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[OPTEK TECHNOLOGY LOGO]
OPTEK TECHNOLOGY, INC.
1215 West Crosby Road
Carrollton, Texas 75006
May 18, 1999
Dear fellow stockholder:
I am pleased to inform you that on May 12, 1999, our company, Optek
Technology, Inc., entered into an Agreement and Plan of Merger with The Dyson-
Kissner-Moran Corporation and DKM Acquisition Corp., a wholly owned subsidiary
of The Dyson-Kissner-Moran Corporation. Pursuant to the Agreement and Plan of
Merger, DKM Acquisition Corp. is today commencing a tender offer to purchase
all outstanding shares of common stock, par value $0.01 per share, of the
Company at a price of $25.50 per Share, which represents approximately a 29.9%
premium to the Company's closing stock price on May 11, 1999, the last trading
day prior to the announcement of this transaction.
Your Board of Directors has unanimously approved the Merger Agreement and
determined that the Offer and the Merger are fair to, and in the best
interests of, the stockholders of the Company. Accordingly, your Board of
Directors recommends that you accept the Offer and tender your Shares to DKM
Acquisition Corp. pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among others, the opinion of ABN AMRO Incorporated,
the Company's financial advisor, to the effect that, as of May 11, 1999 and
based upon and subject to the considerations and limitations set forth in the
opinion, the $25.50 in cash per Share to be received by the stockholders of
the Company in the Offer and the Merger was fair from a financial point of
view to such holders. The full text of the written opinion of ABN AMRO
Incorporated is attached to the enclosed Schedule 14D-9, and you are urged to
read the opinion in its entirety.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9.
Also enclosed are DKM Acquisition Corp.'s Offer to Purchase, dated May 18,
1999, and related materials, including a Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of
the Offer and provide instructions as to how to tender your Shares. On behalf
of the Company, I urge you to read the enclosed material and consider this
information carefully and I would like to personally thank you for your time
as a stockholder of the Company.
Sincerely,
/s/ THOMAS R. FILESI
Thomas R. Filesi
Chairman of the Board and
Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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OPTEK TECHNOLOGY, INC.
(Name of Subject Company)
OPTEK TECHNOLOGY, INC.
(Name of Persons Filing Statement)
Common stock, par value $0.01 per share 683815 10 4
(Title of Class of Securities) (CUSIP Number of Class of Securities)
Thomas R. Filesi
Chairman and Chief Executive Officer
1215 West Crosby Road
Carrollton, Texas 75006
(972) 323-2200
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person Filing Statement)
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With copies to:
Christopher M. Hewitt David H. Oden
Hewitt & Hewitt, P.C. Haynes and Boone, LLP
2612 Thomas Avenue 901 Main Street, Suite 3100
Dallas, Texas 75205 Dallas, Texas 75202-3789
(214) 969-0250 (214) 651-5000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Optek Technology, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 1215 West Crosby Road, Carrollton, Texas 75006. The
title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-
9") relates is the Company's common stock, par value $0.01 per share (the
"Common Stock"). Unless the context otherwise requires, as used herein, the
"Shares" shall mean shares of the Common Stock.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") by DKM Acquisition
Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary
of The Dyson-Kissner-Moran Corporation, a Delaware corporation ("Parent"), to
purchase all the issued and outstanding Shares at a price of $25.50 per Share,
net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase dated
May 18, 1999 (the "Offer Price") and the related Letter of Transmittal
(together constituting the "Offer Documents"). The Offer is described in the
Tender Offer Statement on Schedule 14D-1 filed by Purchaser with the
Securities and Exchange Commission on May 18, 1999 (as amended or
supplemented, the "Schedule 14D-1"). The Offer Documents indicate that the
principal executive offices of Purchaser and Parent are located at 565 Fifth
Avenue, 4th Floor, New York, New York 10017.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of May 12, 1999 (the "Merger Agreement") among the Company, Parent and
Purchaser. The Merger Agreement provides that, as soon as practicable
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, Purchaser will be merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue as
the surviving corporation (the "Surviving Corporation") and will become a
wholly owned subsidiary of Parent. In the Merger, each Share outstanding at
the Effective Time (as defined in the Merger Agreement) (other than Shares
held in the treasury of the Company, Shares owned by Parent, Purchaser or any
other subsidiary of Parent or shares held by stockholders who properly
exercise their dissenters' rights under the Delaware General Corporation Law
("Delaware Law" or "DGCL") ) will, by virtue of the Merger and without any
action by the holder thereof, be converted into the right to receive the Offer
Price upon the surrender of the certificate formerly representing such Share
("Certificate"). The Merger Agreement is summarized in Item 3 of this Schedule
14D-9. A copy of the Merger Agreement is incorporated by reference as Exhibit
1 to this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Except as set forth in or incorporated by reference in this Item 3(b),
to the knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings or actual or potential
conflicts of interest between the Company or its affiliates and (i) its
executive officers, directors or affiliates or (ii) Purchaser, Parent or any
of their respective executive officers, directors or any of their respective
affiliates.
The Company has entered into certain contracts, agreements, arrangements or
understandings between the Company or its affiliates and certain of its
executive officers, directors or affiliates as described in the Company's
Proxy Statement dated January 29, 1999 for the 1999 Annual Meeting of
Stockholders under the headings "Securities Ownership of Certain Beneficial
Owners and Management," "Executive Compensation," "Option Grants," "Option
Exercises and Year End Option Values," "Employment Agreements" and "Directors
Compensation," a copy of which is incorporated by reference as Exhibit 7
hereto.
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On March 16 1999, the Compensation Committee of the Board of Directors
granted to Thomas R. Filesi, Chairman, Chief Executive Officer and a Director
of the Company; Jerry L. Curtis, President, Chief Operating Officer and a
Director of the Company; Richard G. Dahlberg, Senior Vice President,
Operations; William J. Collinsworth, Vice President, Finance and Chief
Financial Officer; and Robert J. Kosobucki, Vice President, Marketing, options
to purchase 10,000, 50,000, 10,000, 20,000 and 5,000 Shares, respectively, for
$15.625 per share (the fair market value of the Common Stock on the date of
grant) under the Company's 1998 Stock Option Plan (the "1998 Plan") in
accordance with the Company's prior practice to grant options to employees on
the date of the annual meeting of stockholders.
Under the terms of the Company's employment agreements with these persons,
all unvested options outstanding upon a change in control of the Company will
become fully exercisable. Therefore, all unvested options issued to these
persons will be immediately and fully vested upon consummation of the Offer.
On March 16, 1999, each of Michael E. Cahr, William H. Daughtrey, Grant A.
Dove, Rodes Ennis and Wayne Stevenson, non-employee Directors of the Company,
was automatically awarded upon reelection as a Director an option to acquire
up to 3,500 shares of the Company's Common Stock for $15.625 per share (the
fair market value of the Common Stock on the date of grant) as mandated by the
Company's Directors Formula Award Plan.
The Merger Agreement provides that all options of the Company, vested or
unvested, will be cancelled, and each holder thereof will receive compensation
equal to the number of Shares subject to the option multiplied by the excess
of $25.50 over the exercise price provided for in the option.
THE MERGER AGREEMENT AND RELATED AGREEMENTS
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full
text of the Merger Agreement, which is incorporated by reference as Exhibit 1
hereto. Capitalized terms not otherwise defined below have the meanings
ascribed to them in the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer as
provided in the Offer Documents.
The Company Board. The Merger Agreement provides that promptly after the
purchase of and payment for any Shares by Purchaser or any of its affiliates
as a result of which Purchaser and its affiliates own beneficially at least a
majority of the then outstanding Shares, Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on the
Company's Board of Directors (the "Company Board") as is equal to the product
of the total number of directors on such Board (giving effect to the increase
in the size of such Board) multiplied by the percentage that the number of
Shares beneficially owned by Purchaser (including Shares so accepted for
payment) bears to the total number of Shares then outstanding. In furtherance
thereof, the Company shall, upon request of Parent, use its best efforts
promptly either to increase the size of the Company Board or to secure the
resignations of such number of its incumbent directors, or both, as is
necessary to enable such designees of Parent to be so elected or appointed to
the Company Board, and the Company shall take all actions available to the
Company to cause such designees of Parent to be so elected or appointed. At
such time, the Company shall, if requested by Parent, also take all action
necessary to cause persons designated by Parent to constitute at least the
same percentage (rounded up to the next whole number) as is on the Company
Board of (i) each committee of the Company Board, (ii) each board of directors
(or similar body) of each subsidiary of the Company and (iii) each committee
(or similar body) of each such board.
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The Merger Agreement provides that, notwithstanding the foregoing, the
parties thereto shall use their respective reasonable best efforts to ensure
that at least two of the members of the Board shall, at all times prior to the
Effective Time, be Continuing Directors (as defined below). From and after the
time, if any, that Parent's designees constitute a majority of the Company
Board, any amendment or modification of the Merger Agreement, any amendment to
the Company's Certificate of Incorporation or By-Laws inconsistent with the
Merger Agreement, any termination of the Merger Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
Purchaser under the Merger Agreement, any waiver of any condition to the
Company's obligations under the Merger Agreement or any of the Company's
rights under the Merger Agreement or other action by the Company under the
Merger Agreement may be effected only by the action of a majority of the
Continuing Directors of the Company, which action shall be deemed to
constitute the action of any committee specifically designated by the Company
Board to approve the actions contemplated by the Merger Agreement and the
Company Option Agreement and the full Company Board; provided, that, if there
shall be no Continuing Directors, such actions may be effected by majority
vote of the entire Company Board; provided, further, that, if there be no such
Continuing Directors, Purchaser shall not decrease the Offer Price or change
the form of consideration to be paid in the Merger. The term "Continuing
Directors" means (i) any member of the Company Board as of the date of the
Merger Agreement or (ii) any successor of a Continuing Director who is (A)
unaffiliated with, and not a designee or nominee of, Parent or Purchaser and
(B) recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Company Board, and in each case under clauses
(i) and (ii), who is not an employee of the Company.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL, Purchaser shall be
merged with and into the Company and the separate corporate existence of
Purchaser will thereupon cease, and the Company will be the surviving
corporation in the Merger. At the Effective Time of the Merger, each Share
then outstanding, other than Shares held by (i) the Company or any of its
subsidiaries, (ii) Parent or any of its subsidiaries including Purchaser and
(iii) stockholders who properly perfect their dissenters' rights under the
DGCL, will be converted into the right to receive $25.50 in cash or any higher
price per Share paid in the Offer, without interest.
Options. The Merger Agreement provides that at or immediately prior to the
Effective Time, each then outstanding Option, whether or not then vested or
exercisable, shall be cancelled by the Company. In consideration of such
cancellation of Options with an exercise price of less than the Offer Price,
the Company (or, at Parent's option, the Purchaser) shall pay to the holders
of such Options an amount in respect thereof equal to the product of (A) the
excess, if any, of the Offer Price over the exercise price of each such Option
and (B) the number of Shares previously subject to the Option immediately
prior to its cancellation (such payment to be net of withholding taxes and
without interest).
The Merger Agreement provides that the Company shall take all actions
necessary and appropriate so that all stock option or other equity based plans
maintained with respect to the Shares ("Option Plans") shall terminate as of
the Effective Time and the provisions in any other benefit plan providing for
the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be deleted as of
the Effective Time, and the Company shall use its best efforts to ensure that
following the Effective Time no holder of an Option or any participant in any
Option Plan shall have any right thereunder to acquire any capital stock of
the Company, Parent, Purchaser or the Surviving Corporation. In addition, the
Company has agreed to obtain all necessary consents from, and mail any
required notices to, holders of Options and amend the terms of the applicable
Option Plans, in each case as is necessary to give effect to the foregoing.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, corporate organization, subsidiaries, capital
stock, options to acquire Shares, authority to enter into the Merger Agreement
and the Company Option Agreement, required consents, no conflicts between the
Merger Agreement and applicable laws and certain agreements to which the
Company or its assets may be subject, financial statements, filings with the
United States Securities and Exchange Commission (the "Commission"),
disclosures in proxy
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statement and tender offer documents, absence of certain changes or events,
litigation, absence of changes in benefit plans, employee benefit plans, tax
matters, no non-deductible payments, compliance with applicable laws,
environmental matters, intellectual property, owned and leased real property,
material contracts, labor and employment matters, product liability,
applicability of state takeover statutes, votes required to approve the Merger
Agreement, brokers' and finders' fees, receipt of the fairness opinion of ABN
AMRO Incorporated, Year 2000 compliance, absence of questionable payments and
full disclosure to Parent.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, corporate organization, authority to enter into the Merger Agreement
and the Company Option Agreement, required consents, no conflicts between the
Merger Agreement or the Company Option Agreement and the certificate of
incorporation and by-laws of Parent and Purchaser or laws applicable to Parent
or Purchaser, disclosures in proxy statement and tender offer documents, prior
activities by Purchaser, brokers' and finders' fees and financing.
Interim Operations. The Merger Agreement provides that after the date of the
Merger Agreement and prior to the time the designees of Parent have been
elected to or appointed to, and shall constitute a majority of, the Company
Board pursuant to the applicable provisions of the Merger Agreement, and
except (i) as expressly contemplated by the Merger Agreement, (ii) as set
forth in the applicable section of the disclosure schedule thereto or (iii) as
agreed in writing by Parent:
(a) the Company shall and shall cause its subsidiaries to carry on their
respective businesses in the ordinary course;
(b) the Company shall and shall cause its subsidiaries to use all
reasonable best efforts consistent with good business judgment to preserve
intact their current business organizations, keep available the services of
their current officers and key employees and preserve their relationships
consistent with past practice with desirable customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them to the end that their goodwill and ongoing businesses shall be
unimpaired in all material respects at the Effective Time;
(c) neither the Company nor any of its subsidiaries shall, directly or
indirectly, amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(d) representatives of the Company and its subsidiaries shall confer at
such times as Parent may reasonably request with one or more
representatives of Parent to report material operational matters and the
general status of ongoing operations;
(e) neither the Company nor any of its subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Company's capital stock or that
of its subsidiaries, except that a wholly-owned subsidiary of the Company
may declare and pay a dividend or make advances to its parent or the
Company or (B) redeem, purchase or otherwise acquire directly or indirectly
any of the Company's capital stock or that of its subsidiaries; (ii) issue,
sell, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its subsidiaries, other than Shares
issued upon the exercise of Options outstanding on the date of the Merger
Agreement in accordance with the Option Plans as in effect on the date of
the Merger Agreement; or (iii) split, combine or reclassify the outstanding
capital stock of the Company or of any of its subsidiaries;
(f) except as permitted by the Merger Agreement, neither the Company nor
any of its subsidiaries shall acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof (including entities which are subsidiaries of the Company or any of
its subsidiaries) or (ii) any assets, including real estate, except
purchases in the ordinary course of business consistent with past practice;
(g) neither the Company nor any of its subsidiaries shall make any new
capital expenditure or expenditures, other than the specific capital
expenditures disclosed and set forth in the applicable section of the
disclosure schedule to the Merger Agreement;
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(h) neither the Company nor any of its subsidiaries shall, except in the
ordinary course of business and except as otherwise permitted by the Merger
Agreement, amend or terminate any material contract where such amendment or
termination would have a material adverse effect on the business,
properties, assets, prospects, financial condition or results of operations
of the Company and its subsidiaries taken as a whole (a "Material Adverse
Effect"), or waive, release or assign any material rights or claims;
(i) neither the Company nor any of its subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any
property or assets other than in the ordinary course of business and
consistent with past practice;
(j) neither the Company nor any of its subsidiaries shall: (i) enter into
any employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or
any its subsidiaries; or (ii) hire or agree to hire any new or additional
key employees or officers;
(k) neither the Company nor any of its subsidiaries shall, except as
required to comply with applicable law or expressly provided in the Merger
Agreement, (i) adopt, enter into, terminate, amend or increase the amount
or accelerate the payment or vesting of any benefit or award or amount
payable under any benefit plan or other arrangement for the current or
future benefit or welfare of any director, officer or current or former
employee, except to the extent necessary to coordinate any such benefit
plans with the terms of the Merger Agreement, (ii) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee, (iii) pay any benefit not provided for under any
benefit plan, (iv) grant any awards under any bonus, incentive, performance
or other compensation plan or arrangement or benefit plan (including the
grant of stock options, stock appreciation rights, stock-based or stock-
related awards, performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreements or awards made
thereunder) or (v) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or benefit plan;
(l) neither the Company nor any of its subsidiaries shall: (i) incur or
assume any long-term debt or, except in the ordinary course of business,
incur or assume any short-term indebtedness in amounts not consistent with
past practice; (ii) incur or modify any material indebtedness or other
liability except as set forth on the applicable section of the disclosure
schedule to the Merger Agreement; (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iv) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned subsidiaries of the Company or customary loans
or advances to employees in the ordinary course of business in accordance
with past practice); (v) settle any material claims other than in the
ordinary course of business, in accordance with past practice and without
admission of liability; or (vi) enter into any material commitment or
transaction except in the ordinary course of business consistent with past
practice;
(m) neither the Company nor any of its subsidiaries shall change any of
the accounting principles used by it unless required by generally accepted
accounting principles;
(n) neither the Company nor any of its subsidiaries shall make or change
any tax election, amend any tax return, change an annual tax accounting
period, adopt or change any method of tax accounting, enter into any
closing agreement, settle or compromise any tax claim or assessment,
surrender any right to claim a tax refund, consent to any extension or
waiver of the limitations period applicable to any tax claim or assessment
or take or omit to take any other action relating to taxes except in the
ordinary course of business consistent with past practice;
(o) neither the Company nor any of its subsidiaries shall pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations in
the ordinary course of business and consistent with past practice, or any
such claims, liabilities or obligations which are reflected or reserved
against in, or contemplated by, the consolidated financial statements (or
the notes thereto) of the Company
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and its consolidated subsidiaries; or except in the ordinary course of
business consistent with past practice, waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which the Company or any of its subsidiaries is a party;
(p) neither the Company nor any of its subsidiaries shall (by action or
inaction) amend, renew, terminate or cause to be extended any lease,
agreement or arrangement relating to any leased properties or enter into
any lease, agreement or arrangement with respect to real property;
(q) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing; and
(r) neither the Company nor any of its subsidiaries shall take any action
that would result in (i) any of its representations and warranties that are
qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not qualified as to materiality
becoming untrue in any material respect or (iii) any of the conditions to
the Offer, as set forth in the Merger Agreement, not being satisfied
(subject to the Company's right to take action specifically permitted by
the Merger Agreement).
Stockholders' Meeting. If required by applicable law in order to consummate
the Merger, the Company, acting through the Company Board, shall, in
accordance with applicable law, its Certificate of Incorporation and By-laws:
(i) as promptly as practicable following the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer, duly call, give notice
of, convene and hold a special meeting of its stockholders (the "Special
Meeting") for the purposes of considering and taking action upon the approval
of the Merger and the approval and adoption of the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy or information
statement relating to the Merger and the Merger Agreement; (iii) obtain and
furnish the information required to be included in the Proxy Statement (as
defined below) and, after consultation with Parent, respond promptly to any
comments made by the Commission with respect to the preliminary proxy or
information statement and cause a definitive proxy or information statement,
including any amendment or supplement thereto (the "Proxy Statement") to be
mailed to its stockholders at the earliest practicable date; provided that no
amendment or supplement to the Proxy Statement will be made by the Company
without consultation with Parent and its counsel; (iv) use its reasonable best
efforts to obtain the necessary approvals of the Merger and the Merger
Agreement by its stockholders; and (v) unless the Merger Agreement has been
terminated in accordance with the provisions of the section summarized under
"Termination" below, subject to its rights pursuant to the section summarized
under "No Solicitation" below, include in the Proxy Statement the
recommendation of the Company Board that stockholders of the Company vote in
favor of the approval of the Merger and the approval and adoption of the
Merger Agreement. Parent has agreed to vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of its other subsidiaries in favor
of the approval of the Merger and the approval and adoption of the Merger
Agreement.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that it shall not, nor shall it permit any of its subsidiaries to, nor shall
it authorize (and shall use its best efforts not to permit) any officer,
director or employee of, or any investment banker, attorney or other advisor
or representative of, the Company or any of its subsidiaries to, (i) solicit
or initiate, or encourage, directly or indirectly, any inquires or the
submission of, any Takeover Proposal (as defined below), (ii) participate in
any discussions or negotiations regarding, or furnish to any Person (as
defined below) any information or data with respect to or access to the
properties of, or take any other action to knowingly facilitate the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal or (iii) enter into any agreement with respect to any
Takeover Proposal or approve or resolve to approve any Takeover Proposal;
provided, that, nothing contained in the applicable provisions of the Merger
Agreement shall prohibit the Company or the Company Board from (A) taking and
disclosing to the Company's stockholders a position with respect to a tender
or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or (B) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Company Board,
after receiving written advice from outside counsel, is required under
applicable law, provided that the Company may not, except as permitted by the
following paragraph, withdraw or modify, or propose to withdraw or modify, its
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position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend any Takeover Proposal, or enter into any
agreement with respect to any Takeover Proposal. Upon execution of the Merger
Agreement, the Company agreed to immediately cease any existing activities,
discussions or negotiations with any parties conducted prior to the date of
the Merger Agreement with respect to any of the foregoing. Notwithstanding the
foregoing, prior to the time of acceptance of Shares for payment pursuant to
the Offer, the Company may furnish information concerning its business,
properties or assets to any Person or group and may negotiate and participate
in discussions and negotiations with such Person or group concerning a
Takeover Proposal if: (x) such Person or group has submitted a Superior
Proposal (as defined below); and (y) the Company Board determines in good
faith after consultation with outside legal counsel that such action is
necessary for the Company Board to comply with its fiduciary duty under
applicable law. The Company will promptly (but in no case later than 24 hours)
notify Parent of the existence of any proposal, discussion, negotiation or
inquiry received by the Company regarding any Takeover Proposal, and the
Company will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry which it may receive regarding any Takeover
Proposal and the identity of the party making such proposal or inquiry or
engaging in such discussion or negotiation. The Company will promptly provide
to Parent any non-public information concerning the Company provided to any
other Person in connection with any Takeover Proposal which was not previously
provided to Parent. The Company will keep Parent informed of the status and
details of any such Takeover Proposal and of any amendments or proposed
amendments to any Takeover Proposal and will promptly notify Parent (but in no
case later than 24 hours) of any determination by the Company Board that a
Superior Proposal has been made.
Pursuant to the Merger Agreement, except as set forth in this paragraph,
neither the Company Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or any such
committee of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, subject to compliance with this paragraph prior
to the time of acceptance for payment of Shares pursuant to the Offer, the
Company Board may withdraw or modify its approval or recommendation of the
Offer, the Merger Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal, in
each case at any time after the fifth business day following Parent's receipt
of written notice from the Company advising Parent that the Company Board has
received a Superior Proposal which it intends to accept, specifying the
material terms and conditions of such Superior Proposal and, identifying the
person making such Superior Proposal, but only if the Company shall have
caused its financial and legal advisors to negotiate with Parent to make such
adjustments to the terms and conditions of the Merger Agreement as would
enable the Company to proceed with the Offer and the Merger on such adjusted
terms. The term "Takeover Proposal" means any bona fide proposal or offer,
whether in writing or otherwise, from any Person other than Parent, Purchaser
or any affiliates thereof (a "Third Party") to acquire beneficial ownership
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
all or a material portion of the assets of the Company or any of its
subsidiaries or 20% or more of any class of equity securities of the Company
or any of its subsidiaries pursuant to a merger, consolidation or other
business combination, sale of shares of capital stock, sale of assets, tender
offer, exchange offer or similar transaction with respect to either the
Company or any of its subsidiaries, including any single or multi-step
transaction or series of related transactions, which is structured to permit
such Third Party to acquire beneficial ownership of any material portion of
the assets of or 20% or more of the equity interest in either the Company or
any of its subsidiaries. The term "Superior Proposal" means an unsolicited
bona fide proposal by a Third Party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than a majority of
the Shares then outstanding or all or substantially all of the assets of the
Company or to acquire, directly or indirectly, the Company by merger or
consolidation, and otherwise on terms which the Company Board determines in
good faith to be more favorable to the Company's stockholders (taking into
account the time period reasonably believed necessary to consummate such
transaction) than the Offer and the Merger (based on advice from the Company's
independent financial advisor that the value of the consideration provided for
in such proposal is superior to the value of the consideration provided for in
the Offer and the Merger), for which financing, to the extent required, is
then
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committed and which, in the good faith reasonable judgment of the Company
Board, is reasonably likely to be consummated. The term "Person" means an
individual, corporation, partnership, joint venture, association, joint stock
company, limited liability company, labor union, estate, trust, unincorporated
organization or other entity, including any Governmental Entity.
Indemnification and Insurance. The Merger Agreement provides that the
Company shall, to the fullest extent permitted under applicable Delaware law,
the terms of the Company's Certificate of Incorporation or By-Laws and
regardless of whether the Merger becomes effective, indemnify and hold
harmless each present and former director, officer or employee of the Company
or any of its subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including reasonable attorneys' fees), judgments,
losses, claims, damages and liabilities incurred in connection with, and
amounts paid in settlement of, any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative and
wherever asserted, brought or filed, (x) arising out of or pertaining to the
Offer or the Merger or (y) otherwise with respect to any acts or omissions or
alleged acts or omissions occurring at or prior to the Effective Time, in each
case for a period of six years after the date hereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time must be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving
Corporation shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received, and (iii) the Surviving
Corporation will cooperate in the defense of any such matter; provided,
however, that the Surviving Corporation shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld or delayed); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six year
period, all rights to indemnification in respect of any such claim or claims
shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to any single action unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. The indemnity agreements of
the Surviving Corporation in this paragraph shall extend to each Person or
entity who controls, or in the past controlled, any present or former
director, officer or employee of the Company or any of its subsidiaries.
The Merger Agreement provides that for a period of 36 months after the
Effective Time, Parent shall cause the Surviving Corporation to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms (including the amounts of
coverage and the amounts of deductibles, if any) that are no less favorable to
such persons than the terms now applicable to them under the Company's current
policies; provided, however, that in no event shall Parent or the Surviving
Corporation be required to expend in excess of 150% of the annual premium
currently paid by the Company for such coverage; and provided further, that if
the premium for such coverage exceeds such amount, Parent or the Surviving
Corporation shall purchase a policy with the greatest coverage available for
such 150% of the annual premium.
Conditions to the Merger. The respective obligations of Parent and
Purchaser, on the one hand, and the Company, on the other hand, to effect the
Merger are subject to the satisfaction of each of the following conditions,
any and all of which may be waived in whole or in part by the Company, Parent
or Purchaser, as the case may be, to the extent permitted by applicable law:
(i) the Merger Agreement shall have been approved and adopted by the requisite
vote of the holders of Shares, if required by applicable law and the
Certificate of Incorporation, in order to consummate the Merger; (ii) no
statute, rule, regulation, order, decree or injunction shall have been
enacted, promulgated or issued by any Governmental Entity precluding,
restraining, enjoining or prohibiting consummation of the Merger; and (iii)
Parent, Purchaser or their affiliates shall have purchased Shares pursuant to
the Offer.
Termination. The Merger Agreement may be terminated and the Merger
contemplated therein may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
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(a) By the mutual written consent of Parent and the Company; provided,
however, that if Parent shall have a majority of the directors pursuant to
the applicable provisions of the Merger Agreement, such consent of the
Company may only be given if approved by the Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting
the Offer or the Merger on the terms contemplated by the Merger Agreement
or (ii) any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties to the Merger Agreement shall use their reasonable
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree,
ruling or other action shall have become final and non-appealable.
(c) By either of Parent or the Company if the Effective Time shall not
have occurred on or before December 31, 1999, provided, that the party
seeking to terminate the Merger Agreement pursuant to this paragraph (c)
shall not have breached in any material respect its obligations under the
Merger Agreement in any manner that shall have proximately contributed to
the failure to consummate the Merger on or before such date.
(d) By the Company: (i) if the Company has entered into an agreement with
respect to a Superior Proposal or has approved or recommended a Superior
Proposal in accordance with the applicable provisions of the Merger
Agreement, provided the Company has complied with all provisions thereof,
including the notice provisions therein, and that it simultaneously
terminates the Merger Agreement; (ii) if Parent or Purchaser shall have
terminated the Offer or the Offer expires without Parent or Purchaser, as
the case may be, purchasing any Shares pursuant thereto; provided that the
Company may not terminate the Merger Agreement pursuant to this clause
(d)(ii) if the Company is in material breach of the Merger Agreement or the
Company Option Agreement; (iii) if Parent, Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of the
Offer, provided, that the Company may not terminate the Merger Agreement
pursuant to this clause (d) (iii) if the Company is in material breach of
the Merger Agreement or the Company Option Agreement; or (iv) if there
shall be a material breach by either Parent or Purchaser of any of its
representations, warranties, covenants or agreements contained in the
Merger Agreement or the Company Option Agreement.
(e) By Parent or Purchaser: (i) (A) if prior to the purchase of the
Shares pursuant to the Offer, the Company Board shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser, its
approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended or approved a Takeover Proposal, or (B) there
shall have been a material breach of any provision of the section of the
Merger Agreement summarized under "No Solicitation" above; (ii) if Parent
or Purchaser shall have terminated the Offer without Parent or Purchaser
purchasing any Shares thereunder, provided that Parent or Purchaser may not
terminate the Merger Agreement pursuant to this clause (e) (ii) if Parent
or Purchaser is in material breach of the Merger Agreement; (iii) if, due
to an occurrence that if occurring after the commencement of the Offer
would result in a failure to satisfy any of the conditions set forth in
Section 14 of the Offer, Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer; or (iv)
if any Person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired or announced
its intention to acquire beneficial ownership (as determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the
Shares; (v) if the Company receives a Takeover Proposal from any Person
(other than Parent or Purchaser), and the Company Board takes a neutral
position or makes no recommendation with respect to such Takeover Proposal
after a reasonable amount of time (and in no event more than five business
days following such receipt) has elapsed for the Company Board to review
and make a recommendation with respect to such Takeover Proposal; or (vi)
if there shall be a material breach by the Company of any of its
representations, warranties, covenants or agreements contained in the
Merger Agreement or the Company Option Agreement.
Termination Fee; Expenses. Pursuant to the Merger Agreement, if (x) Parent
or Purchaser terminates the Merger Agreement pursuant to clauses (e)(i) or
(e)(v) under the heading "Termination" above or (y) the
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Company terminates the Merger Agreement pursuant to clause (d)(i) under the
heading "Termination" above, then in each case, the Company shall pay, or
cause to be paid to Parent, at the time of termination, an amount equal to
$7,000,000 (the "Termination Fee") and an amount equal to Parent's and
Purchaser's actual and reasonably documented out-of-pocket expenses incurred
in connection with the Offer, the Merger, the Merger Agreement and the Company
Option Agreement, including, without limitation, the fees and expenses payable
to all banks, investment banking firms, and other financial institutions and
Persons and their respective agents and counsel incurred in connection with
acting as Parent's or Purchaser's financial advisor with respect to, or
arranging or committing to provide or providing any financing for, the Offer
or the Merger up to $1,500,000 (the "Expenses").
In addition, if the Merger Agreement is terminated (i) by either Parent or
the Company pursuant to clause (c) under the heading "Termination" above at
any time when there is pending a Superior Proposal, (ii) by Parent pursuant to
clauses (e)(ii), (iii) or (vi) under the heading "Termination" above (other
than by reason of a breach of any provision of the section of the Merger
Agreement summarized under "No Solicitation" above) or (iii) by the Company
pursuant to clause (d)(ii) under the heading "Termination" above (except, in
the case of clauses (e)(ii), (e)(iii) and (d)(ii), by reason of a failure of
the conditions in paragraphs (c) or (i) set forth in Section 14 of the Offer)
and at the time of any such termination, Parent is not in material breach of
this Agreement, then the Company shall pay to Parent, at the time of
termination, the Expenses. If, within 9 months after any termination referred
to in this paragraph, the Company shall enter into an agreement with respect
to a Takeover Proposal or any Person shall acquire 40% of the outstanding
Shares, then the Company shall pay the Termination Fee concurrently with
entering into any such agreement or, if sooner, within one day after such
acquisition. Any payments required to be made pursuant to this paragraph shall
be made by wire transfer of same day funds to an account designated by Parent.
Company Option Agreement
The following is a summary of certain provisions of the Company Option
Agreement. This summary is not a complete description of the terms and
conditions of the Company Option Agreement and is qualified in its entirety by
reference to the full text of the Company Option Agreement, which is
incorporated by reference as Exhibit 2 hereto. Capitalized terms not otherwise
defined below have the meanings ascribed to them in the Company Option
Agreement.
Grant of Option. The Company Option Agreement provides for the grant by the
Company to Parent of an irrevocable option (the "Stock Option") to purchase up
to 19.9% of the number of Shares (the "Option Shares") issued at the time of
the grant of the Stock Option, at a price of $25.50 per Share (the "Exercise
Price"), payable in cash in accordance with the terms of the Company Option
Agreement.
Exercise of Option. The Company Option Agreement provides that the Stock
Option may be exercised by Parent, in whole or in part, at any time or from
time to time after the Merger Agreement becomes terminable pursuant to a
Triggering Event (as defined below). For the purposes of the Company Option
Agreement, "Triggering Event" means any termination of the Merger Agreement
which could entitle Parent to the Termination Fee under the Merger Agreement.
Cash Payment. If, at any time during the period commencing on the occurrence
of a Triggering Event and ending on the termination of the Stock Option in
accordance with the provisions of the Company Option Agreement, Parent sends
to the Company a notice indicating Parent's election to exercise its right
(the "Cash-Out Right") described in this paragraph, then the Company shall pay
to Parent, in exchange for the cancellation of the Stock Option with respect
to such number of Option Shares as Parent specifies an amount in cash equal to
the amount by which (A) the highest of (i) the price per share of the Shares
at which a tender offer or exchange offer therefor has been made, (ii) the
highest price per share of the Shares to be paid by any third-party pursuant
to an agreement with the Company, (iii) the highest closing price per Share
within the six month period immediately preceding the Notice Date and (iv) in
the event of a sale of all or a substantial portion of the Company's assets,
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of the Company divided by the number of Shares
outstanding at the time of such sale, exceeds (B) the Exercise Price,
multiplied by the number of shares for which the Stock Option is then
exercised.
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If Parent receives in aggregate (i) the Termination Fee and Expenses
pursuant to the applicable provisions of the Merger Agreement, (ii) amounts
from the sale or other disposition of the Option Shares, and (iii) amounts
paid pursuant to the Company Option Agreement as described in the above
paragraph, and the aggregate of such amounts is in excess of the sum of (A)
$8,500,000 plus (B) the amounts paid by Parent to purchase any Option Shares,
then Parent, at its sole election, shall either (1) reduce the number of
Option Shares, (2) deliver to the Company for cancellation Option Shares
previously purchased by Parent, (3) pay cash to the Company or (4) any
combination thereof, so that the amount received by Parent pursuant to clauses
(i), (ii) and (iii) above shall not exceed the sum of the amounts in clauses
(A) and (B) above after taking into account the foregoing actions.
Termination of Option. The Company Option Agreement provides that the Stock
Option will terminate upon the earlier of: (i) the purchase of Shares pursuant
to the Offer; (ii) six months after the date on which a Triggering Event
occurs; or (iii) the termination of the Merger Agreement in accordance with
its terms prior to the occurrence of a Triggering Event, unless, in the case
of clauses (ii) and (iii), Parent could be entitled to receive the Termination
Fee following such time or termination upon the occurrence of certain events,
in which case the Stock Option will not terminate until the later of (x) six
months following the time such fees become payable and (y) the expiration of
the period in which Parent has such right to receive the Termination Fee.
Registration Rights. The Company Option Agreement provides that Parent,
within three years, may, by written notice to the Company, request that the
Company register under the Securities Act all or any part of the Shares
beneficially owned by Parent in order to permit the sale or other disposition
of such securities pursuant to (a) a shelf registration or (b) a bona fide,
firm commitment underwritten public offering.
Adjustment upon Changes in Capitalization. The Company Option Agreement
provides that in the event of any change in the Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Stock
Option, and the Exercise Price per share, will be adjusted appropriately and
proper provision will be made so that Parent will receive upon exercise of the
option the number and class of shares or other securities or property that
Parent would have received with respect to the Shares if the Stock Option has
been exercised immediately prior to such event or the record date therefor, as
applicable.
Confidentiality Agreement
The following is a summary of certain provisions of the Confidentiality
Agreement entered into on November 6, 1998 by Parent and the Company, as
supplemented on December 15, 1998 (the "Confidentiality Agreement"). This
summary is not a complete description of the terms and conditions of the
Confidentiality Agreement and is qualified in its entirety by reference to the
full text of the Confidentiality Agreement, which is incorporated by reference
as Exhibit 8 hereto. Capitalized terms not otherwise defined below have the
meanings described to them in the Confidentiality Agreement.
Pursuant to the terms of the Confidentiality Agreement, the Company and
Parent agreed to provide, among other things, for the confidential treatment
of their discussions regarding a possible business combination and the
exchange of certain confidential information concerning the Company and Wabash
(as defined below). Parent further agreed that, without the prior written
consent of the Company, neither Parent nor any of its subsidiaries would hire
any employee of the Company for a period of two years from the termination of
discussions concerning a possible business combination between the Company and
a subsidiary of Parent. The Company also agreed not to hire any employee of
Parent or its subsidiaries, without the prior written consent of Parent, for
the same period of time. Parent further agreed that, for a period of one year
from the termination of discussions concerning a possible business combination
between the Company and a subsidiary of Parent, unless specifically requested
by the Company in writing, neither Parent nor any of its affiliates will, in
any manner, directly or indirectly, (a) acquire any securities or property of
the Company, (b) propose to enter into any merger or business combination or
purchase a material portion of the assets of the Company other than a
confidential proposal made to the Company Board without any public disclosure
by Parent, (c) participate in any solicitations of proxies,
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(d) participate in a "group" (within the meaning of the Exchange Act) with
respect to any securities of the Company, (e) seek to control or influence the
management or policies of the Company or the Company Board, (f) disclose any
intention, plan or arrangement inconsistent with any of the foregoing or (g)
advise, assist or encourage any other persons in connection with any of the
foregoing.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors.
The Company's Board of Directors has unanimously approved the Merger
Agreement and determined that the Offer and the Merger are fair to and in the
best interests of the stockholders of the Company and recommends that all
stockholders of the Company accept the Offer and tender all their Shares
pursuant to the Offer. This recommendation is based in part upon an opinion
received by the Board of Directors of the Company from ABN AMRO Incorporated
("ABN AMRO") that the consideration to be received by the holders of the
Shares in the Offer and in the Merger is, as of the date of such opinion and
based on and subject to certain matters and assumptions stated therein, fair,
from a financial point of view, to the holders of the Shares. The full text of
the fairness opinion received by the Board of Directors of the Company from
ABN AMRO (the "ABN AMRO Opinion") is filed as an exhibit to this Schedule 14D-
9 and as Annex II hereto and is incorporated herein by reference. Stockholders
are urged to read such opinion in its entirety.
A copy of the press release issued jointly by the Company and Parent on May
12, 1999 announcing the Merger and the Offer is filed as Exhibit 5 to this
Schedule 14D-9 and is incorporated herein by reference in its entirety.
(b) Background of the Offer, Reasons for the Recommendation.
From time to time during the past several years, the Board of Directors of
the Company has considered various strategic and financial alternatives with a
view toward increasing stockholder value. In addition to internal development
of its technology, this process has included efforts to identify companies
having compatible technologies to expand the product offering, size and growth
of the Company either through joint venture arrangements or acquisitions. In
August 1996, Parent initiated discussions with Thomas R. Filesi, Chairman and
Chief Executive Officer of the Company, regarding the possibility of Parent
making a significant investment in the Company. Discussions continued
sporadically through February 1997, when Parent indicated that it had no
interest in proceeding. In October 1998, representatives of Parent and the
Wabash Technologies operation of Parent's Kearney-National Inc. subsidiary
("Wabash") again approached the Company and requested a meeting to determine
whether a combination of the businesses of the Company and Wabash would be
attractive to the parties.
In order to evaluate the possibility of a combination, on November 6, 1998
the Company and Parent entered into a mutual non-disclosure agreement to
protect the information which would be exchanged. During late 1998 and early
1999, the Company also had discussions with other companies in related
businesses to identify alliances to more aggressively pursue advanced
technologies.
At several subsequent meetings in December 1998 and January 1999,
representatives of Parent and Wabash met with Mr. Filesi, Jerry L. Curtis,
President and Chief Operating Officer of the Company, and William J.
Collinsworth, Chief Financial Officer of the Company. At these meetings, the
Company suggested that it might be willing to acquire Wabash in exchange for
Shares. On January 20, 1999, representatives of the Company, including Messrs.
Filesi and Curtis, visited facilities of Wabash to explore the merits of a
possible business combination. On January 21, 1999, Mr. Filesi met with Robert
R. Dyson, Chairman and Chief Executive Officer of Parent, Joseph L. Aurichio,
President and Chief Operating Officer of Parent, and Bruce A. Cauley, Vice
President-Corporate Development of Parent. At that meeting, Mr. Dyson
suggested that Parent might be interested in acquiring all of the equity
interest in the Company. On January 25, 1999, Mr. Dyson advised Mr. Filesi
that Parent would like to put together a friendly purchase of the Company for
cash. He emphasized that Parent would be prepared to move quickly, and its
proposal would not be subject to a financing contingency.
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On January 27, 1999, the Company's Board held a meeting to discuss the
results of these preliminary meetings. During that meeting, Mr. Filesi
described his discussions with Parent and another company regarding a possible
combination of their respective businesses. Based on those reports, the Board
appointed a special committee consisting of Messrs. Michael E. Cahr and Grant
A. Dove to further investigate a possible combination of the Company with
Wabash. Subsequently, on February 10, 1999 the committee met with Messrs.
Dyson, Aurichio and Robert D. Farley, Vice President-Corporate Transactions of
Parent with a view toward acquiring Wabash for Shares of the Company. They
expressed their belief that such a transaction might qualify as a pooling of
interests for accounting purposes. Parent's representatives reiterated their
interest in a purchase of the Company for cash, but agreed to reconsider the
issue and speak further with the Company.
At the subsequent regularly scheduled meeting of the Board of Directors on
February 16, 1999, the committee reported upon its discussions with Parent and
Wabash's representatives concerning a possible combination of the Company with
Wabash. Various alternative structures were discussed, but without specifics
since neither party had advanced any proposal.
On February 18, 1999, Mr. Farley advised Mr. Filesi that Wabash did not
qualify under the accounting rules for pooling transactions. As a result, and
in light of the adverse impact which would result from amortization of
goodwill under the purchase accounting rules, the acquisition of Wabash by the
Company was not an attractive alternative. Mr. Filesi indicated that the
Company's Board had independently reached the same conclusions. Parent then
again suggested an acquisition of the Company for cash, and Mr. Filesi said
that the Company would consider such an offer.
During the period from late February to early March, the Company received
unsolicited inquiries from two parties ("Company A" and "Company B",
respectively) indicating general interest in discussing a transaction with the
Company. On March 17, 1999, the Company entered into a non-disclosure
agreement with Company B to protect any non-public information which might be
provided.
On March 25, 1999, Messrs. Filesi and Collinsworth met with representatives
of ABN AMRO to discuss the status of recent discussions between management and
several parties interested in exploring a possible business combination with
the Company, including Parent, and to review the Company's strategic and
financial alternatives, including remaining independent. That same day, Mr.
Filesi received an unsolicited oral indication of interest by Company A to
acquire the Company for consideration in the low $20's. Company A had
conducted no non-public due diligence upon which to base any proposal,
however. Mr. Filesi responded that the Company was not for sale and had no
interest in pursuing a transaction in the price range proposed by Company A.
In addition, on March 25, 1999 Parent advised the Company that it was
prepared to enter discussions relating to the price at which it might acquire
the Company and suggested that the Company engage financial and legal advisors
to facilitate the process. On April 1, 1999, Parent orally indicated to Mr.
Filesi that Parent would be interested in discussing an acquisition of the
Company at $22.50 per Share subject to further due diligence, negotiation of a
definitive agreement, and confidentiality until a definitive agreement could
be reached. On April 7, 1999, Mr. Filesi advised Mr. Cauley that the Company
would continue discussions with Parent and was considering retaining an
investment banker.
On March 29, 1999, Company A again contacted Mr. Filesi to indicate its
interest in the Company. Mr. Filesi reiterated that the Company had no
interest in the price range stated by Company A.
After that date and through April 19, 1999, due diligence activities
continued sporadically between the Company and each of Parent and Company B.
On April 15, 1999, Company B had preliminary discussions with Mr. Filesi
concerning its level of interest in acquiring the Company. On April 19, 1999,
Company B stated that, based upon the information received to date, it did not
feel it could propose an offer at a price level that would be attractive to
the Company.
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On April 22, 1999, the Company received an unsolicited, written indication
of interest from Company A to acquire the Company subject to due diligence and
negotiation of a definitive agreement. The Company subsequently agreed to
enter into a non-disclosure agreement with Company A .Management informed both
Parent and Company A that there had been no decision by the Company's Board to
sell the Company, and that the Company was willing to proceed in discussions
on a non-exclusive basis. On April 26, 1999, the Company's Board met to
discuss the unsolicited indication of interest and the Company's strategic
position and to retain ABN AMRO as its financial advisor to assist in a review
of strategic and financial alternatives, including a sale of the Company. At
that meeting, the Board also authorized the Company's management and ABN AMRO
to respond to any proposals received and to use reasonable efforts to obtain
additional proposals.
On April 27, 1999, at a meeting attended by Messrs. Cauley, Farley and a
representative of Bear Stearns & Co. Inc. ("Bear Stearns"), and Messrs.
Filesi, Curtis, Collinsworth and a representative of ABN AMRO, the Company
advised Parent that it expected to issue a press release on May 18 to announce
the Company's second quarter earnings and expected that any announcement with
respect to an acquisition of the Company should be made on or before May 18,
1999. Parent confirmed its general interest in the Company, subject to
completion of due diligence and negotiation of agreements, and confirmed its
financial ability to complete an acquisition for cash. The next day, ABN AMRO
advised Bear Stearns that Parent should submit its proposal to the Company,
together with a form of acquisition agreement, no later than May 7, and that
such proposal should include no financing contingency. ABN AMRO also
communicated to Company A and Company B the Company's interest in receiving
proposals which were not subject to any financing contingency by May 7, 1999.
Also on April 27, 1999, Mr. Filesi received an unsolicited indication of
interest from an additional company ("Company C") to enter into a transaction
with the Company. Mr. Filesi arranged for representatives of Company C to
visit the Company's facilities on May 3, 1999. Later on April 27, 1999, Mr.
Filesi received an unsolicited indication of interest from a fifth company
("Company D") to enter into a transaction with the Company. Mr. Filesi also
contacted another company ("Company E") which had contacted the Company the
previous year to indicate a possible interest in a transaction with the
Company.
Also on April 27, 1999, the Board met with ABN AMRO and Company management
to review the status of these various discussions. Mr. Filesi reported upon
the additional unsolicited overtures he had received from Company C and
Company D and upon his discussions with Company E. ABN AMRO identified
additional parties, including a company ("Company F") which had previously
contacted ABN AMRO with an interest. After such discussion, the Board of
Directors authorized management and ABN AMRO to continue discussions with
Parent and other interested parties to explore the merits and prospects of a
potential business combination culminating in the submission of acquisition
proposals on May 7, 1999.
On April 28, 1999, the Company executed non-disclosure agreements with
Company C and Company D. Company F was contacted by ABN AMRO and a non-
disclosure agreement was discussed, but Company F declined to proceed with any
further discussions.
On April 29, 1999, representatives of Company D contacted Mr. Filesi and
expressed interest in pursuing an acquisition of the Company for stock. A
representative of Company E also contacted Mr. Filesi to indicate a general
interest, but stated that Company E would discuss the matter internally and
would respond. No subsequent communications were received from Company E.
On April 30, 1999, Company D contacted ABN AMRO to express its interest in a
business combination, but acknowledged that it needed to (i) consider an
exchange of shares, which were illiquid, non-US traded securities or (ii)
raise funds through the issuance of additional equity in order to consummate a
transaction. On that basis, the Company determined that Company D would not be
competitive with the other parties and terminated further discussions.
Throughout the week of May 3, 1999, ABN AMRO and Company management met
separately with representatives of Parent, Company A, Company B and Company C,
to conduct business, financial, legal and operational due diligence. These
meetings included discussion of the Company's results of operations for April
30, 1999 and the forecast for the balance of the Company's fiscal year, both
of which were below the Company's previous projections and research analysts'
current estimates.
14
<PAGE>
On Friday, May 7, 1999, ABN AMRO received written proposals to acquire all
of the Company's issued and outstanding shares together with initial drafts of
a definitive agreement from Company A and Parent. Each proposal was subject to
the negotiation of a definitive agreement. The proposal of Parent was
expressly conditioned upon confidentiality and provided that disclosure of the
proposal would result in its automatic withdrawal. That same date, Mr. Filesi
received an oral indication of interest from Company C, subject to due
diligence, which was less than the Offer Price. Parent's proposal was less
than the proposal received from Company A. Further, Company B informed ABN
AMRO that it was not willing to submit a proposal at that time although it
later submitted an oral proposal (see below). ABN AMRO reviewed the proposals
with management and management authorized ABN AMRO to (i) continue discussions
with Company A to determine if Company A was prepared to improve its proposal
and (ii) discuss the other terms of its proposal and the draft definitive
agreement. Upon further discussions with Company A, Company A indicated that
it had little flexibility with respect to its proposal. After reviewing the
status of discussions with Company A, management authorized ABN AMRO to
continue discussions with Parent only if Parent would consider improving its
proposal.
After several conversations with ABN AMRO and Parent's financial advisor
regarding Parent's initial proposal, Parent indicated that it was prepared to
offer $25.50 per share, subject to the negotiation of a definitive agreement.
During the period from May 10, 1999 to May 12, 1999, the parties conducted
negotiations with respect to the Merger Agreement and the Company Option
Agreement and related business issues, including the amount of the termination
fee and the circumstances under which it would be payable and certain other
terms of the Offer and the Merger. In subsequent discussions between ABN AMRO
and Bear Stearns, Bear Stearns indicated that Parent was not prepared to
increase its proposal above $25.50 per share.
On Monday, May 10, 1999, the Board of Directors met with ABN AMRO, which
updated the Board concerning the state of the discussions. After this meeting,
ABN AMRO reaffirmed with Company B its communication of May 7, 1999. After
several discussions between ABN AMRO and Company B, Company B indicated that
it would be willing to proceed at a price which was below the Offer Price,
subject to limited additional due diligence and negotiation of a definitive
agreement.
At a meeting held on May 11, 1999, the Company's Board reviewed the status
of discussions with all parties and discussed Parent's proposal and the
Company's current and anticipated financial performance. ABN AMRO delivered to
the Company's Board its opinion to the effect that, as of such date and based
upon and subject to certain matters and assumptions stated therein, the
consideration to be received by the holders of Shares pursuant to the Offer
and under the terms of the Merger Agreement is fair to such holders from a
financial point of view, and discussed the effects of the Company Option
Agreement and other terms of the Merger Agreement. At the conclusion of its
discussion, the Company's Board unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby, including the Offer, the
Merger and the Company Option Agreement, and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the holders of
the Shares, and unanimously recommended that stockholders of the Company
accept the Offer and tender their Shares.
Following the approval by the Company's Board and completion of final terms
of the Merger Agreement on May 12, 1999, Parent, the Purchaser and the Company
executed and delivered the Merger Agreement, and on May 12, 1999, they issued
a press release announcing the execution of the Merger Agreement and the
transactions contemplated thereby.
On May 18, 1999, pursuant to the terms of the Merger Agreement, Purchaser
commenced the Offer.
Reasons for the Recommendation
In reaching its conclusions to approve the Merger and recommend that
stockholders accept the Offer, the Board of Directors of the Company
considered a number of factors, including, without limitation, the following:
(i) the financial and other terms and conditions of the Offer and the
Merger Agreement;
15
<PAGE>
(ii) the Company's business, financial condition, results of operations,
assets, liabilities, business strategy and prospects, as well as various
uncertainties associated with those prospects, including the impact of
industry trends upon the Company's growth prospects;
(iii) the Board of Directors' review over the last several months of the
Company's strategic plan and its reevaluation of whether remaining
independent was the best means to achieve the Company's business goals and
maximize stockholder value;
(iv) that the $25.50 per Share price to be received by the Company's
stockholders in both the Offer and the Merger represents an approximately
29.9% premium over the closing market price of $19.63 per Share on May 11,
1999, the last full trading day prior to the announcement of the execution
of the Merger Agreement, and premiums of approximately 44.7% and 82.1% over
the average closing prices for the one-week period and the four-week
period, respectively, preceding May 11, 1999, and that such price would be
payable in cash, thus eliminating any uncertainties in valuing
consideration to be received by the Company stockholders;
(v) that the Offer and the Merger would not be subject to any financing
condition and that Parent has represented that the funds necessary to
consummate the Offer and the Merger are available and will be provided to
Purchaser;
(vi) the written opinion of ABN AMRO that the consideration to be
received by the holders of Common Stock in the Offer and the Merger is fair
to such stockholders from a financial point of view; a copy of the ABN AMRO
Opinion is attached as an exhibit to this Schedule 14D-9 and as Annex II
and is incorporated herein by reference. Holders are urged to read such
opinion in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered and limitations of
the review undertaken by ABN AMRO;
(vii) the presentation of ABN AMRO to the Board of Directors at its
meeting on May 11, 1999, as to various financial and other matters
involving the Company and the transaction which the Board of Directors
deemed relevant, including, among other things, (a) a review of the
Company's historical and projected financial performance and other data
provided to ABN AMRO by the Company relating to the Company's business, (b)
a review of the stock prices and trading volumes of the Shares, (c) a
review of the trading and operating performance of certain publicly traded
sensor and electronic components companies, (d) a review of certain
transactions in the sensor and electronic components industry, (e) a review
of premiums paid in certain other transactions, (f) a discounted cash flow
valuation of the Company, and (g) an analysis of the consideration implied
by the Offer Price as a multiple of various measures of the Company's
operating performance;
(viii) the fact that management of the Company had held discussions with
other parties, including several of the companies it reasonably considered
to be potential interested parties, concerning possible business
combinations, and such discussions had resulted in three other parties
making serious proposals, all of which involved proposed transactions at
lower prices per share than the Offer Price;
(ix) the fact that, to the extent required by the fiduciary obligations
of the Company's Board of Directors to the stockholders under Delaware law,
the Company may terminate the Merger Agreement in order to approve a tender
offer or exchange offer for the Shares or other proposed business
combination by a third party on terms more favorable to the Company's
stockholders than the Offer and the Merger taken together, upon the payment
of a $7 million termination fee and up to $1.5 million of Parent's expenses
associated with the Offer and the Merger;
(x) the future of the Company's employees and Parent's expressed
intention to keep the Company's existing work force substantially in place;
and
(xi) the impact of the Offer and the Merger on existing options and
employment agreements with Company personnel.
The foregoing is not intended to be exhaustive, but is intended to include
many of the material factors considered by the Company's Board. In view of the
complexity and variety of the issues, the Board did not
16
<PAGE>
attempt to quantify or otherwise attempt to assign any relative or specific
weights to the specific factors considered, and individual directors may have
given differing weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company decided to retain ABN AMRO on April 26, 1999 as a financial
advisor in connection with a review of strategic and financial alternatives,
including a possible transaction to acquire the Company's Shares, and to
analyze the fairness of any proposed transaction from a financial point of
view. Pursuant to its agreement with the Company, ABN AMRO will be entitled to
a fee of approximately $1.8 million upon completion of the Merger and, in
addition, became entitled to receive $200,000 upon delivery of the ABN AMRO
Opinion. Upon the signing of the agreement by ABN AMRO and the Company, ABN
AMRO was also due $50,000 which will be credited against any amounts received
upon completion of the Merger. In addition, the Company has agreed to
reimburse ABN AMRO for its out-of-pocket expenses, including the fees and
disbursements of its counsel, and to indemnify ABN AMRO and its partners,
employees, agents, affiliate or controlling persons against certain
liabilities relating to or arising out of its engagement, including
liabilities under federal securities laws.
In the ordinary course of business, ABN AMRO may actively trade the Shares
for its own account and for the accounts of customers and may, therefore, at
any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty (60) days, to the best of the Company's knowledge,
no transactions in the Shares have been effected by the Company or any
executive officer, director, affiliate or subsidiary of the Company except as
set forth below.
Within the last sixty (60) days, the Company purchased Shares as follows:
<TABLE>
<CAPTION>
Date Amount Price Per Share
---- ------ ---------------
<S> <C> <C>
March 19, 1999...................................... 3,100 $15.00
March 22, 1999...................................... 6,200 $14.8125
March 23, 1999...................................... 6,200 $14.75
</TABLE>
No other transactions in the Shares have been effected by the Company within
the past sixty (60) days, other than issuance of awards of 22,167 Shares upon
exercise of employee stock options held by non-executive employees of the
Company.
(b) To the best of the Company's knowledge, all of the Company's executive
officers and directors who own Shares currently intend to tender all of their
Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary thereof; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary thereof; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that
relates to, or would result in, one or more of the events referred to in Item
7 (a) above.
17
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) State Business Combination Law.
Delaware. The Company has elected not to be governed by Section 203 of the
DGCL.
(b) Antitrust
The Offer and the Merger are subject to the Hart-Scott-Rodino Antitrust
Improvements Act (the "HSR Act") and the rules promulgated thereunder, which
provide that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and certain waiting period requirements have been
satisfied.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act by each of Parent and the Company. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Parent, unless the
Antitrust Division and the FTC terminate the waiting period prior thereto.
However, the FTC or the Antitrust Division may extend the waiting period by
requesting additional information or documentary material. If such a request
is made, the waiting period would be extended and would expire at 11:59 p.m.,
New York City time, on the tenth calendar day after the date of substantial
compliance by Parent with such request. Only one extension of the waiting
period pursuant to a request for additional information is authorized by the
HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Parent. Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period
requirements imposed by the HSR Act with respect to the Offer have been
satisfied.
The FTC and the Antitrust Division frequently scrutinize the legality under
the Antitrust Laws (as defined below) of transactions such as the Offer and
the Merger. At any time before or after Purchaser's acquisition of Shares
pursuant to the Merger, the Antitrust Division or the FTC could take such
action under the Antitrust Laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise seeking divestiture of Shares acquired by
Purchaser or divestiture of substantial assets of Parent, the Company or their
respective affiliates. Private parties and state attorneys general may also
bring legal action under the Antitrust Laws under certain circumstances.
As used in this Schedule 14D-9, "Antitrust Laws" shall mean and include the
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other Federal and state statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines,
and other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade.
18
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated as of May 12, 1999, among Parent,
Purchaser and the Company (incorporated by reference herein to
Exhibit(c)(1) to Schedule 14D-1 of Purchaser and Parent, filed on May
18, 1999).
2 Stock Option Agreement, dated as of May 12, 1999, between the Company
and Parent (incorporated by reference herein to Exhibit (c)(2) to
Schedule 14D-1 of Purchaser and Parent, filed on May 18, 1999).
3 Opinion of ABN AMRO Incorporated dated May 11, 1999.*
4 Consent of ABN AMRO Incorporated (included in Exhibit 3).
5 Joint press release issued by the Company and Parent on May 12, 1999.
6 Letter to Stockholders, dated May 18, 1999, from Thomas R. Filesi,
Chairman and Chief Executive Officer of the Company.*
7 Proxy Statement dated January 29, 1999 for the Company's 1999 Annual
Meeting of Stockholders (incorporated by reference herein).
8 Confidentiality Agreement, dated as of November 6, 1998, as
supplemented on December 15, 1998, by and between the Company and
Parent (incorporated by reference herein to Exhibit (c)(3) to Schedule
14D-1 of Purchaser and Parent, filed on May 18, 1999).
</TABLE>
- --------
* Included in the Schedule 14D-9 mailed to the Company's stockholders.
[SIGNATURE PAGE FOLLOWS]
19
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Optek Technology, Inc
/s/ Thomas R. Filesi
By: _________________________________
Thomas R. Filesi
Chairman of the Board and Chief
Executive Officer
May 18, 1999
20
<PAGE>
ANNEX I
OPTEK TECHNOLOGY, INC.
1215 WEST CROSBY ROAD
CARROLLTON, TEXAS 75006
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-l THEREUNDER
This Information Statement is being mailed on or about May 18, 1999 as part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Optek Technology, Inc. (the "Company") to the holders of record of
shares of Common Stock, par value $0.01 per share, of the Company (the
"Shares"). You are receiving this Information Statement in connection with the
possible election of persons designated by the Purchaser (as defined below) to
a majority of the seats on the Board of Directors of the Company.
On May 12, 1999, the Company, The Dyson-Kissner-Moran Corporation, a
Delaware corporation ("Parent"), and DKM Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of Parent entered into
an Agreement and Plan of Merger (the "Merger Agreement") in accordance with
the terms and subject to the conditions of which (i) Parent will cause
Purchaser to commence a tender offer (the "Offer") for all outstanding Shares
at a price of $25.50 per Share, net to the seller in cash, and (ii) Purchaser
will be merged with and into the Company (the "Merger"). As a result of the
Offer and the Merger, the Company will become a wholly owned subsidiary of
Parent.
The Merger Agreement requires the Company to take such action as Purchaser
may reasonably request to cause Purchaser's designees to be elected to the
Board of Directors under the circumstances described therein. See "Board of
Directors and Executive Officers--Right to Designate Directors; Parent
Designees" below.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the Schedule
14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on May 18,
1999. The Offer is scheduled to expire at 12:00 midnight, New York City Time,
on Tuesday, June 15, 1999, unless the Offer is extended.
The information contained in this Information Statement concerning Purchaser
and Parent has been furnished to the Company by Purchaser and Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of May 12, 1999, there were 7,642,773
shares outstanding and 930,034 shares reserved for issuance upon exercise of
outstanding options. The Board of Directors currently consists of seven
members. At each annual meeting of stockholders, Directors are elected to hold
office for one year terms until the next annual meeting of stockholders.
Right to Designate Directors; Parent Designees
The Merger Agreement provides that, promptly upon the purchase of and
payment for any Shares satisfying the Minimum Condition, Parent shall be
entitled to designate the number of Directors, rounded up to the nearest
I-1
<PAGE>
whole number, on the Company's Board of Directors that equals the product of
(i) the total number of Directors on the Company Board of Directors (giving
effect to the Directors designated by Parent) multiplied by (ii) the
percentage that the aggregate number of Shares beneficially owned by Parent,
Purchaser and any of their affiliates bears to the total number of Shares then
outstanding. The Company has agreed that, upon request of Parent, it will use
its best efforts promptly either to increase the size of its Board of
Directors or secure the resignations of such number of its incumbent
Directors, or both, as is necessary to enable Parent's designees to be so
elected or appointed to the Company's Board of Directors, and that it shall
cause Parent's designees to be so elected or appointed at such time.
Purchaser has indicated that it will designate Robert R. Dyson, Joseph L.
Aurichio, Robert D. Farley, Bruce A. Cauley and John F. Tierney, Jr. as
Parent's designees (the "Parent Designees").
Mr. Dyson, age 52, has been Chairman of the Board and Chief Executive
Officer of Parent since 1992.
Mr. Aurichio, age 67, has been President and Chief Operating Officer of
Parent since 1993.
Mr. Farley, age 57, has been Vice President--Corporate Transactions of
Parent since 1987.
Mr. Cauley, age 46, has been Vice President--Corporate Development of Parent
since 1994. From 1988 to 1994, he was Deputy General Manager of Banque Paribas
Dallas.
Mr. Tierney, age 38, has been Executive Vice President and Chief Operating
Officer of Kearney-National Inc., a subsidiary of Parent, since April 1999.
From 1993 to April 1999, he was Vice President and Chief Financial Officer of
Kearney-National Inc.
None of the Parent Designees (i) is currently a Director of, or holds any
position with, the Company, (ii) has a familial relationship with any
Directors or executive officers of the Company, or (iii) to the best knowledge
of Parent and Purchaser, beneficially owns any securities (or right to acquire
such securities) of the Company, except Mr. Cauley, who owns 300 Shares in
joint tenancy with his wife, which Shares were purchased on September 30,
1997. The Company has been advised by Parent and Purchaser that, to the best
of Parent's and Purchaser's knowledge, none of the Parent Designees has been
involved in any transactions with the Company or any of its Directors,
executive officers or affiliates which are required to be disclosed herein or
in the Schedule 14D-9.
It is expected that the Parent Designees may assume office at any time
following the acceptance for payment of, and payment for, any Shares pursuant
to the Offer, and that, upon assuming office, the Parent Designees will
thereafter constitute at least a majority of the Board of Directors.
Biographical information concerning each of the Company's current directors
and executive officers is presented on the following pages.
I-2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The persons named below are the current Directors and executive officers of
the Company. The following sets forth as to each Director or executive officer
his age (as of May 18, 1999), principal occupation and business experience,
the period during which he has served as a Director or executive officer and
the expiration of his term as a Director or executive officer.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Thomas R. Filesi........ 64 Director, Chairman and Chief Executive Officer
Jerry L. Curtis......... 51 Director, President and Chief Operating Officer
Michael E. Cahr......... 59 Director
William H. Daughtrey.... 59 Director
Grant A. Dove........... 70 Director
Rodes Ennis............. 63 Director
Wayne Stevenson......... 63 Director
Richard G. Dahlberg..... 46 Senior Vice President
William J.
Collinsworth........... 48 Vice President, Finance and Chief Financial Officer
Robert J. Kosobucki..... 47 Vice President, Worldwide Sales and Marketing
</TABLE>
Mr. Filesi has served as Chief Executive Officer and a Director of the
Company since April 1991. Before joining the Company, he was employed by
Motorola, Inc. Semiconductor Products Sector for 21 years, completing his
tenure there as Director of Manufacturing, RF Products.
Mr. Curtis was elected President, Chief Operating Officer and Director in
May 1998. Prior to joining the Company, he was employed by Motorola, Inc.
Semiconductor Products Sector for 25 years, completing his tenure there as a
Vice President and General Manager.
Mr. Cahr was elected a Director of the Company in August 1988. He is
Chairman of Allscrips Pharmaceuticals, Inc., a private company engaged in the
sale of prepackaged pharmaceuticals, having previously served as President and
Chief Executive Officer from January 1995 to December 1997. Until late 1994 he
was Manager of Venture Capital at Allstate Insurance Company in Northbrook,
Illinois, having been with Allstate Insurance Company since 1987.
Mr. Daughtrey was elected a Director of the Company in March 1992. Mr.
Daughtrey is currently President of Princeton Associates, Inc., a management
consulting firm. Prior to founding Princeton Associates, Inc. in January 1991,
he was Group Managing Partner for Virginia/Maryland Management Consulting
Services at Coopers & Lybrand, Richmond, Virginia from December 1984. On
September 1, 1995, JGB Industries, Inc., a company for which Mr. Daughtrey had
formerly served as interim President and Chief Executive Officer from November
1993 to August 1995, filed for protection under Chapter 11 of the Bankruptcy
Code.
Mr. Dove was elected a Director of the Company in July 1989. He was Chairman
of the Board from March 1993 through May 1998. He is currently a managing
partner of Technology Strategies & Alliance, a strategic planning and
investment banking firm. He spent 28 years with Texas Instruments
Incorporated, retiring in 1987 as Executive Vice President. He then served as
Chairman and Chief Executive Officer of Microelectronics and Computer
Technology Corporation, a research and development consortium, retiring in
1992. He currently serves on the boards of the Cooper Cameron Corporation, an
oilfield services company; Media One Group, a provider of telecommunications
and cable television; and Intervoice, Inc., a telecommunications equipment and
software sales provider.
Mr. Ennis was elected a Director of the Company in February 1987. Mr. Ennis
currently serves as a general management consultant and formerly served as
President of the Journeys and Hardy Divisions of Genesco, Inc., a footwear
retailer, from March 1990 to December 1992.
I-3
<PAGE>
Mr. Stevenson was elected a Director of the Company in September 1992. Mr.
Stevenson is the Chairman and Chief Executive Officer of CSI Control Systems
International, Inc., a private firm engaged in the manufacture and
installation of environmental controls for the commercial market, a position
he has held since 1986.
Mr. Dahlberg was elected Vice President, Engineering in March 1994 and
became a Senior Vice President in December 1997. Mr. Dahlberg has been
employed by the Company since 1983 and has served in various engineering
capacities. He is a Registered Professional Engineer in the State of Texas.
Mr. Collinsworth joined the Company as Vice President, Finance and Chief
Financial Officer in October 1996. From 1993 until joining the Company, he was
an independent financial consultant specializing in start-up and troubled
companies. In that role, he worked with several private companies and also
served as Chief Financial Officer for Value Added Communications, Inc.
("VAC"), a provider of telecommunications services and equipment, from June
1994 to October 1994. In November 1995, VAC filed for protection under Chapter
11 of the Bankruptcy Code.
Mr. Kosobucki joined the Company as Vice President, Worldwide Sales and
Marketing in July 1995. From 1991 to 1995, he served in various strategic
marketing and sales capacities for Summagraphics Corp., a manufacturer of
computer-based printers and plotters, most recently as Director of Strategic
Sales and Product Marketing. He is a Registered Professional Engineer in the
State of New York.
Directors are elected annually and serve until their successors are duly
elected and qualified. Officers serve at the discretion of the Board, subject
to contractual rights. There is no family relationship between any Director,
nominee for Director or executive officer of the Company.
The Company's Board of Directors has appointed a Compensation Committee,
composed of the non-employee Directors Cahr, Ennis and Stevenson; an Audit
Committee, composed of the non-employee Directors Ennis, Daughtrey and
Stevenson; and a Board Affairs Committee composed of the non-employee
Directors Daughtrey, Cahr and Stevenson. The Compensation Committee
administers the Company's employee benefit plans and sets executive
compensation. The Audit Committee has been appointed to review the Company's
financial statements and its relationship with its independent auditors. The
Board Affairs Committee selects nominees for the Board of Directors to be
presented for consideration to the Company's stockholders and reviews the
remuneration of non-employee Directors.
During the fiscal year ended October 30, 1998, the Compensation Committee
held four meetings, the Audit Committee held two meetings and the Board
Affairs Committee held one meeting. During the fiscal year ended October 30,
1998, the Company's Board of Directors held a total of seven meetings, and
each incumbent Director then serving attended at least 75% of the aggregate
number of meetings of the Board and its Committees.
I-4
<PAGE>
COMPENSATION OF DIRECTORS
Directors Compensation
Non-employee Directors of the Company receive a yearly fee of $12,000 paid
in quarterly installments, $1,000 for each Directors' meeting attended, $2,000
per year committee chairman fee to be paid in quarterly installments, and $750
for each committee meeting attended outside of the regularly scheduled board
meetings and are reimbursed for travel expenses incurred in connection with
each such meeting.
Each non-employee Director of the Company is also awarded upon election at
an annual meeting of stockholders options to acquire up to 3,500 shares of the
Common Stock pursuant to the Company's Directors' Formula Award Plan. These
awards contain the following rights:
1. Stock Options--Options to acquire common stock which are not entitled to
treatment as incentive stock options under the Internal Revenue Code.
2. Reload Options--Options to reacquire shares of common stock which are
used to exercise stock options at the market price used for such
exercise.
3. Alternative Appreciation Rights--Rights to acquire an equivalent number
of shares equal in terms of present market value to the difference
between current market value and exercise price of the stock purchasable
pursuant to any of the preceding options.
The exercise price of all options granted is equal to the fair market value of
the Company's Common Stock on the date of grant. Each option awarded pursuant
to the plan vests and becomes fully exercisable if such individual continues
to serve as a Director until the next annual meeting of stockholders. Options
granted under the plan expire ten years from the date of grant, and no option
may be exercised by any person after the expiration of its term.
In addition, each non-employee Director of the Company is entitled to
participate under the Directors' Formula Compensation Plan. Under the plan,
each participant may by written election to the Company delivered by December
31 of a calendar year elect, in lieu of all or part of the annual retainer
otherwise payable to him during the following calendar year: (a) to defer
payment of such amounts until after he has ceased to be a Director, to be paid
in ten annual installments bearing interest at the prime rate or upon his
death; (b) to receive shares of the Company's Common Stock, the number of
shares to equal the amount of the retainer for which an election is given
divided by the greater of (i) the fair market value of the Company's Common
Stock on the date of grant; or (ii) $5.00 per share; or (c) to receive options
to purchase at an exercise price equal to 50% of the fair market value
determined in the manner set forth above the number of shares of the Company's
Common Stock determined by dividing the amount elected by the difference
between the market price of the Common Stock and the exercise price. To date,
no elections have been made to participate in this plan.
After the consummation of the Merger, it is expected that the Company's
Board of Directors will act to appoint new members to the Audit and
Compensation Committees. To the Company's knowledge, no decision has been made
by the Parent Designees regarding the membership of any such committees of the
Board.
I-5
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the Company's Common
Stock held at May 18, 1999 by (i) each stockholder known by the Company to own
beneficially more than 5% of the Company's Common Stock, (ii) each of the
Company's executive officers and Directors, and (iii) all executive officers
and Directors as a group. To the Company's knowledge, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable, and the information contained in the
footnotes to the table.
<TABLE>
<CAPTION>
Name and Address Number Percentage(1)
- ---------------- ------- -------------
<S> <C> <C>
F.S. Warrant, L.P. ..................................... 650,000 8.5%
901 East Byrd Street, 17th Floor
Richmond, VA 23219
Wellington Management Company, LLP...................... 633,000 8.3%
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc........................... 628,000 8.2%
100 East Pratt St.
Baltimore, MD 21289
Beru Aktiengelsellschaft................................ 540,000 7.1%
Moerikestrasse 155
71636 Ludwigsburg, Germany
Thomas R. Filesi(2)..................................... 396,167 5.1%
1215 West Crosby Road
Carrollton, TX 75006
Jerry L. Curtis(3)...................................... 33,333 *
Richard G. Dahlberg(4).................................. 43,473 *
William J. Collinsworth(5).............................. 33,783 *
Robert J. Kosobucki(6).................................. 55,317 *
Michael E. Cahr(7)...................................... 62,000 *
William H. Daughtrey, Jr.(8)............................ 8,722 *
Grant A. Dove........................................... 206,736 2.7%
Rodes Ennis(9).......................................... 50,500 *
Wayne Stevenson(10)..................................... 22,750 *
All executive officers and Directors as a group (11
persons)(11) .......................................... 912,781 10.7%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes shares over which the
listed beneficial owner holds sole or shared voting or dispositive power.
In addition to shares actually outstanding, all shares subject to warrants
and options exercisable within 60 days of May 18, 1999 are deemed
outstanding and beneficially owned by the person holding such options and
warrants for purposes of computing the number of shares beneficially held
by such person and the percentage ownership of such person, but are not
deemed to be outstanding for the purposes of computing percentage
ownership of any other person.
I-6
<PAGE>
(2) Includes 95,167 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(3) Includes 33,333 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(4) Includes 18,001 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(5) Includes 33,333 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(6) Includes 34,303 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(7) Includes 3,500 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999. Also includes 6,500 shares owned of record by Mr. Cahr's
wife of which Mr. Cahr may be deemed the beneficial owner.
(8) Includes 3,500 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(9) Includes 24,500 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(10) Includes 22,750 shares that may be acquired upon exercise of stock options
which are presently exercisable or will become exercisable within 60 days
of May 18, 1999.
(11) Includes 268,387 shares that may be acquired upon exercise of stock
options which are presently exercisable or will become exercisable within
60 days of May 18, 1999.
I-7
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes monetary and non-monetary compensation awarded
to, earned by or paid to the Company's six most highly compensated officers
during the three fiscal years ended October 30, 1998:
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------- --------------
Number of
Shares Subject
to Options
Name and Principal Position Year Salary Bonus Granted
- --------------------------- ---- -------- -------- --------------
<S> <C> <C> <C> <C>
Thomas R. Filesi.................... 1998 $203,461 $150,000 12,000
Chairman and 1997 185,000 200,000 10,000
Chief Executive Officer 1996 175,000 175,000 10,000
Jerry L. Curtis..................... 1998 $ 96,923(1) $100,000(2) 100,000
President and
Chief Operating Officer
Richard G. Dahlberg................. 1998 $100,000 $ 65,000 10,000
Senior Vice President, 1997 100,000 80,000 8,000
Engineering 1996 91,400 65,000 8,000
Thomas S. Garrett................... 1998 $121,000 $ 65,000 10,000
Senior Vice President, 1997 121,000 80,000 8,000
Operations 1996 115,000 75,000 8,000
William J. Collinsworth............. 1998 $135,000 $ 65,000 20,000
Vice President, Finance 1997 135,000 70,000 20,000
and Chief Financial Officer 1996 5,192(3) 20,000
Robert J. Kosobucki................. 1998 $100,000 $ 65,000 10,000
Vice President, Strategic 1997 100,000 70,000 8,000
Marketing 1996 89,811(4) 52,000 8,000
</TABLE>
- --------
(1) Represents compensation paid from May 1998 through October 30, 1998.
(2) Includes $50,000 paid as a signing bonus, but does not include $43,000 paid
for moving expenses.
(3) Represents compensation paid for October 1996.
(4) Does not include $44,900 paid for moving expenses.
I-8
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
Option Grants
The following table contains information about stock options granted to the
executive officers named in the preceding table during the fiscal year ended
October 30, 1998:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates
of Stock Price
Number of Percentage of Total Appreciation
Shares Options Granted Exercise for Option Term
Underlying to Employees in Price Expiration ---------------------
Name Options Granted Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- --------------- ------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas R. Filesi........ 12,000 4.1% $27.0625 3/16/08 $ 204,232 $ 517,601
Jerry L. Curtis......... 100,000 34.3% 22.4375 5/17/08 1,411,072 3,575,965
Richard G. Dahlberg..... 10,000 3.4% 27.0625 3/16/08 170,193 431,307
Thomas S. Garrett....... 10,000 3.4% 27.0625 3/16/08 170,193 431,307
William J.
Collinsworth........... 20,000 6.9% 27.0625 3/16/08 340,387 862,614
Robert J. Kosobucki..... 10,000 3.4% 27.0625 3/16/08 170,193 431,307
</TABLE>
Option Exercises And Fiscal Year End Option Values
The following table reflects, for each of the previously named executive
officers, option exercises during the fiscal year ended October 30, 1998, the
number of shares underlying both exercisable and unexercisable options as of
the fiscal year end and the value of unexercised "in the money" options as of
the fiscal year end:
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In the Money
Options Options
Number of at Fiscal Year End at Fiscal Year End (2)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas R. Filesi........ 0 $ 0 84,499 22,001 $1,071,932 $ 66,392
Jerry L. Curtis......... 0 0 0 100,000 0 0
Richard G. Dahlberg..... 18,665 280,409 9,334 18,001 89,922 53,116
Thomas S. Garrett....... 7,999 114,664 6,667 18,001 75,504 53,116
William J.
Collinsworth........... 0 0 19,999 40,001 143,360 144,240
Robert J. Kosobucki..... 4,155 70,260 25,636 18,001 257,747 53,116
</TABLE>
- --------
(1) For purposes of calculating the value realized, the Company has used the
closing price as reported by Nasdaq on the date of exercise.
(2) For purposes of calculating the value of unexercised "in the money"
options, the Company has used the closing price as reported by Nasdaq as
of October 30, 1998.
I-9
<PAGE>
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company and
upon written representations received by the Company, the following persons
were all Directors, executive officers or beneficial owners of more than 10
percent of the Company's Common Stock during fiscal 1998 who failed to file
any such report on a timely basis, and the following table summarizes the
timeliness of all reports filed by them during that fiscal year:
<TABLE>
<CAPTION>
Reports Filed
---------------
Name Timely Late
- ---- ------- ------
<S> <C> <C>
Thomas R. Filesi............................................. 1
Richard Dahlberg............................................. 2 2
Thomas S. Garrett............................................ 2 2
William J. Collinsworth...................................... 1
Robert Kosobucki............................................. 2 2
</TABLE>
Based thereon, none of such persons failed to file any report under Section
16(a) of the Exchange Act with respect to the Company's most recent fiscal
year.
CHANGE-IN-CONTROL SEVERANCE AGREEMENTS
Employment Agreements
The Company has entered into employment agreements with the Chairman,
President and Vice Presidents of the Company. The agreements provide a term of
three years, three years and two years, respectively, with evergreen
provisions extending the term an additional year at the end of each year of
service unless either party gives notice of intent not to renew at least six
months, six months and three months, respectively, prior to the end of each
year of service. These agreements also provide for a lump sum payment of the
lesser of the compensation payable during the balance of the term or the
amount $1.00 less than a "parachute" payment under the Internal Revenue Code
if certain terms of the executives' employment are altered and the executive
elects to terminate after a change of control of the Company. All such
agreements contain provisions assigning all discoveries by the employee to the
Company and restricting use or disclosure of confidential information.
Under the terms of the Company's employment agreements with these persons,
all unvested options outstanding upon a change in control of the Company will
become fully exercisable. Therefore, all unvested options issued to these
persons will be immediately and fully vested upon consummation of the Offer.
I-10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee reviews and recommends to the Board of Directors
the compensation payable to the executive officers of the Company. The
determination of base salary has been based in the past largely upon that
level required to compete with other employers in the industry in which the
Company is engaged. The Compensation Committee annually reviews compensation
payable to the executives and the award of options and other nonmonetary
benefits to those individuals.
At present, the Compensation Committee has determined to increase the base
salaries of the Company's more highly paid personnel only modestly from year
to year. The intent of this policy is to have base salaries in the lower range
of competitive industry companies, but to use "at risk" cash bonuses to
augment total cash compensation when the Company performs well.
As a result, the chief executive officer and other officers of the Company
were awarded bonuses based upon their performance related to goals established
prior to the beginning of the fiscal year. The Committee believes that
providing key managerial personnel the means to achieve additional
compensation through these programs stimulates the kind of productive efforts
evidenced during the last several fiscal years.
Further, to provide longer-term incentives, the Compensation Committee has
awarded stock options which will provide a return to these executives
commensurate with the Company's success. During 1998, the Committee approved
awards of ten year stock options to key managerial personnel in order to give
incentive to management to implement a long-term strategic plan and to align
their interests with those of the stockholders.
Michael E. Cahr
Rodes Ennis
Wayne Stevenson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, Mr. Dove served on the Compensation Committee of CSI
Control Systems International, Inc., a private company of which Mr. Stevenson
is Chairman and Chief Executive Officer. During this same period, Mr.
Stevenson served on the Company's Compensation Committee.
I-11
<PAGE>
CERTAIN TRANSACTIONS
The Company's Bylaws provide that the Company shall indemnify its Directors
and may indemnify its officers, employees and other agents to the fullest
extent not prohibited by Delaware law. The Company is also empowered under its
Bylaws to enter into indemnification contracts with its Directors and officers
and to purchase insurance on behalf of any person it is required or permitted
to indemnify.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's Directors will not
be liable for monetary damages for breach of the Directors' fiduciary duty of
care to the Company or its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of non-
monetary relief would remain available under Delaware law. Each Director will
continue to be subject to liability for breach of the Director's duty of
loyalty to the Company or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
any transaction from which the Director derived an improper personal benefit
and for improper distributions to stockholders. This provision also does not
affect a Director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
As part of the terms of his employment, the Company made a loan to its
President and Chief Operating Officer, Jerry L. Curtis, in the amount of
$99,990 evidenced by a note bearing interest at 5.5% per annum and payable on
July 23, 2001.
Further, in April 1999 the Company made a loan to Richard G. Dahlberg,
Senior Vice President, in the amount of $275,000 evidenced by a non-interest
bearing note maturing on April 30, 2004 and secured by a pledge of the
Company's common stock held by Mr. Dahlberg.
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy these transactions were, and all future
transactions between the Company and any of its officers, Directors or
principal stockholders will be, approved by a majority of the disinterested
members of the Board of Directors and will be in connection with bona fide
business purposes of the Company.
I-12
<PAGE>
HISTORICAL STOCK PERFORMANCE
The following graph compares the cumulative stockholder return on the
Company's Common Stock with the cumulative return of (1) equity securities
listed on the NASDAQ Market Index and (2) other companies reporting results
who are classified in the same Standard Industrial Classification number as
the Company.
Graph depicts comparative performance reflecting the following data points:
Compare 5-Year Cumulative Total Return
Among Optek Technology, Inc.
Nasdaq Market Index and SIC Code Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Oct. 29, Oct. 28, Oct. 27, Oct. 31, Oct. 31, Oct. 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Optek Technology, Inc. 100.00 157.14 428.57 1,171.43 2,072.00 1,986.29
Electronic Components & Access 100.00 119.98 223.82 241.08 340.16 337.54
NASDAQ Market Index 100.00 106.32 126.11 148.10 194.09 219.46
</TABLE>
I-13
<PAGE>
ANNEX II
May 11, 1999
Board of Directors
Optek Technology, Inc.
1215 Crosby Road
Carrollton, Texas 75006
Members of the Board:
We understand that Optek Technology, Inc. ("Optek" or the "Company"), The
Dyson-Kissner-Moran Corporation ("DKM") and DKM Acquisition Corp., a wholly
owned subsidiary of DKM ("Purchaser"), propose to enter into an Agreement and
Plan of Merger, substantially in the form of the agreement dated May 12, 1999,
(the "Merger Agreement") which provides, among other things, for: (i) the
commencement by Purchaser of a tender offer (the "Tender Offer") for all
outstanding shares of common stock, par value $0.01 per share, of the Company
(the "Shares") for $25.50 per share net to the seller in cash (the "Merger
Consideration"); and (ii) the subsequent merger (the "Merger") of Purchaser
with and into the Company. Pursuant to the Merger, the Company will become a
wholly owned subsidiary of DKM and each issued and outstanding Share will be
converted into the right to receive $25.50 per share in cash.
You have asked us whether, in our opinion, the Merger Consideration pursuant
to the Merger Agreement and the Tender Offer is fair, from a financial point
of view, to the holders of Shares (other than DKM and its affiliates).
In connection with this opinion, we have, among other things:
i. reviewed certain publicly available financial statements and other
business information relating to the Company;
ii. reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by its management;
iii. analyzed certain financial projections prepared by management of the
Company;
iv. discussed the past and current operations and financial condition and
the prospects of the Company;
v. reviewed the reported prices and trading activity for the Shares;
vi. compared the financial and operating performance of the Company and the
prices and trading activity of the Shares with that of certain other
publicly-traded companies that we considered to be relevant;
vii. compared the proposed financial terms of the transaction with the
financial terms, to the extent publicly available, of certain other
transactions that we considered to be relevant;
viii. reviewed the draft Merger Agreement and certain related documents;
and
ix. performed such other analyses and examinations and considered such
other matters as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information reviewed by us and we have
not obtained, nor have we made or assumed responsibility for undertaking, any
independent verification of such information. We have assumed that financial
data relating to the prospects of the Company have been reasonably prepared on
bases reflecting the best currently available estimates and judgment of the
Company as to the future financial performance of the Company. In addition, we
have assumed, with your consent, that the transaction will be consummated in
accordance with the terms set forth in the Merger Agreement. We have not made
an independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries. Our opinion is necessarily based on the
economic, monetary, market and other conditions as in effect on, and the
information made available to us, as of the date hereof.
II-1
<PAGE>
There has been no public solicitation of indications of interest in a
possible acquisition of the Company. However, in connection with our
engagement, we were authorized to have discussions with a limited number of
third parties to solicit indications of interest in a possible acquisition of
the Company and held discussions with certain of these parties prior to the
date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services,
including rendering this opinion, a significant portion of which is contingent
upon the consummation of the Merger. In addition, in the ordinary course of
our business, we may actively trade the Shares and other securities of the
Company, for our own account and for the accounts of customers and may,
therefore, at any time hold a long or short position in such securities.
It is understood that this letter is for the information and assistance of
the Board of Directors of the Company in its consideration of the transaction
contemplated by the Merger Agreement and may not be used for any other purpose
or reproduced, disseminated, quoted or referred to at any time, in any manner
or for any purpose without our prior written consent, except that the Company
may use this letter in its entirety as part of any filing made by the Company
in respect of the transaction with the Securities and Exchange Commission.
This letter does not address the Company's underlying business decision to
enter into the transaction nor does it constitute a recommendation to any
holder of the Shares as to whether or not such holder should tender such
Shares in connection with the Tender Offer or how such holder should vote with
respect to the proposed Merger.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration pursuant to the Merger Agreement and
the Tender Offer is fair, from a financial point of view, to the holders of
the Shares.
Very truly yours,
/s/ ABN AMRO Incorporated
ABN AMRO Incorporated
II-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated as of May 12, 1999, among Parent,
Purchaser and the Company (incorporated by reference herein to Exhibit
(c)(1) to Schedule 14D-1 of Purchaser and Parent, filed on May 18,
1999).
2 Stock Option Agreement, dated as of May 12, 1999, between the Company
and Parent (incorporated by reference herein to Exhibit (c)(2) to
Schedule 14D-1 of Purchaser and Parent, filed on May 18, 1999).
3 Opinion of ABN AMRO Incorporated dated May 11, 1999.*
4 Consent of ABN AMRO Incorporated (included in Exhibit 3).
5 Joint press release issued by the Company and Parent on May 12, 1999.
6 Letter to Stockholders, dated May 18, 1999, from Thomas R. Filesi,
Chairman and Chief Executive Officer of the Company.*
7 Proxy Statement dated January 29, 1999 for the Company's 1999 Annual
Meeting of Stockholders (incorporated by reference herein).
8 Confidentiality Agreement, dated as of November 6, 1998, as
supplemented on December 15, 1998, by and between the Company and
Parent (incorporated by reference herein to Exhibit (c)(3) to Schedule
14D-1 of Purchaser and Parent, filed on May 18, 1999).
</TABLE>
- --------
* Included in the Schedule 14D-9 mailed to the Company's stockholders.
<PAGE>
EXHIBIT 5
[LOGO]
Contacts:
William J. Collinsworth
Vice President and Chief Financial Officer
Optek Technology, Inc.
(972) 323-2301
For Immediate Release
John H. FitzSimons
Secretary and General Counsel
The Dyson-Kissner-Moran Corporation
(212) 885-1626
The Dyson-Kissner-Moran Corporation to Acquire Optek Technology, Inc. for
$25.50 per Share in Cash
Carrollton, Texas and New York, New York (May 12, 1999)--Optek Technology,
Inc. (NASDAQ: OPTT) and The Dyson-Kissner-Moran Corporation ("DKM") jointly
announced that they have signed a definitive agreement for Optek to be
acquired by DKM for $25.50 per share in cash. The value of the transaction is
approximately $200 million on a fully-diluted basis.
In the transaction, Optek shareholders will receive $25.50 per share in cash
under a tender offer for all of Optek's outstanding shares. The tender offer
is expected to commence within a week and is scheduled to close after the
expiration of 20 business days. Optek shares not purchased in the tender offer
will be converted into $25.50 per share in cash in a subsequent merger.
The transaction has been unanimously approved by the Board of Directors of
Optek and is not subject to financing. Optek's Board has recommended that
stockholders tender their shares and approve the merger. The tender offer is
subject to a majority of Optek's shares being tendered and not withdrawn, as
well as other considerations.
Tom Filesi, Chairman and CEO of Optek, commented: "The combination of DKM's
Wabash Technologies and Optek brings together two leaders in their respective
markets and creates opportunities for the customers, suppliers and employees
of both companies. The combined entity will offer its customers access to a
broad array of technologies and present future growth opportunities."
"Optek is a tremendous addition to our core holdings and has all of the
features we look for in an acquisition" said Robert R. Dyson, Chairman and CEO
of DKM.
Separately, Optek announced its results for the second fiscal quarter ended
April 30, 1999. Second quarter revenues were $20.1 million, which represent a
decrease of approximately 13% from the same quarter of the prior fiscal year.
Optek earned $0.30 per share on a diluted basis in the second fiscal quarter
which compares to $0.46 per share on a diluted basis for the same quarter of
the prior fiscal year.
As Optek has previously reported, sales of commercial products have been
soft during the second quarter, particularly in higher margin assembly
products. Softness in the demand for these products is expected to continue
into at least the third quarter. In addition, sales of automotive products
were negatively affected by a customer's decision in the last month of the
quarter to implement a pull system to better control its inventory, resulting
in a reduction in sales. Optek's margins for the quarter were also impacted by
increased expenditures related to establishing capacity for production of
fiber optic products in anticipation of increases in sales of such products in
future periods.
<PAGE>
Optek Technology, Inc. is a leading manufacturer of custom optoelectronic,
magnetic and fiber optic sensor products. Optek provides components worldwide
for manufacturers of office and computer equipment, automobiles, industrial
equipment, aerospace and defense applications, medical equipment and
communications equipment. Additional information can be accessed on the
Internet at http://www.optekinc. com.
The Dyson-Kissner-Moran Corporation is a privately owned holding company
with 1998 revenues approaching $700 million. Wabash Technologies, owned by
DKM's Kearney-National Inc. subsidiary, is a producer of customized sensors
and actuators for the global automotive and off-road markets.
