreement pursuant to the terms and conditions
of that certain Letter Agreement dated June 11, 1996 regarding confidential
information by and between Parent and the Company which are hereby incorporated
in and made a part of this Agreement as if they were set forth herein in their
entirety. Notwithstanding the foregoing (i) Parent and the Company may disclose
such information as may be necessary in connection with seeking the Parent
Required Statutory Approvals, the Company Required Statutory Approvals and the
Company Stockholders' Approval (as defined
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in Section 7.2 below), and (ii) each of Parent, Subsidiary and the Company may
disclose any information that it is required by law or judicial or
administrative order to disclose.
SECTION 7.2. STOCKHOLDERS' APPROVAL. Subject to the fiduciary duties of
the Board of Directors of the Company under applicable law, the Company shall,
as promptly as practicable, submit the transactions contemplated hereby for the
approval of its stockholders at a meeting of stockholders and, subject to the
fiduciary duties of the Board of Directors of the Company under applicable law,
shall use its commercially reasonable efforts to obtain stockholder approval and
adoption (the "Company Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of the stockholders shall be held
as soon as practicable following the date upon which the Registration Statement
becomes effective. The Company shall, through its Board of Directors, but
subject to the fiduciary duties of the members thereof, recommend to its
stockholders approval of the transactions contemplated by this Agreement. For
purposes of such approval, the parties hereto agree that the Company's Employee
Stock Ownership Plan may appoint an independent fiduciary to vote the shares of
Company Common Stock represented thereby. The Company (i) acknowledges that a
breach of its covenant contained in this Section 7.2(a) to convene a meeting of
its stockholders and call for a vote with respect to the approval of this
Agreement and the Merger will result in irreparable harm to Parent which will
not be compensable in money damages, and (ii) agrees that such covenant shall be
specifically enforceable and that specific performance and injunctive relief
shall be a remedy properly available to Parent for a breach of such covenant.
SECTION 7.3. AFFILIATES OF THE COMPANY. Within 30 days after the date
of this Agreement, (i) the Company shall deliver to Parent a letter identifying
all persons who may be deemed affiliates of the Company under Rule 145 of the
Securities Act ("Rule 145"), including, without limitation, all directors and
executive officers of the Company, and (ii) the Company shall advise the persons
identified in such letter of the resale restrictions imposed by applicable
securities laws, including Accounting Series Release No. 135 ("ASR 135"). Each
of the Company and Parent shall use its commercially reasonable efforts to
obtain as soon as practicable after the date hereof from all directors,
executive officers and affiliates of the Company and Parent an agreement (the
"Affiliate Agreements") that such persons will comply with the provisions of ASR
135 as amended by Staff Accounting Bulletins Nos. 65 and 76 and that if Parent
so elects, the Parent Common Stock issued to such directors, executive officers
and affiliates of the Company pursuant to the Merger may be legended to refer to
the Affiliate Agreement and the resale restrictions therein.
SECTION 7.4. EXCHANGE LISTING. Parent shall use its commercially
reasonable efforts to effect, at or before the Effective Time, authorization for
listing on The New York Stock Exchange, upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the Merger.
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SECTION 7.5. EXPENSES AND FEES. Each party hereto agrees to bear its
own expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement, except:
(a) Parent shall pay and be responsible for all fees and expenses
incurred in connection with the printing, filing and mailing of the Joint Proxy
Statement/Prospectus and with all HSR Act filings associated with the
transaction and any other filings required by antitrust regulations of foreign
jurisdictions; and
(b) If the Company (i) fails to fulfill its obligations as set forth in
Section 6.5(a)-(c) or (ii) terminates this Agreement pursuant to Section 6.5(d),
the Company shall pay to Parent the sum of $5,000,000 in lieu of any other
payments or penalties or the reimbursement of expenses incurred by Parent; and
(c) If the waiting period applicable to the consummation of the Merger
under the HSR Act shall not have expired or been terminated on or prior to the
date specified in Section 9.1(a)(i) and provided that the Company shall have
fulfilled its obligations under Section 7.6(b), Parent shall pay to the Company
the sum of $10,000,000 in lieu of any other payments or penalties or the
reimbursement of expenses incurred by the Company.
SECTION 7.6. AGREEMENT TO COOPERATE.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable pursuant to all agreements, contracts, indentures or other
instruments to which the parties hereto are a party, or under any applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its commercially reasonable
efforts to (i) obtain all necessary or appropriate waivers, consents and
approvals from lenders, landlords, security holders or other parties whose
waiver, consent or approval is required to consummate the Merger, (ii) effect
all necessary registrations, filings and submissions, and (iii) lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible).
(b) Without limiting the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable after the date hereof the
HSR Act filing and any other filings required by antitrust regulations of other
jurisdictions including foreign countries. Each of Parent and the Company shall
(i) use all best efforts to comply as expeditiously as possible with all lawful
requests of the Federal Trade Commission (the "FTC") or the Antitrust Division
for additional information and documents, and (ii) not under any circumstances
whatsoever extend any waiting period under the HSR Act or enter into any
agreement with the FTC or the Antitrust Division not to consummate the
transactions
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contemplated by this Agreement, except with the prior written consent of the
other parties hereto, which consent shall not be unreasonably withheld, and
(iii) use all best efforts, including litigation with the FTC or the Antitrust
Division if necessary, to cause the expeditious termination of the HSR Act
waiting period and the efficient and expeditious conclusion of review by the FTC
or the Antitrust Division under the HSR Act.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation without
the consent of Parent, which consent will not be unreasonably withheld.
SECTION 7.7. PUBLIC STATEMENTS. The parties (i) shall consult with each
other prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby, and (ii)
shall not issue any such press release or written public statement prior to such
consultation, except as may be required by law and applicable listing
requirements.
SECTION 7.8. OPTION AND WARRANTS; BENEFIT PLANS.
(a) (i) Each unexpired option or warrant to purchase Company
Common Stock ("Company Options" and "Company Warrants," respectively),
which by its terms becomes at the Effective Time an option or warrant
to purchase shares of Parent Common Stock, shall automatically and
without any action on the part of the holder thereof be converted into
an option or warrant to purchase the number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock which could
be acquired upon the exercise of such Company Option or Company
Warrant, as the case may be, multiplied by the Exchange Ratio (as
defined in Section 3.2(a)), at an exercise price (per share of Parent
Common Stock) equal to the per share exercise price of such Company
Option or Company Warrant divided by the Exchange Ratio. Options and
warrants to purchase Parent Common Stock described in this paragraph
(i) of Section 7.8(a) are sometimes herein referred to as "Exchanged
Options" and "Exchanged Warrants."
(ii) With respect to each currently unexpired Company Option
and Company Warrant, Parent shall offer to the holder thereof,
contingent upon the effectiveness of the Merger, the right to exchange
such Company Option or Company Warrant for an option issued by Parent
(an "Exchanged Option") to purchase the number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock
which could be acquired upon the exercise of such Company Option or
Company Warrant, as the case may be, multiplied by the Exchange Ratio
(as defined in Section 3.2(a)), at an exercise price (per share of
Parent Common Stock) equal to the per share exercise price of such
Company Option or Company Warrant divided by the Exchange
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Ratio. The other terms of an Exchanged Option shall, at the election of
the holder of the Company Option or Company Warrant, be either (i)
substantially identical to the other terms of the Company Option or
Company Warrant or (ii) similar to the terms of options granted under
Parent's existing stock option plans with such modifications from such
existing option plans as Parent, in its sole discretion, may determine
except that Parent shall not be obligated to offer options under this
clause "(ii)" if Parent's auditors advise that such offer would be
inconsistent with pooling of interests accounting treatment. To the
extent that the Parent in its sole discretion determines that the
offering of the alternatives described in the preceding sentence would
result in a disqualification of a Company Option as an incentive stock
option under Section 422 of the Code, clause (ii) shall not apply to
such Company Option.
(iii) This Section 7.8 shall not apply to a Company Option or
Company Warrant to the extent that it is inconsistent with an
employment agreement or other agreement between Parent and the holder
of such Company Option or Company Warrant.
(iv) Parent shall (X) reserve for issuance the number of
shares of Parent Common Stock that will become issuable upon the
exercise of the Exchanged Options and Exchanged Warrants and (Y)
promptly after the Effective Time, issue to each holder of an Exchanged
Option and Exchanged Warrant a document evidencing the same. Parent
agrees to file with the Securities and Exchange Commission (the "SEC")
at the Effective Time a Registration Statement on Form S-8 or other
appropriate form under the Securities Act (as hereinafter defined)
relating to shares of Parent Common Stock issuable upon exercise of the
Exchanged Options and Exchanged Warrants and use its commercially
reasonable efforts to cause such Registration Statement to remain
effective until the exercise or expiration of such Exchanged Options
and Exchanged Warrants.
(b) Parent agrees to provide benefit plans of general applicability
which will be made available to employees of the Company at the Effective Time
and for at least the two (2) years immediately thereafter, the terms of which
shall be at least as favorable as those found in the Company Plans in effect for
the benefit of such employees prior to the Effective Time; provided, however,
that the terms of the plans so provided may be modified at any time during such
two (2) year period to the extent Parent determines that such modifications are
necessary in order for such plans, or for the Parent Plans, to maintain their
tax-qualified or tax-exempt status under the Code, or to comply with the
requirements of ERISA or any other applicable law. Parent also agrees to give
such employees credit for all eligibility and vesting they have accrued during
their respective terms of employment with the Company.
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SECTION 7.9. NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
Parent and Subsidiary agrees to give prompt notice to each other of, and to use
their respective commercially reasonable efforts to prevent or promptly remedy
(i) the occurrence or failure to occur or the impending or threatened occurrence
or failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 7.10. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) The Surviving Corporation shall observe any indemnification
provisions now existing in the Articles of Incorporation or By-Laws of the
Company or in the indemnification agreements set forth in the Company Disclosure
Letter for the benefit of any individual who served as a director or officer of
the Company at any time prior to the Effective Time.
(b) Commencing at the Effective Time, Parent shall indemnify, defend
and hold harmless each individual who served as a director, officer, employee or
fiduciary of the Company or any of its subsidiaries (the "Indemnified Parties")
at any time prior to the Effective Time from and against (i) all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer, employee
or fiduciary of the Company or any of its subsidiaries, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after the Effective Time ("Indemnified
Liabilities) and (ii) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent a corporation
is permitted under the MBCA to indemnify its own directors, officers, employees
and fiduciaries, as the case may be (and the Surviving Corporation will pay
expenses in advance of the final disposition of any such action or proceeding to
each Indemnified Party to the full extent permitted by law). Without limiting
the foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising before
or after the Effective Time), (x) the Indemnified Parties may retain counsel
satisfactory to them and the Company (or them and the Surviving Corporation
after the Effective Time), (y) the Company (or after the Effective Time, the
Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (z) the Company (or after the Effective Time, the Surviving
Corporation) will use all commercially reasonable efforts to assist in the
vigorous defense of any such matter, provided that neither the Company nor the
Surviving Corporation
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shall be liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section 7.10, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Company or, after the Effective Time, the Surviving Corporation (but
the failure so to notify an Indemnifying Party shall not relieve it from any
liability which it may have under this Section except to the extent such failure
prejudices such party). The Indemnified Parties as a group may retain only one
law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(c) The provisions of this Section 7.10 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or her
heirs and representatives.
SECTION 7.11. JOINT PROXY STATEMENT/PROSPECTUS AND REGISTRATION
STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
Parent and the Company shall prepare and file with the SEC a Joint Proxy
Statement/Prospectus and Registration Statement on Form S-4 relating to the
approval of the Merger by the stockholders of the Company and shall use all
commercially reasonable efforts to cause the Registration Statement to become
effective as soon thereafter as practicable.
(b) Prior to the date of approval of the Merger by the Company's
stockholders, each of the Company, Parent and Subsidiary shall correct promptly
any information provided by it to be used specifically in the Joint Proxy
Statement/Prospectus and Registration Statement that shall have become false or
misleading in any material respect and shall take all steps necessary to file
with the SEC and have declared effective or cleared by the SEC any amendment or
supplement to the Joint Proxy Statement/Prospectus or the Registration Statement
so as to correct the same and to cause the Joint Proxy Statement/Prospectus as
so corrected to be disseminated to the stockholders of the Company and Parent,
in each case to the extent required by applicable law.
SECTION 7.12. TAX-FREE TREATMENT OF MERGER. The Parent and Company
shall each use its commercially reasonable efforts to cause the Merger to be
treated as a tax-free reorganization for federal, state and foreign income tax
purposes and agree that this Agreement shall serve as the Plan of Reorganization
therefor.
SECTION 7.13. EARLY PUBLICATION. Parent shall publish 30 days'
post-closing combined financial results of Parent and the Surviving Corporation
for the first full 30-day period following the Closing within twenty (20) days
of the end of such period in a form sufficient to satisfy the pooling of
interests accounting requirements.
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ARTICLE VIII
CONDITIONS
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. Unless waived by the parties, the respective obligations of each party
to effect the Merger shall be subject to the fulfillment at or prior to the
Closing of the following conditions:
(a) this Agreement and the transactions contemplated hereby, as
appropriate, shall have been approved and adopted by the requisite vote of the
stockholders of the Company under applicable law;
(b) the shares of Parent Common Stock issuable in the Merger shall have
been authorized for listing on The New York Stock Exchange;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act and other applicable antitrust regulations of applicable
jurisdictions shall have expired or been terminated;
(d) the Registration Statement shall have been declared effective by
the SEC in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued by the SEC and remain
in effect and no proceedings for that purpose shall, on or prior to the
Effective Time, have been instituted or, to the knowledge of Parent or the
Company, threatened by the SEC or any state regulatory authorities;
(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger shall
have been issued and remain in effect (each party agreeing to use its
commercially reasonable efforts to have any such injunction, order or decree
lifted);
(f) no action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any state or federal government or governmental
agency in the United States which would prevent the consummation of the Merger
or make the consummation of the Merger illegal; and
(g) all material governmental waivers, consents, orders and approvals,
domestic or foreign, legally required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and be in effect at
the Effective Time.
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SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER. Unless waived by the Company, the obligation of the Company
to effect the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions:
(a) Parent and Subsidiary shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of Parent and
Subsidiary contained in this Agreement shall be true and correct in all material
respects (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be true and
correct in all respects) on and as of the date made and on and as of the Closing
Date, except for those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date),
as if made at and as of such date, and the Company shall have received a
Certificate of the Chairman of the Board and Chief Executive Officer and the
President or a Vice President of Parent, in form and substance reasonably
satisfactory to the Company, to that effect;
(b) the Company shall have received an opinion of Godfrey & Kahn, S.C.,
independent counsel to the Company, in form and substance reasonably
satisfactory to the Company, effective as of the Closing Date and based on
representations of the Company and Parent, to the effect that (i) the Merger of
Subsidiary with and into the Company pursuant to this Agreement and applicable
state law will be treated for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) Parent,
Subsidiary and the Company will each be a party to the reorganization within the
meaning of Section 368(b) of the Code, and (iii) the stockholders of the Company
will not recognize gain or loss as a result of the Merger, except to the extent
such stockholders receive any Fractional Share Payment;
(c) the Company shall have received an opinion from the law firm
Carter, Ledyard & Milburn, independent counsel to Parent and Subsidiary, dated
the Closing Date, reasonably satisfactory to the Company, as to such matters as
are customarily the subject of an opinion to the acquired company by counsel for
the acquiring company in similar transactions;
(d) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in or
constitute, a Parent Material Adverse Effect, taken as a whole;
(e) all waivers, consents, orders, authorizations, and approvals
required to be obtained, and all filings required to be made by Parent and
Subsidiary for the authorization, execution and delivery of this Agreement and
the consummation by Parent and Subsidiary of the transactions contemplated
hereby shall have been obtained and made by Parent and Subsidiary, except where
the failure to obtain the waivers, consents, orders, authorization or
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approvals required to be obtained or any filings required to be made would not
have a Parent Material Adverse Effect, taken as a whole;
(f) no governmental authority, foreign or domestic, shall have
promulgated any statute, rule or regulation which, when taken together with all
such promulgations, would materially impair the value of the Merger to the
Company's shareholders;
(g) the Company shall have received from Cleary Gull Reiland & McDevitt
Inc. an opinion reasonably acceptable to the Company, dated as of the date on or
about which the Joint Proxy Statement/Prospectus is first distributed to the
stockholders of the Company, to the effect that the consideration to be received
by the stockholders of the Company in the Merger is fair, from a financial point
of view, to the holders of Company Common Stock; and
(h) All required consents and approvals of lenders who have advanced
$5,000,000 or more to Parent and lessors of material leases or other material
contracts of the Parent shall have been obtained and be in effect at the
Effective Time if the failure to obtain such consents would have a Parent
Material Adverse Effect.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
SUBSIDIARY TO EFFECT THE MERGER. Unless waived by Parent and Subsidiary, the
obligations of Parent and Subsidiary to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects (except
that where any statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct in all
respects) on and as of the date made and on and as of the Closing Date, except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), as if
made at and as of such date, and Parent shall have received a Certificate of the
Chairman of the Board and Chief Executive Officer and the President and Chief
Operating Officer or a Vice President of the Company, in form and substance
reasonably satisfactory to Parent to that effect;
(b) Parent shall have received an opinion from the law firm of Godfrey
& Kahn, S.C., independent counsel to the Company, effective as of the Closing
Date, reasonably satisfactory to Parent as to such matters as are customarily
the subject of an opinion to the acquiring company by counsel for the acquired
company in similar transactions;
(c) the Affiliate Agreements required to be delivered to Parent
pursuant to Section 7.3 shall have been furnished as required by Section 7.3;
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(d) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in or
constitute, a Company Material Adverse Effect, taken as a whole, other than (x)
changes or events involving the financial performance of the Company or (y)
changes or events involving the financial condition of the Company resulting
solely from changes in the financial performance of the Company;
(e) all waivers, consents, orders, authorizations, and approvals
required to be obtained, and all filings required to be made by the Company for
the authorization, execution and delivery of this Agreement and the consummation
by the Company of the transactions contemplated hereby shall have been obtained
and made by the Company except where the failure to obtain the waivers,
consents, orders, authorizations, or approvals required to be obtained or any
filings required to be made would not have a Company Material Adverse Effect,
taken as a whole;
(f) no governmental authority shall have promulgated any statute, rule
or regulation which, when taken together with all such promulgations, would
materially impair the value to Parent of the Merger;
(g) All required consents and approvals of lenders who have advanced
$5,000,000 or more to the Company and lessors of material leases or other
material contracts of the Company shall have been obtained and be in effect at
the Effective Time;
(h) Parent shall have received a letter from Coopers & Lybrand to the
effect that in their opinion neither the Company nor any of its affiliates has
taken or agreed to take any action that would affect the ability of Parent to
account for the business combination to be effected by the Merger as a pooling
of interests;
(i) Company Options and Company Warrants covering not less than 513,835
shares of Company Common Stock shall, prior to or at the Effective Time, either
have been exercised or will be converted into Exchanged Options or Exchanged
Warrants so that the number of shares covered by Company Options or Company
Warrants following the closing shall not exceed 128,458; and
(j) The consolidated gross sales (prior to the impact of any
adjustments to gross sales, including sales credits) of the Company and its
subsidiaries for the period commencing August 1, 1996 and ending sixty (60) days
prior to the scheduled date of the meeting of the Company's stockholders at
which Company Stockholders' Approval is sought shall be not less than the
consolidated gross sales (prior to the impact of any adjustments to gross sales,
including sales credits) of the Company and its subsidiaries for the similar
period during fiscal year 1996, in each case determined in accordance with
generally accepted accounting principles consistently applied.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated by the
mutual consent of the parties, or at any time prior to the Closing Date, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company, as follows:
(a) The Company shall have the right to terminate this Agreement;
(i) if the Merger is not completed by October 15, 1997 other
than on account of delay or default on the part of the Company;
(ii) if the Merger is enjoined by a final, unappealable order
of a U. S. court having jurisdiction not entered at the request or with
the support of the Company or any of their affiliates or associates;
(iii) if the terms and conditions of Section 6.5(d) and
Section 7.5(b) are satisfied;
(iv) if Parent (A) has breached any representation, warranty
or covenant in any material respect, and (B) does not cure such default
in all material respects within 30 days after written notice of such
default is given to Parent by the Company;
(v) if the Company's stockholders' vote is not sufficient to
approve the transactions contemplated by this Agreement; or
(vi) if the Parent Average Trading Price is less than $21.00
per share.
(b) Parent shall have the right to terminate this Agreement;
(i) if the Merger is not completed by October 15, 1997 other
than on account of delay or default on the part of Parent;
(ii) if the Merger is enjoined by a final, unappealable order
of a U.S. court having jurisdiction not entered at the request or with
the support of Parent or any of their affiliates or associates;
(iii) if the Company (A) has breached any representation,
warranty or covenant in any material respect, and (B) does not cure
such default in all material respects within 30 days after written
notice of such default is given to the Company by Parent; or
(iv) if the Company's stockholders' vote is not sufficient to
approve the transactions contemplated by this Agreement.
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SECTION 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, Parent, Subsidiary, or their respective officers or
directors (except as set forth in this Section 9.2 and in Sections 7.1, 7.5 and
7.7, all of which shall survive the termination), provided, however, that
nothing in this Section 9.2 shall relieve any party from liability for any
breach of this Agreement.
SECTION 9.3. AMENDMENT. This Agreement may not be amended except by
action taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law.
SECTION 9.4. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall not be deemed to
be continuing or to apply to any future obligation or requirement of any part
hereto provided herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in Articles IV and V of this Agreement
shall not survive the Merger, and after effectiveness of the Merger, the
Company, Parent, Subsidiary or their respective officers or directors shall have
no further obligation with respect thereto. The covenants and agreements set
forth in only the following sections of this Agreement shall survive the Merger:
Sections 3.3, 7.5, 7.8, 7.10 and 7.13.
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SECTION 10.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Subsidiary to:
Pall Corporation
25 Harbor Park Drive
Port Washington, NY 11050
Attention: Eric Krasnoff
Chairman and Chief Executive Officer
Facsimile Number: 516-484-3529
with a copy to:
Carter, Ledyard & Milburn
Two Wall Street
New York, NY 10005
Attention: Heywood Shelley
Facsimile Number: 212-732-3232
(b) If to the Company, to:
Gelman Sciences Inc.
600 South Wagner Road
Ann Arbor, Michigan
Attention: Charles Gelman
Facsimile Number: (313) 913-6336
with a copy to:
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Attention: Richard J. Bliss
Facsimile Number: (414) 273-5198
SECTION 10.3. INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears (i) the words "herein," "hereof" and "hereunder" and other words of
similar impact refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision.
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SECTION 10.4. MISCELLANEOUS. This Agreement (including the documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) is not intended to confer upon any other person any rights or remedies
hereunder except for rights of indemnified parties under Section 7.10, and (c)
shall not be assigned by operation of law or otherwise. THIS AGREEMENT SHALL BE
GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE
LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE
PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 10.5. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement. Each of the parties agrees to
accept and be bound by facsimile signatures hereto.
SECTION 10.6. PARTIES IN INTEREST. 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 10.7. EXHIBITS AND SCHEDULES. All Exhibits and Schedules
referred to in this Agreement shall be attached hereto and are incorporated by
reference herein.
SECTION 10.8. SEVERABILITY. If any term or other provision of this
Agreement in invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.9. DEFINITION OF KNOWLEDGE. For those warranties and
representations set forth in Article IV which are subject to the qualification
"to Parent's knowledge," Parent will be deemed to have knowledge of a matter if
(i) Eric Krasnoff, Jeremy Hayward-Surry or Gilbert Weiner have knowledge of the
matter, or (ii) such matter has come, or should reasonably be expected to have
come, to the attention of either of such individuals if such individual had
conducted a reasonable due diligence review of Parent's operations and business,
including, without limitation, reasonable inquiries to key personnel of Parent
regarding the business and operations of Parent and a review of, and discussion
with key
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personnel regarding, pertinent books and records of Parent. For those warranties
and representations set forth in Article V which are subject to the
qualification "to the Company's knowledge," the Company will be deemed to have
knowledge of a matter if (i) Charles Gelman, Kim Davis, George Uveges or Edward
Levitt have knowledge of the matter, or (ii) such matter has come, or should
reasonably be expected to have come, to the attention of any of such individuals
if such individual had conducted a reasonable due diligence review of the
Company's operations and business, including, without limitation, reasonable
inquiries to key personnel of the Company regarding the business and operations
of the Company and a review of, and discussion with key personnel regarding,
pertinent books and records of the Company.
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IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
PALL CORPORATION
By:/s/ Eric Krasnoff
--------------------------------------
Eric Krasnoff,
Chairman and Chief Executive Officer
PALL ACQUISITION CORPORATION
By:/s/ Eric Krasnoff
--------------------------------------
Eric Krasnoff, President
GELMAN SCIENCES INC.
By:/s/ Charles Gelman
--------------------------------------
Charles Gelman,
Chairman and Chief Executive Officer
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<PAGE> 150
EXHIBIT B
October 27, 1996
Board of Directors
Gelman Sciences Inc.
600 South Wagner Road
Ann Arbor, MI 48103
Dear Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders (the "Stockholders") of shares of common stock, par value
$0.10 per share ("Gelman Common Stock"), of Gelman Sciences Inc. ("Gelman") of
the consideration to be received by the Stockholders pursuant to the terms of
the Merger Agreement dated as of October 27, 1996 (the "Merger Agreement") by
and among Pall Corporation ("Pall"), Pall Acquisition Corporation, a wholly
owned, direct subsidiary of Pall ("Subsidiary"), and Gelman, pursuant to which
Gelman will be merged (the "Merger") with and into Subsidiary and Gelman will
become a wholly owned subsidiary of Pall.
Under the Merger Agreement, each issued and outstanding share of Gelman
Common Stock, other than shares of Gelman Common Stock to be canceled pursuant
to the Merger Agreement, will be converted into the right to receive a number of
Pall shares determined as follows:
(i) if the Pall Average Trading Price is $27.96 per share or more, 1.1804
shares of Pall common stock;
(ii) if the Pall Average Trading Price is less than $27.96 per share but
more than $25.29 per share, a number of shares of Pall common stock
equal to $33.00 divided by the Pall Average Trading Price;
(iii) if the Pall Average Trading Price is $25.29 per share or less, 1.3047
shares of Pall common stock.
Notwithstanding the foregoing, if the Pall Average Trading Price is less than
$21.00 per share, the Gelman Board of Directors has the right to terminate the
Merger Agreement without liability in any respect whatsoever. The "Pall Average
Trading Price" shall mean the average of the closing sales price of a share of
Pall common stock, as reported by New York Stock Exchange Consolidated
Transactions, during the 30 "Trading Days" (which term shall mean a day on which
the New York Stock Exchange is open for business) preceding the third Trading
Day before the meeting of Gelman's stockholders to
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Gelman Sciences Inc.
October 27, 1996
Page 2
approve the transactions contemplated by the Merger Agreement. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
In arriving at our opinion, we have reviewed, among other things, the Merger
Agreement and certain business and financial information relating to Gelman,
including certain financial projections, estimates and analyses provided to us
by Gelman. We have also reviewed and discussed the businesses and prospects of
Gelman and its subsidiaries with representatives of Gelman's management. We have
considered certain financial and stock market data relating to Gelman and in
certain cases have compared that information to similar data for other publicly
held companies in businesses considered to be generally comparable to Gelman.
We have also reviewed certain publicly available business and financial
information relating to Pall, including certain information concerning the
estimates of the future operating and financial performance prepared by industry
experts unaffiliated with Pall, and have had discussions with a representative
of Pall's management. In addition, we have reviewed financial plans prepared by
Pall's management. We have considered certain financial and stock market data
relating to Pall and in certain cases have compared that information to similar
data for publicly held companies in businesses considered to be generally
comparable to that of Pall.
In arriving at our opinion, we have also considered the financial impact of the
Merger on Pall's future earnings per share, an unleveraged after-tax discounted
cash flow analysis of both Gelman and Pall, an analysis of Gelman's percentage
contribution to the pro forma operating results for Pall compared to the implied
percentage ownership interest of holders of Gelman Common Stock in Pall after
giving effect to the Merger, a comparison of the purchase price premium to be
paid for the Gelman Common Stock based on the Exchange Ratio to certain other
similar-sized mergers, certain publicly available information concerning the
nature and terms of certain other transactions that Cleary Gull believed to be
relevant on a comparative basis, a historical comparison of Gelman's and Pall's
stock market prices and such other information, financial studies and analyses
and financial, economic and market criteria as we deemed relevant and
appropriate.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. We have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of Gelman or Pall or any of
their respective subsidiaries, nor have we been furnished with any such
evaluation or appraisal that has not been publicly disclosed. With respect to
the financial plan, estimates and analyses provided to us by Gelman, we have
assumed, with your permission, that all such information was reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management of Gelman as to future financial performance and was based upon the
historical performance of Gelman and certain estimates and assumptions which
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Gelman Sciences Inc.
October 27, 1996
Page 3
were reasonable at the time made. upon advice of Gelman and its legal and
accounting advisors, we have assumed the Merger will be treated as a pooling of
interests transaction in accordance with generally accepted accounting
principals and as a tax-free reorganization for federal income tax purposes. Our
opinion is based on economic, monetary and market conditions existing on the
date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the Stockholders pursuant to the
Merger Agreement is fair, from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of Gelman in this
transaction and will receive a fee for our services, a significant portion of
which is contingent upon the approval and consummation of the merger. In
addition, Gelman has agreed to indemnify us for certain liabilities that may
arise out of the rendering of this option. On March 22, 1995, we were the
managing underwriter of a public offering of 1,437,500 shares of Gelman common
Stock for which we received customary compensation. In the ordinary course of
business, we actively trade securities of Gelman and Pall for our own account
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of Gelman and
is rendered to the Board of Directors of Gelman in connection with its
consideration of the Merger. We are not making any recommendation regarding
whether or not it is advisable for Stockholders to vote in favor of the merger.
We have not been requested to opine as to, and our opinion does not in any
manner address, Gelman's underlying business decision to proceed with or effect
the Merger. We are not rendering any opinion as to the decision to proceed with
or effect the Merger. We are not rendering any opinion as to the value of Pall
or making any recommendation to the Stockholders in respect of the advisability
of disposing of or retaining Pall common stock received pursuant to the Merger.
Very truly yours,
CLEARY GULL REILAND & McDEVITT INC.
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EXHIBIT C
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT ("Agreement") is entered into this day
of , 199 , by and among Pall Corporation, a New York corporation
("Pall"), Gelman Sciences Inc., a Michigan corporation ("Gelman"), and
("Grantee").
RECITALS
WHEREAS, Grantee is the holder of one or more outstanding options ("Gelman
Option") pursuant to which Grantee is or, subject to a schedule of
exercisability (vesting) set forth therein, may become entitled to purchase a
specified number of shares of common stock of Gelman ("Gelman Shares") at a
specified exercise price per share, as set forth on Schedule A attached hereto
("Schedule A"); and
WHEREAS, Pall has entered into a certain Agreement and Plan of
Reorganization and Merger with Gelman, dated October 27, 1996 ("Merger
Agreement"), pursuant to which all holders of outstanding options to purchase
Gelman Shares are to be offered in exchange therefor options to purchase the
number of shares of Pall common stock ("Pall Shares") equal to the number of
Gelman Shares which could be acquired upon the exercise of such Gelman Options
multiplied by the Exchange Ratio, at an exercise price per share equal to the
per share exercise price of such Gelman options divided by the Exchange Ratio,
all as such terms are defined in the Merger Agreement; and
WHEREAS, Pall, Gelman, and Grantee mutually desire that, at the Effective
Time of the Merger under the Merger Agreement, each of Grantee's outstanding
Gelman Options be terminated in exchange for an option ("Pall Option") to
purchase Pall Shares on substantially the same terms and conditions; subject,
however, to the formula noted in the immediately preceding paragraph for
determining the number of Pall Shares purchasable and the exercise price,
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and undertakings hereinafter set forth, Pall, Gelman and Grantee
hereby agree as follows:
1. The foregoing recitals are made a part of this Agreement. Words and
terms used herein with initial capital letters and not defined herein are
used herein as defined in the Merger Agreement. Grantee acknowledges
receipt of the combined Proxy Statement (of Gelman) -- Prospectus (of Pall)
dated , 1996 which Prospectus covers, inter alia, Pall's
offer to Grantee to exchange a Pall Option for each Gelman Option held by
Grantee.
2. Grantee hereby accepts Pall's offer to exchange a Pall Option, in
the form of Schedule B hereto, for each Gelman Option held by Grantee and
agrees that, at the Effective Time of the Merger, each Gelman Option held
by Grantee shall automatically be deemed terminated and exchanged for a
Pall Option for a number of Pall Shares equal to the number of Gelman
Shares covered by such Gelman Option multiplied by the Exchange Ratio, at
an exercise price per share equal to the per share exercise price of such
Gelman Option divided by the Exchange Ratio. Each such Pall Option shall be
in the form of Schedule B hereto and the vesting provisions and the
expiration date thereof shall descend from and be the same as the vesting
provisions in and the expiration date of the Gelman Option for which such
Pall Option is exchanged. If the Gelman Option exchanged states that
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it is intended to be (in whole or in part) an incentive stock option qualifying
as such within the meaning of the Internal Revenue Code of 1986, as amended, the
Pall Option issued in exchange therefor shall likewise so state, to the same
extent.
3. Grantee agrees to deliver to Pall, either before or promptly after
the Effective Time, at such address or location as Pall may hereafter
specify, the "Stock Option Agreement" evidencing each Gelman Option held by
Grantee and Pall agrees that, promptly after receipt thereof (but not prior
to the Effective Time), Pall will issue and deliver to Grantee a written
instrument evidencing each Pall Option for which each such Gelman Option is
being exchanged as provided herein. A Pall Option shall not be exercisable
until such instrument has been delivered to Grantee.
4. This Agreement is conditioned upon the consummation of the Merger
and if, for whatever reason, the Merger Agreement shall be terminated or it
shall be established that the Merger will not be consummated (of which fact
Gelman shall notify Grantee), this Agreement shall automatically terminate
and be of no further force or effect and any Gelman Stock Option Agreement
theretofore delivered to Pall shall promptly be returned to Grantee.
5. Grantee agrees that, at the Effective Time, any and all claims and
rights that Grantee ever had, now has or hereafter may have under all of
Grantee's Gelman Options against Gelman or its successors and assigns shall
be deemed released and extinguished, and thereafter Grantee's rights shall
be only against Pall, for the issuance and delivery of the Pall Option and
the performance of Pall's obligations thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PALL CORPORATION
By
--------------------------------------
Title:
GELMAN SCIENCES INC.
By
--------------------------------------
Title:
GRANTEE
--------------------------------------
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SCHEDULE A
TO
EXCHANGE AGREEMENT DATED , 199
BY AND AMONG PALL CORPORATION,
GELMAN SCIENCES INC. AND
GRANTEE:
GRANTEE'S GELMAN OPTION(S)
Grant Date:
Type of Option (ISO, NQSO):
Number of shares granted:
Number of shares remaining as of the date hereof (after any prior exercise):
Exercise price (as of the date hereof):
Number of shares now vested:
Future Vesting Schedule:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<S> <C>
</TABLE>
Date of Expiration of Term:
Note: The information above should be furnished separately for each option.
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SCHEDULE B
TO
EXCHANGE AGREEMENT DATED , 199
BY AND AMONG PALL CORPORATION,
GELMAN SCIENCES INC. AND
GRANTEE:
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION
To Purchase Common Stock of Pall Corporation
Granted in Exchange for Gelman Sciences Inc. Stock Option
Granted to:
Date of Grant: [Note: This will be the Effective Time of the Merger]
Number of Shares:
Purchase Price Per Share:
Expiration Date:
Granted in Exchange for Gelman Sciences Inc. Option dated:
sec.1. Subject to the terms and conditions hereof, Pall Corporation (the
"Company") hereby grants you an irrevocable option (the "Option") to purchase
the number of shares of common stock of the Company ("Common Stock") set forth
above at the price per share set forth above. This option [is] [is not] intended
to be an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
sec.2. On the Date of Grant the Option is exercisable for shares
and will become exercisable for the balance of the shares covered hereby in
installments as follows:
<TABLE>
<CAPTION>
[LIST VESTING DATES] [NUMBER OF SHARES BECOMING VESTED]
- -------------------- ----------------------------------
<S> <C>
</TABLE>
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sec.3. The Option may not be exercised by you unless all of the following
conditions are met:
(a) Counsel for the Company must be satisfied at the time of exercise
that the issuance of shares upon exercise will be in compliance with the
Securities Act of 1933, as amended, and applicable state laws.
(b) You must give the Company written notice of exercise specifying
the number of shares with respect to which the Option is being exercised
and at the time of exercise pay the full purchase price for the shares
being acquired either (i) in cash (the word "cash" being deemed to include
a check) or (ii) with the consent of the Committee (as defined below), in
Common Stock, or partly in cash and partly in Common Stock, in accordance
with sec.6 hereof. The minimum number of shares with respect to which the
Option may be exercised in part at one time shall be 25.
(c) You must at all times during the period beginning with the Date of
Grant of the Option and ending on the date of such exercise have been
either an employee or a director of the Company or of one of its subsidiary
corporations (or of a corporation or a parent or subsidiary of a
corporation assuming this option by reason of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation in a transaction to which Section 424(a) of the Code
applies); provided, however: (i) if your employment or directorship
terminates for any reason other than your death, you have the right for a
period of 90 days following such termination, but in no event subsequent to
the expiration date of the Option, to exercise that portion of the Option,
if any, which is exercisable by you on the date of termination of your
employment or directorship, and (ii) if your employment or directorship
terminates by reason of your death, the provisions of sec.4 shall govern.
(d) You (or your estate or any person exercising this option pursuant
to sec.4 hereof) must make payment to the Company by cash or check of such
amount as is sufficient to satisfy the Company's obligation, if any, to
withhold federal, state and local taxes by reason of such exercise or make
such other arrangement satisfactory to the Committee as will enable the
Company to satisfy any such obligation.
(e) The shares covered hereby have been listed (subject only to
official notice of issuance) on any national securities exchange on which
the Common Stock is then listed.
sec.4. The Option is not transferable by you otherwise than by will or the
laws of descent and distribution and is exercisable during your lifetime only by
you. If at the time of your death the Option has not been fully exercised, your
estate or any person who acquires the right to exercise this option by bequest
or inheritance or by reason of your death may, at any time within 180 days after
the date of your death (but in no event after the expiration
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date), exercise this option with respect to the number of shares as to which you
could have exercised this option at the time of your death. It shall be a
condition to the exercise of this option after your death that the Company shall
have been furnished evidence satisfactory to it of the right of the person
exercising this option to do so and that all estate, transfer, inheritance or
death taxes payable with respect to the Option or the shares to which it relates
have been paid or otherwise provided for to the satisfaction of the Company.
sec.5. If the Company effects any stock split, stock dividend, combination,
exchange of shares or similar capital adjustments, occurring after the Date of
Grant of this option and prior to its exercise in full, the number and kind of
shares for which this option may thereafter be exercised and the option price
per share shall be proportionately and appropriately adjusted so as to reflect
such change, all as determined by the Committee. In the event of any transaction
to which sec.424(a) of the Code applies (i.e., a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation involving the Company or a parent or subsidiary of the Company), the
Company shall have the right to substitute or cause to be substituted for the
Option a new option, or to cause the Option to be assumed, provided such
substitution or assumption meets the requirements of said sec.424(a).
sec.6. With the consent of the Committee (as defined in sec.7 hereof), you
may make payment at the time of exercise by delivering to the Company shares of
Common Stock of the Company having a total fair market value equal to the option
exercise price, or a combination of cash and such shares having a total fair
market value equal to the option exercise price, provided, however, that all
shares so delivered must have been beneficially owned by you for at least six
months prior to the option exercise date and, upon request, the Company shall be
given satisfactory proof of such beneficial ownership. For the purposes of the
preceding sentence, the fair market value of a share of Common Stock shall be
the mean between the high and low sale prices of the Common Stock on the trading
day preceding the option exercise date as such prices are reported by and for
the New York Stock Exchange Composite Transactions. Certificates representing
shares delivered to the Company pursuant to this paragraph shall be duly
endorsed or accompanied by the appropriate stock powers, in either case with
signature guaranteed if so required by the Company.
sec.7. The Option shall be administered by the Compensation Committee of
the Company as from time to time constituted (the "Committee"). The Committee
shall be authorized to interpret the Option and to make all other decisions
necessary or advisable for the administration thereof. The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Option
in the manner and to the extent the Committee deems desirable to carry it into
effect. Any decision of the Committee in the administration of the Option, as
described herein, shall be final and conclusive. The Committee may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or any officer of the Company to execute and
deliver documents on behalf of the Committee. No member of the Committee shall
be liable for anything done or omitted to be done by him or by any other member
of the Committee in
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connection with the Option, except for his own willful misconduct or as
expressly provided by statute.
sec.8. Nothing in the Option shall confer any rights on any officer or
other employee to continue in the employ of the Company or any of its subsidiary
corporations or shall interfere in any way with the right of the Company or any
of its subsidiary corporations, as the case may be, to terminate his or her
employment at any time.
sec.9. The words "employee", "subsidiary corporation" and any other words
or terms used in the Option which are defined or used in Section 422 or 424 of
the Code shall, unless the context clearly requires otherwise, have the meanings
assigned to them therein, irrespective of whether the Option is an incentive
stock option.
PALL CORPORATION
By
------------------------------------
Secretary
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 7.02 of the Registrant's Bylaws provides as
follows:
"Indemnification. The Corporation shall indemnify any person
made or threatened to be made a party to any action or proceeding,
whether civil or criminal (and whether or not by or in the right of the
corporation or of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise), by reason of the fact that such person, his
testator or intestate, is or was a director or officer of the
corporation or served any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity at the request of the
corporation, against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and
necessarily incurred as a result of such action or proceeding, or any
appeal therein, provided that (i) no indemnification may be made to or
on behalf of any person if a judgment or other final adjudication
adverse to such person establishes that his acts were committed in bad
faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that he personally
gained in fact a financial profit or other advantage to which he was
not legally entitled; (ii) no indemnification shall be required in
connection with the settlement of any pending or threatened action or
proceeding, or any other disposition thereof except a final
adjudication, unless the corporation has consented to such settlement
or other disposition, and (iii) the corporation shall not be obligated
to indemnify any person by reason of the adoption of this Section 7.02
if and to the extent such person is entitled to be indemnified under a
policy of insurance as such policy would apply in the absence of the
adoption of this Section 7.02.
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"Reasonable expenses, including attorneys' fees, incurred in
defending any action or proceeding, whether threatened or pending,
shall be paid or reimbursed by the corporation in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of
the person seeking indemnification to repay such amount to the
corporation to the extent, if any, such person is ultimately found not
to be entitled to indemnification.
"Notwithstanding any other provision hereof, no amendment or
repeal of this Section 7.02, or any other corporate action or agreement
which prohibits or otherwise limits the right of any person to
indemnification or advancement or reimbursement of expenses hereunder,
shall be effective as to any person until the 60th day following notice
to such person of such action, and no such amendment or repeal or other
corporate action or agreement shall deprive any person of any right
hereunder arising out of any alleged or actual act or omission
occurring prior to such 60th day.
"The corporation is hereby authorized, but shall not be
required, to enter into agreements with any of its directors, officers
or employees providing for rights to indemnification and advancement
and reimbursement of reasonable expenses, including attorneys' fees, to
the extent permitted by law, but the corporation's failure to do so
shall not in any manner affect or limit the rights provided for by this
Section 7.02 or otherwise.
"For purposes of this Section 7.02, the term 'the corporation'
shall include any legal successor to the corporation, including any
corporation which acquires all or substantially all of the assets of
the corporation in one or more transactions. For purposes of this
Section 7.02, the corporation shall be deemed to have requested a
person to serve an employee benefit plan where the performance by such
person of his duties to the corporation or any subsidiary thereof also
imposes duties on, or otherwise involves services by, such person to
the plan or participants or beneficiaries of the plan, and excise taxes
assessed on a person with respect to an employee benefit plan pursuant
to applicable law shall be considered fines.
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"The rights granted pursuant to or provided by the foregoing
provisions of this Section 7.02 shall be in addition to and shall not
be exclusive of any other rights to indemnification and expenses to
which any such person may otherwise be entitled by law, contract or
otherwise."
Section 721 of the New York Business Corporation Law (the
"B.C.L.") provides that no indemnification may be made to or on behalf of any
director or officer of the Registrant if "a judgment or other final adjudication
adverse to the director or officer establishes that his acts were committed in
bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that he personally gained in
fact a financial profit or other advantage to which he was not legally
entitled." Section 7.02 of the Registrant's By-Laws includes the foregoing
statutory language.
The rights granted under Section 7.02 of the By-Laws are in
addition to, and are not exclusive of, any other rights to indemnification and
expenses to which any director or officer may otherwise be entitled. Under the
B.C.L., a New York corporation may indemnify any director or officer who is made
or threatened to be made a party to an action by or in the right of such
corporation against "amounts paid in settlement and reasonable expenses,
including attorneys' fees," actually and necessarily incurred by him in
connection with the defense or settlement of such action, or in connection with
an appeal therein, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in the best interests of the
corporation, except that no indemnification shall be made in respect of (1) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (2) any claim, issue or matter as to which such director or officer shall
have been adjudged liable to the corporation, unless and only to the extent that
a court determines that the director or officer is fairly and reasonably
entitled to indemnity (B.C.L. Section 722(c)). A corporation may also indemnify
directors and officers who are parties to other actions or proceedings
(including actions or proceedings by or in the right of any other corporation or
other enterprise which the director or officer served at the request of the
corporation) against "judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees," actually or necessarily
incurred as a result of such actions or proceedings, or any
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appeal therein, provided the director or officer acted, in good faith, for a
purpose which he reasonably believed to be in the best interests of the
corporation (or in the case of service to another corporation or other
enterprise at the request of such corporation, not opposed to the best interests
of such corporation) and, in criminal cases, that he also had no reasonable
cause to believe that his conduct was unlawful (B.C.L. Section 722(a)). Any
indemnification under Section 722 may be made only if authorized in the specific
case by disinterested directors, or by the board of directors upon the opinion
in writing of independent legal counsel that indemnification is proper, or by
the shareholders (B.C.L. Section 723(b)), but even without such authorization, a
court may order indemnification in certain circumstances (B.C.L. Section 724).
Further, any director or officer who is "successful, on the merits or
otherwise," in the defense of an action or proceeding is entitled to
indemnification as a matter of right (B.C.L. Section 723(a)).
A New York corporation may generally purchase insurance,
consistent with the limitations of New York insurance law and regulatory
supervision, to indemnify the corporation for any obligation which it incurs as
a result of the indemnification of directors and officers under the provisions
of the B.C.L., so long as no final adjudication has established that the
directors' or officers' acts of active and deliberate dishonesty were material
to the cause of action so adjudicated or that the directors or officers
personally gained in fact a financial profit or other advantage (B.C.L. Section
726).
The Registrant has policies insuring its officers and
directors against certain civil liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act").
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
The index to exhibits appears immediately following the
signature pages of this Registration Statement.
II-4
<PAGE> 164
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable with respect to the Registrant, since Item 14
of Form S-4 is not applicable to it. Not applicable with respect to Gelman
Sciences Inc. ("Gelman"), since Item 17 of Form S-4 is not applicable to Gelman.
(c) REPORT, OPINION OR APPRAISAL
The opinion of Cleary Gull Reiland & McDevitt Inc. is set
forth as Exhibit B to the Proxy Statement-Prospectus constituting Part I of this
Registration Statement.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3)
of the Securities Act, unless the information required to be included
in such post-effective amendment is contained in periodic reports filed
by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") and incorporated herein by
reference;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the
most recent post-effective amendment hereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement, unless the information required
to be included in such post-effective amendment is contained in
periodic reports filed by the Registrant pursuant to Section 13 or
15(d) of the Exchange Act and incorporated herein by reference.
(Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b)
II-5
<PAGE> 165
if, in the aggregate, the change in volume represents no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.);
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
(b) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) The undersigned Registrant hereby undertakes that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (2) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3)
II-6
<PAGE> 166
of the Securities Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to this
Registration Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(4) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 20 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this Registration Statement
through the date of responding to the request.
(6) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-7
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Village of East
Hills, State of New York, on the 6th day of December, 1996.
PALL CORPORATION
By:/s/Jeremy Hayward-Surry
------------------------
Jeremy Hayward-Surry
President, Treasurer and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
Eric Krasnoff, Jeremy Hayward-Surry and Peter Schwartzman, and each of them
singly, his true and lawful attorneys-in-fact with full power to execute in
the name of such person, in the capacities stated below, and to file, such one
or more amendments to this Registration Statement as the Registrant deems
appropriate, and generally to do all such things in the name and on behalf of
such person, in the capacities stated below, to enable the Registrant to comply
with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission thereunder, and hereby
ratifies and confirms the signature of such person as it may be signed by said
attorneys-in-fact, or any one of them, to any and all amendments to this
Registration Statement.
II-8
<PAGE> 168
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and the above power of attorney have been signed on
December 6, 1996, by the following persons in the capacities indicated.
Signature Title
/s/Eric Krasnoff Chairman and Chief Executive
- ---------------------------- Officer (Principal Executive
Eric Krasnoff Officer) and Director
/s/Jeremy Hayward-Surry President, Treasurer
- ---------------------------- and Chief Financial Officer
Jeremy Hayward-Surry (Principal Financial Officer)
and Director
/s/Peter Schwartzman Chief Accountant
- ---------------------------- (Principal Accounting
Peter Schwartzman Officer)
/s/Abraham Appel Director
- ----------------------------
Abraham Appel
/s/Ulric Haynes, Jr. Director
- ----------------------------
Ulric Haynes, Jr.
/s/Edwin W. Martin, Jr. Director
- ----------------------------
Edwin W. Martin, Jr.
II-9
<PAGE> 169
/s/David B. Pall Director
- ----------------------------
David B. Pall
/s/Katharine L. Plourde Director
- ----------------------------
Katharine L. Plourde
/s/Chesterfield F. Seibert Director
- ----------------------------
Chesterfield F. Seibert
/s/Heywood Shelley Director
- ----------------------------
Heywood Shelley
/s/Alan B. Slifka Director
- ----------------------------
Alan B. Slifka
Director
- ----------------------------
James D. Watson
/s/Derek T.D. Williams Director
- ----------------------------
Derek T.D. Williams
II-10
<PAGE> 170
INDEX TO EXHIBITS
EXHIBIT
NUMBER Exhibit
2 - Agreement and Plan of Reorganization and
Merger, made on October 27, 1996, by and among Pall
Corporation, Pall Acquisition Corporation and
Gelman Sciences Inc., included as Exhibit A to the
Proxy Statement-Prospectus constituting Part I of
this Registration Statement. The copy so included
does not include the schedule to the Agreement and
Plan of Reorganization and Merger listed in the
table of contents thereto. The Registrant
undertakes to furnish such schedule to the
Commission upon its request.
4.1 - Rights Agreement dated as of November 17,
1989, between the Registrant and United
States Trust Company of New York, as Rights
Agent, filed as Exhibit I to the
Registrant's Registration Statement on Form
8-A (File No. 1-4311) dated September 10,
1992, for the registration of the Common
Share Purchase Rights pursuant to Section
12(b) of the Securities Exchange Act of
1934.*
4.2 - Form of Exchange Agreement by and among the
Registrant and the holders of certain
options to purchase the common stock of
Gelman, included as Exhibit C to the Proxy
Statement-Prospectus constituting Part I of
this Registration Statement.
- --------
* Incorporated herein by reference.
<PAGE> 171
- Note: The Registrant hereby agrees to
provide the Commission, upon request,
copies of such instruments defining the
rights of holders of long-term debt of the
Registrant and its subsidiaries as are
specified in Item 601(b)(4)(iii)(A) of
Regulation S-K.
5 - Opinion of Carter, Ledyard & Milburn with
respect to the securities being registered
hereunder.
8 - Opinion of Godfrey & Kahn, S.C. with
respect to certain Federal income tax
matters.**
23(a) - Consent of KPMG Peat Marwick LLP.
23(b) - Consent of Coopers & Lybrand L.L.P.
23(c) - Consent of Cleary Gull Reiland & McDevitt
Inc.
23(d) - Consent of Carter, Ledyard & Milburn
(included in Exhibit 5).
23(e) - Consent of Godfrey & Kahn, S.C. (to be
included in Exhibit 8).
24 - Powers of Attorney (included in the signature
page of this Registration Statement).
99 - Form of Proxy.
- --------
** To be filed by amendment.
<PAGE> 1
EXHIBIT 5
CARTER, LEDYARD & MILBURN
Counselors at Law
2 Wall Street
New York, New York 10005
----------
(212) 732-3200
Fax (212) 732-3232
December 5, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Pall Corporation
Ladies and Gentlemen:
We have acted as counsel for Pall Corporation, a New York corporation
(the "Corporation"), in connection with the issuance of up to 11,323,938 shares
(the "Shares") of the Common Stock, par value $.10 per share, of the
Corporation, and up to 11,323,938 Common Share Purchase Rights (the "Rights"),
to the stockholders of Gelman Sciences Inc. ("Gelman") pursuant to the Agreement
and Plan of Reorganization and Merger dated October 27, 1996, by and among the
Corporation, Pall Acquisition Corporation and Gelman (the "Merger Agreement").
Each Right is attached to one of the Shares and, prior to the Distribution Date
(as defined in the Rights Agreement providing for the Rights), will be
transferable with and only with, and will be evidenced by the certificate
evidencing, such Share. Pursuant to the Merger Agreement, (i) up to 698,144 of
the Shares (the "Option Shares") may be issued after the merger provided for in
the Merger Agreement, upon the exercise of options which are being offered by
the Corporation (the "Options") in exchange for currently outstanding options to
purchase shares of Gelman common stock, and (ii) up to 124,142 of the Shares
(the "Warrant Shares") may be issued after the said merger upon the exercise of
currently outstanding warrants to purchase shares of Gelman common stock
<PAGE> 2
Securities and Exchange Commission -2-
(the "Warrants"), which Warrants will automatically, in accordance with their
terms, be converted into warrants to purchase Shares at the effective time of
the Merger.
We have examined the Merger Agreement, the Warrants and the form of the
Options, as well as originals, or copies certified or otherwise identified to
our satisfaction, of such corporate records and such other documents as we have
deemed relevant as a basis for our opinion hereinafter expressed.
Based on the foregoing, we are of the opinion that (i) the Shares, the
Rights and the Options, when issued and delivered pursuant to the Merger
Agreement, will be legally issued, and the Shares will be fully paid and
non-assessable, and (ii) the Option Shares, the Warrant Shares and attached
Rights, when paid for in accordance with the terms of the Options and the
Warrants, will be legally issued, and the Option Shares and Warrant Shares will
be fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Corporation's Registration Statement on Form S-4 being filed in connection with
the issuance of the Shares, the Rights and the Options, and to the reference to
this firm appearing under the captions "The Merger -- Conditions to the Merger"
and "Legal Matters" in the prospectus constituting Part I of the said
Registration Statement.
Heywood Shelley, a member of this firm, is a director of the
Corporation.
Very truly yours,
/s/ Carter, Ledyard & Milburn
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Pall Corporation:
We consent to the incorporation by reference, in this registration
statement on Form S-4 of Pall Corporation and subsidiaries, of our reports dated
September 3, 1996, relating to the consolidated balance sheets of Pall
Corporation and subsidiaries as of August 3, 1996, and July 29, 1995, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for the years ended August 3, 1996, July 29, 1995 and July 30, 1994 and related
schedule, which reports are incorporated by reference or appear in the Annual
Report on Form 10-K of Pall Corporation for the fiscal year ended August 3,
1996.
Such reports refer to the adoption by the Company of the Financial
Accounting Standards Board's Statement No. 112, "Employers' Accounting for
Postemployment Benefits" in fiscal year 1995.
We also consent to the reference to our firm under the heading of
"Experts" in the registration statement.
KPMG PEAT MARWICK LLP
Jericho, New York
December 5, 1996
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-4 of our report dated September 30, 1996, on our audits of
the financial statements and financial statement schedule of Gelman Sciences
Inc. We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
December 4, 1996
<PAGE> 1
EXHIBIT 23(c)
CONSENT
We hereby consent to the use of our name and the inclusion of our
written fairness opinion dated October 27, 1996, in the Proxy
Statement-Prospectus constituting Part I of the Registration Statement on Form
S-4 of Pall Corporation ("Pall") relating to the issuance of up to 11,323,938
shares of Pall common stock in the merger of Gelman Sciences Inc. and a
wholly-owned subsidiary of Pall. We also consent to the references to us in the
said Proxy Statement-Prospectus appearing in the letter to stockholders and
under the captions "Summary -- The Merger --Opinion of Gelman's Financial
Advisor" and "The Merger --Background of the Merger" and "-- Opinion of Gelman's
Financial Advisor." In giving such consent, we do not admit and we hereby
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Dated as of this 4th day of December, 1996
CLEARY GULL REILAND & McDEVITT INC.
By: /s/Chris Barnes
---------------------------------
Chris Barnes, Principal
<PAGE> 1
EXHIBIT 99
P GELMAN SCIENCES INC.
R SPECIAL MEETING OF STOCKHOLDERS
O ____________, 1997
X THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Y
The undersigned hereby appoints Charles Gelman and Kim A. Davis, and
each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to
vote, as designated hereon, all of the shares of common stock of
Gelman Sciences Inc. ("Gelman") which the undersigned is entitled to
vote at a Special Meeting of Stockholders of Gelman to be held on
_________, 1997, and at any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG PALL
CORPORATION, PALL ACQUISITION CORPORATION AND GELMAN, AS MORE FULLY
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT-PROSPECTUS AND INCLUDED
THEREIN AS EXHIBIT A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
(change of address)
________________________________________________________
________________________________________________________
________________________________________________________
(If you have written in the above space, please mark the
corresponding box on the reverse side of this card.)
SEE REVERSE
SIDE
<PAGE> 2
[X] PLEASE MARK YOUR
VOTES AS IN THIS EXAMPLE.
FOR AGAINST ABSTAIN
1. PROPOSAL TO [ ] [ ] [ ]
APPROVE AND ADOPT
THE AGREEMENT AND
PLAN OF REORGANIZATION AND MERGER
MADE ON OCTOBER
27, 1996, BY AND AMONG
PALL CORPORATION, PALL
ACQUISITION CORPORATION AND
GELMAN, AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
2. In their discretion, the
Proxies are authorized to vote
upon such other business as
may properly come before the
meeting or any adjournment or
postponement thereof.
Change of Address. [ ]
I plan to attend the meeting. [ ]
The undersigned hereby revokes all
proxies heretofore given by the
undersigned to vote at the Special
Meeting or any adjournment or
postponement thereof.
Please sign exactly as your name
appears below. When shares are held
by joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
SIGNATURE(S) _______________ DATE _____________________
SIGNATURE(S) _______________ DATE _____________________
Please mark, sign, date and return this Proxy Card promptly,
using the envelope provided.
