<PAGE>
As filed with the Securities and Exchange Commission on September 12, 1994
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BENSON EYECARE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 5048 13-3368387
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
------------------------
Suite B-302, 555 Theodore Fremd Avenue, Rye, New York 10580 (914) 967-9400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
MARTIN E. FRANKLIN
Chairman of the Board, Chief Executive Officer
and President
Benson Eyecare Corporation
Suite B-302
555 Theodore Fremd Avenue
Rye, New York 10580
(914) 967-9400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copy to:
WILLIAM J. GRANT, JR., ESQ.
BRUCE R. KRAUS, ESQ.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4669
(212) 821-8000
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective and
all other conditions to the merger of a wholly owned subsidiary of Benson
Eyecare Corporation with and into Optical Radiation Corporation pursuant to the
Merger Agreement described in the enclosed Joint Proxy Statement/Prospectus have
been satisfied or waived.
If the securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
Proposed Proposed
maximum maximum
Title of each class of Amount offering aggregate Amount of
securities to be to be price per offering registration
registered (1) registered unit price fee (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value (3).................. 8,000,000 $7.125(4) $57,000,000 $12,976.40
shares
- --------------------------------------------------------------------------------
Rights (5).................. 5,897,738 $2.00 $11,795,476 ---
================================================================================
</TABLE>
<PAGE>
(1) This Registration Statement relates to securities issuable in
connection with the merger (the "Merger") of Benson Acquisition Corporation, a
wholly owned subsidiary of Benson Eyecare Corporation ("Benson"), with and into
Optical Radiation Corporation ("ORC").
(2) Pursuant to Rule 457(f) under the Securities Act of 1933, as amended,
the registration fee was computed on the basis of the market value of the ORC
common stock (including stock options) to be exchanged in the Merger (which
value was calculated using the average of the high and low prices per share of
ORC common stock, par value $0.50 per share ("ORC Common Stock"), on the Nasdaq
National Market on September 8, 1994) and the amount of cash to be paid by
Benson in connection with the Merger. Pursuant to Rule 457(b), the registration
fee payable upon the filing of this Registration Statement may be reduced by the
amount of the filing fee paid in connection with Benson's and ORC's preliminary
Joint Proxy Statement/Prospectus (the "Joint Proxy Statement/Prospectus"). A
fee of $29,856.84 was paid on July 22, 1994 upon the filing under the Securities
Exchange Act of 1934 of the Joint Proxy Statement/Prospectus. Therefore, the
registration fee payable upon the filing of this Registration Statement is
$0.00.
(3) The 8,000,000 shares of Benson common stock, par value $0.01 per
share ("Benson Common Stock"), being registered represent an estimate of shares
of Benson Common Stock issuable in connection with the Merger.
(4) Represents the closing price of Benson Common Stock on the American
Stock Exchange on September 8, 1994.
(5) As part of the consideration being distributed in connection with the
Merger, each share of ORC Common Stock will entitle the holder thereof to the
right ("Right") to receive a pro rata share of the OSP Disposition Proceeds (as
defined in the enclosed Joint Proxy Statement/Prospectus). To the extent the
value of the OSP Disposition Proceeds is less than $2.00 per share of ORC Common
Stock, each Right will entitle the holder thereof to a fraction of Benson Common
Stock having a value equal to the amount of such difference. The Rights are new
securities for which neither a trading market nor a book value currently exists.
The fair value of each Right is estimated to be $2.00.
================================================================================
<PAGE>
BENSON EYECARE CORPORATION
Cross-Reference Sheet Showing Locations in the Prospectus
of the Responses to the Items of Form S-4
(Pursuant to Item 501 of Regulation S-K)
<TABLE>
<CAPTION>
Form S-4
Item Number and Caption Location in Prospectus
----------------------- ----------------------
<S> <C>
A. Information About the Transaction
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus.................... Forepart of the Registration
Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front and Outside Back
Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information........................... Outside and Inside Front Cover
Page of Prospectus; Summary;
Certain Investment
Considerations; Selected
Historical and Pro Forma
Financial Information
4. Terms of the Transaction.............. Summary; Certain Investment
Considerations; The Merger and
Special Factors; The Merger
Agreement
5. Pro Forma Financial Information....... Summary; Selected Historical and
Pro Forma Financial Data
Information
6. Material Contacts with the
Company Being Acquired................ Summary; Certain Investment
Considerations; The Merger and
Special Factors
7. Additional Information Required
for Reoffering by Persons and Parties
Deemed to be Underwriters............. Not Applicable
8. Interests of Named Experts and
Counsel............................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities........ Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form S-4
Item Number and Caption Location in Prospectus
----------------------- ----------------------
<S> <C>
B. Information About the Registrant
10. Information with Respect to
S-3 Registrants...................... Summary; Certain Investment
Considerations; Selected
Historical and Pro Forma
Financial Information
11. Incorporation of Certain
Information by Reference............. Incorporation of Documents By
Reference
12. Information with Respect to S-2
or S-3 Registrants................... Not Applicable
13. Incorporation of Certain
Information by Reference............. Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants...................... Not Applicable
C. Information About the Company Being Acquired
15. Information with Respect to S-3
Companies............................ Summary; Certain Investment
Considerations; Selected
Historical and Pro Forma
Financial Information
16. Information with Respect to S-2
or S-3 Companies..................... Not Applicable
17. Information with Respect to
Companies Other Than
S-3 or S-2 Companies................. Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents
or Authorizations are to
be Solicited......................... Summary; General Information; The
Merger and Special Factors
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange Offer.... Not Applicable
</TABLE>
<PAGE>
OPTICAL RADIATION CORPORATION
1300 OPTICAL DRIVE
AZUSA, CALIFORNIA 91702
Dear Shareholders:
You are cordially invited to attend the Special Meeting of Shareholders of
Optical Radiation Corporation, a California corporation ("ORC"), to be held at
10:00 A.M. on October 12, 1994, at the offices of ORC, 1300 Optical Drive,
Azusa, California 91702.
At this important meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger, as amended (the "Merger Agreement"), pursuant to
which a wholly owned subsidiary of Benson Eyecare Corporation ("Benson") will
be merged with and into ORC (the "Merger"). The Merger terms provide that each
outstanding share of ORC common stock will be converted into the right to
receive (a) $17.00 in cash, (b) a fraction of a share of Benson common stock
equal to an exchange ratio (discussed below), and (c) a right (a "Right") to
receive certain proceeds from the sale of the OSP division of ORC plus, to the
extent that the amount of such proceeds is less than $2.00, a fraction of a
share of Benson common stock having a value equal to the amount of such
difference ((a), (b) and (c) collectively, the "Merger Consideration"). The
exchange ratio will be calculated as follows: (a) if the average closing price
of Benson common stock during the 20 consecutive trading days ending on the
fifth trading day prior to our Special Meeting (the "average closing price")
exceeds $10.80, the exchange ratio will be equal to $8.10 divided by the
average closing price; (b) if the average closing price is $10.80 or less, but
greater than $7.20, the exchange ratio will be equal to 0.75; (c) if the
average closing price is $7.20 or less, but greater than $6.00, the exchange
ratio will be equal to one half of the sum of (i) 0.75 and (ii) the quotient
obtained by dividing $5.40 by the average closing price; (d) if the average
closing price is $6.00 or less, and ORC shall not have elected to terminate
the Merger Agreement pursuant to the terms of the Merger Agreement, the
exchange ratio will be equal to 0.825; and (e) if the average closing price is
$6.00 or less, and ORC shall have elected to terminate the Merger Agreement
pursuant to the terms of the Merger Agreement, but Benson shall have
thereafter timely elected to rescind such termination pursuant to the terms of
the Merger Agreement, the exchange ratio will be equal to $4.95 divided by the
average closing price. Benson and ORC will issue a press release announcing
the exchange ratio at the time it is established prior to our Special Meeting.
Upon consummation of the Merger, the equity interest in ORC of its
shareholders will cease and ORC will become a wholly owned subsidiary of
Benson.
The accompanying Notice and Joint Proxy Statement/Prospectus provide a
detailed description of the proposed business combination and its effects on
the shareholders of ORC, the matters to be considered at the Special Meeting
and information concerning ORC and Benson. Please give this information your
careful attention.
The affirmative vote approving and adopting the Merger Agreement by the
holders of a majority of the outstanding shares of ORC common stock, in
conjunction with the affirmative vote approving and adopting the Merger
Agreement by the holders of a majority of the outstanding shares of Benson
common stock at a special meeting of Benson shareholders to be held
simultaneously with our Special Meeting, is required to consummate the Merger.
Donaldson, Lufkin & Jenrette Securities Corporation, ORC's financial
advisor, has rendered its opinion that the Merger Consideration is fair, from
a financial point of view, to ORC's shareholders (excluding Benson and its
affiliates and Benson's direct and indirect subsidiaries).
<PAGE>
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, ORC AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED THE
TERMS OF THE MERGER PURSUANT TO THE MERGER AGREEMENT AND RECOMMENDS THAT YOU
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
It is important that your shares be represented at the Special Meeting,
regardless of the number you hold. Therefore, please sign, date and return your
proxy card as soon as possible, whether or not you plan to attend. This will
not prevent you from voting your shares in person if you subsequently choose to
attend.
If you have any questions regarding the Merger, including the value of the
exchange ratio, or if you need assistance in voting your shares, please call
MacKenzie Partners, Inc. at (800) 322-2885 (toll-free).
As soon as practicable after the effectiveness of the Merger, we will send
you instructions for surrendering ORC share certificates and a letter of
transmittal to be used for this purpose. You should not submit your share
certificates for exchange until you have received such instructions and the
letter of transmittal.
Sincerely,
Richard D. Wood
Chairman of the Board,
Chief Executive Officer and
President
2
<PAGE>
BENSON EYECARE CORPORATION
SUITE B-302
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
Dear Shareholders:
You are cordially invited to attend the Special Meeting of Shareholders of
Benson Eyecare Corporation ("Benson") to be held at 1:00 P.M. on October 12,
1994, at the Citibank Amphitheater, 399 Park Avenue, 12th Floor, New York, New
York.
At this important meeting, you will be asked to consider and vote upon an
Agreement and Plan of Merger, as amended (the "Merger Agreement") pursuant to
which a wholly owned subsidiary of Benson will be merged (the "Merger") with
and into Optical Radiation Corporation ("ORC"). The Merger terms provide that
each outstanding share of ORC common stock will be converted into the right to
receive (a) $17.00 in cash, (b) a fraction of a share of Benson common stock
equal to an exchange ratio (discussed below), and (c) a right (a "Right") to
receive certain proceeds from the sale of the OSP division of ORC plus, to the
extent that the amount of such proceeds is less than $2.00, a fraction of a
share of Benson common stock having a value equal to the amount of such
difference ((a), (b) and (c) collectively, the "Merger Consideration"). The
exchange ratio will be calculated as follows: (a) if the average closing price
of Benson common stock during the 20 consecutive trading days ending on the
fifth trading day prior to the special meeting of ORC shareholders (the
"average closing price") exceeds $10.80, the exchange ratio will be equal to
$8.10 divided by the average closing price; (b) if the average closing price of
Benson common stock is $10.80 or less, but greater than $7.20, the exchange
ratio will be equal to 0.75; (c) if the average closing price of Benson common
stock prior to the Special Meeting is $7.20 or less, but greater than $6.00,
the exchange ratio will be equal to one half of the sum of (i) 0.75 and (ii)
the quotient obtained by dividing $5.40 by the average closing price; (d) if
the average closing price is $6.00 or less, and ORC shall not have elected to
terminate the Merger Agreement pursuant to the terms of the Merger Agreement,
the exchange ratio will be equal to 0.825; and (e) if the average closing price
of Benson common stock prior to the Special Meeting is $6.00 or less, and ORC
shall have elected to terminate the Merger Agreement pursuant to the terms of
the Merger Agreement, but Benson shall have thereafter timely elected to
rescind such termination pursuant to the terms of the Merger Agreement, the
exchange ratio will be equal to $4.95 divided by the average closing price.
Benson and ORC will issue a press release announcing the exchange ratio at the
time it is established prior to the special meeting of ORC shareholders.
Holders of ORC's outstanding stock options will be offered the opportunity to
either (I) or (II): (I) Exchange each option for: (i) cash in an amount equal
to the product of (A) the number of shares subject to such option and (B) the
difference between $23.00 and the per share exercise price of such option
(provided that the option exercise price is less than $23.00 per share); and
(ii) an amount (payable in shares of Benson common stock) equal to the product
of (A) the number of shares subject to such option and (B) the excess, if any,
of (x) the Merger Consideration per share (expressed in dollars, with Benson
common stock valued at the average closing price) over (y) the greater of (1)
the per share exercise price of such option and (2) $23.00 per share. (II)
Convert such options into options ("Benson Stock Options") issued under the
Benson Eyecare Corporation 1992 Stock Option Plan (the "Benson Stock Option
Plan") to purchase a number of shares of Benson common stock equal to the
product of (i) the number of shares subject to the options to be converted, and
(ii) the option exchange ratio. The option exchange ratio is determined as the
quotient of (X) the Merger Consideration per share of ORC common stock
(expressed in dollars, with Benson common stock valued at the average closing
price) and (Y) the average closing price per share of Benson common stock. The
price per share of such Benson Stock Options shall equal the quotient of (A)
the original option price per share applicable to the holder's options, and (B)
the option exchange ratio. Based on the price of Benson common stock as of
September 8, 1994, an aggregate of 6,659,274 shares of Benson common stock will
be issued in the Merger. Assuming an exchange ratio of 0.825, full exchange of
all ORC outstanding stock options and the full distribution of Benson common
stock pursuant to the Rights, an aggregate of 6,900,000 shares of Benson common
stock would be issued in the Merger. Because the
<PAGE>
exchange ratio is subject to increase in the event that the average closing
price of Benson common stock is less than $6.00 per share, Benson has
registered a total of 8,000,000 shares of Benson common stock in connection
with the Merger. Upon consummation of the Merger, the equity interest in ORC of
its shareholders will cease and ORC will become a wholly owned subsidiary of
Benson.
In addition, at this meeting you will be asked to consider and vote upon an
amendment to the Benson Stock Option Plan to permit additional grants and
issuances pursuant to the plan in order to, among other things, effectuate the
conversion of ORC stock options in the Merger.
The accompanying Notice and Joint Proxy Statement/Prospectus provide a
detailed description of the proposed business combination and its effects on
the shareholders of Benson, the matters to be considered at the Special Meeting
and information concerning Benson and ORC. Please give this information your
careful attention.
The affirmative vote approving and adopting the Merger Agreement by the
holders of a majority of the outstanding shares of Benson common stock
represented in person or by proxy at the Special Meeting, in conjunction with
the affirmative vote approving and adopting the Merger Agreement by the holders
of a majority of the outstanding shares of ORC common stock at a special
meeting of ORC shareholders to be held simultaneously with our Special Meeting,
is required to consummate the Merger.
Salomon Brothers Inc, Benson's financial advisor, has rendered its opinion,
dated June 30, 1994, that the Merger Consideration to be paid by Benson in the
Merger is fair, from a financial point of view, to Benson.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, BENSON AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED
THE TERMS OF THE MERGER PURSUANT TO THE MERGER AGREEMENT AND RECOMMENDS THAT
YOU VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
It is important that your shares be represented at the Special Meeting,
regardless of the number you hold. Therefore, please sign, date and return your
proxy card as soon as possible, whether or not you plan to attend. This will
not prevent you from voting your shares in person if you subsequently choose to
attend.
If you have any questions regarding the Merger, including the value of the
exchange ratio, or if you need assistance in voting your shares, please call
MacKenzie Partners, Inc. at (800) 322-2885 (toll-free).
Sincerely,
Martin E. Franklin
Chairman of the Board,
Chief Executive Officer and
President
2
<PAGE>
OPTICAL RADIATION CORPORATION
1300 OPTICAL DRIVE
AZUSA, CALIFORNIA 91702
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
A Special Meeting of Shareholders of Optical Radiation Corporation, a
California corporation ("ORC"), will be held at the offices of ORC, 1300
Optical Drive, Azusa, California 91702, at 10:00 A.M. on October 12, 1994 for
the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of June 30, 1994, as amended, among ORC,
Benson Eyecare Corporation ("Benson") and Benson Acquisition Corporation
("Benson Sub"), a wholly owned subsidiary of Benson, a copy of which is
attached as Annex A to the Joint Proxy Statement/Prospectus accompanying
this Notice, pursuant to which (i) Benson Sub will be merged into ORC, (ii)
each outstanding share of ORC common stock, par value $0.50 per share, will
be converted into the right to receive (a) $17.00 in cash, (b) a fraction
of a share of Benson common stock equal to an exchange ratio (as described
in the Joint Proxy Statement/Prospectus), and (c) a right to receive
certain proceeds from the sale of the OSP division of ORC plus, to the
extent that the amount of such proceeds is less than $2.00, a fraction of a
share of Benson common stock having a value equal to the amount of such
difference ((a), (b) and (c) collectively, the "Merger Consideration"), and
(iii) each holder of ORC's outstanding stock options will be offered the
opportunity to either (I) or (II): (I) Exchange each option for (a) cash in
an amount equal to the product of (W) the number of shares subject to such
option and (X) the difference between $23.00 and the per share exercise
price of such option (provided that the option exercise price is less than
$23.00 per share); and (b) an amount (payable in shares of Benson common
stock) equal to the product of (Y) the number of shares subject to such
option and (Z) the excess, if any, of (i) the Merger Consideration per
share over (ii) the greater of (1) the per share exercise price of such
option and (2) $23.00 per share. (II) Convert such options into options
issued under the Benson Eyecare Corporation 1992 Stock Option Plan to
purchase a number of shares of Benson common stock equal to the product of
(i) the number of shares subject to the options to be converted and (ii) an
option exchange ratio (as described in the Joint Proxy
Statement/Prospectus).
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 6, 1994
as the record date for the determination of the holders of ORC's common stock
entitled to notice of, and to vote at, the meeting. Your attention is directed
to the accompanying Joint Proxy Statement/Prospectus.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE YOUR
REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A POSTAGE-PREPAID
ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING THE MEETING
MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors
Gary N. Patten
Secretary
Dated: September 12, 1994
<PAGE>
BENSON EYECARE CORPORATION
SUITE B-302
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
A Special Meeting of Shareholders of Benson Eyecare Corporation, a Delaware
corporation ("Benson"), will be held at the Citibank Amphitheater, 399 Park
Avenue, 12th Floor, New York, New York at 1:00 P.M. on October 12, 1994 for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of June 30, 1994, as amended, among Benson,
Benson Acquisition Corporation ("Benson Sub"), a wholly owned subsidiary of
Benson, and Optical Radiation Corporation ("ORC"), a copy of which is
attached as Annex A to the Joint Proxy Statement/Prospectus accompanying
this Notice, pursuant to which (i) Benson Sub will be merged into ORC, (ii)
each outstanding share of ORC common stock, par value $0.50 per share, will
be converted into the right to receive (a) $17.00 in cash, (b) a fraction
of a share of Benson common stock equal to an exchange ratio (as described
in the Joint Proxy Statement/Prospectus), and (c) a right to receive
certain proceeds from the sale of the OSP division of ORC plus, to the
extent that the amount of such proceeds is less than $2.00, a fraction of a
share of Benson common stock having a value equal to the amount of such
difference ((a), (b) and (c) collectively, the "Merger Consideration"), and
(iii) each holder of ORC's outstanding stock options will be offered the
opportunity to either (I) or (II): (I) Exchange each option for (a) cash in
an amount equal to the product of (W) the number of shares subject to such
option and (X) the difference between $23.00 and the per share exercise
price of such option (provided that the option exercise price is less than
$23.00 per share); and (b) an amount (payable in shares of Benson common
stock) equal to the product of (Y) the number of shares subject to such
option and (Z) the excess, if any, of (i) the Merger Consideration per
share over (ii) the greater of (1) the per share exercise price of such
option and (2) $23.00 per share. (II) Convert such options into options
issued under the Benson Eyecare Corporation 1992 Stock Option Plan (the
"Benson Stock Option Plan") to purchase a number of shares of Benson common
stock equal to the product of (i) the number of shares subject to the
options to be converted, and (ii) an option exchange ratio (as described in
the Joint Proxy Statement/Prospectus).
2. To approve an amendment to the Benson Stock Option Plan to permit
additional grants and issuances pursuant to the plan.
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 9, 1994
as the record date for the determination of the holders of Benson's common
stock entitled to notice of, and to vote at, the meeting. Your attention is
directed to the accompanying Joint Proxy Statement/Prospectus.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE YOUR
REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A POSTAGE-PREPAID
ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING THE MEETING
MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors
Peter H. Trembath
Secretary
Dated: September 12, 1994
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS
----------------
BENSON EYECARE CORPORATION
PROSPECTUS
----------------
PROXY STATEMENT
FOR
OPTICAL RADIATION CORPORATION BENSON EYECARE CORPORATION
SPECIAL MEETING OF SHAREHOLDERS SPECIAL MEETING OF SHAREHOLDERS
EACH MEETING TO BE HELD OCTOBER 12, 1994
----------------
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Boards of Directors of Optical Radiation
Corporation, a California corporation ("ORC"), and Benson Eyecare Corporation,
a Delaware corporation ("Benson"), for use at a Special Meeting of Shareholders
of ORC (the "ORC Special Meeting") and a Special Meeting of Shareholders of
Benson (the "Benson Special Meeting"), each of which will be held on October
12, 1994, and at any and all adjournments or postponements thereof. At the ORC
Special Meeting, the shareholders of ORC will consider and vote upon the
approval and adoption of the Agreement and Plan of Merger, dated as of June 30,
1994, as amended on July 6, 1994 and August 29, 1994 (the "Merger Agreement"),
among ORC, Benson and Benson Acquisition Corporation, a wholly owned subsidiary
of Benson and a California corporation ("Benson Sub"), and at the Benson
Special Meeting, the shareholders of Benson will consider and vote upon the
approval and adoption of the Merger Agreement, pursuant to which Benson will
issue ("Benson Share Issuance") Benson common stock, $0.01 par value ("Benson
Common Stock"), and pursuant to which Benson Sub will be merged into ORC (the
"Merger") such that ORC will be the surviving corporation (the "Surviving
Corporation"). If the Merger Agreement is approved and the Merger is
consummated, (i) each outstanding share of ORC common stock, par value $0.50
per share ("ORC Common Stock"), will be converted into the right to receive (a)
$17.00 in cash, (b) a fraction of a share of Benson Common Stock equal to an
exchange ratio, and (c) a right ("Right") to receive certain proceeds from the
sale of the OSP Division (as defined below) of ORC plus, to the extent that the
amount of such proceeds is less than $2.00, a fraction of a share of Benson
Common Stock having a value equal to the amount of such difference ((a), (b)
and (c) collectively, the "Merger Consideration"), and (ii) each holder of
ORC's stock options ("ORC Stock Options") will be offered the opportunity to
either (I) or (II): (I) Exchange each option for (a) cash in an amount equal to
the product of (W) the number of shares subject to such option and (X) the
difference between $23.00 and the per share exercise price of such option
(provided that the option exercise price is less than $23.00 per share); and
(b) an amount (payable in shares of Benson Common Stock) equal to the product
of (Y) the number of shares subject to such option and (Z) the excess, if any,
of (i) the Merger Consideration per share (expressed in dollars) over (ii) the
greater of (1) the per share exercise price of such option and (2) $23.00 per
share. (II) Convert the ORC Stock Options into options ("Benson Stock Options")
issued under the Benson Eyecare Corporation 1992 Stock Option Plan (the "Benson
Stock Option Plan") to purchase a number of shares of Benson Common Stock equal
to the product of (i) the number of shares subject to the ORC Stock Options and
(ii) an option exchange ratio. Upon consummation of the Merger, the equity
interest in ORC of its shareholders will cease and ORC will become a wholly
owned subsidiary of Benson.
This Joint Proxy Statement/Prospectus constitutes the Prospectus of Benson
with respect to shares of Benson Common Stock to be issued in connection with
the Merger. An aggregate of 6,900,000 shares of Benson Common Stock would be
issued in the Merger (assuming an exchange ratio of 0.825, full exchange of
<PAGE>
all outstanding ORC Stock Options and the full distribution of Benson Common
Stock pursuant to the Rights). Because the exchange ratio is subject to
increase in the event that the average closing price of Benson Common Stock is
less than $6.00 per share, Benson has registered a total of 8,000,000 shares
of Benson Common Stock in connection with the Merger. On September 8, 1994,
the last reported sales price of ORC Common Stock on the Nasdaq National
Market ("NNM") was $22.875, and the last reported sales price of Benson Common
Stock on the American Stock Exchange ("Amex") was $7.125.
Each share of ORC Common Stock and Benson Common Stock outstanding at the
close of business on September 6, 1994 and September 9, 1994, respectively,
entitles the record holder thereof to notice of, and to vote at, the ORC
Special Meeting and the Benson Special Meeting, respectively, or any
adjournments or postponements thereof, but shares can be voted at the meetings
only if the record holder is present or represented by proxy.
Approval and adoption of the Merger Agreement require the affirmative vote
of the holders of a majority of shares of Benson Common Stock represented in
person or by proxy at the Benson Special Meeting and the affirmative vote of
the holders of a majority of shares of ORC Common Stock. For purposes of
determining whether the Merger Agreement has received the required number of
votes for approval at the Benson Special Meeting and by the holders of shares
of ORC Common Stock, abstentions will be included in the vote totals with the
result that an abstention has the same effect as a negative vote.
All proxies that are properly executed and returned will be voted in
accordance with the instructions noted thereon. ANY PROXY NOT SPECIFYING THE
CONTRARY WILL BE VOTED IN FAVOR OF THE MERGER AGREEMENT. Any proxy may be
revoked at any time before it is voted by giving written notice of such
revocation to, or by filing a later dated proxy with, the Secretary of ORC or
Benson, as the case may be. In addition, any proxy may be voided by attending
the ORC Special Meeting or the Benson Special Meeting, as the case may be, and
voting in person.
All information contained herein with respect to ORC has been provided by
ORC. All information contained herein with respect to Benson and Benson Sub
has been provided by Benson.
----------------
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BEFORE VOTING.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN, OR INCORPORATED BY REFERENCE IN, THIS JOINT
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. UNDER THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), THE PROPOSAL TO APPROVE THE MERGER AGREEMENT CONSTITUTES AN
OFFER OF BENSON COMMON STOCK TO HOLDERS OF ORC COMMON STOCK. THE DELIVERY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
THE SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED HEREBY OR A
SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF ANY SECURITIES HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION REGARDING ORC OR BENSON SET FORTH HEREIN SINCE THE DATE HEREOF OR
INCORPORATED BY REFERENCE SINCE THE DATE HEREOF.
This Joint Proxy Statement/Prospectus and the related form of proxy for each
of ORC and Benson are first being mailed to the respective shareholders on or
about September 12, 1994.
THE SECURITIES TO BE ISSUED PURSUANT TO THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS SEPTEMBER 12, 1994.
2
<PAGE>
AVAILABLE INFORMATION
Benson has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement"), of which this Joint Proxy Statement/Prospectus
is a part, under the Securities Act, with respect to the Benson Common Stock
and the Rights. As permitted by the rules and regulations of the Commission,
this Joint Proxy Statement/Prospectus omits certain information contained in
the Registration Statement. For such information reference is made to the
Registration Statement and the exhibits thereto. Each summary in this Joint
Proxy Statement/Prospectus of information included in the Registration
Statement or any exhibit thereto is qualified in its entirety by reference to
such information or exhibit. ORC and Benson are subject to the informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and
in accordance therewith each files reports, proxy statements and other
information with the Commission. The Registration Statement, as well as
reports, proxy statements and other information filed by ORC and Benson with
the Commission pursuant to the informational requirements of the Exchange Act,
may be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, 14th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
material filed by Benson can be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006, on which the shares of
Benson Common Stock are listed. Material filed by ORC can be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
ORC and Benson hereby incorporate into this Joint Proxy Statement/Prospectus
by reference the following documents previously filed with the Commission
pursuant to the Exchange Act:
<TABLE>
<C> <S>
1. Benson's Annual Report on Form 10-K, as amended by an amendment on Form
10-K/A, for the fiscal year ended December 31, 1993
2. Benson's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1994
3. Benson's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1994
4. Benson's Current Report on Form 8-K dated April 30, 1993, as amended by an
amendment on Form 8-K/A dated April 22, 1994
5. Benson's Current Report on Form 8-K dated June 30, 1993, as amended by an
amendment on Form 8-K/A dated April 22, 1994
6. Benson's Current Report on Form 8-K dated February 28, 1994, as amended by
an amendment on Form 8-K/A dated April 14, 1994 and an amendment on Form
8-K/A dated April 25, 1994
7. Benson's Current Report on Form 8-K dated May 9, 1994
8. Benson's Current Report on Form 8-K dated July 8, 1994
9. Benson's description of Benson Common Stock contained in Benson's
Registration Statement pursuant to Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description
10. ORC's Annual Report on Form 10-K for the fiscal year ended July 31, 1993
11. ORC's Quarterly Report on Form 10-Q for the fiscal quarter ended October
31, 1993
12. ORC's Quarterly Report on Form 10-Q for the fiscal quarter ended January
31, 1994
13. ORC's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
1994
14. ORC's Current Report on Form 8-K dated October 15, 1993
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
15. ORC's Current Report on Form 8-K dated December 2, 1993
16. ORC's Current Report on Form 8-K dated June 30, 1994
17. ORC's description of ORC Common Stock contained in ORC's Registration
Statement pursuant to Section 12 of the Exchange Act, including any
amendment or report filed for the purpose of updating such description
</TABLE>
In addition, all reports and other documents filed by ORC and Benson pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date hereof and prior to the ORC Special Meeting and the Benson Special Meeting
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS RELATING TO
BENSON AND ORC (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE
UPON WRITTEN OR ORAL REQUEST FROM ANY PERSON, INCLUDING ANY BENEFICIAL OWNER,
TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, TO, IN THE CASE OF
DOCUMENTS RELATING TO ORC, OPTICAL RADIATION CORPORATION, 1300 OPTICAL DRIVE,
AZUSA, CALIFORNIA 91702, ATTENTION: SECRETARY (TELEPHONE NO. (818) 969-3344),
OR, IN THE CASE OF DOCUMENTS RELATING TO BENSON, BENSON EYECARE CORPORATION,
SUITE B-302, 555 THEODORE FREMD AVENUE, RYE, NEW YORK 10580, ATTENTION: DESIREE
DESTEFANO (TELEPHONE NO. (914) 967-9400). IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY OCTOBER 4, 1994.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF DOCUMENTS BY REFERENCE................................... 3
SUMMARY................................................................... 7
Parties to the Merger................................................... 7
Time, Place and Date of Special Meetings; Record Date................... 8
Terms of Merger; Merger Consideration................................... 8
Certain Investment Considerations....................................... 11
Benson Stock Option Plan Amendment...................................... 12
Recommendations of the Boards of Directors of ORC and Benson............ 12
Opinions of Financial Advisors.......................................... 12
Required Vote........................................................... 13
Interests of Certain Persons in the Merger; Relationship Between Benson
and ORC................................................................ 13
Stock Exchange Listing.................................................. 13
Regulatory Approval..................................................... 14
Certain Federal Income Tax Consequences................................. 14
Accounting Treatment.................................................... 14
Dissenters' Rights...................................................... 14
Market Prices of Benson Common Stock.................................... 15
Market Prices of ORC Common Stock....................................... 15
Selected Historical and Pro Forma Combined Financial Data............... 16
CERTAIN INVESTMENT CONSIDERATIONS......................................... 21
Investment Considerations Relating to Benson and ORC.................... 21
Investment Considerations Relating to Benson............................ 22
Investment Considerations Relating to ORC............................... 24
GENERAL INFORMATION....................................................... 29
Purpose of Special Meetings............................................. 29
Record Date; Voting Rights; Proxies..................................... 29
Solicitation of Proxies................................................. 29
Quorum.................................................................. 30
Required Vote........................................................... 30
THE MERGER AND SPECIAL FACTORS............................................ 31
Background of the Merger................................................ 31
Recommendations of the Boards of Directors of ORC and Benson; Reasons
for the Merger......................................................... 32
Opinions of Financial Advisors.......................................... 35
Financing of Merger Consideration....................................... 44
Federal Income Tax Consequences......................................... 44
Federal Securities Law Consequences..................................... 45
Accounting Treatment.................................................... 45
Stock Exchange Listing.................................................. 45
Dissenters' Rights...................................................... 45
THE MERGER AGREEMENT...................................................... 48
General................................................................. 48
The Merger.............................................................. 48
Effective Time.......................................................... 48
Terms of the Merger..................................................... 48
Stock Options........................................................... 50
Surrender and Payment................................................... 51
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fractional Shares....................................................... 51
Conditions to Consummation of the Merger................................ 52
Representations and Warranties.......................................... 52
Acquisition Proposals................................................... 53
Conduct of Business by ORC Pending the Merger........................... 53
Covenants............................................................... 54
No Shopping............................................................. 56
Indemnification......................................................... 56
Termination; Fees and Expenses.......................................... 56
Amendment; Waiver....................................................... 57
MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF ORC AND BENSON AND
RELATED SHAREHOLDER MATTERS.............................................. 58
Benson.................................................................. 58
ORC..................................................................... 58
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION................... 60
Benson Selected Financial Information................................... 60
ORC Selected Financial Information...................................... 62
Pro Forma Combined Financial Statements................................. 63
DESCRIPTION OF CAPITAL STOCK OF BENSON.................................... 70
General................................................................. 70
Benson Common Stock..................................................... 70
Preferred Stock......................................................... 70
COMPARISON OF SHAREHOLDER RIGHTS.......................................... 70
THE BENSON SHARE ISSUANCE................................................. 79
PROPOSED AMENDMENT TO BENSON STOCK OPTION PLAN............................ 79
Plan Amendment Proposal................................................. 79
Description of Plan..................................................... 80
New Plan Benefits Table................................................. 82
Executive Compensation.................................................. 83
OTHER MATTERS............................................................. 87
LEGAL MATTERS............................................................. 87
EXPERTS................................................................... 87
SHAREHOLDER PROPOSALS..................................................... 88
ANNEX A--Agreement and Plan of Merger
ANNEX B--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
ANNEX C--Opinion of Salomon Brothers Inc
ANNEX D--California General Corporation Law, Chapter 13
ANNEX E--Amendment to Benson Stock Option Plan
</TABLE>
6
<PAGE>
SUMMARY
The following is a brief summary of the more detailed information contained
in this Joint Proxy Statement/Prospectus ("Proxy Statement") with respect to
the Merger Agreement attached hereto as Annex A, the transactions contemplated
thereby and the Benson Stock Option Plan Amendment. This Summary is not
intended to be complete and is qualified in its entirety by the more detailed
information contained elsewhere in this Proxy Statement, the Annexes hereto and
other documents referred to in this Proxy Statement. Terms used but not defined
in this Summary have the meanings ascribed to them elsewhere in this Proxy
Statement. Cross references in this Summary are to the captions of sections of
this Proxy Statement. As used in this Proxy Statement, "Benson" means Benson
and its subsidiaries, unless the context requires otherwise.
Shareholders of ORC and Benson should read carefully this Proxy Statement and
the Annexes hereto in their entirety.
PARTIES TO THE MERGER
ORC. ORC designs, manufactures and markets a wide range of products for the
vision care market. ORC consists of two operating groups: the Consumer Optical
Group ("Consumer Group") and the Ophthalmic Surgical Products Group ("Surgical
Group"). The Consumer Group manufactures prescription eyewear and ophthalmic
semi-finished and finished lenses in addition to precision electroformed
optics. The Surgical Group manufactures intraocular lenses ("IOLs"), corneal
topography systems, high-intensity lamps and photo exposure systems. In
addition, through Corneal Contouring, Inc. ("CCI"), the Surgical Group is
engaged in developing a non-laser, mechanical procedure to correct vision. ORC
has announced that it intends to sell the OSP division of the Surgical Group
(the "OSP Division"). The OSP Division includes the IOL business, corneal
topography systems and CCI. For the nine months ended April 30, 1994, the OSP
Division had total revenues of approximately $14.7 million which was comprised
of IOL sales of approximately $13.6 million and corneal topography sales of
approximately $1.1 million. As of April 30, 1994, the IOL business had total
assets of approximately $13.6 million while the corneal topography business had
total assets of $2.4 million. The remaining business in the OSP Division, CCI,
had no revenues for that nine month period and total assets of approximately
$8.3 million. On June 30, 1994, ORC entered into a letter of intent to sell the
IOL business to Akorn, Inc. ("Akorn"). Akorn terminated the letter of intent on
August 18, 1994. ORC is identifying and contacting prospective buyers regarding
an acquisition of all of the components of its OSP Division--the IOL business,
CCI business and the corneal topography business. However, in light of the
status of current discussions, ORC believes that it is reasonably likely that
it will not enter into any agreements on or prior to the effectiveness of the
Merger relating to the sale of all or part of the OSP Division. ORC was
incorporated in California on July 29, 1969. ORC's principal and executive
offices are located at 1300 Optical Drive, Azusa, California 91702 and its
telephone number is (818) 969-3344.
Benson. Benson, a holding company, is one of the leading distributors of
eyecare products and services in the United States and distributes both ready-
to-wear and prescription eyewear products. Benson is the largest distributor in
the United States of value-priced sunglasses and ready-to-wear reading glasses
("readers") and is the nation's largest operator of ophthalmologist-based
dispensaries. Benson was incorporated in the State of Delaware on September 25,
1986 and entered the eyecare business in October 1992. Benson's principal and
executive offices are located at 555 Theodore Fremd Avenue, Suite B-302, Rye,
New York 10580 and its telephone number is (914) 967-9400.
Benson Sub. Benson Sub, a wholly owned subsidiary of Benson, is a California
corporation formed solely to effectuate the Merger. Pursuant to the terms of
the Merger Agreement, at the Effective Time (as defined below), Benson Sub will
merge with and into ORC, and ORC will become a wholly owned subsidiary of
Benson.
7
<PAGE>
TIME, PLACE AND DATE OF SPECIAL MEETINGS; RECORD DATE
The ORC Special Meeting. The ORC Special Meeting will be held at 10:00 a.m.
on October 12, 1994 at the offices of ORC, 1300 Optical Drive, Azusa,
California 91702. Only holders of ORC's common stock, $0.50 par value per share
("ORC Common Stock"), of record at the close of business on September 6, 1994
(the "ORC Record Date") are entitled to vote at the ORC Special Meeting or any
adjournment or postponement thereof.
The Benson Special Meeting. The Benson Special Meeting will be held at 1:00
p.m. on October 12, 1994 at the Citibank Amphitheater, 399 Park Avenue, 12th
Floor, New York, New York. Only holders of Benson's common stock, $0.01 par
value per share ("Benson Common Stock"), of record at the close of business on
September 9 , 1994 (the "Benson Record Date") are entitled to vote at the
Benson Special Meeting or any adjournment or postponement thereof.
TERMS OF MERGER; MERGER CONSIDERATION
The following description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
a copy of which is attached hereto as Annex A and incorporated herein by
reference. Shareholders of ORC and Benson are urged to read the Merger
Agreement in its entirety.
Merger Consideration. Upon the effectiveness of the Merger, each outstanding
share of ORC Common Stock, with the exception of shares held in the treasury of
ORC, shares owned by subsidiaries of ORC and shares held by shareholders who
properly exercise dissenters' rights under California General Corporation Law
("CGCL"), will be converted into the right to receive (a) $17.00 in cash, (b) a
fraction of a share of Benson Common Stock equal to the Exchange Ratio (as
defined below) and (c) a pro rata share of the OSP Disposition Proceeds (as
defined below) (not including the Option Portion thereof, as defined below)
plus, to the extent the amount of such proceeds is less than $2.00, a fraction
(the "Fraction") of a share of Benson Common Stock having a value equal to the
amount of such difference ((a), (b) and (c) collectively, the "Merger
Consideration"). In light of the status of current discussions, ORC believes
that it is reasonably likely that it will not enter into any agreements on or
prior to the effectiveness of the Merger relating to the sale of all or part of
the OSP Division. If no agreement has been entered into on or prior to the
effectiveness of the Merger, in addition to being entitled to the right to
receive (a) and (b) above, each outstanding share of ORC Common Stock will be
converted into the right to receive a fraction of a share of Benson Common
Stock having a value equal to $2.00 in lieu of a pro rata share of the OSP
Disposition Proceeds.
The exchange ratio (the "Exchange Ratio") will be calculated as follows: (a)
if the average closing price on Amex of Benson Common Stock during the 20
consecutive trading days ending on the fifth trading day prior to the ORC
Special Meeting ("Average Closing Price") exceeds $10.80, the Exchange Ratio
will be equal to $8.10 divided by the Average Closing Price; (b) if the Average
Closing Price is $10.80 or less, but greater than $7.20, the Exchange Ratio
will be equal to 0.75; (c) if the Average Closing Price is $7.20 or less, but
greater than $6.00, the Exchange Ratio will be equal to one half of the sum of
(i) 0.75 and (ii) the quotient obtained by dividing $5.40 by the Average
Closing Price; (d) if the Average Closing Price is $6.00 or less and ORC shall
not have elected to terminate the Merger Agreement pursuant to the terms of the
Merger Agreement, the Exchange Ratio will be equal to 0.825; and (e) if the
Average Closing Price is $6.00 or less and ORC shall have elected to terminate
the Merger Agreement pursuant to the terms of the Merger Agreement, but Benson
shall have thereafter timely elected to rescind such termination pursuant to
the terms of the Merger Agreement, the Exchange Ratio will be equal to $4.95
divided by the Average Closing Price.
Benson and ORC will issue a press release announcing the Exchange Ratio at
the time it is established prior to the ORC Special Meeting.
If you have any questions regarding the Merger, including the value of the
Exchange Ratio, or if you need assistance in voting your shares, please call
MacKenzie Partners, Inc. at (800) 322-2885 (toll-free).
8
<PAGE>
If the Average Closing Price is less than $6.00, ORC will have the right, by
written notice delivered at least three business days prior to the ORC Special
Meeting, to terminate the Merger Agreement (which termination is not effective
until after Benson's right to rescind such termination has expired); provided,
however, that Benson has the right, by written notice delivered to ORC at least
one business day prior to the ORC Special Meeting, to elect to rescind such
termination, whereupon the Exchange Ratio will be adjusted to equal $4.95
divided by the Average Closing Price.
OSP disposition proceeds ("OSP Disposition Proceeds") means the following:
the proceeds received by ORC prior to December 31, 1994 upon the sale of the
OSP Division, or any portion thereof (with marketable securities or other
instruments to be valued at their fair market value on the date of such sale),
pursuant to agreements entered into on or prior to the Effective Time (as
defined below), minus all costs, expenses and fees of ORC associated with such
dispositions, and plus (or minus) the present value to ORC of the net tax
benefit (or cost), whenever realized, relating to the OSP Division arising from
such disposition and the distribution to shareholders, provided that there
shall be deducted from amounts that would otherwise be considered OSP
Disposition Proceeds an amount equal to 15% of the amount by which the OSP
Disposition Proceeds exceeds $19,195,560.
Pursuant to the terms of the Merger Agreement, ORC and the Stock Option
Committee of its Board of Directors will take all action reasonably necessary
or appropriate to offer to each stock option holder the opportunity to either
(I) or (II):
(I) Exchange each ORC Stock Option for:
(i) a cash amount equal to the product of (X) the number of shares of
ORC Common Stock subject to such option and (Y) the difference between
$23.00 and the per share exercise price of such option (provided that
the option exercise price is less than $23.00 per share); and
(ii) an amount (payable in shares of Benson Common Stock) equal to the
product of (W) the number of shares of ORC Common Stock subject to such
option and (X) the excess, if any, of
(A) the Merger Consideration per share of ORC Common Stock (expressed
in dollars, with Benson Common Stock valued at the Average Closing
Price) over
(B) the greater of (Y) the per share exercise price of such option
and (Z) $23.00 per share.
The Benson Common Stock issuable pursuant to subclause (ii) will be
obtained by the Surviving Corporation as follows: (1) if applicable,
Benson will furnish to the Surviving Corporation, without additional
consideration, a number of shares of Benson Common Stock equal to the
number of shares of ORC Common Stock subject to such option multiplied
by the Fraction and (2) the Surviving Corporation will purchase from
Benson in exchange for OSP Disposition Proceeds of like value (the
"Option Portion") all remaining shares of Benson Common Stock so
issuable.
(II) Convert each ORC Stock Option into Benson Stock Options such that
the holder is entitled to purchase a number of shares of Benson Common
Stock equal to the product of (i) the number of shares subject to the ORC
Stock Options, and (ii) the Option Exchange Ratio. The option exchange
ratio (the "Option Exchange Ratio") will be calculated as follows: the
quotient of (X) the Merger Consideration per share of ORC Common Stock
(expressed in dollars, with Benson Common Stock valued at the Average
Closing Price) and (Y) the Average Closing Price per share of Benson Common
Stock. The price per share of the Benson Stock Options shall equal the
quotient of (A) the original option price per share applicable to the
holder's ORC Stock Option and (B) the Option Exchange Ratio. The Benson
Stock Options so acquired by each holder will be fully vested and
exercisable, and will be subject to the same terms and conditions
applicable to the ORC Stock Options, to the extent permissible under the
terms of the Benson Stock Option Plan.
9
<PAGE>
Fractional shares will not be issued, but the pro rata portion of the net
proceeds of the sale of all such fractional shares will be paid in cash to the
persons entitled thereto. As a result of the conversion of the ORC Common
Stock, the ORC Common Stock will be delisted from the NNM and will not be
listed on any national securities exchange or quoted in any inter-dealer
quotation system, and holders of ORC Common Stock will become shareholders of
Benson.
Sale of OSP Division. The Merger Agreement contemplates that ORC will
continue to attempt to sell the OSP Division, or portions thereof. For the nine
months ended April 30, 1994, the OSP Division had total revenues of
approximately $14.7 million which was comprised of IOL sales of approximately
$13.6 million and corneal topography sales of approximately $1.1 million. As of
April 30, 1994, the IOL business had total assets of approximately $13.6
million while the corneal topography business had total assets of $2.4 million.
The remaining business in the OSP Division, CCI, had no revenues for the nine
month period ended April 30, 1994 and total assets of approximately $8.3
million as of April 30, 1994.
On June 30, 1994, Akorn and ORC signed a letter of intent with respect to the
sale of ORC of the OSP Division's IOL business. Akorn terminated the letter of
intent on August 18, 1994. In light of the status of current discussions, ORC
believes that it is reasonably likely that it will not enter into any
agreements on or prior to the effectiveness of the Merger relating to the sale
of all or part of the OSP Division.
Conditions to the Merger. The obligations of Benson and ORC to consummate the
Merger are subject to various conditions, including, but not limited to: (i)
obtaining requisite shareholder and governmental approvals; (ii) the absence of
any preliminary or permanent injunction or other order by any federal or state
court which prevents the consummation of the Merger or makes such consummation
illegal; and (iii) approval for listing on Amex, subject to official notice of
issuance, of the Benson Common Stock to be issued in connection with the
Merger. In addition, the Merger Agreement provides that the obligations of
Benson and Benson Sub to consummate the Merger are also subject to (i) the
representations and warranties of ORC being true and correct as of the
Effective Time; (ii) the performance or compliance by ORC in all material
respects with all agreements, conditions and covenants required by the Merger
Agreement to be performed or complied with on or before the Effective Time;
(iii) the holders of not more than 5% of the ORC Common Stock shall have made a
demand for payment pursuant to appraisal rights under California law by the
conclusion of the ORC Special Meeting; and (iv) ORC must have at least $30.0
million in cash that is free and clear of all liens or other encumbrances. The
obligations of ORC to consummate the Merger are also subject to (i) the
representations and warranties of Benson and Benson Sub contained in the Merger
Agreement being true and correct as of the Effective Time; and (ii) the
performance or compliance by Benson and Benson Sub in all material respects
with all agreements, conditions and covenants required by the Merger Agreement
to be performed or complied with on or before the Effective Time.
Termination; Fees and Expenses. The Merger Agreement may be terminated at any
time prior to the Effective Time: (a) by mutual consent of the Benson Board of
Directors and ORC Board of Directors; (b) by either Benson or ORC if the Merger
is not consummated by December 31, 1994, provided that this right to terminate
is not available to the party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of the
Merger to occur before such date; (c) by either Benson or ORC if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission issues an order, decree or ruling or takes any other action that
permanently restrains, enjoins or otherwise prohibits the transactions
contemplated by the Merger Agreement and such order, decree, ruling or other
action becomes final and nonappealable; (d) by Benson if the ORC Board of
Directors (i) withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in any manner adverse to Benson or Benson Sub, (ii)
recommends to the holders of ORC Common Stock any proposal with respect to a
tender offer, merger, consolidation, share exchange or similar transaction
involving ORC or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement, or (iii) resolves to do (i) or (ii); (e)
by ORC if, prior to the Effective Time, a corporation, partnership, person or
other entity or group makes a bona
10
<PAGE>
fide offer that the ORC Board of Directors determines in its good faith
judgment and in the exercise of its fiduciary duties, based on the advice of
legal counsel, is more favorable to ORC's shareholders than the Merger,
provided that any such termination by ORC will not be effective until payment
of the termination fees required by the Merger Agreement; or (f) by either
Benson or ORC if the other party breaches the Merger Agreement in any material
respect and such breach continues for a period of ten days after the receipt of
notice of the breach from the non-breaching party.
If the Average Closing Price is less than $6.00, ORC will have the right, by
written notice delivered at least three business days prior to the ORC Special
Meeting, to terminate the Merger Agreement (which termination is not effective
until after Benson's right to rescind such termination has expired); provided
that Benson has the right, by written notice delivered to ORC at least one
business day prior to the ORC Special Meeting, of its election to rescind such
termination, whereupon the Exchange Ratio will be adjusted to equal $4.95
divided by the Average Closing Price.
Except as provided below, all costs and expenses incurred in connection with
the Merger Agreement and the transactions contemplated thereby will be paid by
the party incurring such costs and expenses. If the Merger Agreement is
terminated by ORC following an event specified in clause (e) above or Benson
terminates the Merger Agreement following the event set forth in clause (f)
above, ORC is required to pay to Benson an amount equal to $4.0 million plus
the lesser of (x) $2.0 million and (y) all actual out-of-pocket costs and
expenses of Benson and Benson Sub incurred in connection with the Merger
Agreement and the transactions contemplated thereby.
CERTAIN INVESTMENT CONSIDERATIONS
Holders of ORC Common Stock and Benson Common Stock, in reaching a decision
regarding a vote in favor of or against the proposal to approve and adopt the
Merger Agreement, should consider carefully certain factors set forth herein
under the heading "Certain Investment Considerations." Factors to be considered
by holders of shares of Benson Common Stock and ORC Common Stock include the
following: (i) the effect on the Merger Consideration of fluctuations in the
Exchange Ratio and other factors, including the stock prices of Benson Common
Stock and ORC Common Stock, (ii) certain regulatory matters affecting Benson
and ORC, including health care regulation and legislation and required
regulatory approval and (iii) the effect on the Merger of any material adverse
event relating to Benson and ORC. See "Summary--Regulatory Approval" and
"Certain Investment Considerations--Investment Considerations Relating to
Benson and ORC."
The following additional factors relating to Benson also should be considered
by the holders of ORC Common Stock and Benson Common Stock: (i) Benson's
historical operating losses and limited operating history, (ii) Benson's
planned disposition of certain businesses, (iii) Benson's rapid growth through
acquisitions, (iv) Benson's competitors in the eyewear market, principally two
large distributors and certain retail chain and department stores, (v) Benson's
dependence on large customers, (vi) Benson's dependence on a small number of
key personnel, (vii) the control of Benson and the Benson Board of Directors
exercised by two executive officers, (viii) the seasonality of Benson's
business, (ix) the potential antitakeover effect of certain Benson charter
provisions and (x) the potential adverse effect on the market price of Benson
Common Stock caused by issuance of a significant amount of Benson Common Stock
and the likelihood that a significant amount of Benson Common Stock will be
eligible for sale in the future. See "Certain Investment Considerations--
Investment Considerations Relating to Benson."
The following additional factors relating to ORC also should be considered by
the holders of ORC Common Stock and Benson Common Stock: (i) the interests,
pursuant to certain employment and severance agreements, of certain ORC
executive officers, one ORC director and certain other ORC employees that are
in addition to those of ORC shareholders generally, (ii) the interest of Benson
Partners (defined below) in the
11
<PAGE>
Merger, (iii) certain regulatory matters, including ongoing FDA examination of
ORC products, (iv) certain environmental matters, including compliance by ORC
with applicable environmental laws and regulations and potential liability
under such laws and regulations, (v) ORC's reliance on major suppliers for
principal raw materials used in ORC's products and (vi) the value and
composition of the Rights, the possibility that a sale of the OSP Division, or
portions thereof, may not be completed and the absence of a public market for
the Rights. See "Certain Investment Considerations--Investment Considerations
Relating to ORC."
BENSON STOCK OPTION PLAN AMENDMENT
At the Benson Special Meeting, Benson shareholders also will consider and
vote upon an amendment to the Benson Stock Option Plan (the "Benson Stock
Option Plan Amendment") to permit additional grants and issuances pursuant to
such plan in connection with the conversion of ORC Stock Options into Benson
Stock Options in the Merger and for other corporate purposes. See "Proposed
Amendment to Benson Stock Option Plan."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF ORC AND BENSON
The Boards of Directors of ORC and Benson believe that the Merger is fair and
in the best interests of their respective shareholders and have unanimously
recommended that holders of ORC Common Stock and Benson Common Stock,
respectively, vote for approval and adoption of the Merger Agreement.
Accordingly, at the June 30, 1994 meeting of the ORC Board of Directors and at
the June 30, 1994 meeting of the Benson Board of Directors, the directors
present at such meetings unanimously approved the Merger Agreement. By
unanimous written consent, dated as of June 30, 1994, the Benson Board of
Directors unanimously ratified and approved the terms of the Merger Agreement.
The Benson Board of Directors also has recommended the adoption of the Benson
Stock Option Plan Amendment, which it unanimously approved on August 16, 1994.
Certain members of ORC's management and ORC's Board of Directors may have
certain interests in the Merger that are in addition to those of shareholders
of ORC generally. These interests arise from severance agreements which provide
for payments upon termination following a change in control such as will occur
in the Merger. See "Certain Investment Considerations--Interests of Certain
Persons in the Merger." Benson believes that no member of the Benson Board of
Directors and no member of Benson's management has a material interest in the
Merger that is in addition to those of shareholders of Benson generally.
OPINIONS OF FINANCIAL ADVISORS
At the June 30, 1994 meeting of the ORC Board of Directors, Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJ") delivered its oral opinion,
subsequently confirmed in writing, as of the date of this Proxy Statement, to
the effect that, as of the date of such opinion, the Merger Consideration to be
paid to the shareholders of ORC in the Merger is fair, from a financial point
of view, to ORC and its shareholders (excluding Benson and its affiliates and
Benson's direct and indirect subsidiaries). A copy of the written opinion of
DLJ, dated September 12, 1994, which sets forth a description of the
assumptions made, matters considered and limits of its review, is attached to
this Proxy Statement as Annex B. See "The Merger and Special Factors--Opinions
of Financial Advisors."
At the June 30, 1994 meeting of the Benson Board of Directors, Salomon
Brothers Inc ("Salomon Brothers") delivered its oral opinion, subsequently
confirmed in writing, to the effect that, as of the date thereof, the Merger
Consideration to be paid by Benson in the Merger is fair, from a financial
point of view, to Benson. A copy of the written opinion of Salomon Brothers,
dated June 30, 1994, which sets forth a
12
<PAGE>
description of the assumptions made, matters considered and limits of its
review, is attached to this Proxy Statement as Annex C. See "The Merger and
Special Factors--Opinions of Financial Advisors."
REQUIRED VOTE
ORC. Approval and adoption of the Merger Agreement requires an affirmative
vote by the holders of a majority of the outstanding shares of ORC Common Stock
on the ORC Record Date. The presence in person or by properly executed proxy of
holders of shares having a majority of the votes entitled to be cast at the ORC
Special Meeting is necessary to constitute a quorum at the ORC Special Meeting.
On the ORC Record Date, there were 5,897,738 shares of ORC Common Stock
outstanding, 1,184,550 of which are beneficially owned by ORC's executive
officers and directors and their affiliates, such number representing
approximately 20% of the shares of ORC Common Stock. Benson, through a limited
partnership of which a wholly owned subsidiary of Benson is the sole general
partner, beneficially owns approximately 9% of the shares of ORC Common Stock,
and such limited partnership has agreed with ORC to vote its shares of ORC
Common Stock in favor of the Merger Agreement. The Chief Executive Officer of
ORC, who beneficially owns approximately 16% of the shares of ORC Common Stock,
has agreed with Benson to vote his shares of ORC Common Stock in favor of the
Merger Agreement.
Benson. Approval and adoption of the Merger Agreement and the Benson Stock
Option Plan Amendment require an affirmative vote by the holders of a majority
of the outstanding shares of Benson Common Stock, represented in person or by
proxy at the Benson Special Meeting. The Merger is not conditioned on the
approval of the Benson Stock Option Plan Amendment. The presence in person or
by properly executed proxy of holders of shares having a majority of the votes
entitled to be cast at the Benson Special Meeting is necessary to constitute a
quorum at the Benson Special Meeting. As of September 8, 1994, there were
18,565,948 shares of Benson Common Stock outstanding and Benson's executive
officers and directors and their affiliates beneficially own 9,243,413 shares,
such number representing approximately 50% of the shares of Benson Common
Stock. Each of the Chief Executive Officer and the Vice Chairman of Benson, who
in the aggregate beneficially own approximately 37% of the shares of Benson
Common Stock, has agreed with ORC to vote his shares of Benson Common Stock in
favor of the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; RELATIONSHIP BETWEEN BENSON AND ORC
In considering the recommendation of the ORC Board of Directors with respect
to the Merger Agreement and the transactions contemplated thereby, shareholders
should be aware that certain members of ORC's management and ORC's Board of
Directors have certain interests in the Merger that are in addition to the
interests of ORC shareholders generally. These interests arise from, among
other things, certain employee benefit and bonus plans, stock options,
indemnification arrangements and severance agreements. See "Certain Investment
Considerations--Investment Considerations Relating to ORC--Interests of Certain
Persons in Merger."
Prior to entering into the Merger Agreement, Benson and ORC sometimes
conducted business with each other in arm's-length transactions customary in
the industry. Benson occasionally purchased lenses from ORC and used certain
ORC lab services to process orders in excess of Benson's normal capacity. In
anticipation of the consummation of the Merger and the sale of the assets of
Benson's retail prescription eyewear business, a subsidiary of ORC has begun
fabricating all of Benson's prescription eyewear and Benson has closed its
prescription eyewear laboratory.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Benson Common Stock to be
issued in connection with the Merger be authorized for listing on Amex, subject
to official notice of issuance. It is not a condition to
13
<PAGE>
the Merger that the Rights to be issued in connection with the Merger be
authorized for listing on Amex, and Benson does not currently intend to list
the Rights on Amex or any other exchange.
REGULATORY APPROVAL
Pursuant to the requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), on July 11, 1994, ORC and Benson each
filed a Notification and Report Form for review under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division"). The waiting period under the
HSR Act with respect to such filing expired on August 10, 1994. See "Certain
Investment Considerations--Investment Considerations Relating to Benson and
ORC--Certain Regulatory Matters--Antitrust."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The conversion of shares of ORC Common Stock into the Merger Consideration
will be a taxable transaction for federal income tax purposes and may also be
taxable under applicable state, local and other tax laws. For federal income
tax purposes, a holder of ORC Common Stock (other than holders of Dissenting
Shares, as defined below) will recognize gain or loss upon the Merger in an
amount equal to the difference between the fair market value of the Merger
Consideration and the holders adjusted tax basis in such ORC Common Stock. See
"The Merger and Special Factors--Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting.
DISSENTERS' RIGHTS
Any holder of record of ORC Common Stock who votes against the Merger and who
follows the procedures set forth in Chapter 13 of the CGCL will be entitled to
have such holder's shares purchased by ORC for cash at their fair market value,
so long as the holders of 5% or more of the outstanding shares of ORC Common
Stock elect to exercise dissenters' rights. The fair market value of shares of
ORC Common Stock will be determined as of June 30, 1994, the day before the
first announcement of the terms of the Merger, exclusive of any appreciation or
depreciation due to the Merger. In order to exercise such rights, a shareholder
must comply with each of the procedural requirements of Chapter 13 of the CGCL,
a description of which is provided in "The Merger and Special Factors--
Dissenters' Rights" and the full text of which is attached hereto as Annex D.
Chapter 13 should be read in its entirety by the shareholders of ORC. If ORC
and the dissenting ORC shareholder cannot agree on the "fair market value," the
fair value of a share of ORC Common Stock will be determined in judicial
proceedings, the results of which cannot be predicted. The failure to take any
of the steps required under Chapter 13 of the CGCL in a timely manner will
result in a loss of appraisal rights. See "The Merger and Special Factors--
Dissenters' Rights."
While the CGCL provides that the holders of at least 5% or more of ORC Common
Stock must elect to exercise dissenters' rights in order for any holder to be
entitled to such rights, the Merger Agreement states that it is a condition to
the consummation of the Merger by Benson that the holders of no more than 5% of
ORC Common Stock shall have made a demand to exercise their dissenters' rights
by the conclusion of the ORC Special Meeting. Benson may therefore elect to
terminate the Merger Agreement if holders of more than 5% of ORC Common Stock
attempt to exercise their dissenters' rights.
14
<PAGE>
MARKET PRICES OF BENSON COMMON STOCK
Benson Common Stock is listed for quotation on Amex under the symbol "EB."
The following table sets forth the quarterly high and low last reported sales
price of the Benson Common Stock for the fiscal quarters indicated.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- -------- -------
<S> <C> <C>
1994
Third Quarter (through September 8).................... 8 1/8 7 1/8
Second Quarter (ending June 30)........................ 8 1/8 7 1/8
First Quarter.......................................... 8 1/4 6 3/4
1993
Fourth Quarter......................................... 8 1/8 6 1/4
Third Quarter.......................................... 8 3/8 6 3/8
Second Quarter......................................... 10 1/8 7 1/2
First Quarter.......................................... 7 3/4 5 3/8
1992
Fourth Quarter......................................... 6 1/8 2 3/8
Third Quarter.......................................... 3 1 5/8
Second Quarter......................................... 2 1/4
First Quarter.......................................... 11/16 5/16
</TABLE>
On June 30, 1994, the last full trading day prior to the announcement that
the Merger Agreement had been executed, the closing stock price for Benson
Common Stock was $7.50. On September 8, 1994, the last full trading day for
which quotations were available at the time of printing of this Proxy
Statement, the closing stock price for Benson Common Stock was $7.125.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE BENSON COMMON
STOCK.
MARKET PRICES OF ORC COMMON STOCK
ORC Common Stock is listed for quotation on NNM under the symbol "ORCO." The
following table sets forth the quarterly high and low last reported sales price
of ORC Common Stock for the fiscal quarters indicated.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ------ ------
<S> <C> <C>
1995
First Quarter (through September 8)....................... 23 21 3/4
1994
Fourth Quarter (ending July 31)........................... 23 5/8 19 1/2
Third Quarter............................................. 22 1/2 17 1/4
Second Quarter............................................ 18 3/4 12 1/2
First Quarter............................................. 18 1/2 14 1/4
1993
Fourth Quarter............................................ 17 13 3/4
Third Quarter............................................. 17 13 3/4
Second Quarter............................................ 17 1/4 13 3/4
First Quarter............................................. 16 13
1992
Fourth Quarter............................................ 21 1/2 12 1/2
Third Quarter............................................. 30 1/2 20 1/4
Second Quarter............................................ 24 1/4 18
First Quarter............................................. 28 19
</TABLE>
15
<PAGE>
On June 30, 1994, the last full trading day prior to the announcement that
the Merger Agreement had been executed, the last reported sales price for ORC
Common Stock was $22.75. On September 8, 1994 the last full trading day for
which quotations were available at the time of printing of this Proxy
Statement, the last reported sales price for ORC Common Stock was $22.875.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE ORC COMMON STOCK.
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table presents selected historical financial data of Benson and
ORC, and selected pro forma combined financial data after giving effect to the
Merger under the purchase method of accounting. Benson's historical financial
data for each of the annual periods presented have been derived from its
audited consolidated financial statements previously filed with the Commission.
ORC's historical financial data for each of the annual periods presented also
have been derived from its audited consolidated financial statements previously
filed with the Commission, excluding the operating results of ORC's OSP
Division. The selected historical financial data for Benson for the six-month
periods ended June 30, 1993 and 1994, and the selected historical financial
data for ORC for the nine-month periods ended April 30, 1993 and 1994, have
been derived from the companies' separate unaudited Quarterly Reports on Form
10-Q previously filed with the Commission, excluding the operating results of
ORC's OSP Division and, in the opinions of Benson's and ORC's respective
managements, include all normal recurring adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of results for
such interim periods. No cash dividends were declared or paid by Benson during
any of the periods indicated.
The selected pro forma combined financial data have been derived from, or
prepared on a basis consistent with, the unaudited pro forma combined condensed
financial statements included herein. These data are presented for illustrative
purposes only and are not necessarily indicative of the operating results or
financial position that would have occurred or that will occur after
consummation of the Merger.
16
<PAGE>
BENSON EYECARE CORPORATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------------------------------------- ---------------------------
PRO FORMA
PRO FORMA JUNE 30, JUNE 30, JUNE 30,
1989(1) 1990(1) 1991(1) 1992(1)(2) 1993(3) 1993(4) 1993 1994 1994(4)
------- ------- ------- ---------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ 8,187 $7,417 $7,599 $16,742 $82,084 $286,281 $39,396 $85,791 $154,805
Cost of sales........... 2,635 2,639 2,714 5,909 34,266 158,578 16,645 39,600 85,336
------- ------ ------ ------- ------- -------- ------- ------- --------
Gross margin............ 5,552 4,778 4,885 10,833 47,818 127,703 22,751 46,191 69,469
Research and
development............ -- -- -- -- -- 2,173 -- -- 1,223
Selling, general and
administrative
expenses............... 5,512 5,041 4,890 12,126 49,424 109,563 19,956 35,315 52,710
Interest expense........ 160 124 78 231 938 8,736 415 1,178 4,294
Other expense (income).. 215 (961) (30) 231 (143) (975) -- -- 24
------- ------ ------ ------- ------- -------- ------- ------- --------
Income (loss) before
income
taxes.................. (335) 574 (53) (1,755) (2,401) 8,206 2,380 9,698 11,218
Provision for income
taxes.................. 1 102 (7) 2 57 3,118 26 1,358 4,263
------- ------ ------ ------- ------- -------- ------- ------- --------
Net income (loss)....... $ (336) $ 472 $ (46) $(1,757) $(2,458) $ 5,088 $ 2,354 $ 8,340 $ 6,955
======= ====== ====== ======= ======= ======== ======= ======= ========
Weighted average shares
outstanding(5)......... 187 185 693 3,712 15,389 23,557(6) 13,381 18,562 24,589(6)
Primary earnings (loss)
per
share.................. $ (1.80) $ 2.55 $ (.07) $ (.47) $ (.16) $ 0.22 $ .18 $ .45 $ .28
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------ ------------------
PRO FORMA
1989(1) 1990(1) 1991(1) 1992(1)(2) 1993(3) 1994 1994
------- ------- ------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 354 $ 585 $ 775 $ 5,370 $25,129 $ 59,710 $ 78,849
Total assets............ 2,082 2,641 3,562 18,438 75,144 115,535 275,884
Long-term debt.......... 820 -- 1,600 6,884 11,240 45,829 120,109
Stockholders' equity.... 342 783 802 5,446 39,449 49,223 97,439
Book value per share.... $ 1.83 $ 4.23 $ 1.16 $ 1.47 $ 2.56 $ 2.65 $ 3.96
</TABLE>
- --------
(1) In October 1992, Benson acquired Pembridge Optical Partners, Inc.
("Pembridge"). Although as a result of this transaction Benson was the
surviving legal entity, Pembridge, which was formed in September 1991, was
the surviving entity for accounting purposes. The acquisition of Superior
Optical Company, Inc. ("Superior Optical") in December 1992 was accounted
for as a pooling of interests and, accordingly, Benson's consolidated
financial statements were restated for all periods prior to the
acquisition to include the results of operations, financial position and
cash flows of Superior Optical. As a result, the Selected Financial Data
for the fiscal years ended December 31, 1989 and 1990 are that of Superior
Optical only, and for the fiscal year ended December 31, 1991 are that of
Superior Optical for the full year combined with Pembridge from September
1991.
(2) The acquisition of Pembridge in October 1992 was treated for accounting
purposes as a reverse acquisition. The results of Pembridge are included
from its date of inception on September 16, 1991. The 1992 acquisition of
Benson Optical Co., Inc. ("Benson Optical") was accounted for as a
purchase. As a result, the information presented reflects the results of
Benson Optical subsequent to its purchase on October 16, 1992.
(3) The acquisitions of Superior Eye Care, Bonneau, and International Eyewear
& Accessories Inc. ("International Eyewear") were effective April 30,
1993, June 1, 1993 and November 30, 1993, respectively. Superior Eye Care
and Bonneau were accounted for as purchases. As a result, the information
presented does not reflect the operations of these companies prior to
their respective dates of acquisition. International Eyewear was accounted
for as a pooling of interests, and, as a result, its results are included
from its inception on January 1, 1993.
(4) The pro forma statements of operations data for the year ended December
31, 1993 and the six months ended June 30, 1994, are presented as if the
acquisitions of Superior Eye Care, Bonneau and Opti-Ray (acquired
effective January 1, 1994) and ORC each had occurred on January 1, 1993.
The pro forma balance sheet data give effect to the combination of Benson
and ORC.
(5) Does not include (i) 1,745,334 shares of Benson Common Stock reserved for
issuance upon the exercise of options granted or that may be granted
pursuant to the Benson 1992 Stock Option Plan, (ii) 200,000 shares of
Benson Common Stock reserved for
17
<PAGE>
issuance upon the exercise of options granted or that may be granted
pursuant to the Benson's 1993 Stock Option Plan for Outside Directors,
(iii) 500,000 shares of Benson Common Stock reserved for issuance under the
Benson Employee Stock Purchase Plan and (iv) 250,000 shares of Benson
Common Stock, subject to adjustment, issuable upon exercise of warrants
(that have an exercise price of $10 per share) issued to RAS Securities
Corp. and ABD Securities Corporation in connection with the Benson's July
1993 offering of Benson Common Stock, (v) 4,521,864 shares of Benson Common
Stock reserved for issuance upon the conversion of Benson's Convertible
Notes due 2001.
(6) See Notes to the Pro Forma Combined Financial Statements appearing
elsewhere in this Proxy Statement.
18
<PAGE>
OPTICAL RADIATION CORPORATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED JULY 31, NINE MONTHS ENDED
---------------------------------------------- -------------------
APRIL 30, APRIL 30,
1989 1990 1991 1992 1993 1993 1994
------- ------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA: (7)
Sales................... $75,760 $93,066 $105,535 $127,026 $129,314 $94,994 $104,148
Cost of sales........... 50,447 60,410 71,244 85,075 85,851 63,763 68,874
------- ------- -------- -------- -------- ------- --------
Gross profit............ 25,313 32,656 34,291 41,951 43,463 31,231 35,274
Selling, general and
administrative
expenses............... 18,976 23,001 27,135 32,277 32,760 24,608 25,196
Research and
development............ 3,067 2,343 2,018 1,772 2,548 2,056 1,754
Special charges
(credits) (8).......... -- -- -- 2,952 -- -- --
Interest income......... 1,564 2,341 2,001 1,757 1,736 1,260 995
Interest (expense)...... (1,544) (2,252) (2,236) (2,257) (2,140) (1,625) (1,512)
Other income (expense).. (92) 172 87 (461) 633 661 57
------- ------- -------- -------- -------- ------- --------
Income from continuing
operations before
provision for income
taxes.................. 3,198 7,573 4,990 3,989 8,384 4,863 7,864
Provision for income
taxes.................. 1,285 2,916 1,921 1,536 3,228 1,872 3,028
------- ------- -------- -------- -------- ------- --------
Net income from
continuing operations
and before cumulative
effect of an accounting
change................. $ 1,913 $ 4,657 $ 3,069 $ 2,453 $ 5,156 $ 2,991 $ 4,836
Cumulative effect of an
accounting change...... -- -- -- -- -- -- 1,420
------- ------- -------- -------- -------- ------- --------
Net income from
continuing operations.. $ 1,913 $ 4,657 $ 3,069 $ 2,453 $ 5,156 $ 2,991 $ 6,256
======= ======= ======== ======== ======== ======= ========
Net income per share
from continuing
operations and before
cumulative effect of an
accounting change (9).. $ .29 $ .70 $ .46 $ .38 $ .84 $ .48 $ .81
Net income per share
from cumulative effect
of accounting change... -- -- -- -- -- -- .23
------- ------- -------- -------- -------- ------- --------
Net income per share
from continuing
operations............. $ .29 $ .70 $ .46 $ .38 $ .84 $ .48 $ 1.04
======= ======= ======== ======== ======== ======= ========
Weighted average shares
outstanding............ 6,692 6,611 6,604 6,491 6,168 6,188 6,032
Cash dividend per share. -- -- $ 2.00 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AT JULY 31, AT APRIL 30,
-------------------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 54,809 $ 60,592 $ 62,508 $ 61,172 $ 67,421 $ 66,056 $ 68,423
Total assets............ 131,915 148,597 140,433 145,203 148,488 146,121 148,910
Long-term debt.......... 22,636 20,907 20,500 20,073 19,170 19,299 18,780
Stockholders' equity.... 84,005 91,690 92,033 92,359 96,928 94,581 98,026
Book value per share.... $ 13.12 $ 14.28 $ 14.28 $ 14.84 $ 15.94 $ 15.56 $ 16.63
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR
AS OF AND FOR THE YEAR THE NINE MONTHS
ENDED JULY 31, 1993 ENDED APRIL 30, 1994
---------------------- --------------------
<S> <C> <C>
COMPARATIVE PER SHARE PRO FORMA
INFORMATION:
Book value per share............... $15.89 $16.34
Income from continuing operations
per share......................... .84 1.04
Pro forma weighted average shares
outstanding (10).................. 6,100 5,998
</TABLE>
- --------
(7) Excludes net loss from discontinued operations of the OSP Division.
(8) Special charges includes litigation expenses in fiscal year 1990;
litigation credit in fiscal year 1991 and in fiscal year 1992 a $3.0
million charge for the cancellation of the Cinema Digital Sound project
and $2.1 million taken for the Orcolon recall and product discontinuation.
19
<PAGE>
(9) Reflects the adaption of SFAS No. 109, "Accounting for Income Taxes" during
the first quarter of fiscal year 1994.
(10) The weighted average number of shares used to calculate Comparative Per
Share Pro Forma Information were calculated as 0.75 (the assumed Exchange
Ratio) multiplied by ORC's actual weighted average shares outstanding
during the period plus 1,474 additional shares issued in connection with
the Rights assuming an $8.00 Average Closing Price.
THE ABOVE INFORMATION SHOULD BE READ IN CONJUNCTION WITH BENSON'S AND ORC'S
HISTORICAL AND PRO FORMA COMBINED FINANCIAL STATEMENTS AND NOTES THERETO,
EITHER INCORPORATED BY REFERENCE OR INCLUDED HEREIN. SEE "UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS."
20
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
Holders of ORC Common Stock and Benson Common Stock should consider carefully
all of the information contained in this Proxy Statement, including the
following:
INVESTMENT CONSIDERATIONS RELATING TO BENSON AND ORC
EFFECT OF THE EXCHANGE RATIO AND OTHER FACTORS ON THE MERGER CONSIDERATION
The relative stock prices of Benson Common Stock and ORC Common Stock at the
Effective Time may vary significantly from the prices as of the date of
execution of the Merger Agreement or the date hereof or the date on which the
Exchange Ratio is determined. These variances may be due to changes in the
business, operations and prospects of Benson or ORC, recently announced federal
health care legislation, market assessments of the likelihood that the Merger
will be consummated and the timing thereof, the effect of any conditions or
restrictions imposed on or proposed with respect to the combined companies by
regulatory agencies in connection with or following consummation of the Merger,
general market and economic conditions, and other factors. Pursuant to the
Merger Agreement, (i) the Exchange Ratio adjusts based upon certain changes in
the price of Benson Common Stock and (ii) the consideration to be received by
holders of ORC Common Stock from the sale of the OSP Division may not be known
until December 31, 1994. Thus, the holders of ORC Common Stock will not be able
to determine the number of shares of Benson Common Stock they will receive
pursuant to the Exchange Ratio until five days prior to the ORC Special Meeting
and may not be able to determine the consideration they will receive pursuant
to the sale of the OSP Division until December 31, 1994. In addition, pursuant
to the Merger Agreement, if the Average Closing Price is less than $6.00, ORC
will have the right to terminate the Merger Agreement; provided, however, that
Benson has the right to elect to rescind such termination, whereupon the
Exchange Ratio will be equal to $4.95 divided by the Average Closing Price.
Because the Exchange Ratio is subject to increase in the event that the Average
Closing Price of Benson Common Stock is less than $6.00, Benson has registered
a total of 8,000,000 shares of Benson Common Stock in connection with the
Merger.
CERTAIN REGULATORY MATTERS
Health Care. The health care industry and, in particular, the relationships
between and among health care professionals, providers and suppliers, are
heavily regulated at the state and federal levels. In the context of Benson's
and ORC's present and proposed business activities, these health care
regulations affect many aspects of Benson's and ORC's relationships with their
customers. These regulations are complex and are changing constantly, and many
aspects of these regulations have not been the subject of regulatory
interpretation; taken together, these factors create great uncertainty
regarding the application of these regulations to Benson's and ORC's business.
In addition, regulation of the health care industry continues to increase and
various regulatory authorities have indicated that the health care industry
will be subject to increased scrutiny and enforcement activity. Violating such
regulations can result in significant monetary fines, operating restrictions
and criminal and other penalties. Because compliance with applicable
regulations depends to a significant extent on how the terms of arrangements
within the health care industry are actually implemented and structured,
determining compliance with these regulations can be extremely difficult. There
can be no assurance that a review of Benson's or ORC's past, present or future
business activities by courts or regulatory authorities will not result in
determinations that could adversely affect the operations of Benson or ORC, or
that the health care regulatory environment will not change so as to restrict
Benson's or ORC's existing operations or limit the expansion of Benson's
business. In addition, the Clinton administration and certain state governments
have announced significant health care initiatives. There can be no assurance
that such initiatives and private cost control initiatives will not have a
material adverse effect on Benson or ORC.
Food and Drug Administration. Certain of the products sold by Benson and ORC
must comply with quality control standards set by the U.S. Food and Drug
Administration (the "FDA"). The FDA regulates the manufacture and sale of
ophthalmic products under the Federal Food, Drug and Cosmetic Act, as
21
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amended by the 1976 Medical Device Amendments and certain subsequent
amendments. Over the past few years, the FDA has become more restrictive in the
regulatory process and has increased its surveillance over existing products
and manufacturing facilities. Increased regulatory scrutiny, in turn, has
extended the new product approval cycle, increased costs, and required more
resources to support ongoing operations and existing products. The FDA has
authority to suspend or remove a product from the market or to cause a
manufacturer to cease operations either at a facility or company wide if it
deems a product or a manufacturing process to be outside regulatory guidelines.
Antitrust. Pursuant to the requirements of the HSR Act, on July 11, 1994, ORC
and Benson each filed a Notification and Report Form for review under the HSR
Act with the FTC and the Antitrust Division. The waiting period under the HSR
Act with respect to such filing expired on August 10, 1994. ORC and Benson do
not believe that any additional filing relating to antitrust issues is required
with respect to the Merger. Notwithstanding that the HSR Act waiting periods
have expired, the FTC or the Antitrust Division could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking divestiture of substantial assets of ORC or Benson.
Consummation of the Merger is conditioned upon, among other things, the absence
of any temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition. ORC and Benson do not believe that consummation of
the Merger will result in a violation of any applicable antitrust laws.
However, there can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or, if such a challenge is made, of the result.
EFFECT ON THE MERGER OF MATERIAL ADVERSE EFFECTS RELATING TO BENSON AND ORC
The absence of a material adverse effect with respect to ORC (which material
adverse effect was not contemplated in documents previously filed with the
Commission) is a condition to the consummation of the Merger by Benson and the
impact of such material adverse effect may have an impact on the operating
results of Benson and value of Benson Common Stock after the Merger if the
Merger is consummated. See "The Merger Agreement." While the absence of a
material adverse effect with respect to Benson is not a condition to the
consummation of the Merger by ORC, the impact of such material adverse effect
may have an impact on the operating results of Benson and value of Benson
Common Stock after the Merger. If a material adverse effect with respect to
Benson were to occur after the Average Closing Price is determined for purposes
of the Merger Consideration, the value of the Benson Common Stock to be
received by holders of ORC Common Stock as part of the Merger Consideration
could be adversely affected.
INVESTMENT CONSIDERATIONS RELATING TO BENSON
OPERATING LOSSES AND LIMITED OPERATING HISTORY
Benson reported losses before income taxes of approximately $53,000, $1.8
million and $2.4 million for the years ended December 31, 1991, 1992 and 1993,
respectively. There can be no assurance that Benson will achieve or sustain
profitability in the future. Although Benson's financial statements include the
results of a predecessor, Benson itself, as a consolidated entity, has a
limited operating history as a result of the reorganization of Benson and the
entrance by Benson into the eyecare industry in October 1992.
PLANNED DISPOSITION OF CERTAIN BENSON BUSINESSES
In anticipation of the consummation of the Merger and in recognition of the
fact that Benson cannot be both an effective retailer and an effective
wholesaler in the prescription eyewear business, Benson intends to sell the
assets of its retail prescription eyewear business. On August 26, 1994, Benson
sold the assets of Pembridge Optical Partners, Inc., consisting primarily of
eight retail stores located in New York and New Jersey, for a total
consideration of approximately $1,300,000. Benson has received indications of
interest relating to the sale of its remaining retail business from various
parties but has not entered into any purchase agreements with prospective
buyers. Benson plans to maintain its relationships with ophthalmologists
22
<PAGE>
through ORC's current customer and supplier contacts. The total assets of
Benson's retail business at June 30, 1994 were approximately $11,600,000. The
business represented approximately $39,900,000 in revenues for the year ended
December 31, 1993.
RAPID GROWTH THROUGH ACQUISITIONS
Benson has expanded its operations primarily by means of acquisitions. It
acquired Benson Optical Co., Inc., Pembridge Optical Partners, Inc. and
Superior Optical Co., Inc. in 1992; Superior Eye Care, Inc., The Bonneau
Company and Pennsylvania Optical Company and certain properties, International
Eyewear & Accessories, Inc. and certain assets of Franklin Optical Company,
Inc. and Vision Care Services, Inc. in 1993 and Opti-Ray, Inc. in 1994. Benson
intends to continue its strategy of aggressive growth through strategic
acquisitions. There can be no assurance that Benson will be successful in
managing the combined operations of the entities acquired, including ORC, or be
able to locate or acquire other suitable acquisition candidates on acceptable
terms, or that any other operations that are acquired can be effectively and
profitably integrated into Benson. Additionally, there can be no assurance that
any future acquisitions will not have a material adverse effect on Benson's
operating results, particularly during the period immediately following such
acquisitions.
HIGHLY COMPETITIVE MARKETPLACE
Benson competes principally with two large distributors in the market for
readers and with numerous distributors of sunglasses. The retail eyecare
industry is fragmented and highly competitive and historically has been subject
to severe price competition. Benson's competitors include numerous retail
optical stores, independent retail outlets and independent opticians,
optometrists and ophthalmologists, as well as large optical chains such as
LensCrafters, Inc. and Pearle, Inc. In addition, industry consolidation and the
installation of optical units in department store chains and warehouse clubs
have further increased Benson's competition. There can be no assurance that
such competition will not adversely affect Benson's operations in the future.
Many of Benson's competitors have established operating histories, are larger
than Benson and have financial and other resources substantially greater than
those of Benson.
DEPENDENCE ON LARGE CUSTOMERS
Benson is dependent on certain large customers, the loss of one or more of
which could have a material adverse effect on Benson. Benson's two largest
customers accounted for approximately 22% of Benson's revenues for 1993; Wal-
Mart Stores, Inc. and Target Stores represented approximately 12% and 10%,
respectively, of Benson's 1993 revenues. As a result of the size of its largest
customers, Benson carries large accounts receivable and in the past has
experienced a write down of accounts receivable associated with the bankruptcy
of one of Benson's customers. Although Benson has implemented internal
procedures designed to limit the extension of credit to any single customer,
there can be no assurance that Benson will not have to write down accounts
receivable again in the future. In addition, certain of Benson's large
customers have the ability to purchase eyecare products directly from the
manufacturers. To the extent a customer does so, Benson's business could be
materially affected. Benson does not typically enter into contracts with its
customers.
DEPENDENCE ON KEY PERSONNEL
Benson's business is managed by a small number of executive officers and key
employees, most of whom have employment contracts with Benson. The loss of the
services of one or more of these executive officers or key employees could have
a material adverse effect on Benson. A number of the members of Benson's
management are new to Benson. Benson believes that its future success will
depend in large part on its continued ability to attract and retain highly
skilled and qualified personnel.
23
<PAGE>
CONTROL BY MANAGEMENT
Martin E. Franklin and Warren B. Kanders, Chief Executive Officer and Vice
Chairman of Benson, respectively, own in the aggregate 6,800,000 shares of
Benson Common Stock, representing approximately 37% of the outstanding shares
of Benson Common Stock. These persons have the practical ability to elect the
entire Board of Directors of Benson and to direct the affairs of Benson.
SEASONALITY
Benson's business is seasonal in nature, with the first and second quarters
having increased sales due to the high demand for sunglasses during such
periods. Since Benson is, and expects to continue to be, subject to some
seasonality of demand, its operating results may be subject to considerable
fluctuations from quarter to quarter.
POTENTIAL ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
Benson has 500,000 shares of authorized and unissued preferred stock and in
excess of 21,000,000 shares of authorized and unissued Benson Common Stock
which could be issued to a third party selected by current management or used
as the basis for a shareholders' rights plan, which could have the effect of
deterring a potential acquiror. The ability of the Benson Board of Directors to
establish the terms and provisions of different series of preferred stock could
discourage unsolicited takeover bids from third parties.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of Benson Common Stock in the public
market in the future could adversely affect the market price of Benson Common
Stock and could impair Benson's ability to raise additional capital through the
sale of its equity securities. The 3,400,000 shares of Benson Common Stock
owned by Martin E. Franklin may be sold from time to time subject to the
restrictions contained in Rule 144 under the Securities Act or pursuant to a
separate registration statement. In addition, Benson has filed a Registration
Statement on Form S-3 registering an aggregate of 4,928,035 shares of Benson
Common Stock, including 3,778,035 shares owned by certain Benson shareholders
(including Warren B. Kanders, Benson's Vice Chairman, who owns 3,400,000
shares) and 1,150,000 shares that may be issued to the limited partners of
Benson Partners (as defined and discussed below). As of September 8, 1994,
Benson had outstanding under the Benson Stock Option Plan options to purchase
approximately 1,027,000 shares of Benson Common Stock and under its 1993 Stock
Option Plan for Outside Directors options to purchase approximately 134,000
shares of Benson Common Stock. The shares issuable upon exercise of these
options have been registered under the Securities Act. The Benson Stock Option
Plan Amendment, if approved by Benson shareholders, will increase the number of
shares of Benson Common Stock available for grant under the Benson Stock Option
Plan. Benson expects to register such additional shares, which may be awarded
under the plan from time to time. Since Benson has issued, and may continue to
issue, significant numbers of shares of Benson Common Stock in connection with
acquisitions or otherwise, the number of outstanding shares of Benson Common
Stock that are likely to be eligible for sale in the future is likely to
increase significantly.
INVESTMENT CONSIDERATIONS RELATING TO ORC
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Employment Agreements. In considering the recommendation of the Board of
Directors of ORC with respect to the Merger, holders of ORC Common Stock should
be aware that certain members of ORC's management, one of whom is a member of
the Board of Directors, have certain interests in the Merger that are in
addition to those of ORC shareholders generally. The Board of Directors of ORC
was aware of these interests when it considered and approved the Merger and the
Merger Agreement.
Four executive officers and ten additional employees of ORC are covered by
individual severance agreements which provide for payments upon termination
following a change in control. Each of Richard D. Wood, William T. Sullivan,
Gary N. Patten and Philip J. Englund, each an executive officer of ORC, and
24
<PAGE>
Weldon Lucas, an executive officer of Omega Optical Co., Inc., a subsidiary of
ORC, has entered into a severance agreement with ORC, dated March 14, 1994,
that provides for two years of salary upon termination following a change in
control (the "Severance Agreement"). Each Severance Agreement has a term of
three years with automatic one-year renewals thereafter; however, if a Change
in Control (as defined below) occurs, the term will be at least one year beyond
such Change in Control. "Change in Control" is defined in the Severance
Agreement as (i) the sale, lease or exchange of all or substantially all of the
assets of ORC; (ii) shareholder approval of a plan of dissolution or
liquidation of ORC; (iii) direct or indirect ownership by a person (other than
a current director or officer, as defined in the Severance Agreement) of 35% or
more of the combined voting power of ORC securities; (iv) incumbent directors'
ceasing to be a majority of the Board of Directors of ORC; or (v) in the
opinion of independent counsel to ORC, the occurrence of an event constituting
a change in control which ORC must report on Form 8-K pursuant to the Exchange
Act. The Merger will constitute a Change in Control under the Severance
Agreement.
During the term of the Severance Agreement, if an employee is terminated in
the first year after a Change in Control or prior to a Change in Control if due
thereto, for any reason other than death, cause, disability or retirement, or
if the employee voluntarily terminates employment in the first year after a
Change in Control for "Good Reason" (generally, certain defined adverse changes
in the employee's status or position as an executive of ORC prior to the Change
in Control and, including specifically, any termination of employment for any
reason, other than death, disability or retirement, from the 91st day following
the Change in Control through the 365th day following the Change in Control),
the employee will receive the following benefits: (i) within five business days
of termination, cash payment equal to the product of (A) the employee's monthly
base salary and (B) 24; (ii) within five business days of termination, cash
payment equal to the amount of cash bonuses paid to the employee in the 12
months preceding the Change in Control, pro rated to the date of termination;
(iii) continuation for two years of insurance coverages providing benefits to
the employee and dependents, provided the employee makes employee contribution
payments as before the termination; and (iv) payment by ORC of outplacement
services, if requested by the employee within six months of termination.
However, if any payments under the Severance Agreement or other benefits
received by the employee from ORC constitute an "excess parachute payment"
under the Internal Revenue Code of 1986, as amended (the "Code"), such payments
shall be reduced to the extent necessary to prevent imposition of excise tax.
Pursuant to separate letter agreements, nine ORC employees who are not
executive officers of ORC are each entitled to one year of severance pay if
such employee is terminated in the first year after a change of control
(defined in these agreements as an event of the type specified in clauses (i),
(ii) or (iii) of the definition of Change in Control in the Severance
Agreement, including the Merger) or prior to such change of control if due
thereto, for any reason other than death, cause, disability or retirement, or
if such employee voluntarily terminates employment with ORC within the first
year after such a change of control as a result of certain defined adverse
changes in his position with ORC. In addition, each such employee would receive
a continuation for one year of insurance coverage providing benefits to the
employee and dependents, provided the employee makes employee contribution
payments as before the termination, and payment by ORC of outplacement
services, if requested by the employee within six months of termination.
Benson Partners. Pursuant to the terms of an Agreement of Limited
Partnership, dated December 7, 1993 (the "Partnership Agreement"), Benson
Services, Inc. (the "General Partner"), a wholly owned subsidiary of Benson,
acts as the sole general partner of, with a 1% interest in, Benson Partners I,
L.P., a Delaware limited partnership ("Benson Partners"). On January 13, 1994,
Benson Partners filed with the Commission a Schedule 13D reporting that it had
acquired 374,000 shares of ORC Common Stock, such number representing on such
date approximately 6.17% of the shares of ORC Common Stock. As of September 6,
1994, Benson Partners owns 529,950 shares of ORC Common Stock ("Acquired
Shares"), such number representing approximately 9% of the shares of ORC Common
Stock. Benson Partners will be treated no more favorably than any other holder
of ORC Common Stock in the Merger. Benson Partners has agreed to vote its
shares of ORC Common Stock in favor of the Merger Agreement.
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The purpose of Benson Partners, as set forth in the Partnership Agreement, is
to acquire up to 9.9% of ORC Common Stock. The General Partner is authorized to
conduct and manage the business and affairs of Benson Partners and is
responsible for purchasing, selling, voting and exercising all rights with
respect to the Acquired Shares. The General Partner will hold all proxies with
respect to the Acquired Shares. No limited partner may transfer, sell or assign
his or its interest in Benson Partners without the prior written consent of the
General Partner. The General Partner may not transfer, sell or assign its
interest in Benson Partners without the prior written consent of all limited
partners.
Profits and losses of Benson Partners will be allocated 80% to the limited
partners pro rata based upon their respective capital contributions and 20% to
the General Partner. The General Partner will contribute 1% of the capital of
Benson Partners. The limited partners will contribute an amount not to exceed
$5.5 million. Subject to certain limitations, the General Partner may
distribute Acquired Shares to all partners pro rata from time to time in
accordance with the positive balances of their capital accounts.
Upon dissolution and winding up of Benson Partners, the assets of Benson
Partners (including any Acquired Shares) may be distributed to the partners in
cash or in kind in proportion to each partner's capital account. In the event
Benson acquires more than 50% of the outstanding ORC Common Stock, Benson
Partners will be dissolved and each limited partner may elect to receive, in
lieu of any distribution in cash or in kind, registered shares of Benson Common
Stock valued at a price of $8.00 per share. Benson and each limited partner of
Benson Partners have agreed that Benson will issue shares of Benson Common
Stock to such limited partner in exchange for the cash component of the Merger
Consideration paid to Benson Partners in the Merger and thereafter distributed
to such limited partner.
CERTAIN REGULATORY MATTERS
In November 1993, the FDA impounded approximately 92,000 one-piece IOL's
manufactured by ORC based upon alleged violations of Good Manufacturing
Practices ("GMP") guidelines promulgated by the FDA. These impounded IOL's had
an inventory value of approximately $2.3 million. ORC filed a claim for the
return of the impounded inventory and denied the allegations. In June 1994, the
FDA agreed that the IOL's manufactured by ORC after October 1993 were not made
in violation of GMP guidelines and returned such impounded IOL's to ORC. On
July 5, 1994, a federal court approved an agreement between ORC and the FDA
allowing ORC to re-examine the remaining impounded IOL's to reconfirm that they
meet ORC's manufacturing specifications and quality standards. The agreement
allows ORC to sell those IOL's that pass this re-examination. During the third
quarter of the fiscal year ending July 31, 1994, ORC recorded inventory reserve
additions of approximately $265,000 that, when combined with previously
established reserves of $605,000, would provide for the expense of re-examining
these IOL's and also provide for these IOL's to be sold at a discount to
existing inventory.
In April 1994, ORC received correspondence from the FDA that challenged its
designation of 21 IOL models in its annual report as similar to existing
Premarket Approved ("PMA") IOLs, and thus exempt from the requirement for the
submission of PMA supplements. ORC has submitted the PMA supplements for these
IOL models. If the FDA ultimately concludes that the information contained in
the PMA supplements is not sufficient for all or some of the models in
question, it could force ORC to recall the models deemed not to be PMA
approved, stop all distribution of these lenses, or compile clinical data based
upon lens implants previously performed. In the aggregate, these IOL lenses
account for approximately $2 million in annualized sales of ORC.
Since the summer of 1991, ORC has been the subject of an FDA investigation
concerning the approval and recall of Orcolon, a synthetic visoelastic gel for
use in cataract surgery. In May 1994, ORC was informed verbally by a
representative of the FDA that the Orcolon investigation has not been closed.
ORC believes that it probably will not receive any formal notification or
confirmation from the FDA if and when the Orcolon investigation is closed.
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ENVIRONMENTAL MATTERS
ORC's facilities are subject to federal, state and local environmental laws
and regulations that apply to ORC's operations, buildings, products and real
property. For example, under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), commonly known as "Superfund," and
various state and local laws and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on, in, or under such property. Such
laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of remediation or removal of such substances may be
substantial, and the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to use, sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic wastes may also be liable for the costs of the removal or remediation of
such wastes at a disposal or treatment facility regardless of whether such
facility was owned or operated by such persons.
ORC's Azusa, California facility is located over a portion of the San Gabriel
Valley Aquifer in which volatile organic compounds ("VOCs") were discovered in
1979. In 1983, the aquifer was declared a Superfund site under authority of
CERCLA. Between 1983 and 1990, ORC received and responded to a series of
information requests from the U.S. Environmental Protection Agency ("EPA"). In
1990, ORC was notified by the EPA that it was a "Potentially Responsible Party"
for the groundwater contamination along with several hundred other companies.
Soil and subsurface samples of properties, including ORC's Azusa facility, were
begun in 1992 and continued into 1994. The costs of this investigation
currently are being borne by Aerojet General Corporation and its Aerojet
Electro Systems Division, ORC's neighbor and former owner of much of the
property where ORC's facilities are located.
After the investigation of the study area (a unit within the larger Superfund
site) in which ORC's property is located is complete, remedial options may be
evaluated and one or more may be adopted. If none of the Potentially
Responsible Parties is willing to agree to perform or finance the selected
remedy, then either the EPA or a state agency will pay for the remediation
effort and seek contribution from parties deemed to be Responsible Parties or
the EPA will bring administrative or judicial action to compel Potentially
Responsible Parties to pay for the remediation. Remediation efforts are not
expected to commence before the mid 1990's at the earliest. In 1994 the EPA
estimated that remediation costs for the study area will be $99.7 million to be
apportioned among Responsible Parties which will be named in Special Notice
Letters to be served by the EPA. Alternate remediation plans, which would
decrease costs to Responsible Parties, have been proposed. As of the date of
this Proxy Statement, ORC has not incurred any remediation costs. ORC expects
that the remediation costs will be borne primarily by the parties that caused
the contamination, but cannot estimate the amount of such remediation costs
that it would be required to bear, if any. ORC has no record of its use of any
of the VOCs identified by the EPA as contaminants of the groundwater. In
addition, to the extent ORC were required to bear a significant portion of the
remediation costs, ORC believes it would have a claim against the prior owner
of the property for contribution or cost recovery. There can be no assurance,
however, that such claim would be successful.
The Portland, Oregon facility of Opti-Craft, Inc., a subsidiary of ORC,
appears on the Oregon Environmental Cleanup Site Information database, a
database of properties which may require cleanup. Following review of
documentation submitted by Opti-Craft, Inc. to the state environmental agency,
the agency determined that no further action is required at the facility unless
additional information becomes available in the future which warrants further
investigation.
Precision Optics, Inc. ("Precision"), a subsidiary of ORC, is one of 22
entities designated as a Responsible Party for cleanup of a disposal facility
located in Stearns County, Minnesota. Precision historically had sent certain
wastes to the St. Augustas Sanitary Landfill/Engen Dump (the "Site"). Wastes
deposited by Precision included ground glass and plastic created by the
processing of ophthalmic lenses; the grindings contained residues of oils used
in the processing of the lenses. The grindings also contained small
27
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concentrations of heavy metals, which are included in certain glass ophthalmic
lenses. Ground water contamination has been identified at the Site. The
principal contaminants identified are VOCs; Precision has no record of having
disposed of any VOCs at the Site. In the past, low concentrations of heavy
metals also have been identified in several test wells at the Site. Precision
was one of a number of optical laboratories and ophthalmic lens manufacturers
who disposed of wastes at the Site; a number of other manufacturers and
municipalities also disposed of wastes at the Site. ORC does not believe that
it has a material exposure or any material potential liability at the Site. The
quantities of waste disposed of by Precision at the Site were not significant
in comparison to quantities disposed of by other Responsible Parties and
Potentially Responsible Parties. Additionally, the state of Minnesota recently
enacted the Landfill Cleanup Program which may provide state reimbursement of
cleanup costs associated with the Site to certain eligible parties. There can
be no assurance, however, that funds will be made available for this Site or to
Precision. Cost estimates for the total cleanup have ranged from approximately
$1.2 million to $2.4 million.
ORC is also subject to other federal, state and local environmental laws and
regulations governing the handling, storage, use, disposal, discharge and
emission of a variety of chemical substances. Certain of these laws and
regulations require the reduction or elimination of many of these chemicals
over a period of time. Some of the required reductions require the substitution
of less hazardous or less toxic chemicals for the presently used chemicals or
the purchase of new equipment or pollution control devices. Substantial
penalties can be imposed for failure to meet emission standards or other
environmental limitations and requirements. To date, compliance with
environmental laws and regulations has not had a material effect on ORC's
earnings nor has it required ORC to undertake significant capital expenditures.
MAJOR SUPPLIERS
The principal raw materials used in ORC's products include petroleum-based
products and compounds, specialty chemicals, glass, nonferrous metals,
electronic components and subassemblies. ORC is dependent on outside suppliers
and subcontractors to meet performance specifications, quality standards and
delivery schedules. Although most raw materials, products and services used by
ORC in its operations are available from numerous sources at competitive
prices, certain raw materials used primarily to make ophthalmic lenses and IOLs
are available from only a few suppliers. However, these vendors tend to be very
substantial in size and disruption of supply is not likely.
CONSIDERATIONS RELATING TO THE RIGHTS
While holders of ORC Common Stock will receive, at a minimum, the Fraction as
a portion of the Merger Consideration, there can be no assurance as to the
value and composition of the OSP Disposition Proceeds represented by the
Rights. In the event ORC is unable to enter into definitive agreements to sell
the entire OSP Division prior to the Effective Time, or to complete all such
sales by December 31, 1994, the Rights may be less valuable than they otherwise
would have been if ORC had had additional time to consummate such agreements or
sales. In light of the status of current discussions, ORC believes that it is
reasonably likely that it will not enter into any agreements on or prior to the
Effective Time relating to the sale of all or part of the OSP Division. If no
agreement has been entered into on or prior to the Effective Time, in addition
to the right to receive $17.00 in cash and a fraction of a share of Benson
Common Stock having a value equal to the Exchange Ratio, each outstanding share
of ORC Common Stock will be converted into the right to receive a fraction of a
share of Benson Common Stock having a value equal to $2.00 in lieu of a pro
rata share of the OSP Disposition Proceeds.
In addition, the Rights will be a new issue of securities with no established
trading market. No one has advised Benson that it intends to make a market in
the Rights. Benson has no obligation to apply for listing of the Rights on any
exchange and currently does not intend to do so. Accordingly, there can be no
assurance that a trading market for the Rights will develop or, if such market
does develop, as to the liquidity of such market.
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GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of each of ORC and Benson
in connection with the solicitation of proxies by and on behalf of the Boards
of Directors of ORC and Benson, as the case may be, for use at the ORC Special
Meeting and the Benson Special Meeting, as the case may be. The ORC Special
Meeting will be held at 10:00 a.m. on October 12, 1994 at the offices of ORC,
1300 Optical Drive, Azusa, California 91702. The Benson Special Meeting will be
held at 1:00 p.m. on October 12, 1994 at the Citibank Amphitheater, 399 Park
Avenue, 12th floor, New York, New York. This Proxy Statement and the related
form of proxy for each of ORC and Benson are first being mailed to their
respective shareholders on or about September 12, 1994.
PURPOSE OF SPECIAL MEETINGS
The shareholders of ORC will be asked to consider and vote upon the Merger
Agreement at the ORC Special Meeting, and the shareholders of Benson will be
asked to consider and vote upon the Merger Agreement and the Benson Stock
Option Plan Amendment at the Benson Special Meeting. Each of the ORC Special
Meeting and the Benson Special Meeting also will be held for the purpose of
transacting such other business, if any, incidental to the conduct of such
meeting as may properly come before it.
RECORD DATE; VOTING RIGHTS; PROXIES
The ORC Board of Directors has fixed the close of business on September 6,
1994 as the ORC Record Date for determining holders entitled to notice of and
to vote at the ORC Special Meeting. The Benson Board of Directors has fixed the
close of business on September 9, 1994 as the Benson Record Date for
determining holders entitled to notice of and to vote at the Benson Special
Meeting.
As of the ORC Record Date, there were 5,897,738 shares of ORC Common Stock
issued and outstanding, entitling the holder thereof to one vote. As of
September 8, 1994, there were 18,565,948 shares of Benson Common Stock issued
and outstanding, entitling the holder thereof to one vote. All shares of ORC
Common Stock and Benson Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. If no instructions are
indicated, such shares of ORC Common Stock and Benson Common Stock will be
voted in favor of the Merger, such shares of Benson Common Stock will be voted
in favor of the Benson Stock Option Plan Amendment and in the discretion of the
proxy holder as to any other matter which may be incidental to the ORC Special
Meeting or the Benson Special Meeting, as the case may be, as may properly come
before such meeting. Neither ORC nor Benson knows of any matters other than as
described in the Notice of Special Meeting that are to come before the ORC
Special Meeting or the Benson Special Meeting, respectively. If any other
matter or matters are properly presented for action at the ORC Special Meeting
or the Benson Special Meeting, the persons named in the enclosed form of proxy
and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment, unless such authorization is withheld. A
shareholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice thereof to the Secretary of ORC or Benson, as
the case may be, by signing and returning a later dated proxy, or by voting in
person at the ORC Special Meeting or the Benson Special Meeting, as the case
may be; however, mere attendance at the ORC Special Meeting or the Benson
Special Meeting will not itself have the effect of revoking the proxy.
SOLICITATION OF PROXIES
The cost of solicitation of proxies for the ORC Special Meeting will be borne
by ORC and brokerage houses, fiduciaries, nominees and others will be
reimbursed for their out-of-pocket expenses in forwarding proxy materials to
beneficial owners of stock held in their names. MacKenzie Partners, Inc. has
been engaged by ORC to act as a proxy solicitor for the ORC Special Meeting and
will receive a fee of $5,000, plus expenses. The cost of solicitation of
proxies for the Benson Special Meeting will be borne by Benson. Benson
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does not intend to engage the services of a proxy solicitor. In addition to the
use of the mails, proxies may be solicited by the directors and officers of
Benson and ORC by personal interview, telephone or telegram. Such directors and
officers will not receive additional compensation for such solicitation but may
be reimbursed for out-of-pocket expenses incurred in connection therewith.
QUORUM
The presence in person or by properly executed proxy of holders of a majority
of the votes entitled to be cast at each of the ORC Special Meeting and the
Benson Special Meeting is necessary to constitute a quorum at the ORC Special
Meeting and the Benson Special Meeting, respectively.
REQUIRED VOTE
The approval and adoption of the Merger Agreement require the affirmative
vote of the holders of a majority of the outstanding shares of Benson Common
Stock, represented in person or by proxy at the Benson Special Meeting and the
affirmative vote of the holders of a majority of the outstanding shares of ORC
Common Stock outstanding on the ORC Record Date. The approval and adoption of
the Benson Stock Option Plan Amendment also require the affirmative vote of the
holders of a majority of the outstanding shares of Benson Common Stock
represented in person or by proxy at the Benson Special Meeting. Approval of
the Benson Stock Option Plan Amendment is not a condition to and is not
required for the consummation of the Merger, and such Amendment, if approved by
Benson shareholders, will be effective whether or not the Merger is
consummated. For purposes of determining whether the Merger Agreement has
received the required number of votes for approval at the Benson Special
Meeting and by the holders of shares of ORC Common Stock, abstentions will be
included in the vote totals with the result that an abstention has the same
effect as a negative vote. With respect to the Benson Special Meeting, in
instances where nominee recordholders, such as brokers, are prohibited from
exercising discretionary authority for beneficial owners who have not returned
a proxy ("broker non-votes"), those shares of Benson Common Stock will not be
included in the vote totals and, therefore, will have no effect on the vote.
With respect to approval by holders of shares of ORC Common Stock, broker non-
votes will be included in the vote totals and, therefore, will have the same
effect as a negative vote. On the ORC Record Date, there were 5,897,738 votes
represented by the outstanding ORC Common Stock, 1,184,550 of which are
beneficially owned by ORC's executive officers and directors and their
affiliates, such number representing approximately 20% of the ORC Common Stock.
Benson, through Benson Partners, beneficially owns approximately 9% of the
shares of ORC Common Stock and has agreed with ORC to vote its shares of ORC
Common Stock in favor of the Merger Agreement. The Chief Executive Officer of
ORC, who beneficially owns approximately 16% of the shares of ORC Common Stock,
has agreed with Benson to vote his shares of ORC Common Stock in favor of the
Merger Agreement. As of September 8, 1994, there were 18,565,948 votes
represented by the outstanding Benson Common Stock and Benson's executive
officers and directors and their affiliates beneficially own 9,243,413 shares,
such number representing approximately 50% of the shares of Benson Common
Stock. Each of the Chief Executive Officer and the Vice Chairman of Benson, who
in the aggregate beneficially own approximately 37% of the shares of Benson
Common Stock, has agreed with ORC to vote his shares of Benson Common Stock in
favor of the Merger Agreement.
THE MATTERS TO BE CONSIDERED AT THE ORC SPECIAL MEETING AND THE BENSON
SPECIAL MEETING ARE OF GREAT IMPORTANCE TO THE SHAREHOLDERS OF ORC AND BENSON.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION PRESENTED IN THIS PROXY STATEMENT, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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THE MERGER AND SPECIAL FACTORS
BACKGROUND OF THE MERGER
In late 1991, the management of ORC undertook an analysis of ORC's two
operating groups--the Consumer Optical Group and the Surgical Group--to
determine what impact the possible acquisition of CCI would have on ORC's
operations. ORC acquired CCI in March 1992, and, based on the analysis
commenced in connection with the CCI acquisition, the ORC Board determined that
the separation of ORC's Consumer Optical Group and Surgical Group would enhance
their respective abilities to access equity capital markets for future
expansion and would also simplify operating relationships with the Surgical
Group's principal regulatory authority, the FDA. On March 16, 1992, ORC
announced that its Board had approved a plan to spin off the Consumer Optical
Group to the holders of ORC Common Stock as a free-standing publicly traded
company.
Approximately one week after the announcement of the contemplated spinoff,
ORC encountered significant adverse publicity in connection with one of its
products, Orcolon. Subsequently, ORC was named as a defendant in a number of
product liability suits involving Orcolon, the FDA initiated an investigation
of this product and ORC's domestic IOL sales volume was negatively affected. In
addition, average IOL selling prices fell sharply due largely to increasing
competitive pressures. In light of the significant management and operating
disruption resulting from these factors, the ORC Board decided to postpone the
spinoff and focus management's attention on ORC's day-to-day operations. On
June 26, 1992, the ORC Board announced the postponement and its continuing
belief that the spinoff would ultimately be in the best interests of ORC.
During the next 12 months, consideration of any restructuring or other
fundamental transaction was postponed.
In July 1993, Mr. Martin E. Franklin, Chairman of the Board, Chief Executive
Officer and President of Benson, initiated discussions with Mr. Richard D.
Wood, Chairman of the Board, Chief Executive Officer and President of ORC,
regarding a possible friendly business combination, which discussions were held
on several occasions. On August 25, 1993, Benson verbally proposed to acquire
all ORC Common Stock for consideration consisting of cash and Benson Common
Stock. In a letter dated September 14, 1993, Mr. Wood formally advised Benson
that ORC was not for sale at that time.
On January 13, 1994, Benson Partners filed with the Commission a Schedule 13D
reporting that it had acquired 374,000 shares of ORC Common Stock, such number
representing on such date approximately 6.17% of the shares of outstanding ORC
Common Stock. As of September 6, 1994, Benson Partners owns 529,950 shares of
ORC Common Stock, such number representing approximately 9% of the outstanding
shares of ORC Common Stock on the ORC Record Date.
In late January 1994, the ORC Board decided to consider strategic
alternatives to enhance value to the ORC shareholders. The ORC Board reached
this decision after considering various factors, including the continuing
interest of Benson, the public disclosure of the FDA's impoundment of certain
of ORC's IOL inventory in November 1993, the continuing stagnation in IOL sales
and the deterioration of the market price of ORC Common Stock prior to the
announcement of the filing of the Schedule 13D by Benson Partners.
On February 17, 1994, ORC announced that it had engaged DLJ as an independent
financial advisor to advise it on strategic plans, including valuing ORC for a
possible sale, a potential spinoff of ORC's consumer optical business, a
corporate reorganization or a possible joint venture. On March 1, 1994, Benson
engaged Salomon Brothers to act as its financial advisor in connection with
Benson's consideration of a possible transaction with ORC. Thereafter, Benson
and its representatives met with ORC and its representatives. In addition, DLJ
contacted approximately 150 parties regarding a possible transaction with ORC
and circulated preliminary information packages describing ORC and each of its
businesses to the approximately 45 parties who expressed interest in a
transaction. As part of this process, DLJ requested interested parties to
submit written indications of interest to purchase all or part of ORC on or
prior to May 16, 1994 for consideration by ORC. Thereafter, Mr. Franklin sent a
letter dated May 11, 1994 to Mr. Wood informing ORC of Benson's
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offer to purchase, subject to the satisfaction of certain conditions, all ORC
Common Stock for a purchase price of $21 per share, consisting of $17 in cash
and $4 in Benson Common Stock. There followed a number of discussions between
the respective financial advisors. On May 23, 1994, the ORC Board met to
consider all indications of interest received and the prospects for pursuing
alternative transactions. At the conclusion of this meeting, ORC announced that
its Board had established June 30, 1994 as the deadline for written offers to
purchase all or a portion of ORC.
Between May 23 and June 23, 1994, ORC conducted a number of meetings with a
number of prospective buyers, including Benson. No prospective buyer, other
than Benson, submitted an offer to purchase all or a portion of ORC. On June
23, 1994, Mr. Franklin spoke with Mr. Wood regarding an acquisition of ORC and
on June 24, 1994, Mr. Franklin and Benson's legal and financial advisors met
with Mr. Wood and ORC's legal and financial advisors. From June 28, 1994
through June 30, 1994, representatives of Benson and ORC, together with their
legal and financial advisors, met to negotiate the terms of the Merger
Agreement. On June 30, 1994, the Boards of Directors of each of Benson and ORC
approved the Merger and the Merger Agreement and, thereafter, Benson and ORC
entered into the Merger Agreement.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF ORC AND BENSON; REASONS FOR THE
MERGER
ORC. At the June 30, 1994 meeting of the ORC Board of Directors, the
directors present at such meeting unanimously approved and adopted the Merger
Agreement and recommended that all ORC shareholders vote in favor of the Merger
at the ORC Special Meeting. The ORC Board of Directors recommends that holders
of ORC Common Stock vote for the approval and adoption of the Merger Agreement.
After more than two years of considering various strategic alternatives,
including discussions between senior management of ORC and Benson during parts
of 1993 and 1994, the ORC Board of Directors concluded in June 1994 that an
acquisition of ORC by Benson was desirable.
In making the determination on June 30, 1994 that the Merger is fair to, and
in the best interests of, the shareholders of ORC and recommending that
shareholders of ORC vote in favor of the Merger and approve and adopt the
Merger Agreement, the ORC Board of Directors considered a number of factors,
including the following:
(i) The ORC Board believed that the Merger was the best strategic
alternative available to ORC and its shareholders. Specifically, the Board
believed that a spinoff transaction was no longer feasible because of the
recent poor operating results of the IOL product line caused by intense
competition and regulatory difficulties, disappointing sales of the corneal
topography system and continued heavy development charges for the
refractive surgical product at CCI, which would effectively preclude
separate financing of the Surgical Group. In addition, no prospective
buyer, other than Benson, submitted an offer to purchase all or a portion
of ORC.
(ii) The ORC Board concluded that sales of the various ORC groups
separately would not equal the value offered by Benson in the Merger due to
the adverse tax consequences of such an approach.
(iii) The Merger would provide the holders of ORC Common Stock with the
opportunity to receive both a substantial cash premium for their shares of
ORC Common Stock compared to the market price at the time of Benson's
January 1994 announcement, and the ability to participate in the continuing
growth of the Consumer Optical Group through ownership of shares of Benson
Common Stock.
(iv) A sale of the components of the OSP Division, or a portion thereof, to
a separate purchaser or purchasers would avoid the potential for operating
conflicts with the Consumer Optical Group. The operating conflicts arise
from CCI's development of a refractive surgical procedure for changing the
shape of the cornea to correct myopia, hyperopia and astigmatism which, to
the extent successful, might compete with customers of the Consumer Optical
Group who sell eyeware to correct vision. In addition, the ORC Board
believed that development of the IOL product line and the successful
development and
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exploitation of CCI's refractive surgical procedure and expansion of the
product line, could be accomplished most effectively if this division were
separated from the Consumer Optical Group. The value to the ORC shareholder
could be further enhanced in the event of a sale of ORC's corneal
topography operations or CCI to other purchasers.
(v) In the event the sale of the IOL business could not be accomplished
or the other operations of the OSP Division could not be sold, Benson would
guarantee $2 per share in value to the holders of ORC Common Stock through
the distribution of additional shares of Benson Common Stock.
In the course of its deliberations, the ORC Board of Directors reviewed and
considered with ORC's management a number of other factors relevant to the
Merger. In particular, the ORC Board considered among other things: (i)
information concerning ORC's and Benson's respective businesses, prospects,
financial performances, financial conditions and operations; (ii) the history
of the trading prices and volume of ORC Common Stock and Benson Common Stock;
(iii) premiums to market and multiples paid in other acquisition and merger
transactions in the consumer optical and other industries; (iv) an analysis of
the respective prospects and pro forma operations of the combined companies;
(v) compatibility of the managements of ORC and Benson; (vi) alternatives for
growth in the consumer optical and OSP Division market; (vii) a financial
presentation by DLJ, including the oral opinion of DLJ that the Merger
Consideration to be received by the shareholders of ORC in the Merger is fair
to such shareholders (excluding Benson and its affiliates and Benson's direct
and indirect subsidiaries) from a financial point of view; (viii) the scope of
the efforts made by ORC management and DLJ to locate other prospective
purchasers for ORC and its various components; (ix) the terms and conditions of
the Merger Agreement; and (x) that certain members of ORC's management, one of
whom is a member of the Board of Directors, have certain interests in the
Merger that are in addition to those of ORC shareholders generally. The ORC
Board believed that the lack of a written valuation report did not affect its
ability to analyze DLJ's fairness opinion.
The ORC Board of Directors also considered the following potentially negative
factors in its deliberations concerning the Merger: (i) the potential
difficulties that might be encountered by Benson in the event it continues its
retail operations in the optical market, (ii) the need for continued ongoing
negotiations for the sale of the various operations of the OSP Division and the
risk that such agreements would not be made prior to the consummation of the
Merger and (iii) the risk that despite the efforts of the combined companies,
key technical and management personnel of the consumer optical groups may not
be retained by the combined companies.
All of the material factors considered by the ORC Board are described above.
In view of the variety of factors, both positive and negative, considered by
the ORC Board, the ORC Board did not find it practicable to quantify or
otherwise assign relative weights to the specific factors considered. The ORC
Board did not establish a specific range of value for ORC.
In recommending approval of the Merger, members of the ORC Board of Directors
may have certain interests in the Merger that are in addition to those of other
shareholders of ORC generally.
Benson. The Benson Board of Directors has determined that the Merger is fair
to, and in the best interests of, Benson and its shareholders. At the June 30,
1994 meeting of the Benson Board of Directors, the directors present at such
meeting unanimously approved and adopted the Merger Agreement. By unanimous
written consent, dated as of June 30, 1994, the Benson Board of Directors
unanimously approved the terms of the Merger Agreement. The Benson Board of
Directors recommends that holders of Benson Common Stock vote for the approval
and adoption of the Merger Agreement.
As described above under "The Merger and Special Factors--Background of the
Merger," Benson's management had been seeking to enter into a business
combination with ORC for an extended period of time. During the course of its
deliberations relating to a possible business combination with ORC, Benson's
management and the Benson Board of Directors concluded that such a combination
would further Benson's long-term business strategy, which includes expanding
existing distribution channels to ophthalmologists,
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adding significant new distribution channels to independent optometrists and
opticians and organizing Benson's administrative and distribution capabilities
to maximize overall efficiency and flexibility.
In the course of reaching its decision to approve the Merger, the Benson
Board of Directors consulted with its financial advisors regarding the
financial aspects and fairness of the Merger, and its legal advisors regarding
the legal terms of the transaction and the obligations of the Benson Board of
Directors in its consideration of the Merger. Benson believes that no member of
the Benson Board of Directors and no member of Benson's management has a
material interest in the Merger that is in addition to those of shareholders
generally. The Benson Board of Directors concluded that the Merger will further
Benson's objectives in part because of its belief that: (i) ORC's businesses
would allow Benson to expand existing distribution channels and add significant
new distribution channels, (ii) the ORC business is compatible with Benson's
wholesale business and that by combining the two businesses Benson, over time,
would be able to realize at least $2 million in annual cost savings and
operating synergies through the elimination of duplicative cost structures such
as administrative head office expenses, insurance expenses and public company
expenses and the realization of the economies of combining distribution
operations (collectively, the "Synergies"), (iii) ORC sales are not seasonal in
nature and therefore would balance the seasonality of Benson's business, and
(iv) ORC's operating management expertise would be beneficial to Benson's
operations.
In reaching its conclusion that the Merger is fair to, and in the best
interest of, Benson and its shareholders, the Benson Board of Directors also
considered, among other things, the following factors:
(i) Benson's knowledge and review of the business, operations,
properties, assets, financial condition and operating results of each of
ORC and Benson;
(ii) the terms and conditions of the Merger Agreement (see "The Merger
Agreement"), which were the product of arms' length negotiations, including
the amount and form of the consideration, as well as the proposed price
protection range compared to the ranges in certain other transactions;
(iii) the oral opinion of Salomon Brothers delivered to the Benson Board
of Directors at its meeting on June 30, 1994 (and subsequently confirmed in
writing), to the effect that, as of the date thereof, the Merger
Consideration to be paid by Benson in the Merger is fair, from a financial
point of view, to Benson, and the oral presentation of Salomon Brothers
(which presentation included an estimation of a range of hypothetical
reference value for ORC's total common shareholders' equity (as discussed
more fully below)) to the Benson Board of Directors at the same meeting
with respect to such opinion;
(iv) the fact that the effect of the Merger would be antidilutive to
Benson's shareholders on an annualized pro forma earnings per share basis;
(v) the regulatory approvals required for the Merger and the estimated
length of time required to consummate the Merger;
(vi) the historical business prospects of Benson and ORC, as well as
Benson's and ORC's current financial condition, including the benefits of
the current management team of ORC and the fact that ORC sales are
generally not seasonal in nature; and
(vii) current industry, economic and market conditions.
The Benson Board of Directors also considered the following potentially
negative factors in its deliberations concerning the Merger: (i) the inherent
difficulty Benson would face, if the Merger is approved, in attempting to be
both an effective retailer and an effective wholesaler in the prescription
eyewear business and, accordingly, Benson's probable need in that event to
divest its retail operations so as to increase the effectiveness and
profitability of the wholesale business in connection with Benson's long-term
business strategy, (ii) possible contingent liabilities, including FDA
examinations, relating to ORC's IOL business, which business may be sold, and
(iii) certain investment considerations related to the Merger. See "Certain
Investment Considerations." The Benson Board of Directors does not consider any
of these negative considerations to be sufficient, either individually or
collectively, to outweigh the advantages of the Merger pursuant to the Merger
Agreement.
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All of the material factors considered by the Benson Board are described
above. In view of the variety of factors, both positive and negative,
considered by the Benson Board, the Benson Board did not find it practicable to
quantify or otherwise assign relative weights to the specific factors
considered. The Benson Board did not establish a specific range of value for
ORC.
OPINIONS OF FINANCIAL ADVISORS
Fairness Opinion of ORC's Financial Advisor. On June 30, 1994, DLJ delivered
its oral opinion to the Board of Directors of ORC, which it subsequently
confirmed in writing as of the date of this Proxy Statement, to the effect
that, as of the date of such opinion, the Merger Consideration to be paid to
the holders of ORC Common Stock pursuant to the terms of the Merger Agreement
is fair, from a financial point of view, to the holders of ORC Common Stock
(excluding Benson and its affiliates and Benson's direct and indirect
subsidiaries). The summary of the opinion of DLJ set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion, a copy of which opinion, dated September 12, 1994, is attached hereto
as Annex B. Holders of ORC Common Stock are urged to read the DLJ opinion in
its entirety for further information as to the assumptions made, matters
considered and other aspects of the review by DLJ. The compensation to be
received by DLJ in connection with the Merger and its opinion is described
below.
The DLJ opinion does not constitute a recommendation to any holder of ORC
Common Stock as to how such shareholder should vote on the proposed Merger at
the ORC Special Meeting. The Merger Consideration was determined through
negotiations between Benson and ORC. DLJ neither determined nor provided a
recommendation as to the form or amount of consideration to be paid to holders
of ORC Common Stock in the Merger. DLJ's opinion does not constitute an opinion
as to the prices at which Benson Common Stock will actually trade at any time.
No restrictions or limitations were imposed by the ORC Board of Directors upon
DLJ with respect to the investigations made or the procedures followed by DLJ
in rendering its opinion. DLJ did not ascribe a specific range of value to ORC,
but made its fairness determination on the basis of the financial analyses
referenced below.
In arriving at its opinion, DLJ has reviewed the Merger Agreement and the
Registration Statement and financial and other information that was publicly
available or furnished to it by ORC and Benson including information provided
during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain internal financial projections of ORC on a stand-alone basis for the
period beginning August 1, 1994 and ending July 31, 1996 prepared by the
management of ORC and certain financial results of Benson for the fiscal year
ended December 31, 1993 and certain internal financial projections of Benson on
a stand-alone basis for the period beginning January 1, 1994 and ending
December 31, 1996, in each case, adjusted for acquisitions completed by Benson,
the pending disposition of Benson's retail businesses and the completion of a
$40 million offering of convertible subordinated notes on May 9, 1994, prepared
by the management of Benson (the "Pro Forma Benson Financials"). For purposes
of comparative analysis, DLJ adjusted the historical and projected financial
results of ORC arithmetically to a December 31 fiscal year end based on months.
In addition, DLJ reviewed prices, premiums and implied multiples paid in
certain other business combinations; compared certain financial and securities
data of ORC and Benson with that of various other companies whose securities
are traded in public markets; reviewed the historical stock prices and trading
volumes of ORC Common Stock and Benson Common Stock; and examined the impact of
the Merger on earnings attributable to Benson Common Stock. DLJ also discussed
the past and current operations, financial condition and prospects of ORC and
Benson with the respective management of each company and conducted such other
financial studies, analyses and investigations as DLJ deemed appropriate for
purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
and other information that was available to it from public sources, that was
provided to it by ORC and Benson or their representatives, or that was
otherwise reviewed by it. DLJ also assumed that the financial projections
supplied to it were reasonably prepared on the basis
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reflecting the best currently available estimates and judgments of the
managements of ORC and Benson as to the future operating and financial
performance of their respective companies. DLJ did not make any independent
evaluation of the assets, liabilities or operations of ORC or Benson, nor did
DLJ verify any of the information reviewed by it. DLJ made no independent
investigation of any legal matters affecting ORC or Benson and assumed the
correctness of all legal advice given to the ORC Board of Directors by counsel
to ORC.
DLJ's opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to it as of,
the date of its opinion. It should be understood that, although subsequent
developments may affect its opinion, DLJ does not have any obligation to
update, revise or reaffirm its opinion. DLJ did not express any opinion as to
the amount or nature of the net proceeds to be realized from the sale of the
OSP Division. DLJ's opinion does not address the relative merits of the Merger
and the other business strategies being considered by the ORC Board of
Directors, including the sale of the OSP Division, nor does it address the ORC
Board's decision to proceed with the Merger.
The following is a summary of certain financial analyses performed by DLJ to
arrive at its oral opinion to the ORC Board of Directors on June 30, 1994. DLJ
performed certain procedures, including each of the financial analyses
described below, and reviewed with the management of ORC the assumptions on
which such analyses were based and other factors, including the current and
projected financial results of ORC and Benson. The analyses were performed
assuming two different values for the Merger Consideration: (1) $26.85,
representing the value received per share of ORC Common Stock, consisting of
$17 in cash, $6 of value in Benson Common Stock (assuming a Benson stock price
of $8.00 per share multiplied by the Exchange Ratio of 0.75) and $4.00 per
share OSP Disposition Proceeds (less $0.15 per share, representing 15% of the
amount by which the amount which would otherwise be considered OSP Disposition
Proceeds exceeds $19,195,560) (the "$26.85 Offer Price") and (2) $23.95,
representing the minimum value of the Merger Consideration, assuming a Benson
Common Stock price of $6.00 per share or less and $2.00 of value per share of
ORC Common Stock resulting from a combination of a pro rata share in the OSP
Disposition Proceeds and that fraction of a share of Benson Common Stock which
together with the pro rata share in the OSP Disposition Proceeds will result in
$2.00 of value per share of ORC Common Stock (the "$23.95 Offer Price").
Approximately $26 million of OSP Disposition Proceeds would be required to
generate the $4.00 per share of OSP Disposition Proceeds used in the $26.85
Offer Price. The following summary does not purport to be a complete
description of the analyses performed by DLJ. DLJ utilized substantially the
same types of financial analysis in preparing its written opinion dated
September 12, 1994.
1. Stock Premium Analysis. DLJ reviewed publicly available information for
four selected transactions involving the acquisition of companies in the
consumer optical industry: the acquisition of International Hydron Corp. by
SmithKline Beckman Corp.; the acquisition of Miller & Santhouse PLC by Boots Co
PLC; the acquisition of Royal International Optical by US Vision Inc.; and the
acquisition of Marquest Medical Products Inc. by Cooper Cos Inc. (the
"Comparable Transactions") and for twenty-six transactions involving
acquisitions in the $100 million to $200 million range (the "Other
Transactions"). DLJ reviewed the price paid per share as a premium to the price
of the stock of the acquired company one day, one week and one month prior to
the announcement of the transaction.
The medians of the premiums paid to the price per share one day, one week and
one month prior to announcement of the Comparable Transactions were 15.3%,
37.2% and 39.3%, respectively. The medians of the premiums paid to the price
per share one day, one week and one month prior to announcement of the Other
Transactions were 36.8%, 38.8% and 45.1%, respectively. The premiums
represented by the $26.85 Offer Price to the price per share of ORC Common
Stock one day, one week and one month prior to June 30, 1994, the day that the
ORC Board of Directors voted to approve the Merger, were 17.4%, 25.6% and
27.9%. The premiums represented by the $23.95 Offer Price to the price per
share of ORC Common Stock one day, one week and one month prior to June 30,
1994 were 4.7%, 12.0% and 14.0%, respectively. The premiums represented by the
$26.85 Offer Price to the price per share of ORC Common Stock one day, one week
and one month prior to January 13, 1994, the day that Benson Partners filed a
Form 13-D pursuant to
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the Exchange Act indicating that it had acquired a 6.2% interest in ORC, were
73.2%, 69.1% and 88.4%, respectively. The premiums represented by the $23.95
Offer Price to the price per share of ORC Common Stock one day, one week and
one month prior to January 13, 1994 were 54.5%, 50.9% and 68.1%, respectively.
Although the Comparable Transactions were used for comparison purposes, none
of such transactions are directly comparable to the Merger.
2. Transaction Analysis. DLJ reviewed publicly available information for nine
selected transactions involving the acquisition of companies in the consumer
optical industry: the acquisition of Bonneau Co. by Benson; the acquisition of
Miller & Santhouse PLC by Boots Co PLC.; the acquisition of Marquest Medical
Products Inc. by Cooper Cos.; the acquisition of Innovisions Holdings Ltd. by
Maxton International; the acquisition of Cooper-Cooper Vision European by
Pilkington PLC; the acquisition of Sola Optical USA Inc. by AEA Investors; the
acquisition of International Hydron Corp. by SmithKline Beckman Corp.; the
acquisition of Royal International Optical by US Vision Inc.; and the
acquisition of Cooper Cos--Worldwide Contact by Wesley Jessen (Schering-Plough)
(the "Comparable M&A Transactions"). DLJ reviewed the Enterprise Value (defined
as purchase price of equity plus debt refinanced or assumed less cash) of the
acquired company as a multiple of revenues, earnings before depreciation,
amortization, interest and taxes ("EBDAIT") and earnings before interest and
taxes ("EBIT") for the latest reported twelve month period and price offered
per share as a multiple of earnings per share ("EPS") for the latest reported
twelve month period and book value per share.
The medians of the ratios of Enterprise Value to latest twelve months'
revenues, EBDAIT and EBIT in the Comparable M&A Transactions were 1.1x, 7.9x
and 12.4x, respectively, as compared to the corresponding multiples for ORC of
1.0x, 11.9x and 20.8x at the $26.85 Offer Price and 0.8x, 10.4x and 18.2x at
the $23.95 Offer Price, respectively. The medians of the ratios of price
offered per share as a multiple of latest twelve months' EPS and book value per
share in the Comparable M&A Transactions were 18.8x and 2.4x, respectively, as
compared to the corresponding multiples for ORC of 44.3x and 1.7x at the $26.85
Offer Price and 39.5x and 1.5x at the $23.95 Offer Price, respectively.
Although the Comparable M&A Transactions were used for comparison purposes,
none of such transactions are directly comparable to the Merger.
3. Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical
operating and financial ratios for ORC and Benson to the corresponding data and
ratios of certain other companies whose securities are publicly-traded and
which DLJ believes have trading, market valuation and operating characteristics
similar to ORC. These companies included Allergan, Inc.; Bausch & Lomb, Inc.;
BMC Industries, Inc.; Bouton Corp. and Omega Health Systems, Inc. (the "ORC
Comparable Companies"). Such data and ratios included Enterprise Value as a
multiple of revenues, EBDAIT and EBIT for the latest reported twelve month
period for the ORC Comparable Companies. DLJ also examined the ratio of the
current stock price to book value per share, latest twelve month EPS, current
calendar year estimated EPS (as arithmetically adjusted (based on months) based
on fiscal year estimates by Institutional Brokers Estimating System ("IBES")),
and next calendar year estimated EPS (as arithmetically adjusted (based on
months) based on fiscal year estimates by IBES) for the ORC Comparable
Companies.
Such analysis indicated that for the ORC Comparable Companies, (i) the median
values of Enterprise Value as a multiple of latest twelve months' revenues,
EBDAIT and EBIT were 1.2x, 5.8x and 8.1x, respectively, as compared to the
corresponding multiples of ORC of 1.0x, 11.9x and 20.8x at the $26.85 Offer
Price and 0.8x, 10.4x and 18.2x at the $23.95 Offer Price, respectively, and
(ii) the median values of price per share as a multiple of book value per
share, latest twelve months' EPS, current calendar year estimated EPS and next
calendar year estimated EPS were 2.6x, 13.3x, 12.9x and 11.9x, respectively, as
compared to
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multiples of ORC of 1.7x, 44.3x, 18.4x and 10.4x at the $26.85 Offer Price and
1.5x, 39.5x, 16.4x and 9.3x at the $23.95 Offer Price, respectively.
Although the ORC Comparable Companies were used for comparison purposes, none
of such companies are directly comparable to ORC.
4. Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects
resulting from the Merger. In conducting its analysis, DLJ relied upon certain
assumptions described above and financial projections provided by the
managements of ORC and Benson, respectively. These projections did not take
into account possible synergies, savings or incremental costs which might be
experienced in the Merger. DLJ analyzed the pro forma effect of the Merger on
Benson's EPS. The analysis indicated that Benson's EPS would have been
approximately 1.4% higher in the fiscal year ended December 31, 1993 than the
EPS of Benson as a stand-alone company during the same period based on the Pro
Forma Benson Financials for the fiscal year ended December 31, 1993.
Furthermore, the analysis indicated that the EPS of Benson would be
approximately 1.0% higher in the fiscal year ending December 31, 1994 and
approximately 15.0% higher in the fiscal year ending December 31, 1995 than the
EPS of Benson as a stand-alone company during the same periods, in each case,
based on the Pro Forma Benson Financials for the fiscal years ending December
31, 1994 and December 31, 1995, respectively. The results of the pro forma
combination analysis are not necessarily indicative of future operating results
or financial position.
5. Stock Trading History. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and volume for ORC Common
Stock from July 1984, with particular focus on the twelve months ended June 29,
1994, and for Benson Common Stock from June 21, 1991, with particular focus on
the six months ended June 29, 1994.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, notwithstanding the separate factors
summarized above, DLJ believes that its analyses must be considered as a whole
and that selecting portions of its analysis and the factors considered by it,
without considering all analysis and factors, could create an incomplete view
of the evaluation process underlying its opinion. None of the analyses
performed by DLJ was indicated by DLJ to have a greater significance than any
other. In performing its analyses, DLJ made numerous assumptions with respect
to industry performance, business and economic conditions and other matters.
The analyses performed by DLJ are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses.
ORC selected DLJ as its financial advisor with respect to its consideration
of strategic alternatives, including possible mergers and acquisitions as well
as other alternatives available to the ORC Board of Directors to preserve or
maximize shareholder value, because DLJ is a nationally recognized investment
banking firm and the principals of DLJ have substantial experience in
transactions similar to those which were being considered by the Company. In
addition, as part of its investment banking services, DLJ is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
Pursuant to the terms of an engagement letter dated February 17, 1994 between
ORC and DLJ, ORC has paid DLJ $525,000 as follows: $125,000 upon execution of
the engagement letter, $300,000 upon notification by DLJ that it was prepared
to deliver an opinion as to the fairness from a financial point of view of the
consideration to be received by holders of ORC Common Stock pursuant to the
terms of the Merger Agreement and $100,000 upon the mailing of this Proxy
Statement to holders of ORC Common Stock. In addition, pursuant to the
engagement letter, ORC will pay DLJ an additional amount equal to 1% of the
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aggregate consideration received by the holders of ORC Common Stock pursuant to
the terms of the Merger Agreement less $375,000 upon consummation of the Merger
and, thus, DLJ may be viewed as having a potential conflict of interest in
rendering its fairness opinion. ORC has also agreed to reimburse DLJ for its
out-of-pocket expenses (including the reasonable fees and expenses of counsel,
up to a maximum of $20,000 without the prior written authorization of ORC)
incurred in connection with its engagement and to indemnify DLJ and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under the federal securities laws. The terms of the fee
arrangement with DLJ, which are customary in transactions of this nature, were
negotiated at arms'-length between ORC and DLJ, and the ORC Board of Directors
was aware of such arrangement.
In the ordinary course of business, DLJ may trade the securities of ORC and
Benson for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Fairness Opinion of Benson's Financial Advisor. At the June 30, 1994 meeting
of the Benson Board of Directors, Salomon Brothers delivered its oral opinion,
which it subsequently confirmed in writing, to the effect that, as of the date
thereof and subject to certain matters as stated therein, the Merger
Consideration to be paid by Benson in the Merger is fair, from a financial
point of view, to Benson. A copy of the written opinion of Salomon Brothers,
dated June 30, 1994, is attached to this Proxy Statement as Annex C and is
incorporated herein by reference in its entirety. HOLDERS OF BENSON COMMON
STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE
MATTERS CONSIDERED, ASSUMPTIONS MADE AND LIMITS OF REVIEW BY SALOMON BROTHERS
IN ARRIVING AT ITS OPINION. THE FEES PAYABLE TO SALOMON BROTHERS IN CONNECTION
WITH ITS ENGAGEMENT, INCLUDING THE RENDERING OF ITS OPINION, ARE DESCRIBED
BELOW.
Salomon Brothers' opinion noted, among other things, that it was based on
conditions as they existed and could be evaluated on the date thereof and does
not address Benson's underlying business decision to effect the Merger. Benson
has not requested Salomon Brothers to, and Salomon Brothers does not have any
obligation to, and has not performed the review or analysis necessary to,
update or reaffirm its opinion to consider or take into account events
occurring or information obtained after June 30, 1994. Salomon Brothers'
opinion was delivered solely for use and consideration by the Benson Board of
Directors, and does not constitute a recommendation to any holder of Benson
Common Stock as to how to vote in connection with the proposal to approve and
adopt the Merger Agreement.
No limitations were imposed by the Benson Board of Directors on the scope of
Salomon Brothers' investigation or the procedures to be followed by Salomon
Brothers in preparing and rendering its opinion. The Merger Consideration to be
paid by Benson in the Merger was determined through negotiations between Benson
and ORC and was approved by the Benson Board of Directors.
In its review and analysis and in arriving at its opinion, Salomon Brothers
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided it or publicly available and did not attempt
independently to verify any of such information. With respect to projections,
Salomon Brothers assumed that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the respective
managements of Benson and ORC at the time of preparation as to the respective
future financial performances of Benson and ORC, including projected cost
savings and operating synergies from the Merger. Salomon Brothers expressed no
view as to such projections or the assumptions on which they were based.
Salomon Brothers did not conduct a physical investigation for valuation
purposes of any of the properties or facilities of Benson or ORC, nor did it
make or obtain any independent evaluations or appraisals of any of such
properties or facilities.
With respect to certain legal and financial matters pertaining to the planned
sale of the OSP Division, including the identification and quantification of
contingent liabilities of the OSP Division that might remain with ORC following
such a sale, Salomon Brothers relied, without independent investigation, upon
the estimates, advice and diligence investigation of management of Benson and,
for purposes of its opinion, assumed with Benson's consent that the present
value of any such contingent liabilities retained by ORC
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following a sale of the OSP Division would not exceed $2 million. Salomon
Brothers also assumed that if the Average Closing Price were less than $6.00,
the Benson Board of Directors would not elect to pursue the Merger if the
Exchange Ratio would be greater than 0.825.
In connection with rendering its opinion, Salomon Brothers reviewed and
analyzed, among other things, the following: (i) the Merger Agreement; (ii)
certain publicly available information concerning Benson, including the Annual
Reports on Form 10-K of Benson for each of the fiscal years in the two-year
fiscal period ended December 31, 1993, and the Quarterly Report on Form 10-Q
of Benson for the fiscal quarter ended March 31, 1994; (iii) certain other
internal information, primarily financial in nature, concerning the business
and operations of Benson furnished to Salomon Brothers by Benson for purposes
of its analysis, including projections of the future financial performance of
Benson and an estimate of the potential cost savings and operating synergies
from the Merger; (iv) certain publicly available information concerning the
trading of, and the trading market for, Benson Common Stock; (v) certain
publicly available information concerning ORC, including the Annual Reports on
Form 10-K of ORC for each of the fiscal years in the three-year fiscal period
ended July 31, 1993, and the Quarterly Reports on Form 10-Q of ORC for the
fiscal quarters ended October 31, 1993, January 30, 1994 and April 30, 1994;
(vi) certain other internal information primarily financial in nature,
concerning the business and operations of ORC furnished to Salomon Brothers by
ORC for purposes of its analysis, including projections of the future
financial performance of ORC (without the OSP Division); (vii) certain
publicly available information concerning the trading of, and the trading
market for, ORC Common Stock; (viii) certain publicly available information
with respect to certain other companies that Salomon Brothers believed to be
comparable in certain respects to Benson or ORC and the trading markets for
certain of such other companies' securities; and (ix) certain publicly
available information concerning the nature and terms of certain other
transactions that Salomon Brothers considered relevant to its inquiry. Salomon
Brothers also met with certain officers and employees of Benson and ORC to
discuss the foregoing, as well as other matters it believed relevant to its
inquiry.
The opinion of Salomon Brothers delivered orally on June 30, 1994 to the
Benson Board of Directors and subsequently confirmed in writing was premised
on a variety of financial analyses. Salomon Brothers discussed its opinion and
summarized certain of such analyses at such June 30, 1994 meeting.
Summary of Transaction. Salomon Brothers estimated that the total
consideration to be paid by Benson for ORC in the Merger (excluding any
consideration payable if the amount of the OSP Disposition Proceeds is less
than $2.00) would be approximately $141 million, assuming an Average Closing
Price for Benson Common Stock of $7.375 (and therefore an Exchange Ratio of
0.75). This estimate took into account all outstanding shares of ORC Common
Stock and ORC Stock Options, and assumed, based on Benson management's
estimate (without independent investigation by Salomon Brothers), that the
maximum present value of any contingent liabilities of the OSP Division that
might remain with ORC following any sale of the OSP Division would not exceed
$2 million.
Projections. In performing its analyses as described below, Salomon Brothers
used and relied upon projections for ORC (without the OSP Division) that were
provided by management of ORC (the "Base Case Projections"). Except for
purposes of its discounted cash flow analysis described below, Salomon
Brothers adjusted the Base Case Projections arithmetically, based on months,
to a December 31 fiscal year end to facilitate a comparative analysis with
Benson's fiscal year end. The Base Case Projections, as so adjusted, forecast
revenues growing 2.2%, 5.7%, 12.9%, 13.5% and 13.7% in the calendar years 1994
through 1998, respectively, with ORC's earnings before depreciation, interest
and taxes ("EBDIAT"), expressed as a percentage of such revenues (the "EBDIAT
Margin"), as 10.6%, 14.3%, 15.3%, 15.4% and 15.3% in the calendar years 1994
through 1998, respectively. For the same period, the Base Case Projections
forecast a four-year cumulative average growth rate ("CAGR") for ORC's
revenues, EBDIAT and net income of 11.4%, 21.9% and 28.5%, respectively.
Salomon Brothers also prepared an alternative set of projections for ORC (the
"Negative Sensitivity Case Projections") by adjusting the Base Case
Projections to make more conservative revenue growth assumptions and to give
credit for little or no margin growth. Accordingly, the Negative Sensitivity
Case Projections forecast for the same period a four-year CAGR for ORC's
revenues, EBDIAT and net income of 7.5%, 12.4% and 17.0%, respectively.
Salomon Brothers also used and relied
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upon projections for Benson that were provided by management of Benson,
adjusted to give effect to the pending disposition of Benson's retail
businesses (the "Benson Projections"), and the estimate of Benson management
that at least $2 million in annual Synergies would result from the Merger.
Salomon Brothers expressed no view on any of the projections provided by the
managements of ORC and Benson, or on their underlying assumptions, or on
whether the Synergies could be obtained.
Contribution Analysis. Salomon Brothers analyzed the pro forma contribution
of each of Benson (without its retail businesses) and ORC (without the OSP
Division) to the combined entity if the Merger were consummated, without taking
into account any Synergies or transaction-related adjustments. Salomon Brothers
used and relied upon the financial data and projections provided by the
managements of Benson and ORC. Such analysis showed that, for 1994, using the
Base Case Projections, ORC would contribute approximately 58.4%, 51.2% and
69.6% of the revenues, net income and free cash flow, respectively, of the
combined entity. For 1994, using the Negative Sensitivity Case Projections,
such analysis showed that ORC would contribute approximately 58.0%, 47.9% and
67.0% of the revenues, net income and free cash flow, respectively, of the
combined entity.
Pro Forma Combination Analysis. Salomon Brothers also analyzed certain pro
forma effects of the Merger on the earnings and capitalization of the combined
entity. Salomon Brothers used and relied upon the financial data and
projections provided by the managements of Benson and ORC, as well as Benson
management's estimate of the Synergies. Such analysis showed that, using the
Base Case Projections (and giving effect to the Synergies and certain
transaction-related adjustments), the Merger would be immediately accretive to
Benson, with 21.9%, 37.9% and 48.3% accretion to earnings per share in 1994,
1995 and 1996, respectively. Using the Negative Sensitivity Case Projections
(and giving effect to the Synergies and certain transaction-related
adjustments), such analysis showed that the Merger would still be immediately
accretive to Benson, with 10.7%, 9.8% and 12.3% accretion to earnings per share
in 1994, 1995 and 1996, respectively. Such analysis also showed that, following
the Merger, current holders of ORC Common Stock would end up owning 18.2% of
the outstanding shares of Benson Common Stock or, if Benson Common Stock was
required to be issued in the Merger because of the absence of any OSP
Disposition Proceeds, 22.5% of the outstanding shares of Benson Common Stock.
Discounted Cash Flow Analysis. In performing its valuation of ORC, Salomon
Brothers performed a discounted cash flow analysis using the Base Case
Projections provided by ORC management (without adjusting such projections to a
December 31 fiscal year end). Salomon Brothers calculated the estimated
unlevered free cash flows (net income plus after-tax interest expense plus
estimated depreciation and other non-cash charges, plus (or minus) changes in
net working capital, minus projected capital expenditures) that ORC (excluding
the OSP Division) is expected to generate over the five-year fiscal period
ending July 31, 1999, using the earnings and cash flow projections set forth in
the Base Case Projections. Salomon Brothers then calculated estimated terminal
values (as of July 31, 1999) for ORC by applying terminal exit multiples
ranging from 6.5 to 8.5 to the projected EBDIAT in the Base Case Projections
for fiscal year 1999. The sum of the unlevered free cash flows for such five-
fiscal-year period and the range of terminal values was then discounted to
present value using discount rates ranging from 15% to 17%, representing
Salomon Brothers' estimate of the weighted average cost of capital of ORC. This
range of present values was then adjusted to deduct ORC's outstanding debt
($19.4 million) and to add back in excess cash on hand ($29.4 million), to
arrive at hypothetical reference values for ORC's common stockholders' equity
(without the OSP Division), using the Base Case Projections, ranging from $178
million (using a 6.5 multiple and a 17% discount rate) to $231 million (using a
8.5 multiple and a 15% discount rate). Salomon Brothers performed the same
discounted cash flow analysis using the Negative Sensitivity Case Projections,
and arrived at hypothetical reference values for ORC's common shareholders'
equity (without the OSP Division) ranging from $120 million (using a 6.5
multiple and a 17% discount rate) to $154 million (using a 8.5 multiple and a
15% discount rate).
Comparable Companies Analysis. In performing its valuation of ORC, Salomon
Brothers considered certain financial, operating and stock market information
for four selected publicly traded companies with businesses related to the
optical products industry (Akorn, Inc., Allergan, Inc., Bausch & Lomb, Inc. and
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BMC Industries, Inc.) and for Benson (collectively, the "Selected Entities").
Although the Selected Entities were comparable in certain respects to ORC based
on certain characteristics of their businesses, none of the Selected Entities
possessed characteristics identical to those of ORC. Accordingly, and in light
of the complex considerations and judgments in evaluating such differences and
other factors that could affect the public trading value of the Selected
Entities, Salomon Brothers accorded a lesser weight to the quantitative results
of this analysis than to its discounted cash flow analysis of ORC summarized
above. For each of the Selected Entities, Salomon Brothers calculated a variety
of multiples, including market price of equity as a multiple of estimated 1994
and 1995 earnings (based on published industry analysts' estimates) and firm
value (market value of equity plus debt minus cash) as a multiple of earnings
before interest and taxes ("EBIT") and EBDIAT, in each case for the latest
twelve month period for which EBIT and EBDIAT information could be obtained.
The median ratios of market price of equity to estimated 1994 earnings and
estimated 1995 earnings, respectively, were 12.9x and 11.5x. The median ratios
of firm value to such EBIT and EBDIAT information, respectively, were 7.1x and
9.2x. Based on this information, Salomon Brothers determined an estimated
hypothetical reference value for ORC's common stockholders' equity (without the
OSP Division) of between $110 and $150 million, representing implied ratios for
ORC (using the Base Case Projections) of market price to estimated calendar
year 1994 earnings of between 12.3x and 16.8x and to estimated calendar year
1995 earnings of between 7.8x and 10.6x, and of firm value to calendar year
1993 EBIT of between 8.4x and 12.5x and to calendar year 1993 EBDIAT of between
5.6x and 8.4x. Applying an estimated 30% control premium to these results,
Salomon Brothers determined an estimated hypothetical reference value for ORC's
common stockholders' equity (without the OSP Division) of between $143 million
and $195 million.
Selected Acquisition Transactions. Salomon Brothers also examined nine
transactions consummated during the last three years involving the acquisition
of companies within the optical products industry. However, because the terms
for most of these transactions had not been disclosed or, where disclosed, were
not with respect to the acquisition of a company with financial or operating
characteristics truly comparable to ORC, Salomon Brothers did not believe this
analysis was meaningful for its valuation of ORC.
Recent Control Premiums Paid. Separately, Salomon Brothers looked at all
publicly-announced transactions for which data could be obtained (in a variety
of industries) that had been announced and completed in 1994 with deal
valuations in the $100 to $500 million range to determine the premiums to pre-
announcement market prices paid in such transactions. Eight transactions
reflected premiums in the 0% to 20% range, nine transactions reflected premiums
in the 20% to 50% range, and twelve transactions reflected premiums in the 50%
and over range.
Valuation of Benson Common Stock. In order to assess the public market
valuation of Benson Common Stock, Salomon Brothers performed a discounted cash
flow analysis for Benson comparable to the discounted cash flow analysis it
performed for ORC. In performing such analysis, Salomon Brothers used the
earnings, cash flow and EBDIAT projections set forth in the Benson Projections
and discount rates ranging from 13% to 15%, representing Salomon Brothers'
estimate of the weighted average cost of capital of Benson, to present value
Benson's projected cash flows and terminal values. The results of this
analysis, based on 18.6 million shares of Benson Common Stock outstanding, were
hypothetical reference values for a share of Benson Common Stock ranging from
$8.05 (using a 6.5 multiple and a 15% discount rate) to $11.27 (using a 8.5
multiple and a 13% discount rate).
To further assess the public market valuation of Benson Common Stock, Salomon
Brothers also performed a comparable companies analysis for Benson using the
same Selected Entities (other than Benson) as in its comparable companies
analysis for ORC. Excluding Benson, the median ratios of market price of equity
to estimated 1994 earnings and estimated 1995 earnings for the Selected
Entities were, respectively, 12.1x and 11.1x. Based on this information,
Salomon Brothers determined an estimated hypothetical reference value for a
share of Benson Common Stock of between $7 and $9, representing implied ratios
for Benson (using the Benson Projections) of market price of equity to
estimated fiscal year 1994 earnings of between 15.2x and 19.6x and to estimated
fiscal year 1995 earnings of between 11.3x and 14.5x. Because none of the
Selected Entities (excluding Benson) possessed characteristics identical to
those of Benson, and in light
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of the complex considerations and judgments in evaluating such differences and
other factors that could affect the public trading value of such Selected
Entities, Salomon Brothers accorded a lesser weight to the quantitative
results of this analysis than to its discounted cash flow analysis of Benson
summarized above.
Historical Stock Trading Ranges. Salomon Brothers also considered charts and
other information concerning the history of the trading prices and volume for
each of ORC Common Stock and Benson Common Stock from January 1, 1993 through
late June, 1994.
OSP Disposition Proceeds Analysis. Salomon Brothers calculated as
approximately $12.7 million the maximum value of the additional shares of
Benson Common Stock that would have to be issued in the Merger to ensure a
$2.00 value for the OSP Disposition Proceeds component of the Merger
Consideration. Salomon Brothers then compared the value of this guarantee with
its estimate of the liquidation value of the assets and liabilities of the OSP
Division to estimate a maximum potential exposure of Benson from such
guarantee. Salomon Brothers estimated what it believed to be a conservative
liquidation value for the assets of the OSP Division by discounting their book
value from 25% to 50% and by assuming, with Benson management's consent, a $4
to $5 million value for the OSP Division's FDA license with respect to one of
its proprietary products, while estimating the liquidation cost of the
liabilities of the OSP Division at 100% of their book value. This analysis
resulted in a liquidation value for the OSP Division ranging from $12.1
million to $13.1 million, representing, when compared to the $12.7 million
maximum value of Benson's guarantee (and excluding possible retained
contingent liabilities, which, as discussed above, Salomon Brothers assumed
would not be in excess of $2 million), a potential shortfall of as much as
approximately $600,000 or a potential surplus of as much as approximately
$400,000.
Salomon Brothers also took into account in its analysis ORC's
representations as to its contacts and discussions with certain prospective
purchasers of all or portions of the OSP Division, and the results thereof. In
particular, Salomon Brothers considered ORC's representation that it rejected
a buyout offer by the OSP Division's then managers in March 1994 of $13
million in cash and approximately $5 million in warrants, and ORC's
expectation that it would receive in the near future a letter of intent from
Akorn, Inc. to acquire the IOL business of the OSP Division for $15 to $18
million in value of Akorn common stock.
As a result of these analyses, Salomon Brothers concluded that Benson's
guarantee of a value for the OSP Disposition Proceeds of at least $2.00 should
not have a material impact upon the economics of the proposed transaction to
Benson.
ORC Common Equity Valuation. Applying its judgment to the results of the
foregoing analyses (particularly its discounted cash flow analysis and, to a
lesser extent, its comparable companies analysis), Salomon Brothers estimated
a range of hypothetical reference value for ORC's total common shareholders'
equity (without the OSP Division) of from $150 million to $180 million.
Salomon Brothers noted that this range was above its estimate of the total
consideration of approximately $141 million to be paid by Benson for ORC
(exclusive of any consideration payable if the OSP Disposition Proceeds are
less than $2.00).
Salomon Brothers believes that its analyses must be considered as a whole,
and that selecting portions of such analyses and of the factors considered by
Salomon Brothers, without considering all of such analyses and factors, could
create an incomplete view of the process underlying its opinions. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Accordingly, the
summary set forth above does not purport to be a complete description of the
analyses performed by Salomon Brothers in arriving at its opinion. Moreover,
the analyses performed by Salomon Brothers do not purport to be appraisals and
are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than those suggested by such
analyses.
Pursuant to its March 1, 1994 engagement of Salomon Brothers, Benson has
paid Salomon Brothers an initial advisory fee of $100,000 upon execution of
its engagement letter, and has agreed to pay Salomon Brothers an additional
fee of $150,000 as a result of the execution of the Merger Agreement. In
addition, contingent upon consummation of the Merger, Benson has agreed to pay
Salomon Brothers an additional fee of $1,250,000 (less the $250,000 in fees
already paid). If the Merger is not consummated, however, the $100,000
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initial fee paid to Salomon will be creditable against any subsequent fees due
to Salomon from Benson for services rendered during the twelve-month period
following the date of its engagement. Benson has also agreed to retain Salomon
Brothers upon customary terms in connection with certain related financings or
transactions, if any, that it determines to undertake within one year following
the Merger. Benson has also agreed to reimburse Salomon Brothers for its
reasonable out-of-pocket expenses, including legal fees and disbursements,
incurred in connection with its engagement, and to indemnify Salomon Brothers
and its affiliates against certain liabilities and expenses, including certain
liabilities arising under the federal securities laws.
Salomon Brothers is an internationally-recognized investment banking firm
engaged, among other things, in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Benson
selected Salomon Brothers on the basis of such expertise, Salomon Brothers'
reputation and its knowledge of Benson and its business. In retaining Salomon
Brothers, Benson took into account that the contingent nature of Salomon
Brothers' fee structure could be viewed as presenting Salomon Brothers with a
potential conflict of interest in rendering a fairness opinion with respect to
the Merger.
In addition to its services as financial advisor to Benson in connection with
the Merger as described above, Salomon Brothers previously acted as lead
underwriter for Benson's May 1994 issuance of $40 million of convertible
subordinated notes, for which it received fees totalling approximately
$500,000, and continues to act as a market maker for such notes. In the
ordinary course of its business and such market making activities, Salomon
Brothers may actively trade the securities of Benson and ORC for its own
account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
FINANCING OF MERGER CONSIDERATION
The cash portion of the Merger Consideration will be financed primarily from
the following sources: (i) substantially all of the cash held by Benson and ORC
at the Effective Time and (ii) one or more Benson credit facilities, including
Benson's existing credit facility.
FEDERAL INCOME TAX CONSEQUENCES
The conversion of shares of ORC Common Stock into the Merger Consideration
will be a taxable transaction for federal income tax purposes and may also be
taxable under applicable state, local and other tax laws. For federal income
tax purposes, a holder of ORC Common Stock (other than holders of Dissenting
Shares, as defined below) will recognize gain or loss upon the Merger in an
amount equal to the difference between the fair market value of the Merger
Consideration such ORC Common Stock is converted into and the holders adjusted
tax basis in such ORC Common Stock. Provided that the ORC Common Stock is held
as a capital asset, such gain or loss will be long-term capital gain or loss
if, as of the Effective Time, the ORC Common Stock has been held for more than
one year, and will be short-term if such ORC Common Stock has been held for one
year or less. For this purpose, the fair market value of the Merger
Consideration will be the sum of the cash received as of the Effective Time
plus the fair market value of the Benson Common Stock received (based on its
trading value as of the Effective Time) plus the value of the right to receive
OSP Disposition Proceeds (including, if applicable, the Fraction). Otherwise,
the value of the right to receive OSP Disposition Proceeds (including, if
applicable, the Fraction) will likely be determined by reference to the trading
value of the ORC Common Stock (that is, the value of the OSP Disposition
Proceeds (including, if applicable, the Fraction) would likely be considered to
be the value of the ORC Common Stock less the sum of the cash and the Benson
Common Stock into which such ORC Common Stock converts).
Under the Code, the maximum marginal tax rate applicable to net capital gains
(the excess of net long-term capital gain over net short-term capital loss) of
individuals is 28%, while short-term capital gains are taxed at ordinary income
rates. The rates imposed on corporate taxpayers are the same for net capital
gains, short-term gains and ordinary income. Excess short-term and long-term
capital losses may be deducted by individual taxpayers against ordinary income
only in an amount not to exceed $3,000 in any year; capital losses are
deductible by corporations only against capital gains.
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The tax basis of Benson Common Stock received pursuant to the Merger will be
the fair market value of such stock as of the Effective Time, and the holding
period of such stock will commence as of the Effective Time.
The tax basis of the right to receive OSP Disposition Proceeds (assuming cash
is not paid with respect to such right as of the Effective Time) will be the
fair market value of such right, determined as set forth above, and a holder
will recognize short-term capital gain or loss upon a subsequent disposition of
such right. It is possible that all or a portion of such gain might be treated
as ordinary income, depending on whether such right is treated as a debt
instrument for federal income tax purposes.
The foregoing discussion may not apply to ORC Common Stock acquired by a
shareholder pursuant to an employee stock plan or otherwise as compensation, to
shareholders who are not citizens or residents of the United States or to other
categories of shareholders subject to special treatment under federal income
tax laws, such as dealers in securities, banks, insurance companies, and tax-
exempt entities.
THE DISCUSSION ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT DOES NOT
ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. IN ADDITION, IT
DOES NOT DISCUSS THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT TO
CERTAIN PERSONS, INCLUDING HOLDERS OF OPTIONS, AND MAY NOT APPLY TO CERTAIN
HOLDERS SUBJECT TO SPECIAL TAX RULES. THE DISCUSSION IS BASED UPON CURRENT LAW.
LEGISLATIVE, JUDICIAL OR ADMINISTRATIVE CHANGES MAY BE FORTHCOMING THAT COULD
AFFECT THIS DISCUSSION. EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR
HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS.
FEDERAL SECURITIES LAW CONSEQUENCES
All Benson Common Stock issued in connection with the Merger will be freely
transferable, except that any Benson Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
ORC prior to the Merger may be sold by them only in transactions permitted by
the resale provisions of Rule 145 promulgated under the Securities Act (or Rule
144 if such persons are or become affiliates of Benson) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of ORC or Benson generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal shareholders
of such party.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting.
STOCK EXCHANGE LISTING
It is a condition to the Merger that the shares of Benson Common Stock to be
issued in connection with the Merger be authorized for listing on Amex, subject
to official notice of issuance. It is not a condition to the Merger that the
Rights to be issued in connection with the Merger be authorized for listing on
Amex, and Benson does not currently intend to list the Rights on Amex or any
other exchange.
DISSENTERS' RIGHTS
ORC. If the Merger is consummated, dissenting holders of shares of ORC Common
Stock will be entitled to have the "fair value" (exclusive of any appreciation
or depreciation due to the Merger) of their shares of ORC Common Stock
judicially determined at the Effective Time and paid to them by complying with
the provisions of Chapter 13 of the CGCL, so long as the holders of 5% or more
of the outstanding shares of ORC Common Stock validly elect to exercise
dissenters' rights.
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While the CGCL provides that the holders of at least 5% or more of the
outstanding shares of ORC Common Stock must validly elect to exercise
dissenters' rights in order for any holder to be entitled to such rights, the
Merger Agreement states that it is a condition to the consummation of the
Merger by Benson that the holders of no more than 5% of the outstanding shares
of ORC Common Stock will have made a demand to exercise their dissenters'
rights by the conclusion of the ORC Special Meeting.
THE FOLLOWING IS A BRIEF SUMMARY OF CHAPTER 13 OF THE CGCL, WHICH SETS FORTH
THE PROCEDURES FOR DISSENTING FROM THE MERGER AND DEMANDING STATUTORY
DISSENTERS' RIGHTS. THIS SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
THE PROVISIONS OF THE CGCL RELATING TO THE RIGHTS OF SHAREHOLDERS OF ORC TO AN
APPRAISAL OF THE VALUE OF THEIR SHARES OF ORC COMMON STOCK, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO CHAPTER 13 OF THE CGCL, THE MATERIAL PROVISIONS OF
WHICH ARE ATTACHED HERETO AS ANNEX D. FAILURE TO FOLLOW THE PROVISIONS OF
CHAPTER 13 OF THE CGCL EXACTLY COULD RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
If the Merger is approved by the required vote of ORC's shareholders and is
not terminated, ORC's shareholders who vote against the Merger and who have
fully complied with all applicable provisions of Chapter 13 of the CGCL, and
whose shares constitute Dissenting Shares (as defined below) will have the
right to require ORC to purchase the shares of ORC Common Stock held by them
for cash at the fair market value of those shares as of the day before the
terms of the Merger were first announced, exclusive of any appreciation or
depreciation due to the Merger. Under the CGCL, no shareholder of ORC who is
entitled to exercise dissenters' rights has any right at law or in equity to
attack the validity of the Merger or to have the Merger set aside or rescinded,
except in an action to test whether the number of shares required to authorize
or approve the Merger had been legally voted in favor of the Merger.
Dissenting shares ("Dissenting Shares") means those shares of ORC Common
Stock with respect to which the holders have voted against the Merger and have
perfected their purchase demand in accordance with Chapter 13 of the CGCL;
provided, however, that no shares shall constitute Dissenting Shares unless
either (i) 5% or more of the outstanding shares of ORC Common Stock file
demands for payment as dissenting shares under Chapter 13 of the CGCL or (ii)
the shares in question are subject to a restriction on transfer imposed by ORC
or by any law or regulation.
ORC is not aware of any restriction on transfer of any shares of the ORC
Common Stock except restrictions that may be imposed upon shareholders who are
deemed to be "affiliates" of ORC for purposes of Rule 145 under the Securities
Act, and those who received shares in private transactions exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act. Those shareholders who believe there is some such restriction
affecting their shares should consult with their own legal counsel as to the
nature and extent of any dissenters' rights they may have.
For a holder of ORC Common Stock to exercise dissenters' rights, the
procedures to be followed under Chapter 13 of the CGCL include the following
requirements:
1. The shareholder of record must have voted the shares against the
Merger. It is not sufficient to abstain from voting. However, the
shareholder may abstain as to part of his or her shares or vote part of
those shares for the Merger without losing the right to exercise
dissenters' rights as to other shares which were voted against the Merger.
2. Any such shareholder who votes against the Merger, and who wishes to
have the shares that are being voted against the Merger purchased, must
make a written demand to have ORC purchase those shares for cash at their
fair market value. The demand must include the information specified below
and must be received by ORC not later than the date of the ORC Special
Meeting.
Merely voting or delivering a proxy directing a vote against the approval of
the Merger does not constitute a demand for purchase. A written demand is
essential.
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The written demand that the dissenting shareholder must deliver to ORC must:
1. Be made by the person who was the shareholder of record on the record
date set for voting on the Merger (or such shareholder's duly authorized
representative) and not by someone who is merely a beneficial owner of the
shares and not by a shareholder who acquired the shares subsequent to the
record date;
2. State the number and class of dissenting shares; and
3. Include a demand that ORC purchase the shares at the dollar amount
that the shareholder claims to be the fair market value of such shares on
the day before the terms of the Merger were first announced, exclusive of
any appreciation or depreciation due to the Merger. The last full trading
day prior to the announcement that the Merger Agreement had been executed
was June 30, 1994. A shareholder may take the position in the written
demand that a different date is applicable. The shareholder's statement of
fair market value constitutes an offer by such dissenting shareholder to
sell the shares to ORC at such price.
The written demand should be delivered to ORC at its principal executive
offices, 1300 Optical Drive, Azusa, California 91702, Attention: Secretary.
A shareholder may not withdraw a demand for payment without the consent of
ORC. Under the terms of the CGCL, a demand by a shareholder is not effective
for any purpose unless it is received by ORC (or any transfer agent thereof).
Within ten days after the approval of the Merger by ORC's shareholders, ORC
must notify all holders of Dissenting Shares of the approval and must offer all
of such shareholders a cash price for their shares which ORC considers to be
the fair market value of the shares. The notice also must contain a brief
description of the procedures to be followed under Chapter 13 of the CGCL to
dispute the price offered and attach a copy of the relevant provisions of the
CGCL in order for a shareholder to exercise the right to have ORC purchase his
or her shares.
Within 30 days after the date on which the notice of the approval of the
Merger is mailed by ORC to holders of Dissenting Shares, the shareholder's
certificates, representing any shares which the shareholder demands be
purchased, must be submitted to ORC at its principal office, or at the office
of any transfer agent, to be stamped or endorsed with a statement that the
shares are dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed. Upon subsequent transfer of those shares,
the new certificates will be similarly stamped, together with the name of the
original dissenting shareholder.
If ORC and a holder of Dissenting Shares agree that the shares held by such
shareholder are eligible for dissenters' rights and agree upon the price of
such shares, such holder of Dissenting Shares is entitled to receive from ORC
the agreed price with interest thereon at the legal rate on judgments in the
State of California from the date of such agreement. Any agreement fixing the
fair market value of dissenting shares as between ORC and the holders thereof
must be filed with the Secretary of ORC at the address set forth below. Subject
to certain provisions of Section 1306 and Chapter 5 of the CGCL, payment of the
fair market value of the Dissenting Shares shall be made within 30 days after
the amount has been agreed upon or within 30 days after any statutory or
contractual conditions to the Merger are satisfied, whichever is later, subject
to surrender of the certificate therefor, unless provided otherwise by
agreement.
If ORC and a holder of Dissenting Shares fail to agree on either the fair
market value of the shares or on the eligibility of the shares to be purchased,
then either such holder of Dissenting Shares or ORC may file a complaint for
judicial resolution of the dispute in the superior court of the proper county.
The complaint must be filed within six months of the date on which the
respective notice of approval is mailed to the shareholders. If a complaint is
not filed within six months, the shares will lose their status as Dissenting
Shares. Two or more holders of Dissenting Shares may join as plaintiffs or be
joined as defendants in such an action. If the eligibility of the shares is at
issue, the court must first decide that issue. If the fair market value
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of the shares is in dispute, the court must determine, or shall appoint one or
more impartial appraisers to assist in its determination of, the fair market
value. The costs of the action will be assessed or apportioned as the court
considers equitable, but if the fair market value is determined to exceed 125%
of the price offered to the shareholder, ORC will be required to pay such
costs.
Any demands, notices, certificates or other documents required to be
delivered to ORC may be sent to the Office of the Secretary, Optical Radiation
Corporation, 1300 Optical Drive, Azusa, California 91702.
Benson. Shareholders of Benson are not entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law (the "DGCL") in connection
with the Merger.
THE MERGER AGREEMENT
GENERAL
The following description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement,
a copy of which is attached hereto as Annex A and incorporated herein by
reference. Shareholders of ORC and Benson are urged to read the Merger
Agreement in its entirety.
THE MERGER
The Merger Agreement provides that, subject to the approval of the Merger by
the shareholders of ORC and by the shareholders of Benson and the satisfaction
or waiver of the other conditions to the Merger, Benson Sub will be merged with
and into ORC in accordance with the CGCL, whereupon the separate existence of
Benson Sub shall cease and ORC will be the Surviving Corporation of the Merger
(the "Surviving Corporation"). At the Effective Time, the conversion of ORC
Common Stock and the conversion of the common stock of Benson Sub pursuant to
the Merger Agreement will be effected as described below. The Articles of
Incorporation and By-Laws of Benson Sub, as in effect immediately before the
Effective Time, shall be the Articles of Incorporation and By-Laws of the
Surviving Corporation. The directors of Benson Sub immediately before the
Effective Time shall be the initial directors of the Surviving Corporation, and
the officers of ORC immediately before the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are elected or appointed and qualified.
EFFECTIVE TIME
Following the adoption of the Merger Agreement and subject to satisfaction or
waiver of certain terms and conditions contained in the Merger Agreement, the
Merger will become effective on such date as the Merger Agreement and the
officers' certificates of each of ORC, Benson and Benson Sub, are duly filed
with the Secretary of State of the State of California (the "Effective Time").
The filing of the Merger Agreement and the officers' certificates shall be made
as promptly as practicable after all conditions contemplated by the Merger
Agreement have been satisfied or waived.
TERMS OF THE MERGER
At the Effective Time, by virtue of the Merger and without any action on the
part of Benson Sub, ORC or the shareholders of ORC and Benson Sub, each share
of ORC Common Stock issued and outstanding immediately prior to the Effective
Time (other than any shares of ORC Common Stock held in ORC's treasury or by
each of ORC's subsidiaries or Dissenting Shares, will be canceled and
extinguished and be converted into the right to receive upon surrender of the
certificate (except as set forth in (iii) below) representing such share:
(i) $17.00 in cash;
(ii) a fraction of a share of Benson Common Stock equal to the Exchange
Ratio (as defined below); and
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(iii) the Right to receive a pro rata share of the OSP Disposition
Proceeds (not including the Option Portion thereof, as defined below) equal
to the amount of such proceeds divided by the total number of shares of ORC
Common Stock entitled to receive such proceeds plus, to the extent that the
amount of such pro rata share has a value at the time of its receipt of
less than $2.00, a fraction (the "Fraction") of a share of Benson Common
Stock having a value equal to the amount of such difference; such shares of
Benson Common Stock, if any, to be issuable on the later of the following
dates (the "OSP Disposition Date"):
(x) at the Effective Time, if ORC has completed the disposition of
the OSP Division by such date, or if such disposition has not been
entirely completed and ORC is not a party to any definitive agreement
providing for the disposition of all or a part of the OSP Division
between the Effective Time and December 31, 1994; and
(y) the date the OSP Disposition Proceeds have been received
((i), (ii) and (iii) collectively, the "Merger Consideration").
In light of the status of current discussions, ORC believes that it is
reasonably likely that it will not enter into any agreements on or prior to the
Effective Time relating to the sale of all or part of the OSP Division. If no
agreement has been entered into on or prior to the Effective Time, in addition
to the right to receive $17.00 in cash and a fraction of a share of Benson
Common Stock having a value equal to the Exchange Ratio, each outstanding share
of ORC Common Stock will be converted into the right to receive a fraction of a
share of Benson Common Stock having a value equal to $2.00 in lieu of a pro
rata share of the OSP Disposition Proceeds.
The following terms contained in the Merger Agreement are used with the
following meanings:
"Average Closing Price" means the average of the per share daily closing
price of Benson Common Stock on Amex during the 20 consecutive trading days
ending on the fifth trading day prior to the ORC Special Meeting.
"Average OSP Disposition Price" means the greater of (i) the Average Closing
Price and (ii) the average of the per share daily closing price of Benson
Common Stock on Amex during the 20 consecutive trading days ending on the fifth
trading day prior to the OSP Disposition Date.
"Exchange Ratio" means the following number, expressed as a decimal fraction
and rounded to the nearest ten thousandth:
(i) if the Average Closing Price exceeds $10.80: $8.10 divided by the
Average Closing Price;
(ii) if the Average Closing Price is $10.80 or less, but more than $7.20:
0.75;
(iii) if the Average Closing Price is $7.20 or less but more than $6.00:
one half of the sum of (x) 0.75 and (y) the quotient obtained by dividing
$5.40 by the Average Closing Price;
(iv) if the Average Closing Price is $6.00 or less, and ORC shall not
have elected to terminate the Merger Agreement based on the level of the
Average Closing Price: 0.825; and
(v) if the Average Closing Price is $6.00 or less, ORC shall have elected
to terminate the Merger Agreement based on the level of the Average Closing
Price, but Benson shall have thereafter timely elected to rescind such
termination: $4.95 divided by the Average Closing Price.
If the Average Closing Price is less than $6.00, ORC will have the right, by
written notice delivered at least three business days prior to the ORC Special
Meeting, to terminate the Merger Agreement (which termination is not effective
until after Benson's right to rescind such termination has expired); provided
that Benson has the right, by written notice delivered to ORC at least one
business day prior to the ORC Special Meeting, to elect to rescind such
termination. Such notices will affect the Exchange Ratio as provided in the
definition thereof.
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"OSP Disposition Proceeds" means the proceeds received by ORC prior to
December 31, 1994 upon the sale of ORC's OSP Division, or any portion thereof
(with marketable securities or other instruments to be valued at their fair
market value on the date of such sale) pursuant to agreements entered into on
or prior to the Effective Time (whether in cash, securities or otherwise) minus
all costs, expenses and fees of ORC associated with such dispositions and plus
(or minus) the present value to ORC of the net tax benefit (or cost), whenever
realized, relating to the OSP Division, arising from such disposition and the
distribution to shareholders, provided that there will be deducted from amounts
that would otherwise be considered OSP Disposition Proceeds an amount equal to
15% of the amount by which the OSP Disposition Proceeds exceeds $19,195,560.
In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or rights
issued in respect of, Benson Common Stock or ORC Common Stock after the date
hereof, the Exchange Ratio will be adjusted so as to fairly and equitably
preserve the aggregate expected value of the Merger Consideration.
Each share of ORC Common Stock held in ORC's treasury and each share owned by
any direct or indirect wholly owned subsidiary of ORC immediately before the
Effective Time will be canceled and extinguished, and no payment or other
consideration will be made with respect thereto.
Each share of common stock, par value $.01 per share, of Benson Sub issued
and outstanding immediately before the Effective Time will be converted into
and will thereafter represent one validly issued, fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving Corporation.
Following the Effective Time, no shares of ORC Common Stock will be
outstanding and such shares will automatically be canceled and retired and will
cease to exist, and each certificate previously evidencing any such shares of
ORC Common Stock (other than any shares of ORC Common Stock held in ORC's
treasury or by each of ORC's subsidiaries or Dissenting Shares) will thereafter
represent the right to receive, upon surrender of such certificate, (i)
certificates evidencing such number of whole shares of Benson Common Stock into
which such ORC Common Stock was converted in accordance with the Exchange Ratio
and (ii) the amount of cash and OSP Distribution Proceeds applicable to such
shares.
STOCK OPTIONS
Holders of ORC's outstanding stock options will be entitled to receive in the
Merger the opportunity to either (I) or (II):
(I) Exchange each ORC Stock Option for:
(i) cash in an amount equal to the product of (A) the number of
shares subject to such option and (B) the difference between
$23.00 and the per share exercise price of such option (provided
that the option exercise price is less than $23.00 per share);
and
(ii) an amount (payable in shares of Benson Common Stock) equal to
the product of (C) the number of shares subject to such option
and (D) the excess, if any, of
(x) the Merger Consideration per share (expressed in dollars, with
Benson Common Stock valued at the Average Closing Price) over
(y) the greater of (1) the per share exercise price of such option
and (2) $23.00 per share.
The Benson Common Stock issuable pursuant to clause (ii) above will be
obtained by the Surviving Corporation as follows: (1) if applicable, Benson
will furnish to the Surviving Corporation, without additional
consideration, a number of shares of Benson Common Stock equal to the
number of shares of ORC Common Stock subject to such option multiplied by
the Fraction and (2) the Surviving Corporation will purchase from Benson in
exchange for OSP Disposition Proceeds of like (the "Option Portion") value
all remaining shares of Benson Common Stock so issuable.
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(II) Convert each ORC Stock Option into Benson Stock Options such that
the holder is entitled to purchase a number of shares of Benson Common
Stock equal to the product of (i) the number of shares subject to the ORC
Stock Options, and (ii) the Option Exchange Ratio. The option exchange
ratio (the "Option Exchange Ratio") will be calculated as follows: the
quotient of (X) the Merger Consideration per share of ORC Common Stock
(expressed in dollars, with Benson Common Stock valued at the Average
Closing Price) and (Y) the Average Closing Price per share of Benson Common
Stock. The price per share of the Benson Stock Options shall equal the
quotient of (A) the original option price per share applicable to the
holder's ORC Stock Options, and (B) the Option Exchange Ratio. The Benson
Stock Options so acquired by each holder will be fully vested and
exercisable, and will be subject to the same terms and conditions
applicable to the ORC Stock Options, to the extent permissible under the
terms of the Benson Stock Option Plan.
SURRENDER AND PAYMENT
The Merger Agreement provides that before the Effective Time, ORC will
appoint a bank or trust company to act as the exchange agent for the holders of
ORC Common Stock (the "Exchange Agent") to receive the funds and securities
necessary to make the payments of the Merger Consideration. Each holder of a
certificate representing any shares of ORC Common Stock canceled upon the
Merger may thereafter surrender such certificate to the Exchange Agent to
effect the surrender of such certificate on such holder's behalf for a period
ending one year after the Effective Time. Promptly after the Effective Time,
Benson shall cause the distribution to holders of record of shares of ORC
Common Stock as of the Effective Time of appropriate materials to facilitate
such surrender, including a letter of transmittal.
SHAREHOLDERS OF ORC SHOULD NOT SEND CERTIFICATES
REPRESENTING THEIR SHARES TO ORC OR TO THE EXCHANGE
AGENT PRIOR TO RECEIPT OF THE LETTER OF TRANSMITTAL
If payment of the Merger Consideration in respect of canceled shares of ORC
Common Stock is to be made to a person other than the person in whose name a
surrendered certificate or instrument is registered, it shall be a condition to
such payment that the certificate or instrument so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that
the person requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name other than that of the registered
holder of the certificate or instrument surrendered or shall have established
to the satisfaction of the Surviving Corporation that such tax either has been
paid or is not payable.
At the close of business on the day of the Effective Time, the stock transfer
books of ORC shall be closed and there shall not be any further registration or
transfer of shares of ORC Common Stock thereafter on the records of ORC. If,
after the Effective Time, certificates for ORC Common Stock are presented to
the Surviving Corporation, they shall be canceled and exchanged (without
interest) for the Merger Consideration.
FRACTIONAL SHARES
Fractional shares of Benson Common Stock shall not be issued in connection
with the Merger. In lieu of any such fractional share, each holder of ORC
Common Stock who would otherwise have been entitled to a fraction of a share of
Benson Common Stock upon surrender of certificates for exchange shall be paid
cash (without interest) in an amount equal to such holder's proportionate
interest in the net proceeds from the sale or sales in the open market of the
aggregate fractional Benson Common Stock issued pursuant to the Merger
Agreement. As soon as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (i) the number of full shares of Benson
Common Stock delivered to the Exchange Agent by Benson over (ii) the aggregate
number of full shares of Benson Common Stock to be distributed to holders of
ORC Common Stock ("Excess Shares"), and the Exchange Agent, as agent for the
former holders of ORC Common Stock, shall sell the Excess Shares at the
prevailing prices on Amex. The sale of the Excess Shares
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<PAGE>
by the Exchange Agent shall be executed on Amex in round lots to the extent
practicable. The Exchange Agent shall deduct from the proceeds of the sale of
the Excess Shares all commissions, transfer taxes and other reasonable out-of-
pocket transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of Excess Shares.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of ORC and Benson to consummate the Merger are subject to the
satisfaction of certain conditions, including: (i) the approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the requisite
vote of ORC's shareholders; (ii) the approval and adoption of the Merger
Agreement by the requisite vote of Benson's shareholders; (iii) the
authorization for listing on Amex subject to official notice of issuance of the
Benson Common Stock issuable to ORC shareholders pursuant to the Merger
Agreement; (iv) the expiration or termination of the waiting period applicable
to the consummation of the Merger under the HSR Act; (v) the effectiveness in
accordance with the provisions of the Securities Act of the Registration
Statement for the Benson Common Stock to be issued in connection with the
Merger and the absence of any stop order suspending effectiveness of the
Registration Statement issued by the Commission; and (vi) the absence of any
preliminary or permanent injunction or other order, decree or ruling issued by
a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or of any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority in effect
which prevents the consummation of the Merger or makes such consummation
illegal.
The obligations of ORC to consummate the Merger are also subject to the
satisfaction of the following further conditions (unless waived by ORC): (i)
the representations and warranties of Benson and Benson Sub shall be true and
correct in all material respects when initially made and as of the Effective
Time, except for changes contemplated by the Merger Agreement, as if made on
and as of the Effective Time and (ii) Benson and Benson Sub shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by the Merger Agreement to be performed or complied with
on or before the Effective Time.
The obligations of Benson and Benson Sub to consummate the Merger are also
subject to the satisfaction of the following further conditions (unless waived
by Benson and Benson Sub): (i) the representations and warranties of ORC shall
be true and correct in all material respects when initially made and as of the
Effective Time, except for changes contemplated by the Merger Agreement, as if
made on and as of the Effective Time; (ii) ORC shall have performed or complied
in all material respects with all agreements, conditions and covenants required
by the Merger Agreement to be performed or complied with on or before the
Effective Time; (iii) holders of not more than 5% of ORC Common Stock shall
have made a demand for payment pursuant to appraisal rights under the CGCL by
the conclusion of ORC Special Meeting; and (iv) ORC shall have at least $30
million in cash that is free and clear of all liens and other encumbrances.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Benson, Benson Sub and ORC relating to, among other things, the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (i) the due organization and corporate power to operate
their respective businesses; (ii) the absence of any violation of ORC, Benson
or Benson Sub of their respective articles or certificate of incorporation and
by-laws; (iii) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement by each such party and of the
transactions contemplated thereby and the execution and delivery of the Merger
Agreement and the transactions contemplated thereby not being in violation of
their respective organizational documents, debt instruments or material
contracts, or federal, state or local laws; (iv) the absence of any
governmental or regulatory authorization, consent, approval or waiver required
to consummate the Merger; (v) reports and other documents filed with the
Commission and other regulatory authorities and the accuracy of the information
contained therein; (vi) the absence of any
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material untrue statements or omissions in this Proxy Statement; (vii) the
absence of brokers, finders or investment bankers (other than Salomon for
Benson and Benson Sub and DLJ for ORC) entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by the
Merger Agreement; and (viii) the absence of any litigation that would have a
material adverse effect on the financial condition, business or results of
operations of ORC or Benson.
The Merger Agreement also contains representations and warranties of Benson
and Benson Sub relating to, among other things, the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) Benson and Benson Sub's having funds available at the
Effective Time which, together with ORC's available cash, will be sufficient to
pay the cash portion of the Merger Consideration; (ii) Benson Sub's not having
incurred any obligations or liabilities, not having engaged in any business or
activities, and not having entered into any agreements or arrangements with any
person or entity; and (iii) Benson's eligibility to file registration
statements with the Commission on Form S-3 and Form S-4.
In addition, the Merger Agreement contains representations and warranties of
ORC relating to, among other things, the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) its capitalization; (ii) the absence of certain changes or
events having a material adverse effect on its financial condition, business or
results of operations; (iii) the absence of any material infringement of any
patents or trademarks owned by or licensed by or to ORC or any of its
subsidiaries; (iv) ORC and its subsidiaries' not having any defined benefit
plans and not receiving any notices of deficiency from the U.S. Department of
Labor; (v) ORC's or any of its subsidiaries' not being a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by ORC or any of its subsidiaries; and (vi) the absence of any
product liability claim that would have a material adverse effect on the
financial condition, business or results of operations of ORC.
ACQUISITION PROPOSALS
ORC has agreed that it will notify Benson immediately if any inquiries or
proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or continued by ORC, in
each case in connection with any acquisition, business combination or purchase
of all or any significant portion of the assets of, or any equity interest in,
ORC or any of its subsidiaries.
CONDUCT OF BUSINESS BY ORC PENDING THE MERGER
Between the date of the Merger Agreement and the Effective Time, unless
Benson shall otherwise consent in writing, ORC has agreed to, and to cause its
subsidiaries to, carry on their respective businesses in the ordinary course
and in a manner consistent with past practice; ORC has agreed to use its
reasonable best efforts to preserve substantially intact the business
organization of ORC and its subsidiaries other than with respect to the
disposition of the OSP Division, to keep available the services of the present
officers, employees and consultants of ORC and its subsidiaries and to preserve
the relationships of ORC and its subsidiaries with customers, suppliers and
others having business dealings with them; and ORC has agreed to discontinue
the business of the OSP Division if the negative cash flow incurred in the
business of the OSP Division from the date of the Merger Agreement through
September 30, 1994 exceeds $1.25 million, or, from September 30 through
December 31, 1994, exceeds $250,000 per month.
ORC has agreed that, except as required or permitted by the Merger Agreement,
neither ORC nor any of its subsidiaries, between the date of the Merger
Agreement and the Effective Time shall, without the prior written consent of
Benson: (i) issue, sell, pledge, dispose of, encumber, authorize (or propose
any of the foregoing) any shares of capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock, or any other ownership interest of ORC or its
subsidiaries other than pursuant to options granted prior to June 27, 1994;
(ii) amend or propose to amend the Articles of Incorporation or By-Laws or
equivalent organizational documents of ORC or its subsidiaries; (iii) split,
combine or reclassify any outstanding shares of ORC Common Stock, or declare,
set aside or pay
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any dividend or distribution payable in cash, stock, property or otherwise with
respect to shares of ORC Common Stock; (iv) redeem, purchase or otherwise
acquire (or offer to do any of the foregoing with respect to) any shares of its
capital stock, except in the performance of its obligations under existing
employee plans; (v) authorize or propose or enter into any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in (i)
through (iv) above; (vi) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof; (vii) except in the ordinary course of business and in a
manner consistent with past practices, sell, pledge, dispose of, or encumber
(or authorize or propose any of the foregoing) any material assets of ORC or
its subsidiaries, other than the disposition of the OSP Division; (viii) incur
any indebtedness for borrowed money, or enter into any contract or agreement,
except in the ordinary course of business other than indebtedness (which may be
secured) incurred for working capital on a short-term basis in an amount
greater than $5 million; (ix) make, or commit to, on or before September 30,
1994, capital expenditures which exceed by $400,000 the planned capital
expenditures previously disclosed to Benson or make or commit to make aggregate
capital expenditures in excess of $200,000 per month without first notifying
Benson, and no capital expenditures may be used for the business of the OSP
Division; (x) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in (vi) through (ix)
above; (xi) take any action other than in the ordinary course of business and
in a manner consistent with past practice or pursuant to disclosed contracts
(none of which actions shall be unreasonable or unusual) with respect to the
grant of any severance or termination pay (otherwise than pursuant to the
policies of ORC or any of its subsidiaries in effect on the date of the Merger
Agreement) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date of the Merger
Agreement; (xii) make any payments (except in the ordinary course of business
and in amounts and in a manner consistent with past practice or pursuant to
disclosed contracts) to any employee, independent contractor or consultants,
enter into any new employee plan, new employment or consulting agreement, grant
or establish any new awards under such plan or agreement, or adopt or amend any
of the foregoing otherwise than in the ordinary course consistent with past
practice; (xiii) take any action except in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures
(including without limitation its procedures with respect to the payment of
accounts payable); or (xiv) before the Effective Time, take any action to cause
the shares of ORC Common Stock to cease to be listed on NNM.
COVENANTS
ORC and Benson have agreed to prepare and file with the Commission, as
promptly as practicable after the execution of the Merger Agreement,
preliminary proxy materials and the Registration Statement containing the
preliminary prospectus with respect to Benson Common Stock to be issued in
connection with the Merger. As promptly as practicable after comments are
received from the Commission with respect to such preliminary materials, and
after furnishing the Commission with all information required, ORC and Benson
have agreed to file with the Commission the definitive Proxy Statement and use
all reasonable efforts to cause the Registration Statement to be declared
effective by the Commission as soon thereafter as practicable.
ORC and Benson have agreed that, promptly following the effectiveness of the
Registration Statement, each shall take all necessary action to convene their
respective shareholders' meetings and will use their reasonable best efforts to
solicit from their respective shareholders proxies in favor of the Merger.
Benson has agreed to use its reasonable best efforts to cause its directors,
officers, subsidiaries and Benson Partners to vote all shares of ORC Common
Stock beneficially held by any of them in favor of the Merger and to vote all
shares of Benson Common Stock beneficially held by any of them in favor of the
Merger, and ORC has agreed to use its reasonable best efforts to cause its
directors and officers to vote any shares of ORC Common Stock beneficially held
by them in favor of the Merger.
ORC has agreed that, prior to the Effective Time, it will cause to be
delivered to Benson a letter from ORC, identifying all persons who were, in its
opinion, at the time of the ORC Special Meeting to vote on the
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Merger, "affiliates" of ORC as that term is used in paragraphs (c) and (d) or
Rule 145 under the Securities Act.
ORC and Benson have agreed to use their best efforts to file, as soon as
practicable (and did file on July 11, 1994), notifications under the HSR Act in
connection with the Merger and the transactions contemplated thereby, and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information and documentation and to respond as promptly as
practicable to all inquiries and requests from any State Attorney General or
other governmental authority in connection with antitrust matters.
Each of ORC, Benson and Benson Sub has agreed to comply in all material
respects with all applicable laws and with all applicable rules and regulations
of any governmental authority in connection with the execution, delivery and
performance of the Merger Agreement and the transactions contemplated thereby.
Benson has agreed to use its reasonable best efforts to have the shares of
Benson Common Stock to be issued in the Merger listed on Amex. Each of ORC,
Benson and Benson Sub has agreed to use all reasonable best efforts to obtain
in a timely manner all necessary waivers, consents and approvals and to effect
all necessary registrations and filings, and to use all reasonable best efforts
to take, or cause to be taken, all other actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by the
Merger Agreement.
ORC and Benson have agreed to give prompt notice to the other of (i) the
occurrence or non-occurrence of any event whose occurrence or non-occurrence
would be likely to cause any representation or warranty contained 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 of ORC, Benson or Benson Sub, as the case may be, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it thereunder.
From the date of the Merger Agreement to the Effective Time, ORC has agreed
to, and to cause its subsidiaries, officers, directors, employees, auditors and
agents to, afford the officers, employees and agents of Benson complete access
at all reasonable times and on reasonable notice to its officers, employees,
agents, accountants, properties, offices and other facilities and to all books
and records, and has agreed to furnish Benson with all financial, operating and
other data and information as Benson, through its officers, employees, agents
or accountants, may reasonably request, and Benson has agreed to cooperate with
ORC in connection with ORC's due diligence review of Benson. The parties have
agreed to, and to cause their respective affiliates and each of their
respective officers, directors, employees, financial advisors and agents to,
hold in strict confidence all data and information obtained by them from the
other and the other's subsidiaries (unless such information is or becomes
publicly available without the fault of any representative, or public
disclosure of such information is required by law) and shall ensure that the
representatives do not disclose such information to others without the prior
written consent of the other party. If the Merger Agreement is terminated, ORC
has agreed to, and to cause its affiliates and representatives to, return
promptly every document (and any copies thereof) furnished to them by Benson or
any of its subsidiaries, divisions, associates or affiliates in connection with
the transactions contemplated by the Merger Agreement, other than documents
filed with the Commission or otherwise publicly available.
ORC and Benson have agreed to consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such statement
before such consultation, except as may be required by law.
Each of ORC, Benson and Benson Sub have agreed to use its best efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
the Merger Agreement and to use its best efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary filings under the
Securities Act, the Exchange Act and the HSR Act and to cooperate in responding
to inquiries from, and making presentations to, regulatory authorities.
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Benson has agreed not to, and to cause its affiliates not to, during the term
of the Merger Agreement, purchase or otherwise acquire beneficial ownership of
any shares of ORC Common Stock or sell or otherwise dispose of any such shares,
other than pursuant to the Merger.
ORC has agreed to keep Benson closely informed as to ORC's efforts to effect
the sale of the OSP Division. ORC further agreed that it would not, without
Benson's consent, make such sales on terms less favorable than those previously
agreed to by Benson and ORC. Pending the disposition of the OSP Division, ORC
has agreed to conduct the business of the OSP Division only in the ordinary
course and not to take any action that would, in any material respect, transfer
cash or other assets of ORC to the OSP Division except as required for ordinary
course obligations.
Benson has agreed to promptly disclose through filings with the Commission
under the Exchange Act the occurrence of any material adverse effect on Benson
or its subsidiaries occurring between April 30, 1994 and the Effective Time and
promptly to furnish to ORC copies of such filings.
NO SHOPPING
Except with respect to the disposition of the OSP Division, neither ORC nor
its subsidiaries shall (i) directly or indirectly, solicit, initiate or
encourage inquiries or submission of proposals or offers from any person
relating to any sale of all or a portion of the material assets, business,
properties of, or any equity interest in, ORC or its subsidiaries, or any
business combination with ORC or its subsidiaries (whether by merger, purchase
of assets, tender offer or otherwise); or (ii) participate in any negotiation
regarding, or furnish to any other person any information (except information
previously publicly disseminated by ORC) with respect to, or otherwise
cooperate in any way with, facilitate or encourage, any effort or attempt by
any other person to do or seek to do any of the foregoing. Notwithstanding the
foregoing, the ORC Board of Directors may review and act upon an unsolicited
proposal relating to any of the transactions referred to above and may
participate in any negotiations regarding, or furnish another person
information relating to, such proposal and otherwise cooperate in any way with,
and assist in, facilitate or encourage, any effort or attempt by any other
person to do or seek to do any of the foregoing, if the Board of Directors
determines, on the advice of legal counsel, that failing to review and act
would constitute a breach of fiduciary duty and that such review and conduct
will not violate the Merger Agreement. ORC shall use its reasonable best
efforts to cause all confidential materials previously furnished to any third
parties to be promptly returned to ORC and shall cease any negotiations
conducted in connection therewith or otherwise conducted with any such parties.
Further, ORC shall immediately notify Benson if any such proposal or offer, or
any inquiry or contact with any person with respect thereto, is made.
INDEMNIFICATION
The Merger Agreement provides that, to the fullest extent permitted under
applicable law and subject to certain conditions, ORC, and after the Effective
Time, the Surviving Corporation and Benson shall indemnify and hold harmless
each director, officer, employee, fiduciary and agent of ORC or its
subsidiaries (and their respective subsidiaries and affiliates) against any
costs, expenses, judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to any of the
transactions contemplated therein. Further, Benson shall cause the Surviving
Corporation to maintain for not less than three years ORC's current directors'
and officers' liability insurance. Benson shall also cause the Surviving
Corporation to continue in effect the indemnification provisions currently
provided by the Articles of Incorporation, By-Laws or written indemnification
agreement of ORC for not less than six years following the Effective Time.
TERMINATION; FEES AND EXPENSES
The Merger Agreement provides that it may be terminated at any time before
the Effective Time: (a) by mutual consent of the Boards of Directors of Benson
and ORC, or (b) by either Benson or ORC if the Merger
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is not consummated by December 31, 1994; provided, however, that the right to
terminate is not available to a party whose failure to fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the failure
of the Merger to occur before such date; (c) by either Benson or ORC if a court
of competent jurisdiction or governmental, regulatory or administrative agency
or commission issues an order, decree or ruling or takes any other action that
permanently restrains, enjoins or otherwise prohibits the transactions
contemplated by the Merger Agreement and such order, decree, ruling or other
action becomes final and nonappealable; (d) by Benson if the ORC Board of
Directors (i) withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in any manner adverse to Benson or Benson Sub, (ii)
recommends to the holders of ORC Common Stock any proposal with respect to a
tender offer, merger, consolidation, share exchange or similar transaction
involving ORC or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement, or (iii) resolves to do (i) or (ii); (e)
by ORC if, prior to the Effective Time, a corporation, partnership, person or
other entity or group makes a bona fide offer that the ORC Board of Directors
determines in its good faith judgment and in the exercise of its fiduciary
duties, based on the advice of legal counsel, is more favorable to ORC's
shareholders than the Merger, provided that any such termination by ORC will
not be effective until payment of the termination fees required by the Merger
Agreement; or (f) by either Benson or ORC if the other party breaches the
Merger Agreement in any material respect and such breach continues for a period
of ten days after the receipt of notice of the breach from the non-breaching
party.
If the Average Closing Price is less than $6.00, ORC will have the right, by
written notice delivered at least three business days prior to the ORC Special
Meeting, to terminate the Merger Agreement (which termination is not effective
until after Benson's right to rescind such termination has expired); provided,
however, that Benson has the right, by written notice delivered to ORC at least
one business day prior to the ORC Special Meeting, of its election to rescind
such termination. See "Certain Investment Considerations--Investment
Considerations Relating to Benson and ORC--Effect of the Exchange Ratio and
Other Factors on the Merger Consideration."
Except as provided below, all costs and expenses incurred in connection with
the Merger Agreement and the transactions contemplated thereby will be paid by
the party incurring such costs and expenses. If the Merger Agreement is
terminated by ORC following an event specified in clause (e) above or Benson
terminates the Merger Agreement following the event set forth in clause (f)
above, ORC is required to pay to Benson an amount equal to $4.0 million plus
the lesser of (x) $2.0 million and (y) all actual out-of-pocket costs and
expenses of Benson and Benson Sub incurred in connection with the Merger
Agreement and the transactions contemplated thereby.
AMENDMENT; WAIVER
The Merger Agreement provides that it may be amended by the parties thereto
at any time before the Effective Time by an instrument in writing signed by the
parties. However, after approval of the Merger by ORC's shareholders, no
amendment may be made which would materially adversely affect the interests of
such shareholders or reduce the amount or change the type of consideration into
which each ORC Share will be converted upon consummation of the Merger.
At any time before the Effective Time, any party to the Merger Agreement may,
in a writing signed by such party (i) extend the time for the performance of
any of the obligations of other parties, (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
other Merger-related document and (iii) waive compliance with any of the
agreements or conditions contained in the Merger Agreement.
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MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF ORC AND BENSON AND RELATED
SHAREHOLDER MATTERS
BENSON
Benson Common Stock is listed for quotation on Amex under the symbol "EB."
The following table sets forth the quarterly high and low last reported sales
price of the Benson Common Stock for the fiscal quarters indicated.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ------- -------
<S> <C> <C>
1994
Third Quarter (through September 8)..................... 8 1/8 7 1/8
Second Quarter (ending June 30)......................... 8 1/8 7 1/8
First Quarter........................................... 8 1/4 6 3/4
1993
Fourth Quarter.......................................... 8 1/8 6 1/4
Third Quarter........................................... 8 3/8 6 3/8
Second Quarter.......................................... 10 1/8 7 1/2
First Quarter........................................... 7 3/4 5 3/8
1992
Fourth Quarter.......................................... 6 1/8 2 3/8
Third Quarter........................................... 3 1 5/8
Second Quarter.......................................... 2 1/4
First Quarter........................................... 11/16 5/16
</TABLE>
On June 30, 1994, the last full trading day prior to the announcement that
the Merger Agreement had been executed, the closing stock price for Benson
Common Stock was $7.50. On September 8, 1994, the last full trading day for
which quotations were available at the time of printing of this Proxy
Statement, the closing stock price for Benson Common Stock was $7.125.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE BENSON COMMON
STOCK.
As of September 8, 1994, there were approximately 270 holders of record of
Benson Common Stock.
No dividends have ever been declared on Benson Common Stock and Benson has no
intention of paying dividends in the foreseeable future.
ORC
ORC Common Stock is listed for quotation on NNM under the symbol "ORCO." The
following table sets forth the quarterly high and low last reported sales price
of ORC Common Stock for the fiscal quarters indicated.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ------ ------
<S> <C> <C>
1995
First Quarter (through September 8)....................... 23 21 3/4
1994
Fourth Quarter (ending July 31)........................... 23 5/8 19 1/2
Third Quarter............................................. 22 1/2 17 1/4
Second Quarter............................................ 18 3/4 12 1/2
First Quarter............................................. 18 1/2 14 1/4
1993
Fourth Quarter............................................ 17 13 3/4
Third Quarter............................................. 17 13 3/4
Second Quarter............................................ 17 1/4 13 3/4
First Quarter............................................. 16 13
1992
Fourth Quarter............................................ 21 1/2 12 1/2
Third Quarter............................................. 30 1/2 20 1/4
Second Quarter............................................ 24 1/4 18
First Quarter............................................. 28 19
</TABLE>
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On June 30, 1994, the last full trading day prior to the announcement that
the Merger Agreement had been executed, the last reported sales price for ORC
Common Stock was $22.75. On September 8, 1994, the last full trading day for
which quotations were available at the time of printing of this Proxy
Statement, the last reported sales price for ORC Common Stock was $22.875.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE ORC COMMON STOCK.
As of September 6, 1994, there were approximately 674 holders of record of
ORC Common Stock. There are also 10,000 shares of preferred stock designated
but, as of the date of this Proxy Statement, none were outstanding.
ORC has paid one cash dividend in its history: a $2.00 per share special
dividend in November 1990. ORC has no intention of paying dividends in the
foreseeable future.
59
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
BENSON SELECTED FINANCIAL INFORMATION
The following selected historical financial data for each of the years in
the period 1989 to 1993 have been derived from audited historical financial
statements. Benson's acquisitions during the periods reflected in the selected
financial data materially affect the comparability of historical data from one
period to another. The selected financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the
notes thereto included in Benson's Annual Report on Form 10-K for the year
ended December 31, 1993, which is incorporated herein by reference and the Pro
Forma Combined Financial Statements included elsewhere in this Proxy
Statement. The selected financial data presented for the six month periods
ended June 30, 1993 and 1994, in the opinion of Benson management, include all
normal recurring adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of results for such interim periods. No cash
dividends were declared or paid during any of the periods indicated. The
following unaudited pro forma statement of operations data for the year ended
December 31, 1993 and the six months ended June 30, 1994, are presented as if
the acquisitions of Superior Eye Care, Inc. ("Superior Eye Care"), The Bonneau
Company and Pennsylvania Optical Company (collectively, "Bonneau"), Opti-Ray,
Inc. ("Opti-Ray") and ORC each had occurred on January 1, 1993, and the pro
forma balance sheet data give effect to the combination of Benson and ORC as
of June 30, 1994. The unaudited pro forma combined financial data presented
herein are not necessarily indicative of the results of operations or
financial position of the Company that would have resulted had such events
occurred at the beginning of the period, as assumed, or of the future results
of the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE SIX MONTHS ENDED
----------------------------------------------------------------------- ----------------------------------
Pro Forma June 30, June 30, Pro Forma
1989(1) 1990(1) 1991(1) 1992(1)(2) 1993(3) 1993(4) 1993 1994 June 30, 1994(4)
--------- --------- --------- ----------- ---------- --------- -------- -------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Total revenues..... $ 8,187 $ 7,417 $ 7,599 $ 16,742 $ 82,084 $286,281 $39,396 $85,791 $154,805
Cost of sales...... 2,635 2,639 2,714 5,909 34,266 158,578 16,645 39,600 85,336
--------- --------- --------- ---------- ---------- -------- ------- ------- --------
Gross margin....... 5,552 4,778 4,885 10,833 47,818 127,703 22,751 46,191 69,469
Research and devel-
opment............ -- -- -- -- -- 2,173 -- -- 1,223
Selling, general
and administrative
expenses.......... 5,512 5,041 4,890 12,126 49,424 109,563 19,956 35,315 52,710
Interest expense... 160 124 78 231 938 8,736 415 1,178 4,294
Other expense (in-
come)............. 215 (961) (30) 231 (143) (975) 24
--------- --------- --------- ---------- ---------- -------- ------- ------- --------
Income (loss) be-
fore income taxes. (335) 574 (53) (1,755) (2,401) 8,206 2,380 9,698 11,218
Provision for in-
come taxes........ 1 102 (7) 2 57 3,118 26 1,358 4,263
--------- --------- --------- ---------- ---------- -------- ------- ------- --------
Net income (loss).. $ (336) $ 472 $ (46) $ (1,757) $ (2,458) $ 5,088 $ 2,354 $ 8,340 $ 6,955
========= ========= ========= ========== ========== ======== ======= ======= ========
Weighted average
shares outstanding
(5)............... 187 185 693 3,712 15,389 23,557(6) 13,381 18,562 24,589(6)
Earnings (loss) per
share Primary
earnings (loss)
per share......... $(1.80) $2.55 $(.07) $(.47) $(.16) $0.22 $0.18 $0.45 $0.28
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------ ------------------
Pro Forma
1989(1) 1990(1) 1991(1) 1992(1)(2) 1993(3) 1994 1994
------- ------- ------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 354 $ 585 $ 775 $ 5,370 $25,129 $ 59,710 $ 78,849
Total assets............ 2,082 2,641 3,562 18,438 75,144 115,535 275,884
Long-term debt.......... 820 -- 1,600 6,884 11,240 45,829 120,109
Stockholders' equity.... 342 783 802 5,446 39,449 49,223 97,439
Book value per share.... $ 1.83 $ 4.23 $ 1.16 $ 1.47 $ 2.56 $ 2.65 $ 3.96
</TABLE>
60
<PAGE>
- --------
(1) In October 1992, Benson acquired Pembridge Optical Partners, Inc.
("Pembridge"). Although as a result of this transaction Benson was the
surviving legal entity, Pembridge, which was formed in September 1991, was
the surviving entity for accounting purposes. The acquisition of Superior
Optical Company, Inc. ("Superior Optical") in December 1992 was accounted
for as a pooling of interests and, accordingly, Benson's consolidated
financial statements were restated for all periods prior to the
acquisition to include the results of operations, financial position and
cash flows of Superior Optical. As a result, the Selected Financial Data
for the fiscal years ended December 31, 1989 and 1990 are that of Superior
Optical only, and for the fiscal year ended December 31, 1991 are that of
Superior Optical for the full year combined with Pembridge from September
1991.
(2) The acquisition of Pembridge in October 1992 was treated for accounting
purposes as a reverse acquisition. The results of Pembridge are included
from its date of inception on September 16, 1991. The 1992 acquisition of
Benson Optical Co., Inc. ("Benson Optical") was accounted for as a
purchase. As a result, the information presented reflects the results of
Benson Optical subsequent to its purchase on October 16, 1992.
(3) The acquisitions of Superior Eye Care, Bonneau, and International Eyewear
& Accessories Inc. ("International Eyewear"), were effective April 30,
1993, June 1, 1993 and November 30, 1993, respectively. Superior Eye Care
and Bonneau were accounted for as purchases. As a result, the information
presented does not reflect the operations of these companies prior to
their respective dates of acquisition. International Eyewear was accounted
for as a pooling of interests, and, as a result, its results are included
from its inception on January 1, 1993.
(4) The pro forma statements of operations data for the year ended December
31, 1993 and the six months ended June 30, 1994 are presented as if the
acquisitions of Superior Eye Care, Bonneau, Opti-Ray (acquired effective
January 1, 1994) and ORC, each had occurred on January 1, 1993. The pro
forma balance sheet data give effect to the combination of Benson and ORC.
(5) Does not include (i) 1,745,334 shares of Benson Common Stock reserved for
issuance upon the exercise of options granted or that may be granted
pursuant to the Benson Stock Option Plan, (ii) 200,000 shares of Benson
Common Stock reserved for issuance upon the exercise of options granted or
that may be granted pursuant to the Benson's 1993 Stock Option Plan for
Outside Directors, (iii) 500,000 shares of Benson Common Stock reserved
for issuance under the Benson Employee Stock Purchase Plan and (iv)
250,000 shares of Benson Common Stock, subject to adjustment, issuable
upon exercise of warrants (that have an exercise price of $10 per share)
issued to RAS Securities Corp. and ABD Securities Corporation in
connection with the Benson's July 1993 offering of Benson Common Stock,
(v) 4,521,864 shares of Benson Common Stock reserved for issuance upon the
conversion of Benson's Convertible Notes due 2001.
(6) See Notes to the Pro Forma Combined Financial Statements appearing
elsewhere in this Proxy Statement.
61
<PAGE>
ORC SELECTED FINANCIAL INFORMATION
ORC's historical financial data for each of the annual periods presented have
been derived from its audited consolidated financial statements previously
filed with the Commission excluding the operating results of the OSP Division.
The historical financial data for the nine months ended April 30, 1993 and 1994
have been derived from the Company's separate unaudited quarterly reports on
Form 10-Q previously filed with the Commission excluding the operating results
of the OSP Division.
OPTICAL RADIATION CORPORATION
(In thousands except per share data)
<TABLE>
<CAPTION>
For the
For the Year Ended July 31, Nine Months Ended
---------------------------------------------- -------------------
April 30, April 30,
1989 1990 1991 1992 1993 1993 1994
------- ------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA: (7)
Sales................... $75,760 $93,066 $105,535 $127,026 $129,314 $94,994 $104,148
Cost of sales........... 50,447 60,410 71,244 85,075 85,851 63,763 68,874
------- ------- -------- -------- -------- ------- --------
Gross profit............ 25,313 32,656 34,291 41,951 43,463 31,231 35,274
Selling, general and ad-
ministrative expenses.. 18,976 23,001 27,135 32,277 32,760 24,608 25,196
Research and develop-
ment................... 3,067 2,343 2,018 1,772 2,548 2,056 1,754
Special charges (cred-
its) (8)............... -- -- -- 2,952 -- -- --
Interest income......... 1,564 2,341 2,001 1,757 1,736 1,260 995
Interest (expense)...... (1,544) (2,252) (2,236) (2,257) (2,140) (1,625) (1,512)
Other income (expense).. (92) 172 87 (461) 633 661 57
------- ------- -------- -------- -------- ------- --------
Income from continuing
operations before
provision for income
taxes.................. 3,198 7,573 4,990 3,989 8,384 4,863 7,864
Provision for income
taxes.................. 1,285 2,916 1,921 1,536 3,228 1,872 3,028
------- ------- -------- -------- -------- ------- --------
Net income from
continuing operations
and before cumulative
effect of an accounting
change................. $ 1,913 $ 4,657 $ 3,069 $ 2,453 $ 5,156 $ 2,991 $ 4,836
Cumulative effect of an
accounting change...... -- -- -- -- -- -- 1,420
------- ------- -------- -------- -------- ------- --------
Net income from continu-
ing operations......... $ 1,913 $ 4,657 $ 3,069 $ 2,453 $ 5,156 $ 2,991 $ 6,256
======= ======= ======== ======== ======== ======= ========
Net income per share
from continuing opera-
tions and before cumu-
lative effect of an ac-
counting change (9).... $ .29 $ .70 $ .46 $ .38 $ .84 $ .48 $ .81
Net income per share
from cumulative effect
of accounting change... -- -- -- -- -- -- .23
------- ------- -------- -------- -------- ------- --------
Net income per share
from continuing
operations............. $ .29 $ .70 $ .46 $ .38 $ .84 $ .48 $ 1.04
======= ======= ======== ======== ======== ======= ========
Weighted average shares
outstanding............ 6,692 6,611 6,604 6,491 6,168 6,188 6,032
Cash dividend per share. -- -- $ 2.00 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
At July 31, At April 30,
-------------------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 54,809 $ 60,592 $ 62,508 $ 61,172 $ 67,421 $ 66,056 $ 68,423
Total assets............ 131,915 148,597 140,433 145,203 148,488 146,121 148,910
Long-term debt.......... 22,636 20,907 20,500 20,073 19,170 19,299 18,780
Stockholders' equity.... 84,005 91,690 92,033 92,359 96,928 94,581 98,026
Book value per share.... $ 13.12 $ 14.28 $ 14.28 $ 14.84 $ 15.94 $ 15.56 $ 16.63
</TABLE>
<TABLE>
<CAPTION>
As of and for
As of and for the year the nine months
ended July 31, 1993 ended April 30, 1994
---------------------- --------------------
<S> <C> <C>
COMPARATIVE PER SHARE PRO FORMA IN-
FORMATION:
Book value per share............... $15.89 $16.34
Income from continuing operations
per share......................... .84 1.04
Pro forma weighted average shares
outstanding (10).................. 6,100 5,998
</TABLE>
62
<PAGE>
- --------
(7) Excludes net loss from discontinued operations of the OSP Division.
(8) Special charges includes litigation expenses in fiscal year 1990;
litigation credit in fiscal year 1991 and in fiscal year 1992 a $3.0
million charge for the cancellation of the Cinema Digital Sound project
and $2.1 million taken for the Orcolon recall and product
discontinuation.
(9) Reflects the adaption of SFAS No. 109, "Accounting for Income Taxes"
during the first quarter of fiscal year 1994.
(10) The weighted average number of shares used to calculate Comparative Per
Share Pro Forma Information were calculated as 0.75 (the assumed Exchange
Ratio) multiplied by ORC's actual weighted average shares outstanding
during the period plus 1,474 additional shares issued in connection with
the Rights assuming an $8.00 Average Closing Price.
THE ABOVE INFORMATION SHOULD BE READ IN CONJUNCTION WITH BENSON'S AND ORC'S
HISTORICAL AND PRO FORMA COMBINED FINANCIAL STATEMENTS AND NOTES THERETO,
EITHER INCORPORATED BY REFERENCE OR INCLUDED HEREIN. SEE "UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS."
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the Merger under the purchase method of accounting. The pro forma combined
financial statements are based on the historical financial statements of
Benson and ORC and estimates and assumptions set forth below.
The pro forma combined balance sheet as of June 30, 1994 gives effect to the
pending acquisition of ORC by Benson. The pro forma combined statement of
operations for the year ended December 31, 1993 includes acquisitions
completed in 1993 and 1994 and the pending acquisition of ORC as if the
acquisitions were made at the beginning of 1993. The amounts presented for the
year ended December 31, 1993 for ORC represent the results of operations of
ORC for the twelve months ended January 31, 1994, excluding the discontinued
operations of the OSP Division. The amounts presented for the six months ended
June 30, 1994 for ORC represent the results of operations of ORC for the six
months ended April 30, 1994, excluding the discontinued operations of the OSP
Division. Therefore, ORC's three months ended January 31, 1994 are included in
both pro forma combined statements of operations. For the three months ended
January 31, 1994 ORC's revenues excluding the OSP division were approximately
$31,831,000 and income from continuing operations was $1,050,000.
For the 1994 acquisition of ORC, pro forma adjustments are based upon
preliminary estimates, available information and certain assumptions that
management deems appropriate. Management does not expect material changes to
the purchase accounting adjustments upon the final allocation of the purchase
price. Final purchase accounting adjustments will be made on the basis of
appraisals and evaluations and, therefore, may differ from the pro forma
adjustments presented herein. For the 1993 and 1994 completed acquisitions,
actual purchase accounting adjustments were used to calculate the pro forma
adjustments. The unaudited pro forma combined financial data presented herein
is not necessarily indicative of the results of operations or financial
position that Benson would have obtained had such events occurred at the
beginning of the period, as assumed, or of the future results of Benson. The
pro forma combined financial statements should be read in conjunction with the
other financial statements and notes thereto included in Benson's Annual
Report on Form 10-K for the year ended December 31, 1993 and Benson's
Quarterly Reports on Form 10-Q for the three months ended March 31, 1994 and
June 30, 1994, respectively, which are incorporated herein by reference.
63
<PAGE>
BENSON EYECARE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
(1) (2)
Benson Optical
Eyecare Radiation Pro Forma
Corporation Corporation Adjustments Combined
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.......... 16,873 29,073 (30,000)(a) 2,336
(13,610)(b)
Trade receivables (net)....... 31,141 22,524 53,665
Inventories................... 26,349 20,178 46,527
Assets held for sale.......... 0 20,029 (8,235)(c) 11,794
Other current assets.......... 2,421 10,101 12,522
------- ------- ------- -------
Total current assets........ 76,784 101,905 (51,845) 126,844
Property and equipment (net).. 16,677 31,142 47,819
Intangible assets (net)....... 15,751 9,614 67,535 (d) 92,900
Other assets.................. 6,323 1,998 8,321
------- ------- ------- -------
Total assets................ 115,535 144,659 15,690 275,884
------- ------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current por-
tion of long-term debt......... 244 547 10,000 (e) 10,791
Accounts payable................ 8,592 4,799 13,391
Accrued compensation............ 1,614 6,703 8,317
Other accrued expenses.......... 6,624 8,872 15,496
------- ------- ------- -------
Total current liabilities..... 17,074 20,921 10,000 47,995
Long-term debt.................. 45,829 18,780 55,500 (e) 120,109
Deferred income taxes........... 0 6,184 6,184
Other long-term liabilities..... 3,409 748 4,157
------- ------- ------- -------
Total liabilities............. 66,312 46,633 65,500 178,445
------- ------- ------- -------
Total stockholders' equity.... 49,223 98,026 48,216 (f) 97,439
(98,026)(g)
------- ------- ------- -------
Total liabilities and stockhold-
ers' equity.................... 115,535 144,659 15,690 275,884
------- ------- ------- -------
</TABLE>
- --------
(1) Represents the consolidated Benson balance sheet as of June 30, 1994.
(2) Represents the consolidated ORC balance sheet as of April 30, 1994 with the
OSP Division shown as an asset held for resale. The calculation of this
amount is based upon the best estimate of management at the time of this
filing.
See accompanying notes to pro forma combined financial statements.
64
<PAGE>
BENSON EYECARE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(1) (2)
Benson Optical
Eyecare Radiation Pro Forma
Corporation Corporation Adjustments Combined
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales.................. $83,017 $69,014 $152,031
Fee income................. 2,774 2,774
------- ------- ------- --------
Total revenues............... 85,791 69,014 0 154,805
Costs and expenses:
Cost of sales.............. 39,600 45,736 85,336
Research and development... 0 1,223 1,223
Selling, general and admin-
istrative................. 35,315 16,766 844 (w) 52,710
(215)(x)
Interest expense........... 1,178 315 2,801 (y) 4,294
Other expense.............. 24 24
------- ------- ------- --------
Total costs and expenses..... 76,093 64,064 3,430 143,587
------- ------- ------- --------
Income (loss) before income
taxes....................... 9,698 4,950 (3,430) 11,218
Provision for income taxes... 1,358 1,914 991 (s) 4,263
------- ------- ------- --------
Net income (loss) from con-
tinuing operations.......... $ 8,340 $ 3,036 ($4,421) $ 6,955
======= ======= ======= ========
Weighted average shares out-
standing.................... 18,562 24,589(z)
======= ========
Primary earnings per share... $ 0.45 $ 0.28
======= ========
Fully diluted earnings per
share....................... $ 0.45 $ 0.28
======= ========
</TABLE>
- --------
(1) Represents the consolidated results of operations of Benson for the six
months ended June 30, 1994 including Benson's retail optical operations
which are being discontinued in conjunction with this acquisition. The
retail optical operations represented approximately $15,310 in total
revenues and $5,507 in cost of sales for the six months ended June 30,
1994.
(2) Represents the consolidated results of operations of ORC for the six months
ended April 30, 1994 excluding the discontinued operations of the OSP
Division.
See accompanying notes to pro forma combined financial statements.
65
<PAGE>
BENSON EYECARE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(1) Pro Forma Subtotal (3)
Benson (2) Adjustments- Combined- Optical
Eyecare Completed Completed Completed Radiation Pro Forma
Corporation Acquisitions Acquisitions Acquisitions Corporation Adjustments Combined
----------- ------------ ------------ ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales.............. $78,205 $64,937 $143,142 $136,101 $279,243
Fee income............. 3,879 3,159 7,038 7,038
------- ------- -------- -------- ------- --------
Total revenues.......... 82,084 68,096 150,180 136,101 $ 0 286,281
Costs and expenses:
Cost of sales.......... 34,266 34,543 (247)(q) 68,562 90,016 158,578
Research and
development............ 0 2,173 2,173
Selling, general and
administrative........ 49,424 29,430 107 (l) 74,684 33,591 1,688 (w) 109,563
(1,093)(h) (400)(x)
(312)(i)
(188)(j)
(802)(k)
(747)(n)
(288)(o)
(125)(p)
(840)(q)
118 (r)
Interest expense....... 938 823 416 (m) 2,177 479 6,080 (y) 8,736
Other (income) expense. (143) (19) (162) (813) (975)
------- ------- ------ -------- -------- ------- --------
Total costs and
expenses............... 84,485 64,777 (4,001) 145,261 125,446 7,368 278,075
------- ------- ------ -------- -------- ------- --------
Income (loss) before
income taxes........... (2,401) 3,319 4,001 4,919 10,655 (7,368) 8,206
Provision for income
taxes.................. 57 19 1,793 (s) 1,869 4,115 (2,866)(s) 3,118
------- ------- ------ -------- -------- ------- --------
Net income (loss) from
continuing operations.. ($2,458) $ 3,300 $2,208 $ 3,050 $ 6,540 ($4,502) $ 5,088
======= ======= ====== ======== ======== ======= ========
Weighted average shares
outstanding............ 15,389 17,530(t) 23,557 (z)
======= ======== ========
Primary earnings (loss)
per share.............. ($0.16) $ 0.17(u) $ 0.22
======= ======== ========
Fully diluted earnings
(loss) per share....... ($0.16) $ 0.17(v) $ 0.22
======= ======== ========
</TABLE>
- --------
(1) Represents the results of operations of Benson for the year ended December
31, 1993 which include a full year's operations from all subsidiaries with
the exception of the following acquisitions: (i) the results of The
Bonneau Company and Pennsylvania Optical Company ("Bonneau") are included
from their acquisition date as of June 1, 1993; (ii) the results of
Superior Eye Care, Inc. ("Superior Eye Care") are included from its
acquisition date as of April 30, 1993; and (iii) the results of Opti-Ray,
Inc. ("Opti-Ray") are not included. Amounts include Benson's retail
operations which are being discontinued in conjunction with this
acquisition. The retail operations represented approximately $39,883 in
total revenues and $14,417 in cost of sales for the year ended December
31, 1993.
(2) Represents the 1993 historical results of operations for completed
acquisitions from January 1, 1993 to their respective dates of
acquisition.
(3) The acquisition of ORC will be completed upon the approval of the
shareholders of Benson and ORC. The amounts represent the results of
operations for the twelve months ended January 31, 1994 excluding the
discontinued operations of the OSP Division. ORC's fiscal year end is July
31.
See accompanying notes to pro forma combined financial statements.
66
<PAGE>
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Adjustment to reflect minimum required ORC cash on hand used to satisfy a
portion of the cash consideration to purchase ORC.
(b) Adjustment to reflect the net Benson cash on hand after draw down of
credit facility used to satisfy a portion of the cash consideration used to
purchase ORC.
(c) Adjustment to reflect the impairment of value of the OSP Division based
upon an assumption of Benson paying $2 per share which reflects the underlying
value of the OSP Division.
(d) Adjustment to reflect estimated goodwill to be recorded on the ORC
transaction and amortized over a 40-year life.
(e) Adjustment to reflect draw down of a credit facility used to satisfy a
portion of the cash consideration to purchase ORC. The facility is expected to
be at substantially the same terms as Benson's existing facility.
(f) Adjustment to reflect Benson common stock issued to purchase ORC assuming
the OSP Division is purchased by Benson for $2 per share and assuming an
Average Closing Price of $8 per share.
THE FOLLOWING TABLE REPRESENTS THE EFFECT OF VARIOUS ASSUMED AVERAGE CLOSING
PRICES:
JUNE 30, 1994:
<TABLE>
<S> <C> <C> <C> <C>
Average Closing Price........................ $ 6.00 $ 7.00 $ 8.00 $ 11.00
Stockholders' equity......................... 90,677 96,130 97,439 116,169
Weighted average shares...................... 25,471 25,263 24,589 24,648
Book value per share......................... $ 3.56 $ 3.81 $ 3.96 $ 4.71
</TABLE>
(g) Adjustment to reflect elimination of stockholders' equity balances of ORC
as the transaction will be accounted for as a purchase.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
(h) Purchase price adjustments relating to the Bonneau acquisition include:
. The amortization of intangibles of $264;
. Depreciation of the contributed buildings using an estimated useful life
of 30 years of $15;
. The net benefit of capitalization and amortization of product displays
purchased and manufactured by Bonneau using an estimated useful life of
three years of $1,422; and
. The additional depreciation on the increased basis in fixed assets using
an estimated useful life of seven years of $50.
(i) Adjustment to reflect the reduction in compensation paid to the former
owner of Bonneau in accordance with the terms of his consulting agreement.
(j) Adjustment to reflect the reduction in rent expense resulting from the
contribution of Bonneau's Dallas facility to the Company.
(k) Adjustment to reflect exclusion of costs associated with Bonneau's
Mexican facility, which was not acquired. The losses arising from the Mexican
facility in 1993 related to the warehousing operation of this
67
<PAGE>
facility. The manufacturing portion of this facility was closed in 1992. The
warehousing operation, however, continued in 1993 and was retained by the
seller of Bonneau.
(l) Purchase price adjustments relating to the Superior Eye Care acquisition
include:
. The additional depreciation on the increased basis in equipment using an
estimated useful life of five years of $80; and
. The amortization of a management contract of $27.
(m) Adjustments to reflect the reduction in interest expense resulting from
the reduction of debt from the net proceeds of the July 1993 Common Stock
offering of $250 and to reflect the increase in interest expense resulting from
$12,500 of debt used to acquire Opti-Ray at the expected interest rate on the
issuance of the convertible notes of 6.5% for the entire year of $813 less $147
interest cost charged by Goody as a cost of capital. The effect on income from
a 1/8% variance in the interest rate on $40,000 principal amount of the Notes
would be $50.
(n) Adjustments to reflect reduction in executive salaries made in
conjunction with the acquisition of Opti-Ray based on the elimination and
renegotiation of executive positions.
(o) Adjustments to reflect discontinuance of officers' life insurance at
Opti-Ray for executive officers not employed after completion of transaction.
(p) Adjustment to reflect reduction in lease expense at Opti-Ray.
(q) Adjustment to reflect savings at Opti-Ray through personnel reductions
arising due to synergies and efficiencies created by the acquisition. This
adjustment is based upon a specific identification of employees who have
received notice of termination and does not include any one-time charges.
(r) Adjustment to reflect the increase in amortization expense of $118 on the
estimated goodwill recorded for Opti-Ray purchase accounting.
(s) Adjustment to calculate the provision for income taxes on the combined
pro forma results at the statutory tax rate of 38%.
(t) The weighted average shares outstanding used to calculate earnings per
share is based on the estimated average number of shares of Common Stock of the
pro forma combined company outstanding during the period calculated as follows:
<TABLE>
<S> <C>
Company shares outstanding at December 31, 1992................... 11,068,693
Shares issued in pooling with International Eyewear............... 1,250,000
Shares issued to acquire Superior Eye Care........................ 835,073
Shares issued to acquire Bonneau.................................. 236,688
Shares issued in July 1993 offering............................... 4,025,000
Other............................................................. 21,299
----------
17,436,753
==========
</TABLE>
Other reflects the conversion of the convertible debt on the actual
conversion dates.
(u) Primary earnings per share for the pro forma year ended December 31, 1993
is based on the weighted average number of shares of Common Stock of the pro
forma combined company outstanding during the period assuming all acquisitions
were consummated at the beginning of the year, including 93,373 shares of
common stock equivalents (17,530,126 shares in total).
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<PAGE>
(v) Fully diluted earnings per share for the pro forma year ended December
31, 1993 is based on the weighted average number of shares of Benson Common
Stock of the pro forma combined company outstanding during the period assuming
all acquisitions were consummated at the beginning of the year, including
98,565 shares of common stock equivalents relating to stock options (17,535,318
shares in total).
(w) Adjustment to reflect the increase in amortization expense to amortize
the estimated goodwill recorded for ORC over a 40-year life.
(x) Adjustment to reflect the elimination of compensation expense relating to
the salary and benefits of the Chief Executive Officer of ORC.
(y) Adjustment to reflect increase in interest expense resulting from the
increased credit facility ($5,240; $2,620), decrease in interest income due to
the use of ORC's excess cash for the purchase of ORC ($1,622; $694) and
deduction of interest paid on existing facility ($782; $513). The interest rate
assumed is Prime plus 0.75% or 8%. The effect on income from a 1/4% variance in
the interest rate on a principal amount of $65,500 would be $164.
(z) Includes 6,027,000 shares of Benson Common Stock issued in connection
with the purchase of ORC assuming an exchange ratio of 0.75 and a Benson Common
Stock distribution in conjunction with the Rights of $2.00 per share.
THE FOLLOWING TABLES REPRESENT THE EFFECT OF VARIOUS ASSUMED AVERAGE CLOSING
PRICES:
FOR THE SIX MONTHS ENDED JUNE 30, 1994:
<TABLE>
<S> <C> <C> <C> <C>
Average Closing Price.......................... $6.00 $7.00 $8.00 $11.00
Weighted average shares........................ 25,471 25,263 24,589 24,648
Primary earnings per share..................... $0.27 $0.28 $0.28 $ 0.28
Fully diluted earnings per share............... $0.27 $0.28 $0.28 $ 0.28
FOR THE YEAR ENDED DECEMBER 31, 1993:
Average Closing Price.......................... $6.00 $7.00 $8.00 $11.00
Weighted average shares........................ 24,439 24,231 23,557 23,616
Primary earnings per share..................... $0.21 $0.21 $0.22 $0.22
Fully diluted earnings per share............... $0.21 $0.21 $0.22 $0.22
</TABLE>
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DESCRIPTION OF CAPITAL STOCK OF BENSON
GENERAL
Benson's authorized capital stock consists of 40,000,000 shares of Benson
Common Stock, $.01 par value, and 500,000 shares of preferred stock, $1.00 par
value.
No shares of preferred stock are presently outstanding. Benson does not
presently have outstanding, and Benson's Restated Certificate of Incorporation
does not authorize, any other classes of capital stock. The issued and
outstanding shares of Benson Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
BENSON COMMON STOCK
Holders of shares of Benson Common Stock have no preemptive, redemption or
conversion rights. The holders of Benson Common Stock are entitled to receive
dividends when and as declared by the Benson Board of Directors out of funds
legally available therefor. Each holder of Benson Common Stock is entitled to
one vote per share of Benson Common Stock held of record by them. As of
September 8, 1994, there were 18,565,948 shares of Benson Common Stock
outstanding. The Benson Common Stock is traded on Amex under the symbol "EB".
The registrar and transfer agent for Benson Common Stock is Continental Stock
Transfer & Trust Company.
PREFERRED STOCK
The Benson Board of Directors has the power, without further vote of
shareholders, to authorize the issuance of up to 500,000 shares of preferred
stock and to fix and determine the terms, limitations and relative rights and
preferences of any shares of preferred stock that it causes to be issued. This
power includes the authority to establish voting, dividend, redemption,
conversion, liquidation and other rights of any such shares. No shares of
preferred stock are now outstanding, and Benson has no current plan to issue
any such shares.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, shareholders of ORC, a California
corporation, will become shareholders of Benson, a Delaware corporation. The
rights of such shareholders will be governed by applicable Delaware law
("Delaware Law"), including the DGCL, and by the Restated Certificate of
Incorporation and Bylaws of Benson (the "Benson Certificate" and the "Benson
Bylaws," respectively). The following is a summary of the material differences
between Delaware Law and applicable California law ("California Law"),
including the CGCL, and between the Benson Certificate and Benson Bylaws, on
the one hand, and the Articles of Incorporation and Bylaws of ORC (the "ORC
Articles" and the "ORC Bylaws," respectively), on the other hand, that may
affect the rights of ORC's shareholders who become shareholders of Benson.
Preemptive Rights. Under both Delaware Law and California Law, shareholders
of a corporation have only such preemptive rights as may be provided in the
corporation's certificate of incorporation. Neither the Benson Certificate nor
the ORC Articles grant any preemptive rights to securityholders.
Dividends and Other Distributions. Under California Law, a corporation may
not make any distribution (including dividends, whether in cash or other
property, and repurchases or redemptions of its shares) to its shareholders
unless either the corporation's retained earnings immediately prior to the
proposed distribution
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equal or exceed the amount of the proposed distribution or, immediately after
giving effect to such distribution, the corporation's assets (exclusive of
goodwill, capitalized research and development expenses and deferred charges)
would be at least equal to 1 1/4 times its liabilities (not including deferred
taxes, deferred income and other deferred credits) and the corporation's
current assets would be at least equal to its current liabilities (or 1 1/4
times its current liabilities if the average pre-tax and pre-interest expense
earnings for the preceding two fiscal years were less than the average interest
expense for such years). California Law also prohibits distributions by a
corporation to its shareholders if the corporation is, or as a result of the
distribution would be, unlikely to meet its liabilities (except for those whose
payment is otherwise adequately provided for) as they mature. Such tests are
applied to California corporations on a consolidated basis.
Delaware Law permits a corporation to declare and pay dividends out of
surplus (defined as net assets minus capital) or, if there is no surplus, out
of net profits for the fiscal year in which the dividend is declared and/or for
the preceding fiscal year as long as the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets. In
addition, Delaware Law generally provides that a corporation may redeem or
repurchase its shares only if such redemption or repurchase would not impair
the capital of the corporation.
Neither the Benson Certificate nor the ORC Articles contain any restrictions
on the payment of dividends or the repurchase of shares.
Voting Requirements Generally. Under California Law, the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present is deemed to be the act of the shareholders, except for
certain matters such as mergers, sales of substantially all of a corporation's
assets, and amendments to articles, which require the vote of a majority of the
shares outstanding, and unless the vote of a greater number or voting by
classes is specifically required by the CGCL or the articles of incorporation.
A supermajority voting provision in a California corporation's articles of
incorporation (i) may not require a vote in excess of 66 2/3% of the
outstanding shares or 66 2/3% of the outstanding shares of any class or series,
(ii) must be approved by at least the same percentage of the outstanding shares
as is required by the provision for the specified corporate action or actions,
and (iii) must be renewed at least every two years in order to remain
effective. Such restrictions on supermajority voting provisions do not apply to
a corporation (i) with fewer than 100 shareholders or (ii) (A) with outstanding
shares of more than one class or series of stock, (B) with no class of equity
securities registered under Section 12(b) or 12(g) of the Exchange Act, (C)
with outstanding securities held of record by fewer than 300 persons, and (D)
that does not have, and never has had, a supermajority voting provision subject
to the two-year renewal requirement.
Under Delaware Law, the affirmative vote of the majority of shares present in
person or represented by proxy at a duly held meeting at which a quorum is
present and entitled to vote on the subject matter is deemed to be the act of
the shareholders, unless the DGCL, the certificate of incorporation or the
bylaws specify a different voting requirement.
Both the ORC Bylaws and the Benson Bylaws provide that on matters other than
the election of directors, the affirmative vote of a majority of the shares
represented at a meeting at which a quorum is present shall be the action of
the shareholders, unless a greater vote is required by California Law or the
ORC Articles, or by Delaware Law or the Benson Certificate, respectively.
Amendment of Certificate of Incorporation; Amendment of Bylaws. Under
California Law, an amendment to a corporation's articles of incorporation
requires the approval of the board of directors and the approval of a majority
of the outstanding shares entitled to vote thereon, unless otherwise specified
by California Law. Under California Law, the holders of the outstanding shares
of a class (whether or not such class is entitled to vote under the articles of
incorporation) are entitled to vote as a separate class on a proposed amendment
that would (i) increase or decrease the aggregate number of shares of such
class, other than an increase necessary to permit the conversion of options or
conversion rights previously approved by
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the outstanding shares, or an increase in connection with certain stock splits;
(ii) effect an exchange, reclassification or cancellation of all or part of the
shares of such class, other than a stock split; (iii) effect an exchange, or
create a right of exchange, of all or part of the shares of another class into
the shares of such class; (iv) change the rights, preferences, privileges or
restrictions of the shares of such class; (v) create a new class of shares
having rights, preferences or privileges prior to the shares of such class, or
increase the rights, preferences or privileges or the number of authorized
shares of any class having rights, preferences or privileges prior to the
shares of such class; (vi) in the case of preferred shares, divide the shares
of any class into series having different rights, preferences, privileges or
restrictions or authorize the board to do so; or (vii) cancel or otherwise
affect dividends on the shares of such class which have accrued but have not
been paid. Different series of the same class do not constitute different
classes for the purpose of voting by classes except when a series is adversely
affected by an amendment in a different manner than other shares of the same
class.
Under California Law, an amendment to a corporation's bylaws generally
requires the approval of either the majority of the outstanding shares or
approval by the board of directors, subject to any restriction in the
corporation's bylaws or articles of incorporation on the power of the board of
directors to amend the bylaws or any provision in the corporation's articles of
incorporation requiring a greater vote.
Under Delaware Law, an amendment to a corporation's certificate of
incorporation requires the approval of the board of directors and the approval
of a majority of the outstanding stock entitled to vote thereon and a majority
of the outstanding stock of each class entitled to vote thereon. Under Delaware
Law, the holders of the outstanding shares of a class are entitled to vote as a
separate class on a proposed amendment that would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to
affect them adversely, but would not so affect the entire class, then only the
shares of the series so affected by the amendment will be considered a separate
class for purposes of voting by classes.
Under Delaware Law, an amendment to a corporation's bylaws requires the
approval of the shareholders, unless the certificate of incorporation confers
the power to amend the bylaws upon the board of directors. If this power has
been so conferred on the directors, the shareholders still retain the right to
adopt, amend or repeal bylaws.
Action by Written Consent. Under both California Law and Delaware Law, unless
otherwise provided in a corporation's articles of incorporation or certificate
of incorporation or bylaws, any action that may be taken at any annual or
special meeting of shareholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
However, California Law prohibits the election of directors by written consent
of the shareholders unless the consent is unanimous or is for the purpose of
filling a vacancy not filled by the directors.
Neither the ORC Articles nor the Benson Certificate restricts the ability of
the shareholders of the respective corporations to take action by written
consent. Both the ORC Bylaws and the Benson Bylaws contain provisions
concerning shareholder actions by written consent consistent with the
provisions of California Law and Delaware Law, respectively.
Special Meetings of Shareholders. Under California Law, a special meeting of
shareholders may be called by the board of directors, the chairman of the
board, the president, the holders of shares entitled to cast not less than ten
percent of the votes at such meeting and other additional persons authorized by
the articles of incorporation or the bylaws. Under Delaware Law, a special
meeting of shareholders may be called
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<PAGE>
by the board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws.
The ORC Bylaws follow California Law as described above, without authorizing
additional persons to call a special meeting. The Benson Bylaws follow
Delaware Law as described above, but also empower the Chairman of the Board,
the President, and a majority of holders of record of all shares of Benson
Common Stock entitled to vote to call a special meeting.
Voting in the Election of Directors. In an election of directors under
cumulative voting, each share of stock normally having one vote is entitled to
a number of votes equal to the number of directors to be elected. A
shareholder may then cast all such votes for a single candidate or may
allocate them among as many candidates as the shareholder may choose. Without
cumulative voting, the holders of a majority of the shares voting in the
election of directors would have the power to elect all the directors to be
elected, and no person could be elected without the support of holders of a
majority of the shares.
Under California Law, cumulative voting in the election of directors is a
right of shareholders. However, a corporation may amend its articles of
incorporation or bylaws to eliminate the right to cumulative voting if it (i)
has outstanding shares listed on the New York Stock Exchange or Amex or (ii)
(A) has outstanding securities designated as qualified for trading as a NNM
security and (B) had at least 800 holders of its equity securities as of the
record date of its most recent annual meeting of shareholders. Such an
amendment must be approved by a majority of a corporation's outstanding shares
voting as a single class. Under California Law, elections for directors need
not be by written ballot unless a shareholder demands election by ballot at
the meeting and before the voting begins or unless the bylaws so require.
Under Delaware Law, cumulative voting is not mandatory, and cumulative
voting rights must be provided in a corporation's certificate of incorporation
if shareholders are to be entitled to cumulative voting rights. Delaware Law
requires that elections of directors be by written ballot, unless otherwise
provided in a corporation's certificate of incorporation.
The ORC Bylaws do not require the election of directors by written ballot
and neither the ORC Articles nor the ORC Bylaws eliminate the right to
cumulative voting. The Benson Certificate does not provide for cumulative
voting. The Benson Bylaws allow voting by ballot at the discretion of the
Board or the presiding officer at a meeting of the stockholders.
Number and Qualification of Directors. Under California Law, the size of a
corporation's board of directors generally may not be less than three. A
corporation's articles of incorporation or bylaws may state a minimum and
maximum number of directors, with the maximum not exceeding two times the
minimum minus one, and with the exact number to be fixed by approval of the
board of directors or shareholders. No bylaw or amendment to the articles of
incorporation reducing the fixed number or minimum number of directors below
five may be adopted if the votes cast against its adoption at a meeting or the
shares not consenting to its adoption in the case of action by written consent
are equal to more than 16 2/3 percent of the outstanding shares entitled to
vote thereon.
Under Delaware Law, the minimum number of directors is one. The number of
directors can be fixed by either the bylaws or the certificate of
incorporation, with changes made by a proper amendment to the appropriate
document. Although Delaware Law does not require directors to be stockholders,
the certificate of incorporation or bylaws may dictate this or any other
requirement.
The ORC Bylaws provide for a variable number of directors between 5 and 9,
with the exact number currently fixed at 5. The Benson Bylaws provide that the
authorized number of directors is between 5 and 12.
Classification of Board. A classified board is one in which a certain
number, but not all, of the directors are elected on a rotating basis each
year. This method of electing directors makes changes in the composition
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of the board of directors, and thus a potential change in control of a
corporation, a lengthier and more difficult process.
Under California Law, a corporation (i) with outstanding shares listed on the
New York Stock Exchange or Amex or (ii) (A) with outstanding securities
designated as qualified for trading as a NNM security and (B) with at least 800
holders of its equity securities as of the record date of its most recent
annual meeting, may amend its bylaws or articles of incorporation to provide
for a board divided into two or three classes to serve for terms of two or
three years, respectively. Under California Law, a board divided into two
classes must be comprised of no less than six directors, with one-half of the
directors or as close an approximation as possible to be elected at each annual
meeting of shareholders. A board divided into three classes must be comprised
of no less than nine directors, with one-third of the directors or as close an
approximation as possible to be elected at each annual meeting of shareholders.
Corporations not qualified as described above must elect the entire board of
directors annually and may not have a classified board of directors.
Delaware Law permits, but does not require, two or three classes of
directors, with staggered terms under which one-half or one-third of the
directors are elected for terms of two or three years, respectively.
None of the ORC Articles, the ORC Bylaws, the Benson Certificate or the
Benson Bylaws provides for a classified board of directors.
Removal of Directors. Under California Law, generally, any director or the
entire board of directors may be removed without cause, with the approval of a
majority of the outstanding shares entitled to vote. However, no individual
director may be removed, unless the entire board is removed, if the number of
votes cast against such removal or not consenting to such removal in the case
of action by written consent would be sufficient to elect the director under
cumulative voting. When the articles of incorporation entitle the shareholders
of a class or series to elect one or more directors, any director so elected
may be removed only by the vote of the holders of the shares of that class or
series. Any action reducing the authorized number of directors does not remove
a director prior to the expiration of the term of office.
Under Delaware Law, any director of a corporation that does not have a
classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares
entitled to vote at an election of directors. In the case of a corporation
having cumulative voting, if less than the entire board is to be removed, a
director may not be removed without cause unless the number of shares voted
against such removal would not be sufficient to elect the director under
cumulative voting. A director of a corporation with a classified board of
directors may be removed only for cause, unless the certificate of
incorporation otherwise provides.
Filling Vacancies on the Board of Directors. Under California Law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the board. If the number of directors in office is
less than a quorum, a vacancy may be filled by the unanimous written consent of
the directors then in office, by the affirmative vote of a majority of the
directors at a properly noticed meeting or by a sole remaining director. A
vacancy created by removal of a director may be filled by the Board only if so
authorized by a corporation's articles of incorporation or by a bylaw approved
by a corporation's shareholders. The CGCL further provides that if, after the
filling of any vacancy by the directors, the directors then in office who have
been elected by the shareholders are less than a majority of the directors,
then a holder or holders of five percent or more of the outstanding shares may
call a special meeting of shareholders or cause a court to order such a
meeting, to elect the entire board.
Under Delaware Law, vacancies may be filled by a majority of the directors
then in office (even though less than a quorum) unless otherwise provided in
the certificate of incorporation or bylaws. The DGCL provides that if, at the
time of filling any vacancy the directors then in office constitute less than a
majority of the board (as constituted immediately prior to any such increase),
the Delaware Court of Chancery may, upon application of any holder or holders
of at least ten percent of the total number of the shares at the time
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outstanding having the right to vote for directors, summarily order a special
election be held to fill any such vacancy or to replace directors chosen by the
board to fill such vacancies.
The ORC Bylaws state that a vacancy created by the removal of a director may
be filled only by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present or by the
unanimous written consent of all shares entitled to vote thereon. The ORC
Bylaws provide that a vacancy not created by the removal of a director may be
filled by a majority of the remaining directors or by a sole remaining
director. The Benson Bylaws state that any vacancy may be filled by a majority
of the remaining directors or by a sole remaining director.
Transactions Involving Officers or Directors. Under California Law, no
contract or other transaction between a corporation and one or more of its
directors, or between a corporation and an entity in which one or more of its
directors has a material financial interest, is void or voidable if (i) the
material facts as to the transaction and as to such director's interest are
fully disclosed or known to the shareholders and such contract or transaction
is approved by the shareholders without counting the shares owned by the
interested director; (ii) the material facts as to the transaction and as to
such director's interest are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or ratifies the
contract or transaction without counting the vote of the interested director,
and the contract or transaction is just and reasonable to the corporation at
the time it is authorized, approved or ratified; or (iii) the person asserting
the validity of the contract or transaction sustains the burden of proof that
the contract or transaction was just and reasonable to the corporation at the
time it is authorized, approved or ratified.
No contract or other transaction between a corporation and an entity in which
one or more of its directors are directors is void or voidable if (i) the
material facts as to the transaction and as to such director's other
directorship are fully disclosed or known to the board or committee and the
board or committee authorizes, approves or ratifies the contract or transaction
without counting the vote of the common director; (ii) the contract or
transaction is approved by the shareholders; or (iii) the contract or
transaction is just and reasonable to the corporation at the time it is
authorized, approved or ratified.
Under California Law, a corporation may not make any loan or guaranty to or
for the benefit of a director or officer of the corporation or its parent,
unless such loan or guaranty, or a plan providing for such loan or guarantee,
is approved by shareholders owning a majority of the outstanding voting shares
of the corporation, without counting the vote of any officer or director
eligible to participate therein. However, if a corporation has 100 or more
shareholders of record on the date of approval by the board, and has a bylaw
approved by the outstanding shares authorizing the board of directors alone to
approve loans or guaranties to or on behalf of officers, whether or not such
officers are directors, or an employee benefit plan authorizing such a loan or
guarantee to an officer, such a loan or guarantee or benefit plan may be
approved by the board alone without counting the vote of any interested
director, if the board determines that any such loan or guaranty may reasonably
be expected to benefit the corporation.
Under Delaware Law, no contract or transaction between a corporation and one
or more of its directors or officers, or between a corporation and any other
entity in which one or more of its directors or officers are directors or
officers, or have a financial interest, is void or voidable if (i) the material
facts as to the director's or officer's relationship or interest and as to the
contract or transaction are disclosed or known to the board of directors or
committee, which in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors; (ii) the
material facts as to the director's or officer's relationship or interest and
as to the contract or transaction are disclosed or known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by the shareholders; or (iii) the contract or
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof, or the
shareholders. A corporation may make loans to, guarantee the obligations of or
otherwise assist its officers or other employees and those of its subsidiaries,
including directors who are also officers or employees, when such action, in
the judgment of the directors, may reasonably be expected to benefit the
corporation.
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The Benson Bylaws contain provisions that generally are consistent with
Delaware Law regarding transactions involving officers and directors. Neither
the ORC Articles and Bylaws nor the Benson Certificate address contracts, loans
or other transactions between the corporations and their respective officers
and directors.
Indemnification and Limitation of Liability. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. There are nonetheless certain
differences between the laws of the two states respecting indemnification.
Under California Law, a corporation has the power to indemnify any agent
against expenses, judgments, fines and settlements incurred in a proceeding
other than an action by or in the right of the corporation if the person acted
in good faith and in a manner that the person reasonably believed to be in the
best interests of the corporation and, in the case of a criminal proceeding,
had no reasonable cause to believe the conduct of the person was unlawful.
California Law permits indemnification of expenses in the case of an action by
or in the right of the corporation, except that (i) no such indemnification may
be made without court approval when a person is adjudged liable to the
corporation in the performance of that person's duty to the corporation and its
shareholders, unless a court determines such person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent that
such court will determine and (ii) no such indemnification may be made without
court approval in respect of amounts paid or expenses incurred in settling or
otherwise disposing of a threatened or pending action or amounts incurred in
defending a pending action which is settled or otherwise disposed of without
court approval. Indemnification of related expenses is required when the
individual has successfully defended the action on the merits. The
indemnification authorized by California Law is not exclusive and a corporation
may grant its officers and directors additional indemnification through the
corporation's articles of incorporation. Other corporate agents may be entitled
by contract or otherwise to indemnification.
Under California Law, a corporation may adopt a provision in its articles of
incorporation eliminating the liability of a director for monetary damages for
breach of the director's fiduciary duty as a director. Such liability cannot be
eliminated where it is based on (i) intentional misconduct or knowing and
culpable violation of law; (ii) acts or omissions that a director believes to
be contrary to the best interests of the corporation or its shareholders, or
that involve the absence of good faith on the part of the director, (iii)
receipt of an improper personal benefit; (iv) acts or omissions that show
reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the
corporation or its shareholders; (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the
director's duty to the corporation and its shareholders; (vi) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (vii) liability for improper distributions,
loans or guarantees.
Similar to California Law, Delaware law grants a corporation the power to
indemnify any agent against expenses, judgments, fines and settlements incurred
in a proceeding, other than an action by or in the right of the corporation, if
the person acted in good faith and in a manner that the person reasonably
believed to be in the best interests of the corporation or (in contrast to
California Law) not opposed to the best interests of the corporation, and, in
the case of a criminal proceeding, had no reason to believe that his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, the corporation has the power to indemnify any agent against
expenses incurred in defending or settling the action if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation. No indemnification may be
made, however, when a person is adjudged liable to the corporation, unless a
court determines such person is entitled to indemnity for expenses, and then
such indemnification may be made only to the extent that such court shall
determine. Like California Law, Delaware Law requires that to the extent an
indemnified individual is successful in the defense of any third-party or
derivative proceeding, or in defense of any claim, issue or matter therein, the
corporation must indemnify such person against expenses incurred in connection
therewith.
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Under Delaware Law, a corporation may adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that such provision may not
eliminate or limit director monetary liability for: (i) breaches of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions in which the director received
an improper personal benefit.
The ORC Articles contain provisions eliminating the liability of directors
for monetary damages to the fullest extent permissible under California Law,
and authorizing excess indemnification of agents to the fullest extent
permissible under California Law, and the ORC Bylaws contain indemnification
provisions consistent with California Law. ORC has entered into indemnification
agreements with certain of its past and present officers and directors that
require ORC to indemnify such persons to the fullest extent permitted under
California law. The Benson Certificate contains a provision eliminating the
liability of a director to the corporation or its shareholders for monetary
damages to the fullest extent permitted under Delaware law. The Benson Bylaws
contain indemnification provisions consistent with Delaware Law. Benson also
has entered into indemnification agreements with certain of its officers and
directors that require Benson to indemnify such persons to the fullest extent
permitted under Delaware Law.
Mergers, Tender Offers and Sales of Substantially all of the Assets. Under
California Law, the principal terms of a merger generally require the approval
of the board and the shareholders of each of the merging corporations and any
parent of a merging corporation if the parent's securities are to be issued or
transferred in the transaction. The principal terms of a sale of assets
reorganization (in which the acquired corporation's shareholders receive equity
securities or debt securities with a maturity of more than five years that are
not adequately secured in exchange for substantially all of the assets of such
acquired corporation) generally require the approval of the board and the
shareholders of the acquiring and the acquired corporation, and the parent of
the acquiring corporation if the parent's securities are to be issued or
transferred in the transaction. The principal terms of a share exchange tender
offer require the approval of the board and the shareholders of the acquiring
corporation and any other corporation whose securities are to be used in the
tender offer.
Under California Law, shareholder approval generally must be by separate
class vote, except that approval by separate class vote of the holders of
preferred stock of an acquiring, surviving or parent corporation is not
required if the rights, preferences, privileges and restrictions of such class
remain unchanged in the transaction and if the transaction does not involve an
amendment to the corporation's articles of incorporation that would otherwise
require such separate class vote. Notwithstanding the foregoing, approval by
the shareholders of a corporation is not required if the corporation or its
shareholders immediately before the transaction, or both, will own immediately
after the transaction equity securities possessing more than five-sixths of the
voting power of the surviving, acquiring or parent corporation, or corporation
whose securities are used in a share exchange tender offer. A disposition of
substantially all of a corporation's assets, other than pursuant to a sale of
assets reorganization described above, requires the approval of the outstanding
shares of the corporation.
Under Delaware Law, the principal terms of a merger generally require the
approval of the board and the shareholders of each of the merging corporations,
but do not require the approval of the shareholders of any parent corporation,
even when the parent corporation's securities are to be used as consideration
for the merger. Unless otherwise required in a corporation's certificate of
incorporation, Delaware Law does not require a stockholder vote of the
surviving corporation in a merger if (i) the merger agreement does not amend
the existing certificate of incorporation, (ii) each share of the surviving
corporation outstanding before the merger is an identical outstanding or
treasury share after the merger, and (iii) either no shares of the surviving
corporation and no securities convertible into such stock are to be issued in
the merger or the number of shares to be issued by the surviving corporation in
the merger does not exceed 20% of the shares outstanding
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immediately prior to the merger. A disposition of substantially all of a
corporation's assets requires the approval of the outstanding shares of the
corporation.
None of the ORC Articles, ORC Bylaws, Benson Certificate or Benson Bylaws
contain any provisions relating to mergers, tender offers or sales of
substantially all of the corporation's assets.
Dissenters' Rights. Under both California and Delaware Law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to dissenters' or appraisal rights pursuant
to which such shareholder may receive cash in the amount of the fair market
value of his or her shares in lieu of the consideration he or she would
otherwise receive in the transaction.
Shareholders of a California corporation whose shares are listed on a
national securities exchange or on a list of over-the-counter margin stocks
issued by the Board of Governors of the Federal Reserve System (as are the
shares of ORC) generally do not have such dissenters' rights unless the holders
of at least 5% of the class of outstanding shares exercise the right or the
corporation or any law restricts the transfer of such shares. Dissenters'
rights are unavailable, however, if the shareholders of a corporation or the
corporation itself, or both, immediately after the reorganization will own
equity securities constituting more than five-sixths of the voting power of the
surviving or acquiring corporation or its parent entity. California Law does
afford dissenters' rights for certain sale of asset reorganizations. For a
further discussion of dissenters' rights under California Law, See "The Merger
and Special Factors--Dissenters' Rights."
Under Delaware Law, such appraisal rights are not available (a) with respect
to the sale, lease or exchange of all or substantially all of the assets of a
corporation, (b) with respect to a merger or consolidation by a corporation the
shares of which are either listed on a national securities exchange or are held
of record by more than 2,000 holders if such stockholders receive only shares
of the surviving corporation or shares of any other corporation which are
either listed on a national securities exchange or held of record by more than
2,000 holders, plus cash in lieu of fractional shares, or (c) to stockholders
of a corporation surviving a merger if no vote of the stockholders of the
surviving corporation is required to approve the merger because the merger
agreement does not amend the existing certificate of incorporation, each share
of the surviving corporation outstanding prior to the merger is an identical
outstanding or treasury share after the merger, and the number of shares to be
issued in the merger does not exceed 20% of the shares of the surviving
corporation outstanding immediately prior to the merger and if certain other
conditions are met.
None of the ORC Articles, ORC Bylaws, Benson Certificate or Benson Bylaws
contains any provisions relating to dissenters' rights of appraisal.
Inspection of Shareholder List. In general, both California Law and Delaware
Law allow any shareholder to inspect and copy a corporation's shareholder list
for a purpose reasonably related to such person's interest as a shareholder.
California Law provides, in addition, for an absolute right to inspect and copy
the corporation's shareholder list by persons holding an aggregate of 5% or
more of a corporation's voting shares, or shareholders holding an aggregate of
1% or more of such shares who have filed a Schedule 14B with the Commission
relating to the election of directors. Delaware does not provide a similar
absolute right of inspection for specified shareholders.
The ORC Bylaws provide that persons holding an aggregate of 5% or more of the
voting stock of ORC may inspect and copy the list of shareholders upon five
days prior written demand. The Benson Bylaws provide that the stockholder list
will be available for the examination of any stockholder for any purpose
germane to a meeting of stockholders.
Shareholder Derivative Suits. California Law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the matter in question, provided that the plaintiff
shareholder acquired such person's shares in the corporation before there was
disclosure to
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the public or the shareholder of the wrongdoing which is the subject of the
action, and provided that certain other criteria are met. California Law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond of up to $50,000.
Under Delaware Law, a stockholder may only bring a derivative action on
behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the matter in question or the stockholder's stock
thereafter devolved upon the stockholder by operation of law. The DGCL does not
have a bonding requirement.
None of the ORC Articles, ORC Bylaws or Benson Certificate contains any
additional provisions relating to shareholder derivative suits. The Benson
Bylaws provide that no legal action shall be asserted by or on behalf of Benson
or any affiliate of Benson against any person who is or was a director or
officer of Benson after the expiration of two years from the date of accrual of
such cause of action.
Dissolution. Under California Law, shareholders holding 50% or more of the
total voting power may authorize a corporation's dissolution, with or without
the approval of the corporation's board of directors. The board may cause the
corporation to dissolve if (a) an order for relief under Chapter 7 of the
federal bankruptcy law has been entered, (b) no shares have been issued or (c)
the corporation has disposed of all of its assets and has not conducted any
business for a period of five years preceding the adoption of a resolution to
dissolve.
Under Delaware Law, if the dissolution is initiated by the board of directors
it may be approved by holders of a majority of the corporation's shares. If the
board of directors does not approve the proposal to dissolve, the dissolution
must be consented to in writing by all stockholders entitled to vote thereon.
THE BENSON SHARE ISSUANCE
At the Benson Special Meeting, holders of Benson Common Stock will consider
and vote upon the Merger Agreement, pursuant to which Benson will issue Benson
Common Stock. Under California Law, the principal terms of the Merger must be
approved by the holders of Benson Common Stock since Benson is the parent of
the merging corporation, Benson Sub, and the Benson Common Stock to be issued
in the Merger will constitute more than one-sixth of the shares of Benson
Common Stock after the Merger. In addition, as the number of shares of Benson
Common Stock to be issued in the Merger will result in an increase in the
number of outstanding shares of Benson Common Stock by more than 20%, Amex
requires Benson to obtain shareholder approval of the issuance of such shares.
Shareholder approval of the Merger will constitute the approval required by
Amex for the Benson Share Issuance in connection with the Merger.
Approval of the Merger and the Benson Stock Option Plan Amendment requires an
affirmative vote by the holders of a majority of the outstanding shares of
Benson Common Stock represented in person or by proxy at the Benson Special
Meeting. The presence in person or by properly executed proxy of holders of
shares of a majority of the votes entitled to be cast at the Benson Special
Meeting is necessary to constitute a quorum at the Benson Special Meeting. See
"General Information--Record Date; Voting Rights; Proxies" and "--Required
Vote."
PROPOSED AMENDMENT TO BENSON STOCK OPTION PLAN
PLAN AMENDMENT PROPOSAL
At the Benson Special Meeting, Benson shareholders will be asked to consider
and act upon a proposal to amend the Benson Stock Option Plan, which is
described below under "Description of Plan." The purpose of the amendment is to
increase the total number of shares of Benson Common Stock that may be awarded
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pursuant to the Benson Stock Option Plan by (i) 500,000 shares plus (ii) an
amount, not to exceed 1,300,000 shares, equal to the number of shares of Benson
Common Stock subject to Benson Stock Options that may be awarded in exchange
for outstanding ORC Stock Options in the Merger. See "The Merger Agreement--
Stock Options." A copy of the Amendment to the Benson Stock Option Plan is
attached as Annex E to this Proxy Statement.
The Benson Stock Option Plan currently authorizes up to 1,800,000 shares of
Benson Common Stock for grant pursuant to options. As of the date of this Proxy
Statement, approximately 689,001 shares of Benson Common Stock remain available
for grant under the Benson Stock Option Plan.
Benson management believes that the proposed increase in the number of shares
available for grant under the Benson Stock Option Plan is necessary in order to
provide a sufficient number of shares to enable Benson to incentivize current
employees as well as new employees who will be joining Benson as a result of
the Merger. Benson management believes that key employees of the new operations
should have a substantial stock interest in Benson and that the stock option
program is an excellent vehicle for rewarding performance that is tied to the
value of the Benson Common Stock. The proposed increase is also necessary in
order to provide the opportunity for holders of ORC Stock Options to receive
Benson Stock Options, instead of cash and Benson Common Stock, in exchange for
their ORC Stock Options as part of the Merger.
Benson management recommends a vote for this proposed amendment to the Benson
Stock Option Plan.
DESCRIPTION OF PLAN
At Benson's 1992 Annual Meeting of Stockholders, shareholders approved the
Benson Stock Option Plan. An increase in the number of shares of Benson Common
Stock that may be awarded under the Plan was approved by Benson shareholders at
the 1993 Annual Meeting of Stockholders. Pursuant to the Benson Stock Option
Plan, eligible employees may be granted stock options ("Options"), which may be
incentive stock options ("Incentive Options") or non-qualified stock options
("Non-Qualified Options"). In addition, stock appreciation rights ("SARs") may
be granted alone, in conjunction with, or as an alternative of Incentive
Options or Non-Qualified Options. The determination of who is a key employee of
Benson will be made by the Benson Board of Directors or its Stock Option
Committee (the "Option Committee").
The Benson Stock Option Plan currently provides for the granting of Options
and SARs with respect to an aggregate of up to 1,800,000 shares (which number
is subject to adjustment in the event of stock dividends, stock splits and
other similar events) of Benson Common Stock, of which approximately 689,001
shares remain available for grant as of the date of this Proxy Statement. If
this proposed amendment to the Benson Stock Option Plan is approved by
shareholders, the total number of Options and SARs authorized under the Plan
will be increased from 1,800,000 shares to at least 2,300,000 shares and up to
a maximum of 3,600,000 shares. See "--Plan Amendment Proposal." To the extent
that Options or SARs granted under the Plan expire or terminate without having
been exercised, the shares of Benson Common Stock covered by such Options or
SARs will again become available for award.
The Option Committee has authority to administer the Benson Stock Option
Plan, although, under certain conditions, both the Executive Committee of the
Benson Board of Directors, if any, and the Board itself have the power to
administer the Benson Stock Option Plan. The Option Committee must consist of
no fewer than two members (or the minimum number of directors as may be
required by applicable law), of the Benson Board of Directors, each of whom is
a "disinterested person" within the meaning of Rule 16b-3 of the Exchange Act.
The Option Committee will have the authority to determine the employees to whom
Options or SARs will be granted, the time when such Options or SARs shall be
granted, the number of shares which shall be subject to each Option or SAR
(subject to certain limitations in the case of Incentive Options), the purchase
price or exercise price of each Option or SAR (no less than 100% of fair market
value for Incentive Options), the period(s) during which such Options or SARs
shall be exercisable (whether in whole or in part) (no more than ten years for
Incentive Options) and the other terms and provisions thereof. Benson
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Common Stock purchased on the exercise of Options may be paid for in cash or by
certified check, or with shares of Benson Common Stock (if permitted by the
terms of the Option and by applicable law) or by promissory note (for not more
than 90% of the price and on such terms as the Option Committee shall
determine). SARs may be exercised for shares of Benson Common Stock (with such
restrictions as to forfeiture and transferability as the Option Committee shall
determine) or, if approved and subject to certain additional limitations, cash.
The Option Committee may at any time suspend or terminate the Benson Stock
Option Plan, provided that rights and obligations under any Option or SAR
granted while the Benson Stock Option Plan is in effect may not be altered or
impaired by suspension or termination of the Plan, except with the consent of
the holder thereof.
In the event of any change in the outstanding shares of Benson Common Stock
(through events such as a stock split, stock dividend, recapitalization of
Benson or other like change in its capital structure), the Option Committee
will make such adjustment to each outstanding Option and SAR that it, in its
sole discretion, deems appropriate, subject to the provisions of Section 424(a)
of the Code, as to Incentive Options and related SARs. It is intended that
Incentive Options granted under the Option Plan will meet the definitional
requirements of Section 422(b) of the Code for "incentive stock options."
Under the Code, an employee generally is not subject to regular income tax
upon the grant or exercise of an Incentive Option if, subsequent to its
exercise, the employee holds the stock received for the longer of two years
from the date of grant or one year from the date of exercise (the "Required
Holding Period"). Upon sale of such stock subsequent to the required holding
period, the difference, if any, between the amount realized from the sale and
the tax basis to the employee will be taxed as long-term capital gain or loss
(provided that such stock was held by the employee as a capital asset at such
time).
In general, if an employee (i) exercises an Incentive Option by delivering
stock previously acquired pursuant to the exercise of an Incentive Option
before the end of the Required Holding Period applicable to such stock, or (ii)
after exercising an Incentive Option, disposes of the stock so acquired before
the end of the Required Holding Period (i.e., in either case, makes a
"disqualifying disposition"), such employee would be deemed in receipt of
ordinary income in the year of the disqualifying disposition in an amount equal
to the excess of the fair market value of the stock at the date of exercise
over the exercise price. However, if the disposition of the stock is a sale or
exchange with respect to which a loss, if sustained, would be recognized to
such employee, and if the sale proceeds are less than the fair market value of
the stock on the date of exercise of the Incentive Option, the employee's
ordinary income would be limited to the excess, if any, if the amount realized
on such disposition over the tax basis of such stock. If the amount realized
upon a taxable disposition of the stock exceeds the fair market value of the
stock on the date of exercise, the excess would be treated as short-term or
long-term capital gain, depending on the applicable holding period on the
disposition date (provided that such stock was held by the employee as a
capital asset at such time).
The Internal Revenue Service (the "IRS") has announced that it currently will
not rule, and consequently there is some uncertainty, as to the federal income
tax consequences of exercising an Incentive Option with stock acquired (i) upon
exercise of an Incentive Option and delivered after the expiration of the
Required Holding Period, or (ii) upon exercise of a Non-Qualified Option or
otherwise.
A deduction is not allowed to Benson for federal income tax purposes with
respect to the grant or exercise of an Incentive Option or the disposition,
after the Required Holding Period, of stock acquired upon exercise. In the
event of a disqualifying disposition, a federal income tax deduction will be
allowed to Benson in an amount equal to the ordinary income taxable to the
employee, provided that such amount constitutes an ordinary and necessary
business expense to Benson and is reasonable.
For purposes of computing whether an employee is subject to any alternative
minimum tax liability, an employee who exercises an Incentive Option generally
would be required to increase alternative minimum
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taxable income, and compute the tax basis in the stock so acquired, in the same
manner as if the optionee had exercised a Non-Qualified Option.
An employee who receives a Non-Qualified Option or SAR will not recognize any
taxable income upon the grant of such Non-Qualified Option or SAR. In general,
upon exercise of a Non-Qualified Option an employee will be treated as having
received ordinary income in an amount equal to the excess of the fair market
value of the stock at the time of exercise over the exercise price. Upon the
receipt of cash or stock pursuant to the exercise of SARs, an employee will
recognize ordinary income in an amount equal to the sum of the amount of cash
at the fair market value of the stock received, and Benson satisfies its
withholding obligation with respect to such income.
Any holder of a Non-Qualified Option or SAR who is subject to the reporting
requirements of Section 16(a) of the Exchange Act should consult his tax
advisor as to whether the timing of income recognition is deferred for any
period following exercise of such Non-Qualified Option or SAR (i.e., the
"Deferral Period"). Absent a written election filed with the IRS within thirty
(30) days after the date of exercise pursuant to Section 83(b) of the Code to
include in income, as of the exercise date, the excess of the fair market value
of the stock on the exercise date over the exercise price, recognition of
income by the holder will be deferred until the expiration of the Deferral
Period, if any.
The Benson Stock Option Plan is not qualified under the provisions of Section
401(a) of the Code and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
NEW PLAN BENEFITS TABLE
Set forth below is a tabular presentation of the benefits and amounts that
will be received by or allocated to each of the indicated persons under the
Benson Stock Option Plan, which amendment thereto is being submitted for
shareholder approval.
<TABLE>
<CAPTION>
BENSON STOCK OPTION PLAN
--------------------------------
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
----------------- ---------------- ---------------
<S> <C> <C>
Martin E. Franklin........................... (1)
Chairman of the Board, Chief Executive
Officer and President
All Executive Officers as a group, including
those listed above.......................... (1)
Non-Executive Director Group................. (2)
All Non-Executive Officer Employee Group..... (1)
</TABLE>
- --------
(1) The grant of options under the Benson Stock Option Plan is entirely within
the discretion of the Option Committee. Benson cannot determine the nature
or amount of awards that will be made in the future.
(2) Not eligible for participation.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by or paid
to (i) Benson's Chief Executive Officer and (ii) the other most highly
compensated executive officers of Benson who earned total compensation for 1993
exceeding $100,000. The Chief Executive Officer and such other officers are
referred to herein as the "Named Executive Officers." Except as disclosed
below, no executive officer of Benson had a total annual salary and bonus for
1993 exceeding $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- -------------------------
AWARDS
-------------------------
OTHER ANNUAL RESTRICTED STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) SARS COMPENSATION
- --------------------------- ---- -------- ----- ------------ ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Martin E. Franklin (1).. 1993(2) $ 50,000 -0- -0- -0- -0- -0-
Chairman, Chief 1992(2) -- -0- -0- -0- -0- -0-
Executive Officer 1991(3) -- -- -- -- -- --
and President
Jack V. Gunion.......... 1993 $103,500 -0- -0- -0- 400,000 -0-
Chief Executive Officer
and 1992(4) -- -- -- -- -- --
President of Benson
Optical 1991(4) -- -- -- -- -- --
</TABLE>
- --------
(1) Mr. Franklin, as the sole shareholder of Pembridge Holdings, Inc. (and Mr.
Kanders, who was a stockholder until March 1993), and Messrs. Franklin and
Kanders as the sole shareholders of Minnetonka Properties, Inc. until
January 3, 1994, were indirect beneficiaries of payments made in 1993 by
Benson or Benson Optical.
(2) Pursuant to an employment agreement effective as of July 1, 1993, Mr.
Franklin earns a salary of $100,000 annually. See "--Employment
Agreements--Martin E. Franklin." Prior to that time, Mr. Franklin did not
receive any salary or other annual compensation from Benson.
(3) Mr. Franklin became Chairman of the Benson Board of Directors and its Chief
Executive Officer on October 16, 1992. He additionally was named President
of Benson on November 15, 1993.
(4) Mr. Gunion became Chief Executive Officer and President of Benson Optical
on March 15, 1993 and resigned as of July 29, 1994. As part of a separation
agreement with Benson, in addition to his 133,333 options that had already
vested, Mr. Gunion was granted accelerated vesting with respect to 50,000
of the 266,667 options that had not yet vested.
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Option/SAR Grant Table
The following table provides information on options granted to the Named
Executive Officers during 1993. No stock appreciation rights were granted in
1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS/ VALUE AT ASSUMED
SARS ANNUAL RATES OF STOCK PRICE
GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM(1)
OPTIONS/ EMPLOYEES BASE PRICE --------------------------------
NAME SARS GRANTED (#) IN 1993 ($/SH) EXPIRATION DATE 0% 5% 10%
- ---- ---------------- ---------- ----------- --------------- ------------------ -------------
($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Martin E. Franklin...... -0- -0- -- N/A 0 0 0
Jack V. Gunion.......... 400,000 (2) 42.1% $6.0125 March 15, 2000 $0 $979,077 $2,281,665
</TABLE>
- --------
(1) These columns illustrate the hypothetical appreciation of the stock options
under the assumption that each option appreciates at the rate of 0%, 5% and
10% respectively, compounded annually until the options expire on March 15,
2000.
(2) Options to purchase 133,333 shares of Benson Common Stock vest on March 15
in each of the years 1994, 1995 and 1996 at an exercise price of $6.0125
per share. Unexercised options are forfeited upon retirement, resignation
or termination of the employee, subject to special rules allowing for the
exercise of options for a three-month period after an executive is no
longer employed by Benson by reason of his death or disability. Mr. Gunion
resigned his position with Benson Optical as of July 29, 1994. As part of a
separation agreement with Benson, in addition to his 133,333 options that
had already vested, Mr. Gunion was granted accelerated vesting with respect
to 50,000 of the 266,667 options that had not yet vested.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information on options/SARs exercised during
1993 by the Named Executive Officers and the value of such officers'
unexercised options/SARs as of the end of such fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END ($)
SHARES ACQUIRED VALUE ------------------------------- ------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin...... -- -- -0- -0- -0- -0-
Jack V. Gunion.......... -- -- -0- 400,000 -0- $345,000 (1)
</TABLE>
- --------
(1) Assumes that the fair market value of the options as of the end of the
fiscal year was $0.8625 per share, based upon the closing price of the
Benson Common Stock on the American Stock Exchange on December 31, 1993 of
$6.875 and the weighted average exercise price of $6.0125 per share.
Directors' Compensation
Except as stated herein, Benson's directors receive no compensation in
connection with their services as directors on its Board of Directors. MD Eye
Care, Inc., a corporation of which Dr. Charles F. Sydnor is a principal, has a
consulting agreement with Benson, but such consulting agreement was not entered
into in consideration of Dr. Sydnor's services as a director of Benson. Dr.
Charles D. Fritch has an employment agreement with Superior Vision; Dr. Fritch
also is a party to agreements entered into in connection with Benson's
acquisition of Superior. None of these agreements were entered into in
consideration of Dr. Fritch's services as a director. Mr. Troubh receives an
annual retainer in the amount of $10,000 for his services as a director.
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In 1993 Benson adopted a Stock Option Plan for Outside Directors (the
"Outside Directors Plan"), which authorizes grants of options to purchase up to
200,000 shares of Benson Common Stock to directors who are not employees of
Benson and are ineligible to participate under the Benson Stock Option Plan for
employees. The Option Committee administers the Outside Directors Plan,
although under certain conditions, both the Executive Committee (if any) and
the Board of Directors itself have the power to administer the Outside
Directors Plan. The Stock Option Committee, the Executive Committee (if any) or
the Board of Directors may award options to directors who are "disinterested
persons," as defined in Rule 16(b)-3 of the Exchange Act, and may establish the
terms of such options, including purchase price, exercise price and the period
during which the options are exercisable. Options granted under the Outside
Directors Plan are intended to be Non-Qualified Options.
As of August 26, 1994, Non-Qualified Options to purchase 10,000, 20,000,
20,000 and 84,000 shares of Benson Common Stock had been granted under the
Outside Directors Plan to, respectively, Messrs. Roberts (a former director),
Troubh and Hanselman and Dr. Sydnor.
Employment Agreements
Martin E. Franklin. Mr. Franklin has entered into an employment agreement
with Benson, effective as of July 1, 1993, pursuant to which he will serve as
Chief Executive Officer of Benson for an initial period of three years, subject
to annual renewal. Under the agreement, Mr. Franklin will receive an annual
base salary of $100,000, subject to (i) increase each year by a minimum of the
annual rate of increase in the Consumer Price Index, and (ii) discretionary
increases determined by the Compensation Committee of the Board of Directors
and/or the Board of Directors from time to time; Mr. Franklin also may receive
a bonus based on performance criteria to be determined by the Board of
Directors. The agreement may be terminated by either party upon at least 90
days' notice prior to the end of the initial term or any subsequent renewal
term. Benson may terminate the agreement for cause in the event of the death,
permanent disability or certain misconduct of Mr. Franklin. Benson may
terminate Mr. Franklin's employment without cause upon 30 days' notice, in
which event Mr. Franklin will be entitled to receive a severance payment equal
to one year's current base salary and his existing benefits for a period of one
year. Although Mr. Franklin currently has no stock options, upon termination of
his employment without cause, all non-vested stock options will automatically
vest. The agreement contains noncompetition and nonsolicitation restrictions
effective during the employment term and for a period of one year thereafter.
Ian G.H. Ashken. Mr. Ashken has entered into an employment agreement with
Benson, effective as of July 1, 1993. Under the agreement, Mr. Ashken will
serve as Chief Financial Officer of Benson and will receive an annual base
salary in 1994 of $135,000, subject to (i) increase each year by a minimum of
the annual rate of increase in the Consumer Price Index, and (ii) discretionary
increases determined by the Compensation Committee of the Board of Directors
from time to time. Mr. Ashken also may receive a bonus based on performance
criteria to be determined by the Board of Directors. The other terms of Mr.
Ashken's employment agreement are the same as the terms of Mr. Franklin's
employment agreement.
Jack V. Gunion. Mr. Gunion entered into an employment agreement with Benson
Optical, pursuant to which he served as Chief Executive Officer of Benson
Optical. Mr. Gunion resigned as of July 29, 1994, at which time his employment
agreement was terminated. Under the employment agreement, Mr. Gunion received
an annual base salary of $130,000, which salary increased annually by a minimum
of the annual rate of increase in the Consumer Price Index. Benson granted Mr.
Gunion Non-Qualified Options to purchase up to 400,000 shares of Benson Common
Stock at an exercise price of $6.0125 per share, of which 133,333 were vested
at the time of his resignation. The remaining 266,667 options were to vest in
equal amounts on March 15, 1995 and 1996. As part of a separation agreement
with Benson, in addition to his 133,333 options that had already vested, Mr.
Gunion was granted accelerated vesting with respect to 50,000 of the 266,667
options that had not yet vested. The terms of Mr. Gunion's employment agreement
were otherwise the same as the terms of Mr. Franklin's employment agreement.
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Charles D. Fritch, M.D. Dr. Fritch is a party to an employment agreement with
Superior Vision whereby Dr. Fritch serves on a part-time basis as Chairman of
both the Board of Directors and the Management Board of Superior Vision for a
term of five years, which term may be renewed automatically for an additional
five years. Dr. Fritch's compensation, as set forth in a separate participation
agreement, is based upon the performance of Superior Vision, calculated for
1993 at the rate of 10% of Superior Vision's annual pre-tax income and 16% of
any gain on the sale of all or part of Superior Vision. Dr. Fritch was also
granted options to purchase 100,000 shares of Benson Common Stock (of which
33,333 have vested), with an exercise price of approximately $6.00 per share.
The remaining 66,667 options vest in equal amounts on April 30, 1995 and 1996.
Superior Vision may terminate the employment agreement with Dr. Fritch for
cause upon the death, permanent disability or misconduct of Dr. Fritch or other
material breach by Dr. Fritch of the terms of the agreement. In the event Dr.
Fritch's employment is terminated as a result of his death, disability or for
cause, Dr. Fritch is entitled to the pro rata portion of any bonus for the year
in which such termination occurs. The agreement contains noncompetition and
nonsolicitation restrictions effective during the term of employment and for a
period of one year thereafter, provided such agreement is not terminated by
Superior Vision without cause.
Other
Benson does not maintain a pension plan or other actuarial or defined benefit
retirement plan for its named executive officers. Benson does not maintain any
long term incentive plans. There were no repricings of outstanding Options or
SARs held by any of Benson's executive officers during 1993.
Compensation Committee and Stock Option Committee Interlocks and Insider
Participation
During 1993, the members of the Compensation Committee of Benson's Board of
Directors were Mr. Franklin (Benson's Chairman, Chief Executive Officer and
President), Mr. Kanders (Benson's Vice Chairman), and Mr. Troubh; the members
of Benson's the Stock Option Committee of Benson's Board of Directors were
Messrs. Franklin, Kanders and Ehrlich. From his initial appointment as Chairman
and Chief Executive Officer of Benson in October 16, 1992 through July 1, 1993,
Mr. Franklin served without compensation as the Chairman and Chief Executive
Officer of Benson; Mr. Kanders has served without compensation as Vice Chairman
since October 16, 1992. Mr. Franklin has entered into an Employment Agreement
with Benson, effective as of July 1, 1993. See "--Employment Agreements--Martin
E. Franklin." Mr. Ehrlich, formerly Chairman and Chief Operating Officer of
Benson, has received no salary from Benson as an employee since October 15,
1992.
Described below are certain transactions between members of the Compensation
and Stock Option Committees and Benson.
On October 16, 1992, Benson acquired all the outstanding capital stock of
Pembridge Optical Partners, Inc. ("Pembridge") from Messrs. Franklin and
Kanders in exchange for the issuance, among other things, of an aggregate of
1,620,000 unregistered shares of Benson Common Stock (the "Pembridge
Acquisition"). In addition, Benson sold Messrs. Franklin and Kanders an
aggregate of 5,180,000 unregistered shares of Benson Common Stock for a
purchase price of $1,942,500. As part of the Pembridge Acquisition, Benson
granted Messrs. Franklin and Kanders certain registration rights with respect
to their shares of Benson Common Stock.
Following the consummation of the Pembridge Acquisition, Benson moved its
executive offices to 135 East 57th Street, Suite 3010, New York, N.Y. 10022,
which it occupied through October, 1993. The space was leased and occupied by
Pembridge Holdings, Inc., which until March 12, 1993 was owned equally by
Messrs. Franklin and Kanders and since that date, by Mr. Franklin exclusively.
Mr. Ashken, an executive officer and director of Benson, is a director and
Executive Vice-President of Pembridge Holdings, Inc. Benson was charged the
current fair market value on a pro rata basis for its use of such office space.
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Following the consummation of the Pembridge Acquisition, Minnetonka
Properties, Inc. (a corporation of which all of the issued and outstanding
capital stock was held by Messrs. Franklin and Kanders) purchased the building
where Benson Optical leases its main headquarters and laboratory facility in
Minnetonka, Minnesota. Effective January 3, 1994, Benson acquired from Messrs.
Franklin and Kanders all of the issued and outstanding capital stock of
Minnetonka Properties, Inc.
OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement will be brought before the ORC Special Meeting and the Benson Special
Meeting. However, if any other matters are presented, it is the intention of
the persons named in the ORC and Benson proxy, respectively, to vote the proxy
in accordance with their best judgment.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities offered
hereby will be passed upon for Benson by Willkie Farr & Gallagher, One Citicorp
Center, 153 East 53rd Street, New York, New York 10022.
EXPERTS
The consolidated financial statements of Benson at December 31, 1993 and 1992
and for each of the years in the two-year period ended December 31, 1993
incorporated in this Proxy Statement by reference to Benson's Annual Report on
Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 1993 and
the financial statements of Charles D. Fritch M.D., Inc. (DBA Fritch Eye Care
Medical Center) at March 31, 1993 and December 31, 1992 and 1991 and for the
three-month period ended March 31, 1993 and for each of the years in the two-
year period ended December 31, 1992 incorporated in this Proxy Statement by
reference to Benson's Current Report on Form 8-K dated April 30, 1993, as
amended on April 22, 1994, have been so incorporated in reliance upon the
reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements and schedules of Benson for the year
ended December 31, 1991 incorporated by reference in this Proxy Statement have
been so incorporated in reliance upon the reports of KPMG Peat Marwick LLP and
Weber, Lipshie & Co., independent certified public accountants, on the
authority of said firms as experts in auditing and accounting.
The financial statements of Opti-Ray, Inc. as of and for the years ended
December 31, 1993 and 1992 incorporated by reference in this Proxy Statement
have been so incorporated in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, on the authority of that firm as
experts in auditing and accounting.
The combined financial statements of The Bonneau Company and Pennsylvania
Optical Company at March 31, 1993 and August 31, 1992, 1991 and 1990 and for
the 31-week period ended March 31, 1993 and each of the three years in the
period ended August 31, 1992 included in this Proxy Statement have been so
included in reliance upon the report of Tuggle, Burton & Co., P.C., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements and schedules of ORC incorporated by
reference in this Proxy Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
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SHAREHOLDER PROPOSALS
Any Benson shareholder who wishes to submit a proposal for presentation to
Benson's 1995 Annual Meeting of Shareholders must submit the proposal to Benson
Eyecare Corporation, Suite B-302, 555 Theodore Fremd Avenue, Rye, New York
10580, Attention: Desiree DeStefano, not later than April 15, 1995 for
inclusion, if appropriate, in Benson's proxy statement and form of proxy
relating to its 1995 Annual Meeting.
If the Merger is not consummated, any ORC shareholder who wishes to submit a
proposal for presentation to ORC's 1994 Annual Meeting of Shareholders must
have submitted the proposal to Optical Radiation Corporation, 1300 Optical
Drive, Azusa, California, 91702, Attention: Secretary, not later than July 18,
1994 (or depending on the date of such meeting such later date as determined
pursuant to Rule 14a-8 under the Exchange Act) for inclusion, if appropriate,
in ORC's proxy statement and form of proxy relating to its 1994 Annual Meeting.
88
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BENSON EYECARE CORPORATION
AND
OPTICAL RADIATION CORPORATION
ANNEXES TO THE JOINT PROXY STATEMENT/PROSPECTUS
Annex A--Agreement and Plan of Merger
Annex B--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
Annex C--Opinion of Salomon Brothers Inc
Annex D--California General Corporation Law, Chapter 13
Annex E--Amendment to Benson Stock Option Plan
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ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BENSON EYECARE CORPORATION,
OPTICAL RADIATION CORPORATION
AND
BENSON ACQUISITION CORPORATION
-------------------------------------
-------------------------------------
AGREEMENT AND PLAN OF MERGER
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
DATED AS OF JUNE 30, 1994
-------------------------------------
-------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
THE MERGER.......................................................... A-1
1.1. The Merger.......................................................... A-1
1.2. Effective Time...................................................... A-1
1.3. Effect of the Merger................................................ A-1
1.4. Subsequent Actions.................................................. A-2
1.5. Articles of Incorporation; By-Laws; Directors and Officers.......... A-2
1.6. Conversion of Securities............................................ A-2
1.7. Dissenting Shares................................................... A-4
1.8. Surrender of Shares; Stock Transfer Books........................... A-4
1.9. No Fractional Shares................................................ A-5
1.10. Stock Options....................................................... A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB......... A-6
2.1. Corporate Organization.............................................. A-6
2.2. Certificate of Incorporation and By-Laws............................ A-6
2.3. Authority Relative to this Agreement................................ A-6
2.4. No Conflict; Required Filings and Consents.......................... A-7
2.5. Financing Arrangements.............................................. A-7
2.6. No Prior Activities................................................. A-7
2.7. Brokers............................................................. A-7
2.8. SEC Filings; Financial Statements................................... A-7
2.9. Joint Proxy Statement-Prospectus.................................... A-8
2.10. Litigation.......................................................... A-8
2.11. Conduct of Business................................................. A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... A-9
3.1. Organization and Qualification; Subsidiaries........................ A-9
3.2. Articles of Incorporation and By-Laws............................... A-9
3.3. Capitalization...................................................... A-9
3.4. Authority Relative to this Agreement................................ A-10
3.5. No Conflict; Required Filings and Consents.......................... A-10
3.6. SEC Filings; Financial Statements................................... A-10
3.7. Absence of Certain Changes or Events................................ A-11
3.8. Trademarks and Patents.............................................. A-12
3.9. Litigation.......................................................... A-12
3.10. Employee Benefit Plans.............................................. A-12
3.11. Labor Matters....................................................... A-12
3.12. Joint Proxy Statement-Prospectus.................................... A-12
3.13. Brokers............................................................. A-12
3.14. Products Liability.................................................. A-13
3.15. Conduct of Business................................................. A-13
</TABLE>
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<TABLE>
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER..................... A-13
4.1. Acquisition Proposals...................................... A-13
4.2. Conduct of Business by the Company Pending the Merger...... A-13
4.3. No Shopping................................................ A-14
ARTICLE V
ADDITIONAL AGREEMENTS...................................... A-15
5.1. Joint Proxy Statement-Prospectus........................... A-15
5.2. Shareholder Meetings....................................... A-15
5.3. Compliance with the Securities Act......................... A-15
5.4. HSR Act.................................................... A-15
5.5. Additional Agreements...................................... A-15
5.6. Notification of Certain Matters............................ A-16
5.7. Access to Information...................................... A-16
5.8. Public Announcements....................................... A-16
5.9. Best Efforts; Cooperation.................................. A-16
5.10. Agreement to Defend and Indemnify.......................... A-16
5.11. Restrictions on the Parent................................. A-17
5.12. OSP Disposition............................................ A-17
5.13. Action by the Officers, Directors, etc..................... A-18
5.14. Dissemination of Certain Information....................... A-18
ARTICLE VI
CONDITIONS OF MERGER....................................... A-18
6.1. Conditions to Obligation of Each Party to Effect the
Merger.................................................. A-18
6.2. Additional Conditions to Obligations of the Company........ A-18
6.3. Additional Conditions to Obligations of the Parent and
Merger Sub.............................................. A-19
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.......................... A-19
7.1. Termination................................................ A-19
7.2. Effect of Termination...................................... A-20
7.3. Termination Fees and Expenses.............................. A-20
ARTICLE VIII
GENERAL PROVISIONS......................................... A-20
8.1. Non-Survival of Representations, Warranties and Agreements. A-20
8.2. Notices.................................................... A-20
8.3. Expenses................................................... A-21
8.4. Certain Definitions........................................ A-21
8.5. Headings................................................... A-21
8.6. Severability............................................... A-21
8.7. Entire Agreement; No Third-Party Beneficiaries............. A-21
8.8. Waiver..................................................... A-21
8.9. Amendment.................................................. A-21
8.10. Assignment................................................. A-22
8.11. Governing Law.............................................. A-22
8.12. Counterparts; Telecopier................................... A-22
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
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<S> <C>
1981 Plan......................................................... 1.10.(a)
1987 Plan......................................................... 1.10.(a)
affiliate......................................................... 3.10, 8.4.(a)
Agreement......................................................... Introduction
Average OSP Disposition Price..................................... 1.6
Average Closing Price............................................. 1.6
California Law.................................................... Recitals
Company........................................................... Introduction
Company SEC Reports............................................... 3.6.(a)
Company Shareholders' Meeting..................................... 1.6
control........................................................... 8.4.(b)
Dissenting Shares................................................. 1.7.(a)
Effective Time.................................................... 1.2
Excess Shares..................................................... 1.9
Exchange Act...................................................... 2.4.(b)
Exchange Agent.................................................... 1.8.(a)
Exchange Ratio.................................................... 1.6
HSR Act........................................................... 2.4.(b)
Indemnified Parties............................................... 5.10.(a)
Joint Proxy Statement-Prospectus.................................. 2.9
Material Adverse Effect........................................... 2.1, 3.1
Merger............................................................ Recitals
Merger Consideration.............................................. 1.6
Merger Sub........................................................ Introduction
OSP Disposition Date.............................................. 1.6
OSP Disposition Proceeds.......................................... 1.6
OSP Division...................................................... 5.12
Parent............................................................ Introduction
Parent Common Stock............................................... 1.6
Parent Information................................................ 2.9
Parent SEC Reports................................................ 2.8.(a)
Parent Stockholders' Meeting...................................... 2.9
person............................................................ 8.4.(c)
Registration Statement............................................ 5.1
Securities Act.................................................... 2.4.(b)
Stock Option Plans................................................ 1.10.(a)
Subsidiary........................................................ 3.1
Surviving Corporation............................................. 1.1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 30, 1994 (the "Agreement"),
among Optical Radiation Corporation, a California corporation (the "Company"),
Benson Eyecare Corporation, a Delaware corporation (the "Parent"), and Benson
Acquisition Corporation, a California corporation and a wholly owned subsidiary
of the Parent ("Merger Sub").
W I T N E S S E T H:
Whereas, the Boards of Directors of the Company, the Parent and Merger Sub
have each determined that it is advisable and in the best interests of their
respective shareholders for the Parent to acquire the Company; and
Whereas, the Boards of Directors of the Company, the Parent and Merger Sub
have each approved the merger (the "Merger") of Merger Sub with the Company
upon the terms and subject to the conditions set forth herein and in accordance
with the Corporations Code of the State of California ("California Law"); and
Whereas, the Board of Directors of the Company has resolved to recommend the
Merger to the holders of Shares and has determined that the consideration to be
paid for each Share in the Merger is fair to the holders of such Shares, and to
recommend that the holders of such Shares adopt this Agreement and the
transactions contemplated hereby.
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, the Parent and Merger Sub hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined below) and upon
the terms of this Agreement and subject to conditions set forth in Article VI
hereof and in accordance with California Law, Merger Sub shall be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger hereinafter sometimes is referred to as the "Surviving Corporation."
Section 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing an Agreement of
Merger, together with an Officers' Certificate of each of the Company, Parent
and Merger Sub, with the Secretary of State of the State of California, in such
forms as required by, and executed in accordance with the relevant provisions
of, California Law (the time of such filing being the "Effective Time"). Prior
to such filing, a closing shall be held at the offices of Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022,
or such other place as the parties shall agree, for the purpose of confirming
the satisfaction or waiver, as the case may be, of the conditions set forth in
Article VI.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of California Law,
including, without limitation, Section 1107 of California Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and
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Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
Section 1.4. Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Merger Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Merger Sub, all such deeds, bills
of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.5. Articles of Incorporation; By-Laws; Directors and
Officers. (a) Unless otherwise determined by the Parent or Merger Sub before
the Effective Time, at the Effective Time the Articles of Incorporation of
Merger Sub, as in effect immediately before the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation; provided, however, that
Article I of the Articles of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is Optical
Radiation Corporation."
(b) The By-Laws of Merger Sub, as in effect immediately before the Effective
Time, shall be the By-Laws of the Surviving Corporation until thereafter
amended as provided by law, the Certificate of Incorporation of the Surviving
Corporation and such By-Laws.
(c) The directors of Merger Sub immediately before the Effective Time shall
be the initial directors of the Surviving Corporation, and the officers of the
Company immediately before the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall exist on
the Board of Directors or in any office of the Surviving Corporation, such
vacancy may thereafter be filled in the manner provided by law.
Section 1.6. Conversion of Securities.
(a) As used in this Section 1.6, the following terms are used with the
following meanings:
"Average Closing Price" means the average of the per share daily closing
price of the Parent Common Stock, par value $.01 per share (the "Parent Common
Stock"), on the American Stock Exchange during the 20 consecutive trading days
ending on the fifth trading day prior to the shareholders' meeting at which the
Company's shareholders are to vote on the Merger (the "Company Shareholders'
Meeting").
"Average OSP Disposition Price" means the greater of (i) the Average Closing
Price and (ii) the average of the per share daily closing price of the Parent
Common Stock on the American Stock Exchange during the 20 consecutive trading
days ending on the fifth trading day prior the OSP Disposition Date defined in
Section 1.6(b)(iii).
"Exchange Ratio" means the following number, expressed as a decimal fraction
and rounded to the nearest ten thousandth:
(i) if the Average Closing Price exceeds $10.80: $8.10 divided by the
Average Closing Price;
(ii) if the Average Closing Price is $10.80 or less, but more than $7.20:
0.75;
(iii) if the Average Closing Price is $7.20 or less but more than $6.00:
one half of the sum of (x) 0.75 and (y) the quotient obtained by dividing
$5.40 by the Average Closing Price;
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(iv) if the Average Closing Price is $6.00 or less, and the Company shall
not have elected to terminate this Agreement pursuant to Section 1.6(c):
0.825; and
(v) if the Average Closing Price is $6.00 or less, the Company shall have
elected to terminate this Agreement pursuant to Section 1.6(c), but the
Parent shall have thereafter timely elected to rescind such termination
pursuant to such Section: $4.95 divided by the Average Closing Price.
"OSP Disposition Proceeds" shall mean the proceeds received by the Company
prior to December 31, 1994 upon the sale of the OSP Division (as defined in
Section 5.12 hereof) or any portion thereof (with marketable securities or
other instruments to be valued at their fair market value on the date of such
sale) pursuant to agreements entered into on or prior to the Effective Time
(whether in cash, securities or otherwise) minus all costs, expenses and fees
of the Company associated with such dispositions and plus (or minus) the
present value to the Company of the net tax benefit (or cost) relating to the
OSP Division, arising from such disposition and the distribution to
shareholders, provided that there shall be deducted from amounts that would
otherwise be considered OSP Disposition Proceeds an amount equal to 15% of the
amount by which the OSP Disposition Proceeds exceeds $19,195,560.
(b) At the Effective Time, by virtue of the Merger and without any action on
the part of Merger Sub, the Company or shareholders, each Share issued and
outstanding immediately prior to the Effective Time (other than any Shares to
be canceled pursuant to Section 1.6(e) and any Dissenting Shares (as defined
below)) shall be canceled and extinguished and be converted into the right to
receive upon surrender of the certificate (except as set forth in Section
1.6(b)(iii)) representing such Share:
(i) $17.00 in cash;
(ii) the number of shares of Parent Common Stock equal to the Exchange
Ratio; and
(iii) a pro rata share of the OSP Disposition Proceeds (not including the
amount thereof payable to the Parent pursuant to Section 1.10(a)(ii) as the
purchase price for the shares of Parent Common Stock issuable pursuant
thereto) equal to the amount of such proceeds divided by the total number
of such Shares entitled to receive such proceeds plus, to the extent that
the amount of such pro rata share has a value at the time of its receipt by
the Company of less than $2.00, a fraction of a share of Parent Common
Stock having a value, valued at the Average OSP Disposition Price, equal to
the amount of such difference; such Common Stock, if any, to be issuable on
the later of the following dates (the "OSP Disposition Date"):
(x) at the Effective Time, if the Company has completed the
disposition of the entire OSP Division by such date, or if such
disposition has not been entirely completed and the Company is not a
party to any definitive agreement providing for the disposition of all
or a part of the OSP Division between the Effective Time and December
31, 1994; and
(y) the date the OSP Disposition Proceeds have been received;
(collectively, the "Merger Consideration").
(c) If the Average Closing Price is less than $6.00, the Company shall have
the right, by written notice delivered at least three business days prior to
the Company Shareholders' Meeting, to terminate this Agreement (which
termination shall not be effective until after the Parent's right to rescind
such termination has expired), provided that the Parent shall have the right,
by written notice delivered to the Company at least one business day prior to
the Company Shareholders' Meeting, of its election to rescind such termination.
Such notices shall affect the Exchange Ratio as provided in the definition
thereof.
(d) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or rights
issued in respect of, Parent Common Stock or Company Common Stock after the
date hereof, the Exchange Ratio shall be adjusted so as to fairly and equitably
preserve the aggregate expected value of the Merger Consideration.
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(e) Each Share held in the treasury of the Company and each Share owned by
any direct or indirect wholly owned subsidiary of the Company immediately
before the Effective Time shall be canceled and extinguished and no payment or
other consideration shall be made with respect thereto.
(f) Each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately before the Effective Time shall thereafter
represent one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
(g) Following the Effective Time, all Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate previously evidencing any such Shares other than any Shares to
be canceled pursuant to Section 1.6(e) and any Dissenting Shares shall
thereafter represent the right to receive, upon surrender of such certificate
in accordance with the provisions of Section 1.8, (i) certificates evidencing
such number of whole shares of Parent Common Stock into which such Company
Common Stock was converted in accordance with the Exchange Ratio and (ii) the
amount of cash and OSP Distribution Proceeds applicable to such Shares.
Section 1.7. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, any Shares held by a holder who has demanded and
perfected his demand for appraisal of his Shares in accordance with California
Law and as of the Effective Time has neither effectively withdrawn nor lost his
right to such appraisal ("Dissenting Shares") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to Section
1.6(b), but the holder thereof shall be entitled to only such rights as are
granted by California Law.
(b) Notwithstanding the provisions of subsection (a) of this Section, if any
holder of Shares who demands appraisal of his Shares under California Law shall
effectively withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares shall automatically be
converted into and represent only the right to receive the Merger Consideration
as provided in Section 1.6(b), without interest thereon, upon surrender of the
certificate or certificates representing such Shares.
(c) The Company shall give the Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals
of such demands, and any other instruments served pursuant to California Law
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under California Law. The
Company shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of the Parent,
settle or offer to settle any such demands.
Section 1.8. Surrender of Shares; Stock Transfer Books. Before the Effective
Time, the Company shall designate a bank or trust company to act as agent for
the holders of Shares (the "Exchange Agent") to receive the funds and
securities necessary to make the payments contemplated by Section 1.6. Such
funds shall be invested by the Exchange Agent as directed by the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America or of any agency thereof and backed
by the full faith and credit of the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Services,
Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $200 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
(b) Each holder of a certificate or certificates representing any Shares
canceled upon the Merger pursuant to Section 1.6(b) may thereafter surrender
such certificate or certificates to the Exchange Agent, as agent for such
holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending one year after the Effective Time. The
Parent agrees that promptly after the Effective Time it
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shall cause the distribution to holders of record of Shares as of the Effective
Time appropriate materials to facilitate such surrender.
(c) If payment of the Merger Consideration in respect of canceled Shares is
to be made to a person other than the person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such
payment that the certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required
by reason of such payment in a name other than that of the registered holder of
the certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not payable.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall not be any
further registration of transfers of Shares thereafter on the records of the
Company. If, after the Effective Time, certificates for Shares are presented to
the Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration as provided in Section 1.6(b). No interest shall accrue or be
paid on any cash payable upon the surrender of a certificate or certificates
which immediately before the Effective Time represented outstanding Shares.
Section 1.9. No Fractional Shares. No certificates or scrip representing less
than one share of Parent Common Stock shall be issued upon the surrender for
exchange of certificates representing Shares pursuant to Section 1.6(b). In
lieu of any such fractional share, each holder of Shares who would otherwise
have been entitled to a fraction of a share of Parent Common Stock upon
surrender of certificates for exchange pursuant to Section 1.6(b) shall be paid
upon such surrender cash (without interest) in an amount equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
fractional Parent Common Stock issued pursuant to this Section 1.9. As soon as
practicable following the Effective Time the Exchange Agent shall determine the
excess of (i) the number of full shares of Parent Common Stock delivered to the
Exchange Agent by Parent over (ii) the aggregate number of full shares of
Parent Common Stock to be distributed to holders of Shares (such excess being
herein called the "Excess Shares"), and the Exchange Agent, as agent for the
former holders of Shares, shall sell the Excess Shares at the prevailing prices
on the American Stock Exchange. The sale of the Excess Shares by the Exchange
Agent shall be executed on the American Stock Exchange and shall be executed in
round lots to the extent practicable. The Exchange Agent shall deduct from the
proceeds of the sale of the Excess Shares all commissions, transfer taxes and
other reasonable out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
Excess Shares. Until the net proceeds of such sale have been distributed to the
former shareholders of the Company, the Exchange Agent will hold such proceeds
in trust for such former shareholders. As soon as practicable after the
determination of the amount of cash to be paid to former shareholders of the
Company in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Agreement such amounts to such former
shareholders.
Section 1.10. Stock Options. (a) Prior to the Effective Time, the Company and
the Stock Option Committee of its Board of Directors shall take all action
reasonably necessary or appropriate to offer each holder of options outstanding
under the Incentive Stock Option Plan for Key Employees (the "1981 Plan") and
the 1987 Stock Option Plan for Directors, Officers and Executive and Key
Employees (the "1987 Plan" and together with the 1981 Plan, the "Stock Option
Plans") the opportunity, by written notice delivered to the Company at least
two business days prior to the Effective Time, to exchange each of his or her
options for:
(i) an amount equal to the product of (X) the number of Shares subject to
such option and (Y) the difference between the $23.00 and the per share
exercise price of such option, payable at the Effective Time in cash,
provided, however, that if the option exercise price is greater than or
equal to $23.00 per Share, then no amounts shall be payable under this
subclause (i); and
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(ii) an amount equal to the product of (X) the number of Shares subject
to such option and (Y) the Average Closing Price, minus $6.00, plus, the
greater of
(I) the amount of OSP Disposition Proceeds per Share eligible to
receive such proceeds and
(II) $2.00, payable on the OSP Disposition Date in shares of Parent
Common Stock valued at the Average OSP Disposition Price, which the
Surviving Corporation shall purchase from the Parent in exchange for
OSP Disposition Proceeds of like value; provided, however, that if the
option exercise price is greater than $23.00 per Share, then the
multiplicand determined in (Y) above shall be reduced by the difference
between the option exercise price and $23.00; provided, further, that
if the amount determined pursuant to the formula set forth above in
this subclause (ii) is less than zero, then no amounts shall be payable
under this subclause (ii).
(b) The Company shall deduct from all amounts payable pursuant to this
Section 1.10 all amounts of Federal, state and local withholding taxes required
by law to be withheld therefrom.
(c) The Stock Option Committee of the Board of Directors shall be permitted
to accelerate the vesting of options outstanding under the Stock Option Plans,
shall permit any unexercised options to expire in accordance with their terms
and shall not take any action that would waive the provisions of Section 3.3(f)
of the option agreements relating to such options (or analogous provisions in
particular option agreements).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB
The Parent and Merger Sub represent and warrant to the Company as follows:
Section 2.1. Corporate Organization. Each of the Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and any necessary governmental authority to own, operate or
lease the properties that it purports to own, operate or lease and to carry on
its business as it is now being conducted, except for such failure which, when
taken together with all other such failures, would not have a Material Adverse
Effect (as defined below) on the Parent and Merger Sub. When used in connection
with the Parent and Merger Sub, the term "Material Adverse Effect" means any
change in or effect on the business of the Parent and its subsidiaries that is
or will be materially adverse to the business, results of operations or
condition (financial or otherwise), liabilities or regulatory status of the
Parent and its subsidiaries taken as a whole.
Section 2.2. Certificate of Incorporation and By-Laws. The Parent has
heretofore furnished to the Company complete and correct copies of its
Certificate of Incorporation and By-Laws, each as amended to the date hereof.
Such Certificate of Incorporation and By-Laws are in full force and effect.
Neither the Parent nor any of its subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws or equivalent
organizational documents.
Section 2.3. Authority Relative to this Agreement. Each of the Parent and
Merger Sub has all necessary corporate power and authority to enter into this
Agreement, subject to obtaining all necessary approvals by the Parent's
stockholders, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Parent and Merger Sub and the consummation by the Parent and Merger Sub
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Parent and Merger Sub and by the
Parent as the sole shareholder of Merger Sub, subject to obtaining all
necessary approvals by the Parent's stockholders. This Agreement has been duly
executed and delivered by the Parent and Merger Sub and
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constitutes a legal, valid and binding obligation of each such corporation,
enforceable against each of them in accordance with its terms.
Section 2.4. No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by the Parent and Merger Sub do not, and the
performance of this Agreement by the Parent and Merger Sub will not, (i)
conflict with or violate any law, regulation, court order, judgment or decree
applicable to the Parent or Merger Sub or by which any of their property or
assets is bound or affected, (ii) violate or conflict with either the
Certificate of Incorporation or By-Laws of either the Parent or Merger Sub, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination or cancellation of, or result in the creation
of a lien or encumbrance on any of the property or assets of the Parent or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, instrument, permit, license or franchise to which the Parent
or Merger Sub is a party or by which the Parent or Merger Sub or any of their
property is bound or affected, except in the case of (i) or (iii) for
conflicts, violations, breaches or defaults which, in the aggregate, would not
have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Securities Act of
1933, as amended (the "Securities Act"), Securities Exchange Act of 1934 (the
"Exchange Act"), "blue sky" laws of various states, the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and filing and recordation of appropriate merger
documents as required by California Law, neither the Parent nor Merger Sub is
required to submit any notice, report or other filing with any governmental
authority, domestic or foreign, in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except as aforesaid, no waiver, consent, approval or
authorization of any governmental or regulatory authority, domestic or foreign,
is required to be obtained or made by either the Parent or Merger Sub in
connection with its execution, delivery or performance of this Agreement.
(c) The Parent has heretofore furnished to the Company copies of its Schedule
13D (including all amendments thereto) filed by it with the SEC with respect to
the Company.
Section 2.5. Financing Arrangements. The Parent and Merger Sub will have
funds available at the Effective Time which, together with the Company's
available cash referred to in Section 6.3(d) hereof, will be sufficient to pay
the cash portion of the Merger Consideration.
Section 2.6. No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby (including any financing), Merger Sub has not incurred any
obligations or liabilities, and has not engaged in any business or activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any person or entity.
Section 2.7. Brokers. No broker, finder or investment banker (other than
Salomon Brothers Inc), is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Parent or Merger Sub.
Section 2.8. SEC Filings; Financial Statements. (a) The Parent has filed all
forms, reports and documents required to be filed with the SEC since October
16, 1992, and has heretofore delivered to the Company in the form filed with
the SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended
December 31, 1993 and December 31, 1992, (ii) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994, (iii) all proxy statements relating to the
Parent's meetings of stockholders (whether annual or special) held since
October 16, 1992 and (iv) all other reports or registration statements (other
than Quarterly Reports on Form 10-Q) filed by the Parent with the SEC since
January 1, 1992 (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (i) were prepared in all material respects in accordance with the
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requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Parent's
subsidiaries is required to file any statements or reports with the SEC
pursuant to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the Parent SEC Reports
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder by the SEC and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial position of
the Parent and its subsidiaries as at the respective dates thereof and the
consolidated results of operations and changes in financial position of the
Parent and its subsidiaries for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as reflected or reserved against in the consolidated financial
statements contained in the Parent SEC Reports, the Parent and its subsidiaries
have no liabilities of any nature (whether accrued, absolute, contingent or
otherwise) which in the aggregate could have a Material Adverse Effect, except
for liabilities incurred since March 31, 1994 in the ordinary course of
business and consistent with past practice. Since March 31, 1994, neither the
Parent nor any of its subsidiaries has incurred any liabilities material to the
Parent and its subsidiaries taken as a whole, except (i) liabilities incurred
in the ordinary course of business and consistent with past practice, or (ii)
liabilities incurred in connection with the Merger.
(d) The Parent is eligible to file registration statements with the SEC on
Form S-3 and Form S-4.
Section 2.9. Joint Proxy Statement-Prospectus. None of the information
supplied in writing by the Parent or Merger Sub, each of their officers,
directors, representatives, agents or employees (the "Parent Information"), for
inclusion in the joint proxy statement-prospectus (such joint proxy statement-
prospectus, as amended or supplemented, is herein referred to as the "Joint
Proxy Statement-Prospectus") will, on the date the Joint Proxy Statement-
Prospectus is filed with the SEC, first mailed to shareholders of the Company
and Parent, at the time of the meeting of the Parent's stockholders to consider
the issuance of Parent Common Stock in the Merger (the "Parent Stockholders'
Meeting"), at the time of the Company Shareholders' Meeting or at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it will be made, will be false or misleading with
respect to any material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading.
Notwithstanding the foregoing, the Parent and Merger Sub do not make any
representation or warranty with respect to any information that has been
supplied by the Company or its accountants, counsel or other authorized
representatives for use in the Joint Proxy Statement-Prospectus.
Section 2.10. Litigation. Except as disclosed in the Parent SEC Reports,
there are no lawsuits pending or, to the best knowledge of the Parent,
threatened against the Parent, or any of its subsidiaries, which are reasonably
likely to have a Material Adverse Effect. As of the date hereof, neither the
Parent nor any of its subsidiaries nor any of their property is subject to any
judgment, injunction or decree, having a Material Adverse Effect.
Section 2.11. Conduct of Business. The business of the Parent and each of its
subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective Certificate of Incorporation or
By-laws or similar organizational documents, or (ii) any note, bond, mortgage,
indenture, contract or agreement to which the Parent or any of its subsidiaries
is now a party or by which the Parent or any of its subsidiaries or any of
their respective properties or assets may be bound, or (iii) any Federal,
state, local or foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Parent or any of its
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subsidiaries, except, with respect to the foregoing clauses (ii) and (iii),
defaults or violations that would not, individually or in the aggregate, have a
Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company Disclosure Schedule previously delivered
by the Company to the Parent, the Company hereby represents and warrants to the
Parent and Merger Sub as follows:
Section 3.1. Organization and Qualification; Subsidiaries. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority and any material necessary
governmental authority to own, operate or lease its properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, when taken together
with all other such failures, would not have a Material Adverse Effect (as
defined below) on the Company. The term "Subsidiary" means any corporation or
other legal entity of which the Company or, if the context requires, the
Surviving Corporation (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity. When used in connection with the Company or any of its
Subsidiaries the term "Material Adverse Effect" means any change in or effect
on the business of the Company and its Subsidiaries that is or will be
materially adverse to the business, results of operations or condition
(financial or otherwise), liabilities or regulatory status of the Company and
its Subsidiaries taken as a whole.
Section 3.2. Articles of Incorporation and By-Laws. Attached to Schedule 3.2
are complete and correct copies of the Company's Articles of Incorporation and
the By-Laws, each as amended to the date hereof, of the Company and the Company
has heretofore furnished to Parent the Company's standard form of its stock
option agreement. Such Articles of Incorporation, By-Laws and the equivalent
organizational documents of its Subsidiaries are in full force and effect.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its Articles of Incorporation or By-Laws or equivalent organizational
documents.
Section 3.3. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 shares of Company Common Stock. As
of June 27, 1994, (i) 5,895,458 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(ii) there were 649,162 shares of Company Common Stock reserved for issuance
pursuant to options granted under the Stock Option Plans and 279,870 shares of
Company Common Stock reserved for future issuance under the Stock Option Plans,
and (iii) the Optical Radiation Corporation Consumer Optical Group Perform,
Incentive and Motivate Plan has been validly canceled, and the Company has
received waivers from all participants relating to such termination and has no
liability thereunder. Schedule 3.3 identifies, as of June 27, 1994, the option
holders, the number of shares subject to each option held, the exercise prices,
vesting schedules and expiration dates of the outstanding options granted under
the Option Plans. All outstanding Shares have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive rights.
Except as set forth in this Section 3.3 or on Schedule 3.3, there are not, as
of the date hereof, any outstanding or authorized subscriptions, options,
warrants, convertible securities, calls, rights, commitments or any other
agreements of any character relating to the issued or unissued capital stock or
other securities of the Company to which the Company is party or by which the
Company is bound obligating the Company to issue, deliver, or sell, or cause to
be issued, delivered or sold,
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additional shares of capital stock of the Company or obligating the Company to
grant, extend or enter into any subscription, option, warrant, call, right,
commitment or other such agreement.
All the outstanding capital stock of each of the Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and is owned by the
Company or a Subsidiary free and clear of any liens, security interests,
pledges, agreements, claims, charges or encumbrances of any nature whatsoever.
There are no existing options, calls or commitments of any character relating
to the issued or unissued capital stock or other securities of any Subsidiary.
Except for the Subsidiaries and except as set forth on Schedule 3.3, the
Company does not directly or indirectly own a greater than 5% equity interest
in any other corporation, partnership, joint venture or other business
association or entity that is material to the assets, obligations and
liabilities of the Company.
Section 3.4. Authority Relative to this Agreement. The Company has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary shareholder approval of the Merger, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to the approval of the Merger by the Company's shareholders in
accordance with California Law. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms.
Section 3.5. No Conflict; Required Filings and Consents. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to the Company or any of
the Subsidiaries or by which its or any of their property is bound or affected,
(ii) violate or conflict with the Articles of Incorporation or By-Laws or
equivalent organizational documents of the Company or any Subsidiary, or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time of both would become a default) under, or give to others any
rights of termination or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or any of the
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, instrument, permit, license or franchise to which the Company
or any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or its or any of their property is bound or affected, except in
the case of (i) or (iii) for conflicts, violations, breaches or defaults which,
in the aggregate, would not have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Exchange Act, the pre-
merger notification requirements of the HSR Act, and filing and recordation of
appropriate merger or other documents as required by California Law, "takeover"
or "blue sky" laws of various states, and except for any notice, filings,
authorizations, consents or approvals which are required because of the
regulatory status of the Company or any of its Subsidiaries or facts
specifically applicable to them, the Company is not required to submit any
notice, report or other filing with any governmental authority, domestic or
foreign, in connection with the execution, delivery or performance of this
Agreement. Except as aforesaid, no waiver, consent, approval or authorization
of any governmental or regulatory authority, domestic or foreign, is required
to be obtained or made by the Company in connection with its execution,
delivery or performance of this Agreement.
Section 3.6. SEC Filings; Financial Statements. (a) The Company has filed all
forms, reports and documents required to be filed with the SEC since August 1,
1991, and has heretofore delivered to the Parent, in the form filed with the
SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended July 31,
1993, July 31, 1992 and July 31, 1991, (ii) Quarterly Reports on Form 10-Q for
the quarters ended October 31, 1993, January 30, 1994 and April 30, 1994, (iii)
all proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since August 1, 1991, and (iv) all other
reports or registration statements (other than Quarterly Reports on Form 10-Q)
filed by the Company with the SEC since August 1, 1991 (collectively, the
"Company SEC Reports"). The Company SEC Reports (i) were prepared in all
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material respects in accordance with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Subsidiaries is required to file any
statements or reports with the SEC pursuant to Sections 13(a) or 15(d) of the
Exchange Act.
(b) The consolidated financial statements contained in the Company SEC
Reports comply in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder by the SEC and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its Subsidiaries as at the respective dates thereof
and the consolidated results of operations and changes in financial position of
the Company and its Subsidiaries for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as reflected or reserved against in the consolidated financial
statements contained in the Company SEC Reports, the Company and its
Subsidiaries have no liabilities of any nature (whether accrued, absolute,
contingent or otherwise) which in the aggregate could have a Material Adverse
Effect, except for liabilities incurred since April 30, 1994 in the ordinary
course of business and consistent with past practice. Since April 30, 1994,
neither the Company nor any of the Subsidiaries has incurred any liabilities
material to the Company and the Subsidiaries taken as a whole, except (i)
liabilities incurred in the ordinary course of business and consistent with
past practice, (ii) liabilities incurred in connection with or as a result of
the Merger, (iii) liabilities disclosed on Schedule 3.7 or (iv) liabilities
incurred in accordance with Section 4.2 hereof.
Section 3.7. Absence of Certain Changes or Events. Since April 30, 1994,
except as contemplated in this Agreement or as previously disclosed in the
Company SEC Reports or as appears on Schedule 3.7, there has not been:
(a) any Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by insurance)
with respect to any of the assets of the Company or any of its Subsidiaries
having a Material Adverse Effect;
(c) any redemption or other acquisition of Company Common Stock by the
Company or any of the Subsidiaries or any declaration or payment of any
dividend or other distribution in cash, stock or property with respect to
Company Common Stock, except for purchases heretofore made pursuant to the
terms of the Company's employee benefit plans;
(d) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business or as contemplated by this Agreement except as
permitted by Section 4.2 hereof;
(e) any mortgage, pledge, security interest or imposition of lien or
other encumbrance on any asset of the Company or any of the Subsidiaries
that is material to the business, financial condition or operations of the
Company and the Subsidiaries taken as a whole except as permitted by
Section 4.2 hereof; or
(f) any change by the Company in accounting principles or methods except
insofar as may have been required by a change in generally accepted
accounting principles and disclosed in the Company SEC Reports.
Since April 30, 1994, the Company and its Subsidiaries have conducted their
business only in the ordinary course and in a manner consistent with past
practice and have not made any material change in the conduct of the business
or operations of the Company and its Subsidiaries taken as a whole. Without
limiting
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the generality of the foregoing, the Company has not, since such date, except
for the contracts referred to in the Company SEC Reports or as disclosed on
Schedule 3.7, made any changes in executive compensation levels or in the
manner in which other employees of the Company or the Subsidiaries are
compensated or agreed to pay any pension, retirement allowance or other
employee benefit not required or permitted by any plan or arrangement existing
on such date to any director, officer or employee, whether past or present, or
committed itself to any collective bargaining agreement or to any additional
pension, profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other employee benefit plan or arrangement, or to any
employment or consulting agreement or to amend any of such plans or any of such
agreements in existence on such date, in each case, other than increases in the
ordinary course of business and consistent with past practice.
Section 3.8. Trademarks and Patents. Except as disclosed on Schedule 3.8, no
material infringement of any patent, patent right, trademark, trademark right,
trade name or trade name right owned by or licensed by or to the Company or any
of the Subsidiaries is known to the Company or any Subsidiary which is
reasonably likely to have a Material Adverse Effect.
Section 3.9. Litigation. Except as disclosed in the Company SEC Reports or on
Schedule 3.9, there are no lawsuits pending or, to the best knowledge of the
Company, threatened against the Company or any of its Subsidiaries, which are
reasonably likely to have a Material Adverse Effect. As of the date hereof,
neither the Company nor any of its Subsidiaries nor any of their property is
subject to any judgment, injunction or decree, having a Material Adverse Effect
except as disclosed on Schedule 3.9 or in the Company SEC Reports.
Section 3.10. Employee Benefit Plans. None of the Company, any Subsidiary, or
any "affiliate" (as defined in Section 407(d)(7) of ERISA): (i) has any defined
benefit plans, (ii) provides, has provided or agreed to provide any post-
retirement benefits which are required to be reported on the Company's
financial statements under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 106 and (iii) has received a notice of
deficiency from the United States Department of Labor.
Section 3.11. Labor Matters. Neither the Company nor any of the Subsidiaries
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or its Subsidiaries.
Section 3.12. Joint Proxy Statement-Prospectus. None of the information
supplied in writing by the Company, each of its officers, directors,
representatives, agents or employees, for inclusion in the Joint Proxy
Statement-Prospectus will on the date the Joint Proxy Statement-Prospectus is
filed with the SEC, first mailed to shareholders in connection with the Company
Shareholders' Meeting, at the time of the Company Shareholders' Meeting or the
Parent Stockholders' Meeting or at the Effective Time, contain any statement,
which at such time and in light of the circumstances under which it will be
made, will be false or misleading with respect to a material fact, or will omit
to state any material fact necessary in order to make the statements therein
not false or misleading. Notwithstanding the foregoing, the Company does not
make any representation or warranty with respect to any information that has
been supplied by the Parent, Merger Sub, or their accountants, counsel or other
authorized representatives for use in the Joint Proxy Statement-Prospectus.
Section 3.13. Brokers. No broker, finder or investment banker (other than
Donaldson Lufkin & Jenrette) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company. The
fees and expenses to be incurred by the Company are estimated to be no greater
than $2,500,000, absent extraordinary unanticipated circumstances and assuming
counsel for Parent or Merger Sub will draft the Joint Proxy Statement--
Prospectus and that the Parent will bear printing and mailing costs of same.
The Company will use its reasonable best efforts to minimize such costs and
obtain back-up for all bills submitted for professional services.
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Section 3.14. Products Liability. Except as disclosed on Schedule 3.14, to
the best knowledge of the Company, there is no notice or claim involving any
product manufactured, produced, distributed or sold by or on behalf of the
Company or its Subsidiaries resulting from an alleged defect in design,
manufacture, materials or workmanship, or any alleged failure to warn, or from
any breach of implied warranties or representations, which would have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
Section 3.15. Conduct of Business. The business of the Company and each of
the Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective Articles of Incorporation or By-
laws or similar organizational documents, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease or other instrument or agreement of any
kind to which the Company or any of the Subsidiaries is now a party or by which
the Company or any of the Subsidiaries or any of their respective properties or
assets may be bound, or (iii) to the best knowledge of the Company, any
Federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any
of the Subsidiaries, except, with respect to the foregoing clauses (ii) and
(iii), defaults or violations that would not, individually or in the aggregate,
have a Material Adverse Effect.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1. Acquisition Proposals. The Company will notify the Parent
immediately if any inquiries or proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated
or continued with the Company, in each case in connection with any acquisition,
business combination or purchase of all or any significant portion of the
assets of, or any equity interest in, the Company or any Subsidiary.
Section 4.2. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, unless the Parent shall otherwise consent in writing, the
businesses of the Company and its Subsidiaries shall be conducted only in, and
the Company and its Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; the
Company will use its reasonable best efforts to preserve substantially intact
the business organization of the Company and its Subsidiaries other than with
respect to the disposition of the OSP Division, to keep available the services
of the present officers, employees and consultants of the Company and its
Subsidiaries and to preserve the present relationships of the Company and its
Subsidiaries with customers, suppliers and other persons with which the Company
or any of its Subsidiaries has significant business relations; and the Company
shall discontinue the business of the OSP Division at such time as the negative
cash flow used in the business of the OSP Division from the date hereof through
September 30, 1994 exceeds $1.25 million or, from September 30 through December
31, 1994, exceeds $250,000 per month. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its Subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly, do any of the following without the
prior written consent of the Parent:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest, of the Company or any of
its Subsidiaries, other than pursuant to options granted prior to June 27,
1994; (ii) amend or propose to amend the Articles of Incorporation or By-
Laws or equivalent organizational documents of the Company or any of its
Subsidiaries; (iii) split, combine or reclassify any outstanding Shares, or
declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to the Shares; (iv) redeem,
purchase or otherwise acquire
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or offer to redeem, purchase or otherwise acquire any shares of its capital
stock, except in the performance of its obligations under existing employee
plans; or (v) authorize or propose or enter into any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in
this Section 4.2(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) except in the ordinary course of business and in a
manner consistent with past practices, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any material assets of the Company or any of its
Subsidiaries other than the disposition of the OSP Division; (iii) incur
any indebtedness for borrowed money, or enter into any contract or
agreement, except in the ordinary course of business other than
indebtedness (which may be secured) incurred for working capital on a short
term basis in an amount greater than $5,000,000; (iv) make or commit on or
before September 30, 1994, to capital expenditures which exceed by $400,000
the amount of planned capital expenditures set forth on a schedule
previously disclosed to the Parent or make or commit to make aggregate
capital expenditures in excess of $200,000 per month without first
notifying the Parent, and no capital expenditures shall be used for the
business of the OSP Division, or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 4.2(b);
(c) take any action other than in the ordinary course of business and in
a manner consistent with past practice or pursuant to disclosed contracts
(none of which actions shall be unreasonable or unusual) with respect to
the grant of any severance or termination pay (otherwise than pursuant to
policies of the Company or any of its Subsidiaries in effect on the date
hereof) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of business and in
amounts and in a manner consistent with past practice or pursuant to
disclosed contracts) to any employee of, or independent contractor or
consultant to, the Company or any Subsidiary, enter into any new employee
plan, any new employment or consulting agreement, grant or establish any
new awards under such plan or agreement, or adopt or otherwise amend any of
the foregoing otherwise than in the ordinary course consistent with past
practice;
(e) take any action except in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures
(including without limitation its procedures with respect to the payment of
accounts payable); or
(f) before the Effective Time, take any action to cause the shares of
Company Common Stock to cease to be listed on the Nasdaq Stock Market.
Section 4.3 No Shopping. Except with respect to the disposition of the OSP
Division, the Company and its Subsidiaries will not, directly or indirectly,
through any officer, director, employee, representative, agent, financial
adviser or otherwise, solicit, initiate or encourage inquiries or submission of
proposals or offers from any person relating to any sale of all or a portion of
the assets, business, properties of (other than immaterial or insubstantial
assets or inventory in the ordinary course of business), or any equity interest
in, the Company or any of its Subsidiaries or any business combination with the
Company or any of its Subsidiaries, whether by merger, purchase of assets,
tender offer or otherwise or participate in any negotiation regarding, or
furnishing to any other person any information (except information which has
been previously publicly disseminated by the Company in the ordinary course of
business) with respect to, or otherwise cooperate in any way with, or assist
in, facilitate or encourage, any effort or attempt by any other person to do or
seek to do any of the foregoing. Notwithstanding the foregoing, the parties
hereby agree that the Board of Directors of the Company may review and act upon
an unsolicited proposal by any other person relating to any of the transactions
referred to in the preceding sentence, and may participate in any negotiations
regarding, or furnish to any other person any information with respect to, and
otherwise cooperate in any
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way with, and assist in, facilitate or encourage, any effort or attempt by any
other person to do or seek any of the foregoing if the Board of Directors
determines, based as to legal matters on the advice of legal counsel, that
failing to review and act would constitute a breach of fiduciary duty, and such
review and conduct will not violate this Agreement. The Company shall use its
reasonable best efforts to cause all confidential materials previously
furnished to any third parties to be promptly returned to the Company and shall
cease any negotiations conducted in connection therewith or otherwise conducted
with any such parties. The Company shall immediately notify the Parent if any
such proposal or offer, or any inquiry or contact with any person with respect
thereto, is made.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. Joint Proxy Statement-Prospectus. As promptly as practicable
after the execution of this Agreement, the Company and Parent shall prepare and
file with the SEC preliminary proxy materials which shall constitute the
preliminary joint proxy statement relating to the shareholder approvals
required to consummate the Merger and a registration statement containing the
preliminary prospectus with respect to the Parent Common Stock to be issued in
connection with the Merger (the "Registration Statement"). As promptly as
practicable, after comments are received from the Commission with respect to
the preliminary proxy materials and after the furnishing by the Company and
Parent of all information required to be contained therein, the Company and the
Parent shall file with the SEC the definitive Joint Proxy Statement-Prospectus
and Parent and the Company shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable,
and shall use all reasonable efforts to cause such Registration Statement to be
declared effective by the SEC.
Section 5.2. Shareholder Meetings. Promptly following the effectiveness of
the Registration Statement, each of the Company and Parent shall promptly take
all action necessary in accordance with applicable law and their respective
Articles of Incorporation and By-Laws to convene the Company Shareholders'
Meeting and the Parent Stockholders' Meeting. The shareholder votes or consents
required for approval of the Merger will be no greater than that set forth in
California Law. Each of Parent and the Company shall use its reasonable best
efforts to solicit from their respective shareholders proxies in favor of, and
shall take all other action necessary or advisable to secure any vote or
consent of shareholders required in connection with, the issuance of the shares
of Parent Common Stock in the Merger and to effect the Merger. The Parent
agrees that it shall vote, or cause to be voted, in favor of the Merger all
Shares directly or indirectly beneficially owned by it.
Section 5.3. Compliance with the Securities Act. Prior to the Effective Time,
the Company shall cause to be delivered to the Parent a letter from the
Company, identifying all persons who were, in its opinion, at the time of the
Company Shareholders' Meeting, "affiliates" of the Company as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act.
Section 5.4. HSR Act. The Company and the Parent shall use their best efforts
to file as soon as practicable notifications under the HSR Act in connection
with the Merger and the transactions contemplated hereby, and to respond as
promptly as practicable to any inquires received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters.
Section 5.5. Additional Agreements. The Company, the Parent and Merger Sub
will each comply in all material respects with all applicable laws and with all
applicable rules and regulations of any governmental authority in connection
with its execution, delivery and performance of this Agreement and the
transactions contemplated hereby and the Parent shall use its reasonable best
efforts to have the shares of Parent Common
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Stock issued in the Merger listed on the American Stock Exchange. Each of the
parties hereto agrees to use all reasonable efforts to obtain in a timely
manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to use all reasonable efforts to take,
or cause to be taken, all other actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 5.6. Notification of Certain Matters. Each of the Company and the
Parent shall give prompt notice to the other of (i) the occurrence, or non-
occurrence of any event whose occurrence, or non-occurrence would be likely to
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to the
Effective Time and (ii) any material failure of the Company, the Parent or
Merger Sub, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.6 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.7. Access to Information. From the date hereof to the Effective
Time, (i) the Company shall, and shall cause its subsidiaries, officers,
directors, employees, auditors and agents to, afford the officers, employees
and agents of the other complete access at all reasonable times and on
reasonable notice to its officers, employees, agents, accountants, properties,
offices and other facilities and to all books and records, and shall furnish
the other with all financial, operating and other data and information as such
party, through its officers, employees, agents or accountants, may reasonably
request and (ii) the Parent shall cooperate with the Company as the Company
shall reasonably request in connection with the Company's due diligence review
of the Parent.
(b) The Parent and the Company agree that each shall, and shall cause their
respective affiliates and each of their respective officers, directors,
employees, financial advisors and agents, to hold in strict confidence all data
and information obtained by them from the other or the other's subsidiaries
(unless such information is or becomes publicly available without the fault of
any representative or public disclosure of such information is required by law
in the opinion of counsel to such party) and shall ensure that the
representatives do not disclose such information to others without the prior
written consent of the other party.
(c) In the event of the termination of this Agreement, the Company shall, and
shall cause its affiliates to, return promptly every document furnished to them
by the Parent or any subsidiary, division, associate or affiliate of the Parent
in connection with the transactions contemplated hereby and any copies thereof
which may have been made, and shall cause the representatives to whom such
documents were furnished promptly to return such documents and any copies
thereof any of them may have made, other than documents filed with the SEC or
otherwise publicly available.
Section 5.8. Public Announcements. The Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement before such consultation, except as
may be required by law.
Section 5.9. Best Efforts; Cooperation. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to use its best efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement and shall use its best efforts to obtain all necessary waivers,
consents and approvals, and to effect all necessary filings under the
Securities Act, the Exchange Act and the HSR Act. The parties shall cooperate
in responding to inquiries from, and making presentations to, regulatory
authorities.
Section 5.10. Agreement to Defend and Indemnify. If any action, suit,
proceeding or investigation relating hereto or to the transactions contemplated
hereby is commenced, whether before or after the Effective Time, the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto. It
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is understood and agreed that, subject to the limitations on indemnification
contained in California Law, the Company shall, to the fullest extent permitted
under applicable law and regardless of whether the Merger becomes effective,
indemnify and hold harmless, and after the Effective Time, the Surviving
Corporation and the Parent shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each director, officer, employee,
fiduciary and agent of the Company or any Subsidiary and their respective
subsidiaries and affiliates including, without limitation, officers and
directors serving as such on the date hereof (collectively, the "Indemnified
Parties") against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation arising
out of or pertaining to any of the transactions contemplated hereby, including
without limitation liabilities arising under the Securities Act or the Exchange
Act in connection with the Merger, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Company, the Surviving Corporation or the Parent shall
advance the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to the Company, the
Surviving Corporation or the Parent, promptly as statements therefor are
received; provided, however, that neither the Company, the Surviving
Corporation nor the Parent shall have any obligation under this clause (i)
unless they shall have received an undertaking from the Indemnified Party to
promptly return any amounts paid by the Company, the Surviving Corporation or
the Parent in the event that it shall ultimately have been determined that the
Indemnified Party is not entitled to be indemnified under applicable law or any
indemnification agreement with the Company to which he is a party, and (ii) the
Company, the Surviving Corporation and the Parent will cooperate in the defense
of any such matter; provided, however, that neither the Company, the Surviving
Corporation nor the Parent shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
further, provided, that neither the Company, the Surviving Corporation nor the
Parent shall be obliged pursuant to this Section to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
single action except to the extent that, in the written opinion of counsel for
the Indemnified Parties, two or more of such Indemnified Parties have
conflicting interests in the outcome of such action. The Parent agrees to cause
the Surviving Corporation to maintain in effect for not less than three years
the Company's current directors' and officers' liability insurance which has
been paid in full as of the date hereof. The Parent shall cause the Surviving
Corporation to continue in effect the indemnification provisions currently
provided by the Certificate of Incorporation, By-Laws or any written
indemnification agreement of the Company for a period of not less than six
years following the Effective Time. This Section shall survive the consummation
of the Merger. This covenant shall survive any termination of this Agreement
pursuant to Section 7.1 hereof. Notwithstanding Section 8.7 hereof, this
Section is intended to be for the benefit of and to grant third party rights to
Indemnified Parties whether or not parties to this Agreement, and each of the
Indemnified Parties shall be entitled to enforce the covenants contained
herein.
(b) If the Parent, the Surviving Corporation or any of either of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provision shall be made so that the successors and assigns of the Parent or
Surviving Corporation assume the obligations set forth in this Section 5.10.
Section 5.11. Restrictions on the Parent. During the term of this Agreement,
the Parent shall not, and shall cause its affiliates not to, purchase or
otherwise acquire beneficial ownership of any Shares or to sell or otherwise
dispose of any Shares, in each case, other than pursuant to the Merger.
Section 5.12. OSP Disposition. The Company will keep the Parent closely
informed as to its efforts to effect the sale by the Company of its Ophthalmic
Surgical Products Division (the "OSP Division"), consisting of its business,
assets and liabilities relating to the manufacturing and marketing of
intraocular lenses, and the business, assets and liabilities relating to the
OSP Division's Corneal Topography Systems and Corneal Contouring, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company. The
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Company may make such sales on terms it deems reasonable and appropriate,
provided that no such terms shall be less favorable to the Company than the OSP
Minimum Sale Terms set forth on Schedule 5.12, without the prior, written
consent of the Parent. Pending the disposition of the OSP Division, or any
portion thereof, the Company shall conduct the business of the OSP Division
only in the ordinary course and shall not take any action that would, in any
material respect, transfer cash or other assets of the Company to the OSP
Division except for cash required to enable it to meet its obligations incurred
in the ordinary course of its business.
Section 5.13. Action by the Officers, Directors, etc. (a) The Company shall
use its reasonable best efforts to cause its directors and officers to vote any
Shares held in favor of the Merger.
(b) The Parent shall use its reasonable best efforts to cause its directors,
officers, subsidiaries and Benson Partners I, L.P. to vote all Shares
beneficially held by any of them in favor of the Merger and to vote all shares
of Parent Common Stock beneficially held by any of them in favor of the
proposals to the stockholders of the Parent contemplated by the Agreement.
Section 5.14. Dissemination of Certain Information. The Parent will promptly
disclose through filings with the SEC under the Exchange Act the occurrence of
any Material Adverse Effect upon the Parent or any of its subsidiaries
occurring between April 30, 1994 and the Effective Time, and will promptly
furnish to the Company a copy of such filing.
ARTICLE VI
CONDITIONS OF MERGER
Section 6.1. Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the following conditions:
(a) Shareholder Approvals. (i) The Merger and this Agreement shall have
been approved and adopted by the requisite vote of the shareholders of the
Company and (ii) the issuance of the shares of Parent Common Stock in the
Merger shall have been approved and adopted by the requisite vote of the
Parent's stockholders;
(b) Amex Listing. The Parent Common Stock to be issued in the Merger
shall have been authorized for listing on the American Stock Exchange upon
official notice of issuance;
(c) HSR Waiting Period. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated;
(d) Effectiveness of Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of the
Securities Act. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and remain in
effect; and
(e) No Prohibition. No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission nor any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect, which prevents the consummation
of the Merger or makes such consummation illegal.
Section 6.2. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Parent and Merger Sub contained in this Agreement shall be true and
correct in all material respects on the date hereof and shall also be true
and correct in all material respects on and as of the Effective Time,
except for changes contemplated by this Agreement, with the same force and
effect as if made on and as of the Effective Time; and
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(b) Agreements, Conditions and Covenants. The Parent and Merger Sub shall
have performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time.
Section 6.3. Additional Conditions to Obligations of the Parent and Merger
Sub. The obligations of the Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on the date hereof and shall also be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement, with the same force and effect as if made
on and as of the Effective Time;
(b) Agreements, Conditions and Covenants. The Company shall have
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by it on or before the Effective Time;
(c) Demand for Appraisal Rights. Holders of not more than 5% of the
Company's Shares shall have made a demand for payment pursuant to appraisal
rights under California Law by the conclusion of the Company Shareholders'
Meeting; and
(d) Cash Position of the Company. The Company shall have at least $30
million in cash that is free and clear of all liens or other encumbrances.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. Termination. This Agreement may be terminated at any time before
the Effective Time:
(a) By mutual consent of the Boards of Directors of the Parent and the
Company; or
(b) By either the Parent or the Company if the Merger shall not have been
consummated by December 31, 1994, provided, however, that the right to
terminate this Agreement under this Section 7.1(b) will not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Merger to occur on or
before such date; or
(c) By either the Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(d) By the Parent if the Board of Directors of the Company (i) withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to the Parent and Merger Sub, (ii) recommends to the holders
of Shares any proposal with respect to a tender offer, merger,
consolidation, share exchange or similar transaction involving the Company
or any of its Subsidiaries, other than the transactions contemplated by
this Agreement, or (iii) resolves to do any of the foregoing; or
(e) By the Company if prior to the Effective Time, a corporation,
partnership, person or other entity or group shall have made a bona fide
offer that the Board of Directors of the Company determines in its good
faith judgment and in the exercise of its fiduciary duties, based on the
advice of legal counsel, is more favorable to the Company's shareholders
than the Merger, provided that any such termination by the Company shall
not be effective until payment of the fees required by Section 7.3(a) and
Section 7.3(b); or
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(f) By either the Parent or the Company if the other party shall have
breached this Agreement hereunder in any material respect and such breach
continues for a period of ten days after the receipt of notice of the
breach from the non-breaching party.
Section 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1 hereof, this Agreement shall forthwith
become void and there shall be no liability on the part of the Parent, Merger
Sub or the Company, except (i) as set forth in Sections 7.3 and 8.1 hereof, and
(ii) nothing herein shall relieve any party from liability for any breach
hereof.
Section 7.3. Termination Fees and Expenses. (a) After this Agreement is
terminated by the Company pursuant to Section 7.1(e) hereof or by the Parent
pursuant to Section 7.1(f) hereof, the Company shall pay to the Parent by
certified check or wire transfer to an account designated by the Parent, within
one business day after receipt of a request therefor, an amount equal to the
lesser of (i) $2,000,000 and (ii) all actual out-of-pocket costs and expenses
of the Parent and Merger Sub incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, legal,
professional and service fees and expenses which amount shall be payable in
same day funds.
(b) Within one business day after this Agreement has been terminated by the
Company pursuant to Section 7.1(e) hereof or by the Parent pursuant to Section
7.1(f) hereof, the Company shall pay to the Parent $4,000,000 by certified
check or wire transfer to an account designated by the Parent which amount
shall be payable in same day funds.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or the termination of this Agreement pursuant to Section
7.1, as the case may be, except that the agreements set forth in Article I and
Section 5.10 shall survive the Effective Time indefinitely and those set forth
in Sections 5.7(b), 5.7(c), 7.3 and 8.3 shall survive termination indefinitely.
Section 8.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
(a) if to the Parent or Merger Sub:
Benson Eyecare Corporation
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Attention: Martin E. Franklin
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: William J. Grant, Jr., Esq.
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(b) if to the Company:
Optical Radiation Corporation
1300 Optical Drive
Azusa, California 91702
Attention: Gary Patten
with a copy to:
Latham & Watkins
701 B Street
San Diego, California 92101
Attention: Donald P. Newell, Esq.
Section 8.3. Expenses. Except as provided in Section 7.3 hereof, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
Section 8.4. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of stock, as trustee or executor, by contract
or credit arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership, association,
trust or any unincorporated organization.
Section 8.5. Headings. 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.
Section 8.6. Severability. If any term or other provision of this Agreement
is 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, the 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 maximum extent
possible.
Section 8.7. Entire Agreement; No Third-Party Beneficiaries. This Agreement
will constitute a binding agreement only when executed and delivered by the
parties hereto and at such time will constitute the entire agreement and will
supersede any and all other prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, is not intended to
confer upon any other person any rights or remedies hereunder.
Section 8.8. Waiver. At any time before 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 hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only as against such party and only if
set forth in an instrument in writing signed by such party.
Section 8.9. Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto by action taken by the Parent and Merger Sub, and
by action taken by or on behalf of the Company's
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Board of Directors at any time before the Effective Time; provided, however,
that, after approval of the Merger by the shareholders of the Company, no
amendment may be made which would materially adversely impact the interests of
the Company's shareholders or reduce the amount or change the type of
consideration into which each Share will be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 8.10. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that the Parent and Merger Sub may assign all or
any of their rights hereunder to any affiliate of the Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder.
Section 8.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, except that
California Law shall apply with respect to the Merger, in each case without
regard to the principles of conflicts of law thereof.
Section 8.12. Counterparts; Telecopier. This Agreement may be executed in one
or more counterparts and by facsimile, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which shall constitute one and the same agreement. Delivery
of an executed counterpart of a signature page to this Agreement by telecopier
shall be effective as delivery of a manually executed counterpart of this
Agreement.
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<PAGE>
In Witness Whereof, the Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
Optical Radiation Corporation
/s/ Gary Patten /s/ Richard D. Wood
Attest: _____________________________ By: _________________________________
Secretary President and Chief Executive
Officer
Benson Eyecare Corporation
/s/ Peter H. Trembath /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
Benson Acquisition Corporation
/s/ Peter H. Trembath /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
A-23
<PAGE>
SCHEDULE 5.12
OSP Minimum Sale Terms
1. Assets to be sold shall consist only of assets primarily or exclusively
dedicated to the OSP Division, and shall not include assets necessary to the
continuing business of the Company and its continuing subsidiaries. No amount
of cash in excess of $5,000 is to be included among the purchased assets.
2. Liabilities to be assumed shall include all liabilities payable to trade
creditors, sales commissions, payroll and related liabilities for transferred
employees and current operating charges directly related to the current and
ordinary production and sale of products of the OSP Division or otherwise
primarily or exclusively related thereto. Liabilities required to be assumed
shall not include product liability and patent infringement claims,
environmental claims and other similar or contingent claims. The Company will,
however, use its reasonable best efforts to obtain the broadest liability
assumption available in such transaction.
3. Representations, warranties and covenants (and survivability thereof)
customary for a disposition of assets of this type.
4. Indemnification for breaches of representations and warranties shall be
subject to a basket customary for a disposition of assets of this type and size
and consistent with the representations and warranties being given and a cap
equal to the aggregate amount of the purchase price.
5. Intercorporate agreements for shared office space, MIS services and the
like will be negotiated on an arm's-length basis with reasonable terms and
conditions (in no event less then the current cost of providing such services),
and shall not in any event extend for a period of more than two years following
the closing of the OSP Division sale.
6. The consideration for the sale shall consist exclusively of cash and
marketable securities, and any such securities shall have such registration
rights as may be required to permit their prompt distribution to shareholders
of the Company and/or sale.
7. The purchase agreement and all agreements ancillary thereto shall not
contain any unusual provisions for the enrichment of the purchaser of the OSP
Division or any of its affiliates, or for the transfer of any assets of the
Company other than assets of the OSP Division.
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<PAGE>
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER, dated as of July 6,
1994, among Optical Radiation Corporation, a California corporation (the
"Company"), Benson Eyecare Corporation, a Delaware corporation (the "Parent"),
and Benson Acquisition Corporation, a California corporation and a wholly owned
subsidiary of the Parent ("Merger Sub").
W I T N E S S E T H:
Whereas, the Company, the Parent and Merger Sub are parties to that certain
Agreement and Plan of Merger, dated as of June 30, 1994 (the "Merger
Agreement"); and
Whereas, the Company, the Parent and Merger Sub desire to amend certain of
the terms of the Merger Agreement.
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, the Parent and Merger Sub hereby agree as follows:
1. The third "Whereas" clause of the Merger Agreement is hereby amended to
delete the word "Shares" where it first occurs and substitute in its place the
following:
"shares (the "Shares") of Common Stock, $.50 par value, of the Company
("Company Common Stock")"
2. Section 1.10(a) of the Merger Agreement is hereby amended by deleting such
section in its entirety and inserting the following in lieu thereof:
Section 1.10 Stock Options. (a) Prior to the Effective Time, the Company
and the Stock Option Committee of its Board of Directors shall take all
action reasonably necessary or appropriate to offer each holder of options
outstanding under the Incentive Stock Option Plan for Key Employees (the
"1981 Plan") and the 1987 Stock Option Plan for Directors, Officers and
Executive and Key Employees (the "1987 Plan" and together with the 1981
Plan, the "Stock Option Plans") the opportunity, by written notice
delivered to the Company at least two business days prior to the Effective
Time, to exchange each of his or her options for:
(i) a cash amount equal to the product of (X) the number of Shares
subject to such option and (Y) the difference between $23.00 and the per
share exercise price of such option, payable at the Effective Time,
provided, however, that if the option exercise price is greater than or
equal to $23.00 per Share, then no amounts shall be payable under this
subclause (i); and
(ii) an amount (payable on the OSP Disposition Date in shares of Parent
Common Stock valued at the Average OSP Disposition Price) equal to the
product of (W) the number of Shares subject to such option and (X) the
excess, if any, of
(A) the Merger Consideration per Share (expressed in dollars, with
Parent Common Stock valued at the Average Closing Price) over
(B) the greater of (Y) the per share exercise price of such option
and (Z) $23 per share.
The Parent Common Stock issuable pursuant to this subclause (ii) will be
obtained by the Surviving Corporation as follows: (1) if applicable, the
Parent will furnish to the Surviving Corporation, without additional
consideration, a number of shares of Parent Common Stock equal to the
number of Shares subject to such option multiplied by the fraction referred
to in Section 1.6(b)(iii) and (2) the Surviving Corporation will purchase
from the Parent in exchange for OSP Disposition Proceeds of like value all
remaining shares of Parent Common Stock so issuable.
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<PAGE>
3. Section 5.7(a) of the Merger Agreement is hereby amended by deleting such
section in its entirety and inserting the following in lieu thereof:
From the date hereof to the Effective Time, (i) the Company shall, and
shall cause its subsidiaries, officers, directors, employees, auditors and
agents to, afford the officers, employees and agents of the Parent complete
access at all reasonable times and on reasonable notice to its officers,
employees, agents, accountants, properties, offices and other facilities
and to all books and records, and shall furnish the Parent with all
financial, operating and other data and information as such party, through
its officers, employees, agents or accountants, may reasonably request and
(ii) the Parent shall cooperate with the Company as the Company shall
reasonably request in connection with the Company's due diligence review of
the Parent.
4. Capitalized terms used but not defined in this Amendment No. 1 shall have
the respective meanings ascribed thereto in the Merger Agreement.
5. Except as expressly amended by this Amendment No. 1, the Merger Agreement
shall remain in full force and effect as the same was in effect immediately
prior to the effectiveness of this Amendment No. 1.
6. This Amendment No. 1 shall be governed and construed on the same basis as
the Merger Agreement, as set forth therein.
In Witness Whereof, the Parent, Merger Sub and the Company have caused this
Amendment No. 1 to be executed as of the date first written above by their
respective officers thereunto duly authorized.
Optical Radiation Corporation
/s/ Gary Patten /s/ Richard D. Wood
Attest: _____________________________ By: _________________________________
President and Chief Executive
Officer
Benson Eyecare Corporation
/s/ Desiree DeStefano /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
Benson Acquisition Corporation
/s/ Desiree DeStefano /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
A-26
<PAGE>
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 To Agreement and Plan of Merger, dated as of August 29,
1994, among Optical Radiation Corporation, a California corporation (the
"Company"), Benson Eyecare Corporation, a Delaware corporation (the "Parent"),
and Benson Acquisition Corporation, a California corporation and a wholly owned
subsidiary of the Parent ("Merger Sub").
W I T N E S E T H:
Whereas, the Company, the Parent and Merger Sub are parties to that certain
Agreement and Plan of Merger, dated as of June 30, 1994, as amended by
Amendment No. 1 thereto dated July 6, 1994 (the "Merger Agreement"); and
Whereas, the Company, the Parent and Merger Sub desire to amend certain of
the terms of the Merger Agreement.
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, the Parent and Merger Sub hereby agree as follows:
1. Section 1.10(a) of the Merger Agreement is hereby amended by deleting such
section in its entirety and inserting the following in lieu thereof:
Section 1.10 Stock Options. (a) Prior to the Effective Time, the Company
and the Stock Option Committee of its Board of Directors shall take all
action reasonably necessary or appropriate to offer each holder of options
("ORC Options") outstanding under the Incentive Stock Option Plan for Key
Employees (the "1981 Plan") and the 1987 Stock Option Plan for Directors,
Officers and Executive and Key Employees (the "1987 Plan" and together with
the 1981 Plan, the "Stock Option Plans") the opportunity, by written notice
delivered to the Company at least five business days prior to the Effective
Time, to either (I) or (II):
(I) Exchange each of his or her ORC Options for:
(i) a cash amount equal to the product of (X) the number of Shares
subject to such ORC Options and (Y) the difference between $23.00 and the
per share exercise price of such ORC Options, payable at the Effective
Time, provided, however, that if the option exercise price is greater than
or equal to $23.00 per Share, then no amounts shall be payable under this
subclause (i); and
(ii) an amount (payable on the OSP Disposition Date in shares of Parent
Common Stock valued at the Average OSP Disposition Price) equal to the
product of (W) the number of Shares subject to such ORC Options and (X) the
excess, if any, of
(A) the Merger Consideration per Share (expressed in dollars, with Parent
Common Stock valued at the Average Closing Price) over
(B) the greater of (Y) the per share exercise price of such ORC Options
and (Z) $23 per share.
The Parent Common Stock issuable pursuant to this subclause (ii) will be
obtained by the Surviving Corporation as follows: (1) if applicable, the
Parent will furnish to the Surviving Corporation, without additional
consideration, a number of shares of Parent Common Stock equal to the
number of Shares subject to such ORC Options multiplied by the fraction
referred to in Section 1.6(b)(iii) and (2) the Surviving Corporation will
purchase from the Parent in exchange for OSP Disposition Proceeds of like
value all remaining shares of Parent Common Stock so issuable.
(II) Convert his or her ORC Options into options issued under the Benson
Eyecare Corporation 1992 Stock Option Plan ("Parent Options") to purchase a
number of shares of Parent Common Stock equal to the product of (i) the
number of Shares subject to the ORC Options to be converted, and (ii)
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<PAGE>
the "Option Exchange Ratio," determined as the quotient of (X) the Merger
Consideration per Share (expressed in dollars, with Parent Common Stock
valued at the Average Closing Price) and (Y) the Average Closing Price per
share of Parent Common Stock. The price per share of such Parent Options
shall equal to the quotient of (A) the original option price per share
applicable to the holder's ORC Options, and (B) the Option Exchange Ratio.
The Parent Options so acquired by each holder will be fully vested and
exercisable, and will be subject to the same terms and conditions
applicable to the ORC Options, to the extent permissible under the terms of
the Benson Eyecare Corporation 1992 Stock Option Plan.
2. Capitalized terms used but not defined in this Amendment No. 2 shall have
the respective meanings ascribed thereto in the Merger Agreement.
3. Except as expressly amended by this Amendment No. 2, the Merger Agreement
shall remain in full force and effect as the same was in effect immediately
prior to the effectiveness of this Amendment No. 2.
4. This Amendment No. 2 shall be governed and construed on the same basis as
the Merger Agreement, as set forth therein.
In Witness Whereof, the Parent, Merger Sub and the Company have caused this
Amendment No. 2 to be executed as of the date first written above by their
respective officers thereunto duly authorized.
Optical Radiation Corporation
/s/ Gary Patten /s/ Richard D. Wood
Attest: _____________________________ By: _________________________________
President and Chief Executive
Officer
Benson Eyecare Corporation
/s/ Desiree DeStefano /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
Benson Acquisition Corporation
/s/ Desiree DeStefano /s/ Martin E. Franklin
Attest: _____________________________ By: _________________________________
Chairman and Chief Executive
Officer
A-28
<PAGE>
ANNEX B
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
September 12, 1994
Board of Directors
Optical Radiation Corporation
1300 Optical Drive
Azusa, CA 91702
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders (excluding Benson Eyecare Corporation ("Benson") and
its affiliates and its direct and indirect subsidiaries) of Optical Radiation
Corporation, a California corporation (the "Company"), of the consideration to
be received by such shareholders pursuant to the terms of the Agreement and
Plan of Merger dated as of June 30, 1994, as amended, among Benson, the Company
and Benson Acquisition Corporation, a wholly owned subsidiary of Benson (the
"Agreement").
Pursuant to the Agreement, Benson Acquisition Corporation will be merged (the
"Merger") with and into the Company. By virtue of the Merger, each share of
common stock of the Company shall be converted into the right to receive (i)
$17.00 in cash; (ii) the number of shares of Benson common stock equal to the
Exchange Ratio; and (iii) a pro rata share of the OSP Disposition Proceeds (not
including the amount payable with respect to Company stock options as provided
in the Agreement) equal to the amount of such proceeds divided by the total
number of such shares entitled to receive such proceeds plus, to the extent
that the amount of such pro rata share has a value at the time of its receipt
by the shareholders of less than $2.00, a fraction of a share of Benson common
stock having a value, valued at the Average OSP Disposition Price, equal to the
amount of such difference (collective, the "Merger Consideration"). Any
capitalized term not otherwise defined herein shall have the meaning assigned
to such term in the Agreement.
In arriving at our opinion, we have reviewed the Agreement, the Registration
Statement on Form S-4 and financial and other information that was publicly
available or furnished to us by the Company and Benson including information
provided during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain internal financial projections of the Company on a stand-alone basis
for the period beginning August 1, 1994 and ending July 31, 1996 prepared by
the management of the Company and certain financial results of Benson for the
fiscal year ended December 31, 1993 and certain internal financial projections
of Benson on a stand-alone basis for the period beginning January 1, 1994 and
ending December 31, 1996, in each case, adjusted for acquisitions completed by
Benson, the pending disposition of Benson's retail businesses and laboratory
and the completion of a $40 million offering of convertible subordinated notes
on May 2, 1994, prepared by the management of Benson. In addition, we have
compared certain financial and securities data of the Company and Benson with
that of various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of the common stock of
the Company and Benson, reviewed prices, premiums and implied multiples paid in
certain other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was available to us from public sources,
that was provided to us by the Company and Benson or their representatives, or
that was otherwise reviewed by us. With respect to the financial projections
supplied to us, we have assumed that they were reasonably prepared on the basis
reflecting the best currently available estimates and judgments of the
managements of the Company and Benson as to the future operating and financial
performance of the
B-1
<PAGE>
Board of Directors September 12, 1994
Optical Radiation Corporation
Page 2
Company and Benson, respectively. We did not make any independent evaluation of
the assets, liabilities or operations of the Company or Benson, nor did we
verify any of the information reviewed by us. We made no independent
investigation of any legal matters affecting the Company or Benson and assumed
the correctness of all legal advice given to the Board of Directors of the
Company by its counsel.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which the Benson common stock will actually trade at any time. Also,
we are expressing no opinion herein as to the amount or nature of the net
proceeds to be realized from the sale of the Company's Ophthalmic Surgical
Products Division. Our opinion does not address the relative merits of the
Merger and the other business strategies being considered by the Company's
Board of Directors, including the sale of the Company's Ophthalmic Surgical
Products Division, nor does it address the Board's decision to proceed with the
Merger. Our opinion does not constitute a recommendation to any shareholder as
to how such shareholder should vote on the proposed Merger.
Donaldson, Lufkin & Jenrette Securities Corporation, as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with the Company having acted as financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Merger Consideration to be received by the shareholders
of the Company in the Merger is fair to such shareholders (excluding Benson and
its affiliates and its direct and indirect subsidiaries) from a financial point
of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
/s/ Peter Nolan
By: _________________________________
Peter Nolan
Managing Director
B-2
<PAGE>
ANNEX C
[SALOMON BROTHERS INC LETTERHEAD]
June 30, 1994
Board of Directors
Benson Eyecare Corporation
555 Theodore Fremd Avenue
Suite B-302
Rye, NY 10580
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from
a financial point of view, to Benson Eyecare Corporation ("Benson"), of the
Merger Consideration (as defined below) to be paid by Benson in the proposed
acquisition by Benson of Optical Radiation Corporation ("Optical") provided for
in the Agreement and Plan of Merger, dated as of June 30, 1994 (the
"Agreement"), among Benson, Optical and Benson Acquisition Corporation ("Merger
Sub"), a wholly-owned subsidiary of Benson, pursuant to which Merger Sub will
be merged (the "Merger") with and into Optical.
As more specifically set forth in the Agreement, and subject to the terms and
conditions thereof, at the effective time of the Merger (the "Effective Time"),
each then issued and outstanding share of common stock, par value $.50 per
share ("Optical Common Stock"), of Optical (other than shares held in the
treasury of Optical or by any direct or indirect wholly-owned subsidiary of
Optical or as to which appraisal rights have been properly exercised under
applicable California law) (the "Merger Eligible Shares") will be converted
into the right to receive consideration (the "Merger Consideration") consisting
of (a) $17.00 in cash, (b) a fraction of a share of common stock, par value
$.01 per share ("Benson Common Stock"), of Benson equal to the Exchange Ratio
(as defined below), (c) the OSP Consideration (as defined below), if any, and
(d) if the value of the OSP Consideration at the time of its receipt is less
than $2.00 (or if there is no OSP Consideration), an additional fraction of a
share of Benson Common Stock having a value equal to such difference (or, if
there is no OSP Consideration, equal to $2.00).
The term "Exchange Ratio" means the fraction (rounded to the nearest ten
thousandth) equal to: (i) $8.10 divided by the Average Closing Price (as
defined in the Agreement), if the Average Closing Price exceeds $10.80; (ii)
0.750, if the Average Closing Price is $10.80 or less, but more than $7.20;
(iii) one-half of the sum of (x) 0.750 and (y) the quotient obtained by
dividing $5.40 by the Average Closing Price, if the Average Closing Price is
$7.20 or less but more than $6.00; and (iv) 0.825, if the Average Closing Price
is $6.00 or less. Notwithstanding the foregoing, in the event that the Average
Closing Price is less than $6.00, Optical will have the right to terminate the
Agreement unless Benson at that time agrees to adjust the Exchange Ratio
upwards to be equal to the quotient obtained by dividing $4.95 by such Average
Closing Price. However, in rendering this opinion we have assumed that if the
Average Closing Price is less than $6.00, the Benson Board of Directors would
not elect to pursue the Merger if the Exchange Ratio would be greater than
0.825.
The Agreement further contemplates that Optical will continue to try to sell
its Opthalmic Surgical Products Division (the "OSP Division"), and that any
proceeds therefrom received prior to December 31, 1994 pursuant to agreements
entered into on or prior to the Effective Time (net of tax effects and
transaction expenses), less 15% of the amount, if any, by which such proceeds
exceed $19,195,560 (the "OSP Proceeds"), will be distributed to the Merger
Eligible Shares at the Effective Time or, under the circumstances described in
the Agreement, when actually received by Optical. The OSP Consideration means
the quotient obtained by dividing the OSP Proceeds, if any, less certain
amounts allocable under the Agreement to the consideration payable in the
Merger to holders of outstanding options to acquire Optical Common Stock, by
the number of the Merger Eligible Shares.
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<PAGE>
Consummation of the Merger is conditioned upon, among other things, (i)
approval and adoption of the Agreement by the shareholders of Optical; (ii)
approval of the issuance of the shares of Benson Common Stock in the Merger by
the shareholders of Benson; (iii) holders of not more than 5% of the
outstanding shares of Optical Common Stock demanding appraisal rights under
California law; and (iv) Optical at the Effective Time having at least $30
million in available cash.
As you are aware, we have acted as financial advisor to Benson in connection
with the Merger and will receive fees from Benson for our services, a
significant amount of which is contingent upon consummation of the Merger.
Additionally, we acted as lead underwriter for the May 1994 issuance by Benson
of $40 million of convertible subordinated notes. In addition, in the ordinary
course of our business, we may actively trade the securities of both Benson and
Optical for our own account and for the accounts of customers (we act as a
market maker for the Benson convertible subordinated notes) and, accordingly,
may at any time hold a long or short position in such securities.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement; (ii) certain publicly
available information concerning Benson, including the Annual Reports on Form
10-K of Benson for each of the years in the two-year fiscal period ended
December 31, 1993, and the Quarterly Report on Form 10-Q of Benson for the
quarter ended March 31, 1994; (iii) certain other internal information,
primarily financial in nature, concerning the business and operations of Benson
furnished to us by Benson for purposes of our analysis, including projections
of the future financial performance of Benson and an estimate of the potential
cost savings and operating synergies from the Merger; (iv) certain publicly
available information concerning the trading of, and the trading market for,
Benson Common Stock; (v) certain publicly available information concerning
Optical, including the Annual Reports on Form 10-K of Optical for each of the
years in the three-year fiscal period ended July 31, 1993, and the Quarterly
Reports on Form 10-Q of Optical for the quarters ended October 31, 1993,
January 30, 1994 and April 30, 1994; (vi) certain other internal information,
primarily financial in nature, concerning the business and operations of
Optical furnished to us by Optical for purposes of our analysis, including
projections of the future financial performance of Optical (without the OSP
Division); (vii) certain publicly available information concerning the trading
of, and the trading market for, Optical Common Stock; (viii) certain publicly
available information with respect to certain other companies that we believe
to be comparable in certain respects to Benson or Optical and the trading
markets for certain of such other companies' securities; and (ix) certain
publicly available information concerning the nature and terms of certain other
transactions that we consider relevant to our inquiry. We have also met with
certain officers and employees of Benson and Optical to discuss the foregoing,
as well as other matters we believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have not attempted
independently to verify any of such information. With respect to projections,
we have assumed that they have been reasonably prepared on bases reflecting the
best available estimates and judgments of the respective managements of Benson
and Optical at the time of preparation as to the respective future financial
performances of Benson and Optical, including projected cost savings and
operating synergies from the Merger. We express no view as to such projections
or the assumptions on which they are based. We have not conducted a physical
investigation for valuation purposes of any of the properties or facilities of
Benson or Optical, nor have we made or obtained any independent evaluations or
appraisals of any of such properties or facilities.
With respect to certain legal and financial matters pertaining to the planned
sale of the OSP Division, including the identification and quantification of
contingent liabilities of the OSP Division that might remain with Optical
following such a sale, we have relied, without independent investigation, upon
the estimates, advice and diligence investigation of management of Benson and,
for purposes of our opinion expressed herein, we have assumed with your consent
that the present value of any such contingent liabilities retained by Optical
following a sale of the OSP Division will not exceed $2 million.
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In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and current financial position and results of operations of
Benson, Optical (both with and without the OSP Division) and the OSP Division
(on a stand-alone basis); (ii) the business prospects of Benson and Optical
(without the OSP Division); (iii) the historical and current market for Benson
Common Stock, Optical Common Stock and the equity securities of certain other
companies that we believe to be comparable in certain respects to Benson or
Optical; (iv) the potential pro forma financial effects of the Merger (based on
the projections and estimates described herein); (v) Optical's representations
as to its contacts and discussions with certain prospective purchasers of all
or portions of the OSP Division, and the results thereof; and (vi) the nature
and terms (including premiums paid) of certain other acquisition transactions
that we believe to be relevant. We have also taken into account our assessment
of general economic, market and financial conditions, as well as our experience
in connection with similar transactions and securities valuation generally. Our
opinion necessarily is based upon conditions as they exist and can be evaluated
on the date hereof. Our opinion is, in any event, limited to the fairness, from
a financial point of view, to Benson of the Merger Consideration to be paid by
Benson in the Merger, and does not address Benson's underlying business
decision to effect the Merger. Our opinion is delivered solely for your use and
consideration, and does not constitute a recommendation to any security holder
of Benson as to how to vote in connection with approval and adoption of the
Agreement or the issuance of shares of Benson Common Stock in the Merger.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that the Merger Consideration to be paid by Benson in the Merger is
fair, from a financial point of view, to Benson.
Very truly yours,
/s/ Salomon Brothers Inc
Salomon Brothers Inc
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ANNEX D
CALIFORNIA GENERAL CORPORATION LAW
Chapter 13. Dissenters' Rights
(S) 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as
defined in subdivision (b). The fair market value shall be determined as of the
day before the first announcement of the terms of the proposed reorganization
or short-form merger, excluding any appreciation or depreciation in consequence
of the proposed action, but adjusted for any stock split, reverse stock split,
or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
(S) 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATION; DEMAND FOR
PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief
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description of the procedure to be followed if the shareholder desires to
exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
(S) 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
(S) 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
(S) 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares
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as dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
(S) 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT; JUDGMENT;
PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which
any dissenting shareholder who is a party, or who has intervened, is entitled
to require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considered equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of
Section 1301).
(S) 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
(S) 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
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(S) 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
(S) 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(S) 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
(S) 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
(S) 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
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rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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ANNEX E
SECOND AMENDMENT TO THE BENSON EYECARE CORPORATION 1992 STOCK OPTION PLAN
Pursuant to Article XVIII of the Benson Eyecare Corporation 1992 Stock Option
Plan (the "Plan") and pursuant to (i) the resolution of the stockholders of
Benson Eyecare Corporation (the "Company"), duly adopted on October , 1994 and
(ii) the Unanimous Written Consent of the Stock Option Committee of the
Company, duly adopted on August 16, 1994, the Plan is hereby amended as
follows:
1. The prior approval of the stockholders of the Company having been obtained
at the Special Meeting of Stockholders held on October , 1994, the first
sentence of Article I of the Plan is hereby amended, to increase the number of
shares which the Company is authorized to issue under the Plan, as follows:
"The total number of shares of Common Stock, par value $.01 per share,
of the Company which may be purchased or acquired pursuant to the
exercise of Options or Rights granted under the Plan shall not exceed,
in the aggregate, 2,300,000 shares of the authorized Common Stock of
the Company, plus, an amount, not to exceed 1,300,000 shares (equal to
the number of shares of the Company's Common Stock subject to options
that may be awarded by the Company to certain employees of Optical
Radiation Corporation), for an aggregate maximum of 3,600,000 shares of
the Company's Common Stock which may be granted under the Plan (the
"Shares"), such number subject to adjustment as provided in Article XII
hereof."
2. The foregoing amendments shall be deemed to have been effective
immediately upon approval thereof by the Company's stockholders of Stock Option
Committee, as appropriate.
3. Except as amended herein, the Plan shall remain unmodified and in full
force and effect.
Dated: October , 1994
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL")
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonable incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had to
reasonable cause to believe his conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses (including attorneys' fees) which he actually
and reasonably incurred in connection therewith. The indemnification provided
is not deemed to be exclusive of any other rights to which an officer or
director may be entitled under any corporation's by-law, agreement, vote or
otherwise.
In accordance with Section 145 of the DGCL, Section EIGHTH of the
Benson Eyecare Corporation ("Benson") Restated Certificate of Incorporation, as
amended (the "Restated Certificate") and Article VI, Sections 1-3, of the Benson
By-Laws (the "By-Laws") provide that Benson shall indemnify each person who is
or was a director,
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officer, employee or agent of Benson (including the heirs, executors,
administrators or estate of such person) or is or was serving at the request of
Benson as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the fullest extent
permitted under subsections 145(a), (b), and (c) of the DGCL or any successor
statute. The indemnification provided by the Restated Certificate and the By-
Laws shall not be deemed exclusive of any other rights to which any of those
seeking indemnification or advancement of expenses may be entitled under any by-
law, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. Expenses (including
attorneys' fees) incurred in defending a civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by Benson in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by
Benson. Section NINTH of the Restated Certificate provides that a director of
Benson shall not be personally liable to Benson or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to Benson or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the DGCL is amended after approval by the shareholders of this Section NINTH to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of Benson shall be
eliminated or limited to the fullest extent permitted by the DGCL as so amended.
Section 9 of the By-Laws provides that Benson may purchase and
maintain insurance on behalf of its directors, officers, employees and agents
against any liabilities asserted against such persons arising out of such
capacities.
Benson has entered into indemnification agreements with each of
its current directors and certain of its officers and other key personnel,
pursuant to which Benson has agreed to indemnify each indemnitee to the
fullest extent authorized by law, against any and all damages, judgments,
settlements and
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fines ("losses") in connection with any action, suit, arbitration or proceeding,
or any inquiry or investigation, whether brought by or in the right of the
Company or otherwise, whether civil, criminal, administrative, investigative or
other, or any appeal therefrom, by reason of an indemnitee's serving as a
director of Benson. An indemnitee is not entitled to indemnification for
any losses that are (i) based or attributable to the indemnitee gaining in fact
any personal profit or advantage to which the indemnitee is not entitled, (ii)
for the return by the indemnitee of any remuneration paid to the indemnitee
without the previous approval of the stockholders of the Company which is
illegal, (iii) for violations of Section 16 of the Securities Exchange Act of
1934 or similar provisions of state law, (iv) based upon knowingly fraudulent,
dishonest or willful misconduct and (v) not permitted to be covered by
applicable law. The agreements provide that the indemnification under the
agreement is not exclusive of any other rights the indemnitee may have under the
Restated Certificate, the By-Laws, the DGCL or any agreement or vote of
shareholders.
Item 21. Exhibits and Financial Statements Schedules.
A. Exhibits.
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2.1 Agreement and Plan of Merger, dated as of June 30, 1994, among Optical
Radiation Corporation, Benson Eyecare Corporation and Benson
Acquisition Corporation (included as Annex A to the Joint Proxy
Statement/Prospectus)
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of July 6,
1994, among Optical Radiation Corporation, Benson Eyecare Corporation
and Benson Acquisition Corporation (included as Annex A to the Joint
Proxy Statement/Prospectus)
2.3 Amendment No. 2 to Agreement and Plan of Merger, dated as of August
29, 1994, among Optical Radiation Corporation, Benson Eyecare
Corporation and Benson Acquisition Corporation (included as Annex A to
the Joint Proxy Statement/Prospectus)
5.1 Opinion of Willkie Farr & Gallagher
23.1 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of KPMG Peat Marwick LLP, Orange County, California
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23.4 Consent of KPMG Peat Marwick LLP, Jericho, New York
23.5 Consent of Weber, Lipshie & Co.
23.6 Consent of Tuggle, Burton & Co., P.C.
23.7 Consent of Arthur Andersen LLP
24 Power of Attorney (included on the signature page)
99.1 Partnership Agreement of Benson Partners I, L.P.
99.2 Form of Agreement among Benson Eyecare Corporation, Benson Services,
Inc. and each of the limited partners of Benson Partners I, L.P.
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B. Financial Statements Schedules.
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No financial statement schedules are required to be filed herewith pursuant
to Item 21(b) or (c) of this Form.
C. Report, Opinions and Appraisals.
-------------------------------
Reference is made to Annexes B and C included as part of the Joint Proxy
Statement/Prospectus.
Item 22. Undertakings.
(1) The undersigned registrant hereby undertakes as follows: 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), the
issuer undertakes that 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.
(2) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act"), and is used in connection with an offering of
securities subject to Rule
II-4
<PAGE>
415 of the Securities Act, will be filed as part of an amendment to the
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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) 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 this Form, 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 the registration statement through the date
of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired therein, that was not the subject of and included in the
registration statement when it became effective.
(5) The undersigned registrant hereby undertakes 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; (ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(6) The undersigned registrant hereby undertakes 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 therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
(7) The undersigned registrant hereby undertakes 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.
(8) The undersigned registrant hereby undertakes 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 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
- ---- ----
(9) 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 foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the 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
II-5
<PAGE>
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 Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
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 City of Rye, State
of New York, on September 12, 1994.
BENSON EYECARE CORPORATION
By: /s/ Martin E. Franklin
------------------------
By: Martin E. Franklin
Title: Chairman, Chief
Executive Officer
and President
POWER OF ATTORNEY
Each of the undersigned directors of Benson Eyecare Corporation hereby
severally constitutes and appoints Martin E. Franklin and Ian G.H. Ashken, and
each of them, as attorneys-in-fact for the undersigned, in any and all
capacities, with full power of substitution, to sign any amendments to this
Registration Statement (including post-effective amendments), and to file the
same with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact, or any of them, may lawfully do
or cause to be done by virtue hereof.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Martin E. Franklin September 12, 1994
- ---------------------- Chairman of the Board of
Martin E. Franklin Directors, Chief Executive
Officer and President
/s/ Warren B. Kanders September 12, 1994
- --------------------- Vice Chairman of the Board
Warren B. Kanders of Directors
/s/ Ian G.H. Ashken September 12, 1994
- -------------------- Chief Financial Officer,
Ian G.H. Ashken Assistant Secretary and
Director
/s/ Burtt R. Ehrlich September 12, 1994
- -------------------- Director
Burtt R. Ehrlich
/s/ Charles D. Fritch September 12, 1994
- --------------------- Director
Charles D. Fritch
/s/ Richard W. Hanselman September 12, 1994
________________________ Director
Richard W. Hanselman
/s/ Charles F. Sydnor September 12, 1994
- --------------------- Director
Charles F. Sydnor
/s/ Raymond S. Troubh September 12, 1994
- --------------------- Director
Raymond S. Troubh
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- ----------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of June 30, 1994, among Optical
Radiation Corporation, Benson Eyecare Corporation and Benson Acquisition
Corporation (included as Annex A to the Joint Proxy Statement/Prospectus)
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of July 6, 1994,
among Optical Radiation Corporation, Benson Eyecare Corporation and Benson
Acquisition Corporation (included as Annex A to the Joint Proxy
Statement/Prospectus)
2.3 Amendment No. 2 to Agreement and Plan of Merger, dated as of August 29,
1994, among Optical Radiation Corporation, Benson Eyecare Corporation and
Benson Acquisition Corporation (included as Annex A to the Joint Proxy
Statement/Prospectus)
5.1 Opinion of Willkie Farr & Gallagher
23.1 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of KPMG Peat Marwick LLP, Orange County, California
23.4 Consent of KPMG Peat Marwick LLP, Jericho, New York
23.5 Consent of Weber, Lipshie & Co.
23.6 Consent of Tuggle, Burton & Co., P.C.
23.7 Consent of Arthur Andersen & Co.
24 Power of Attorney (included on the signature page)
99.1 Partnership Agreement of Benson Partners I, L.P.
99.2 Form of Agreement among Benson Eyecare Corporation, Benson Services, Inc.
and each of the limited partners of Benson Partners I, L.P.
</TABLE>
- ----------------
<PAGE>
Exhibit 5.1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
September 12, 1994
Benson Eyecare Corporation
Suite B-302
555 Theodore Fremd Avenue
Rye, New York 10580
Re: Benson Eyecare Corporation
Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Benson Eyecare Corporation, a Delaware
Corporation ("Benson"), in connection with the preparation of the Registration
Statement on Form S-4 (the "Registration Statement") being filed by Benson on
the date hereof with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, with respect to 8,000,000 shares of common stock, $0.01
par value per share of Benson ("Common Stock"), and certain rights to receive
future consideration (the "Rights"). The Common Stock and the Rights are being
registered in connection with the merger of Benson Acquisition Corporation, a
California corporation and a wholly-owned subsidiary of Benson ("Sub"), into
Optical Radiation Corporation, a California corporation ("ORC"). The Common
Stock and the Rights are described in the Joint Proxy Statement/Prospectus (the
"Prospectus") included in the Registration Statement to which this opinion is an
exhibit.
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for purposes of
this opinion. We have, with your consent, relied as to factual matters on
certificates or other documents furnished by Benson or its officers and by
government authorities. We have assumed the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as copies.
We are not members of the Bar of any jurisdiction other than the State of
New York and, with your consent, we express no opinion other than on the laws of
the State of New York and the General Corporation Law of the State of Delaware.
Based on the foregoing, we are of the following opinions:
1. The shares of Common Stock to which the Registration Statement relates,
when issued as described in the
<PAGE>
Prospectus, will be duly authorized, validly issued, fully paid and
nonassessable.
2. The Rights have been duly authorized and validly issued and will
constitute valid and binding obligations.
We are aware that we are referred to under the heading "Legal Matters" in
the Prospectus and we hereby consent to the use of our name in the Prospectus
and the filing of this opinion as an exhibit to the related Registration
Statement.
Very truly yours
/s/ Willkie Farr & Gallagher
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report
related to Benson Eyecare Corporation dated March 9, 1994, which appears on page
F-2 of its Annual Report on Form 10-K for the year ended December 31, 1993 and
of our report related to Charles D. Fritch M.D., Inc. DBA Fritch Eye Care
Medical Center dated May 12, 1993, which appears in Benson's Current Report on
Form 8-K dated April 30, 1993, as amended on April 22, 1994. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Dallas, Texas
September 7, 1994
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Benson Eyecare Corporation:
We consent to the incorporation by reference in the registration statement on
Form S-4 of Benson Eyecare Corporation of our report dated December 11, 1992
except as to note 2, which is as of December 31, 1992, relating to the
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1991, and all related schedules, which report
appears in the December 31, 1992 annual report on Form 10-K of Benson Eyecare
Corporation. We did not audit the financial statements of Pembridge Optical
Partners, Inc., a wholly-owned subsidiary, which statements reflect total
revenues constituting 16 percent in 1991 of the related consolidated total.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to the amounts included for
Pembridge Optical Partners, Inc., is based solely on the report of the other
auditors. We also consent to the reference to us under the heading "Experts" in
the prospectus.
KPMG PEAT MARWICK LLP
Orange County, California
September 8, 1994
<PAGE>
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Benson Eyecare Corporation:
We consent to the incorporation by reference in the registration statement on
Form S-4 of Benson Eyecare Corporation of our report dated March 11, 1994, with
respect to the financial statements of Opti-Ray, Inc. as of and for the years
ended December 31, 1993 and 1992, which report appears in the Form 8-K/A of
Benson Eyecare Corporation dated April 14, 1994, and to the reference to our
Firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Jericho, New York
September 8, 1994
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
March 20, 1992, on the financial statements of Pembridge Optical Partners, Inc.
as of December 31, 1991 and for the period from September 16, 1991 (inception)
to December 31, 1991, appearing on page F-4 of Benson Eyecare Corporation's
Annual Report on Form 10-K and 10-K/A for the year ended December 31, 1993. We
also consent to the references to us under the heading "Experts" in such
Prospectus.
WEBER, LIPSHIE & CO.
Certified Public Accountants
New York, New York
September 9, 1994
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
May 5, 1993, on the financial statements of The Bonneau Company and Pennsylvania
Optical Company as of August 31, 1990, 1991, 1992 and March 31, 1993, and the
related statements of income, changes in shareholder's equity and cash flows for
each of the years in the three year period ended August 31, 1992 and for the
seven months ended March 31, 1993, appearing on page F-25 of Benson Eyecare
Corporation's Registration Statement on Form S-1 (Regis. No. 33-63864) and
incorporated by reference in Benson Eyecare Corporation's Form 8-k dated June
30, 1993 as amended on April 22, 1994. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
TUGGLE, BURTON & CO., P.C.
Certified Public Accountants
Dallas, Texas
September 8, 1994
<PAGE>
Exhibit 23.7
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated September 15, 1993
incorporated by reference or included in Optical Radiation Corporation's Annual
Report on Form 10-K for the year ended July 31, 1993 and to all references to
our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
September 8, 1994
<PAGE>
EXHIBIT 99.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
BENSON PARTNERS I, L.P.
Dated December 7, 1993
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<C> <S> <C>
ARTICLE I DEFINITIONS......................................... 1
ARTICLE II FORMATION........................................... 4
2.1 Organization........................................ 4
2.2 Name of Partnership................................. 5
2.3 Principal Office, Resident Agent, Registered
Office.............................................. 5
2.4 Office.............................................. 5
2.5 Duration............................................ 5
ARTICLE III PURPOSES AND POWERS................................. 5
3.1 Purposes............................................ 5
3.2 Powers.............................................. 6
ARTICLE IV THE GENERAL PARTNER................................. 7
4.1 Powers of the General Partner....................... 7
4.2 Actions Requiring Consent........................... 8
4.3 Responsibilities of the General Partner;
Meeting of Partners................................. 8
4.4 Partnership Expenses................................ 8
4.5 Tax Filings......................................... 8
4.6 Limitations on Power of the General Partner......... 9
ARTICLE V TRANSFER OF INTERESTS; PLEDGES; WITHDRAWALS;
ADDITIONAL LIMITED PARTNERS; LIMITED PARTNERS'
POWERS.............................................. 9
5.1 Transfer of Interests............................... 9
5.2 Withdrawal.......................................... 10
5.3 Expulsion........................................... 10
5.4 Consequences of Withdrawal or Expulsion............. 10
5.5 Amount Payable to Withdrawn Partner................. 10
5.6 Timing of Withdrawal Payment........................ 11
5.7 Retention of Rights................................. 11
5.8 Effect of Withdrawal as to Other Partners........... 11
5.9 Additional Limited Partners......................... 12
5.10 Limitations on Powers of the Limited Partners....... 12
ARTICLE VI CAPITAL CONTRIBUTIONS............................... 12
6.1 Initial Capital Contributions....................... 12
6.2 Additional Capital Contributions.................... 12
6.3 Failure to Contribute............................... 13
6.4 General Partner's Capital Contribution.............. 13
6.5 Capital Contributions by Institutional Limited
Partners............................................ 13
</TABLE>
(i)
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE VII ALLOCATIONS AND INTERIM DISTRIBUTIONS............... 14
7.1 Allocation.......................................... 14
7.2 Proration of Income and Deductions.................. 15
7.3 Contributed Property................................ 15
7.4 Interim Distributions............................... 16
7.5 Assignor-Assignee Allocations....................... 16
ARTICLE VIII DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND LIQUIDATION.......................... 16
8.1 Dissolution......................................... 16
8.2 Winding Up and Liquidation.......................... 17
8.3 Accounting on Dissolution........................... 17
8.4 Application of Partnership Properties............... 17
8.5 Option to Purchase Benson Corp. Stock Upon
Certain Dissolution Event........................... 18
8.6 Valuation of Assets and Related Matters............. 18
ARTICLE IX NOTICES AND PAYMENTS................................ 18
9.1 Notices............................................. 18
9.2 Payments............................................ 19
ARTICLE X CERTAIN REPRESENTATIONS,
WARRANTIES AND AGREEMENTS........................... 19
10.1 Status.............................................. 19
10.2 Authority........................................... 19
10.3 No Breach or Default................................ 19
10.4 No Governmental Consents............................ 20
10.5 Investment Representation........................... 20
10.6 Purchase of Securities of Target Company............ 20
10.7 Accuracy of Information............................. 20
10.8 Compliance with Applicable Laws..................... 21
ARTICLE XI POWER OF ATTORNEY................................... 21
11.1 Grant of Power of Attorney.......................... 21
ARTICLE XII MISCELLANEOUS....................................... 22
12.1 Binding Effect; Amendment........................... 22
12.2 Section Headings.................................... 22
12.3 Governing Law....................................... 22
12.4 Dispute Resolution.................................. 22
12.5 Severability........................................ 22
12.6 Waiver.............................................. 22
12.7 Cooperation......................................... 23
12.8 Fiscal Year......................................... 23
12.9 Investment of Partnership Funds..................... 23
12.10 Indemnification..................................... 23
12.11 Liability of Partners............................... 24
12.12 Confidentiality..................................... 24
12.13 No Third-Party Beneficiary.......................... 25
</TABLE>
(ii)
<PAGE>
<TABLE>
<C> <S> <C>
12.14 Counterparts........................................ 25
</TABLE>
PURCHASER'S REPRESENTATION LETTER
SCHEDULES
Schedule A - Limited Partners
Schedule B - Capital Commitments
Schedule C - Participation
(iii)
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
BENSON PARTNERS I, L.P.
Agreement of Limited Partnership of Benson Partners I, L.P., dated December
7, 1993, by and among Benson Services, Inc., as the general partner, and the
limited partners whose names are set forth on Schedule A attached hereto (each
of the foregoing collectively, the "Partners" and individually, a "Partner").
R E C I T A L S:
- - - - - - - -
WHEREAS, the General Partner (as defined below) and the Limited Partners
(as defined below) have determined that it is in their best interests to form
the Partnership (as defined below) in order to pursue an investment, directly or
indirectly, in the securities of such company that is identified in a side
letter agreement dated the date hereof between the General Partner and each of
the Limited Partners (the "Target Company");
NOW, THEREFORE, in consideration of the mutual covenants, representations
and agreements as set forth herein, the Partners hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
"Act" means the Delaware Revised Uniform Limited Partnership Act, as may be
---
amended from time to time.
"Additional Limited Partners" has the meaning ascribed to it in Section 5.9
---------------------------
of this Agreement.
"Affiliate", as to any Person, means any other Person that directly or
---------
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person.
"Agreement" means this Agreement of Limited Partnership, as originally
---------
executed and as amended, modified, supplemented or restated from time to time.
"Bankruptcy" of a Partner shall occur if a Partner (i) generally fails to
----------
pay or admits in writing his or its inability to pay his or its debts as they
come due, (ii) files any petition or action for relief as to himself or itself
under any bankruptcy, reorganization, insolvency or moratorium law, or any other
similar law or laws for the relief of, or relating to, debtors, (iii) applies
for or consents to a receiver, trustee or
<PAGE>
custodian for himself or it or a substantial portion of his or its property, or
makes a general assignment for the benefit of creditors, or (iv) has an
involuntary petition or action filed against him or it under any bankruptcy,
reorganization or insolvency law or any similar law or laws, which petition or
action remains undismissed for a period of 60 days.
"Beneficial ownership" has the meaning ascribed to it pursuant to the
--------------------
provisions of Rule 13d-3 under the Securities Exchange Act of 1934.
"Benson Corp." means Benson Eyecare Corporation, a Delaware corporation.
------------
"Capital Account", as to each Partner, means an account (a) to which is
---------------
credited the cash and the agreed value of any property contributed to the
Partnership by such Partner as a Capital Contribution, as the value of such
Capital Contribution is adjusted pursuant to this Agreement, and the profit
allocated to such Partner and (b) to which is charged the loss allocated to such
Partner and the amount of cash and the fair market value (or, in the case of
distributions under Section 5.5, the fair market value as of the date decided on
by the General Partner under that Section) of any property distributed to such
Partner.
"Capital Call" means the aggregate amount of capital to be contributed to
------------
the Partnership from time to time by the Partners pursuant to Article VI.
"Capital Commitment" means the amount of funds set forth opposite such
------------------
Partner's name on Schedule B.
"Capital Contribution," as to any Partner, means the aggregate of all
--------------------
contributions of such Partner pursuant to Article VI.
"Certificate" means the Partnership's Certificate of Limited Partnership as
-----------
defined in Section 2.1 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Entity" means any corporation, association, partnership, joint venture,
------
trust, estate or other organization.
"General Partner" means Benson Services, Inc. and its successors pursuant
---------------
to Section 8.1(e) hereof.
"Indemnitee" has the meaning ascribed to it in Section 12.10 of the
----------
Agreement.
-2-
<PAGE>
"Individual Limited Partners" means the individuals designated on Schedule
---------------------------
A as Individual Limited Partners, as such schedule is amended from time to time.
"Institutional Limited Partners" means the institutions designated on
------------------------------
Schedule A as Institutional Limited Partners, as such schedule is amended from
time to time.
"Limited Partners" means the Individual Limited Partners and the
----------------
Institutional Limited Partners designated on Schedule A as such Limited
Partners, as such schedule is amended from time to time by the General Partner;
provided, however, that the General Partner may only amend Schedule A upon the
- -------- -------
admission of any Person(s) to the Partnership as Additional Limited Partners
pursuant to this Agreement.
"Participation," as to any Partner, means the number set forth opposite
-------------
such Person's name as listed on Schedule C, as such schedule is amended from
time to time by the General Partner pursuant to this Agreement; provided,
--------
however, that the sum total of all Partners' Participations will at all times
- -------
equal one; provided, further, that the Participation of each Partner will be
-------- -------
adjusted, and Schedule C thereby will be amended by the General Partner, upon
the admission and initial Capital Contribution of an Additional Limited Partner
so that such Partner's Participation is equal to the ratio of its Capital
Account to the Capital Accounts of all Partners after adjusting the Capital
Accounts of the Partners pursuant to Section 7.1 for the profit or loss through
such date, including the profit or loss deemed realized attributable to the
change in the book values of Partnership property pursuant to Section 5.9(b);
provided, however, for purposes of this computation the Capital Account of the
- -------- -------
General Partner shall be first reduced by the excess of allocations to it under
Section 7.1(a)(iii)(y) over the losses allocated to it under Section 7.1(b)(i).
"Partners" means the Persons designated as such in the recitals to this
--------
Agreement, but excluding, from and after the date of such Withdrawal, any Person
who has Withdrawn from the Partnership.
"Partnership" means the limited partnership established pursuant to the
-----------
provisions of the Act in accordance with the terms and conditions of this
Agreement, as it may be amended from time to time.
"Person" means any individual, Entity or group (as used in the Securities
------
Exchange Act of 1934, as amended, and the rules and regulations thereunder).
-3-
<PAGE>
"Prime Rate" means a fluctuating interest rate per annum as shall be in
----------
effect from time to time which rate per annum shall at all times be equal to the
rate of interest announced publicly by Citibank, N.A. in New York, New York,
from time to time, as Citibank, N.A.'s base rate.
"Redetermination Value" as to a Partner at any date means the balance that
---------------------
would be in its Capital Account if all the assets of the Partnership had been
sold for their fair market value (which shall be, as to any Securities held by
the Partnership, the closing sales price quoted regular way as of such date
(except that if such Securities are trading "ex-dividend" or "ex-distribution",
on such date, the Redetermination Value shall be adjusted to reflect the portion
of the dividend or distribution to be received with respect to such Securities)
for such Securities on the principal stock exchange or other trading market on
which such Securities are traded less an amount equal to estimated brokerage
commissions that would have been attributable to such a sale) as of such date
and all Partnership liabilities had been paid as of such date.
"Security Proceeds" has the meaning ascribed to it in Section 6.5(c) of
-----------------
this Agreement.
"Target Company" has the meaning ascribed to it in the recitals.
--------------
"Withdrawal" of a Partner means transfer of a Partnership interest in
----------
violation of Section 5.1, withdrawal in violation of Section 5.2, expulsion
pursuant to Section 5.3 or Bankruptcy of a Partner. "Withdraw" and "Withdrawn"
-------- ---------
have correlative meanings.
"Withdrawal Date" has the meaning ascribed to it in Section 5.4 of this
---------------
Agreement.
"Withdrawal Payment" has the meaning ascribed to it in Section 5.5 of this
------------------
Agreement.
ARTICLE II
FORMATION
---------
2.1 Organization. (a) The Partners hereby form the Partnership
------------
pursuant to the provisions of the Act. The rights and liabilities of the
Partners shall be, except as otherwise expressly provided in this Agreement, as
provided in the Act.
(b) The General Partner shall execute a Certificate of Limited Partnership
(the "Certificate") pursuant to the
-4-
<PAGE>
provisions of the Act and cause the Certificate to be filed and recorded in all
offices required by the Act. The General Partner shall also execute and record
all amendments to the Certificate or additional certificates as may be required
by this Agreement or by law.
2.2 Name of Partnership. The name of the Partnership shall be "Benson
-------------------
Partners I, L.P." or such other name as the General Partner may from time to
time designate.
2.3 Principal Office, Resident Agent, Registered Office. The principal
---------------------------------------------------
office of the Partnership shall be Suite B-302, 555 Theodore Fremd Avenue, Rye,
New York 10580 or any other place determined by the General Partner. The name
and address of the registered agent for service of process in the State of
Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801. The address of the registered office of the Partnership in the
State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801.
2.4 Office. The books and records of the Partnership shall be
------
maintained at the principal place of business of the Partnership or such other
place as the General Partner shall determine and so inform the Limited Partners.
2.5 Duration. The term of the Partnership shall commence on the date
--------
the Certificate is filed and shall continue until December 31, 1994 or the
earlier dissolution and termination of the Partnership pursuant to the
provisions of Article VIII hereof.
ARTICLE III
PURPOSES AND POWERS
-------------------
3.1 Purposes. The purposes of the Partnership are:
--------
(a) to purchase, acquire, trade and invest in up to 9.9% of the common
voting securities (the "Securities") of the Target Company, either directly or
indirectly, pursuant to open-market or negotiated purchases, a tender offer or
otherwise;
(b) to hold, sell, exchange, transfer, mortgage, pledge or otherwise
dispose of the Securities of the Target Company, either directly or indirectly,
and otherwise exercise all rights, powers, privileges and other incidents of
ownership or possession with respect to the Securities of the Target Company and
other Partnership property;
-5-
<PAGE>
(c) to borrow or raise moneys, and, from time to time without limitation as
to amount or manner and time of repayment, to issue, accept, endorse and execute
promissory notes, drafts, warrants, bonds, debentures and other negotiable or
non-negotiable instruments and evidences of indebtedness, and to secure the
payment of such other obligations of the Partnership by mortgage upon, or other
hypothecation of, all or part of the property of the Partnership, including the
Securities of the Target Company, whether at the time owned or thereafter
acquired all for the purpose of furthering the affairs of the Partnership; and
(d) to enter into, make and perform all contracts and undertakings, and
engage in all activities and transactions, as the General Partner deems
necessary or advisable, to carry out the foregoing objects and purposes.
3.2 Powers. The Partnership shall have all such powers as are
------
necessary or appropriate to carry out the purposes of the Partnership,
including, without limitation, the following powers; provided, however, that the
-------- -------
Partnership shall hold no assets other than cash and Securities of the Target
Company:
(a) to acquire and hold Securities of the Target Company and to take any
actions incident thereto;
(b) to sell, exchange, transfer or otherwise dispose of any Securities of
the Target Company pursuant to open-market or negotiated sale, a bona fide
tender offer from any Person (including any Affiliate of the General Partner) to
purchase the Securities, or otherwise;
(c) to have and maintain one or more offices within or without the State of
Delaware and in connection therewith to do such acts and things and incur such
expenses as may be necessary or advisable in connection with the maintenance of
such office or offices and the conduct of the business of the Partnership;
(d) to open, conduct and close accounts with brokers and/or dealers and to
pay the commissions, fees and other charges applicable to transactions in all
such accounts;
(e) to open, maintain and close accounts with one or more banks or other
financial institutions, and to draw checks and other orders for the payment of
money;
(f) to borrow money or guarantee indebtedness of others in furtherance of
the purposes set forth in Section 3.1 and, subject to applicable margin
regulations, to secure the payment of such
-6-
<PAGE>
borrowings, guarantees or other obligations of the Partnership by the pledge of,
or the grant of security interests in, all or part of the assets of the
Partnership; provided, however, that any such borrowing or guarantee by the
-------- -------
Partnership shall be on a basis that is recourse only to the Partnership if such
borrowing or guarantee is unsecured or the Partnership assets securing such
borrowing or guarantee if such borrowing or guarantee is secured; and
(g) to take such other actions as the General Partner may deem necessary or
advisable in connection with the foregoing, including, without limitation, the
retention of agents, independent contractors, attorneys, accountants and
investment counselors and the preparation and filing of all Partnership tax
returns.
ARTICLE IV
THE GENERAL PARTNER
-------------------
4.1 Powers of the General Partner. The operations and affairs of the
-----------------------------
Partnership shall be administered exclusively by the General Partner, which,
subject to the provisions of this Agreement, shall have all power and authority
specifically conferred upon the Partnership or the General Partner pursuant to
this Agreement and full power and authority to take all action necessary or
appropriate to carry out the purposes of the Partnership as set forth in Article
III. Without limiting the foregoing and subject to the provisions of this
Agreement, the General Partner shall have the sole and exclusive right, power
and authority on behalf of the Partnership (i) to determine the amount, timing
and price of any open market purchases and sales of Securities of the Target
Company, (ii) to decide whether, when, at what price and on what other terms and
conditions to initiate, continue or accept a tender offer for Securities of the
Target Company (including any tender offer initiated by an Affiliate of the
General Partner), (iii) to decide whether to amend, suspend or discontinue any
tender offer for Securities of the Target Company, (iv) generally to purchase,
sell or otherwise acquire or dispose of Securities of the Target Company in its
discretion, (v) to negotiate and execute any and all agreements with the Target
Company and/or its directors, officers or shareholders, (vi) to determine and
enter into any borrowing or other financing arrangements with any third parties,
and (vii) to vote or otherwise act on behalf of the Partnership, by proxy,
consent or otherwise, in respect of any voting of Securities of the Target
Company; provided, however, that nothing contained in this Agreement (or any
-------- -------
fiduciary obligation arising hereunder or under any law) shall preclude the
General Partner and its
-7-
<PAGE>
Affiliates from commencing a tender offer with respect to the Securities of the
Target Company, from acquiring the Securities of the Target Company or from
engaging in any other securities activities. All determinations and judgments
made by the General Partner in good faith and in accordance with the terms of
this Agreement shall be conclusive and binding on all Partners; provided,
--------
further, that the foregoing shall not affect the liability and obligations of
- -------
the General Partner, the Partners and the Partnership that are specifically
provided in Sections 12.10 and 12.11.
4.2 Actions Requiring Consent. Except as set forth in Sections 4.4
-------------------------
and 5.9, the consent of the General Partner and Limited Partners holding at
least 75% of all Participations shall be necessary to amend this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the prior
written consent of the General Partner shall be necessary to permit the transfer
of a Limited Partner's interest in the Partnership to any Entity.
4.3 Responsibilities of the General Partner; Meeting of Partners.
------------------------------------------------------------
The General Partner shall devote such time to managing the business of the
Partnership as it reasonably deems necessary to perform its duties as set forth
in this Agreement. The General Partner shall conduct meetings, by telephone or
otherwise, of the Partners once each month, or more frequently as may be
reasonably requested by any of the Partners, to inform the Limited Partners with
respect to the Partnership's business and affairs. The General Partner will
make the books and records of the Partnership available for inspection by any of
the Limited Partners.
4.4 Partnership Expenses. The Partnership will be responsible and
--------------------
will pay, or reimburse the General Partner, for its organizational and operating
expenses (not to exceed $75,000 in the aggregate, subject to increase with the
consent of Limited Partners holding at least 50% of all Participations),
including all legal, auditing, accounting, brokerage, finder, placement,
investment banking, interest, filing and other fees or expenses incurred by the
Partnership or by the General Partner in connection with the business and
activities of the Partnership, including, without limitation, expenses so
incurred by the General Partner prior to the formation of the Partnership.
Except as expressly provided above, no Partner other than the General Partner
shall incur any costs or expenses on behalf of the Partnership without the prior
consent of the General Partner.
4.5 Tax Filings. The General Partner, at the expense of the
-----------
Partnership, shall prepare and file, or cause to be prepared
-8-
<PAGE>
and filed, a federal income tax information return in compliance with the
applicable provisions of the Code, and any required state and local tax and
information returns, for each tax year of the Partnership, which year shall end
on December 31 unless otherwise required by law. The General Partner shall make
such tax elections as it deems necessary or appropriate, including the making or
revocation of an election under Section 754 of the Code. The Partners designate
the General Partner as the tax matters partner of the Partnership pursuant to
Section 6231(a)(7) of the Code and authorize the General Partner to take any and
all action necessary to confirm such designation.
4.6 Limitations on Power of the General Partner. The General
-------------------------------------------
Partner, without the prior written consent of, or ratification by, all of the
Partners, shall have no authority to:
(a) do any act in contravention of the Certificate, as such
Certificate may be amended from time to time;
(b) do any act which would make it impossible to carry out the
purposes of the Partnership; and
(c) possess Partnership property, or assign its General Partner's
rights in specific Partnership property, for other than a Partnership purpose.
ARTICLE V
TRANSFER OF INTERESTS; PLEDGES; WITHDRAWALS;
ADDITIONAL LIMITED PARTNERS; LIMITED PARTNERS' POWERS
-----------------------------------------------------
5.1 Transfer of Interests. (a) No Limited Partner may assign,
---------------------
transfer, pledge or otherwise encumber, in whole or in part, its interest in the
Partnership or in any Securities contributed to the Partnership, without (i) the
prior written consent of the General Partner, which consent may be withheld for
any reason and (ii) the receipt by the General Partner not less than ten
business days prior to the date of any proposed transfer of a written opinion of
counsel satisfactory to the General Partner as to such matters as the General
Partner may reasonably request including, without limitation, that such transfer
would not result in: (i) a violation of the United States Securities Act of
1933, as amended, or any "Blue Sky" laws or other securities laws of any state
of the United States applicable to the Partnership or the Partnership interest
to be transferred; (ii) the Partnership being required to register, or seek an
exemption from registration, as an investment company under the Investment
Company Act of 1940, as amended; or (iii) the Partnership being treated as an
association taxable as a
-9-
<PAGE>
corporation for Federal income tax purposes. The transferring Limited Partner
agrees that it will pay all expenses, including reasonable attorneys' fees,
incurred by the Partnership in connection with such transfer.
(b) The General Partner may not assign, transfer, pledge or otherwise
encumber, in whole or in part, its interest as general partner in the
Partnership without the prior written consent of all Partners.
5.2 Withdrawal. No Partner shall Withdraw from the Partnership
----------
without the prior written consent of the General Partner.
5.3 Expulsion. A Partner may be expelled from the Partnership by the
---------
General Partner at any time in its sole discretion, including, but not limited
to, (a) breach of this Agreement in any material respect or in conduct that
materially and prejudicially affects the carrying on of Partnership affairs, (b)
failure to make any contribution of capital in accordance with Article VI of
this Agreement when requested by the General Partner to do so, or (c) Bankruptcy
of such Partner.
5.4 Consequences of Withdrawal or Expulsion. If a Partner Withdraws
---------------------------------------
from the Partnership, then, effective as of the date on which such Partner gives
notice in writing to the Partnership or the date on which the Partnership gives
notice in writing to the Partner, as the case may be (the "Withdrawal Date"),
such Withdrawn Partner shall cease to share in the profit or loss of the
Partnership, and shall cease to be responsible for liabilities incurred
subsequent to such date. Such Withdrawn Partner shall be responsible for any
damages to the Partnership or to the other Partners caused by such Withdrawal,
including, without limitation, lost profits and consequential damages. The
remaining Partners shall be entitled to continue the business of the Partnership
and shall be entitled to possess all Partnership property. A Partner who
Withdraws from the Partnership shall thereupon cease to be a Partner and shall
no longer have any right to vote or to consent to any action taken or proposed
to be taken pursuant to this Agreement, including, without limitation, any
action provided in Section 4.2.
5.5 Amount Payable to Withdrawn Partner. The Withdrawn Partner shall
-----------------------------------
be entitled to receive from the Partnership an amount equal to the excess, if
any, of (a) the Redetermination Value of the Withdrawn Partner's interest in the
Partnership at the Withdrawal Date over (b) the amount of damages, if any, owed
by such Partner pursuant to Section 6.3 plus, without duplication, the amount of
damages to the remaining Partners
-10-
<PAGE>
caused by such Withdrawal including, without limitation, lost profits and
consequential damages (such excess, if any, being called the "Withdrawal
Payment"). Such Withdrawal Payment shall not accrue interest from the date of
Withdrawal to the date of payment. The amount of the Withdrawal Payment shall
be determined by the holders of a majority of the Participations of the
remaining Partners, whose determination, absent manifest error, shall be final
and binding on the Withdrawn Partner and the Partnership.
For purposes of the foregoing, a decline in the value of Securities of
the Target Company shall be presumed, absent compelling evidence to the
contrary, to have been caused by such Withdrawal for a period of three months
following the earlier of such Withdrawal or the public announcement of a
Partner's intent to Withdraw. The Withdrawn Partner shall not have any right to
receive any profits attributable to the use of its rights in Partnership
property after the Withdrawal Date. The Withdrawal Payment shall be payable in
cash or in kind or in a combination thereof, at the option of the General
Partner at the time of payment, and to the extent paid in kind, the assets so
used shall be valued at their fair market value as of the date of payment or the
Withdrawal Date, which date shall be decided upon by the General Partner. The
fair market value of any publicly-traded Securities held by the Partnership
shall be the closing sales price quoted regular way as of such date (except that
if such Securities are trading "ex-dividend" or "ex-distribution", on such date,
the fair market value shall be adjusted to reflect the portion of the dividend
or distribution to be received with respect to such securities) for such
Securities on the principal stock exchange or other trading market on which such
Securities are traded.
5.6 Timing of Withdrawal Payment. The Withdrawal Payment shall be
----------------------------
paid not later than the date of dissolution and liquidation of the Partnership.
5.7 Retention of Rights. The rights provided for in this Article V
-------------------
shall be in addition to any other rights and remedies of the Partnership and the
remaining Partners which arise at law or in equity by virtue of a Withdrawal by
a Partner from the Partnership in contravention hereof.
5.8 Effect of Withdrawal as to Other Partners. If a Partner
-----------------------------------------
Withdraws, the other Partners shall share in the profits, losses and
distributions (other than the Withdrawal Payment) otherwise allocable to such
Withdrawn Partner in the ratio of their respective Participations.
-11-
<PAGE>
5.9 Additional Limited Partners. (a) The General Partner may from
---------------------------
time to time admit additional Limited Partners ("Additional Limited Partners")
to the Partnership and may amend this Agreement acting alone to reflect such
admission without the consent of all Partners. The General Partner shall have
the authority to discuss the terms of admission, amount of Participation and
Capital Commitment with any prospective Additional Limited Partner, and,
establish the terms of admission, amount of Participation and Capital Commitment
with such Additional Limited Partner.
(b) Upon the admission and initial Capital Contribution of an
Additional Limited Partner, the carrying values of the Partnership's assets will
be adjusted to equal their respective fair market values as determined under the
principles of Section 5.5 and in a manner consistent with the Additional Limited
Partner's Participation and Capital Commitment.
5.10 Limitations on Powers of the Limited Partners. The Limited
---------------------------------------------
Partners shall not participate in the management or control of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for the Partnership or to bind the Partnership in any other way.
The Limited Partners shall have no right or authority to be consulted with
respect to any affairs of the Partnership or to vote on matters other than the
matters on which the Limited Partners may vote, or as to which the consent of
the Partners is required, as set forth in this Agreement. Notwithstanding the
foregoing, the General Partner may also be a Limited Partner.
ARTICLE VI
CAPITAL CONTRIBUTIONS
---------------------
6.1 Initial Capital Contributions. Each Limited Partner shall, on
-----------------------------
the date hereof, make an initial capital contribution to the Partnership in an
amount equal to 10% of such Partner's Capital Commitment.
6.2 Additional Capital Contributions. Each Partner shall, upon the
--------------------------------
terms and conditions specified below, make additional capital contributions to
the Partnership from time to time when notified of Capital Calls by the General
Partner; provided, however, that (i) the General Partner shall make Capital
-------- -------
Calls only when and to the extent that it reasonably considers necessary to fund
purchases of Securities of the Target Company through the Partnership or to pay
Partnership expenses, and (ii) the aggregate amount of all Capital Calls of any
Partner may not exceed such Partner's Capital Commitment. Within three business
-12-
<PAGE>
days of receiving notice of an Capital Call from the General Partner, each of
the Partners (including the General Partner) shall make a capital contribution
to the Partnership in an amount equal to the product of such Capital Call and
the ratio of its Participation to the Participations of all Partners who have
not Withdrawn. Except as provided in Section 6.5, all capital contributions
made pursuant to this Article VI shall be in cash.
6.3 Failure to Contribute. If a Partner fails to contribute any
---------------------
amount required under Section 6.1 or 6.2, such Partner shall be responsible, in
the sole discretion of the General Partner, for any damages to the Partnership
caused by such failure, as well as for the amount required to be contributed
plus interest thereon at the Prime Rate plus 5% from the date that such
contribution is due until the date such contribution is made.
6.4 General Partner's Capital Contribution. The General Partner
--------------------------------------
shall make an aggregate capital contribution to the Partnership in an amount
equal to at least one percent of the aggregate Capital Contributions of the
Partners. The General Partner's Capital Contribution shall be paid to the
Partnership at such time as the General Partner, in its discretion, shall
determine.
6.5 Capital Contributions by Institutional Limited Partners. For
-------------------------------------------------------
purposes of Sections 6.1 and 6.2, the Institutional Limited Partners may, with
the consent of the General Partner, satisfy their Capital Contributions in the
following manner:
(a) Following notification of a Capital Call by the General Partner,
the Partnership shall purchase Securities on behalf of such Institutional
Limited Partner with a market value equal to the product of such Capital Call
and the ratio of such Institutional Limited Partner's Participation to the
Participations of all Partners who have not Withdrawn. Such Securities shall be
registered in the name of such Institutional Limited Partner and shall be
delivered to such Institutional Limited Partner to hold on behalf of the
Partnership. Upon delivery of such Securities, such Institutional Limited
Partner shall pay the Partnership's designated broker the purchase price
(including commissions) of such Securities.
(b) Each Institutional Limited Partner agrees (i) to deliver to the
Partnership a proxy which authorizes the General Partner to exercise all voting
rights with respect to such Securities, (ii) to deliver promptly to the
Partnership all notices, reports and documents received with respect to such
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<PAGE>
Securities, (iii) not to sell, assign, pledge, transfer or otherwise encumber
such Securities and (iv) to take only such actions with respect to such
Securities as are directed by the General Partner. Each Institutional Partner
hereby grants to the Partnership a first-priority security interest in such
Securities and all proceeds relating thereto to the extent of the balance of
such Partner's Capital Account. An Institutional Partner's Capital Account will
be reduced to the extent of any Security Proceeds such Institutional Partner
fails to remit to the Partnership upon the request of the General Partner.
(c) All Securities held by an Institutional Limited Partner pursuant
to this Section 6.5 shall be treated as Partnership property for all purposes
under this Agreement, including any cash, Securities or other property,
including any rights to subscribe for additional Securities, which such
Institutional Partner may thereafter receive upon or in respect of such
Securities, whether by dividend, liquidation or other distribution (collectively
"Security Proceeds").
(d) Each Institutional Limited Partner agrees to provide the General
Partner immediately upon request with evidence that such Institutional Limited
Partner continues to hold such Securities as the General Partner may request.
ARTICLE VII
ALLOCATIONS AND INTERIM DISTRIBUTIONS
-------------------------------------
7.1 Allocation. (a) Profit of the Partnership for any period shall be
----------
allocated to the Partners' Capital Accounts in the following manner:
(i) first, to the General Partner to the extent that the aggregate loss
previously allocated to it under Section 7.1(b)(iii) exceeds the profit
previously allocated to it under this Section 7.1(a)(i);
(ii) second, among the Partners in proportion to, and to the extent of,
the amount by which the aggregate loss previously allocated to each such Partner
under Section 7.1(b)(ii) exceeds the profit previously allocated to such Partner
pursuant to this Section 7.1(a)(ii); and
(iii) third, (x) 80% to the Partners in proportion to their relative
Participations and (y) 20% to the General Partner.
-14-
<PAGE>
(b) Loss of the Partnership for any period shall be allocated to the
Partners' Capital Accounts in the following manner:
(i) first, (x) 80% to the Partners in proportion to their relative
Participations and (y) 20% to the General Partner until the cumulative losses
allocated to the General Partner under this Section 7.1(b)(i)(y) equal the
cumulative profit previously allocated to it under Section 7.1(a)(iii)(y);
(ii) second, among the Partners in proportion to, and to the extent of,
their positive Capital Account balances; and
(iii) third, to the General Partner.
(c) The net profit or loss of the Partnership shall be determined in
accordance with generally accepted accounting principles, with marketable
securities shall be carried at cost and profit or loss recorded when realized
except as otherwise expressly provided herein. Partnership profit (and loss)
shall include any increase (decrease) in the carrying value of Partnership
assets under Section 5.9(b) and the excess (deficit) of the value of distributed
property charged to the Capital Account of the distributee Partner over (under)
the Partnership's carrying value for the distributed property.
(d) Except as otherwise provided herein, allocations and computations
pursuant to this Section 7.1 shall be made as of the close of the last day of
the Partnership's fiscal year.
7.2 Proration of Income and Deductions. Solely for U.S. federal, state
----------------------------------
and local income tax purposes, and not for purposes of computing Capital Account
balances, taxable income, gain, loss, deductions and credits shall be allocated
by the General Partner among the Partners to take into account, as nearly as
practicable, the extent to which changes in the value of the Partnership's
assets have resulted in credits and debits to the Capital Accounts of such
Partners.
7.3 Contributed Property. Profit or loss with respect to property
--------------------
contributed to the Partnership shall be computed based on the agreed value of
such property at the time of the contribution. For U.S. federal and state
income tax purposes, allocations of profit or loss will be made under section
704(c) of the Code to take account of the difference between the basis of such
property to the Partnership and its agreed market value at the time of the
contribution, but such allocations pursuant to section 704(c) of the Code shall
not affect the computation or allocation of profit or loss for purposes of
Section 7.1.
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<PAGE>
7.4 Interim Distributions. The General Partner may distribute securities
---------------------
or other property constituting all or any portion of the Partnership assets in
cash or in kind in such amounts as the General Partner shall determine in its
sole discretion, and any such distribution shall be made to the Partners in
accordance with the positive balances in such Partners' Capital Accounts;
provided, however, that in the case of securities, no such distributions shall
- -------- -------
be made unless such securities are freely tradeable in the public securities
market of the United States without registration under the Securities Act of
1933; and further provided, however, that on a sale of Securities to the General
--- ------- -------- -------
Partner or its Affiliate, the General Partner's pro rata interest in the
Securities to be disposed of may be distributed to the General Partner rather
than being sold by the Partnership and the proceeds being distributed to the
General Partner. For purposes of determining the value of the assets of the
Partnership at any time distributed in kind pursuant to this Section 7.4, the
assets of the Partnership shall be valued in the manner provided for in Section
5.5 or, if necessary, in the manner reasonably determined by the General
Partner.
7.5 Assignor-Assignee Allocations. The Partnership shall allocate taxable
-----------------------------
items attributable to a Partner's interest that is assigned between the assignor
and assignee based on an interim closing of the books of the Partnership.
ARTICLE VIII
DISSOLUTION OF THE PARTNERSHIP;
WINDING UP AND LIQUIDATION
---------------------------------
8.1 Dissolution. The earlier to occur of any of the following events
-----------
shall work an immediate dissolution of the Partnership:
(a) the acquisition by Benson Corp. of greater than 50% of the Securities
of the Target Company;
(b) the disposition by the Partnership of all Securities of the Target
Company held, directly or indirectly, by them;
(c) the expiration of the term of the Partnership pursuant to Section 2.5
of this Agreement;
(d) the consent to dissolution of the Partners holding at least 75% of the
Participations;
-16-
<PAGE>
(e) the resignation, dissolution, insolvency or Bankruptcy of the General
Partner, provided, that the Partnership shall not be dissolved if, within 90
days after such withdrawal, all Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
such withdrawal, of one or more additional General Partners; or
(f) the occurrence of any other event that would cause a dissolution of the
Partnership by operation of law.
Any dissolution of the Partnership shall be effective on the date the event
occurs giving rise to the dissolution, but the Partnership shall not terminate
until all its affairs have been wound up and its assets distributed as provided
in this Article VIII.
8.2 Winding Up and Liquidation. Subject to the provisions of Sections
--------------------------
5.4, in the event of the dissolution of the Partnership for any reason, the
General Partner shall commence to wind up the affairs of the Partnership and to
distribute all of its assets. In winding up the affairs of the Partnership, the
General Partner may take any and all action as it may determine to be in the
best interest of the Partners (including, without limitation, any arrangements
to be made with creditors, whether and to what extent and under what terms the
assets of the Partnership, including the Securities of the Target Company, are
to be sold or distributed in kind to the Partners, and the amount or necessity
of establishing cash or other reserves to cover contingent and/or other
liabilities of the Partnership). Unless otherwise agreed by all the Partners,
no distribution of Securities shall be made unless such Securities are freely
tradeable in the public securities market of the United States without
registration under the Securities Act of 1933.
8.3 Accounting on Dissolution. Subject to the provisions of Section 5.4,
-------------------------
upon dissolution of the Partnership an accounting shall be made of the
Partnership's assets, liabilities and operations from the date of the last
previous accounting to the date of dissolution. Profit or loss realized
subsequent to the date of dissolution shall be allocated in accordance with
Article VII. As to each asset other than cash, gain or loss shall be allocated
and proper adjustments made to the Capital Accounts of the Partners as if such
asset had been sold for its then fair market value, as determined pursuant to
Section 8.6.
8.4 Application of Partnership Properties. In winding up the affairs of
-------------------------------------
the Partnership, the assets of the Partnership, in cash or in kind, shall be
applied in the following order of priority:
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<PAGE>
(a) In payment of all liabilities of the Partnership to creditors. If any
liability is contingent or uncertain in amount, a reserve will be established in
such amount as the General Partner deems reasonably necessary. Upon the
satisfaction or other discharge of such contingency, the amount of the reserve
not required, if any, will be distributed in accordance with the remainder of
this Section 8.4; and
(b) In payment of any remaining assets to the Partners in proportion to
each Partner's Capital Account.
(c) In the event that, at the time of dissolution of the Partnership,
there is a negative balance in the Capital Account of any Partner, such Partner
shall, prior to any distribution in accordance with this Section, make
contributions in cash to the Partnership sufficient to eliminate such negative
balance, and all other Partners may, at their option, take such action as such
Partners deem appropriate to obtain payment by such Partner of such amount,
together with interest thereon at the Prime Rate plus 5%, from the date that
such contribution is due, at the cost and expense of the Partner owing such
additional contribution.
8.5 Option to Purchase Benson Corp. Stock Upon Certain Dissolution Event.
--------------------------------------------------------------------
In the event of a dissolution of the Partnership pursuant to Section 8.1(a) of
this Agreement, each Limited Partner may elect to receive, in whole or in part,
in lieu of any distribution in cash or in kind of the assets of the Partnership
pursuant to Section 8.4 of this Agreement, that number of registered shares of
common stock, par value $0.01 per share, of Benson Corp. equal to the positive
balance of such Partner's Capital Account divided by $8. Benson Corp. agrees to
contribute such stock to the Partnership upon the request of the General Partner
in fulfillment of the Partnership's obligations pursuant to this Section 8.5.
8.6 Valuation of Assets and Related Matters. Any non-cash assets of the
---------------------------------------
Partnership shall be valued for purposes of accounting upon dissolution pursuant
to Section 8.3 at their fair market value as determined by the General Partner,
it being understood that, if possible, Securities shall be valued in the manner
provided for in Section 5.5.
ARTICLE IX
NOTICES AND PAYMENTS
--------------------
9.1 Notices. All notices and demands required or permitted under this
-------
Agreement shall be in writing, and may be delivered personally or sent by
facsimile transmission, telex or certified
-18-
<PAGE>
or registered mail, postage prepaid, to the Partners at their respective
addresses as shown from time to time on the records of the Partnership. Any
Partner may specify a different address by notifying the other Partners in
writing of such different address. Any such notice or demand shall be deemed
given or made when received.
9.2 Payments. All payments hereunder shall be made in U.S. dollars by
--------
certified or official bank check drawn against (or, if requested by the party to
receive a payment, by wire transfer of) next day funds.
ARTICLE X
CERTAIN REPRESENTATIONS,
WARRANTIES AND AGREEMENTS
-------------------------
Each of the Partners represents and warrants to, and agrees with, the other
Partners as follows:
10.1 Status. If applicable, such Partner is duly incorporated or duly
------
organized, as the case may be, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, as the case may be.
Such Partner has full power and authority to own its property and to carry on
its business as now conducted. Such Partner is (i) an individual who is a
citizen of the United States or (ii) a corporation or partnership created or
organized under the laws of the United States or any political subdivision
thereof.
10.2 Authority. Such Partner has full power and authority to execute and
---------
deliver this Agreement and to carry out his or its obligations hereunder in
accordance with the terms and provisions hereof. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate or
partnership action on the part of such Partner. This Agreement constitutes the
valid and legally binding obligation of such Partner, enforceable against him or
it in accordance with its terms, except as enforceability may be limited by
equitable principles regardless of whether considered at law or in equity, or by
bankruptcy, insolvency, reorganization and other similar laws now or hereafter
in effect relating to creditors' rights generally.
10.3 No Breach or Default. The execution, delivery and performance by
--------------------
such Partner of this Agreement and the transactions contemplated hereby will not
constitute a breach of any term or provision of, or a default under, (a) any
outstanding
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<PAGE>
indenture, mortgage, loan or agreement or other similar contract or agreement to
which such Partner or any of its Affiliates is a party or by which it or any of
its Affiliates or its or their property is bound, (b) its certificate or
articles of incorporation or by-laws or other constituent documents, (c) any
law, rule or regulation, or (d) any order, writ, judgment or decree having
applicability to it.
10.4 No Governmental Consents. No consent, license, approval or
------------------------
authorization of any governmental body, authority, bureau or agency is required
on the part of such Partner or any of its Affiliates in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated herein.
10.5 Investment Representation. (a) Each Limited Partner is acquiring his
-------------------------
or its interest in the Partnership for his or its own account, for investment
and not with a view to the distribution of the interest, is fully able to bear
the economic risks of becoming a Limited Partner and has such knowledge and
experience in financial and business matters that he or it is capable of
evaluating the merits and risks inherent in becoming a Limited Partner.
(b) Each of the Partners represents and warrants to the other Partners
that, except as heretofore disclosed in writing to the other Partners or as
acquired by or on behalf of the Partnership pursuant to this Agreement, neither
it nor any of its Affiliates beneficially owns any Securities of the Target
Company or the right to acquire any such Securities.
10.6 Purchase of Securities of Target Company. Each Partner agrees that
----------------------------------------
except as provided herein or with the consent of all the Partners, neither it
nor any of its Affiliates will, directly or indirectly, from and after the date
hereof and until the dissolution and termination of the Partnership, (x)
acquire, for its own account or for the account of any Person for which it
exercises investment discretion, record or beneficial ownership, or dispose, of
Securities of the Target Company (or the right to acquire Securities of the
Target Company), or (y) act or agree to act together or in concert with any
other Person for the purpose of acquiring, holding, voting or disposing of any
Securities of the Target Company. The agreement contained in this Section 10.6
shall survive the Withdrawal of any Partner from the Partnership and shall
terminate upon the conclusion of the term of the Partnership.
10.7 Accuracy of Information. Each Partner shall furnish to the General
-----------------------
Partner all information regarding such Partner or its
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<PAGE>
Affiliates required for inclusion in any documents to be prepared or filed in
connection with the business of the Partnership, including, without limitation,
all information required to be disclosed pursuant to Rule 13d of the Securities
Exchange Act of 1934 and any other federal and state securities laws, and all
such information will be true and correct in all material respects and will not
omit to state any material fact necessary to be stated therein in order that
such information not be misleading.
10.8 Compliance with Applicable Laws. Such Partner is and will remain in
-------------------------------
compliance with all laws and regulations applicable to the subject matter of
this Agreement.
ARTICLE XI
POWER OF ATTORNEY
-----------------
11.1 Grant of Power of Attorney. Each Limited Partner, by the execution
--------------------------
of this Agreement, or by authorizing such execution on his behalf, does
irrevocably make, constitute and appoint the General Partner, with full power of
substitution and resubstitution, as its true and lawful attorney and agent, with
full power and authority in his name, place and stead to execute, swear to,
acknowledge, deliver, file and record in the appropriate public offices:
(a) the Certificate, fictitious or assumed name certificates and other
certificates and instruments (including counterparts of this Agreement) which
the General Partner deems necessary or desirable to qualify or continue the
Partnership as a limited partnership or to conduct the business of the
Partnership in the jurisdictions in which the Partnership may conduct business
or own or lease property;
(b) all certificates of dissolution, conveyances and other instruments
which the General Partner deems necessary or desirable to effect the dissolution
and termination of the Partnership;
(c) all instruments, reports or filings required to be filed by the
Partnership or any Partners in connection with the business or dealings of the
Partnership pursuant to federal or state securities laws, rules or regulations;
and
(d) any other instrument which is now or may hereafter be required by law
to be filed on behalf of the Partnership or which is required to reflect the
exercise by the General Partner of any
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<PAGE>
power granted to it under this Agreement in connection with the conduct of the
Partnership's business.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Binding Effect; Amendment. This Agreement constitutes the entire
-------------------------
agreement among the parties relating to the subject matter hereof and supersedes
any prior agreement or understanding among them relating to such subject matter.
Except as herein otherwise specifically provided, this Agreement shall be
binding upon and inure to the benefit of the parties and their legal
representatives, heirs, administrators, executors, successors and assigns. This
Agreement may not be amended or modified without the prior written consent of
all the Partners.
12.2 Section Headings. Headings contained in this Agreement are inserted
----------------
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provisions hereof.
12.3 Governing Law. This Agreement and the rights of the parties
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without giving effect to the principles of conflicts of
law thereof.
12.4 Dispute Resolution. The parties hereto covenant and agree that in
------------------
the event of any dispute arising out of the terms and conditions of this
Agreement that they consent and submit to the jurisdiction of the federal or
state courts located in the State of New York, City of New York, Borough of
Manhattan and of the federal or state courts located in the State of Delaware,
City of Wilmington.
12.5 Severability. Each provision of this Agreement is intended to be
------------
severable. If any term or provision of this Agreement or the application of any
such term or provision to any Person or circumstance shall be held illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remainder of this Agreement or the application of the
remainder of the Agreement to all Persons or circumstances other than those to
which it is held invalid or illegal.
12.6 Waiver. No waiver of any provision hereof shall be effective unless
------
in writing, and no such waiver shall be deemed a waiver of such provision in the
future or a waiver of any other provision.
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<PAGE>
12.7 Cooperation. The parties hereto covenant and agree that they will
-----------
execute such other and further instruments and documents as in the opinion of
the General Partner are or may be necessary or convenient to effectuate and
carry out the Partnership created by this Agreement and its business.
12.8 Fiscal Year. The fiscal year of the Partnership is the calendar
-----------
year.
12.9 Investment of Partnership Funds. All funds of the Partnership which
-------------------------------
are not otherwise employed in the Partnership's business shall be kept in
interest-bearing accounts or instruments as shall be designated by the General
Partner.
12.10 Indemnification. (a) To the fullest extent permitted by law, the
---------------
Partnership will indemnify and hold harmless the General Partner and each
stockholder, director, officer, partner, controlling person, employee,
representative or agent thereof (each, an "Indemnitee") from and against any and
all losses, claims, expenses, damages or liabilities to which an Indemnitee may
become subject in connection with any matter arising out of or in connection
with the Partnership's business or affairs, except to the extent that any such
loss, claim expense, damage or liability results solely from the willful
misfeasance or bad faith of the Indemnitee. If for any reason (other than the
willful misfeasance or bad faith of the Indemnitee) the foregoing
indemnification is unavailable or insufficient to hold the Indemnitee harmless,
then the Partnership shall contribute to the amount paid or payable by the
Indemnitee as a result of such loss, claim, damage, expense or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Partnership on the one hand and the Indemnitee on the other hand but also
the relative fault of the Partnership and the Indemnitee, as well as any
relevant equitable considerations.
(b) In the event that an Indemnitee becomes involved in any capacity in
any action, proceeding or investigation brought by or against any person
(including any Limited Partner) in connection with any matter arising out of or
in connection with the Partnership's business or affairs (including a breach of
this Agreement by the Limited Partner), the Partnership will periodically
reimburse the Indemnitee for its legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, provided
that the Indemnitee shall promptly repay to the Partnership the amount of any
such reimbursed expenses paid to it if it shall ultimately be determined by a
final non-appealable judgment of a court of competent jurisdiction that such
Indemnitee is not entitled to be
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<PAGE>
so indemnified by the Partnership in connection with such action, proceeding or
investigation.
(c) The rights to indemnification and reimbursement provided for in this
Section 12.10 may be satisfied only out of the assets of the Partnership. None
of the Partners shall be personally liable for any claim for indemnification or
reimbursement under this Section 12.10.
12.11 Liability of Partners. (a) Neither the General Partner, nor any of
---------------------
its Affiliates nor any stockholder, director, officer, partner, controlling
person, employee, representative or agent thereof shall be liable, responsible
or accountable in damages or otherwise to the Partnership or to any Partner or
to any successor, assignee or transferee of the Partnership or of any Partner
for (i) any act or omission performed or omitted by it, or for any costs,
damages or liabilities arising therefrom, in the absence of willful misfeasance
or bad faith by the General Partner, (ii) any tax liability imposed on the
Partnership or any Limited Partner or (iii) any losses due to the negligence of
any employees, brokers or other agents of the Partnership (whether or not such
persons are directly employed by the General Partner).
(b) Except as otherwise provided by state law, a Limited Partner shall not
be liable for any debts or bound by any obligations of the Partnership, except
each Limited Partner shall be obligated to make its full Capital Contribution
upon the terms specified in this Agreement. None of the Limited Partners shall
be liable for the debts or liabilities of any other Partner. Each Limited
Partner by execution of this Agreement represents and warrants to every other
Partner and to the Partnership that such Limited Partner will not take any
action which would cause such Limited Partner to become liable for the
obligations of the Partnership or otherwise engage in conduct which would cause
any other person reasonably to believe that such Limited Partner is a general
partner of the Partnership.
12.12 Confidentiality. Each Partner represents and warrants that it has
---------------
not and agrees that it will not, and will direct such of its directors,
partners, officers, employees, attorneys, representatives, advisors and
Affiliates controlled by it as are privy to such knowledge not to, until such
time as the General Partner on behalf of the Partnership has publicly disclosed
the same and notified each such Partner that it has done so, disclose to any
Person either the existence or terms of this Agreement or its subject matter or
the identity of the Partners; provided, however, that the General Partner will
-------- -------
not disclose such information without the prior written consent of all Partners
or the written opinion of counsel that such
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<PAGE>
disclosure is necessary. Without limiting the generality of the foregoing, no
Partner shall confirm any statement made by third parties regarding this
Agreement or such discussions or information. In the event that a Partner
receives either a request to disclose all or any part of the foregoing under the
terms of a valid and effective subpoena or order issued by a court or government
agency of competent jurisdiction or advice of legal counsel that disclosure is
otherwise legally required under applicable law, such Partner agrees, prior to
making such disclosure: (i) immediately to notify all other Partners of the
existence and terms of, and the circumstances surrounding, such request or
advice, (ii) to consult with the other Partners on the advisability of taking
legally available steps to resist or narrow any such request or otherwise to
obviate the need for such disclosure and (iii) if disclosure of such information
is required, to exercise its best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of the
disclosed information as the General Partner so designates. The agreement
contained in this Section 12.12 shall survive the Withdrawal of any Partner or
any termination or dissolution of the Partnership.
12.13 No Third-Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of the Partners (and those persons
specifically entitled to indemnification under this Article XII), and, except as
aforesaid, it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person.
12.14 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument, and it shall not be necessary that each
counterpart be signed by all the Partners so long as each Partner shall have
executed a counterpart which has been delivered to the other Partners.
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<PAGE>
EXHIBIT 99.2
AGREEMENT
This Agreement, dated as of September __, 1994, by and among Benson
Eyecare Corporation, a Delaware corporation ("Benson Eyecare"), ______________,
a limited partner (the "Limited Partner") of Benson Partners I, L.P., a Delaware
limited partnership ("Benson Partners"), and Benson Services, Inc., a Delaware
corporation (the "General Partner").
WHEREAS, the Limited Partner is a party to an Agreement of Limited
Partnership of Benson Partners, dated December 7, 1993 (the "Partnership
Agreement"), pursuant to which the General Partner, a wholly-owned subsidiary of
Benson Eyecare is the sole general partner of Benson Partners; and
WHEREAS, Benson Partners currently owns 529,950 shares of common
stock, par value $0.50 per share ("ORC Common Stock"), of Optical Radiation
Corporation, a California corporation ("ORC"); and
WHEREAS, Benson Eyecare, ORC and Benson Acquisition Corporation, a
wholly-owned subsidiary of Benson Eyecare ("Benson Sub"), have entered into an
Agreement and Plan of Merger, dated as of June 30, 1994, as amended as of July
6, 1994 and as further amended as of August 29, 1994 (the "Merger Agreement"),
pursuant to which (i) Benson Sub will be merged into ORC (the "Merger") and (ii)
each outstanding share of ORC Common Stock will be converted into the right to
receive (a) $17.00 in cash, (b) a fraction of a share of common stock, par value
$0.01 per share ("Benson Common Stock"), of Benson Eyecare equal to the Exchange
Ratio (as defined in the Merger Agreement) and (c) the right to receive certain
proceeds from the sale of the OSP division of ORC plus, to the extent that the
amount of such proceeds has a value that is less than $2.00, a fraction of a
share of Benson Common Stock having a value equal to the amount of such
difference; and
WHEREAS, on the date of effectiveness of the Merger (the "Effective
Date"), Benson Partners shall be dissolved pursuant to Section 8.1(a) of the
Partnership Agreement (the "Dissolution Event") and the assets of Benson
Partners shall be distributed pursuant to Article VIII of the Partnership
Agreement; and
WHEREAS, pursuant to Section 8.5 of the Partnership Agreement, each
limited partner of the Partnership has been given the option, upon the
Dissolution Event, to receive, in whole or in part, in lieu of any distribution
in cash or in kind of the assets of Benson Partners, that number of shares of
Benson Common Stock equal to the positive balance of such Partner's Capital
Account (as defined in the Partnership Agreement) divided by $8.00 (the "Option
Right").
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements as set forth
herein, the parties hereto agree as follows:
1. Waiver of Option Right. The Limited Partner hereby waives the
----------------------
Option Right in lieu of the agreements set forth herein.
2. Election to Purchase Benson Common Stock with Cash Liquidating
--------------------------------------------------------------
Distributions.
- -------------
(a) Upon the distribution of the assets of Benson Partners to its
partners (including the Limited Partner) upon the Dissolution Event pursuant to
Article VIII of the Partnership Agreement, and provided that the Determination
Price (as defined below) is greater than $6.00, the Limited Partner hereby
directs the General Partner to cause the cash to be distributed to him by Benson
Partners at such time (the "Cash Liquidation Amount") to be paid directly to
Benson Eyecare.
(b) Benson Eyecare shall, upon receipt of the amount referred to in
paragraph 2(a) above, issue to the Limited Partner
(i) in the event that the Determination Price is equal to $8.00
or more, (A) that number of registered shares of Benson
Common Stock equal to the Cash Liquidation Amount divided by
$8.00 and (B) cash in lieu of any fractional shares of Benson
Common Stock;
(ii) in the event that the Determination Price is less than $8.00
but more than $6.00, (A) that number of registered shares of
Benson Common Stock equal to the Cash Liquidation Amount
divided by a number equal to (x) a fraction, the numerator of
which is the Determination Price and the denominator of which
is $8.00, multiplied by (y) the Determination Price and (B)
cash in lieu of any fractional shares of Benson Common Stock.
(c) The Determination Price shall be equal to the higher of (i) the
average of the per share closing price of the Benson Common Stock on the
American Stock Exchange ("AMEX") during the 20 consecutive trading days ending
on the fifth trading day prior to the shareholders' meeting at which the
shareholders of ORC are to vote on the Merger and (ii) the closing price per
share on the Effective Date of the Benson Common Stock on the AMEX.
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<PAGE>
3. Interim Distributions. The Limited Partner and the General
---------------------
Partner hereby agree that, notwithstanding Section 7.4 of the Partnership
Agreement, prior to the Effective Date, the General Partner on behalf of Benson
Partners may (i) allocate the profit of Benson Partners to be received in the
Merger to the Partners' Capital Accounts pursuant to Section 7.1 of the
Partnership Agreement, (ii) distribute to the General Partner all or part of the
capital in the General Partner's Partner's Capital Account pursuant to
subparagraph (i) above at the election of the General Partner and (iii) make
such distribution to the General Partner in cash, securities (including ORC
Common Stock) or other property at the election of the General Partner.
4. Binding Effect. This Agreement constitutes the entire agreement
--------------
among the parties relating to the subject matter hereof and supersedes any prior
agreement or understanding among them relating to such subject matter. This
Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
5. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
6. Governing Law. This Agreement and the rights of the parties here
-------------
under shall be governed by and interpreted in accordance with the laws of the
State of Delaware, without giving effect to the principles of conflicts of law
thereof.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
------------------------
By:
---------------------
Name:
BENSON EYECARE CORPORATION
By:
---------------------
Martin E. Franklin
President and Chief
Executive Officer
BENSON SERVICES, INC.
By:
---------------------
Martin E. Franklin
President and Chief
Executive Officer
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