<PAGE>
As filed with the Securities and Exchange Commission on April 18, 1994
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________________
ADVANCED TECHNOLOGY LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3845 91-1353386
(State of Incorporation) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number)
W. Brinton Yorks
22100 Bothell-Everett Highway 22100 Bothell-Everett Highway
Bothell, WA 98041-3003 Bothell, WA 98041-3003
(206) 478-7000 (206) 478-7000
(Address and telephone number of registrant's principal executive offices) (Name, address and telephone number of
agent for service)
</TABLE>
_________________________
<TABLE>
<CAPTION>
<S> <C> <C>
Copies to:
EVELYN CRUZ SROUFE ALLEN FINKELSON KATHLEEN M. SHAY
Perkins Coie Cravath, Swaine & Moore Duane, Morris & Heckscher
1201 Third Avenue, 40th Floor 825 8th Avenue, Worldwide Plaza One Liberty Place, 42d Floor
Seattle, Washington 98101-3099 New York, NY 10019 Philadelphia, PA 19103-7396
(206) 583-8888 (212) 474-1000 (215) 979-1000
</TABLE>
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective and the effective
time of the Merger (the "Merger") of a subsidiary of Advanced Technology
Laboratories, Inc. ("ATL") and Interspec, Inc. ("Interspec"), as described in
the Amended and Restated Agreement and Plan of Merger, dated as of February 10,
1994 (the "Merger Agreement") attached as Appendix I to the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement.
_________________________
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
_________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value
(including associated
Preferred Share Purchase
Rights)........ 2,714,058(1) N/A N/A $3,130(2)(3)
========================================================================================================================
</TABLE>
(1) Based upon the product of (a) 6,270,937 (the number of outstanding shares of
Interspec Common Stock as of April 12, 1994) plus the number of shares of
Interspec Common Stock subject to purchase upon outstanding options that
will be exerciseable at or before the anticipated effective time of the
Merger, and (b) 0.413, the Exchange Ratio (as defined in the Merger
Agreement).
(2) The registration fee was computed pursuant to Rule 457(f) under the
Securities Act of 1933, as amended (the "Securities Act") by multiplying (a)
$5.50, the average of the high and low sales price of a share of Interspec
Common Stock quoted on the National Association of Securities Dealers
Automated Quotations System National Market on April 12, 1994, as reported
in published financial services, and (b) the number of outstanding shares of
Interspec Common Stock as of April 12, 1994 plus the number of shares of
Interspec Common Stock subject to purchase upon outstanding options that
will be exerciseable at or before the anticipated effective time of the
Merger. The result was then multiplied by 1/29 of one percent.
(3) Pursuant to Rule 457(b) under the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, the
total registration fee of $12,463 is offset by the filing fee of $9,333
previously paid by ATL in connection with the filing of the preliminary
proxy materials on March 4, 1994. Accordingly, the fee payable upon the
filing of this Registration Statement is $3,130.
_________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO
ITEM 501(B) OF REGULATION S-K
<TABLE>
<S> <C> <C>
ITEMS OF FORM S-4 HEADING IN PROSPECTUS
- - - ------------------------------------------------------------ -----------------------------------------------------------------
Item 1 Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover Page
Item 2 Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page; Outside Back Cover Page
Item 3 Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... Summary; Risk Factors
Item 4 Terms of the Transaction.......................... The Merger; Other Agreements; Background of and Reasons for the
Merger; Description of ATL Capital Stock; Comparison of Rights of
ATL and Interspec Shareholders
Item 5 Pro Forma Financial Information................... Unaudited Pro Forma Condensed Combined Financial Statements
Item 6 Material Contacts with Company Being Acquired..... Background of and Reasons for the Merger
Item 7 Additional Information Required for Reoffering
by Persons and Parties Deemed to be Underwriters.. Not Applicable
Item 8 Interests of Named Experts and Counsel............ Not Applicable
Item 9 Disclosure of Commission Position on
Indemnifications for Securities Act Liabilities... Not Applicable
Item 10 Information with Respect to S-3 Registrants....... Available Information; Incorporation of Certain
Documents by Reference
Item 11 Incorporation of Certain Information by Reference. Available Information; Incorporation of Certain
Documents by Reference
Item 12 Information with Respect to S-2 or S-3 Registrants Not Applicable
Item 13 Incorporation of Certain Information by Reference. Not Applicable
Item 14 Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ Not Applicable
Item 15 Information with Respect to S-3 Companies........ Not Applicable
Item 16 Information with Respect to S-2 or S-3 Companies.. Available Information; Incorporation of Certain
Documents by Reference
Item 17 Information with Respect to Companies Other than
S-3 or S-2 Companies.............................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Item 18 Information if Proxies, Consents, or Authorizations
Are to Be Solicited................................ Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Meetings of Shareholders;
Summary; The Merger--Rights of Dissenting
Interspec Shareholders; Interests of Certain Persons
in The Merger; Principal ATL Shareholders; Election of ATL
Directors; Executive Officers of ATL;
Executive Compensation
Item 19 Information if Proxies, Consents or
Authorizations Are Not to Be Solicited............. Not Applicable
</TABLE>
<PAGE>
[LOGO]
April 18, 1994
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
Bothell, WA 98041-3003
Dear Shareholder:
You are cordially invited to attend the 1994 Annual General Meeting of
Shareholders (the "ATL Annual Meeting") of ATL, which will be held on Monday,
May 16, 1994, at 10:30 a.m., local time, at the Four Seasons Olympic Hotel, 411
University Street, Seattle, Washington.
At the ATL Annual Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance (the "Issuance") of shares of common stock of
ATL (the "ATL Common Stock"), to the shareholders of Interspec, Inc.
("Interspec") in connection with an Amended and Restated Agreement and Plan of
Merger among ATL, a subsidiary of ATL and Interspec (the "Merger Agreement"),
which provides for the merger of the ATL subsidiary into Interspec (the
"Merger"). In the Merger, each outstanding share of common stock of Interspec
(the "Interspec Common Shares") will be converted into 0.413 share of ATL
Common Stock, and Interspec will become a wholly owned subsidiary of ATL.
Accordingly, an aggregate of approximately 2,588,000 shares of ATL Common Stock
will be issued in exchange for outstanding Interspec Common Shares in
connection with the Merger, constituting approximately 20% of the outstanding
ATL Common Stock following the Merger. You will also be asked to approve a
proposal to amend the ATL 1992 Option, Stock Appreciation Right, Restricted
Stock, Stock Grant and Performance Unit Plan (the "ATL Option Plan"), subject
to approval of the Issuance by the ATL shareholders, to increase the number of
shares of ATL Common Stock authorized for issuance thereunder by 450,000 to
enable the issuance of shares of ATL Common Stock upon the exercise of
outstanding options to purchase Interspec Common Shares, which will be adjusted
and deemed to constitute options to purchase shares of ATL Common Stock
pursuant to the Merger Agreement, and to impose certain limits on option grants
thereunder. Approval of the amendment to the ATL Option Plan is considered by
ATL to be critical to ensuring the retention of key employees of Interspec. In
addition, you will be asked to elect eight directors to ATL's Board of
Directors and to ratify the appointment of KPMG Peat Marwick as ATL's
independent auditors for 1994.
ATL'S BOARD OF DIRECTORS HAS DETERMINED THE ISSUANCE AND THE MERGER TO BE
FAIR TO AND IN THE BEST INTERESTS OF ATL AND ITS SHAREHOLDERS, HAS UNANIMOUSLY
APPROVED THE ISSUANCE AND THE MERGER AGREEMENT AND RECOMMENDS A VOTE FOR
APPROVAL OF THE ISSUANCE. ATL'S BOARD OF DIRECTORS ALSO RECOMMENDS THAT YOU
VOTE FOR THE AMENDMENT TO THE ATL OPTION PLAN, FOR THE ELECTION OF THE EIGHT
NOMINEES FOR DIRECTOR AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT
MARWICK.
You should read carefully the accompanying Notice of Annual General Meeting
of Shareholders and the Joint Proxy Statement/Prospectus for details of the
Merger and additional related information.
Whether or not you plan to attend the ATL Annual Meeting, please complete,
sign and date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope. Your stock will be voted in accordance with the
instructions you have given in your proxy. If you attend the ATL Annual
Meeting, you may vote in person if you wish, even though you previously have
returned your proxy card. Your prompt cooperation will be greatly appreciated.
Sincerely,
/s/ Dennis C. Fill
------------------------------------
Dennis C. Fill
Chairman and Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
ADVANCED TECHNOLOGY
LABORATORIES, INC.
22100 BOTHELL EVERETT HIGHWAY
BOTHELL, WASHINGTON 98041-3003
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 1994
TO THE SHAREHOLDERS OF ADVANCED TECHNOLOGY LABORATORIES, INC.:
The Annual General Meeting of Shareholders (the "ATL Annual Meeting") of
Advanced Technology Laboratories, Inc., a Delaware corporation ("ATL"), will be
held on Monday, May 16, 1994, at 10:30 a.m., local time, at the Four Seasons
Olympic Hotel, 411 University Street, Seattle, Washington, for the following
purposes:
1. To consider and vote upon a proposal to approve the issuance (the
"Issuance") of shares of common stock of ATL, par value $.01 per share,
together with associated purchase rights (the "ATL Common Stock"), to the
shareholders of Interspec, Inc. ("Interspec") in connection with an Amended
and Restated Agreement and Plan of Merger, dated as of February 10, 1994
(the "Merger Agreement"), among Interspec, ATL and ATL Sub Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of ATL ("Merger
Sub"), which provides for the merger of Merger Sub into Interspec (the
"Merger"). Pursuant to the Merger Agreement, Interspec will become a wholly
owned subsidiary of ATL, and each share of common stock, par value $.001
per share, of Interspec (the "Interspec Common Shares") issued and
outstanding immediately prior to the Merger will be converted into 0.413
share of ATL Common Stock. THE MERGER IS MORE COMPLETELY DESCRIBED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS, AND A COPY OF THE MERGER
AGREEMENT IS ATTACHED AS APPENDIX I THERETO.
2. To consider and vote upon a proposal to amend the ATL 1992 Option,
Stock Appreciation Right, Restricted Stock, Stock Grant and Performance
Unit Plan (the "ATL Option Plan"), subject to approval of the Issuance by
the ATL shareholders, to increase the number of shares of ATL Common Stock
authorized for issuance thereunder by 450,000 to enable the issuance of
shares of ATL Common Stock upon the exercise of outstanding options to
purchase Interspec Common Shares, which will be adjusted and deemed to
constitute options to purchase shares of ATL Common Stock pursuant to the
Merger Agreement, and to impose certain limits on option grants thereunder.
3. To elect eight directors to ATL's Board of Directors to hold office
until the next annual meeting of shareholders and until their respective
successors are elected and qualified.
4. To ratify the appointment of KPMG Peat Marwick as ATL's independent
auditors for 1994.
5. To transact such other business as may properly come before the ATL
Annual Meeting or any adjournments or postponements thereof.
Only holders of record of shares of ATL Common Stock at the close of business
on March 23, 1994, the record date for the ATL Annual Meeting, are entitled to
notice of and to vote at the ATL Annual Meeting and any adjournments or
postponements thereof.
The affirmative vote of the holders of shares representing a majority of the
shares of ATL Common Stock present, in person or by proxy, and entitled to vote
thereon at the ATL Annual Meeting is required to approve the Issuance, the
amendment of the ATL Option Plan and the appointment of the independent
auditors. The affirmative vote of the holders of a plurality of the shares of
ATL Common Stock present, in person or by proxy, at the ATL Annual Meeting is
required for the election of directors. Holders of shares of ATL Common Stock
will not be entitled to dissenters' rights as a result of the Merger because
ATL is not a constituent corporation in the Merger.
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE ATL ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. YOUR STOCK WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS YOU HAVE GIVEN IN YOUR PROXY. YOUR PROXY MAY BE REVOKED AT ANY
TIME BEFORE IT IS VOTED BY SIGNING AND RETURNING A LATER-DATED PROXY WITH
RESPECT TO THE SAME SHARES, BY FILING WITH THE SECRETARY OF ATL A WRITTEN
REVOCATION BEARING A LATER DATE OR BY ATTENDING AND VOTING IN PERSON AT THE ATL
ANNUAL MEETING.
By Order of the Board of Directors
/s/ W. Brinton Yorks, Jr.
--------------------------------------
W. Brinton Yorks, Jr.
Secretary
Bothell, Washington
April 18, 1994
2
<PAGE>
LOGO
April 18, 1994
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Interspec Special Meeting") of Interspec, Inc. ("Interspec"), which will be
held on Monday, May 16, 1994, at 10:00 a.m., local time, at the offices of
Duane, Morris & Heckscher, One Liberty Place, 42nd Floor, Philadelphia,
Pennsylvania.
At the Interspec Special Meeting, you will be asked to consider and vote upon
a proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of February 10, 1994, among Interspec, Advanced Technology
Laboratories, Inc. ("ATL") and a subsidiary of ATL (the "Merger Agreement"),
pursuant to which the ATL subsidiary will be merged into Interspec (the
"Merger"). In the Merger, each outstanding share of common stock of Interspec
(the "Interspec Common Shares") will be converted into 0.413 share of common
stock of ATL (together with associated purchase rights, the "ATL Common
Stock"), and Interspec will become a wholly owned subsidiary of ATL. Interspec
shareholders will receive cash in lieu of any fractional share of ATL Common
Stock.
You should read carefully the accompanying Notice of Special Meeting of
Shareholders and the Joint Proxy Statement/Prospectus for details of the Merger
and additional related information.
INTERSPEC'S BOARD OF DIRECTORS HAS DETERMINED THE MERGER TO BE FAIR TO AND IN
THE BEST INTERESTS OF INTERSPEC AND ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER.
The affirmative vote of a majority of votes cast by the holders of Interspec
Common Shares entitled to vote thereon is required to approve and adopt the
Merger Agreement and the Merger.
Whether or not you plan to attend the Interspec Special Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed postage-prepaid envelope. If you attend the Interspec Special Meeting,
you may vote in person if you wish, even though you previously have returned
your proxy card. Your prompt cooperation will be greatly appreciated.
Please do not send your share certificates with your proxy card. After
approval of the Merger Agreement and the Merger by Interspec shareholders and
the satisfaction of all other conditions to the Merger, you will receive a
transmittal form and instructions for the exchange of your shares.
Sincerely,
/s/ Edward Ray
Edward Ray
Chairman, President and Chief
Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
INTERSPEC, INC.
110 WEST BUTLER AVENUE
AMBLER, PENNSYLVANIA 19002-5795
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 1994
TO THE SHAREHOLDERS OF INTERSPEC, INC.:
A Special Meeting of Shareholders (the "Interspec Special Meeting") of
Interspec, Inc., a Pennsylvania corporation ("Interspec"), will be held on
Monday, May 16, 1994, at 10:00 a.m., local time, at the offices of Duane,
Morris & Heckscher, One Liberty Place, 42nd Floor, Philadelphia, Pennsylvania,
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Amended and
Restated Agreement and Plan of Merger, dated as of February 10, 1994
(the "Merger Agreement"), among Interspec, Advanced Technology
Laboratories, Inc., a Delaware corporation ("ATL"), and ATL Sub
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
ATL ("Merger Sub"), and the merger of Merger Sub into Interspec upon the
terms and subject to the conditions of the Merger Agreement (the
"Merger"). Pursuant to the Merger Agreement, Interspec will become a
wholly owned subsidiary of ATL, and each share of common stock, par
value $.001 per share, of Interspec (the "Interspec Common Shares")
issued and outstanding immediately prior to the Merger will be converted
into 0.413 share of common stock of ATL, par value $.01 per share ("ATL
Common Stock"). Interspec shareholders will receive cash in lieu of any
fractional share of ATL Common Stock. THE MERGER IS MORE COMPLETELY
DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS, AND A
COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX I THERETO.
2. To transact such other business as may properly be brought before the
Interspec Special Meeting or any adjournments or postponements thereof.
Only holders of record of Interspec Common Shares at the close of business on
March 29, 1994, the record date for the Interspec Special Meeting, are entitled
to notice of and to vote at the Interspec Special Meeting and any adjournments
or postponements thereof.
The affirmative vote of a majority of votes cast by the holders of Interspec
Common Shares entitled to vote thereon is necessary to approve and adopt the
Merger Agreement and the Merger.
Holders of Interspec Common Shares will have the right to dissent from the
Merger and, subject to certain conditions, receive payment for their shares.
These rights are described in greater detail in the accompanying Joint Proxy
Statement/Prospectus under the caption "THE MERGER--Rights of Dissenting
Interspec Shareholders," and are set forth in Sections 1930 and 1571 through
1580 of the Pennsylvania Business Corporation Law of 1988, a copy of which is
attached as Appendix IV to the accompanying Joint Proxy Statement/Prospectus.
WHETHER OR NOT YOU PLAN TO ATTEND THE INTERSPEC SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE. YOUR STOCK WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS YOU HAVE GIVEN IN YOUR PROXY. YOUR PROXY MAY BE REVOKED AT ANY
TIME BEFORE IT IS VOTED BY SIGNING AND RETURNING A LATER-DATED PROXY WITH
RESPECT TO THE SAME SHARES, BY FILING WITH THE SECRETARY OF INTERSPEC A WRITTEN
REVOCATION BEARING A LATER DATE OR BY ATTENDING AND VOTING AT THE INTERSPEC
SPECIAL MEETING.
By Order of the Board of Directors
/s/ Michael J. Wassil
Michael J. Wassil
Secretary
Ambler, Pennsylvania
April 18, 1994
<PAGE>
ADVANCED TECHNOLOGY LABORATORIES, INC.
AND
INTERSPEC, INC.
----------------
JOINT PROXY STATEMENT
----------------
ADVANCED TECHNOLOGY LABORATORIES, INC.
PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of shares
of common stock, par value $.01 per share (together with associated purchase
rights, the "ATL Common Stock"), of Advanced Technology Laboratories, Inc., a
Delaware corporation ("ATL"), in connection with the solicitation of proxies by
ATL's Board of Directors (the "ATL Board") for use at the 1994 Annual General
Meeting of Shareholders to be held on Monday, May 16, 1994, at the Four Seasons
Olympic Hotel, 411 University Street, Seattle, Washington, commencing at 10:30
a.m., local time, and at any adjournments or postponements thereof (the "ATL
Annual Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of common stock, par value $.001 per share (the "Interspec Common
Shares"), of Interspec, Inc., a Pennsylvania corporation ("Interspec"), in
connection with the solicitation of proxies by Interspec's Board of Directors
(the "Interspec Board") for use at the Special Meeting of Shareholders to be
held on Monday, May 16, 1994, at the offices of Duane, Morris & Heckscher, One
Liberty Place, 42nd Floor, Philadelphia, Pennsylvania, commencing at 10:00
a.m., local time, and at any adjournments or postponements thereof (the
"Interspec Special Meeting").
This Joint Proxy Statement/Prospectus constitutes the Prospectus of ATL filed
as part of a Registration Statement on Form S-4 (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to shares
of ATL Common Stock issuable in connection with the Merger (as defined herein).
All information concerning ATL contained in this Joint Proxy
Statement/Prospectus has been furnished by ATL, and all information concerning
Interspec prior to the Merger contained in this Joint Proxy
Statement/Prospectus has been furnished by Interspec.
This Joint Proxy Statement/Prospectus is first being mailed to shareholders
of ATL and of Interspec on or about April 18, 1994.
THE SHARES OF ATL COMMON STOCK ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
FOR A DESCRIPTION OF RISK FACTORS RELATING TO THE MERGER AND THE RELATED
TRANSACTIONS DESCRIBED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, SEE "RISK
FACTORS."
----------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS APRIL 18, 1994.
i
<PAGE>
ATL ANNUAL MEETING
At the ATL Annual Meeting, shareholders of record of ATL at the close of
business on March 23, 1994, will consider and vote upon (i) a proposal to
approve the issuance (the "Issuance") of shares of ATL Common Stock in exchange
for Interspec Common Shares and upon the exercise of currently outstanding
options to purchase Interspec Common Shares, which will be adjusted and deemed
to constitute options to purchase shares of ATL Common Stock, in connection
with the Amended and Restated Agreement and Plan of Merger, dated as of
February 10, 1994 (the "Merger Agreement"), among Interspec, ATL and ATL Sub
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of ATL
("Merger Sub"), pursuant to which Merger Sub will be merged into Interspec (the
"Merger"); (ii) a proposal to amend the ATL 1992 Option, Stock Appreciation
Right, Restricted Stock, Stock Grant and Performance Unit Plan (the "ATL Option
Plan"), subject to approval of the Issuance by the ATL shareholders, to
increase the number of shares of ATL Common Stock authorized for issuance
thereunder by 450,000 and to impose certain limits on option grants thereunder;
(iii) the election of eight directors to the ATL Board to hold office until the
next annual meeting of ATL shareholders and until their respective successors
are elected and qualified; (iv) a proposal to ratify the appointment of KPMG
Peat Marwick as ATL's independent auditors for 1994; and (v) such other
business as may properly come before the ATL Annual Meeting or any adjournments
or postponements thereof.
INTERSPEC SPECIAL MEETING
At the Interspec Special Meeting, shareholders of record of Interspec at the
close of business on March 29, 1994, will consider and vote upon (i) a proposal
to approve and adopt the Merger Agreement and the Merger and (ii) such other
business as may properly come before the Interspec Special Meeting or any
adjournments or postponements thereof. Holders of Interspec Common Shares will
have the right to dissent from the Merger and, subject to certain conditions,
receive payment for their shares. These rights are described in greater detail
under the caption "THE MERGER--Rights of Dissenting Interspec Shareholders,"
and are set forth in Sections 1930 and 1571 through 1580 of the Pennsylvania
Business Corporation Law of 1988 (the "PBCL"), a copy of which is attached as
Appendix IV to this Joint Proxy Statement/Prospectus. Holders of Interspec
Common Shares who are entitled to and who properly demand appraisal in
accordance with Section 1571 of the PBCL and who do not fail to perfect or
otherwise lose their right to appraisal are herein referred to as "Dissenting
Shareholders" and such shares are referred to as "Dissenting Shares."
CONSUMMATION OF THE MERGER
Upon consummation of the Merger, (i) each issued and outstanding Interspec
Common Share (other than shares owned by Interspec and Dissenting Shares) will
be converted into the right to receive 0.413 share of ATL Common Stock (the
"Exchange Ratio"), which share will be accompanied by associated purchase
rights as described in "DESCRIPTION OF ATL CAPITAL STOCK--Shareholder Rights
Plan," (ii) each outstanding option to purchase Interspec Common Shares will be
deemed to constitute an option to purchase that number of shares of ATL Common
Stock equal to the product of the Exchange Ratio and the number of Interspec
Common Shares subject to such option, and (iii) all Interspec Common Shares
will no longer be outstanding and will automatically be canceled, and each
holder of a certificate representing Interspec Common Shares will cease to have
any rights with respect thereto, except the right to receive the shares of ATL
Common Stock to be issued in consideration therefor upon the surrender of such
certificate, without interest. Fractional shares of ATL Common Stock will not
be issued in connection with the Merger. In lieu of any such fractional shares,
each holder of Interspec Common Shares who otherwise would be entitled to
receive a fractional share of ATL Common Stock pursuant to the Merger will be
paid an amount by check, without interest, equal to such holder's proportionate
interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent (as defined herein), on behalf of all such holders, of the
aggregate fractional shares of ATL Common Stock, if any, that would have been
issued in the Merger. See "THE MERGER--Terms of the Merger."
ii
<PAGE>
AVAILABLE INFORMATION
ATL and Interspec are subject to the information and reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
certain regional offices of the Commission located at Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such information
can be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Joint Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth above.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS
IS DELIVERED UPON WRITTEN OR ORAL REQUEST
TO, IN THE CASE OF DOCUMENTS RELATING TO ATL, THE SECRETARY, ADVANCED
TECHNOLOGY LABORATORIES, INC., 22100 BOTHELL EVERETT HIGHWAY, BOTHELL,
WASHINGTON 98041-3003, TELEPHONE NUMBER (206) 487-7000; AND IN THE CASE OF
DOCUMENTS RELATING TO INTERSPEC, THE SECRETARY, INTERSPEC, INC., 110 WEST
BUTLER AVENUE, AMBLER, PENNSYLVANIA 19002-5795, TELEPHONE NUMBER (215) 540-
9190. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BEFORE MAY 6, 1994.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by ATL or Interspec with the
Commission pursuant to the Exchange Act are incorporated herein by this
reference:
A. ATL's Annual Report on Form 10-K for the year ended December 31, 1993;
B. ATL's Current Report on Form 8-K dated February 15, 1994;
C. ATL's Current Report on Form 8-K dated March 2, 1994;
D. Interspec's Annual Report on Form 10-K for the fiscal year ended
November 30, 1993, as amended;
E. Interspec's Current Report on Form 8-K dated February 24, 1994; and
F. Interspec's Quarterly Report on Form 10-Q for the quarter ended February
28, 1994.
The information relating to ATL and Interspec contained in this Joint Proxy
Statement/Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference
herein.
All documents filed by ATL pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date hereof and prior to the date of the ATL
Annual Meeting shall be deemed to be incorporated by reference herein and to be
a part hereof from the date any such document is filed.
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Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference
herein) modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed to constitute
a part hereof except as so modified or superseded. All information appearing in
this Joint Proxy Statement/Prospectus is qualified in its entirety by the
information and consolidated financial statements (including notes thereto)
appearing in the documents incorporated herein by reference, except to the
extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY ATL OR INTERSPEC. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ATL OR INTERSPEC SINCE THE DATE HEREOF OR THAT THE
INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THEREOF.
iv
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................... iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... iii
GLOSSARY.................................................................. vi
SUMMARY................................................................... 1
The Companies............................................................ 1
Meetings of Shareholders................................................. 1
The Merger............................................................... 2
Summary Historical and Unaudited Pro Forma Condensed Combined Financial
Data.................................................................... 7
Comparative Per Share Data............................................... 9
RISK FACTORS.............................................................. 10
MEETINGS OF SHAREHOLDERS.................................................. 14
General.................................................................. 14
Matters to Be Considered at the Meetings................................. 15
Record Date; Shares Entitled to Vote; Vote Required...................... 16
Proxies; Proxy Solicitation.............................................. 17
BACKGROUND OF AND REASONS FOR THE MERGER.................................. 18
Background............................................................... 18
Reasons for the Merger; Recommendations of the Boards of Directors....... 22
Opinion of Financial Advisor to the ATL Board............................ 24
Opinion of Financial Advisor to the Interspec Board...................... 27
THE COMPANIES............................................................. 32
ATL...................................................................... 32
Merger Sub............................................................... 32
Interspec................................................................ 32
THE MERGER................................................................ 33
Terms of the Merger...................................................... 33
Effective Time of the Merger............................................. 34
Exchange of Interspec Common Shares...................................... 34
Effect on Interspec Employee Benefit and Stock Plans..................... 35
Trading of Shares of ATL Common Stock on the Nasdaq National Market...... 35
Representations and Warranties........................................... 35
Business of Interspec Pending the Merger................................. 36
Business of ATL Pending the Merger....................................... 37
No Solicitation.......................................................... 37
Conditions to Consummation of Merger..................................... 38
Amendment and Waiver; Termination........................................ 39
Certain Federal Income Tax Consequences.................................. 40
Regulatory Matters....................................................... 41
Resale of Shares of ATL Common Stock Issued in the Merger; Affiliates.... 41
Accounting Treatment..................................................... 41
Management and Operations of Interspec After the Merger.................. 42
Expenses and Fees........................................................ 42
Rights of Dissenting Interspec Shareholders.............................. 42
CONFLICTS OF INTEREST..................................................... 45
Employment Agreements.................................................... 45
Adjustment of Interspec Stock Options; Grant of ATL Stock Options........ 45
</TABLE>
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Indemnification of Directors and Officers Pursuant to the Merger
Agreement............................................................... 45
COMPARATIVE PER SHARE MARKET INFORMATION.................................. 46
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 47
DESCRIPTION OF ATL CAPITAL STOCK.......................................... 52
Shareholder Rights Plan.................................................. 52
DESCRIPTION OF INTERSPEC CAPITAL STOCK.................................... 54
COMPARISON OF RIGHTS OF ATL AND OF INTERSPEC SHAREHOLDERS................. 55
General.................................................................. 55
Changes Principally Attributable to Differences Between the DGCL and the
PBCL.................................................................... 55
Statutory Regulation of Corporate Takeovers.............................. 60
ELECTION OF ATL DIRECTORS................................................. 63
Director Compensation.................................................... 66
Committees of the ATL Board.............................................. 66
Compensation Committee Interlocks and Insider Participation.............. 67
AMENDMENT OF THE ATL OPTION PLAN.......................................... 67
Proposed Amendment....................................................... 67
Description of the ATL Option Plan....................................... 69
EXECUTIVE OFFICERS OF ATL................................................. 75
EXECUTIVE COMPENSATION.................................................... 76
Compensation Summary..................................................... 76
Option Grants............................................................ 77
Option Exercises and Year-End Values..................................... 77
Compensation Committee Report on Executive Compensation.................. 78
Comparison of Five-Year Cumulative Total Return.......................... 80
Retirement Plan.......................................................... 81
Change in Control Agreements............................................. 81
Certain Relationships and Related Transactions........................... 81
Section 16 Reporting..................................................... 82
PRINCIPAL ATL SHAREHOLDERS................................................ 83
LEGAL OPINION............................................................. 84
TAX OPINION............................................................... 84
EXPERTS................................................................... 84
RATIFICATION OF APPOINTMENT OF AUDITORS................................... 84
PROPOSALS BY ATL SHAREHOLDERS............................................. 84
ANNUAL REPORT AND FORM 10-K............................................... 85
</TABLE>
Appendix I--Amended and Restated Agreement and Plan of Merger, dated as of
February 10, 1994, among ATL, Merger Sub and Interspec
Appendix II--Opinion of Goldman, Sachs & Co.
Appendix III--Opinion of Merrill Lynch & Co.
Appendix IV--Dissenters' Rights Provisions of the Pennsylvania Business Corpo-
ration Law of 1988
v
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GLOSSARY
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1992 Distribution.................... 7
Acquiring Person..................... 52
Acquisition Comparables.............. 29
Antitrust Division................... 6
ATL.................................. i
ATL Annual Meeting................... i
ATL Board............................ i
ATL Bylaws........................... 14
ATL Certificate of Incorporation..... 14
ATL Common Stock..................... i
ATL Comparable Companies............. 29
ATL Guarantee........................ 5
ATL Low Case......................... 31
ATL Mean Case........................ 31
ATL Option Plan...................... ii
ATL Record Date...................... 2
ATL Series A Preferred Shares........ 52
Business Combination................. 73
Certificates......................... 34
Change of Control.................... 73
Closing.............................. 5
Code................................. 5
Commission........................... i
Compensation Committee............... 69
Convertible Note Amendments.......... 5
Convertible Notes.................... 5
DCF.................................. 30
Device Companies..................... 26
DGCL................................. 3
Dissenting Shareholders.............. ii
Dissenting Shares.................... ii
EBIT................................. 26
EBITDA............................... 29
Effective Time....................... 3
Employment Agreements................ 45
Engagement Letter.................... 25
EPS.................................. 26
ERISA................................ 36
Excess Shares........................ 34
Exchange Act......................... iii
Exchange Agent....................... 34
Exchange Ratio....................... ii
Expiration Date...................... 53
FDA.................................. 11
FDC Act.............................. 11
FTC.................................. 6
Goldman Sachs........................ 3
Holding Period....................... 74
HSR Act.............................. 6
Incentive Stock Options.............. 69
Incumbent Directors.................. 73
Interspec............................ i
Interspec Articles of Incorporation.. 54
Interspec Base Case.................. 30
Interspec Board...................... i
Interspec Bylaws..................... 55
</TABLE>
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Interspec Common Shares.............. i
Interspec Comparable Companies....... 29
Interspec Conservative Case.......... 30
Interspec Record Date................ 2
Interspec Severe Competition Case.... 30
Interspec Special Meeting............ i
Interspec Stock Option............... 35
Interspec Stock Plans................ 35
ISSOP 401(k)......................... 76
Issuance............................. ii
LTM.................................. 25
Market Capitalization................ 29
Market Value......................... 28
Medical Imaging Companies............ 26
Merger............................... ii
Merger Agreement..................... ii
Merger Sub........................... ii
Merrill Lynch........................ 3
MIC Plan............................. 76
NASD................................. 16
Nasdaq............................... 4
NOE Plan............................. 78
Nonemployee Director Plan............ 66
Nonqualified Stock Options........... 69
Noteholder........................... 5
OBRA................................. 68
Offer Value.......................... 30
Opinions............................. 27
Oral Opinion......................... 27
PBCL................................. ii
Pennsylvania Commission.............. 63
Pro Forma Case One................... 31
Pro Forma Case Two................... 31
Proposed Regulations................. 68
Purchase Price....................... 52
Redemption Price..................... 54
Registration Statement............... i
Representation Agreement............. 21
Restricted Period.................... 71
Retirement Plan...................... 81
Right Certificates................... 53
Rights............................... 52
Rights Agreement..................... 52
SARs................................. 70
Securities Act....................... i
Selected Transactions................ 26
Separation Date...................... 53
SFAS 109............................. 51
Significant Shareholders............. 21
SpaceLabs............................ 7
STS.................................. 67
Superior Proposal.................... 38
Supplemental Plan.................... 81
Surviving Corporation................ 33
Takeover Disclosure Law.............. 63
Takeover Proposal.................... 5
Transaction Value.................... 30
Westmark............................. 7
Written Opinion...................... 27
</TABLE>
vi
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SUMMARY
Certain significant matters discussed in this Joint Proxy
Statement/Prospectus are summarized below. This summary is not intended to be
complete and is qualified in all respects by reference to the more detailed
information appearing or incorporated by reference in this Joint Proxy
Statement/Prospectus (including the Appendices hereto).
THE COMPANIES
Advanced Technology Laboratories, Inc. ATL is engaged in the high-technology
electronic medical systems business. ATL develops, manufactures, markets and
services diagnostic medical ultrasound systems worldwide. The mailing address
of ATL's principal executive offices is 22100 Bothell Everett Highway, Bothell,
Washington 98041-3003, and its telephone number is (206) 487-7000. See "THE
COMPANIES--ATL."
ATL Sub Acquisition Corp. Merger Sub, a wholly owned subsidiary of ATL, was
formed by ATL solely for the purpose of effecting the Merger. The mailing
address of Merger Sub's principal executive offices is c/o ATL, 22100 Bothell
Everett Highway, Bothell, Washington 98041-3003, and its telephone number is
(206) 487-7000. See "THE COMPANIES--Merger Sub."
Interspec, Inc. Interspec develops, manufactures, markets and services
diagnostic medical ultrasound imaging systems, and related supplies and
accessories for physicians' offices, clinics and hospitals worldwide. The
mailing address of Interspec's principal executive offices is 110 West Butler
Avenue, Ambler, Pennsylvania 19002-5795, and its telephone number is (215) 540-
9190. See "THE COMPANIES--Interspec."
MEETINGS OF SHAREHOLDERS
Date, Time and Place of the Meetings
ATL. The ATL Annual Meeting is to be held on Monday, May 16, 1994, at 10:30
a.m., local time, at the Four Seasons Olympic Hotel, 411 University Street,
Seattle, Washington.
Interspec. The Interspec Special Meeting is to be held on Monday, May 16,
1994, at 10:00 a.m., local time, at the offices of Duane, Morris & Heckscher,
One Liberty Place, 42nd Floor, Philadelphia, Pennsylvania.
Purposes of the Meetings
ATL. At the ATL Annual Meeting, shareholders of ATL will consider and vote
upon (i) a proposal to approve the Issuance, pursuant to the Merger Agreement,
of shares of ATL Common Stock in exchange for Interspec Common Shares and upon
the exercise of currently outstanding options to purchase Interspec Common
Shares; (ii) a proposal to amend the ATL Option Plan, subject to approval of
the Issuance by the ATL shareholders, to increase the number of shares of ATL
Common Stock authorized for issuance thereunder by 450,000 to enable the
adjustment of outstanding options to purchase Interspec Common Shares, which
will be deemed to constitute options to purchase shares of ATL Common Stock
pursuant to the Merger Agreement, and to impose certain limits on option grants
thereunder; (iii) the election of eight directors to the ATL Board to hold
office until the next annual meeting of ATL shareholders and until their
respective successors are elected and qualified; (iv) a proposal to ratify the
appointment of KPMG Peat Marwick as ATL's independent auditors for 1994; and
(v) such other business as may properly come before the ATL Annual Meeting or
any adjournments or postponements thereof.
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<PAGE>
Interspec. At the Interspec Special Meeting, shareholders of Interspec will
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement
and the Merger and (ii) such other business as may properly come before the
Interspec Special Meeting or any adjournments or postponements thereof.
Record Dates
ATL. Only holders of record of shares of ATL Common Stock at the close of
business on March 23, 1994, are entitled to notice of and to vote at the ATL
Annual Meeting or any adjournments or postponements thereof. On that date,
10,521,020 shares of ATL Common Stock were outstanding and entitled to vote. As
of March 23, 1994, directors and executive officers of ATL and their affiliates
may be deemed to be beneficial owners of approximately 2% of the outstanding
voting shares of ATL Common Stock.
Interspec. Only holders of record of Interspec Common Shares at the close of
business on March 29, 1994, are entitled to notice of and to vote at the
Interspec Special Meeting or any adjournments or postponements thereof. On that
date, 6,265,987 Interspec Common Shares were outstanding and entitled to vote.
As of March 29, 1994, directors and executive officers of Interspec and their
affiliates may be deemed to be beneficial owners of approximately 7% of the
outstanding voting Interspec Common Shares.
Votes Required
ATL. The affirmative vote of the holders of shares representing a majority of
the shares of ATL Common Stock present, in person or by proxy, and entitled to
vote thereon at the ATL Annual Meeting is required for approval of the
Issuance, for approval of the amendment to the ATL Option Plan and for approval
of the ratification of the appointment of independent auditors. See "MEETINGS
OF SHAREHOLDERS--Record Date; Shares Entitled to Vote; Vote Required--ATL." The
amendment of the ATL Option Plan is contingent upon approval of the Issuance by
the ATL shareholders. Approval of the amendment to the ATL Option Plan by the
ATL shareholders is considered by ATL to be critical to ensuring the retention
of key employees of Interspec and is a condition to consummation of the Merger.
The directors elected will be the eight candidates receiving the greatest
number of votes cast by the holders of shares of ATL Common Stock present, in
person or by proxy, at the ATL Annual Meeting. See "ELECTION OF ATL DIRECTORS."
Interspec. The affirmative vote of a majority of votes cast, in person or by
proxy, by the holders of Interspec Common Shares entitled to vote at the
Interspec Special Meeting is required for approval and adoption of the Merger
Agreement and the Merger. See "MEETINGS OF SHAREHOLDERS--Record Date; Shares
Entitled to Vote; Vote Required--Interspec."
THE MERGER
General. Upon consummation of the Merger, Merger Sub will merge into
Interspec, Interspec will become a wholly owned subsidiary of ATL and each
Interspec Common Share issued and outstanding immediately prior to the Merger
(other than shares owned by Interspec and Dissenting Shares) will be converted
into the right to receive 0.413 share of ATL Common Stock, which share will be
accompanied by associated purchase rights as described in "DESCRIPTION OF ATL
CAPITAL STOCK--Shareholder Rights Plan." In addition, each outstanding option
to purchase Interspec Common Shares will be adjusted in accordance with its
terms to represent the option to acquire, subject to the same terms and
conditions as were applicable to such option, including vesting, that number of
shares of ATL Common Stock equal to the product of 0.413 and the number of
Interspec Common Shares subject to such option. Based on the capitalization of
ATL and Interspec as of February 10, 1994, and the Exchange Ratio, as a result
of the Merger, Interspec shareholders will own approximately 20% of the
outstanding shares of ATL Common Stock immediately following consummation of
the Merger, assuming no dissenters' rights are perfected.
2
<PAGE>
Fractional Shares. No fractional shares of ATL Common Stock will be issued in
the Merger. In lieu of any such fractional shares, each holder of Interspec
Common Shares who otherwise would be entitled to receive a fractional share of
ATL Common Stock pursuant to the Merger will be paid an amount by check,
without interest, equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares of ATL Common
Stock, if any, that would have been issued in the Merger. See "THE MERGER--
Terms of the Merger."
Recommendations of the Boards of Directors
ATL. The ATL Board has determined the Issuance and the Merger to be fair to
and in the best interests of ATL and its shareholders and has unanimously
approved the Issuance and the Merger Agreement. The ATL Board recommends that
ATL shareholders approve the Issuance, the amendment of the ATL Option Plan and
the ratification of the independent auditors and vote for the election of the
eight nominees for director. The ATL Board's recommendations are based upon a
number of factors discussed in this Joint Proxy Statement/Prospectus. See
"BACKGROUND OF AND REASONS FOR THE MERGER," "AMENDMENT OF THE ATL OPTION PLAN"
and "ELECTION OF ATL DIRECTORS."
Interspec. The Interspec Board has determined the Merger to be fair to and in
the best interests of Interspec and its shareholders and has unanimously
approved the Merger Agreement. The Interspec Board recommends that Interspec
shareholders approve and adopt the Merger Agreement and the Merger. The
Interspec Board's recommendations are based upon a number of factors discussed
in this Joint Proxy Statement/Prospectus. See "BACKGROUND OF AND REASONS FOR
THE MERGER."
Opinions of Financial Advisors
ATL. On February 10, 1994, Goldman, Sachs & Co. ("Goldman Sachs") delivered
its oral opinion to the ATL Board to the effect that, based on various
considerations and assumptions, the Exchange Ratio was fair to ATL. Goldman
Sachs subsequently confirmed its oral opinion by delivery of its written
opinion dated the date of this Joint Proxy Statement/Prospectus. A copy of the
full text of the written opinion of Goldman Sachs, which sets forth the
assumptions made, procedures followed, matters considered and limits of its
review, is attached to this Joint Proxy Statement/Prospectus as Appendix II,
and should be read carefully in its entirety. See "BACKGROUND OF AND REASONS
FOR THE MERGER--Opinion of Financial Advisor to the ATL Board."
Interspec. Merrill Lynch & Co. ("Merrill Lynch") has rendered an opinion to
the Interspec Board to the effect that, as of April 14, 1994, the Exchange
Ratio is fair to the Interspec shareholders from a financial point of view. A
copy of the opinion of Merrill Lynch, dated April 14, 1994, setting forth the
assumptions made, the matters considered and the limitations on the review
undertaken in rendering such opinion, is attached to this Proxy
Statement/Prospectus as Appendix III, and should be read carefully in its
entirety. See "BACKGROUND OF AND REASONS FOR THE MERGER--Opinion of Financial
Advisor to the Interspec Board."
Effective Time of the Merger. Promptly following the satisfaction or waiver
(where permissible) of the conditions to the Merger, the Merger will be
consummated and become effective at the time the certificate of merger to be
filed pursuant to the Delaware General Corporation Law (the "DGCL") and the
articles of merger pursuant to the PBCL are duly filed with the Secretary of
State of the State of Delaware and of the Commonwealth of Pennsylvania,
respectively, or such later date and time as may be specified in such
certificate of merger and articles of merger (the "Effective Time"). See "THE
MERGER--Effective Time of the Merger" and "--Conditions to the Consummation of
the Merger."
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Exchange of Certificates in the Merger. As soon as reasonably practicable
after the Effective Time, the Exchange Agent will mail a transmittal form and
instructions to each holder of record (other than Dissenting Shareholders) of
certificates that immediately prior to the Effective Time represented
outstanding Interspec Common Shares, which form and instructions are to be used
in forwarding such certificates for surrender and exchange for (i) certificates
representing that number of whole shares of ATL Common Stock that such holder
has the right to receive pursuant to the Merger and (ii) cash for any
fractional share of ATL Common Stock to which such holder otherwise would be
entitled. INTERSPEC SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL SUCH TRANSMITTAL FORM AND INSTRUCTIONS ARE
RECEIVED. Holders of certificates formerly representing Interspec Common Shares
will not be entitled to receive dividends or any other distributions from ATL
until such certificates are so surrendered. Persons entitled to receive
dividends or other distributions in respect of the certificates surrendered in
connection with the Merger will not be entitled to receive interest on such
dividends or other distributions. See "THE MERGER--Terms of the Merger" and "--
Exchange of Interspec Common Shares."
Trading of Shares of ATL Common Stock on the Nasdaq National Market. The
shares of ATL Common Stock to be issued in the Merger have been approved for
trading on the National Association of Securities Dealers, Inc. Automated
Quotations ("Nasdaq") National Market, subject to official notice of issuance.
Business of ATL and Interspec Pending the Merger
ATL. ATL has agreed that, prior to the Effective Time or earlier termination
of the Merger Agreement, except as permitted by the Merger Agreement, ATL and
its subsidiaries will carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as previously
conducted and will not engage in any of a number of actions specified in the
Merger Agreement. See "THE MERGER--Business of ATL Pending the Merger."
Interspec. Interspec has agreed that, prior to the Effective Time or earlier
termination of the Merger Agreement, except as permitted by the Merger
Agreement, Interspec and its subsidiaries will carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as previously conducted and will not engage in any of a number of
actions specified in the Merger Agreement. See "THE MERGER--Business of
Interspec Pending the Merger."
No Solicitation. The Merger Agreement provides that Interspec will not, nor
will it permit any of its subsidiaries to, nor will it authorize or permit any
officer, director, employee or any investment banker, attorney or other agent
or representative of Interspec or any of its subsidiaries, directly or
indirectly, to (i) solicit, initiate or encourage the submission of any
proposal for a merger or other business combination involving Interspec or any
of its subsidiaries or any proposal or offer to acquire in any manner, directly
or indirectly, an equity interest in, any voting securities of, or a
substantial portion of the assets of Interspec or any of its subsidiaries,
other than the transactions contemplated by the Merger Agreement (each, a
"Takeover Proposal"), or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a Takeover Proposal.
Notwithstanding such restrictions, Interspec may, to the extent required by the
fiduciary obligations of its directors, provide information to third parties
making unsolicited requests therefor and negotiate with third parties making
unsolicited Takeover Proposals. See "THE MERGER--No Solicitation."
Management and Operations of Interspec After the Merger. After the Merger,
Interspec will be a wholly owned subsidiary of ATL and will operate as one of
ATL's business units. ATL currently intends to maintain Interspec's facilities
in Ambler and Reedsville, Pennsylvania. After the Merger, Interspec will have
access to resources generally available to ATL's other business units, will
participate in appropriate activities with other ATL business units and will be
managed by its current officers under the direction and guidance of ATL's
senior management and the ATL Board. See "THE MERGER--Management and Operations
of Interspec After the Merger."
4
<PAGE>
Conditions of the Merger. The consummation of the Merger (the "Closing") is
subject to the satisfaction or waiver on or prior to the Closing of certain
conditions set forth in the Merger Agreement. See "THE MERGER--Conditions to
the Consummation of the Merger."
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of matters presented in this
Joint Proxy Statement/Prospectus by the Interspec shareholders, by mutual
written consent of ATL and Interspec or by either ATL or Interspec under
certain circumstances, including, (i) if any required vote of ATL shareholders
or Interspec shareholders has not been obtained, (ii) if the Merger has not
been consummated by August 9, 1994, subject to extension for up to 60 days in
certain circumstances, (iii) if any governmental entity shall have issued an
order, decree or ruling, or taken any other action, permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, or (iv) if either
party materially breaches its obligations under the Merger Agreement. In the
event that a Takeover Proposal is commenced, publicly proposed, publicly
disclosed or communicated to Interspec (or the willingness of any person to
make a Takeover Proposal is publicly disclosed or communicated to Interspec)
and (A) the Interspec Board, in the exercise of its fiduciary obligations,
determines that such Takeover Proposal is a superior proposal and, therefore,
withdraws or modifies its approval of the Merger, approves or enters into an
agreement for such Takeover Proposal or terminates the Merger Agreement, (B)
the required vote of Interspec shareholders is not obtained at the Interspec
Special Meeting, or (C) the Interspec Special Meeting does not occur prior to
August 9, 1994 (as may be extended), then Interspec will be required to pay to
ATL a termination fee of $1,000,000 and reimburse up to $500,000 of ATL's
expenses relating to the proposed Merger. See "THE MERGER--Amendment and
Waiver; Termination."
Certain Federal Income Tax Consequences. It is expected that the Merger will
constitute a reorganization for federal income tax purposes under the Internal
Revenue Code of 1986, as amended (the "Code"), and, accordingly, that no gain
or loss will be recognized by holders of Interspec Common Shares upon the
conversion of Interspec Common Shares into shares of ATL Common Stock in the
Merger (except with respect to any cash received in lieu of a fractional share
of ATL Common Stock and with respect to any Dissenting Shares). It is further
expected that no gain or loss will be recognized by Interspec or ATL as a
result of the Merger. See "THE MERGER--Certain Federal Income Tax
Consequences." Interspec shareholders are urged to consult their own tax
advisors as to the specific tax consequences to them of the Merger.
Other Agreements
Amendment to Convertible Notes and the Note Purchase Agreement. As a
condition subsequent to the Merger Agreement, Interspec and each holder (a
"Noteholder") of Interspec's 11% Convertible Subordinated Notes (the
"Convertible Notes") agreed to amend the Convertible Notes and the Note
Purchase Agreement dated as of May 31, 1989, among Interspec and the
Noteholders, effective as of the Closing (the "Convertible Note Amendments").
As of March 31, 1994, there was an aggregate of $6,500,000 principal amount of
the Convertible Notes outstanding. Pursuant to the Convertible Note Amendments,
(i) the Noteholders consent as noteholders to the Merger for all purposes under
the Note Purchase Agreement and the Convertible Notes and (ii) effective upon
consummation of the Merger, the Convertible Notes will be convertible into
0.413 share of ATL Common Stock for each $7.00 of outstanding principal amount
of the Convertible Notes, or an aggregate of 383,500 shares of ATL Common
Stock.
ATL Guarantee. To induce the Noteholders to enter into the Convertible Note
Amendments, ATL has agreed to enter into a guarantee, effective as of the
Closing (the "ATL Guarantee"), pursuant to which ATL will guarantee (i) the
prompt payment by Interspec, as and when due, of all amounts now or hereafter
owing by Interspec in respect of the principal of and interest on the
Convertible Notes, (ii) any and all expenses of the Noteholders pursuant to
Section 4.3 of the Convertible Notes, and (iii) any and all expenses, including
reasonable attorneys' fees, incurred by the Noteholders in enforcing their
rights under the ATL Guarantee.
5
<PAGE>
Regulatory Matters. In connection with the Merger, ATL and Interspec are
required to file notifications with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). Consummation of the Merger is conditioned
upon, among other things, expiration of the waiting period under the HSR Act.
The parties to the Merger are not aware of any other regulatory approvals
required to consummate the Merger.
Accounting Treatment. It is expected that the Merger will be accounted for
using the pooling-of-interests treatment under generally accepted accounting
principles for accounting and financial reporting purposes. See "THE MERGER--
Accounting Treatment" and "--Conditions to the Consummation of the Merger."
Conflicts of Interest. In connection with the Merger, ATL has agreed to, or
to cause Interspec to, enter into employment agreements with Edward Ray,
Michael J. Wassil and Patrick J. Faivre, each of whom is currently an officer
or significant employee of Interspec. In addition, each outstanding option to
purchase Interspec Common Shares will be adjusted in accordance with its terms
to represent an option to acquire, subject to the same terms and conditions as
were applicable to such option, including vesting, that number of shares of ATL
Common Stock equal to the product of 0.413 and the number of Interspec Common
Shares subject to such option. ATL also agreed that, for a period of six years
after the Effective Time, ATL will indemnify the present and former directors
and officers of Interspec from liabilities arising out of acts or omissions
occurring at or prior to the Effective Time to the fullest extent permitted or
required by applicable law. In connection with this indemnification, ATL will
cause to be maintained, for a period of five years after the Effective Time,
Interspec's current directors' and officers' liability insurance and
indemnification policy so long as the annual premium paid therefor would not be
in excess of 150% of the last annual premium paid therefor prior to the date of
Closing.
Appraisal Rights. Under the PBCL, holders of Interspec Common Shares who vote
against or refrain from voting in favor of approval of the Merger and the
Merger Agreement and who duly file with Interspec a written notice of intention
to demand payment of the "fair value" of such shares prior to the taking of any
shareholder vote on the Merger and the Merger Agreement, and who thereafter
timely demand payment, will have the right to receive a cash payment equal to
the "fair value" of such shares. To properly exercise such rights, a
shareholder of Interspec must hold such shares on the date of mailing of such
notice of intention to demand payment and continuously hold such shares through
the Effective Time, and must comply with all other procedural requirements of
Sections 1571 through 1580 of the PBCL. Failure to follow any of these and
other applicable procedures may result in the loss of statutory appraisal
rights. See "THE MERGER---Rights of Dissenting Interspec Shareholders."
Comparative Rights of Shareholders. If the Merger is consummated,
shareholders of Interspec, a Pennsylvania corporation, will become shareholders
of ATL, a Delaware corporation. The rights of Interspec shareholders differ in
certain respects from the rights of ATL shareholders, including the
requirements for shareholder action without a meeting, votes required for
certain amendments to the certificate of incorporation and for mergers and
other fundamental transactions, and the standard for finding a breach of
fiduciary duty by directors. In addition, ATL has adopted a shareholder rights
plan pursuant to which shareholders have rights to purchase shares of capital
stock of ATL in certain circumstances. See "DESCRIPTION OF ATL CAPITAL STOCK"
and "COMPARISON OF RIGHTS OF ATL AND OF INTERSPEC SHAREHOLDERS."
6
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following summary historical financial data of ATL and Interspec and the
summary unaudited pro forma condensed combined financial data have been derived
from the historical consolidated financial statements of ATL and Interspec. The
pro forma condensed combined financial data give effect to the Merger by
combining the financial statement data of ATL and of Interspec at and for each
year in the three-year period ended December 31, 1993, on the pooling-of-
interests basis of accounting. The pro forma condensed combined financial data
are not necessarily indicative of actual or future operating results or the
financial position that would have occurred or will occur upon consummation of
the Merger. The summary financial data presented below should be read in
conjunction with the consolidated financial statements of ATL and of Interspec
and the notes thereto incorporated by reference herein. The historical
financial data at and for each year in the five-year period ended December 31,
1993 with respect to ATL, and for each year in the five-year period ended
November 30, 1993 with respect to Interspec, have been extracted from the
audited consolidated financial statements of ATL and of Interspec filed with
the Commission. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
ATL SELECTED HISTORICAL FINANCIAL DATA(1)(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR FISCAL YEARS ENDED
----------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27, DECEMBER 28, DECEMBER 29,
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $304,511 $323,711 $279,716 $287,289 $265,480
Net income (loss)....... (5,106) 7,407 6,371 6,946 12,746
Net income (loss) per
share.................. (0.46) 0.67 0.62 0.68 1.23
Weighted average common
shares and equivalents
outstanding............ 10,992 11,086 10,220 10,239 10,350
BALANCE SHEET DATA:
Total assets............ $276,698 $295,611 $291,608 $254,719 $253,192
Short-term borrowings... 3,679 4,528 7,985 6,175 3,742
Shareholders' equity.... 186,370 204,136 190,346 169,706 173,549
</TABLE>
- - - --------
(1) On June 26, 1992, ATL (previously named Westmark International Incorporated
("Westmark")) distributed to its shareholders all the common stock of
SpaceLabs Medical, Inc. ("SpaceLabs"), a wholly owned subsidiary, on a one-
for-one basis (the "1992 Distribution"). The 1992 Distribution had the
effect of dividing Westmark into two separate, publicly traded companies,
one engaged in the diagnostic ultrasound business (ATL) and the other
(SpaceLabs), engaged in the patient monitoring and clinical information
systems business. The historical consolidated financial statements of ATL
were retroactively restated to deconsolidate the financial statements of
SpaceLabs to reflect the 1992 Distribution. Accordingly, ATL's historical
financial statements are presented as if there never had been an
affiliation between ATL and SpaceLabs.
(2) Neither ATL nor its predecessor Westmark has ever paid any cash dividends
on its capital stock.
7
<PAGE>
INTERSPEC SELECTED HISTORICAL FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR FISCAL YEARS ENDED NOVEMBER
30,
----------------------------------------
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $61,377 $60,343 $61,547 $64,906 $55,933
Income (loss) before extraordinary
item................................ 1,255 2,222 8,486 (1,539) (5,803)
Net income (loss).................... 1,950 3,232 9,246 (1,202) (5,244)
Net income (loss) per share:
Before extraordinary item.......... $ .20 $ .35 $ 1.36 $ (.25) $ (.95)
Extraordinary item................. .11 .16 .12 .05 .09
------- ------- ------- ------- -------
$ .31 $ .51 $ 1.48 $ (.20) $ (.86)
======= ======= ======= ======= =======
Weighted average common shares and
equivalents outstanding............. 6,284 6,309 6,261 6,105 6,102
BALANCE SHEET DATA:
Total assets......................... $53,274 $49,146 $46,518 $53,625 $51,804
Short-term borrowings, including
current installments of long-term
debt................................ 2,070 457 516 10,294 10,784
Long-term debt....................... 11,600 12,077 16,047 18,404 16,946
Shareholders' equity................. 25,905 24,373 20,734 11,501 12,080
</TABLE>
- - - --------
(1) In January, 1991 Interspec sold its wholly owned Norwegian subsidiary,
Vingmed Sound. Accordingly, certain year to year financial items will not
be comparable. For further information, see Note 7 of the Notes to
Consolidated Financial Statements included in Item 8 of the Interspec
Annual Report on Form 10-K for the fiscal year ended November 30, 1993.
UNAUDITED ATL AND INTERSPEC
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AT OR FOR FISCAL YEARS ENDED(1)
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27,
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $360,497 $380,405 $336,392
Net income (loss)....................... (3,321) 10,729 15,237
Net income (loss) per share............. (.24) .78 1.19
Weighted average common shares and
equivalents outstanding................ 13,587 13,692 12,806
BALANCE SHEET DATA:
Total assets............................ $329,397
Short-term borrowings, including current
installments of long-term debt......... 5,749
Long-term debt.......................... 11,600
Shareholders' equity.................... 210,835
</TABLE>
- - - --------
(1) Interspec has a November 30 fiscal year-end. Interspec financial
information at and for the fiscal years ended November 30, 1993, 1992 and
1991 has been combined with ATL financial information at and for the fiscal
years ended December 31, 1993 and 1992, and December 27, 1991.
8
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents comparative per share data for ATL (on a
historical and pro forma basis) and for Interspec (on a historical and a pro
forma equivalent basis) based upon the historical consolidated financial
statements of ATL and Interspec. Neither company has paid any cash dividends.
The pro forma combined information is not necessarily indicative of actual or
future operating results or the financial position that would have occurred or
will occur upon consummation of the Merger. The information presented below
should be read in conjunction with the Unaudited Pro Forma Condensed Combined
Financial Statements included elsewhere in this Joint Proxy
Statement/Prospectus and the separate historical consolidated financial
statements of ATL and of Interspec incorporated by reference herein.
<TABLE>
<CAPTION>
AT OR FOR FISCAL YEARS ENDED(1)
--------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 27,
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
ATL:
Historical:
Net income (loss).................... $ (.46) $.67 $ .62
Book value........................... 17.74
Pro Forma(2):
Net income (loss).................... $ (.24) $.78 $1.19
Book value........................... 16.10
INTERSPEC:
Historical:
Net income........................... $ .31 $.51 $1.48
Book value........................... 4.13
Pro Forma Equivalent(3):
Net income (loss).................... $ (.10) $.32 $ .49
Book value........................... 6.65
</TABLE>
- - - --------
(1) Interspec has a November 30 fiscal year-end. Interspec financial
information at and for the fiscal years ended November 30, 1993, 1992 and
1991 has been combined with ATL financial information at and for the fiscal
years ended, December 31, 1993 and 1992, and December 27, 1991.
(2) The pro forma combined financial data give effect to the Merger by
combining the financial statement data of ATL and of Interspec at and for
each fiscal year in the three-year period ended December 31, 1993 on the
pooling-of-interests basis of accounting.
(3) The pro forma equivalent information for Interspec was calculated by
multiplying the combined entity Pro Forma Combined per share amounts by the
Exchange Ratio of 0.413 share of ATL Common Stock to each Interspec Common
Share.
9
<PAGE>
RISK FACTORS
In considering the Issuance and the Merger, ATL shareholders and Interspec
shareholders should take into account the following:
NO ASSURANCES BUSINESSES CAN BE SUCCESSFULLY COMBINED. Following the Merger,
integration of the operations of ATL and Interspec will require dedication of
significant management resources. ATL and Interspec are currently each
independent diagnostic ultrasound companies and have duplicative functions that
will need to be coordinated or consolidated. The costs of such coordination and
consolidation may be significant. The management of ATL and of Interspec will
be faced with particular challenges in integrating the business operations of
ATL and Interspec into a cohesive, coordinated operation. Following the Merger,
ATL will face greater administrative and operational complexities due to the
scope and volume of its business. ATL may not be successful in its efforts to
integrate and streamline overlapping functions and therefore there can be no
assurance that the synergies expected from combining ATL and Interspec will be
realized.
DIFFERING TECHNICAL FOCUS AND PRODUCT PLANS. ATL has focused its resources on
the development of all digital ultrasound products. Interspec has pursued more
traditional analog/digital hybrid product architectures. ATL has new product
plans that were in place prior to announcement of the Merger and that ATL
expects to continue to pursue. Certain of these plans may be incompatible with
Interspec's products or new product plans, which may result in changes in
product marketing or development plans, or both. Such conflicts and changes
could have a material adverse effect on the companies.
POSSIBILITY OF SALES DECLINE DURING PRODUCT DISTRIBUTION TRANSITION. There
can be no assurance that the transition from Interspec's current dealers and
distributors to ATL's distribution network will not be lengthy or that it will
not consume a substantial amount of time and effort, during which time sales of
Interspec products may decline. Although ATL will seek to preserve a number of
existing Interspec dealer relationships, there can be no assurance that it will
be successful.
LACK OF DIVERSIFICATION. Following the Merger, ATL and Interspec will each be
engaged primarily in the diagnostic medical ultrasound business. The Merger
will not result in diversification of the business of ATL or Interspec outside
of ultrasound clinical markets. Consequently, the combined company will still
be subject to adverse developments in the medical ultrasound business as a
result of competition, technological change, governmental regulation, change in
third-party reimbursement policies or any other factors to a greater extent
than a company with more diverse businesses. See "--Intense Competition," "--
Rapid Technological Change," "--Extensive Government Regulation," "--Dependence
on Third-Party Reimbursement; Cost Containment," and "Unpredictable Effect of
Healthcare Reform; Consolidation."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST.
The executive officers and directors of Interspec have certain interests in
connection with the Merger that are in addition to those of Interspec
shareholders generally. In connection with the Merger, ATL has agreed to enter
into or assume existing employment agreements with Edward Ray, Michael J.
Wassil and Patrick J. Faivre, each of whom is currently an officer or a
significant employee of Interspec. In addition, each outstanding option to
purchase Interspec Common Shares will be adjusted in accordance with its terms
to represent an option to acquire, subject to the same terms and conditions as
were applicable to such option, including vesting, that number of shares of ATL
Common Stock equal to the product of 0.413 and the number of Interspec Common
Shares subject to such option. ATL also agreed that, for a period of six years
after the Effective Time, ATL will indemnify the present and former directors
and officers of Interspec from liabilities arising out of acts or omissions
occurring at or prior to the Effective Time to the fullest extent permitted or
required by applicable law. In connection with this indemnification, ATL will
cause to be maintained, for a period of five years after the Effective Time,
Interspec's current directors' and officers' liability insurance and
indemnification policy so long as the annual premium paid therefor would not be
in excess of 150% of the last annual premium paid therefor prior to the date of
Closing. See "CONFLICTS OF INTEREST."
10
<PAGE>
POTENTIAL LOSS OF PERSONNEL. Key employees of Interspec could terminate their
employment pending or following the Merger, which could adversely affect
Interspec's operations for a period of time.
DILUTION. Consummation of the Merger will result in immediate dilution in the
book value per share of ATL Common Stock from $17.74 per share to $16.10 per
share, based upon the book value of ATL at December 31, 1993. Additional
dilution is likely to occur upon the exercise of options to purchase Interspec
Common Shares that will be adjusted in accordance with their terms to be
exercisable for shares of ATL Common Stock pursuant to the Merger Agreement and
upon conversion of the Convertible Notes that will be amended to be convertible
into shares of ATL Common Stock pursuant to the Convertible Note Amendments.
INTENSE COMPETITION. The markets for diagnostic medical ultrasound products
are intensely competitive. Both ATL and Interspec face intense competition from
many domestic and foreign companies. In addition to primary competitors of ATL
and Interspec, certain leaders of the medical imaging industry have signaled
their intention to become more competitive in the ultrasound market. These
companies and several of the other competitors of ATL and Interspec have far
greater financial, marketing, servicing, technical and research and development
resources than those of ATL and Interspec. There can be no assurance that
actual or potential competitors will not develop and market products that are
superior or perceived to be superior relative to products supplied by ATL or
Interspec. Competition could adversely affect ATL's and Interspec's revenues
and profitability.
RAPID TECHNOLOGICAL CHANGE. The diagnostic medical ultrasound business is
characterized by rapidly evolving technology, resulting in relatively short
product life cycles and continuing competitive pressure to develop and market
new products. There can be no assurance that either ATL or Interspec will be
able to develop and market new products on a cost-effective and timely basis,
that such products will compete favorably with products developed by others or
that ATL's and Interspec's existing technology will not be superseded by new
technology developed by competitors.
EXTENSIVE GOVERNMENT REGULATION. Both ATL's and Interspec's products and
manufacturing activities are subject to extensive and rigorous governmental
regulation, principally by the U.S. Food and Drug Administration (the "FDA")
and corresponding state and foreign agencies. The FDA administers the Federal
Food, Drug and Cosmetic Act, as amended (the "FDC Act"). ATL and Interspec are
subject to the standards and procedures contained in the FDC Act and the
regulations promulgated thereunder, and are subject to inspection by the FDA
for compliance with such standards and procedures. Failure to comply with FDA
regulations could result in sanctions being imposed, including restrictions on
the marketing of, or the recall of, the affected company's products.
ATL and Interspec have received clearance from the FDA and foreign regulatory
authorities in the past, when required, to market their products. Several
features of Interspec's new products have not yet been cleared for marketing in
the United States. The process of obtaining future regulatory approvals may be
lengthy, expensive and uncertain. Moreover, regulatory approvals, when granted,
may contain significant limitations on the uses for which a product may be
marketed. Approvals may be withdrawn for failure to conform to regulatory
standards or due to the occurrence of unforeseen problems. There can be no
assurance that either company will be able to obtain necessary regulatory
approvals in the future, and delays in the receipt of or failure to receive
such approvals, the loss of existing approvals or failure to comply with
regulatory requirements could have a material adverse effect on the business,
financial condition and results of operations of the affected company.
ATL RESTRUCTURING AND ASSOCIATED CHARGE. In August 1993, ATL restructured its
operations, reducing its worldwide workforce by approximately 11%. As a result
of the restructuring, ATL reported a charge of $4.3 million for costs
associated with the restructuring, primarily consisting of severance payments
and other personnel costs. The restructuring was undertaken in response to the
continued uncertainty in the U.S. healthcare industry and to streamline ATL's
operations to make it more competitive. See "--Intense Competition" and "--
Unpredictable Effect of Healthcare Reform; Consolidation." The effect of the
restructuring charge on 1993 financial results is discussed under "--Recent
Losses and Future Uncertainty
11
<PAGE>
of Financial Results." There can be no assurance that the uncertainty regarding
healthcare and the competitive environment will not result in the need for
future restructuring.
RECENT LOSSES AND FUTURE UNCERTAINTY OF FINANCIAL RESULTS. In 1993 the U.S.
market for products of ATL and Interspec was adversely affected by national
interest in healthcare reform, and the consequent trends toward consolidation
and deferral of capital equipment acquisitions by healthcare providers. Coupled
with an absence of significant growth in overseas markets, these market changes
increased competition for sales in the medical diagnostic markets of ATL and
Interspec. The uncertainty over pending healthcare reform legislation and
increasing competition caused a deterioration in unit volumes in the medical
ultrasound market, adversely affecting prices and profit margins for both ATL
and Interspec. ATL responded to these market pressures by instituting a
restructuring in August 1993 that reduced its worldwide labor force by
approximately 11% and consequently incurred an associated $4.3 million
restructuring charge. Interspec's 1993 financial results were also affected by
increased expenses associated with expansion of its international distribution
system for new products and a decline in its transducer business. These factors
combined to result in the posting of two quarterly losses by ATL and declining
revenue for Interspec as compared with earlier periods. ATL's losses in 1993,
together with a repurchase of $13.4 million of its shares outstanding,
contributed to a reduction in its total assets as compared to 1992. With the
continuing uncertainty over the outcome of healthcare reform in the United
States and the economic conditions of overseas markets, such factors may
continue to adversely affect Interspec and ATL in the future. There can be no
assurance that market pressures on unit volumes, product pricing, and profit
margins will not result in future quarterly losses of the combined entity of
ATL and Interspec and that the revenues and total assets of the combined entity
will not decline correspondingly.
POTENTIAL CHANGES DUE TO REGULATORY INSPECTIONS. Following a routine
inspection by the FDA and the issuance of a warning letter to ATL in 1992, ATL
put into place expanded programs of documentation, process control, and
continuous quality improvement to enhance regulatory compliance. During the
latter half of 1993, the FDA conducted a follow up of its 1992 inspection. ATL
has received the investigator's observations from the follow-up inspection,
which ATL believes will not lead to further regulatory action by the FDA. ATL
is also awaiting the results of a routine FDA inspection of the Mahwah, New
Jersey facility of Nova MicroSonics, a division of ATL. ATL's ability to obtain
timely FDA export and new product approvals is dependent upon the results of
such inspections. If the FDA should impose additional requirements in
connection with the referenced inspections, ATL could incur substantial expense
in effecting process improvements and modifications of products previously sold
to customers.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT; COST CONTAINMENT. ATL's and
Interspec's products are used by healthcare providers for medical services for
which the providers may seek reimbursement from various third-party payors such
as government programs and private health insurance plans. Such reimbursement
is subject to the regulations and policies of governmental agencies and other
third-party payors. Reduced governmental expenditures in many countries
continue to put pressure on diagnostic procedure reimbursement. ATL and
Interspec cannot predict what changes may be forthcoming in these policies and
procedures, nor the effect of such changes on their businesses.
Third-party payors worldwide, including governmental agencies, are under
increasing pressure to contain medical costs. Limits on reimbursement or other
cost-containment measures imposed by third-party payors may adversely affect
the financial condition and ability of hospitals and other healthcare providers
to purchase products such as those of ATL and Interspec by reducing funds
available for capital expenditures or otherwise. A material decrease in
healthcare reimbursement levels or an adverse change in the general financial
condition of hospitals and other healthcare providers could adversely affect
future sales of either company's products. Governmental and other third-party
payors are increasingly challenging the prices charged for medical products and
services. There can be no assurance that the use of ATL's or Interspec's
products will be considered cost-effective by third-party payors, that
reimbursement will be available or, if available, that payors' reimbursement
levels will not adversely affect each company's ability to sell its products on
a profitable basis. Failure by hospitals and other healthcare providers to
obtain reimbursement from third-party payors and/or changes in governmental and
private third-party payors' policies toward
12
<PAGE>
reimbursement for procedures employing either company's products could have a
material adverse effect on the affected company's business, financial condition
and results of operations.
UNPREDICTABLE EFFECT OF HEALTHCARE REFORM; CONSOLIDATION. The United States
government is currently considering healthcare-system reform. The national
focus on possible healthcare legislation has caused U.S. ultrasound purchasers
to become more cautious in making expenditures and investing in capital
equipment. In addition, the U.S. healthcare system has undergone various
consolidations in recent years, which have reduced the potential number of
customers for ATL's and Interspec's products. These factors have led many
hospitals and other medical service suppliers to defer or reduce their capital
equipment expenditures. ATL and Interspec cannot predict what effect, if any,
such change may have on their respective businesses, or when the deleterious
effect of these conditions on their respective businesses will change.
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS. ATL and Interspec each hold a
number of patents and have patent applications pending. There can be no
assurance that pending patent applications will be approved or that the issued
patents or pending applications will not be challenged or circumvented by
competitors. Each company has also sought trademark protection for the brand
names of the products that it currently markets. There can be no assurance that
trademark protection will be granted and maintained. Certain critical
technology incorporated in each company's products is protected by copyright
and trade secret laws and confidentiality and licensing agreements. There can
be no assurance that such protection will prove adequate or that the affected
company will have adequate remedies for violation of its intellectual property
rights.
Because of the substantial length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace, the medical device industry places considerable importance on
obtaining patent, trademark, copyright and trade secret protection for new
technologies, products and processes. The loss of protection for ATL's or
Interspec's technology could have a material adverse effect on the affected
company's business. Certain technology incorporated in each company's products
is licensed under agreements with third parties, and the loss of certain of
such licenses could have a material adverse effect on the affected company's
business.
Companies in high-technology businesses routinely review the products of
others for possible conflict with their own patent rights. ATL and Interspec
have from time to time received notices of claims from others alleging patent
infringement. ATL is currently the defendant in a patent infringement action in
which the plaintiff is seeking over $5 million in damages. While neither ATL
nor Interspec believes that it infringes any valid patent of any third party,
there can be no assurance that either ATL or Interspec will not be subject to
future claims of patent infringement or that any claim will not require that
the affected company pay substantial damages or delete certain features from
its products, or both. Such claims could temporarily interrupt ATL's or
Interspec's ability to ship affected products.
ABSENCE OF DIVIDENDS. ATL currently does not, nor does it intend to, pay cash
dividends on shares of ATL Common Stock. ATL's dividend policy will be reviewed
from time to time by the ATL Board in light of ATL's earnings and financial
condition and such other business considerations as the ATL Board considers
relevant. Restrictions on the payment of dividends exist under ATL's current
credit facilities.
VOLATILITY OF TRADING PRICES OF SHARES OF ATL COMMON STOCK. The market prices
for securities of medical technology companies have been volatile. Among other
things, announcements of technical innovations or new commercial products by
ATL, Interspec or their competitors, developments concerning proprietary
rights, including patents and litigation matters, publicity regarding actual or
potential medical results with products under development by ATL or Interspec
and regulatory developments in both the United States and foreign countries, as
well as period-to-period fluctuations in revenues and financial results, may
have a significant impact on the market price of shares of ATL Common Stock
following the Merger.
DEPENDENCE ON SINGLE-SOURCE SUPPLIERS. ATL and Interspec depend on some
single-source vendors for certain important component parts for certain
products. An abrupt disruption in the supply of a single-source
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part for a product could have a material adverse effect on the affected
company's production of products incorporating such items in cases where the
existing inventory of the components is not adequate to meet the affected
company's demand for the component during such disruption. Vendors of highly
specialized and unique parts such as custom semiconductor devices and critical
scanhead materials can occasionally experience difficulty in the manufacture of
products. Vendors can also experience difficulty in meeting quality standards
that ATL and Interspec require of their respective vendors. In addition, these
items generally have long order lead times, restricting the ability of ATL and
Interspec to respond quickly to changing market conditions.
POSSIBILITY OF PRODUCTS LIABILITY AND WARRANTY CLAIMS. The manufacture and
sale of ATL's and Interspec's products entail inherent risk of product
liability claims. Each of ATL and Interspec currently has a limited amount of
products liability insurance; however, in the event of a product liability
claim there can be no assurance that the coverage limits of such insurance
policies will be adequate. Products liability insurance is expensive and in the
future may not be available on acceptable terms, if at all. A successful claim
against ATL or Interspec in excess of insurance coverage could have a material
adverse effect on the affected company's business, financial condition and
results of operations.
In 1992 and 1993, Interspec was involved in a lawsuit filed by a competitor
concerning alleged deceptive advertising of an industrial couplant product sold
by Interspec's Echo Ultrasound division. A couplant is a water-based gel
applied to materials which are being ultrasonically examined for flaws and
defects. Numerous metallic components are tested ultrasonically, including
pipes, fittings, welded joints, airplane parts, steel vessels, power plant
fixtures and rotors, large crankshafts, gun bores and many other items. The
allegations in the lawsuit concerned claims about the corrosion inhibition
characteristics of the couplant. This lawsuit was settled after Interspec
notified its customers that the product may cause corrosion and pitting of
steel under certain conditions. Corrosion may lead to failure of parts in
certain circumstances and such parts failures have, on occasion, been
associated with accidents or incidents involving aircraft and other products.
No product liability claims have been made against Interspec for damages
arising from corrosion due to use of its couplant. There can be no assurance
that such claims will not be asserted against Interspec and ATL in the future
or, if asserted, that any such future claims will not result in material
liability for Interspec and ATL.
POSSIBLE ANTITAKEOVER EFFECTS. ATL has the authority to issue six million
shares of preferred stock in one or more series and to fix the powers,
designations, preferences and relative, participating, optional or other rights
thereof without any further vote or action by ATL's shareholders. The issuance
of preferred stock could dilute the voting power of holders of shares of ATL
Common Stock and could have the effect of delaying, deferring or preventing a
change in control of ATL. Certain provisions of ATL's Restated Certificate of
Incorporation (the "ATL Certificate of Incorporation"), Restated Bylaws (the
"ATL Bylaws"), Shareholder Rights Plan and employee benefit plans as well as
Delaware law may operate in a manner that could discourage or render more
difficult a takeover of ATL or the removal of management or may limit the price
certain investors may be willing to pay in the future for shares of ATL Common
Stock. See "DESCRIPTION OF ATL CAPITAL STOCK" and "COMPARISON OF RIGHTS OF ATL
AND OF INTERSPEC SHAREHOLDERS."
MEETINGS OF SHAREHOLDERS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of shares
of ATL Common Stock in connection with the solicitation of proxies by the ATL
Board for use at the ATL Annual Meeting to be held on Monday, May 16, 1994, at
the Four Seasons Olympic Hotel, 411 University Street, Seattle, Washington,
commencing at 10:30 a.m., local time, and at any adjournments or postponements
thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
Interspec Common Shares in connection with the solicitation of proxies by the
Interspec Board for use at the Interspec Special Meeting to be held on Monday,
May 16, 1994, at the offices of Duane, Morris & Heckscher, One Liberty Place,
42nd
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Floor, Philadelphia, Pennsylvania, commencing at 10:00 a.m., local time, and at
any adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to shareholders of ATL and of Interspec on or about April
18, 1994.
MATTERS TO BE CONSIDERED AT THE MEETINGS
ATL. At the ATL Annual Meeting, shareholders of record of ATL as of the close
of business on March 23, 1994, will consider and vote upon (i) a proposal to
approve the Issuance of shares of ATL Common Stock in exchange for Interspec
Common Shares and upon the exercise of currently outstanding options to
purchase Interspec Common Shares, which will be adjusted and deemed to
constitute options to purchase shares of ATL Common Stock, pursuant to the
Merger Agreement; (ii) a proposal to amend the ATL Option Plan, subject to
approval of the Issuance by the ATL shareholders, to increase the number of
shares of ATL Common Stock authorized for issuance thereunder by 450,000 and to
impose certain limits on option grants thereunder; (iii) the election of eight
directors to the ATL Board to hold office until the next annual meeting of ATL
shareholders and until their respective successors are elected and qualified;
(iv) a proposal to ratify the appointment of KPMG Peat Marwick as ATL's
independent auditors for 1994; and (v) such other business as may properly come
before the ATL Annual Meeting or any adjournments or postponements thereof.
Holders of shares of ATL Common Stock will not be entitled to dissenters'
rights as a result of the Issuance. See "THE MERGER--Terms of the Merger."
THE ATL BOARD HAS APPROVED THE ISSUANCE AND THE MERGER AGREEMENT AND
RECOMMENDS THAT ATL SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ISSUANCE, "FOR"
APPROVAL OF THE AMENDMENT TO THE ATL OPTION PLAN, "FOR" ELECTION OF THE
NOMINEES FOR DIRECTOR AND "FOR" RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
AUDITORS. See "BACKGROUND OF AND REASONS FOR THE MERGER," "AMENDMENT OF THE ATL
OPTION PLAN," "ELECTION OF ATL DIRECTORS" and "RATIFICATION OF APPOINTMENT OF
AUDITORS."
INTERSPEC. At the Interspec Special Meeting, shareholders of record of
Interspec as of the close of business on March 29, 1994, will consider and vote
upon (i) a proposal to approve and adopt the Merger Agreement and the Merger
and (ii) such other business as may properly come before the Interspec Special
Meeting or any adjournments or postponements thereof. The Merger Agreement
provides that, upon the terms and subject to the conditions thereof, Merger Sub
will merge into Interspec, Interspec will become a wholly owned subsidiary of
ATL, each issued and outstanding Interspec Common Share (other than shares
owned by Interspec and Dissenting Shares) will be converted into the right to
receive 0.413 share of ATL Common Stock and each outstanding option to purchase
Interspec Common Shares will be deemed to constitute an option to purchase that
number of shares of ATL Common Stock equal to the product of the Exchange Ratio
and the number of Interspec Common Shares subject to such option. Fractional
shares of ATL Common Stock will not be issued in connection with the Merger. In
lieu of any such fractional shares, each holder of Interspec Common Shares who
otherwise would be entitled to receive a fractional share of ATL Common Stock
pursuant to the Merger will be paid an amount by check, without interest, equal
to such holder's proportionate interest in the net proceeds from the sale or
sales in the open market by the Exchange Agent, on behalf of all such holders,
of the aggregate fractional shares of ATL Common Stock, if any, that would have
been issued in the Merger. See "THE MERGER--Terms of the Merger."
Holders of Interspec Common Shares will be entitled to dissenters' rights as
a result of the Merger. See "THE MERGER--Rights of Dissenting Interspec
Shareholders."
THE INTERSPEC BOARD HAS APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT
AND THE MERGER AND RECOMMENDS THAT INTERSPEC SHAREHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. See "BACKGROUND OF AND
REASONS FOR THE MERGER."
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RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
ATL. The close of business on March 23, 1994 (the "ATL Record Date") has been
fixed as the record date for determining the holders of shares of ATL Common
Stock who are entitled to notice of and to vote at the ATL Annual Meeting. As
of the ATL Record Date, there were 10,521,020 shares of ATL Common Stock
outstanding and entitled to vote. The holders of record on the ATL Record Date
of shares of ATL Common Stock are entitled to one vote per share of ATL Common
Stock. The presence in person or by proxy of the holders of shares representing
a majority of the voting power of the shares of ATL Common Stock entitled to
vote is necessary to constitute a quorum for the transaction of business at the
ATL Annual Meeting. Under Section 1(c) of Part III, Section 5 of Schedule D to
the Bylaws of the National Association of Securities Dealers, Inc. (the
"NASD"), the affirmative vote of the holders of shares representing a majority
of the shares of ATL Common Stock present, in person or by proxy, and entitled
to vote on the Issuance at the ATL Annual Meeting is required for approval
thereof. The affirmative vote of the holders of a majority of the shares of ATL
Common Stock present, in person or by proxy, and entitled to vote thereon at
the ATL Annual Meeting is required for approval of the amendment to the ATL
Option Plan to increase the number of shares of ATL Common Stock authorized for
issuance thereunder and to approve the ratification of the appointment of the
independent auditors. The directors elected will be the eight candidates
receiving the greatest number of votes cast by the holders of shares of ATL
Common Stock present, in person or by proxy, at the ATL Annual Meeting. Holders
of shares of ATL Common Stock are not entitled to cumulate votes in the
election of directors. As of the ATL Record Date, directors and executive
officers of ATL and their affiliates may be deemed to be beneficial owners of
approximately 2% of the outstanding voting shares of ATL Common Stock. Each of
the directors and executive officers of ATL plans to vote or direct the vote of
all shares of ATL Common Stock over which he or she has voting control in favor
of the Issuance, the amendment to the ATL Option Plan, the election of the
eight nominees for director and the ratification of the appointment of KPMG
Peat Marwick.
Abstention from voting will have the practical effect of voting against the
Issuance, the amendment to the ATL Option Plan and the ratification of the
appointment of the independent auditors since they represent one less vote for
the Issuance, such amendment or such ratification, as the case may be. Broker
nonvotes will have no effect on the Issuance, the amendments to the ATL Option
Plan or the ratification of the appointment of the independent auditors since
they will not represent shares entitled to vote on the Issuance, such amendment
or such ratification at the ATL Annual Meeting. Abstention from voting and
broker nonvotes on the election of directors will have no effect since they
will not represent votes cast at the ATL Annual Meeting for the purpose of
electing directors.
INTERSPEC. The close of business on March 29, 1994 (the "Interspec Record
Date") has been fixed as the record date for determining the holders of
Interspec Common Shares who are entitled to notice of and to vote at the
Interspec Special Meeting. As of the Interspec Record Date, there were
6,265,987 Interspec Common Shares outstanding and entitled to vote. The holders
of record on the Interspec Record Date of Interspec Common Shares are entitled
to one vote per Interspec Common Share. The presence in person or by proxy of
the holders of shares representing a majority of the voting power of the
Interspec Common Shares entitled to vote is necessary to constitute a quorum
for the transaction of business at the Interspec Special Meeting. Under the
PBCL, the affirmative vote of a majority of votes cast, in person or by proxy,
by the holders of Interspec Common Shares entitled to vote at the Interspec
Special Meeting is required for approval and adoption of the Merger Agreement
and the Merger. As of the Interspec Record Date, directors and executive
officers of Interspec and their affiliates may be deemed to be beneficial
owners of approximately 7% of the outstanding voting Interspec Common Shares.
Each of the directors and executive officers of Interspec plans to vote or
direct the vote of all Interspec Common Shares over which he or she has voting
control in favor of the approval and adoption of the Merger Agreement and the
Merger.
Abstention from voting and broker nonvotes will not have any effect on the
proposal to approve and adopt the Merger Agreement and the Merger since they
are not considered votes cast at the Interspec Special Meeting for purposes of
the proposal.
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PROXIES; PROXY SOLICITATION
ATL. Shares of ATL Common Stock represented by properly executed proxies
received at or prior to the ATL Annual Meeting that have not been revoked will
be voted at the ATL Annual Meeting in accordance with the instructions
contained therein. Shares of ATL Common Stock represented by properly executed
proxies for which no instruction is given will be voted "FOR" approval of the
Issuance, "FOR" approval of the amendment to the ATL Option Plan, "FOR"
election of the nominees for director and "FOR" ratification of the appointment
of independent auditors. ATL shareholders are requested to complete, sign, date
and return promptly the enclosed proxy card in the postage-prepaid envelope
provided for this purpose to ensure that their shares are voted. A shareholder
may revoke a proxy by submitting at any time prior to the vote on the Issuance,
the approval of the amendment to the ATL Option Plan, the election of the
nominees for director and the ratification of the appointment of independent
auditors a later-dated proxy with respect to the same shares, by delivering
written notice of revocation to the Secretary of ATL at any time prior to such
vote or by attending the ATL Annual Meeting and voting in person. Mere
attendance at the ATL Annual Meeting will not in and of itself revoke a proxy.
If the ATL Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the ATL Annual Meeting all proxies will be voted in
the same manner as such proxies would have been voted at the original convening
of the ATL Annual Meeting (except for any proxies that have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.
INTERSPEC. Interspec Common Shares represented by properly executed proxies
received at or prior to the Interspec Special Meeting that have not been
revoked will be voted at the Interspec Special Meeting in accordance with the
instructions contained therein. Interspec Common Shares represented by properly
executed proxies for which no instruction is given will be voted "FOR" approval
and adoption of the Merger Agreement and the Merger. Interspec shareholders are
requested to complete, sign, date and return promptly the enclosed proxy card
in the postage-prepaid envelope provided for this purpose to ensure that their
shares are voted. A shareholder may revoke a proxy by submitting at any time
prior to the vote on the Merger a later-dated proxy with respect to the same
shares, by delivering written notice of revocation to the Secretary of
Interspec at any time prior to such vote or by attending the Interspec Special
Meeting and voting in person. Mere attendance at the Interspec Special Meeting
will not in and of itself revoke a proxy.
If the Interspec Special Meeting is postponed or adjourned for any reason, at
any subsequent reconvening of the Interspec Special Meeting all proxies will be
voted in the same manner as such proxies would have been voted at the original
convening of the Interspec Special Meeting (except for any proxies that have
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
meeting.
PROXY SOLICITATION. ATL and Interspec will each bear the cost of soliciting
proxies from their respective shareholders. ATL will pay Georgeson & Co. a fee
of $8,000 covering its services in soliciting the forwarding and return of
proxy material and will reimburse Georgeson & Co. for out-of-pocket expenses
incurred in connection therewith. In addition to solicitation by mail,
directors, officers and employees of ATL and of Interspec may solicit proxies
by telephone, telegram or otherwise. Interspec will pay Corporate Investor
Communications, Inc. a fee of $4,000 covering its services in soliciting the
forwarding and return of proxy material and will reimburse Corporate Investor
Communications, Inc. for out-of-pocket expenses incurred in connection
therewith. Such directors, officers and employees of ATL and Interspec will not
be additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of ATL Common Stock and Interspec Common Shares
held of record by them will be reimbursed for their reasonable expenses
incurred in forwarding such material.
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BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND
ATL. ATL develops, manufactures, markets and services diagnostic medical
ultrasound systems worldwide. Although ATL produces products that address all
the principal clinical applications, ATL's products are primarily focused on
the premium (over $150,000 per unit) radiology and vascular markets and the
low-cost (under $40,000 per unit) obstetrics and gynecology ("ob-gyn") markets.
In 1993, ATL introduced a premium product for the cardiology, shared services
and internal medicine markets, but it has not comprehensively addressed the
market for cardiology or mid-range ($40,000 to $150,000 per unit) products. ATL
has an extensive domestic and international distribution network and a strong
financial position.
ATL purchases transesophaegeal echocardiography scanheads and other solid
state array scanheads from Interspec's Echo Ultrasound division for inclusion
in ATL's ultrasound systems pursuant to standard OEM agreements entered into
periodically since 1989. Through its Nova MicroSonics division, ATL sells
cardiac analysis products known as stress echo modules to Interspec for
inclusion in Interspec's medical ultrasound systems pursuant to standard OEM
agreements entered into periodically since February 1992.
INTERSPEC. Interspec develops, manufactures, markets and services diagnostic
medical ultrasound systems and accessories for physicians' offices, clinics and
hospitals. Interspec has developed and marketed products specifically designed
to serve the cardiology markets. During the fourth quarter of fiscal 1990,
Interspec established a relationship with a third party to develop a high-
performance, mid-range, multi-purpose radiology ultrasound imaging system using
Interspec's proprietary technology. The third party, a multi-national company,
agreed to distribute this radiology system internationally, which would have
provided the financing to assist Interspec in establishing a distribution
network for this radiology system in the United States. Interspec and the third
party terminated the relationship in June 1992 prior to commencement of any
product distribution.
Upon termination, Interspec retained all rights to the product and its
technology, but was faced with the need to establish an alternative
distribution system for the radiology system both internationally and in the
United States. During 1993, Interspec, with approval of the Interspec Board,
explored several alternatives, one of which was a possible distribution
arrangement with ATL.
DISCUSSIONS OF A DISTRIBUTION ARRANGEMENT. On August 31, 1993, Dennis C.
Fill, Chairman and Chief Executive Officer of ATL, met with Edward Ray,
Chairman, President and Chief Executive Officer of Interspec, at the European
Society of Cardiologists conference in Nice, France. Messrs. Fill and Ray had a
general discussion of healthcare industry developments and considered the
possible distribution by ATL of Interspec's multi-purpose radiology ultrasound
system. To further consider this possibility, ATL and Interspec entered into a
Confidential Disclosure Agreement on September 13, 1993, which was amended on
October 14, 1993, to enable each company to evaluate the products of the other.
On September 13 and 14, an ATL engineer and an ATL clinical manager observed a
demonstration of the Interspec radiology ultrasound system at the Thomas
Jefferson University clinic in Philadelphia, Pennsylvania. The favorable
demonstration led to meetings on September 21 and October 14 in New York City
and in Pennsylvania between Mr. Fill, Mr. Ray, Harvey N. Gillis, Senior Vice
President and Chief Financial Officer of ATL, and Michael J. Wassil, Vice
President, Finance, and Chief Financial Officer of Interspec, to discuss a
potential strategic alliance between ATL and Interspec, whereby ATL would
distribute Interspec products. At a regularly scheduled meeting of the
Interspec Board on October 7, 1993, Mr. Ray informed the Interspec Board of
discussions with ATL regarding product distribution. At a regularly scheduled
meeting of the ATL Board on October 29, 1993, the ATL Board was informed of the
preliminary discussions with Interspec regarding some form of strategic
alliance.
CONSIDERATION OF A BUSINESS COMBINATION. In considering the possible terms of
a distribution arrangement with Interspec, ATL officers began to analyze
whether a merger with Interspec might be a viable alternative. The ATL officers
concluded that a merger might be desirable because it would permit ATL to
market
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Interspec's products as part of an integrated line of ultrasound products
without the uncertainty associated with a distribution arrangement. Because a
distribution arrangement is subject to periodic renegotiation and renewal,
customers are sometimes reluctant to purchase from distributors because they
may lose the manufacturer's support if the relationship should be terminated. A
merger with Interspec would represent a stronger commitment by ATL to support
Interspec's product lines, which in turn could facilitate ATL's ability to
market Interspec's products, to the mutual benefit of ATL and Interspec.
Accordingly, on November 7, 1993, Messrs. Fill and Ray met again at the
American Heart Association meeting in Atlanta, Georgia and first explored the
possibility of a business combination between ATL and Interspec. The parties
next met at the Radiological Society of North America meeting in Chicago,
Illinois on November 30 to further explore the possibility of a combination and
to exchange information regarding their respective businesses and technologies.
Messrs. Fill and Ray were joined by Messrs. Gillis and Wassil and Eugene A.
Larson, a director of ATL and member of its Scientific Advisory Board, for
these discussions. During these discussions, Mr. Fill indicated a preliminary
range of values that ATL might be willing to propose for a business combination
of the two companies. Such preliminary values were based solely on internal
analyses of Interspec's business developed by ATL's officers, without the
benefit of an in-depth due diligence investigation of Interspec and its
products. Mr. Ray indicated that the proposed range of values was insufficient
to interest Interspec in considering a combination with ATL because he did not
believe it adequately reflected Interspec's contribution to a combined company.
On December 21, 1993, Messrs. Fill and Ray met in Princeton, New Jersey, to
discuss the possible synergies arising from the fit between ATL's high end and
Interspec's mid-range products, ATL's strength in the radiology, vascular and
ob-gyn markets and Interspec's strength in the cardiology markets and the
expanded distribution system that might result from a business combination of
the two companies. They also discussed the possibility of structuring the
combination as a stock-for-stock merger and establishing the ratio for the
exchange of ATL Common Stock for Interspec Common Shares based on a comparison
of the relative market capitalizations of the two companies and of the
contributions of ATL and Interspec to the operations of a combined entity. Mr.
Ray indicated his willingness to resume exploratory talks, and on December 23,
Mr. Ray reported to the Interspec Board that ATL had approached Interspec
regarding discussion of a possible merger. Mr. Ray obtained the approval of the
Interspec Board to continue such discussions with ATL and was authorized to
contact and formally engage Merrill Lynch as Interspec's financial advisor in
connection with a possible business combination with ATL. On January 3, 1994,
Interspec retained Merrill Lynch as its financial advisor. In mid-December, ATL
engaged Goldman Sachs to advise ATL in connection with discussions with
Interspec. At a telephonic meeting of the ATL Board on January 7, 1994, Mr.
Fill and other ATL executives reported on the discussions with Interspec, the
potential synergies that might result from a business combination and the
advantages of such a combination over a distribution arrangement, as discussed
above, and obtained the approval of the ATL Board to continue such exploratory
discussions.
On January 12, 1994, Messrs. Fill and Gillis and Messrs. Ray and Wassil and
their respective financial advisors met in New York City to conduct financial
due diligence and discuss potential valuations of a business combination of the
two companies. The discussions focused on a comparison of the relative market
capitalizations of the two companies and of the contributions of ATL and
Interspec to the operations of a combined entity, the weight to be accorded to
each company's contributions, the relative trading prices of the ATL Common
Stock and the Interspec Common Shares and the ability of ATL to account for a
potential merger as a pooling of interests. The discussions continued between
the financial advisors on January 13. No agreement was reached on a mutually
acceptable valuation.
On January 16, 1994, Mr. Fill proposed to Mr. Ray a potential merger through
a stock-for-stock exchange, using an exchange ratio that would provide an
amount of ATL Common Stock worth approximately $7.00 for each Interspec Common
Share. The potential merger was conditioned upon the ability of ATL to use the
pooling-of-interests accounting method. On January 18, the Interspec Board met
with Interspec's senior management and representatives of Merrill Lynch and
reviewed ATL's preliminary proposal for a stock-for-stock merger. The Interspec
Board discussed the possibility of continuing to pursue a distribution
arrangement, the prior history of such discussions, the market perception that
a distribution arrangement might not provide customers with long-term customer
support relative to a combination, the
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synergies presented by ATL in terms of product and market fit and the potential
benefits from access to its worldwide distribution system, the potential
distraction of management focus and disruption of Interspec's business that
could result from a broader search for another partner and the low probability
that another partner would provide the unique synergies offered by ATL, and the
risks involved with remaining an independent company, including the constraints
on Interspec's ability to finance its continued growth. After discussions, the
Interspec Board determined that a merger with ATL could provide a better
opportunity for value to Interspec's shareholders than a distribution
arrangement with ATL or others, and authorized management, Merrill Lynch and
Interspec's counsel to pursue the proposal further in accordance with the
guidance provided by the Interspec Board.
Between January 18 and February 9, 1994, the parties negotiated the terms of
a definitive merger agreement and related agreements, continued to evaluate the
accounting treatment for the transaction, and conducted due diligence
investigations of one another's businesses. Negotiations focused on: (i) the
exchange ratio to be used for the exchange of shares, taking into account the
due diligence investigation performed by each company and the advice of its
financial advisors; (ii) the treatment of the Convertible Notes, including the
willingness of the Noteholders to agree to a redemption of the Convertible
Notes after consummation of the proposed merger or to an amendment of the
Convertible Notes to provide for their conversion into ATL Common Stock; (iii)
whether to include price protection provisions in the event of fluctuations in
the price of ATL Common Stock and, if so, the need for corresponding price
protection provisions for ATL in the event of fluctuations in the price of
Interspec Common Shares; (iv) the ability of Interspec to terminate the merger
agreement if the Interspec Board believed it had a fiduciary duty to terminate
(the "fiduciary out"); (v) the termination fee and expense reimbursement
requested by ATL to compensate ATL in the event Interspec should terminate the
merger agreement pursuant to a fiduciary out or if the merger agreement should
be terminated under certain other circumstances; and (vi) continuation of
existing contracts for the employment of key Interspec executives in order to
assure ATL that it would retain such executives for a reasonable transition
period following the proposed merger. During the last week of January,
Interspec commenced discussions with the Noteholders regarding the treatment of
the Convertible Notes.
On February 1, Messrs. Fill and Ray settled upon a fixed exchange ratio,
conditioned upon the ability to use the pooling-of-interests accounting method
for the proposed merger, of preparation of a mutually satisfactory agreement
and approval of the respective Boards, of 0.413 share of ATL Common Stock for
each Interspec Common Share. The Exchange Ratio, along with the other terms of
the merger agreement, were determined in arm's-length negotiations between the
management teams of both companies, in consultation with their respective
Boards of Directors and financial advisors. The Exchange Ratio approximated the
value of $7.00 per Interspec Common Share initially proposed by ATL, which ATL
and Interspec management believed was supported by their financial due
diligence and the advice of their respective financial advisors summarized
under "--Opinion of Financial Advisor to the ATL Board;" and "--Opinion of
Financial Advisor to the Interspec Board." The ratio was fixed, and did not
contemplate price protection provisions in the event of fluctuations in the
price of the shares of either company. ATL and Interspec ultimately concluded
that the certainty of a fixed ratio was consistent with the valuation of both
companies based on the historical and anticipated long-term contributions of
each to the combined company on a pro forma basis, rather than on the basis of
possible short-term fluctuations in the trading price of their respective
shares during the interval between announcement and consummation of the
proposed merger. In light of the importance to Interspec of the fiduciary out
provision, Interspec was ultimately willing to agree to payment of the
termination fee and expenses to ATL in the event the fiduciary out provision
became operative, or if the Merger Agreement should terminate under certain
other circumstances.
On February 7, 1994, the ATL Board met with ATL executives and ATL's
financial and legal advisors in New York City to consider the terms of the
proposed merger with Interspec, and received a draft merger agreement. The ATL
Board also heard reports from Mr. Fill, Mr. Larson and David M. Perozek,
President and Chief Operating Officer of ATL, regarding the negotiations with
Interspec and the potential benefits of the proposed merger listed under
"Reasons for the Merger; Recommendations of the Boards of Directors--ATL"
below. Goldman Sachs delivered the presentation described under "Opinion of
Financial Advisor to the ATL Board" below. The ATL Board then reviewed the
terms of the draft merger agreement with ATL
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executives and ATL's legal and financial advisors. Because ATL had not yet
determined that the pooling-of-interests method could be utilized to account
for the proposed merger, the ATL Board authorized Mr. Fill to negotiate a lower
alternative price to be effective in the event the merger should be accounted
for using the purchase method of accounting.
On February 8, 1994, the Interspec Board held a meeting at which it was
provided with a written summary and a draft merger agreement. At the meeting,
Interspec's senior management and Interspec's legal advisors reviewed the
principal aspects of the draft merger agreement and Merrill Lynch made the
presentation described under "Opinion of Financial Advisor to the Interspec
Board" below. The Interspec Board reviewed the history and status of the
negotiations, the uncertainty as to whether the transaction would be treated by
ATL for accounting purposes as a pooling-of-interests rather than as a
purchase, and the possibility of a lower exchange ratio in the event purchase
accounting was used. After discussion, the Interspec Board authorized the
continuation of negotiations, taking into account the alternate forms of
accounting treatment for the proposed transaction. That evening, Messrs. Fill
and Ray discussed an alternative exchange ratio of 0.3835 in the event ATL
could not use the pooling-of-interests method. On February 9, 1994, the
Interspec Board held a telephonic meeting at which it received an update with
respect to the terms of the draft merger agreement from Interspec's legal
counsel and received an update on the negotiations between Messrs. Fill and
Ray. Mr. Ray reviewed the status of the negotiations and the proposal for ATL
to acquire Interspec using an exchange ratio of 0.3835 under purchase
accounting treatment, and 0.413 if pooling-of-interests treatment was used by
ATL. Mr. Ray reported on ATL's efforts to resolve this issue. After discussion,
the Interspec Board authorized the continuation of negotiations regarding the
final terms of the Merger Agreement, and scheduled a telephonic meeting for
late the following morning.
On February 9, 1994, the ATL Board met telephonically with ATL executives and
ATL's financial and legal advisors to consider in detail the specific price and
terms of the possible merger. Mr. Fill reviewed the history of the negotiations
with Interspec, including the preliminary agreement of Messrs. Fill and Ray,
subject to approval of the ATL Board and the Interspec Board, to an exchange
ratio of 0.3835 if ATL could not use the pooling-of-interests accounting
treatment, and 0.413 if ATL were so able to account for the proposed merger.
Mr. Gillis reported that the determination of whether the merger could be
accounted for as a pooling-of-interests was not yet resolved. The ATL Board
then reviewed the terms of the draft merger agreement with ATL executives and
ATL's legal and financial advisors. Representatives of Goldman Sachs continued
their presentation to the ATL Board, as described under "Opinion of Financial
Advisor to the ATL Board" below, and responded to additional questions from the
ATL Board regarding the financial terms of the proposed merger. The ATL Board
then received the oral opinion of Goldman Sachs that, as of such date, the
exchange ratio was fair to ATL. See "Opinion of Financial Advisor to the ATL
Board" below. Accordingly, the ATL Board unanimously approved the Merger
Agreement and the related agreements, including an agreement that would
automatically increase the Exchange Ratio for the Merger from 0.3835 to 0.413
in the event it was determined prior to February 28, 1994, that ATL could use
the pooling-of-interests treatment for the transaction. The ATL Board also
unanimously approved the Issuance and the amendment to the ATL Option Plan and
unanimously resolved to recommend that the ATL shareholders approve the
Issuance and the amendment to the ATL Option Plan. ATL's obligations under the
Merger Agreement were conditioned upon execution of the Convertible Note
Amendments by the Noteholders and execution of an agreement relating to certain
tax matters (the "Representation Agreement") by certain holders of 5% or more
of the outstanding Interspec Common Shares (the "Significant Shareholders"), in
each case prior to February 28, 1994.
On February 10, 1994, the Interspec Board held a telephonic meeting to
consider all aspects of the proposed transaction. Mr. Ray summarized the final
stages of the negotiations and Merrill Lynch supplemented the presentation made
by it to the Interspec Board on February 8, 1994. The Interspec Board received
the oral opinion of Merrill Lynch, confirmed by its written opinion dated April
14, 1994, described under "Opinion of Financial Advisor to the Interspec Board"
below that, as of such date, the Exchange Ratio was fair to the holders of
Interspec Common Shares from a financial point of view. At the conclusion of
that meeting, the Interspec Board unanimously approved the Merger Agreement and
resolved to recommend that the Interspec shareholders vote to approve and adopt
the Merger Agreement and the Merger.
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EXECUTION OF MERGER AGREEMENT. The Merger Agreement was executed by the
parties on Thursday, February 10, 1994, and press releases were issued by each
company announcing the Merger. A copy of the Merger Agreement is attached to
this Joint Proxy Statement/Prospectus as Appendix I. On February 24, 1994, ATL
determined that the pooling-of-interests method of accounting would be
appropriate for the transaction, and a press release was issued to announce
that an Exchange Ratio of 0.413 would be used for the exchange of shares. As of
February 25, 1994, all the Noteholders had executed the Convertible Note
Amendments.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
ATL
The ATL Board has determined the Issuance and the Merger to be fair to and in
the best interests of ATL and its shareholders. ACCORDINGLY, THE ATL BOARD HAS
UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE ISSUANCE AND RECOMMENDS THAT
THE ATL SHAREHOLDERS VOTE "FOR" APPROVAL OF THE ISSUANCE AND "FOR" APPROVAL OF
THE AMENDMENT OF THE ATL OPTION PLAN TO ENABLE THE RETENTION OF KEY EMPLOYEES
OF INTERSPEC SUBSEQUENT TO THE MERGER.
In reaching the conclusions and recommendations described above, the ATL
Board considered, without assigning relative weights to, the following factors,
which include all factors the ATL Board considered to be material:
(i) the terms and conditions of the Merger Agreement, including: (A) the
adjustment to the Exchange Ratio in the event ATL could not account for the
Merger as a pooling-of-interests, which ensured that the ATL shareholders
would not experience additional dilution of earnings per share in the event
the Merger were to be accounted for as a purchase with resulting
amortization of goodwill; (B) the agreement of Interspec not to solicit any
Takeover Proposal (subject to the fiduciary out), which minimized the risk
that ATL would invest considerable management time and incur significant
expenses without consummating a transaction; (C) the amount of the
termination fee and expense reimbursement payable to ATL under certain
conditions, which compensates ATL in the event Interspec should exercise
its fiduciary out or the Merger Agreement should be terminated under
certain other circumstances; and (D) the requirement that the Noteholders
execute the Convertible Note Amendments on or before February 28, 1994
(extended to March 7, 1994), which fixed ATL's obligations to the
Noteholders following the Merger on terms consistent with the Exchange
Ratio provided for in the Merger Agreement;
(ii) the historical and prospective business of ATL, including the
current financial condition and future prospects of ATL, the strategic
direction of ATL's business, the current conditions in, and future
prospects of, the high-technology diagnostic medical systems industry and
the competitive position of ATL in that industry, the historical business
and future prospects of Interspec and its current financial condition, and
the competitive position of Interspec in the high-technology diagnostic
medical systems industry, which indicated to the ATL Board that there is a
good strategic fit between the two companies and supported the conclusion
of its financial advisors referred to in paragraph (iv) below;
(iii) the strength of Interspec's mid-range cardiology products and
distribution system in the United States, its new mid-range, multi-purpose
radiology system, its capabilities to manufacture a broad range of
ultrasound transducers that would complement ATL's manufacturing
capabilities and Interspec's limited international distribution network;
ATL's strength in premium-priced products, particularly in the radiology
market, and its established United States and international distribution
system; and the potential opportunities in international markets for mid-
range products addressing a combined cardiology and internal medicine
capability, all of which led the ATL Board to believe that there was the
potential for substantial synergies from the Merger, which would permit the
shareholders of ATL to benefit from the creation of a combined company with
an integrated and more complete product line that can be distributed with
greater efficiencies;
(iv) the Merger's structure, which would not result in recognition of
income or gain for federal income tax purposes by ATL or Interspec, thereby
reducing the amount of federal income tax to be paid by the combined
company, and could permit ATL to account for the Merger as a pooling-of-
interests,
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thereby minimizing the impact on earnings per share of the amortization of
goodwill that would be required by purchase accounting treatment;
(v) historical data relating to market prices and trading volumes of the
shares of ATL Common Stock and the Interspec Common Shares, market prices
of the shares of ATL Common Stock and the Interspec Common Shares compared
to those of certain other publicly traded companies, the likely effects of
the Merger on ATL's financial condition, including the potential dilutive
effect of the Issuance, the likely reaction of the financial market to the
Merger and the effect of such reaction on the price of shares of ATL Common
Stock, which the ATL Board believed indicated that the Interspec Common
Shares to be received in the Merger in consideration for the shares of ATL
Common Stock represented a fair value to ATL from a financial point of
view; and
(vi) the presentations of Goldman Sachs delivered to the ATL Board at its
meetings on February 7 and 9, 1994, including its oral opinion delivered on
February 10, confirmed by its written opinion dated April 18, 1994, that on
such date and based on various assumptions and considerations, the Exchange
Ratio is fair to ATL.
Interspec
The Interspec Board has determined the Merger to be fair to and in the best
interests of Interspec and its shareholders. ACCORDINGLY, THE INTERSPEC BOARD
HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT AND THE
MERGER AND RECOMMENDS THAT THE INTERSPEC SHAREHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
In reaching the conclusions and recommendations described above, the
Interspec Board considered, without assigning relative weights to, the
following factors, which include all factors the Interspec Board considered to
be material:
(i) the terms and conditions of the Merger Agreement, including the
Exchange Ratio with respect to shares of ATL Common Stock to be received in
exchange for Interspec Common Shares, which provides Interspec shareholders
with an opportunity to participate in the long-term prospects of ATL, and
which the Interspec Board believes will be enhanced by the addition of
Interspec and Interspec's product lines in cardiology and its multi-purpose
radiology system;
(ii) the Interspec Board's belief that the combination of Interspec and
ATL will result in a diagnostic ultrasound company with a more
comprehensive distribution network to market existing Interspec products
and additional products as they are developed, which is expected to enhance
the effective, worldwide distribution of Interspec's mid-range products in
the cardiology and radiology ultrasound markets, and its belief that
Interspec's new product development will benefit from ATL's extensive
advanced technology;
(iii) the fact that, with the addition of Interspec, ATL will have a
broader range of mid-range-priced products to complement its already
existing premium-priced radiology product line and allow it to reenter the
cardiology ultrasound market; and that Interspec's capability to
manufacture a broad range of models of ultrasonic transducers through
Interspec's Echo Ultrasound division complements ATL's design engineering
and manufacturing needs, and that the supplies business of Interspec's Echo
Ultrasound division also complements ATL's diagnostic medical ultrasound
supplies business, which would permit the shareholders of Interspec to
benefit from the creation of a combined company with an integrated and more
complete product line;
(iv) the Interspec Board's belief that the addition of Interspec to ATL
will enable Interspec and the combined company to be more competitive in
the medical ultrasound industry than Interspec would be on a stand-alone
basis; that Interspec's limited resources have constrained its ability to
establish an effective channel of distribution for its mid-range radiology
ultrasound products and to pursue new opportunities in technology and
market development, and that by integrating the Interspec product line into
ATL's worldwide distribution system and combining their technological
resources, both companies will be able to pursue a broader range of
technology and market opportunities on a more competitive basis, which
would permit Interspec shareholders to benefit from an investment in a
combined company that will be better able to compete in world markets;
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(v) alternatives to the Merger, including, among other things, remaining
an independent entity and entering into a strategic alliance or
distribution arrangement with ATL, and possible strategic alliances or
arrangements with other partners, weighed against the risks associated with
such alternatives, including constraints on Interspec's ability to obtain
financing to support its growth if it were to remain an independent entity,
which resulted in the Interspec Board's conclusion that no other available
alternative would provide significantly greater value to the Interspec
shareholders than the Merger;
(vi) ATL's expressed desire for Interspec to continue for the immediate
future with its existing management in place, which the Interspec Board
believes is important for Interspec to realize its long-term potential,
together with ATL's agreement to enter into employment agreements with
three of Interspec's current officers providing for their continued
employment, to continue Mr. Ray as President of Interspec reporting to
ATL's Chief Executive Officer and to appoint Mr. Ray to the ATL Board to
ensure such continuity after the Merger;
(vii) the structure of the Merger, which would constitute a tax-free
reorganization under the Code and permit Interspec shareholders to continue
their investment in the combined company without incurring federal income
tax obligations by reason of the combination and could permit ATL to
account for the Merger as a pooling-of-interests, which would avoid the
impact on earnings per share of the amortization of goodwill by the
combined company, with the consequences summarized under "THE MERGER--
Certain Federal Income Tax Consequences" and "--Accounting Treatment";
(viii) the presentations of Merrill Lynch at its meetings on February 8
and February 10, 1994, including Merrill Lynch's oral opinion on February
10, confirmed by its written opinion, dated April 14, 1994, described under
"Opinion of Financial Advisor to the Interspec Board" below, that, as of
such dates, the Exchange Ratio was fair to Interspec shareholders from a
financial point of view; and
(ix) ATL's technology leadership in diagnostic medical ultrasound, and
particularly its pioneering efforts in all-digital ultrasound systems.
In considering the Merger, Interspec shareholders should make their own
assessment of the expected trading value of ATL Common Stock. In connection
with such assessment, the shareholders may wish to consider the trading prices
of shares of ATL Common Stock and Interspec Common Shares during the periods
prior to, and following, the announcement of the Merger Agreement. The trading
prices of shares of both companies are volatile and may be affected by a number
of factors, including factors relating to the Merger and the Exchange Ratio.
Such factors may include: expectations concerning the future trading value of
shares of ATL Common Stock; the time required to consummate the Merger; and
expectations concerning the likelihood that the Merger will be consummated.
Therefore, the trading prices of shares of ATL Common Stock and Interspec
Common Shares may reflect certain market expectations concerning the value of
shares of ATL Common Stock; however, the impact of any such market expectation
cannot be accurately quantified. See "COMPARATIVE PER SHARE MARKET
INFORMATION." SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR ATL
COMMON STOCK AND INTERSPEC COMMON SHARES.
OPINION OF FINANCIAL ADVISOR TO THE ATL BOARD
The ATL Board retained Goldman Sachs as ATL's exclusive financial advisor in
connection with the possible merger or other combination of ATL with Interspec.
Goldman Sachs is an internationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Goldman
Sachs is familiar with ATL, having acted as ATL's financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Merger Agreement. The ATL Board selected Goldman Sachs to act as ATL's
exclusive financial advisor based on Goldman Sachs' familiarity with ATL and
Goldman Sachs' substantial experience in mergers and acquisitions and in
securities valuation generally.
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On February 10, 1994, Goldman Sachs delivered its oral opinion to the ATL
Board to the effect that, based on various considerations and assumptions, the
Exchange Ratio was fair to ATL. Goldman Sachs subsequently confirmed its oral
opinion by delivery of its written opinion dated April 18, 1994. The full text
of Goldman Sachs' written opinion, which sets forth the assumptions made,
procedures followed, matters considered and limits of its review, is attached
hereto as Appendix II and is incorporated by reference herein. HOLDERS OF ATL
COMMON STOCK ARE URGED TO AND SHOULD READ SUCH OPINION IN ITS ENTIRETY.
In connection with its written opinion dated April 18, 1994, Goldman Sachs
reviewed, among other things: the Merger Agreement; Annual Reports to
Shareholders of ATL and Westmark, ATL's predecessor, and ATL's and Westmark's
Annual Reports on Form 10-K for the six years ended December 31, 1993; Annual
Reports to Shareholders of Interspec and Interspec's Annual Reports on Form 10-
K for the six fiscal years ended November 30, 1993; certain interim reports to
shareholders and Quarterly Reports on Form 10-Q of ATL and Interspec; certain
other communications from ATL and Interspec to their respective shareholders;
and certain internal financial analyses and forecasts for ATL and Interspec
regarding the past and current business operations, financial condition and
future prospects of the respective companies. In addition, Goldman Sachs has
reviewed the reported price and trading activity for the ATL Common Stock and
the Interspec Common Shares, compared certain financial and stock market
information for ATL and Interspec with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the medical device industry
specifically and in other industries generally and performed such other studies
and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for the
purposes of its opinion. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of ATL or Interspec nor
has Goldman Sachs been furnished with any such evaluation or appraisal. In
connection with the rendering of its written opinion dated April 18, 1994,
Goldman Sachs also assumed that the Merger will be accounted for as a pooling
of interests under generally accepted accounting principles.
The terms of ATL's engagement of Goldman Sachs are set forth in a letter
agreement dated February 3, 1994, between Goldman Sachs and ATL (the
"Engagement Letter"). Pursuant to the terms of the Engagement Letter, ATL paid
Goldman Sachs a fee of $100,000 on February 28, 1994, and has agreed to pay
Goldman Sachs a transaction fee payable upon consummation of the Merger of
$500,000 (against which ATL is entitled to credit the $100,000 previously paid
to Goldman Sachs). In addition, ATL has agreed to reimburse Goldman Sachs for
its reasonable out-of-pocket expenses, including the fees and disbursements of
its counsel, plus any sales, use or similar taxes arising in connection with
its engagement, and to indemnify Goldman Sachs against certain liabilities
relating to or arising out of its engagement, including liabilities under the
federal securities laws.
The following is a summary of the financial analyses utilized and considered
material by Goldman Sachs in connection with providing its oral opinion to the
ATL Board on February 10, 1994 and does not purport to be a complete
description of such analyses. Goldman Sachs considered the results of its
analyses collectively and did not consider separately the extent to which any
such analysis supported its fairness determination. Goldman Sachs utilized
substantially the same types of financial analyses in preparing its written
opinion dated April 18, 1994 as it utilized in providing its oral opinion.
Contribution Analysis. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including, among other
things, revenues, gross profit, operating profit, net income, book value and
total assets) for ATL, Interspec and the pro forma combined entity resulting
from the Merger based on ATL and Interspec managements' consensus financial
forecasts for each of ATL, Interspec and the pro forma combined entity. Based
on such review, Goldman Sachs analyzed the contribution of each of ATL and
Interspec to the pro forma combined entity. Such analysis indicated that, for
the latest twelve months ("LTM"), ATL would contribute 83.8% of combined
revenues of $376,000,000 and 82.9% of combined gross profit of $170,000,000,
and 67.7% of combined operating profit of $9,000,000. Goldman Sachs also
considered that while ATL incurred a loss in net income for LTM, Interspec
showed net income of $2,000,000 for the same period. Such analysis also showed
that for the most recent quarter ATL would contribute 87.7%
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of combined book value of $211,000,000 and 83.6% of combined total assets of
$323,000,000. The analysis of Goldman Sachs also indicated that ATL's
shareholders' percentage of equity ownership in the combined entity would be
approximately 78%, which compares favorably to ATL's contribution to operating
profit and net income.
Pro Forma Analysis. Goldman Sachs reviewed certain financial information for
the pro forma combined entity resulting from the Merger based on ATL and
Interspec managements' consensus financial forecasts for each of ATL, Interspec
and the pro forma combined entity. Such analysis indicated that earnings per
share for the pro forma combined entity, calculated with synergies, would be
higher as compared with actual and forecasted earnings per share for ATL as a
stand-alone entity whether the Merger would be accounted for as a pooling of
interests or as a purchase. Such analysis, calculated without synergies,
indicated that (i) if the Merger would be accounted for as a pooling of
interests, earnings per share for the pro forma combined entity would be higher
as compared with forecasted earnings per share for ATL as a stand-alone entity
in 1994, and lower as compared with forecasted earnings per share for ATL as a
stand-alone entity in 1995 and 1996, and (ii) if the Merger would be accounted
for as a purchase, earnings per share for the pro forma combined entity would
be lower as compared with forecasted earnings per share for ATL as a stand-
alone entity. Such analysis also indicated if the transaction would be
accounted for as a pooling of interests that, with synergies, the pick-
up/(dilution) to earnings of the combined entity as compared to earnings of ATL
on a stand-alone basis for estimated 1994, estimated 1995 and estimated 1996
would be 63.8%, 33.9% and 14.0%, respectively, while without synergies such
pick-up/(dilution) would be 14.9%, (6.1%) and (11.1%). If the transaction would
be accounted for as a purchase, with synergies, the pick-up/(dilution) to
earnings of the combined entity as compared to ATL on a stand-alone basis for
estimated 1994, 1995 and 1996 would be 51%, 24.3% and 10.6%, respectively,
while without synergies such pick-up/(dilution) would be (10.6%), (19.8%) and
(17.4%). For certain assumptions made regarding synergies, see "General."
Multiple Analyses. Using exchange ratios of 0.413 and 0.3835, Goldman Sachs
analyzed the multiples of Interspec's projected revenues and earnings
represented by the aggregate consideration to be received by Interspec
shareholders pursuant to the Merger Agreement. Such aggregate consideration was
analyzed using (i) reported trading prices for ATL Common Stock and Interspec
Common Shares for the 20 days preceding February 4, 1994 (the last trading date
preceding the ATL Board meeting), (ii) reported trading prices for ATL Common
Stock and Interspec Common Shares for February 4, 1994, (iii) the low price
reported for the 52 weeks preceding February 4, 1994, and (iv) the high price
reported for the 52 weeks preceding February 4, 1994. Based on such analysis,
Goldman Sachs determined that the aggregate consideration to be received by
Interspec shareholders pursuant to the Merger Agreement as a multiple of
estimated revenues for 1994 and 1995 was (i) .9x and .9x, (ii) .9x and .8x,
(iii) .9x and .8x, and (iv) 1x and .9x, assuming revenues of Interspec of
$64,300,000 and $69,200,000, respectively. Goldman Sachs also determined that
the equity consideration per share as a multiple of estimated earnings before
interest and taxes ("EBIT") for 1994 and 1995 was (i) 12.5x and 10.5x, (ii) 12x
and 10.1x, (iii) 11.5x and 9.7x, and (iv) 13.5x and 11.4x, assuming estimated
EBIT of Interspec of $4,800,000 and $5,700,000. Finally, Goldman Sachs
determined that the aggregate consideration as a multiple of estimated earnings
per share ("EPS") for 1994 and 1995 was (i) 21.8x and 20.5x, (ii) 20.7x and
19.4x, (iii) 19.7x and 18.5x and (iv) 24.2x and 22.8x, assuming estimated EPS
of Interspec of $.32 and $.34. These analyses assume an Exchange Ratio of
0.413. Goldman Sachs compared such multiples to multiples of certain comparable
publicly-traded companies described below under "Selected Company Analysis" and
certain comparable transactions described below under "Selected Transactions
Analysis" and determined that the multiples relating to the Merger were
substantially within the range of such comparable multiples.
Selected Company Analysis. Goldman Sachs reviewed and compared certain actual
and estimated financial, operating and stock market information of ATL,
Interspec and selected companies in the ultrasound industry, including Acuson
Corp., ADAC Laboratories, Diasonics Inc. and Elscint, Inc. (the "Medical
Imaging Companies"), as well as selected companies in the medical devices
industry, including Nellcor Inc., Protocol Systems, Inc., and SpaceLabs
Medical, Inc. (the "Device Companies"). Goldman Sachs considered the Device
Companies to be less comparable to ATL and Interspec than the Medical Imaging
Companies.
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Such analysis indicated that the values of levered market capitalization as a
multiple of the LTM revenues and LTM EBIT (i) for the Medical Imaging Companies
ranged from .3x to 1.4x and 9.3x to 21.1x, respectively and (ii) for the Device
Companies ranged from 1.3x and to 1.8x and 6.7x to 18.6x, respectively, as
compared to corresponding values of 0.4x for ATL (LTM EBIT multiple for ATL was
not meaningful because EBIT was negative) and .6x and 12.1x, respectively, for
Interspec. Such multiples of LTM revenues and LTM EBIT were also compared to
the aggregate consideration to be received in the Merger as a multiple of the
1994 revenues of Interspec which ranged from .9x to 1.0x (depending on the
price used for ATL Common Stock) and to the aggregate consideration to be paid
in the Merger as a multiple of Interspec's 1994 EBIT which ranged from 11.5x to
13.5x (depending on the price used for ATL Common Stock). Such analysis also
indicated that the ratio of price per share to earnings per share for estimated
1994 ranged from 7.8x to 31.1x for the Medical Imaging Companies and 13.4x to
16.3x for the Device Companies as compared to a range of 19.7x to 24.2x for the
equity consideration per share to be paid in the Merger.
Selected Transactions Analysis. Goldman Sachs analyzed certain information
relating to selected transactions in the medical devices industry since 1983,
including Allied Corporation, Inc.'s acquisition of Instrumentation Lab, Inc.,
Miles, Inc.'s acquisition of Cooper Technicon, Inc., Toshiba America Medical
Systems acquisition of the Magnetic Resonance Imaging Division of Diasonics,
Inc., MDS Health Group Limited's acquisition of Nordion International, Inc.,
Thermo Electron Corp.'s acquisition of Thermo Instrument Systems, Inc. and
Thermo Instrument Systems acquisition of Spectra-Physics Analytical, Inc. (the
"Selected Transactions"). Such analysis indicated that for the Selected
Transactions (i) levered aggregate consideration as multiples of LTM revenues
ranged from 1.0x to 1.5x, as compared to a range of .9x to 1.0x (depending on
the price used for ATL Common Stock) for the aggregate consideration to be
received in the Merger as a multiple of the 1994 revenues of Interspec, (ii)
equity consideration as multiples of LTM net income ranged from 10.5x to 58.8x,
as compared to a range of 19.7x to 24.2x (depending on the price used for ATL
Common Stock) for the equity consideration to be paid in the Merger as a
multiple of 1994 earnings per share of Interspec, and (iii) with respect to
levered aggregate consideration as a multiple of LTM EBIT, 11.2x was the only
EBIT multiple available as compared to a range of 11.5x to 13.5x (depending on
the price used for ATL Common Stock) for the aggregate consideration to be paid
in the Merger as a multiple of Interspec's 1994 EBIT.
Other Analyses. Goldman Sachs also reviewed and analyzed the historical
revenue breakdown of Interspec for the years fiscal 1990-1993.
General. As described above, certain of the analyses performed by Goldman
Sachs relied on estimates of future financial performance provided by the
managements of ATL and Interspec, including certain consensus financial
forecasts for ATL, Interspec and the pro forma combined entity resulting from
the Merger prepared jointly by the managements of ATL and Interspec. In
performing such analyses and rendering its opinion, Goldman Sachs assumed the
accuracy and completeness of the assumptions of the management of ATL regarding
the amount and timing of the realization of the benefits expected to occur
following completion of the Merger; including, but not limited to, increased
revenues, increased market share, increased earnings performance, potential
cost savings and other operating and financial synergistic benefits. In that
regard, Goldman Sachs also assumed with ATL's consent that the financial
forecasts prepared by the management of ATL relating to the benefits expected
to occur following completion of the transaction have been reasonably prepared
on a basis reflecting the best currently available judgments and estimates of
ATL and that such forecasts will be realized in the amounts and at the times
contemplated thereby.
The foregoing summary does not purport to be a complete description of the
analyses performed by Goldman Sachs. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could create an
incomplete view of the processes underlying Goldman Sachs' opinion. In arriving
at its fairness determination, Goldman Sachs considered the results of all such
analyses. In reaching its opinion as to the fairness of the Exchange Ratio to
ATL, Goldman Sachs considered, in light of its experience and professional
judgment, the analysis as a whole. Goldman Sachs did not rely exclusively on
any single analysis nor did Goldman Sachs exclude any of the analyses
summarized above in reaching its opinion that the Exchange Ratio is fair to
ATL. The analyses were prepared solely for
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the purposes of Goldman Sachs' providing its opinion to the ATL Board as to the
fairness of the Exchange Ratio to ATL, and do not purport to be appraisals or
necessarily reflect the prices at which Interspec or its securities actually
may be sold. Analyses based on forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses.
OPINION OF FINANCIAL ADVISOR TO THE INTERSPEC BOARD
On February 10, 1994, Merrill Lynch delivered to the Interspec Board its oral
opinion (the "Oral Opinion") that, as of that date, the Exchange Ratio in the
Merger was fair to the holders of Interspec Common Shares from a financial
point of view. Merrill Lynch confirmed, as of April 14, 1994, the Oral Opinion
in a written opinion dated April 14, 1994 (the "Written Opinion" and, together
with the Oral Opinion, the "Opinions"). The full text of the Written Opinion,
which sets forth the assumptions made, matters considered and limitations of
the review undertaken, is attached as Appendix III to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. The summary
discussion of the Opinions set forth in this Joint Proxy Statement/Prospectus
is qualified in its entirety by reference to the full text of the Written
Opinion. Interspec shareholders are urged to read the Written Opinion in its
entirety. The Opinions are directed only to the fairness of the Exchange Ratio
from a financial point of view as of the date of the Opinions, and do not
constitute a recommendation to any Interspec shareholder as to how such
shareholder should vote at the Interspec Special Meeting. The Exchange Ratio
was determined through negotiations between Interspec and ATL and was approved
by the Interspec Board.
In arriving at the Opinions, Merrill Lynch, among other things: (i) reviewed
certain publicly available business and financial information relating to
Interspec, ATL and Westmark, ATL's predecessor; (ii) reviewed certain
information, including financial forecasts, relating to the business, earnings,
cash flow, assets and prospects of Interspec and ATL furnished to it by
Interspec and ATL, respectively; (iii) conducted discussions with members of
senior management of Interspec and of ATL concerning their respective
businesses and prospects; (iv) reviewed the historical market prices and
trading activity of Interspec Common Shares and ATL Common Stock and compared
them with those of certain publicly traded companies that Merrill Lynch deemed
to be reasonably similar to Interspec and ATL, respectively; (v) compared the
results of operations of Interspec and of ATL with those of certain companies
that Merrill Lynch deemed to be reasonably similar to Interspec and ATL,
respectively; (vi) compared the proposed financial terms of the Merger with the
financial terms of certain other mergers and acquisitions that Merrill Lynch
deemed to be relevant; (vii) reviewed the Merger Agreement; and (viii) reviewed
such other financial studies and analyses and performed such other
investigations and took into account such other matters as was deemed necessary
or appropriate for purposes of rendering the Opinions, including an assessment
of general economic, market, monetary and other conditions as they existed on
the respective dates of the Opinions. Merrill Lynch also assumed that the
Merger would qualify for pooling-of-interests accounting treatment and as a
tax-free transaction for the Interspec shareholders.
In preparing the Opinions, Merrill Lynch relied upon and assumed the accuracy
and completeness of all information supplied or otherwise made available to it
by Interspec and ATL. Merrill Lynch did not independently verify such
information and did not undertake an independent appraisal of the assets of
Interspec or ATL. In addition, Merrill Lynch assumed that the financial
forecasts furnished to it by Interspec and ATL, respectively, were reasonably
prepared and reflect, as of the dates of the Opinions, the best currently
available estimates and judgments of the management of Interspec and of ATL as
to the expected future financial performance of Interspec and ATL, as the case
may be. Merrill Lynch was not authorized by Interspec or the Interspec Board to
solicit, nor did Merrill Lynch solicit, third-party indications of interest for
an acquisition of all or part of Interspec.
The Opinions are based on numerous macroeconomic, operating and financial
assumptions that existed at the time of rendering each of the Opinions and
involve the application of complex methodologies and educated judgment. Any
estimates incorporated in the analyses performed by Merrill Lynch are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
such businesses or companies may be sold or at which their shares of capital
stock may trade in the future.
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The following is a summary of the analyses performed by Merrill Lynch in
connection with the Oral Opinion, which it reviewed with the Interspec Board on
February 8, 1994 and on February 10, 1994. In connection with the Written
Opinion, Merrill Lynch performed certain additional procedures in order to
update the assumptions underlying the Oral Opinion. In arriving at its opinion
that the Exchange Ratio in the Merger is fair to the holders of Interspec
Common Shares, Merrill Lynch relied upon the results of the various analyses
discussed below. Merrill Lynch did not rely exclusively on any single analysis
nor did Merrill Lynch exclude any analysis discussed below in making its
determination of fairness.
Stock Trading History. Merrill Lynch reviewed and analyzed the history of the
trading prices and volumes of Interspec Common Shares and ATL Common Stock. In
addition, Merrill Lynch reviewed and analyzed the relationship between
movements of the prices of Interspec Common Shares and ATL Common Stock,
respectively, and movements in the Standard & Poor's industrial average of 400
stocks.
Analysis of Selected Comparable Publicly Traded Companies. Merrill Lynch
compared certain financial information for Interspec and ATL to corresponding
publicly available financial information of certain other medical ultrasound
and medical monitoring equipment companies. Merrill Lynch calculated multiples
for such companies of the market value of the total outstanding common equity
("Market Value") to LTM net income, 1994 projected net income and LTM book
value, and multiples of the Market Value plus preferred equity at liquidation
value, minority interests (if any) and total debt minus cash and cash
equivalents (the "Market Capitalization") to LTM and 1994 projected earnings
before interest, taxes, depreciation and amortization ("EBITDA"), LTM and 1994
projected EBIT and LTM and 1994 projected revenue.
Merrill Lynch compared Interspec to 10 medical ultrasound and medical
monitoring equipment companies deemed by Merrill Lynch to be comparable in
certain respects to Interspec: Acuson Corporation, ATL, CNS, Inc., Criticare
Systems, Inc., Diasonics Ultrasound, Inc., Elscint Limited, Marquette
Electronics, Inc., Nellcor Incorporated, Protocol Systems, Inc. and SpaceLabs
Medical, Inc. (collectively, the "Interspec Comparable Companies"). An analysis
of the multiples for the Interspec Comparable Companies produced the following
results: (a) Market Value to LTM net income yielded a mean of 16.0x; (b) Market
Value to 1994 projected net income yielded a mean of 12.7x; (c) Market Value to
LTM book value yielded a mean of 1.53x; (d) Market Capitalization to LTM EBITDA
yielded a mean of 8.0x; (e) Market Capitalization to LTM EBIT yielded a mean of
11.4x; (f) Market Capitalization to LTM revenue yielded a mean of 1.07x; (g)
Market Capitalization to 1994 projected EBITDA yielded a mean of 6.3x; (h)
Market Capitalization to 1994 projected EBIT yielded a mean of 9.8x; and (i)
Market Capitalization to 1994 projected revenue yielded a mean of 0.94x.
Merrill Lynch then calculated aggregate and per share imputed equity values
for Interspec by applying Interspec's actual and certain forecasted financial
results to the multiples derived from its analysis of the Interspec Comparable
Companies described above. Considering the mean multiples discussed above,
Merrill Lynch calculated per share imputed equity values of Interspec ranging
from a low of $2.86 (based on Market Value as a multiple of LTM net income) to
a high of $8.02 (based on Market Capitalization as a multiple of 1994 projected
revenue). Merrill Lynch summarized that, in its judgment, the Interspec
Comparable Companies indicated a valuation ranging between $3.60 and $6.50 per
Interspec Common Share.
Merrill Lynch compared ATL to 10 medical ultrasound and medical monitoring
equipment companies deemed by Merrill Lynch to be comparable in certain
respects to ATL: Acuson Corporation, CNS, Inc., Criticare Systems, Inc.,
Diasonics Ultrasound, Inc., Elscint Limited, Interspec, Inc., Marquette
Electronics, Inc., Nellcor Incorporated, Protocol Systems, Inc. and SpaceLabs
Medical, Inc. (collectively, the "ATL Comparable Companies"). An analysis of
the multiples for the ATL Comparable Companies produced the following results:
(a) Market Value to LTM net income yielded a mean of 18.8x; (b) Market Value to
1994 projected net income yielded a mean of 12.5x; (c) Market Value to LTM book
value yielded a mean of 1.56x; (d) Market Capitalization to LTM EBITDA yielded
a mean of 7.5x; (e) Market Capitalization to LTM EBIT yielded a mean of 11.6x;
(f) Market Capitalization to LTM revenue yielded a mean of 1.09x; (g) Market
Capitalization to 1994 projected EBITDA yielded a mean of 6.3x; (h) Market
Capitalization to 1994 projected EBIT yielded a mean of 9.0x; and (i) Market
Capitalization to 1994 projected revenue yielded a mean of 0.97x.
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Merrill Lynch then calculated aggregate and per share imputed equity values
for ATL by applying ATL's actual and certain forecasted financial results to
the mean multiples derived from its analysis of the ATL Comparable Companies
described above. Considering the mean multiples discussed above, Merrill Lynch
calculated per share imputed equity values of ATL ranging from a low of $5.95
(based on Market Value as a multiple of 1994 projected net income) to a high of
$37.02 (based on Market Capitalization as a multiple of LTM revenue) (the
"Publicly Traded Companies Range"). Merrill Lynch considered that, given
current market conditions, the value of the ATL Common Stock to be delivered to
the holders of the Interspec Common Shares at the Exchange Ratio of 0.413 is
within or above the Publicly Traded Companies Range.
No company utilized in the Analysis of Selected Comparable Publicly Traded
Companies was identical to Interspec or ATL. Accordingly, an analysis of the
results of such a comparison is not purely mathematical; rather, it involves
complex considerations and judgments concerning differences in historical and
projected financial and operating characteristics of the comparable companies
and other factors that could affect the public trading value of the comparable
companies or company to which they are being compared.
Analysis of Selected Comparable Acquisition Transactions. Merrill Lynch
reviewed the financial terms of eight acquisition transactions (the
"Acquisition Comparables") that Merrill Lynch considered comparable to the
Merger: the acquisition of Circadian by an investor group; the acquisition of
Lorad Corp. by Thermotrex Corp.; the acquisition of Intertherapy, Inc. by
Cardiovascular Imaging Systems, Inc.; the acquisition of Vingemed Sound by
Sonotron; the acquisition of Teknar, Inc. by Mentor Corporation; the
acquisition of Diasonics, Inc.'s MRI Division by Toshiba Corp.; the acquisition
of Universal/Allied's Imaging Division by Gendex Corp.; and the acquisition of
Cooper Lasersonics (Cavitron) by Pfizer, Inc.
Merrill Lynch analyzed the consideration paid for the equity of each of these
Acquisition Comparables (the "Offer Value") and the Offer Value plus the
acquired business's total debt, liquidation value of preferred stock and
minority interest (if any) less cash and cash equivalents (the "Transaction
Value") multiples from these transactions. In particular, Merrill Lynch
calculated Offer Value as a multiple of LTM net income and LTM book value and
Transaction Value as a multiple of LTM EBITDA, LTM EBIT and LTM revenue.
An analysis of the multiples for the Acquisition Comparables produced the
following results: (a) Offer Value to LTM net income yielded a mean of 22.9x;
(b) Offer Value to LTM book value yielded a mean of 2.97x; (c) Transaction
Value to LTM EBITDA yielded a single multiple of 6.1x; (d) Transaction Value to
LTM EBIT yielded a mean of 8.0x; and (e) Transaction Value to LTM revenue
yielded a mean of 1.30x.
Merrill Lynch then calculated aggregate and per share imputed equity values
for Interspec by applying Interspec's actual and certain forecasted financial
results to the multiples derived from its analysis of the Acquisition
Comparables described above. Considering all the mean multiples discussed
above, Merrill Lynch calculated per share imputed equity values of Interspec
ranging from a low of $2.12 (based on Transaction Value as a multiple of LTM
EBIT) to a high of $10.71 (based on Offer Value as a multiple of LTM book
value). Merrill Lynch summarized that, in its judgment, the Acquisition
Comparables indicated a valuation ranging between $3.50 and $10.00 per
Interspec Common Share (the "Comparable Acquisition Transactions Range").
Merrill Lynch considered that, given current market conditions, the value of
the ATL Common Stock to be delivered to the holders of the Interspec Common
Shares at the Exchange Ratio of 0.413 is within the Comparable Acquisition
Transactions Range.
Merrill Lynch did not utilize Acquisition Comparables with respect to ATL.
Acquisition Comparables would not provide a meaningful analytical tool in the
case of ATL due to the inconsistencies in ATL's LTM financial performance
compared to historical financial performance for previous 12-month periods.
No acquired business utilized in the Analysis of Selected Comparable
Acquisition Transactions was identical to Interspec. Accordingly, an analysis
of the results of this comparison is not purely mathematical; rather it
involves complex considerations and judgments concerning differences in
historical and projected financial and operating characteristics of the
comparable acquired businesses and other factors that could affect the
acquisition value of such businesses and Interspec.
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Discounted Cash Flow Analysis. Merrill Lynch calculated ranges of equity
value for Interspec based upon the discount to present value of its five-year
stream of unlevered after-tax free cash flow and its fiscal 1998 terminal
values based upon a range of multiples of its projected fiscal 1998 EBITDA.
Merrill Lynch ran a discounted cash flow analysis ("DCF") for three separate
cases. In conducting its DCF analysis, Merrill Lynch relied upon financial
projections (1) provided by the management of Interspec (the "Interspec Base
Case"), (2) provided by the management of Interspec (the "Interspec
Conservative Case"), and (3) developed on its own that anticipated severe
industry competition and pricing pressure (the "Interspec Severe Competition
Case"). In the Interspec Base Case, Merrill Lynch utilized discount rates
ranging from 14% to 18% and terminal value multiples of 1998 EBITDA ranging
from 4.0x to 7.0x. In the Interspec Conservative Case and the Interspec Severe
Competition Case, Merrill Lynch utilized discount rates ranging from 12% to 16%
and terminal value multiples of 1998 EBITDA ranging from 4.0x to 7.0x. The
range of terminal value multiples used reflects different assumptions regarding
the long-term growth and profitability of Interspec beyond fiscal 1998.
Utilizing the Interspec Base Case, Merrill Lynch calculated equity present
values of Interspec ranging from a low of $5.49 to a high of $11.11 per
Interspec Common Share on a fully diluted basis. Utilizing the Interspec
Conservative Case, Merrill Lynch calculated equity present values of Interspec
ranging from a low of $5.00 to a high of $10.53 per Interspec Common Share on a
fully diluted basis. Utilizing the Interspec Severe Competition Case, Merrill
Lynch calculated equity present values of Interspec ranging from a low of $4.29
to a high of $8.54 per Interspec Common Share on a fully diluted basis. Merrill
Lynch summarized that, in its judgment, the three DCF cases indicated valuation
ranging between $5.00 and $8.00 per Interspec Common Share.
Merrill Lynch calculated ranges of equity value for ATL based upon the
discount to present value of its five-year stream of unlevered after-tax free
cash flow and its fiscal 1998 terminal value based upon a range of multiples of
its projected fiscal 1998 EBITDA. In conducting its analysis, Merrill Lynch
relied upon the mean of the high and low financial projections provided by the
management of ATL (the "ATL Mean Case") and certain financial information for
1997 through 1998 as extrapolated by Merrill Lynch from its discussions with
the management of ATL and the low case provided by ATL management (the "ATL Low
Case") and certain information for 1997 and 1998 as extrapolated by Merrill
Lynch based on discussions with the management of ATL. In the ATL Mean Case
Merrill Lynch utilized discount rates ranging from 14% to 18% and terminal
value multiples of 1998 EBITDA ranging from 4.0x to 7.0x. In the ATL Low Case,
Merrill Lynch utilized discount rates ranging from 12% to 16% and 1998 EBITDA
terminal value multiples ranging from 4.0x to 7.0x. Utilizing the ATL Mean
Case, Merrill Lynch calculated equity present values of ATL ranging from a low
of $14.49 to a high of $22.94 per share of ATL Common Stock on a fully diluted
basis. Utilizing the ATL Low Case, Merrill Lynch calculated equity present
values of ATL ranging from a low of $13.47 to a high of $21.31 per share of ATL
Common Stock on a fully diluted basis.
Merrill Lynch then utilized DCF methodology to compare relative ranges of
value for Interspec and ATL. The comparison of the Interspec Conservative Case
to the ATL Low Case yielded a relative value of one Interspec Common Share, on
a fully diluted basis, ranging between 0.371 and 0.494 share of ATL Common
Stock. The comparison of the Interspec Severe Competition Case to the ATL Low
Case yielded a relative value of one Interspec Common Share, on a fully diluted
basis, ranging between 0.318 and 0.401 share of ATL Common Stock.
Pro Forma Analysis. Merrill Lynch analyzed certain pro forma effects
resulting from the Merger, including the effect of consummation of the Merger
on the EPS of ATL following the Merger. In conducting its analysis, Merrill
Lynch relied upon the Interspec Conservative Case and the Interspec Severe
Competition Case, and the ATL Low Case. Merrill Lynch prepared two pro forma
analyses: (1) combining the Interspec Conservative Case with the ATL Low Case
("Pro Forma Case One") and (2) combining the Interspec Severe Competition Case
with the ATL Low Case ("Pro Forma Case Two"). In both pro forma analyses
Merrill Lynch assumed that the Merger would qualify for pooling-of-interests
accounting treatment and that the combined entity could achieve 50% of the
combination synergies as prepared by and provided to Merrill Lynch by Interspec
management. In Pro Forma Case One above, Merrill Lynch calculated that the
accretion to the ATL shareholders would be 42.3% in 1994, 107.4% in 1995, 58.4%
in 1996, 58.9% in 1997 and 59.7%
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in 1998. In Pro Forma Case Two above, Merrill Lynch calculated that the
accretion to the ATL shareholders would be 39.8% in 1994, 105.8% in 1995, 54.0%
in 1996, 51.6% in 1997 and 49.3% in 1998.
Merrill Lynch then analyzed certain estimated pro forma market values in
which it compared an estimated projected market value for 100% of Interspec on
a standalone basis for 1994-1996 to 19.8% of an estimated pro forma market
value for the same periods of the combined company (19.8% represents
Interspec's shareholders' ownership interest in the combined company, assuming
ATL has 10,500,000 shares outstanding and issues to the Interspec shareholders
2,587,000 shares). In Pro Forma Case One, Merrill Lynch calculated that the
accretion of economic interest (incremental increase in total market value) to
Interspec's shareholders was $12.5 million in 1994, $9.1 million in 1995 and
$16.3 million in 1996. In Pro Forma Case Two, Merrill Lynch calculated that the
accretion of economic interest to Interspec's shareholders was $14.8 million in
1994, $11.9 million in 1995 and $30.5 million in 1996. The results of the pro
forma analysis are not necessarily indicative of future operating results or
financial position of the combined company.
The Written Opinion should be read in its entirety. The summary of the
financial and comparative analyses set forth above contains information with
respect to all material analyses employed by Merrill Lynch in reaching the
Opinions, but does not purport to be a complete description of Merrill Lynch's
presentation to the Interspec Board or the analyses conducted by Merrill Lynch.
Merrill Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all factors and analyses, could create an incomplete and/or
misleading view of the process underlying the Opinions. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. In performing its analyses, Merrill
Lynch made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
the control of Interspec or ATL. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
as set forth therein. Analyses relating to the value of the businesses do not
purport to be appraisals or to reflect the prices at which businesses may
actually be sold. Because such estimates are inherently subject to uncertainty,
none of Interspec, ATL, Merrill Lynch or any other person assumes
responsibility for their accuracy.
Merrill Lynch is an internationally recognized investment banking firm
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and for other purposes. The Interspec Board selected
Merrill Lynch as its financial advisor because it is an internationally
recognized investment banking firm and has substantial experience in
transactions similar to the Merger. Pursuant to an engagement letter dated
January 3, 1994 with Merrill Lynch, Interspec has paid Merrill Lynch for its
financial advisory services in connection with the Merger a fee of $50,000 and
has agreed to pay Merrill Lynch a fee contingent on, and payable upon the
closing of, the Merger in an amount equal to 1.5% of the aggregate purchase
price paid in the Merger, against which the $50,000 fee will be credited. In
addition, the engagement letter provides that Interspec will reimburse Merrill
Lynch for its reasonable out-of-pocket expenses (including reasonable fees and
expenses of its legal counsel) and will indemnify Merrill Lynch and certain
related persons against certain liabilities arising out of the Merger and
Merrill Lynch's engagement.
Merrill Lynch has, in the past, provided financing services to Interspec and
has received fees for rendering such services. Merrill Lynch has not previously
provided financial advisory services to ATL. In the ordinary course of its
business, Merrill Lynch actively trades securities for its own account and for
the account of its customers and, accordingly, may at any time hold a long or
short position in securities of Interspec and ATL.
THE COMPANIES
ATL
ATL is engaged in the high-technology diagnostic medical ultrasound business.
ATL develops, manufactures, markets and services diagnostic medical ultrasound
systems worldwide that are used in a number of medical specialties to assist
the physician in monitoring and diagnosing a variety of conditions, such as
tumors, inflammations, obstructions, cardiovascular diseases and fetal
development.
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Prior to June 26, 1992, ATL was named Westmark. On June 26, 1992, Westmark
was divided into two separate, publicly traded companies, one engaged in the
diagnostic ultrasound business (ATL) and the other (SpaceLabs), engaged in the
patient monitoring and clinical information systems business, pursuant to a
tax-free distribution of SpaceLabs common stock to the shareholders of
Westmark. Concurrently, Westmark changed its name to Advanced Technology
Laboratories, Inc., the same name as that of its major operating subsidiary.
MERGER SUB
Merger Sub, a Delaware corporation and wholly owned subsidiary of ATL, was
formed by ATL solely for the purpose of effecting the Merger.
INTERSPEC
Interspec develops, manufactures, markets and services medical diagnostic
ultrasound imaging systems, and related supplies and accessories for
physicians' offices, clinics and hospitals worldwide. It markets these products
directly in North America and through distributors in the rest of the world.
Interspec offers a full line of diagnostic medical ultrasound systems,
including systems designed primarily for the private practice cardiovascular
market, the hospital cardiovascular market and the hospital radiology market.
THE MERGER
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX I TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND INCORPORATED BY REFERENCE HEREIN.
TERMS OF THE MERGER
THE MERGER. Subject to the terms and conditions of the Merger Agreement,
Merger Sub will merge into Interspec at the Effective Time. The separate
corporate existence of Merger Sub will then cease, and the internal corporate
affairs of Interspec (the "Surviving Corporation") will continue to be governed
by the laws of the Commonwealth of Pennsylvania.
ARTICLES OF INCORPORATION AND BYLAWS. The Merger Agreement provides that the
articles of incorporation of Interspec as in effect immediately prior to the
Effective Time will become the articles of incorporation of the Surviving
Corporation, except that Article 5 thereof will be amended to read as follows:
"The total number of shares of all classes of stock which the corporation shall
have authority to issue is 100 shares of Common Stock, par value $1.00 per
share." The bylaws of Interspec as in effect immediately prior to the Effective
Time will become the bylaws of the Surviving Corporation.
DIRECTORS AND OFFICERS. The directors of Merger Sub at the Effective Time
will become the directors of the Surviving Corporation until their successors
have been duly elected and qualified or until their earlier resignation or
removal. In addition, Mr. Ray will continue as a director of the Surviving
Corporation. The officers of Interspec at the Effective Time will become the
officers of the Surviving Corporation until their successors have been duly
appointed and qualified or until their earlier resignation or removal. See
"Management and Operations of Interspec After the Merger" below.
CONVERSION OF INTERSPEC COMMON SHARES IN THE MERGER. At the Effective Time,
each issued and outstanding Interspec Common Share (other than shares owned by
Interspec and Dissenting Shares) will be converted (subject to the provisions
with respect to fractional shares described below) into the right to receive
0.413 share of ATL Common Stock. In addition, each outstanding option to
purchase Interspec Common Shares will be adjusted in accordance with its terms
to represent an option to acquire, subject to the same
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terms and conditions as were previously applicable to such option, including
vesting, that number of shares of ATL Common Stock as the holder of such stock
option would have been entitled to receive pursuant to the Merger had such
holder exercised such stock option in full immediately prior to the Effective
Time, at a price per share equal to (i) the aggregate exercise price for the
Interspec Common Shares otherwise purchasable pursuant to such stock option
divided by (ii) the aggregate number of full shares of ATL Common Stock deemed
purchasable pursuant to such stock option. See "Effect on Interspec Employee
Benefit and Stock Plans" below.
Any Interspec Common Shares owned by ATL or Interspec or any of their
respective subsidiaries will be canceled.
The Exchange Ratio of 0.413 share of ATL Common Stock for each Interspec
Common Share was determined through negotiations between ATL and Interspec,
each of which was advised with respect to such negotiations by its respective
financial advisor.
Based on the number of Interspec Common Shares outstanding on the Interspec
Record Date, assuming the exercise of all outstanding Interspec stock options
(whether or not currently exercisable), the conversion of all outstanding
Convertible Notes, and based on the Exchange Ratio established in the Merger
Agreement, a maximum of 3,091,400 shares of ATL Common Stock may be issued in
connection with the Merger. This share number includes 2,587,852 shares
required for the tender of all Interspec Common Shares by Interspec
shareholders of record as of March 29, 1994 (assuming no Dissenting Shares);
383,500 shares required if all Noteholders convert their Notes into Interspec
Common Shares prior to the Effective Time; and 120,000 shares of ATL Common
Stock required if all holders of Interspec options which are vested as of the
Effective Time exercise such options to purchase Interspec Common Shares prior
to the Effective Time (assuming approximately one-half of Interspec options
outstanding on the Interspec Record Date become vested and are exercised prior
to the Effective Time).
FRACTIONAL SHARES. No fractional shares of ATL Common Stock will be issued in
the Merger. In lieu of any such fractional shares, each holder of Interspec
Common Shares who otherwise would be entitled to receive a fractional share of
ATL Common Stock pursuant to the Merger will be paid an amount by check,
without interest, equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares of ATL Common
Stock (the "Excess Shares"), if any, that would have been issued in the Merger.
As soon as practicable following the Effective Time, the Exchange Agent will
determine the number of Excess Shares, if any, and the Exchange Agent, as agent
of the former holders of Interspec Common Shares, will sell any such Excess
Shares at the prevailing prices on the Nasdaq National Market. The sale of
Excess Shares will be executed through one or more member firms of the NASD in
round lots to the extent practicable.
EFFECTIVE TIME OF THE MERGER
Promptly following the satisfaction or waiver (where permissible) of the
conditions to the Merger, the Merger will be consummated and become effective
at the time the certificate of merger is duly filed with the Secretary of State
of the State of Delaware and the articles of merger are duly filed with the
Secretary of State of the Commonwealth of Pennsylvania or such later date and
time as may be specified in such certificate of merger and articles of merger
(the "Effective Time"). The Merger Agreement may be terminated by either party
if, among other reasons, the Merger has not been consummated on or before
August 9, 1994 (subject to possible extension for up to 60 days under certain
circumstances). See "Conditions to Consummation of the Merger" below.
EXCHANGE OF INTERSPEC COMMON SHARES
The Merger Agreement provides that the exchange of Interspec Common Shares in
the Merger will be effected as follows:
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(i) as of the Effective Time, ATL will deposit with First Chicago Trust
Company of New York or such other bank or trust company as may be
designated by ATL (the "Exchange Agent") certificates representing shares
of ATL Common Stock issuable in exchange for outstanding Interspec Common
Shares (other than shares owned by Interspec and Dissenting Shareholders);
(ii) as soon as reasonably practicable after the Effective Time, the
Exchange Agent will mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding Interspec Common Shares (the "Certificates"), whose shares were
converted into the right to receive shares of ATL Common Stock, transmittal
form and instructions for use in effecting the surrender of the
Certificates for payment;
(iii) upon surrender of the Certificates for cancellation to the Exchange
Agent, together with transmittal forms duly executed and any other required
documents, holders of such Certificates will receive in exchange therefor
shares of ATL Common Stock and cash in lieu of a fractional share of ATL
Common Stock, and the surrendered Certificates will be canceled; and
(iv) after the Effective Time, each outstanding, unsurrendered
Certificate will be deemed to represent only the right to receive upon such
surrender the number of shares of ATL Common Stock and the cash in lieu of
a fractional share of ATL Common Stock into which such Interspec Common
Shares will have been converted; however, the holders of outstanding,
unsurrendered Certificates after the Effective Time will not be entitled to
receive any dividends or distributions with a record date after the
Effective Time theretofore paid with respect to the shares of ATL Common
Stock until such Certificates are surrendered, although any such dividends
or distributions will accrue and be payable to the holder, without
interest, upon surrender of the Certificate.
INTERSPEC SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS AND INSTRUCTIONS.
All shares of ATL Common Stock issued and cash in lieu of fractional shares
paid upon surrender for exchange of Certificates shall be deemed to have been
issued in full satisfaction of all rights pertaining to such Interspec Common
Shares.
EFFECT ON INTERSPEC EMPLOYEE BENEFIT AND STOCK PLANS
Under the Merger Agreement, ATL has agreed to cause Interspec, as the
Surviving Corporation, to maintain the employee benefit plans of Interspec and
its subsidiaries as in effect on February 10, 1994 (or to provide benefits that
are comparable in the aggregate), for at least two years following the
Effective Time, and thereafter ATL will cause the employees of Interspec to
have benefit plans that are at least comparable to those provided to the
employees of ATL. ATL has agreed to cause each employee benefit plan of
Interspec, as the Surviving Corporation, or of ATL covering such employees to
recognize the service of such employees with Interspec and its subsidiaries
prior to the Effective Time, but only for purposes of eligibility to
participate in, and vesting under, any such plan.
ATL intends to grant to key employees of the Surviving Corporation options to
purchase shares of ATL Common Stock and restricted stock awards commensurate
with those granted to key employees of ATL. See "AMENDMENT OF THE ATL OPTION
PLAN."
At the Effective Time, each outstanding employee stock option to purchase
Interspec Common Shares (an "Interspec Stock Option") issued pursuant to
Interspec's 1982 Incentive Stock Option Plan, the 1985 Incentive Stock Option
Plan, the 1986 Non-Qualified Stock Option Plan, the 1988 Non-Qualified Stock
Option Plan and the 1991 Non-Qualified Stock Option Plan and any other stock
option plan, program or arrangement of Interspec (collectively, the "Interspec
Stock Plans"), whether vested or unvested, will be assumed by ATL. Each
Interspec Stock Option will be deemed to constitute an option to acquire, on
the
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same terms and conditions as were previously applicable under its respective
Interspec Stock Plan, that number of shares of ATL Common Stock equal to the
number of Interspec Common Shares subject to such Interspec Stock Option
immediately prior to the Effective Time multiplied by 0.413 (with the result
rounded up to the nearest whole share), and the per share exercise price shall
be adjusted by dividing the per share exercise price under such Interspec Stock
Option immediately prior to the Effective Time by 0.413; provided, however,
that in the case of any option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422 through 424 of the Code,
the option price, the number of shares purchasable pursuant to such option and
the terms and condition of exercise of such option will be determined in order
to comply with Section 424 of the Code.
TRADING OF SHARES OF ATL COMMON STOCK ON THE NASDAQ NATIONAL MARKET
The shares of ATL Common Stock to be issued in the Merger have been approved
for trading on the Nasdaq National Market, subject to official notice of
issuance.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes various customary representations and
warranties of the parties thereto. The Merger Agreement includes
representations and warranties by Interspec as to, among other things, (i) the
corporate organization, standing and power of Interspec and its subsidiaries;
(ii) approval by the Interspec Board of the Merger Agreement; (iii) Interspec's
capitalization; (iv) the authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (v) the Merger
Agreement's noncontravention of any agreement, law, or charter or bylaw
provision and the absence of the need (except as specified) for governmental or
third-party filings, consents, approvals or actions with respect to the Merger;
(vi) documents filed by Interspec with the Commission and the accuracy of
information contained therein; (vii) the accuracy of information supplied by
Interspec in connection with this Joint Proxy Statement/Prospectus and the
Registration Statement; (viii) the absence of certain material changes or
events since the most recent audited financial statements filed with the
Commission, including material adverse changes in the business, properties,
assets, condition (financial or otherwise), results of operations or prospects
of Interspec and its subsidiaries taken as a whole, any dividend, any split,
reclassification or combination of capital stock, or certain changes in
accounting methods, principles or practices; (ix) no material pending or
threatened litigation, except as disclosed; (x) the terms, existence,
operations, liabilities and compliance with applicable laws of Interspec's
benefit plans and certain other matters relating to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); (xi) filing of tax returns
and payment of taxes; (xii) absence of "excess parachute payments" under the
Code; (xiii) the inapplicability of Subchapter F of Chapter 25 of the PBCL,
relating to business combinations with interested shareholders, to the Merger
Agreement and related agreements and transactions; (xiv) labor relations; (xv)
brokers' fees and expenses; (xvi) receipt of an opinion of financial advisors;
(xvii) compliance with applicable laws; (xviii) certain debt instruments and
other material contracts; and (xix) rights to intellectual property.
The Merger Agreement also includes representations and warranties by ATL and
Merger Sub as to, among other things, (i) the corporate organization, standing
and power of ATL and Merger Sub; (ii) approval by the ATL Board of the Merger
Agreement; (iii) ATL's capitalization; (iv) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters, including the authorization of the shares of ATL Common Stock to be
issued in the Merger; (v) the Merger Agreement's noncontravention of any
agreement, law, or charter or bylaw provision and the absence of the need
(except as specified) for governmental or third-party filings, consents,
approvals or actions with respect to the Merger, the Issuance or the amendment
to the ATL Option Plan; (vi) documents filed by ATL with the Commission and the
accuracy of information contained therein; (vii) the accuracy of information
supplied by ATL in connection with this Joint Proxy Statement/Prospectus and
the Registration Statement; (viii) the absence of certain material changes or
events since the most recent audited financial statements filed with the
Commission, including material adverse changes in the business, properties,
assets, condition (financial or
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otherwise), results of operations or prospects of ATL and its subsidiaries
taken as a whole, any dividend, any split, reclassification or combination of
capital stock, or certain changes in accounting methods, principles or
practices; (ix) no material pending or threatened litigation, except as
disclosed; (x) labor relations; (xi) brokers' fees and expenses; (xii) receipt
of an opinion of financial advisors; (xiii) benefit plans and other matters
relating to ERISA; (xiv) filing of tax returns and payment of taxes; (xv) the
absence of certain events giving rise to the exercisability of the Rights (as
defined herein) under the Rights Agreement (as defined herein); (xvi)
compliance with applicable laws; (xvii) certain debt instruments and other
material contracts; and (xviii) rights to intellectual property.
BUSINESS OF INTERSPEC PENDING THE MERGER
Interspec has agreed that, prior to the Effective Time or earlier termination
of the Merger Agreement, it will, and it will cause its subsidiaries to, carry
on their respective businesses in the usual, regular and ordinary course
substantially in the same manner as conducted prior to the execution of the
Merger Agreement and, to the extent consistent therewith, preserve intact their
respective current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them. Interspec has also
agreed that prior to the Effective Time, unless ATL agrees in writing or as
otherwise permitted by the Merger Agreement, it will not, and it will not
permit any of its subsidiaries to, among other things: (i) declare or pay any
dividends or other distributions on shares of its capital stock, other than
dividends by a wholly owned subsidiary to Interspec, or split, combine or
reclassify any of its capital stock or purchase, redeem or otherwise acquire
any shares of its capital stock; (ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, other than upon the exercise of
outstanding Interspec Stock Options or upon the conversion of the Convertible
Notes; (iii) amend its articles of incorporation or bylaws; (iv) make any
material acquisition or enter into any merger; (v) dispose of or encumber any
material assets other than sales in the ordinary course of business of
inventory or of furniture, fixtures and equipment that are no longer used by or
useful to Interspec or its subsidiaries; (vi) incur any indebtedness for
borrowed money or guarantee any such indebtedness, except for short-term
borrowings incurred in the ordinary course of business and except for
intercompany indebtedness, or make any loans or capital contributions to or
investments in any person, other than to Interspec or any of its wholly owned
subsidiaries; (vii) make any capital expenditures that, individually, are in
excess of $50,000 or, in the aggregate, are in excess of $300,000; (viii) make
any material tax election or settle any tax liability; (ix) satisfy, settle or
discharge any claims or obligations, other than the satisfaction in the
ordinary course of business of liabilities disclosed in the most recent
financial statements filed with the Commission or incurred in the ordinary
course of business since the date of such financial statements; (x) modify any
material contract other than in the ordinary course of business; (xi) take any
action that would preclude the use of the pooling-of-interests method of
accounting or disqualify the Merger as a "reorganization" for tax purposes; or
(xii) authorize or agree to take any of the foregoing actions.
BUSINESS OF ATL PENDING THE MERGER
ATL has agreed that, prior to the Effective Time or earlier termination of
the Merger Agreement, it will, and it will cause its subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course
substantially in the same manner as conducted prior to the execution of the
Merger Agreement and, to the extent consistent therewith, preserve intact their
respective current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them. ATL has also agreed
that prior to the Effective Time, unless Interspec agrees in writing or as
otherwise permitted by the Merger Agreement, it will not, and it will not
permit any of its subsidiaries to, among other things: (i) declare or pay any
dividends or other distributions on shares of its capital stock, other than
dividends by a wholly owned subsidiary to ATL, or split, combine or reclassify
any of its capital stock or purchase, redeem or otherwise acquire any shares of
its capital stock; (ii) take any action that would preclude the use of the
pooling-of-interests method of accounting or disqualify the Merger as a
"reorganization" for tax purposes; (iii) amend the Rights Agreement in any
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manner adverse to the holders of Interspec Common Shares; (iv) issue, deliver,
sell, pledge or otherwise encumber any shares of its capital stock, if any such
action could reasonably be expected to require an amendment of this Joint Proxy
Statement/Prospectus; (v) make any material acquisition or enter into any
merger, if any such action could reasonably be expected to require an amendment
of this Joint Proxy Statement/Prospectus; or (vi) authorize or agree to take
any of the foregoing actions.
NO SOLICITATION
The Merger Agreement provides that Interspec will not, nor will it permit any
of its subsidiaries to, nor will it authorize or permit any director, officer,
employee, agent or other representative of Interspec or any of its subsidiaries
to, directly or indirectly, (i) solicit, initiate or encourage the submission
of any Takeover Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a Takeover Proposal;
provided, however, that the Merger Agreement provides that prior to the
Interspec Special Meeting, to the extent required by the fiduciary obligations
of the Interspec Board, as determined in good faith by the Interspec Board
based on the advice of outside counsel, Interspec may, (A) in response to an
unsolicited request therefor, furnish information with respect to Interspec to
any person pursuant to a customary confidentiality agreement (as determined by
Interspec outside counsel) and discuss such information (but not the terms of
any possible Takeover Proposal) with such person and (B) upon receipt by
Interspec of a Takeover Proposal, following delivery to ATL of notice thereof,
participate in negotiations regarding such Takeover Proposal. Interspec has
agreed to notify ATL promptly (orally and in writing) of any such inquiries or
proposals.
The Merger Agreement provides that the Interspec Board shall not (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to ATL or
Merger Sub, the approval or recommendation by the Interspec Board of 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, in the event
the Interspec Board receives a Takeover Proposal that, in the exercise of its
fiduciary obligations (as determined in good faith by the Interspec Board based
on the advice of outside counsel), it determines to be a Superior Proposal (as
defined below), the Interspec Board may (subject to the following sentences)
withdraw or modify its approval or recommendation of the Merger Agreement and
the Merger, approve or recommend any such Superior Proposal, enter into an
agreement with respect to such Superior Proposal or terminate the Merger
Agreement, in each case at any time after the second business day following
ATL's receipt of written notice advising ATL that the Interspec Board has
received a Superior Proposal and describing the terms thereof. In the event the
Interspec Board takes any of the foregoing actions with respect to such
Superior Proposal, Interspec shall, concurrently with the taking of any such
action, pay to ATL a termination fee of $1,000,000 and reimburse up to $500,000
of ATL's expenses. The term "Superior Proposal" means a bona fide Takeover
Proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the Interspec Common Shares then
outstanding or all or substantially all the assets of Interspec, and otherwise
on terms that the Interspec Board determines in its good faith reasonable
judgment to be more favorable to Interspec shareholders than the Merger (based
on the written opinion, with only customary qualifications, of Interspec'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 Merger) and for which financing, to the extent required, is then committed
or which, in the good faith reasonable judgment of the Interspec Board, is
reasonably capable of being financed by such third party.
CONDITIONS TO CONSUMMATION OF MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The respective
obligations of Interspec, ATL and Merger Sub to effect the Merger are subject
to the satisfaction or waiver of the following conditions: (i) the Merger shall
have been approved by at least a majority of votes cast by the holders of
Interspec Common
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Shares entitled to vote thereon at the Interspec Special Meeting; (ii) the
Issuance and the amendment to the ATL Option Plan shall have been approved by
the holders of a majority of the shares of ATL Common Stock present, in person
or by proxy, and entitled to vote thereon at the ATL Annual Meeting; (iii) the
shares of ATL Common Stock issuable pursuant to the Merger Agreement and under
the Interspec Stock Plans shall have been approved for trading on the Nasdaq
National Market; (iv) the waiting period under the HSR Act applicable to the
Merger shall have expired or been terminated; (v) all required authorizations
in connection with the execution and delivery of the Merger Agreement and the
performance of the obligations thereunder shall have been obtained; (vi) there
shall not be in effect any judgment, writ, order, injunction or decree of any
court or governmental body enjoining or otherwise preventing consummation of
the transactions contemplated by the Merger Agreement; (vii) the Registration
Statement shall have been declared effective and shall not be the subject of
any stop order suspending the effectiveness thereof or any proceeding seeking
such a stop order; (viii) holders in excess of 5% of the Interspec Common
Shares shall not have exercised dissenters' rights under applicable law; (ix)
ATL and Interspec shall have received letters from KPMG Peat Marwick stating
that the Merger will qualify as a pooling of interests for accounting purposes;
and (x) ATL shall have received a tax opinion of Cravath, Swaine & Moore, and
Interspec shall have received a tax opinion of Duane, Morris & Heckscher, in
each case to include an opinion that the Merger will constitute a "tax-free"
reorganization under Section 368(a) of the Code.
CONDITIONS TO THE OBLIGATIONS OF ATL AND MERGER SUB. In addition to the
foregoing conditions, the obligations of ATL and Merger Sub to effect the
Merger are further subject to satisfaction or waiver of the following
conditions, among others: (i) the representations and warranties of Interspec
that are qualified as to materiality shall be true and correct, and the
representations and warranties of Interspec that are not so qualified shall be
true and correct in all material respects; (ii) Interspec shall have performed
in all material respects all material obligations required to be performed by
it under the Merger Agreement; (iii) there shall not be pending or threatened
by any governmental entity any suit, action or proceeding and there shall not
be pending by any other person any suit, action or proceeding that has a
reasonable likelihood of success, in each case seeking to restrain or restrict
(A) the consummation of the Merger, (B) the operation of any material portion
of the business of ATL, Interspec or their respective subsidiaries, (C) the
ownership by ATL or Merger Sub of any Interspec Common Shares, or (D) the
control of Interspec by ATL, or seeking to obtain from ATL any material
damages; and (iv) Interspec shall have received the fairness opinion described
in "BACKGROUND OF AND REASONS FOR THE MERGER--Opinion of Financial Advisor to
the Interspec Board."
CONDITIONS TO THE OBLIGATIONS OF INTERSPEC. In addition to the foregoing
conditions, the obligations of Interspec to effect the Merger are further
subject to satisfaction or waiver of the following conditions, among others:
(i) the representations and warranties of ATL and Merger Sub that are qualified
as to materiality shall be true and correct, and the representations and
warranties of ATL and Merger Sub that are not so qualified shall be true in all
material respects; (ii) ATL and Merger Sub shall have performed in all material
respects all material obligations required to be performed by them under the
Merger Agreement; (iii) there shall not be pending or threatened by any
governmental entity any suit, action or proceeding and there shall not be
pending by any other person any suit, action or proceeding that has a
reasonable likelihood of success, in each case seeking to restrain or restrict
(A) the consummation of the Merger, (B) the operation of any material portion
of the business of ATL, Interspec or their respective subsidiaries, (C) the
ownership by ATL or Merger Sub of any Interspec Common Shares, or (D) the
control of Interspec by ATL, or seeking to obtain from ATL any material
damages; and (iv) ATL shall have received the fairness opinion described in
"BACKGROUND OF AND REASONS FOR THE MERGER--Opinion of Financial Advisor to the
ATL Board."
AMENDMENT AND WAIVER; TERMINATION
The parties to the Merger Agreement may not amend, change, supplement, waive
or otherwise modify the Merger Agreement, except by an instrument in writing
signed by the parties thereto. Subject to the
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foregoing, (i) the Merger Agreement may be amended at any time by action taken
or authorized by the respective Boards of Directors of ATL, Merger Sub and
Interspec (except that after the Merger Agreement has been approved by the
holders of Interspec Common Shares, no amendment may be entered into that
requires further approval by such shareholders unless such further approval is
obtained) and (ii) the parties, by action taken or authorized by their
respective Boards of Directors, may extend the time for performance of the
obligations of the other parties to the Merger Agreement, may waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement and may
waive compliance with any agreements or conditions for their respective benefit
contained in the Merger Agreement.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by Interspec shareholders or ATL
shareholders, by the mutual written consent of ATL and Interspec. The Merger
Agreement may also be terminated by either ATL or Interspec if, among other
things, (i) the Merger has not been consummated by August 9, 1994, subject to
possible extension for up to 60 days under certain circumstances (provided that
such right to terminate will not be available to any party whose willful and
material breach of any obligation under the Merger Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date),
(ii) any court or governmental body in the United States has issued a final and
nonappealable order, decree or ruling, or taken any other final and
nonappealable action, permanently restraining, enjoining or otherwise
prohibiting the Merger, or (iii) under certain circumstances with respect to a
breach of certain representations, warranties, covenants or other agreements,
the breaching party has failed to effect a cure within 30 days after notice of
such breach. The Merger Agreement also may be terminated by Interspec in the
event it receives a Superior Proposal as described under "No Solicitation"
above.
In the event that a Takeover Proposal is commenced, publicly disclosed or
communicated to Interspec (or the willingness of any person to make a Takeover
Proposal is publicly disclosed or communicated to Interspec) and (i) the
Interspec Board withdraws or modifies its approval of the Merger, approves or
enters into an agreement for such Takeover Proposal or terminates the Merger
Agreement, (ii) the required vote of Interspec shareholders is not obtained at
the Interspec Special Meeting, or (iii) the Interspec Special Meeting does not
occur prior to August 9, 1994 (as may be extended for up to 60 days as referred
to above), then Interspec will be required to pay to ATL a termination fee of
$1,000,000 and reimburse up to $500,000 of ATL's expenses relating to the
proposed Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Cravath, Swaine & Moore, counsel to ATL, and Duane, Morris & Heckscher,
counsel to Interspec, have delivered opinions that for federal income tax
purposes under current law, assuming that the Merger and related transactions
will take place as described in the Merger Agreement and that certain factual
matters represented by ATL, Interspec and certain Interspec shareholders are
true and correct at the time of confirmation of the Merger, (i) the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and (ii) each of ATL, Merger Sub and
Interspec will be a party to the reorganization within the meaning of Section
368(b) of the Code.
Assuming that the Merger and related transactions will take place as
described in the Merger Agreement and that certain factual matters represented
by ATL, Interspec and certain Interspec shareholders are true and correct at
the time of consummation of the Merger, then in the respective opinions of
Cravath, Swaine & Moore and Duane, Morris & Heckscher, the following would be
the material federal income tax consequences of the Merger:
(i) no gain or loss will be recognized by ATL, Merger Sub or Interspec in
the Merger;
(ii) no gain or loss will be recognized by the shareholders of Interspec
upon receipt of shares of ATL Common Stock in exchange for their Interspec
Common Shares, except that holders of Interspec Common Shares who receive
cash upon exercise of any available dissenters' rights or cash in lieu of a
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fractional share of ATL Common Stock will recognize gain or loss equal to
the difference between such cash and the tax basis in their shares subject
to dissenters' rights or the tax basis allocated to their fractional shares
of ATL Common Stock, and such gain or loss will constitute capital gain or
loss if their Interspec Common Shares are held or, in the case of an
Interspec shareholder that receives cash in lieu of fractional shares,
would have been held, as a capital asset at the Effective Time;
(iii) the tax basis of the shares of ATL Common Stock (including
fractional shares of ATL Common Stock) received by the shareholders of
Interspec will be the same as the tax basis of their Interspec Common
Shares exchanged therefor; and
(iv) the holding period of the shares of ATL Common Stock in the hands of
the Interspec shareholders will include the holding period of their
Interspec Common Shares exchanged therefor, provided such Interspec Common
Shares are held as a capital asset at the Effective Time.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER OR IN FAVOR OF APPROVAL OF THE ISSUANCE. THE DISCUSSION NEITHER
ADDRESSES THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR INTERSPEC
SHAREHOLDER NOR THE INTERSPEC SHAREHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER
CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS,
INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS AND
SHAREHOLDERS WHO ACQUIRED THEIR INTERSPEC COMMON SHARES PURSUANT TO THE
EXERCISE OF INTERSPEC STOCK OPTIONS OR OTHERWISE AS COMPENSATION, NOR DOES IT
ADDRESS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR
FOREIGN JURISDICTION. MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF INTERSPEC
STOCK OPTIONS ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON THE CODE,
TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS
AS OF THE DATE HEREOF. ALL THE FOREGOING ARE SUBJECT TO CHANGE EITHER
PROSPECTIVELY OR RETROACTIVELY AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION. INTERSPEC SHAREHOLDERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER TO THEM.
REGULATORY MATTERS
The Merger is subject to the expiration or termination of the applicable
waiting period under the HSR Act. Certain aspects of the Merger will require
notifications to, and filings with, certain securities and other authorities in
certain states, including jurisdictions where ATL and Interspec currently
operate.
Under the HSR Act and the rules promulgated thereunder by the FTC, the Merger
may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and the
applicable waiting period has expired or been terminated. ATL and Interspec
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on March 18, 1994. Unless it is extended, the thirty day
waiting period for these filings will terminate on April 17, 1994. At any time
before or after consummation of 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 consummation
of the Merger or seeking divestiture of substantial assets of ATL or Interspec.
At any time before or after the Effective Time, and notwithstanding that the
waiting period under the HSR Act has expired, any state could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the
Merger or seeking divestiture of substantial assets of ATL or Interspec.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
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Based on information available to them, ATL and Interspec believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, ATL and Interspec would prevail or would not be required to accept
certain adverse conditions in order to consummate the Merger.
RESALE OF SHARES OF ATL COMMON STOCK ISSUED IN THE MERGER; AFFILIATES
The shares of ATL Common Stock to be issued in the Merger will be freely
transferable, except that shares issued to any Interspec shareholder who may be
deemed to be an "affiliate" (as defined under the Securities Act, and generally
including, without limitation, directors, certain executive officers and
beneficial owners of 10% or more of a class of capital stock) of Interspec for
purposes of Rule 145 under the Securities Act or for purposes of applicable
interpretations regarding the pooling-of-interests method of accounting shall
not be transferable except in compliance with the Securities Act and until such
time as financial results covering at least 30 days of combined operations of
ATL and Interspec after the Merger have been published. This Joint Proxy
Statement/Prospectus does not cover resales of shares of ATL Common Stock
received by any person who may be deemed to be an affiliate of Interspec.
ACCOUNTING TREATMENT
It is expected that the Merger will be accounted for using the pooling-of-
interests method under generally accepted accounting principles for accounting
and financial reporting purposes.
The Merger Agreement provides that a condition to consummation of the Merger
is the receipt of a letter from KPMG Peat Marwick, the independent auditors of
ATL and of Interspec, confirming that the pooling-of-interests method of
accounting is appropriate for the Merger.
MANAGEMENT AND OPERATIONS OF INTERSPEC AFTER THE MERGER
Directors After the Merger. Edward Ray, Chairman of the Interspec Board, has
been invited to join the ATL Board after the Effective Time. Pursuant to the
Merger Agreement, the directors of the Surviving Corporation at the Effective
Time will consist of the directors of Merger Sub, who currently include Messrs.
Fill, Perozek, Gillis and Yorks, in addition to Mr. Ray who will continue as a
director of the Surviving Corporation.
Management After the Merger. As provided in the Merger Agreement, the
officers of the Surviving Corporation at the Effective Time will consist of the
officers of Interspec. Following the Effective Time, Edward Ray, Michael J.
Wassil and Patrick J. Faivre will remain President of Interspec, Vice President
of Finance of Interspec and Vice President of the Echo Ultrasound division of
Interspec, respectively. See "CONFLICTS OF INTEREST--Employment Agreements."
Operations. Following the Merger, Interspec will be a wholly owned subsidiary
of ATL and will operate as one of ATL's business units, having access to
resources generally available to, and participating in appropriate activities
with, ATL's other business units. ATL currently intends to maintain Interspec's
facilities in Ambler and Reedsville, Pennsylvania.
EXPENSES AND FEES
Whether or not the Merger is consummated, all fees and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such fees or expenses, except that each of
ATL and Interspec shall pay one-half of the printing and mailing costs incurred
in connection with the printing and mailing of this Joint Proxy
Statement/Prospectus.
42
<PAGE>
RIGHTS OF DISSENTING INTERSPEC SHAREHOLDERS
If any holders of Interspec Common Shares properly exercise dissenters'
rights of appraisal in connection with the Merger under Sections 1571 through
1580 of the PBCL, any shares held by such holders will not be converted into
the right to receive shares of ATL Common Stock, but instead will be converted
into the right to receive the "fair value" of such shares pursuant to Sections
1571 through 1580 of the PBCL. THE FOLLOWING SUMMARY OF THE PROVISIONS OF
SECTIONS 1571 THROUGH 1580 IS NOT INTENDED TO BE A COMPLETE STATEMENT OF SUCH
PROVISIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SECTIONS 1571 THROUGH 1580, A COPY OF WHICH (AS WELL AS A COPY OF SECTION 1930
OF THE PBCL) IS ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX
IV AND INCORPORATED HEREIN BY REFERENCE.
General. Any holder of Interspec Common Shares who has duly demanded the
payment of the fair value of his or her shares under Sections 1571 through 1580
will not, after the Effective Time, be a shareholder of Interspec or a
shareholder of ATL for any purpose or be entitled to the payment of dividends
or other distributions on any such Interspec Common Shares or shares of ATL
Common Stock; moreover, the Interspec Common Shares of any Dissenting
Shareholder will be converted into the right to receive either (i) the fair
value of such Interspec Common Shares, determined in accordance with Sections
1571 through 1580, or (ii) shares of ATL Common Stock, if any Dissenting
Shareholder effectively withdraws his or her demand for appraisal rights.
INTERSPEC SHAREHOLDERS SHOULD NOTE THAT, UNLESS ALL THE REQUIRED PROCEDURES
FOR CLAIMING DISSENTERS' RIGHTS ARE FOLLOWED WITH PARTICULARITY, DISSENTERS'
RIGHTS WILL BE LOST. VOTING AGAINST THE MERGER, WHETHER IN PERSON OR BY PROXY,
IS NOT SUFFICIENT NOTICE TO PERFECT DISSENTERS' RIGHTS.
Filing Notice of Intention to Demand Fair Value. Before any shareholder vote
is taken on the Merger, a Dissenting Shareholder must deliver to Interspec a
written notice of his or her intention to demand fair value of the Interspec
Common Shares if the Merger is effected. Such written notice may be sent to the
Secretary of Interspec at Interspec's address set forth on page (iii) of this
Joint Proxy Statement/Prospectus. Neither the return of a proxy by the
Dissenting Shareholder with instructions to vote the Interspec Common Shares
represented thereby against the Merger nor a vote against the Merger or an
abstention from voting on the Merger is sufficient to satisfy the requirement
of delivering a written notice to Interspec. In addition, the Dissenting
Shareholder must not effect any change in the beneficial ownership of the
Interspec Common Shares from the date of filing the notice with Interspec
through the Effective Time, and the Dissenting Shareholder must not vote the
Interspec Common Shares for which payment of fair value is sought in favor of
the Merger. The submission of a signed blank proxy will serve to waive
appraisal rights if not revoked, but a failure to vote, a vote against or an
abstention from voting on the Merger will not waive such rights. Proper
revocation of a signed blank proxy or a signed proxy instructing a vote for
adoption and approval of the Merger will also preserve dissenters' rights under
Pennsylvania law. Failure by a Dissenting Shareholder to comply with any of the
foregoing shall result in such Dissenting Shareholder's forfeiting any right to
payment of the fair value of such Dissenting Shareholder's Interspec Common
Shares.
Record and Beneficial Owners. A record holder of Interspec Common Shares may
assert dissenters' rights as to fewer than all the Interspec Common Shares of
the same class or series registered in his or her name only if the holder
dissents with respect to all the Interspec Common Shares beneficially owned by
any one person and discloses the name and address of the person or persons on
whose behalf he or she dissents. A beneficial owner of Interspec Common Shares
who is not the record holder may assert dissenters' rights with respect to
Interspec Common Shares held on his or her behalf if such Dissenting
Shareholder submits to Interspec the written consent of the record holder not
later than the time of assertion of dissenters' rights. The beneficial owner
may not dissent with respect to less than all the Interspec Common Shares of
the same class or series he or she owns, whether or not such Interspec Common
Shares are registered in the beneficial owner's name.
43
<PAGE>
Notice to Demand Payment. If the Merger is approved by the requisite vote at
the Interspec Special Meeting, Interspec shall mail to all Dissenting
Shareholders who gave due notice of their intention to demand payment of fair
value and who refrained from voting in favor of the Merger a notice stating
where and when a demand for payment must be sent, and Certificates must be
deposited to obtain payment. The notice shall be accompanied by a copy of
Sections 1571 through 1580 of the PBCL and include a form for demanding
payment, which form shall have a request for certification of the date that
beneficial ownership of the Interspec Common Shares was acquired by the
Dissenting Shareholder or the person on whose behalf the Dissenting Shareholder
dissents. The time set for the receipt of a demand and the Dissenting
Shareholder's Certificates shall not be less than 30 days from the mailing of
the notice. Failure by a Dissenting Shareholder to timely demand payment and
deposit Certificates pursuant to such notice will cause such Dissenting
Shareholder to lose all right to receive payment of the fair value of his or
her Interspec Common Shares. If the Merger has not been effected within 60 days
after the date set for demanding payment and depositing Certificates, Interspec
shall return any Certificates that have been deposited. Interspec, however, may
at any later time send a new notice regarding demand for payment and deposit of
Certificates with like effect.
Payment of Fair Value of Interspec Common Shares. Promptly after the
Effective Time, or upon timely receipt of demand for payment if the Merger has
already been effected, Interspec shall either remit to Dissenting Shareholders
who have made demand and deposited their Certificates the amount Interspec
estimates to be the fair value of the Interspec Common Shares or give written
notice that no remittance will be made under Section 1577 of the PBCL. Such
remittance or notice shall be accompanied by (i) Interspec's closing balance
sheet and statement of income for a fiscal year ending not more than 16 months
prior to the date of remittance or notice, together with the latest available
interim financial statements, (ii) a statement of Interspec's estimate of the
fair value of the Interspec Common Shares, and (iii) a notice of the right of a
Dissenting Shareholder to demand payment or supplemental payment, as the case
may be, accompanied by a copy of Sections 1571 through 1580 of the PBCL. If
Interspec does not remit the amount of its estimate of the fair value of the
Interspec Common Shares, it shall return all Certificates that have been
deposited and make a notation thereon that a demand for payment has been made.
Estimate by Dissenting Shareholder of Fair Value of Interspec Common Shares.
If a Dissenting Shareholder believes that the amount estimated or paid by
Interspec for his or her Interspec Common Shares is less than their fair value,
the Dissenting Shareholder may send to Interspec his or her own estimate of the
fair value, which shall be deemed a demand for payment of the amount of the
deficiency. If the Dissenting Shareholder does not file his or her own estimate
of the fair value within 30 days after mailing such remittance or notice by
Interspec, the Dissenting Shareholder shall be entitled to no more than the
amount estimated in the notice or remitted by Interspec.
Valuation Proceedings. Within 60 days after the latest of (i) the Effective
Time, (ii) timely receipt of any demands for payment, or (iii) timely receipt
of any Dissenting Shareholder estimates of fair value, if any demands for
payment remain unsettled, Interspec may file in court an application for relief
requesting that the fair value of the Interspec Common Shares be determined by
the court. Each Dissenting Shareholder whose demands have not been settled
shall be made a party to the proceeding and shall be entitled to recover the
amount by which the fair value of such Dissenting Shareholder's Interspec
Common Shares is found to exceed the amount, if any, previously remitted. Such
Dissenting Shareholder shall also be entitled to interest on such amount from
the Effective Time until the date of payment. If Interspec fails to file an
application within the 60-day period, any Dissenting Shareholder who has not
settled his or her claim may do so in Interspec's name within 30 days after the
expiration of the 60-day period. If no Dissenting Shareholder files an
application within such 30-day period, each Dissenting Shareholder who has not
settled his or her claim shall be paid no more than Interspec's estimate of the
fair value of the Interspec Common Shares and may bring an action to recover
any amount not previously remitted.
Costs and Expenses of Valuation Proceedings. The costs and expenses of any
valuation proceeding, including the reasonable compensation and expenses of any
appraiser appointed by the court, shall be determined by the court and assessed
against Interspec, except that any part of such costs and expenses may be
assessed as the court deems appropriate against all or some of the Dissenting
Shareholders whose action in demanding supplemental payment is found by the
court to be dilatory, obdurate, arbitrary, vexatious or in
44
<PAGE>
bad faith. The court may also assess the fees and expenses of counsel and
experts for any or all of the Dissenting Shareholders against Interspec if it
fails to comply substantially with Sections 1571 through 1580 or acts in a
dilatory, obdurate, arbitrary or vexatious manner or in bad faith. The court
can also assess any such fees or expenses incurred by Interspec against any
Dissenting Shareholder if such Dissenting Shareholder is found to have acted in
a dilatory, obdurate, arbitrary or vexatious manner or in bad faith. If the
court finds that the services of counsel for any Dissenting Shareholder were of
substantial benefit to the other Dissenting Shareholders and should not be
assessed against Interspec, it may award to such counsel reasonable fees to be
paid out of the amounts awarded to the Dissenting Shareholders who were
benefited.
CONFLICTS OF INTEREST
EMPLOYMENT AGREEMENTS
Promptly after the Effective Time, ATL will assume or enter into employment
agreements (the "Employment Agreements") with each of Edward Ray, Michael J.
Wassil and Patrick J. Faivre, each of whom is currently an officer or
significant employee of Interspec. Messrs. Ray, Wassil and Faivre currently
have employment agreements with Interspec dated December 23, 1993. Mr. Ray
currently has a three-year employment agreement, and Messrs. Wassil and Faivre
each have one-year agreements. Mr. Ray has had a series of three-year
agreements with Interspec since 1987. In addition, the ATL Board is expected to
appoint Mr. Ray as a director of the ATL Board immediately following the
Merger.
The Employment Agreements provide for the employment of Mr. Ray as President
of Interspec, Mr. Wassil as Vice President of Finance of Interspec and Mr.
Faivre as Vice President of the Echo Ultrasound division of Interspec following
the Effective Time. The term of Mr. Ray's Employment Agreement expires on April
14, 1997. Each of Messrs. Wassil's and Faivre's Employment Agreements has a
one-year term, beginning on December 23, 1993, and is automatically renewable
for successive one-year periods unless either party gives notice of nonrenewal
at least 120 days prior to the expiration of the current term. Mr. Ray's
Employment Agreement provides for an annual base salary of $300,000 for the
term thereof, subject to increase from time to time by the Compensation
Committee of the ATL Board. Mr. Ray will also be paid an annual bonus,
determined by the Compensation Committee of the ATL Board, of not less than
$140,000. In addition, Mr. Ray will be eligible to receive options to purchase
shares of ATL Common Stock and to receive restricted stock awards of shares of
ATL Common Stock commensurate with those granted to key employees of ATL. Mr.
Wassil's Employment Agreement provides for compensation at the rate of $155,000
per year, subject to increase from time to time by the Interspec Board. Mr.
Faivre's Employment Agreement provides for compensation at the rate of $127,900
per year, subject to increase from time to time by the Interspec Board.
ADJUSTMENT OF INTERSPEC STOCK OPTIONS; GRANT OF ATL STOCK OPTIONS
Each Interspec Stock Option, whether or not vested or exercisable, that is
outstanding at the Effective Time will be adjusted in accordance with its terms
to represent an option to acquire, subject to the same terms and conditions as
were applicable to such Interspec Stock Option, including vesting, that number
of shares of ATL Common Stock equal to the product of the Exchange Ratio and
the number of Interspec Common Shares subject to such Interspec Stock Option,
at a price per share equal to the aggregate exercise price for the Interspec
Common Shares subject to such Interspec Stock Option divided by the number of
full shares of ATL Common Stock deemed to be purchasable pursuant to such
Interspec Stock Option. See "THE MERGER--Effect on Interspec Employee Benefit
and Stock Plans."
Following consummation of the Merger, ATL intends to grant to key employees
of Interspec options to purchase shares of ATL Common Stock and restricted
stock awards consistent with those granted to key employees of ATL. See
"AMENDMENT OF THE ATL OPTION PLAN."
45
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS PURSUANT TO THE MERGER AGREEMENT
Pursuant to the Merger Agreement, from and after the Effective Time, ATL will
indemnify, defend and hold harmless the present and former officers, directors
and employees of Interspec against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring at or prior to the
Effective Time to the fullest extent permitted or required under applicable
law. ATL has agreed that rights of indemnification existing in favor of such
persons under Interspec's articles of incorporation and bylaws will survive the
Merger and continue for a period of not less than six years. ATL has also
agreed that it shall cause to be maintained for a period of not less than five
years from the Effective Time Interspec's current directors' and officers'
liability insurance and indemnification policy to the extent it provides
coverage for events occurring prior to the Effective Time for all persons who
were directors and officers of Interspec on the date of Closing for so long as
the annual premium paid therefor would not be in excess of 150% of the last
annual premium paid therefor prior to the date of Closing.
COMPARATIVE PER SHARE MARKET INFORMATION
Market prices for the shares of ATL Common Stock and Interspec Common Shares
are reported on the Nasdaq National Market. The table below sets forth for the
fiscal periods indicated the high and low sale prices per share of ATL Common
Stock and per Interspec Common Share on the Nasdaq National Market as reported
in published financial sources. For current price information, ATL shareholders
and Interspec shareholders are urged to consult publicly available sources.
<TABLE>
<CAPTION>
PRICE PER SHARE PRICE PER
OF ATL COMMON INTERSPEC
STOCK COMMON SHARE
--------------- -------------
HIGH LOW HIGH LOW
------- ------- ------ ------
<S> <C> <C> <C> <C>
FISCAL 1992
First Quarter................................... (1) (1) $7 7/8 $5 1/4
Second Quarter.................................. (1) (1) 7 1/4 3 1/4
Third Quarter................................... $28 1/4 $14 1/2 4 3/4 3 1/2
Fourth Quarter.................................. 24 1/2 16 1/2 5 3/8 3 7/8
FISCAL 1993
First Quarter................................... 19 15 3/4 6 1/4 4 1/4
Second Quarter.................................. 18 3/4 15 1/2 4 5/8 3 1/4
Third Quarter................................... 17 3/4 15 1/4 4 5/8 2 5/8
Fourth Quarter.................................. 17 1/2 15 3/4 4 1/2 2 3/4
FISCAL 1994
First Quarter................................... 17 1/4 15 6 1/8 3
Second Quarter (through April 14, 1994)......... 15 1/4 14 1/4 5 3/4 5 3/8
</TABLE>
- - - --------
(1) Prior to June 26, 1992, ATL was known as Westmark, and included SpaceLabs,
now a separately traded public company; therefore the Westmark stock price
prior to June 26, 1992 is not meaningful for comparison purposes. See "THE
COMPANIES--ATL."
On February 10, 1994, the last full trading day prior to announcement of the
execution of the Merger Agreement, the reported Nasdaq National Market closing
price per share of ATL Common Stock was $16.75 and per Interspec Common Share
was $4.00. On April 14, 1994, the most recent available date prior to printing
this Joint Proxy Statement/Prospectus, the reported Nasdaq National Market
closing price per share of ATL Common Stock was $15.00 and per Interspec Common
Share was $5.69.
ATL has never paid cash dividends on shares of ATL Common Stock and Interspec
has never paid cash dividends on Interspec Common Shares. The Merger Agreement
prohibits ATL and Interspec from paying cash dividends prior to the Effective
Time. In addition, ATL's credit facility limits the ability of ATL to pay cash
dividends in certain circumstances. It is not anticipated that any cash
dividends will be paid on shares of ATL Common Stock in the foreseeable future.
46
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Statements of Operations
and Balance Sheet give effect to the Merger on the pooling-of-interests method
of accounting. These Unaudited Pro Forma Condensed Combined Financial
Statements have been prepared from the historical consolidated financial
statements of ATL and of Interspec incorporated by reference herein and should
be read in conjunction therewith. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
This pro forma condensed combined information is not necessarily indicative
of actual or future operating results or financial position that would have
occurred or will occur upon consummation of the Merger.
The Unaudited Pro Forma Condensed Combined Balance Sheet gives effect to the
Merger as if it had occurred on December 31, 1993, combining the balance sheet
of ATL as of December 31, 1993 and the balance sheet of Interspec as of
November 30, 1993. The Unaudited Pro Forma Condensed Combined Statements of
Operations give effect to the Merger as if it had occurred on December 29,
1990, combining the results of ATL for each of the years in the three-year
period ended December 31, 1993 and the results of Interspec for each of the
years in the three-year period ended November 30, 1993.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ----------------------
ATL INTERSPEC ADJUSTMENTS COMBINED
-------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues....................... $304,511 $61,377 $(5,391)(a) $360,497
Cost of sales.................. 167,769 32,105 (5,226)(a) 194,648
-------- ------- ------- --------
Gross profit................... 136,742 29,272 (165) 165,849
Operating expenses:
Selling, general and
administrative.............. 91,952 18,000 109,952
Research and development..... 43,838 8,227 52,065
Restructuring charge......... 4,275 -- 4,275
Other expense (income), net.. 2,486 177 2,663
-------- ------- ------- --------
142,551 26,404 168,955
-------- ------- ------- --------
Income (loss) from operations.. (5,809) 2,868 (165) (3,106)
Investment income.............. 2,912 176 3,088
Interest expense............... (689) (1,028) (1,717)
-------- ------- ------- --------
Income (loss) before income
taxes......................... (3,586) 2,016 (165) (1,735)
Income tax expense............. 1,520 761 (695)(b) 1,586
-------- ------- ------- --------
Income (loss) before
extraordinary item............ (5,106) 1,255 530 (3,321)
Extraordinary item: utilization
of tax loss carryforward...... -- 695 (695)(b) --
-------- ------- ------- --------
Net income (loss).............. $ (5,106) $ 1,950 $ (165) $ (3,321)
======== ======= ======= ========
Weighted average common shares
and equivalents outstanding... 10,992 6,284 13,587
Per share data:
Income (loss) before
extraordinary item.......... $ (.46) $ .20 $ (.24)
Extraordinary item........... -- .11 --
-------- ------- --------
Net income (loss).......... $ (.46) $ .31 $ (.24)
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
47
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------ ----------------------
ATL INTERSPEC ADJUSTMENTS COMBINED
-------- --------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments.... $ 54,635 $ 123 $ 54,758
Receivables........................ 86,813 16,704 $ (706)(a) 102,811
Inventories........................ 74,678 15,454 (1,440)(a) 88,692
Prepaid expenses................... 1,305 875 2,180
Deferred income taxes.............. 7,403 -- 1,571(b) 8,974
-------- ------- ------- --------
Total current assets............. 224,834 33,156 (575) 257,415
Marketable debt security............. 4,988 -- 4,988
Property, plant and equipment, net... 45,318 14,493 59,811
Other assets, net.................... 1,558 5,625 7,183
-------- ------- ------- --------
$276,698 $53,274 $ (575) $329,397
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings.............. $ 3,679 $ 1,600 $ 5,279
Current installments of long-term
debt.............................. -- 470 470
Accounts payable and accrued
expenses.......................... 49,138 12,496 $ (706)(a) 60,928
Deferred revenue................... 29,691 1,020 30,711
Taxes on income.................... 4,763 183 4,946
-------- ------- ------- --------
Total current liabilities........ 87,271 15,769 (706) 102,334
Deferred income taxes................ 3,057 -- 1,571(b) 4,628
Long-term debt, less current
installments........................ -- 5,100 5,100
Subordinated long-term debt.......... -- 1,588 1,588
Subordinated long-term debt--related
parties............................. -- 4,912 4,912
Shareholders' equity................. 186,370 25,905 (1,440) 210,835
-------- ------- ------- --------
$276,698 $53,274 $ (575) $329,397
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
48
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ----------------------
ATL INTERSPEC ADJUSTMENTS COMBINED
-------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues........................... $323,711 $60,343 $(3,649)(a) $380,405
Cost of sales...................... 174,571 32,164 (3,739)(a) 202,996
-------- ------- ------- --------
Gross profit....................... 149,140 28,179 90 177,409
Operating expenses:
Selling, general and
administrative.................. 95,343 16,540 111,883
Research and development......... 38,313 7,738 46,051
Restructuring charge............. 3,764 -- 3,764
Stock distribution expenses...... 1,195 -- 1,195
Other expense (income), net...... 4,454 (376) 4,078
-------- ------- ------- --------
143,069 23,902 166,971
-------- ------- ------- --------
Income from operations............. 6,071 4,277 90 10,438
Investment income.................. 4,224 409 4,633
Interest expense................... (790) (1,359) (2,149)
-------- ------- ------- --------
Income before income taxes......... 9,505 3,327 90 12,922
Income tax expense................. 2,098 1,105 (1,010)(b) 2,193
-------- ------- ------- --------
Income before extraordinary item... 7,407 2,222 1,100 10,729
Extraordinary item: utilization of
tax loss carryforward............. -- 1,010 (1,010)(b) --
-------- ------- ------- --------
Net income......................... $ 7,407 $ 3,232 $ 90 $ 10,729
======== ======= ======= ========
Weighted average common shares and
equivalents outstanding........... 11,086 6,309 13,692
Per share data:
Income before extraordinary item. $ .67 $ .35 $ .78
Extraordinary item............... -- .16 --
-------- ------- ------- --------
Net income..................... $ .67 $ .51 $ .78
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
49
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 27, 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ----------------------
ATL INTERSPEC ADJUSTMENTS COMBINED
-------- --------- ----------- --------
<S> <C> <C> <C> <C>
Revenues........................... $279,716 $61,547 $(4,871)(a) $336,392
Cost of sales...................... 156,683 35,275 (4,491)(a) 187,467
-------- ------- ------- --------
Gross profit....................... 123,033 26,272 (380) 148,925
Operating expenses:
Selling, general and
administrative.................. 87,430 15,675 103,105
Research and development......... 35,206 7,197 42,403
Gain on sale of subsidiary....... -- (7,393) (7,393)
Other expense (income), net...... (3,475) (69) (3,544)
-------- ------- ------- --------
119,161 15,410 134,571
-------- ------- ------- --------
Income from operations............. 3,872 10,862 (380) 14,354
Investment income.................. 4,073 283 4,356
Interest expense................... (697) (1,813) (2,510)
-------- ------- ------- --------
Income before income taxes......... 7,248 9,332 (380) 16,200
Income tax expense................. 877 846 (760)(b) 963
-------- ------- ------- --------
Income before extraordinary item... 6,371 8,486 380 15,237
Extraordinary item: utilization of
tax loss carryforward............. -- 760 (760)(b) --
-------- ------- ------- --------
Net income......................... $ 6,371 $ 9,246 $ (380) $ 15,237
======== ======= ======= ========
Weighted average common shares and
equivalents outstanding........... 10,220 6,261 12,806
Per share data:
Income before extraordinary item. $ .62 $ 1.36 $ 1.19
Extraordinary item............... -- .12 --
-------- ------- ------- --------
Net income..................... $ .62 $ 1.48 $ 1.19
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
50
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1: The pro forma condensed Balance Sheet information reflects the result
of combining the balance sheet of ATL as of December 31, 1993 with the balance
sheet of Interspec as of November 30, 1993, the companies' respective year
ends.
NOTE 2: The pro forma Statements of Operations for the fiscal years ended
December 31, 1993 and 1992 and December 27, 1991 reflect the results of
combining the historical results of operations of ATL and of Interspec.
Interspec has a November 30 year-end and, accordingly, the Interspec
statements of operations for the fiscal years ended November 30, 1993, 1992 and
1991 have been combined with the ATL statements of operations for the fiscal
years ended December 31, 1993 and 1992 and December 27, 1991, respectively.
NOTE 3: Pro Forma Adjustments
(a) The pro forma condensed Statements of Operations include adjustments
to eliminate revenues and cost of sales generated from transactions between
ATL and Interspec. The pro forma condensed Balance Sheet includes
adjustments to eliminate the amount of unrealized profit in inventory and
trade accounts receivable and payable resulting from transactions between
ATL and Interspec.
(b) The pro forma condensed Balance Sheet and Statements of Operations
contain adjustments that reflect Interspec's adoption of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes," retroactively to the beginning of fiscal year 1988. Adjustments
were made to the pro forma condensed Balance Sheet to record deferred tax
assets, deferred tax liabilities and a related valuation allowance that
were not recorded prior to the adoption of SFAS 109. Further adjustments
were made to the pro forma Statements of Operations to reclassify the tax
benefits from net operating loss carryforwards as a component of income tax
expense rather than as an extraordinary item.
NOTE 4: Total costs to be incurred by ATL and Interspec in connection with
the Merger are estimated to be approximately $2.3 million. These costs relate
primarily to legal, accounting, investment advisory and printing services and
will be charged against income in the periods subsequent to the pro forma
combined financial statements. Accordingly, these costs have not been reflected
in the pro forma financial statements.
NOTE 5: Per share data are based on the weighted average number of common
shares and dilutive common share equivalents outstanding. The pro forma ATL
Common Stock include shares of ATL Common Stock assumed to be issued as if the
Merger had taken place at the beginning of the respective periods.
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DESCRIPTION OF ATL CAPITAL STOCK
The following description is summarized from the provisions of the ATL
Certificate of Incorporation.
ATL's authorized capital includes 50,000,000 shares of ATL Common Stock. All
shares of ATL Common Stock are entitled to participate equally in dividends.
Each shareholder has one vote for each share registered in such shareholder's
name as of the applicable record date for any matter presented to shareholders.
All shares of ATL Common Stock rank equally on liquidation. Holders of shares
of ATL Common Stock have no preemptive rights and are not entitled to cumulate
their votes in the election of directors.
ATL's authorized capital also includes 6,000,000 preferred shares, 500,000 of
which have been designated Series A Preferred Shares (the "ATL Series A
Preferred Shares"). There are no preferred shares issued or outstanding. The
ATL Board is authorized to establish the number of shares, designations,
relative rights, preferences and limitations, including voting and conversion
rights, of any future series of preferred shares.
SHAREHOLDER RIGHTS PLAN
Pursuant to the Amended and Restated Rights Agreement dated as of June 26,
1992, between ATL and First Chicago Trust Company of New York, as Rights Agent,
as amended (the "Rights Agreement"), holders of shares of ATL Common Stock
currently hold rights to purchase shares of ATL Series A Preferred Shares
exercisable only in certain circumstances (the "Rights"). The Rights, which are
represented by certificates for ATL Common Stock, currently trade together with
the ATL Common Stock. Each Right, when it becomes exercisable as described
below, will entitle the registered holder to purchase one one-hundredth (
1/100) of an ATL Series A Preferred Share at a price (the "Purchase Price")
equal to four times the average of the high and low sale prices of the ATL
Common Stock as reported on the Nasdaq National Market for each of the 10
trading days commencing on the sixth trading day following the Distribution
Date (as defined in the Rights Agreement).
The ATL Series A Preferred Shares issuable upon exercise of the Rights will
not be redeemable. Each ATL Series A Preferred Share will be entitled to a
minimum preferential quarterly dividend payment of $.01 per share, but will be
entitled to an aggregate dividend of 100 times the dividend declared per share
of ATL Common Stock, if any. In the event of dissolution, liquidation or
winding up of ATL, whether voluntary or involuntary, the holders of ATL Series
A Preferred Shares will be entitled to a minimum preferential payment of $.01
per share, but will be entitled to an aggregate preferential payment of 100
times the payment made per share of ATL Common Stock. Each ATL Series A
Preferred Share will have 100 votes, voting together with the ATL Common Stock.
Finally, in the event of any merger, business combination, consolidation or
other transaction in which the ATL Common Stock is exchanged, each ATL Series A
Preferred Share will be entitled to receive 100 times the amount received per
share of ATL Common Stock. Because of the nature of the ATL Series A Preferred
Shares' dividend, liquidation and voting rights, the value of the one one-
hundredth ( 1/100) interest in an ATL Series A Preferred Share issuable upon
exercise of each Right should approximate the value of one share of ATL Common
Stock. Customary antidilution provisions are designed to protect that
relationship in the event of certain changes in the ATL Common Stock and the
ATL Series A Preferred Shares. The ATL Series A Preferred Shares are authorized
to be issued in fractions that are an integral multiple of one one-hundredth (
1/100) of an ATL Series A Preferred Share. ATL may, but is not required to,
issue fractions of shares upon the exercise of Rights, and, in lieu of
fractional shares, ATL may utilize a depository arrangement as provided by the
terms of the ATL Series A Preferred Shares and, in the case of fractions other
than one one-hundredth ( 1/100) of an ATL Series A Preferred Share or integral
multiples thereof, may make a cash payment based on the market price of such
shares.
Until the earlier of (i) such time as ATL learns that a person or group
(including any affiliate or associate of such person or group) has acquired, or
has obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding ATL Common Stock (such person or group being an "Acquiring Person")
and (ii)
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such date, if any, as may be designated by the ATL Board following the
commencement of, or first public disclosure of an intent to commence, a tender
or exchange offer for outstanding ATL Common Stock that could result in the
offeror becoming the beneficial owner of 15% or more of the outstanding ATL
Common Stock (the earlier of such dates, subject to certain exceptions, being
the "Separation Date"), the Rights will be evidenced by certificates for ATL
Common Stock registered in the names of the holders thereof (which certificates
for ATL Common Stock will also be deemed to be Right Certificates, as defined
herein), not by separate Right Certificates. Therefore, until the Separation
Date, the Rights will be transferred with and only with the ATL Common Stock.
As soon as practicable following the Separation Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of ATL Common Stock as of the close of business on the Separation Date
(and to each initial record holder of certain ATL Common Stock originally
issued after the Separation Date), and such separate Right Certificates alone
will thereafter evidence the Rights.
The Rights are not exercisable until the Separation Date and will expire on
June 30, 2002 (the "Expiration Date"), unless earlier redeemed or canceled by
ATL, as described below.
The number of ATL Series A Preferred Shares or other securities issuable upon
exercise of a Right, the Purchase Price, the Redemption Price (as defined
herein) and the number of Rights associated with each outstanding share of ATL
Common Stock are all subject to adjustment by the ATL Board in the event of any
change in the ATL Common Stock or the ATL Series A Preferred Shares, whether by
reason of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of securities, split-ups, split-offs,
spin-offs, liquidations, other similar changes in capitalization, any
distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of ATL Common Stock or ATL
Series A Preferred Shares, as the case may be (other than the Rights or regular
quarterly cash dividends), or otherwise.
In the event a person becomes an Acquiring Person, the Rights will entitle
each holder of a Right (other than those held by an Acquiring Person (or any
affiliate or associate of such Acquiring Person)) to purchase, for the Purchase
Price, that number of one one-hundredth ( 1/100) of an ATL Series A Preferred
Share equivalent to the number of shares of ATL Common Stock that at the time
of the transaction would have a market value of twice the Purchase Price. Any
Rights that are at any time beneficially owned by an Acquiring Person (or any
affiliate or associate of an Acquiring Person) will be null and void and
nontransferable and any holder of any such Right (including any purported
transferee or subsequent holder) will be unable to exercise or transfer any
such Right.
After there is an Acquiring Person the ATL Board may elect to exchange each
Right (other than Rights that have become null and void and nontransferable as
described above) for consideration per Right consisting of one-half of the
securities that would be issuable at such time upon the exercise of one Right
pursuant to the terms of the Rights Agreement, and without payment of the
Purchase Price.
In the event ATL is acquired in a merger by, or other business combination
with, or 50% or more of its assets or assets representing 50% or more of its
earning power are sold, leased, exchanged or otherwise transferred (in one or
more transactions) to, a publicly traded corporation, each Right will entitle
its holder (subject to the next paragraph) to purchase, for the Purchase Price,
that number of common shares of such corporation that at the time of the
transaction would have a market value of twice the Purchase Price. In the event
ATL is acquired in a merger by, or other business combination with, or 50% or
more of its assets or assets representing 50% or more of the earning power of
ATL are sold, leased, exchanged or otherwise transferred (in one or more
transactions) to, an entity that is not a publicly traded corporation, each
Right will entitle its holder (subject to the next paragraph) to purchase, for
the Purchase Price, at such holder's option, (i) that number of shares of the
surviving corporation in the transaction with such entity (which surviving
corporation could be ATL) that at the time of the transaction would have a book
value of twice the Purchase Price, (ii) that number of shares of such entity
that at the time of the transaction would have a
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book value of twice the Purchase Price, or (iii) if such entity has an
affiliate that has publicly traded common shares, that number of common shares
of such affiliate that at the time of the transaction would have a market value
of twice the Purchase Price.
At any time prior to the earlier of (i) such time as a person becomes an
Acquiring Person and (ii) the Expiration Date, the ATL Board may redeem the
Rights in whole, but not in part, at a price (in cash or ATL Common Stock or
other securities of ATL deemed by the ATL Board to be at least equivalent in
value) of $.01 per Right, subject to adjustment as provided in the Rights
Agreement (the "Redemption Price"); provided, however, that for the 120-day
period after any date of a change (resulting from a proxy or consent
solicitation) in a majority of the ATL Board in office at the commencement of
such solicitation, the Rights may only be redeemed if (A) there are directors
then in office who were in office at the commencement of such solicitation and
(B) the ATL Board, with the concurrence of a majority of such directors then in
office, determines that such redemption is, in its judgment, in the best
interests of ATL and its shareholders. Immediately upon the action of the ATL
Board electing to redeem the Rights, ATL will make an announcement thereof,
and, upon such election, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption
Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of ATL, including, without limitation, the right to vote or to
receive dividends.
At any time prior to the Separation Date, ATL may, without the approval of
any holder of the Rights, supplement or amend any provision of the Rights
Agreement (including the date on which the Separation Date would occur, the
time during which the Rights may be redeemed or the terms of the ATL Series A
Preferred Shares), except that no supplement or amendment shall be made that
reduces the Redemption Price (other than pursuant to certain adjustments
therein), provides for an earlier Expiration Date or makes certain changes to
the definition of Acquiring Person. However, for the 120-day period after any
date of a change (resulting from a proxy or consent solicitation) in a majority
of the ATL Board in office at the commencement of such solicitation, the Rights
Agreement may be supplemented or amended only if (A) there are directors then
in office who were in office at the commencement of such solicitation and (B)
the ATL Board, with the concurrence of a majority of such directors then in
office, determines that such supplement or amendment is, in its judgment, in
the best interests of ATL and its shareholders.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire ATL without
conditioning the offer on substantially all the Rights being acquired. The
Rights will not interfere with any merger or other business combination
approved by the ATL Board since the ATL Board may, at its option, at any time
prior to any person becoming an Acquiring Person, redeem all but not less than
all the then outstanding Rights at the Redemption Price.
DESCRIPTION OF INTERSPEC CAPITAL STOCK
The following description is summarized from the provisions of the
Interspec's Amended and Restated Articles of Incorporation (the "Interspec
Articles of Incorporation").
Interspec's authorized capital includes 10,000,000 Interspec Common Shares.
All Interspec Common Shares are entitled to participate equally in dividends.
Each shareholder has one vote for each share registered in such shareholder's
name as of the applicable record date for any matter presented to shareholders.
All Interspec Common Shares rank equally on liquidation. Holders of Interspec
Common Shares have no preemptive rights and are not entitled to cumulate their
votes in the election of directors.
Interspec's authorized capital also includes 400,000 preferred shares. There
are no preferred shares issued or outstanding. The Interspec Board is
authorized to establish the number of shares, designations, relative rights,
preferences and limitations, including voting and conversion rights, of any
future series of preferred shares.
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COMPARISON OF RIGHTS OF ATL AND OF INTERSPEC SHAREHOLDERS
If the Merger is consummated, holders of Interspec Common Shares will become
holders of shares of ATL Common Stock and the rights of the former Interspec
shareholders will be governed by the laws of the state of Delaware and by the
ATL Certificate of Incorporation and the ATL Bylaws. The rights of ATL
shareholders under the ATL Certificate of Incorporation and the ATL Bylaws
differ in certain respects from the rights of Interspec shareholders under the
Interspec Articles of Incorporation and the Restated and Amended Bylaws of
Interspec (the "Interspec Bylaws"). Certain differences between the rights of
ATL shareholders and Interspec shareholders are summarized below. This summary
is qualified in its entirety by reference to the full text of such documents.
For information as to how such documents may be obtained, see "AVAILABLE
INFORMATION."
GENERAL
Upon consummation of the Merger, the shareholders of Interspec will become
shareholders of ATL. Accordingly, the rights of Interspec shareholders
following the Merger will, subject to the limitations set forth in the
following paragraph, be governed by Delaware law as well as by the ATL
Certificate of Incorporation and the ATL Bylaws.
While it is not practical to discuss all changes in the rights of Interspec
shareholders as a result of the application of Delaware law in lieu of
Pennsylvania law, the following is a summary of material differences. As
indicated in the following discussion, the PBCL contains certain provisions
applicable only to "registered corporations," which in essence are publicly
held corporations such as Interspec that have a class of voting shares
registered under the Exchange Act.
CHANGES PRINCIPALLY ATTRIBUTABLE TO DIFFERENCES BETWEEN THE DGCL AND THE PBCL
Action by Written Shareholder Consent. Under the DGCL, unless otherwise
provided by the certificate of incorporation, any action that may be taken by
the shareholders may be taken without a meeting if such action is taken by
written consents signed by the holders of such stock having not less than the
minimum number of votes that would be necessary to take such action at a
meeting at which all shares were present and voted. Under the PBCL, the
shareholders may act without a meeting only by written consent by all the
shareholders who would be entitled to vote at a meeting for such purpose,
unless the articles of incorporation or bylaws otherwise provide. The Interspec
Articles of Incorporation and the Interspec Bylaws contain no such provision.
Special Meetings of Shareholders. Under the DGCL, a special meeting of
shareholders may be called only by the board of directors or such persons as
may be authorized by the certificate of incorporation or bylaws. The ATL Bylaws
provide that special meetings of shareholders for any purpose may be called by
(i) the Chairman of the ATL Board, (ii) the President, (iii) a majority of the
ATL Board, or (iv) the holders of at least two-thirds of the voting power of
the then-outstanding shares of stock of all classes and series of the
corporation entitled to vote generally in the election of members of the ATL
Board. Under the PBCL, the shareholders of a "registered corporation" are
entitled to call a special meeting of shareholders only if they are authorized
to do so in the articles of incorporation. Because the Interspec Articles of
Incorporation do not contain such a provision, special shareholders' meetings
may be called only by the Interspec Board.
Voting by Ballot. Under the DGCL, election of directors must be by written
ballot unless the certificate of incorporation otherwise provides (the ATL
Certificate of Incorporation does not so provide). Under the PBCL, the election
of directors need not be by written ballot unless required by vote of the
shareholders at the election and before the voting begins. Voting by ballot is
required for a Pennsylvania corporation having such requirement in its bylaws,
but the Interspec Bylaws contain no such provision.
Charter Amendments. The DGCL requires that amendments to a certificate of
incorporation be approved by the affirmative vote of shareholders entitled to
cast a majority of the votes that all shareholders are entitled to cast
thereon, unless the certificate of incorporation requires approval by a greater
proportion of votes. In
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addition, an amendment must be separately approved by a majority vote of all
outstanding shares of any class, whether or not otherwise entitled to vote, if
the amendment would increase or decrease the aggregate number of authorized
shares of such class (unless class voting with respect thereto is waived in the
certificate of incorporation), increase or decrease the par value of the shares
of such class, or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely. Pennsylvania law is
similar to the foregoing except (i) the majority vote or votes required is a
majority of the votes actually cast on the amendment, (ii) shareholder approval
is not required for certain nonmaterial amendments, such as a change in the
corporate name, a provision for perpetual existence, or, if the corporation has
only one class of shares outstanding, a change in the number and par value of
authorized shares to effect a stock split, (iii) class votes are not required
for any changes to par values of any class, nor are they required for any
decrease in the number of authorized shares of any class, and (iv) approval of
the holders of shares of a class is required for the authorization of a new
class or an increase in the number of authorized shares of an existing class
having a preference as to dividends or assets that is senior to the shares of
the class whose voting rights are to be determined. Also, unless the articles
provide otherwise, which the Interspec Articles of Incorporation do not,
shareholders of a Pennsylvania "registered corporation" may not propose
amendments to the articles.
Mergers and Other Fundamental Transactions. The DGCL requires, in general,
that a merger, consolidation, sale of assets or dissolution be approved by the
affirmative vote of shareholders entitled to cast a majority of the votes that
all shareholders are entitled to cast thereon, unless the certificate of
incorporation requires approval by a greater proportion of votes. The ATL
Certificate of Incorporation does not contain such a supermajority requirement.
In the case of Pennsylvania corporations, mergers and other fundamental
transactions in general would require shareholder approval by only a majority
of the votes actually cast by all shareholders entitled to vote thereon, unless
the articles required a higher vote. The Interspec Articles of Incorporation do
not require a higher threshold of shareholder approval.
Mergers Without Shareholder Approval. Unless the certificate of incorporation
otherwise provides (which the ATL Certificate of Incorporation does not), the
DGCL permits the board of directors of a corporation to effect a merger without
shareholder approval (and no appraisal rights are available to dissenting
shareholders) if the number of common shares of the corporation issued or
issuable in the transaction does not exceed 20% of the number previously
outstanding and certain conditions are met. Additionally, when certain
conditions are met, no vote is required for the merger of a Delaware
corporation into a corporation that holds at least 90% of the outstanding
shares of each class of stock of such corporation. Under the PBCL, shareholder
approval is not required (whether or not the corporation is the survivor) (i)
for a merger if the survivor is a Pennsylvania corporation, the outstanding
shares are unaffected and have majority voting power and no changes are made to
the articles except those that the board would be permitted to make on its own
initiative by amending the articles or (ii) for the merger of a Pennsylvania
corporation with another corporation that owns at least 80% of its outstanding
shares.
Special Treatment. Under the PBCL, an amendment to the articles or a plan of
reclassification, merger, consolidation, exchange, asset transfer, division or
conversion that provides mandatory special treatment for the shares of a class
held by particular shareholders or groups of shareholders that differs
materially from the treatment accorded other shareholders or groups of
shareholders holding shares of the same class or series must be approved by
each group of holders of any outstanding shares of a class who are to receive
the same special treatment under the amendment or plan, voting as a special
class in respect to the plan, regardless of any limitations stated in the
articles or bylaws on the voting rights of any class. At the option of the
corporation's board of directors, the approval of such special treatment by any
such affected group may be omitted, but in such event the holders of any
outstanding shares of the special class so denied voting rights are entitled to
dissenters' rights (i.e., the right to demand payment in cash by the
corporation of the fair value of one's shares). Delaware statutory law has no
comparable provision.
Amendments of the Bylaws. Under the DGCL, unless the certificate of
incorporation or bylaws otherwise provide, the shareholders may amend bylaws at
any annual meeting, notwithstanding the fact that no prior notice of such
purpose has been given, and without the consent of the corporation's board of
directors. Under
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the PBCL, action cannot be taken at an annual or special meeting of
shareholders on an amendment of the bylaws unless a copy of the proposed
amendment or a summary thereof has been included with the notice of the
meeting. Under the DGCL, if the certificate of incorporation confers on the
board of directors the power to amend the bylaws, as does the ATL Certificate
of Incorporation, the power of the board to make changes in the bylaws is not
limited. The PBCL limits the power of a board of a Pennsylvania corporation to
adopt bylaws on specified subjects, absent a contrary provision in the articles
(the Interspec Articles of Incorporation contain no such provision).
Directors' Duties and Liabilities. Both the DGCL and the PBCL provide that
the board of directors has the ultimate responsibility for managing the
business and affairs of a corporation. In discharging this function, directors
have fiduciary duties of care and loyalty to the corporation and its
shareholders. The duty of loyalty in both states requires that directors act in
good faith and place the best interests of the corporation and its shareholders
above their own individual interests. In addition, the PBCL specifically
authorizes directors, in considering the best interests of the corporation, to
consider the effects of any action upon employees, suppliers and customers of
the corporation, upon communities in which offices or other establishments of
the corporation are located, and all other pertinent factors.
Directors of both Delaware and Pennsylvania corporations have a duty to
perform their duties with a certain degree of care and diligence. The Delaware
Supreme Court has held that the duty of care requires the exercise of an
informed business judgment. Under Delaware case law, an "informed business
judgment" means that the directors have informed themselves of all material
information reasonably available to them. Having become so informed, they then
must act with requisite care in the discharge of their duties. Liability of
directors of a Delaware corporation to the corporation or its shareholders for
breach of the duty of care generally requires a finding by a court that the
directors were grossly negligent. Directors of Pennsylvania corporations are
obligated to perform their duties in good faith, in a manner they reasonably
believe to be in the best interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would exercise under similar circumstances. Absent breach of fiduciary
duty, lack of good faith or self-dealing, actions taken as a director of a
Pennsylvania corporation are presumed to be in the best interests of the
corporation.
In the context of takeover bids or other corporate control contests or
transactions, the Delaware courts have applied an "enhanced duty" standard for
many director actions. In this context, the PBCL distinguishes Pennsylvania
fiduciary standards from those of Delaware. The PBCL (i) explicitly gives a
board of directors authority in responding to a takeover bid to weigh (in
addition to consideration of employees, suppliers, customers, communities and
other pertinent factors) the long-term interests of the corporation and the
possibility that they may be best served by the independence of the
corporation, and the resources, intent and conduct (past, stated and potential)
of the prospective acquiror, (ii) relieves the board of directors in such
circumstances from any duty to regard the shareholder interest as dominant or
controlling, (iii) explicitly gives a board of directors discretion in the
context of a takeover bid to refuse to redeem or modify a shareholder rights
plan, (iv) declares actions by directors with respect to a takeover bid to be
subject to the same standard of conduct for directors that is applicable to all
other conduct, and (v) establishes a presumption that actions with respect to a
takeover bid by the "disinterested directors" (a term defined to include
essentially all directors except certain officers and persons associated with
the prospective acquiror) are lawful unless it is proved under a clear and
convincing evidence standard that a director did not act in good faith after
reasonable investigation.
Provisions Affecting Directors' Monetary Liability. Both the DGCL and the
PBCL, subject to certain limitations, permit a corporation's certificate of
incorporation (or, in Pennsylvania, a bylaw adopted by a corporation's
shareholders) to limit or eliminate a director's exposure to monetary liability
for breach of duty. The ATL Certificate of Incorporation provides that, to the
fullest extent permitted by the DGCL, no director of ATL shall be personally
liable to ATL or its shareholders for monetary damages for breach of fiduciary
duty as a director. The Interspec Bylaws provide that a director shall not be
personally liable for monetary damages for any action taken, or any failure to
take any action, unless the director has breached or failed to
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perform the duties of his or her office and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. Such limitation
(i) does not apply to the responsibility or liability of a director pursuant to
any criminal statute or the liability of a director for the payment of taxes
and (ii) may, in the view of certain commentators, shield a director from
liability for certain breaches of his or her duty of loyalty as well as his or
her duty of care. However, the limitations on director liability provided under
the DGCL and the PBCL may not be effective to protect directors from liability
under federal law, including federal securities law.
The ATL Certificate of Incorporation provides that no repeal or amendment of
the limitation on director liability shall apply to or have any effect on the
liability or alleged liability for or with respect to acts or omissions of such
director occurring prior to such repeal or amendment; the Interspec Bylaws
contain a comparable provision. Therefore, any repeal or modification of the
limitation on director liability may not have any retroactive effect in the
cases of both ATL and Interspec.
While these provisions afford directors protection from awards of monetary
damages for certain breaches of their duty of care, they do not eliminate the
duty of care. Accordingly, such provisions have no effect on the availability
of equitable remedies such as an injunction or rescission. As a practical
matter, however, such remedies may not always be available or effective.
Shareholders, for example, may not be aware of a transaction or an event until
it is too late to prevent it.
The limitation on director liability was not included in the ATL Certificate
of Incorporation or the Interspec Bylaws in response to any pending or
threatened litigation. The ATL Board and the Interspec Board both continue to
believe that the diligence exercised by directors stems primarily from their
desire to act in the best interests of their respective companies, not from a
fear of monetary damage awards.
Indemnification of Directors and Officers. Both the DGCL and the PBCL permit
a corporation to indemnify its directors and officers against expenses,
judgments, fines and amounts paid in settlement incurred by them in connection
with any pending, threatened or completed action or proceeding (other than, in
the case of a Delaware corporation, an action by or in the right of corporation
(a "derivative action")), and permit such indemnification against expenses
incurred in connection with any pending, threatened or completed derivative
action, if the director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. Furthermore, both states'
laws provide that expenses incurred in defending any action or proceeding may
be paid by the corporation in advance of the final disposition upon receipt of
an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined that the director or officer is not entitled to
be indemnified by the corporation.
In both states the statutory provisions for indemnification and advancement
of expenses are nonexclusive with respect to any other rights, such as
contractual rights (and, in the case of a Pennsylvania corporation, under a
bylaw or vote of shareholders or disinterested directors), to which a person
seeking indemnification or advancement of expenses may be entitled. Such
contractual or other rights may, for example, under the PBCL, provide for
indemnification against judgments, fines and amounts paid in settlement
incurred by the indemnified person in connection with derivative actions. The
PBCL permits such derivative action indemnification in any case except where
the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
The Interspec Bylaws currently provide for mandatory indemnification of
directors and officers to the fullest extent now or hereafter permitted by
Pennsylvania. At the present time, insofar as Interspec is concerned, these
boundaries are dictated by the PBCL and related legislation, which prohibit
indemnification where the conduct is determined by a court to constitute
willful misconduct or recklessness. The ATL Certificate of Incorporation
similarly provides for indemnification of directors and officers to the fullest
extent permitted by the DGCL. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or
persons controlling the corporation pursuant to such provisions, the Commission
has taken the position that such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
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Both the DGCL and the PBCL permit a corporation to purchase and maintain
insurance on behalf of any director or officer of the corporation against any
liability asserted against the director or officer and incurred in such
capacity, whether or not the corporation would have the power to indemnify the
director or officer against such liability. Both Interspec and ATL presently
have directors' and officers' liability insurance.
Removal of Directors. The PBCL provides that, unless otherwise provided in a
bylaw adopted by the shareholders, any director or directors of a Pennsylvania
corporation may be removed from office without assigning cause by the vote of
the shareholders entitled to elect directors. The Interspec Bylaws provide that
directors can be removed at any time, with or without cause, by the unanimous
vote or consent of the shareholders entitled to elect directors. The board of
directors of a Pennsylvania corporation also is empowered to remove any
director who has been convicted of a felony or declared of unsound mind by
court order, or for any other proper cause enumerated in the bylaws (the
Interspec Bylaws do not state any such cause). Also, under the PBCL, any
shareholder or director of a Pennsylvania corporation has the right to petition
a court to remove one or more directors for reasons of "fraudulent or dishonest
acts, or gross abuse of authority or discretion with reference to the
corporation." Under the DGCL, a director may be removed with or without cause
by a vote of a majority of the shares then entitled to vote at an election of
directors, except that if the board of directors is classified, directors may
be removed only for "cause" and except that where the holders of any class or
any series are entitled to elect one or more directors, such directors may be
removed without cause only by the affirmative vote of the holders of a majority
of the outstanding shares of such class or series.
Filling Vacancies on the Board of Directors. The DGCL provides that any
vacancy or newly created directorship on a board of directors may be filled by
the remaining directors, although less than a quorum, except where such
director is entitled to be elected by a class of shareholders, in which event a
majority of the remaining directors elected by that class may fill the vacancy.
Under certain circumstances, the Delaware Court of Chancery may order a
shareholders meeting to fill vacancies on the board. Under the PBCL, vacancies
on the board of directors, including vacancies resulting from an increase in
the number of directors, may be filled by a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, and
such person shall be a director and serve for the balance of the unexpired
term, unless otherwise restricted in the bylaws (the Interspec Bylaws contain
no such restrictions).
Requirements for Advance Notification of Director Nominations. The Interspec
Bylaws provide that no shareholder shall be permitted to nominate a candidate
for election as a director unless such shareholder provides to the Secretary of
Interspec in writing (i) information about such candidate that is equivalent to
the information concerning the candidates nominated by the Interspec Board that
was contained in Interspec's proxy statement for the immediately preceding
annual meeting of shareholders at which directors were elected, if Interspec
distributed a proxy statement to its shareholders in connection with such
election of directors, or (ii) if Interspec did not distribute such a proxy
statement, certain information about such candidate set forth in the Interspec
Bylaws. Such information must be provided not later than 120 days before the
first anniversary of the preceding annual meeting of shareholders.
Loans to Directors, Officers and Employees. The PBCL permits loans,
guarantees of obligations or similar undertakings by a corporation to its
directors, officers or employees. The DGCL permits a corporation to make loans
to officers of a corporation where such loans may reasonably be expected to
benefit the corporation.
Officers' Duties and Liabilities. Under the PBCL, the statutory standards of
care for directors and officers of Pennsylvania corporations are distinct. The
standard of care for directors of Pennsylvania corporations is discussed under
"Directors' Duties and Liabilities" above. As to officers, the PBCL provides
that, except as otherwise provided in the articles of incorporation, an officer
shall perform his or her duties as an officer in good faith, in a manner the
officer reasonably believes to be in the best interests of the corporation and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would exercise under similar circumstances. The DGCL does
not address the standards of care imposed on directors and officers.
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Dividends. The DGCL generally permits dividends to be paid out of any
surplus, defined as the excess of the net assets of the corporation over the
amount determined to be the capital of the corporation by the board of
directors (which amount cannot be less than the aggregate par value of all
issued shares of capital stock). The DGCL also permits a dividend to be paid
out of the net profits of the current or the preceding fiscal year, or both,
unless net assets are less than the capital of any outstanding preferred
shares. Under the PBCL, a corporation may make distributions of cash or
property unless, after giving effect thereto, (i) the corporation would be
unable to pay its debts as they become due in the usual course of its business
or (ii) the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed upon the dissolution of the
corporation to satisfy the preferential rights, if any, of shareholders having
superior preferential rights to those shareholders receiving the distribution.
Total assets and liabilities for this purpose are to be determined by the board
of directors, which may base its determination on such factors as it considers
relevant, including the book values of the corporation's assets and liabilities
and unrealized appreciation and depreciation of the corporation's assets.
Stock Repurchases. Under the DGCL, a corporation may not purchase or redeem
shares of any class when its capital is impaired or such purchase would cause
impairment of capital, except that a corporation may purchase or redeem out of
capital any of its preferred shares if such shares will be retired upon the
acquisition thereof and the capital of the corporation will be thereby reduced.
Such reduction of capital is permitted only if the assets of the corporation
remaining after such reduction would be sufficient to pay any debts of the
corporation for which payment has not otherwise been provided. The PBCL permits
the redemption of any class of shares and treats the redemption or repurchase
by a corporation of its stock the same as a dividend.
Appraisal or Dissenting Shareholders' Rights. The rights of shareholders to
demand payment in cash by a corporation of the fair value of their shares under
certain circumstances are called "appraisal rights" under the DGCL and
"dissenters' rights" under the PBCL. The DGCL does not afford appraisal rights
to holders of shares listed on a national securities exchange, traded on a
national market system or held of record by more than 2,000 shareholders,
unless the plan of merger or consolidation converts such shares into anything
other than stock of the surviving corporation or stock of another corporation
that is either listed on a national securities exchange or held of record by
more than 2,000 shareholders. The PBCL is substantially the same as the DGCL
regarding appraisal rights, except that where shares whose rights are to be
determined are listed on a national securities exchange or held of record by
more than 2,000 shareholders, dissenters' rights will nevertheless be available
unless the plan converts such shares solely into stock of the acquiring,
surviving, new or other corporation. The concept of "fair value" in payment for
shares upon exercise of appraisal or dissenters' rights is substantially
identical under the DGCL and the PBCL, respectively. Any valuation techniques
or methods may be employed that are generally acceptable in the financial
community.
STATUTORY REGULATION OF CORPORATE TAKEOVERS
Business Combination Statute. Both Delaware and Pennsylvania have adopted a
"business combination" type of takeover statute. Business combination statutes
generally prohibit a target corporation from engaging in any "business
combination" with an "interested shareholder" of the target corporation for a
set period of time following the date on which the interested shareholder
became such. An interested shareholder is typically defined as the direct or
indirect beneficial owner of a specified percentage of the target corporation's
outstanding shares. Business combination statutes are intended primarily to
prevent highly leveraged takeover bids in which the target's assets are to be
used as collateral for the interested shareholder's debt financing of the
takeover. Such takeover bids usually depend on the prompt consummation of a
merger or business combination, or the prompt sale of corporate assets, after
the acquisition of control of the target corporation.
The DGCL (in Section 203) provides that a person who acquires 15% or more of
the outstanding voting stock of a Delaware corporation becomes an "interested
shareholder," and the corporation may not effect mergers or certain other
"business combinations" with the interested shareholder for a period of three
years, unless (i) prior to the date the acquiror becomes an interested
shareholder and the board of directors approves
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either the business combination or the transaction that results in the
shareholder's becoming an interested shareholder or (ii) the interested
shareholder is able by means of the tender offer, or other transaction by which
the acquiror becomes an interested shareholder, to acquire ownership of at
least 85% of the outstanding voting stock of the corporation (excluding in that
calculation shares owned by directors of the corporation who are also officers
and shares owned by certain employee stock plans) or (iii) the interested
shareholder obtains control of the board of directors, which then approves a
business combination that is authorized by a vote of the holders of two-thirds
of the outstanding voting stock not held by the interested shareholder. The
definition of interested shareholder does not include (i) persons who owned 15%
or more of the corporation's voting stock before December 23, 1987, (ii)
persons who received more than 15% of the voting stock as a gift or bequest
from a person who owned it before that date, or (iii) persons whose ownership
of the voting stock rises over the 15% threshold as a result of action taken by
the corporation unless that person thereafter acquires additional shares.
A "business combination" is defined broadly in the DGCL to include any merger
or consolidation with the interested shareholder, any merger or consolidation
caused by the interested shareholder in which the surviving corporation will
not be subject to the DGCL, and the sale, lease, exchange, mortgage, pledge,
transfer or other disposition to the interested shareholder of any assets of
the Corporation having a market value equal to or greater than 10% of the
aggregate market value of the assets of the corporation. "Business combination"
is also defined to include transfers of stock of the corporation or a
subsidiary to the interested shareholder (except for transfers in a conversion,
exchange or pro rata distribution that does not increase the interested
shareholder's proportionate ownership of a class or series), or any receipt by
the interested shareholder (except proportionately as a shareholder) of any
loans, advances, guarantees, pledges or other financial benefits.
The business combination provisions of the PBCL, Subchapter 25F, are similar
to the foregoing, except that (i) an "interested shareholder" under
Pennsylvania law is the direct or indirect beneficial owner of shares entitled
to cast at least 20% of the votes entitled to be cast for the election of
directors, not counting shares that have been held continuously by a natural
person since January 1, 1983, or that were transferred thereafter by such a
person by gift, inheritance, bequest, devise or other testamentary distribution
to another natural person or a trust, estate, foundation or similar entity, and
(ii) the corporation may not engage in a business combination (the definition
of which is similar to that under the DGCL) with an interested shareholder for
a period of five years (rather than three as in Delaware), unless (x) the
business combination or the purchase of stock by means of which the interested
shareholder became such is approved by the corporation's board of directors in
advance of such stock purchase, (y) the business combination is approved by the
affirmative vote of all the holders of all the outstanding common shares of the
corporation, or (z) the interested shareholder is the beneficial owner of at
least 80% of the voting stock of the corporation (including, unlike Delaware,
the stock owned by management and by employee plans), and the business
combination is approved at a meeting called for such purpose no earlier than
three months after the interested shareholder acquires such 80% beneficial
ownership by the affirmative vote of a majority of the shares other than those
beneficially owned by the interested shareholder and its affiliates and
associates. Thus, the incumbent management of a Pennsylvania corporation can
prevent a business combination with an interested shareholder for at least five
years if management controls more than 20% of the outstanding voting stock. In
the case of a business combination with such an 80% shareholder, the value of
the consideration to be paid by the interested shareholder in connection with
the business combination must satisfy certain "fair price" formulae specified
in the statute, and the interested shareholder, after becoming such, must not
have acquired any additional voting shares of the corporation except as
provided in the statute.
After the five-year restricted period, an interested shareholder of a
Pennsylvania corporation may engage in a business combination with the
corporation if the business combination is approved by the affirmative vote of
a majority of the shares other than those beneficially owned by the interested
shareholder and its affiliates and associates, or if the business combination
is approved at a shareholders meeting called for such purpose and the
conditions set forth in the immediately preceding sentence are satisfied.
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The Delaware and Pennsylvania business combination statutes provide only
limited regulation of certain self-dealing transactions between a corporation
and certain large shareholders. Moreover, wholly apart from the exceptions
mentioned above, there are a number of additional methods whereby even an
interested shareholder can benefit from a merger or sale of a corporation's
assets during the first three years (Delaware) or five years (Pennsylvania)
after becoming an interested shareholder. For example, the Delaware statute
provides that if, after an interested shareholder becomes such, an acquisition
is proposed by a third party and is approved or not opposed by a majority of
the board of directors who were directors before the interested shareholder
became such, the interested shareholder is no longer subject to the three-year
restriction and is given at least 20 days in which to develop a competing
proposal. Also, under both the Delaware and Pennsylvania statutes, a
shareholder prior to becoming an interested shareholder may solicit proxies or
shareholder consents to change the composition of the board of directors, and
the new board that the shareholder or shareholders, as the case may be, have
elected or helped to elect may approve a business combination with the
shareholder without the statutory delay. Finally, an interested shareholder may
simply acquire control of the corporation, remove the incumbent board and
thereafter sell assets to third parties or even (in the case of Delaware)
liquidate the corporation, provided that any dividends or liquidating
distributions be made to all remaining shareholders pro rata, thus giving
minority shareholders the opportunity to realize their fair share of the true
value of the assets of the corporation.
It should be noted that the Delaware and Pennsylvania business corporation
statutes (i) do not prohibit tender offers or in any way regulate when, how, at
what price or by whom they may be made, (ii) do not in any way delay the
purchase of shares in tender offers, (iii) do not interfere with the right of a
shareholder, whether "interested" or not, to mount a proxy contest to remove
incumbent management, (iv) do not prevent a shareholder from buying sufficient
stock to replace existing management immediately, and (v) do not eliminate or
delay a shareholder's right to vote on the election of directors or on any
other corporate matters, except certain defined self-dealing transactions.
Control Transaction Statute. In addition to the business combination statute,
the PBCL, but not the DGCL, includes a "cash-out" type of takeover statute,
Subchapter 25E. Cash-out statutes require an acquiror of more than a specified
percentage of a target corporation's stock (20% under Subchapter 25E), upon
demand by any target shareholder, to purchase the shares of such shareholder at
a price that reflects the highest premium paid by the acquiror in accumulating
the target's stock. Such statutes are intended to limit the perceived coercive
effect of two-tier and partial tender offers and so-called "creeping tender
offers," in which large blocks of shares are purchased on the open market, and
to ensure that all shareholders share in any control premium paid by the
acquiror. However, the Interspec Bylaws expressly provide that Subchapter 25E
shall not apply to Interspec.
Control-Share Acquisition Statute. The PBCL also contains a control-share
acquisition statute, Subchapter 25G. Under Subchapter 25G, before an acquiror
(either a person or a group of persons acting in concert) of 20%, 33 1/3% or
50% of the voting power of a "registered" corporation may exercise voting power
with respect to "control shares" (a term defined to include shares above the
applicable threshold, shares acquired within 180 days of the control-share
acquisition and any shares acquired with the intention of making a control-
share acquisition), the shareholders of the corporation must have approved such
exercise by a vote of (i) a majority of all outstanding shares having voting
power and (ii) a majority of outstanding "disinterested shares." The vote may
take place at the next available shareholders meeting, or the acquiror may
accelerate the consideration of the issue by agreeing to pay the cost of a
special meeting. If the acquiror does not seek voting rights in the prescribed
manner or if such voting rights are denied or lapse, unless otherwise provided
in the corporation's articles of incorporation, Subchapter 25G authorizes the
corporation to redeem all the control shares from an acquiror at any time
within two years after the control-share acquisition. The redemption price of
control shares is the average of the high and low sale prices of shares of the
same class and series on the date the corporation gives notice to the acquiror
of the call for redemption.
The Interspec Bylaws expressly provide that Subchapter 25G shall not be
applicable. This provision was adopted pursuant to a statutory option to opt
out of the proposed control-share acquisition statute by a resolution of the
Interspec Board within 90 days after enactment of the new law.
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Disgorgement Statute. The PBCL contains a provision, Subchapter 25H, that
requires disgorgement of profits by a "controlling person" (a term defined
generally to mean a person or group seeking 20% of the voting interest or
making a bid for control). Any profit made by such person on a trade in shares
of the corporation during the 18 months following acquisition of "controlling
person" status would belong to and be recoverable by the corporation, unless
the shares involved were purchased more than 24 months before the acquisition
of such status. The profit recovery may be enforced by the corporation or by a
shareholder if the corporation fails to prosecute the action seeking such
recovery in the prescribed manner. Interspec has opted out of the disgorgement
statute in the same manner described above with respect to the control-share
acquisition statute.
Other Antitakeover Provisions of the PBCL. The PBCL contains a number of
other provisions not found in the DGCL that are designed to strengthen the
position of incumbent management in connection with a takeover attempt. For
example, the PBCL provides that a Pennsylvania corporation has the general
power, exercisable by its board of directors, to accept, reject, respond to or
take no action in respect of an actual or proposed acquisition, divestiture,
tender offer, takeover or other fundamental change. Delaware case law, by
contrast, has developed special standards for deciding whether to uphold or
abrogate the actions of incumbent management in the context of takeover
proposals.
In addition, the PBCL expressly authorizes the issuance of securities or
rights that contain such terms as may be fixed by the board of directors, which
may include provisions that limit any person owning or offering to acquire a
specified amount of the outstanding common shares of a corporation from
exercising or receiving the securities or rights. This statutory authorization
is intended to expressly validate the adoption of shareholder rights plans
("poison pills"), which are often implemented by corporations to deter
undesirable takeovers or accumulations of large equity positions in the
corporation.
Tender Offer Statutes. Pennsylvania has adopted a takeover statute (the
"Takeover Disclosure Law") requiring a tender offeror to file a registration
statement with the Pennsylvania Securities Commission (the "Pennsylvania
Commission"), deliver a copy to the target corporation and publicly disclose
the material terms of the proposed offer. A takeover offer automatically
becomes effective 20 days after the date of filing the registration statement
with the Pennsylvania Commission, unless delayed by order of the Pennsylvania
Commission or by a hearing. Any hearing scheduled by the Pennsylvania
Commission must be held within 30 days of the date of filing the registration
statement, and any determination made following the hearing must be made within
30 days after such hearing has been closed, unless extended by order of the
Pennsylvania Commission. The Pennsylvania Commission may deny registration of
the offer if, after a hearing, it finds that the takeover offer fails to
provide full and fair disclosure to the offerees of all material information
concerning the offer, or otherwise violates the Takeover Disclosure Law or the
Pennsylvania Securities Act of 1972. The Takeover Disclosure Law applies to
takeover offers directed at Pennsylvania-domiciled corporations, as well as to
corporations having their principal places of business and substantial assets
in Pennsylvania.
The federal law that comprehensively regulates tender offers (known as the
"Williams Act") applies both to ATL and Interspec and will continue to apply
whether or not the Merger occurs.
ELECTION OF ATL DIRECTORS
In accordance with the ATL Bylaws, the ATL Board has fixed the number of
directors constituting the ATL Board at eight, each to hold office for a term
of one year and until his or her successor shall have been elected and
qualified. Ralph M. Barford, Kirby L. Cramer, Harvey Feigenbaum, Dennis C.
Fill, Eugene A. Larson, John R. Miller, David M. Perozek and Harry Woolf have
been nominated for election to the ATL Board for 1994. It is intended that
votes will be cast pursuant to the accompanying proxy for the election of these
nominees, each of whom is at present a director of ATL, unless contrary
instructions are received. If any nominee should become unavailable for any
reason, it is intended that votes will be cast for a substitute
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nominee designated by the ATL Board. The ATL Board has no reason to believe
that the nominees named will be unable to serve if elected. The ATL Board is
expected to increase the number of directors constituting the ATL Board to nine
and to appoint Edward Ray as an additional director immediately following the
Merger. See "CONFLICTS OF INTEREST."
Biographical information regarding each of the nominees for the ATL Board is
set forth below:
RALPH M. BARFORD. Mr. Barford (age 64) has served as a Director and a member
of the Audit and Compensation Committees of ATL since January 2, 1987. He is
Chairman of the Compensation Committee and, until May 5, 1993, was Chairman of
the Audit Committee. Mr. Barford has been President of Valleydene Corporation
Limited, an investment company, since 1972. He is also Chairman and a director
of GSW, Inc., a manufacturer of consumer products, and Camco Inc., an appliance
manufacturer. Mr. Barford holds a Bachelor of Commerce degree from the
University of Toronto and a Master of Business Administration degree from
Harvard Business School. He is a member of the boards of directors of Bank of
Montreal, Hollinger Inc., Molson Companies Ltd., Morton International, Inc.,
SpaceLabs, Algoma Steel Corporation and BCE Inc.
KIRBY L. CRAMER. Mr. Cramer (age 57) has served as a Director since February
26, 1993, and as a member of the Compensation Committee and Chairman of the
Audit Committee of ATL since May 5, 1993. He is the Chairman Emeritus of
Hazleton Laboratories Corporation, a contract biological and chemical research
laboratory, which was acquired by Corning Incorporated in 1987. He is Chairman
of the Board of Rainier Trust Company and also President of Keystone Capital
Company, an investment company. Mr. Cramer received his Bachelor of Arts degree
from Northwestern University and Master of Business Administration degree from
the University of Washington and is a graduate of the Harvard Business School's
Advanced Management Program. In 1988, he received an honorary Doctor of Laws
degree from James Madison University. Mr. Cramer is a member of the University
of Washington Foundation and also the Advisory Board of the University of
Washington Graduate School of Business Administration. He is the past President
and Trustee Emeritus of the Darden School Foundation of the University of
Virginia. Mr. Cramer is a member of the boards of directors of Rainier Trust
Company, Immunex Corporation, Unilab Corporation, The Commerce Bank of
Washington, N.A., Kirschner Medical Corporation, Sasquatch Publishing Company
and Olympic Boat Company.
HARVEY FEIGENBAUM, M.D. Dr. Feigenbaum (age 60) has served as a Director and
a member of the Audit and Executive Committees of ATL since January 2, 1987.
Dr. Feigenbaum has been a Distinguished Professor of Medicine at the Indiana
University Medical Center since 1980 and joined its faculty in 1962. He was
elected to Phi Beta Kappa and received a Bachelor's degree summa cum laude from
Indiana University in 1955, an M.D. from the Indiana School of Medicine in
1958, and his Cardiovascular Subspecialty, American Board of Internal Medicine
in 1969. Dr. Feigenbaum is a fellow of the American College of Physicians, the
American College of Cardiology, the Council on Clinical Cardiology of the
American Heart Association and the American Institute of Ultrasound in
Medicine, as well as a member of the Editorial Boards of the American Heart
Journal, the American Journal of Cardiology and CIRCULATION. He is the editor
of the Journal of the American Society of Echocardiography. Dr. Feigenbaum is a
director of Regentrief Foundation for Delivery of Healthcare and SpaceLabs.
DENNIS C. FILL. Mr. Fill (age 64) has served as a Director, Chairman of the
Board and Chief Executive Officer of ATL and as a member of the Executive
Committee of ATL since November 11, 1986. From 1978 through mid-December 1986,
he served as a member of the board of directors of Squibb Corporation (the
former parent of ATL) and as its President and Chief Operating Officer. Mr.
Fill was also a member of the executive committee and the finance committee of
the Squibb Corporation board of directors. Mr. Fill attended Ealing College,
the Institute of Export and Borough Polytechnic. He also served in the Royal
Air Force. Mr. Fill is a member of the boards of directors of Beckman
Instruments, Inc., Morton International, Inc., SpaceLabs Medical, Inc. and
Cytran, Inc.
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EUGENE A. LARSON. Mr. Larson (age 51) has served as a Director and a member
of ATL's Scientific Advisory Board since December 22, 1992, and as a member of
the Executive Committee since May 5, 1993, and previously served as a Director
and President of ATL from June 1988 to January 1990. Mr. Larson has served as a
consultant to ATL since January 1993. From January 1991 to December 1992, he
served as Executive Vice President of ATL. He also served as a consultant to
Westmark and ATL in 1987 and 1990, and as ATL's Vice President, Technology from
February 1988 to June 1988. He was Professor of Entrepreneurship and
Innovation, Department of Engineering, Pennsylvania State University in 1986
and 1987. At Johnson & Johnson (1982 to 1986), Mr. Larson was President of
three operating companies, beginning with the 1982 acquisition of Echo
Ultrasound, Inc., a manufacturer of medical ultrasound devices, of which he was
also a founder (1973-1984), IREX (1984-1985) and Photomedica (1985-1986).
Previously he was founder and President of Aerotech Laboratories, a
manufacturer of industrial ultrasound electronics, which was acquired by Smith
Kline & French in 1970. He has served as a director of Geisinger Medical Center
and President and director of Lewistown Hospital. In 1988, he was awarded the
Pioneer in Ultrasound Award by the American Institute of Ultrasound in
Medicine.
JOHN R. MILLER. Mr. Miller (age 55) has served as a Director of ATL since
July 16, 1993 and a member of the Compensation Committee of ATL since February
18, 1994. He is currently a Senior Fellow of the Discovery Institute for Public
Policy and Chairman of the Cascadia Project in Seattle, Washington. Mr. Miller
is also a senior advisor to Chanen, Clarke, Couder & Painter, Ltd., an
investment bank with offices in Seattle, San Francisco and Hong Kong. From 1985
to 1992, Mr. Miller served as a U.S. Congressman for the First District of
Washington State. While a Member of Congress, he served on the Budget Committee
and the Foreign Affairs Committee, including the Subcommittee on International
Economic Policy and Trade; International Operations. From 1981 to 1984, Mr.
Miller was a Political Commentator for KIRO (CBS ) Television and Radio. Mr.
Miller was a member of Phi Beta Kappa and received his Bachelor of Arts degree
from Bucknell University and a Doctor of Laws degree and Master of Economics
degree from Yale University Law and Graduate Schools, respectively.
DAVID M. PEROZEK. Mr. Perozek (age 51) has been President and Chief Operating
Officer of ATL since April 13, 1992. He became a Director of ATL on May 18,
1992. Prior to joining ATL, Mr. Perozek spent 17 years with the Medical
Products Group of the Hewlett-Packard Company. From February 1991 to March
1992, he served as a staff general manager of Hewlett-Packard's Medical
Products Group. From 1989 to February 1991, he served as general manager of
Hewlett-Packard's Apollo Systems division. From 1980 to 1989, Mr. Perozek
served as general manager of Hewlett-Packard's ultrasound business. Mr. Perozek
received his Bachelor of Science degree in Electrical Engineering from the
University of Detroit and both Masters of Science and Electrical Engineering
degrees from the Massachusetts Institute of Technology, and has completed the
Stanford Executive Management Program at Stanford University. He has served as
Chairman of the Ultrasound Section and as a member of the Diagnostic Imaging
and Therapy Systems Division of the National Electrical Manufacturers
Association (NEMA) and has served as chairman of NEMA's Ultrasound Section and
on the board of governors of the American Institute of Ultrasound Medicine.
HARRY WOOLF, PH.D. Dr. Woolf (age 70) has served as a Director and a member
of the Compensation Committee of ATL since January 2, 1987. He has also served
as Chairman of ATL's Scientific Advisory Board since May 1, 1987. In 1987, Dr.
Woolf completed an 11-year appointment as the director of The Institute for
Advanced Study, Princeton, New Jersey, and is currently a Professor at the
Institute. Dr. Woolf received his Bachelor of Science and Master of Arts
degrees from the University of Chicago and his Doctor of Philosophy degree from
Cornell University. He has also received honorary doctorates from Whitman
College, American University, Johns Hopkins University and St. Lawrence
University. Dr. Woolf has been honored by election to the Academie
Internationale d'Histoire des Sciences, American Philosophical Society, Sigma
Xi, Phi Beta Kappa and American Academy of Arts and Sciences. He is a Trustee
of the Rockefeller Foundation and Reed College. Dr. Woolf is a member of the
boards of directors of Alex. Brown Mutual Funds and Merrill Lynch Open-End
Investment Funds-Cluster C. He is also a director of the Johns Hopkins Program
for International Education on Gynecology and Obstetrics, Inc., the
International Research and Exchanges Board and Family Health International.
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During 1993, there were six meetings of the ATL Board. All incumbent
directors were in attendance at over 75% of such meetings.
DIRECTOR COMPENSATION
Directors who are employees of ATL do not receive any fee for their services
as directors. Directors who are not employees of ATL are paid an annual
retainer of $20,000 and receive an additional fee of $500 for attendance at
each meeting of the ATL Board plus $500 for attendance at each meeting of a
committee of the ATL Board. A nonemployee director serving as a committee
chairman receives an additional $1,000 per annum.
As approved by the shareholders on May 5, 1993, directors who are not
employees of ATL are also eligible for a grant of stock options under the
Nonemployee Director Stock Option Plan (the "Nonemployee Director Plan"). Each
nonemployee director will automatically receive annually, on the first day of
July, an option to purchase 2,000 shares of ATL Common Stock, at an exercise
price equal to the fair market value on the date of grant. The options vest
upon the optionee's continued service as a director until the first anniversary
of the date of grant. Each option expires on the earlier of five years from the
date of grant or one year after a director's termination as a director. In
1993, Messrs. Barford, Feigenbaum, Cramer and Woolf were recipients of grants
under the Nonemployee Director Plan. Dr. Feigenbaum has made arrangements for
any proceeds realized from his ATL stock options to be donated to charity. All
nonemployee directors currently proposed to serve as directors are eligible for
grants in 1994. In addition, as a consultant to ATL in 1993, Mr. Larson
received an option grant to acquire 15,000 shares of ATL Common Stock under the
ATL Option Plan. These options vest in equal installments over a four-year
period beginning on the first anniversary of the date of grant.
See "EXECUTIVE COMPENSATION--Certain Relationships and Related Transactions"
for other payments to directors.
COMMITTEES OF THE ATL BOARD
ATL has established standing committees of the ATL Board, including Audit,
Compensation and Executive Committees. In addition, Directors serving on the
Scientific Advisory Board participate in and direct the setting of ATL's
technology strategy. Each of these committees is responsible to the full ATL
Board, and its activities are therefore subject to approval of the ATL Board.
The functions performed by these committees can be summarized as follows:
Audit Committee. The Audit Committee reviews the accounting principles,
internal accounting controls, audit plan and financial results of ATL in order
to safeguard ATL's assets and to provide for the reliability of its financial
records. The members of this Committee are Mr. Cramer (Chairman), Dr.
Feigenbaum and Mr. Barford. The Audit Committee met four times during 1993. All
members were in attendance at all meetings.
Compensation Committee. The Compensation Committee establishes salaries,
incentives and other forms of compensation for directors, officers and other
executives of ATL and its subsidiaries. This Committee also administers ATL's
various incentive compensation and benefit plans and recommends the
establishment of policies relating to such incentive compensation and benefit
plans. The members of this Committee are Mr. Barford (Chairman), Mr. Cramer,
Mr. Miller and Dr. Woolf. This Committee met five times during 1993. All
members were in attendance at all meetings.
Executive Committee. The Executive Committee has authority, subject to
limitations prescribed by the ATL Board, to exercise, during the intervals
between meetings of the ATL Board, the powers of the full ATL Board, and is
also available, on a standby basis, for use in an emergency or when scheduling
makes it impractical to bring the full ATL Board together for a meeting. The
members of this Committee are Mr. Fill, Dr. Feigenbaum, Mr. Cramer and Mr.
Larson. This Committee did not meet during 1993.
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Scientific Advisory Board. The Scientific Advisory Board meets with a group
of senior scientists of ATL known as the Senior Technical Staff ("STS") and has
the authority to control and direct ATL's technology strategy. Regular meetings
of the STS are held weekly, and members of the Scientific Advisory Board attend
these meetings as circumstances dictate. The members of the Scientific Advisory
Board are Dr. Woolf and Mr. Larson.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Woolf. Dr. Harry Woolf, Director, received $60,000 in his capacity as
Chairman of the Scientific Advisory Board.
Dr. Feigenbaum. Dr. Harvey Feigenbaum, Director, received $48,000 for
consulting services provided to Nova MicroSonics, a division of ATL located in
Mahwah, New Jersey.
Mr. Larson. The Company entered into a consulting agreement with Mr. Larson
for a 14-month term commencing January 1, 1993. During 1993, Mr. Larson
received $198,750 for consulting services, including his services as a member
of the Scientific Advisory Board. Mr. Larson's compensation for services as a
member of the Scientific Advisory Board is at an annual rate of $48,000, which
is paid on a quarterly basis.
See also "EXECUTIVE COMPENSATION--Certain Relationships and Related
Transactions" for other payments.
AMENDMENT OF THE ATL OPTION PLAN
PROPOSED AMENDMENT
The ATL Board recommends the adoption of an amendment to the ATL Option Plan
to increase the number of shares authorized for issuance under the ATL Option
Plan from 1,700,000 to 2,150,000 and to impose certain limits on options and
stock appreciation rights granted thereunder. On February 9, 1994, the ATL
Board unanimously approved the amendment subject to approval of the Issuance
and the amendment by ATL's shareholders at the ATL Annual Meeting.
Approximately 292,800 shares of ATL Common Stock will be available for future
grants to incoming Interspec employees and others under the ATL Option Plan,
based on the number of options outstanding at February 25, 1994. The amendment
of the ATL Option Plan is contingent upon approval of the Issuance by the ATL
shareholders, and approval of the amendment to the ATL Option Plan by the ATL
shareholders is a condition to the consummation of the Merger. A copy of the
amended ATL Option Plan will be furnished by ATL to any shareholder upon
written request to ATL's Corporate Secretary.
The ATL Option Plan provides for awards of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock, stock
grants and performance units. A maximum of 550,000 shares may be issued as
restricted stock awards and stock grants, which maximum amount will not be
affected by the amendment. The principal features of the ATL Option Plan are
described below.
On February 8, 1993, the ATL Board approved an ATL Common Stock repurchase
program, by which ATL's management had been authorized to repurchase on the
open market up to 1,000,000 shares of ATL Common Stock. As of February 25,
1994, ATL has repurchased 816,000 shares under the program. It has been ATL's
practice to retain substantially all such repurchased shares as treasury stock,
to be available for use with ATL's employee benefit plans.
The ATL Board believes that the proposed amendment to the ATL Option Plan is
necessary to enable the adjustment of the Interspec Stock Options by ATL at the
Effective Time, such that they will be deemed to constitute options to purchase
shares of ATL Common Stock pursuant to the Merger Agreement. See "THE MERGER--
Effect on Interspec Employee Benefit and Stock Plans." The ATL Board also
believes that the increase in the number of shares authorized for issuance
under the ATL Option Plan is a critical requirement in order for ATL to grant
to key employees of Interspec options to purchase shares of ATL
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Common Stock and restricted stock awards commensurate with those granted to key
employees of ATL, as well as to continue to attract and retain the services of
other experienced and knowledgeable employees in a competitive high-technology
industry where its competitors utilize various stock option and equity
participation plans to attract and retain such employees.
The proposed amendment to the ATL Option Plan would also limit the maximum
number of shares of ATL Common Stock with respect to which options or stock
appreciation rights may be granted to any eligible recipient in any one fiscal
year to ten percent of the aggregate number of shares of ATL Common Stock
authorized for issuance under the ATL Option Plan. Pursuant to the amendment, a
new paragraph, to read substantially as follows, will be added to Section 5 of
the ATL Option Plan, entitled "Eligibility":
The maximum number of shares of Common Stock with respect to which an
option or options or a stock appreciation right or stock appreciation
rights may be granted to any eligible employee in any one fiscal year of
the Company shall not exceed ten percent of the aggregate number of shares
of Common Stock authorized for issuance under the plan (the "Maximum Annual
Employee Grant").
In addition, Section 15 of the ATL Option Plan, entitled "Adjustments Upon
Changes in Capitalization" will be amended to provide that, subject to other
provisions of the ATL Stock Option Plan, in the event of certain changes in the
outstanding stock of ATL by reason of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of
shares, split-ups, split-offs, spin-offs, liquidations or other similar changes
in capitalization, or any distribution to shareholders other than cash
dividends, the Compensation Committee shall make such adjustments in the
Maximum Annual Employee Grant, if any, in light of the change or distribution
as the Compensation Committee, in its sole discretion, determines to be
appropriate, in addition to adjusting the number and class of shares or rights
subject to options and stock appreciation rights and the exercise prices
thereof, in their discretion.
The ATL Board believes the revisions to Sections 5 and 15 of the ATL Option
Plan are necessary in order to preserve the deductibility of compensation
related to options or stock appreciation rights granted thereunder in
accordance with amendments to the Code effected by the 1993 Omnibus Budget
Reconciliation Act ("OBRA"). OBRA became law in August 1993 and added a new
Section 162(m) to the Code. Under Section 162(m), publicly held companies may
be unable to deduct for federal income tax purposes compensation (including
compensation related to the exercise of stock options or stock appreciation
rights) for the chief executive officer and the other four most highly
compensated executive officers that exceeds $1 million in any one year. Section
162(m) excludes "performance-based" compensation from the aggregate
compensation subject to the $1 million limit.
Under Section 162(m) and the proposed regulations interpreting Section 162(m)
promulgated December 20, 1993 (the "Proposed Regulations"), compensation
attributable to stock options or stock appreciation rights will be deemed to be
performance-based if the options or rights are granted (i) under a plan that is
approved by the company's shareholders, (ii) by a committee consisting solely
of two or more outside directors (as defined in the Proposed Regulations),
(iii) at an exercise price (or base amount, in the case of a stock appreciation
right) that is equal to the fair market value of the company's stock on the
grant date, and (iv) under a plan that contains a per-employee limit on the
number of shares for which options or stock appreciation rights may be granted
during a specified period.
Under the Proposed Regulations, compensation paid under plans that as of
December 20, 1993 met the shareholder approval and disinterested administration
requirements of Rule 16b-3 promulgated under the Exchange Act will be treated
as having satisfied the performance-based compensation requirements of Section
162(m) until the date of the first shareholders meeting after December 31,
1996, unless the plan was materially modified or all the stock issuable under
the plan was issued before that date.
The ATL Option Plan met the identified Rule 16b-3 requirements on the
specified date. However, the amendment of the ATL Option Plan to increase the
number of shares issuable thereunder will constitute a material modification
that will trigger compliance with all four of the Section 162(m) criteria in
order for stock options and stock appreciation rights granted under the ATL
Option Plan to be deemed "performance-
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based." The proposed amendments to Sections 5 and 15 providing for the Maximum
Annual Employee Grant are intended to preserve the ability of ATL to grant
options and stock appreciation rights under the ATL Option Plan that will be
deemed to be performance-based and therefore excluded from the compensation
subject to the $1 million limit on deductibility under the Proposed
Regulations.
The proposed regulations will not constitute binding authority upon which
taxpayers can rely until they are adopted as temporary or final regulations. It
is possible that any such temporary or final regulations will retroactively
change the Proposed Regulations in a manner that will cause options or SARs
issued under the ATL plan not to qualify as performance-based compensation and
to be subject to the $1 million limit on deductibility. Because no temporary or
final regulations have been issued to date, ATL is relying upon the proposed
regulations in its attempt to qualify the options and SARs as performance-based
compensation.
DESCRIPTION OF THE ATL OPTION PLAN
The ATL Option Plan was approved by the shareholders of ATL on May 19, 1992
and provides for awards of incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock, stock grants and performance
units.
Eligibility to Receive Awards. Employees, consultants and independent
contractors of ATL and its subsidiaries, including Interspec upon consummation
of the Merger, selected by ATL's Compensation Committee are eligible to receive
awards of options, stock appreciation rights, restricted stock grants and/or
performance units under the ATL Option Plan.
Terms and Conditions of Stock Option Grants. The Compensation Committee of
the ATL Board (the "Compensation Committee") is authorized under the ATL Option
Plan, in its discretion, to issue options under the ATL Option Plan as
"Incentive Stock Options" (as defined in Section 422 of the Code) or as
"Nonqualified Stock Options" (defined in the ATL Option Plan as being all other
options granted thereunder). The option price for each option granted under the
ATL Option Plan will be not less than 100% of the fair market value of the ATL
Common Stock on the date of grant, except that, with respect to any
Nonqualified Stock Option, the option price may equal the average daily fair
market value of the shares of ATL Common Stock calculated over any continuous
period of trading days beginning and ending no more than 30 business days
before or after the granting date of such option. For purposes of the ATL
Option Plan, "fair market value" means the average of the high and low sale
prices of the Common Stock for the period in question as reported on the Nasdaq
National Market.
Upon exercise, the option price is to be paid in full in cash or, to the
extent permitted by the Compensation Committee, in ATL Common Stock owned by
the optionee for at least three months and having a market value on the date of
exercise equal to the aggregate option price, or in a combination of cash and
stock. The option price may also be paid by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker designated
by ATL to promptly deliver the exercise price to ATL. The option price under
each option will remain constant during the life of such option, regardless of
changes in the market value of the ATL Common Stock. No cash consideration will
be paid to ATL by optionees for the granting of any option. The optionee must
pay to ATL applicable withholding taxes upon exercise of the option as a
condition to receiving the share certificates. The withholding tax may be paid
in cash or by the withholding or delivery of ATL Common Stock.
Each option will have a term of not more than 10 years from the date of
grant, and may be exercisable in installments as prescribed by the Compensation
Committee in the option grant, but no option can be exercisable prior to the
first anniversary of the date of grant, except in the case of the death of an
optionee during employment or except as the Compensation Committee otherwise
determines. It has been the practice of the Compensation Committee that both
Nonqualified Stock Options and Incentive Stock Options granted to employees
under the ATL Option Plan are exercisable in annual installments of 25% of the
number of shares initially granted, commencing on the first anniversary of the
grant date, such installments to be cumulative, and will not be exercisable
prior thereto, except as described below.
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If the employment of an optionee is terminated other than by reason of death,
normal or early retirement or disability, the optionee may exercise the option
at any time within one year after such termination (but not after the
expiration date of the option), to the extent of the number of shares
purchasable at the date of termination of employment.
In the event of the termination of an optionee's employment because of normal
retirement or disability, the optionee may exercise such option at any time
prior to expiration of the option, to the extent of the remaining shares
covered by such option, whether or not such shares had become purchasable by
the optionee at the date of termination of employment. In the event of the
termination of an optionee's employment because of early retirement, the
optionee may exercise such option at any time prior to expiration of the
option, to the extent of the remaining shares covered by such option, at such
time or times as such option becomes purchasable by the optionee in accordance
with its terms. In the event of the death of an optionee while the optionee is
employed by ATL or any of its subsidiaries or while such option is otherwise
outstanding, the option may be exercised by the optionee's beneficiary or legal
representative at any time within a period of one year after the optionee's
death, but not after the expiration of the option, to the extent of the
remaining shares covered by his or her option, whether or not such shares had
become purchasable by the optionee at the date of the optionee's death. In the
event of the death of an optionee during the one-year period following
termination of the optionee's employment or following termination of employment
by reason of normal or early retirement or disability, such option (unless such
termination is for cause) may be exercised by the optionee's beneficiary or
legal representative, but only to the extent of the number of shares
purchasable by the optionee pursuant to the provisions of his or her option at
the date of termination of the optionee's employment.
Notwithstanding the foregoing provisions, but subject to the provisions of
the next paragraph, the Compensation Committee may determine, in its sole
discretion, in the case of any termination of employment that (i) the optionee
may exercise such option to the extent of the remaining shares covered thereby
whether or not such shares had become purchasable by the optionee at the date
of termination of his or her employment and (ii) such option may be exercised
at any time prior to the expiration of the original term of the option.
In the event that an optionee does not remain in the employ of ATL or any of
its subsidiaries and the termination of the optionee's service is for cause,
the option will automatically terminate on the date of first notification to
the optionee of such termination unless the Compensation Committee otherwise
determines.
The ATL Option Plan also provides that, if the option grant so states, upon
notification of an intention to exercise a Nonqualified Stock Option, either in
whole or in part, the Compensation Committee may require the optionee to
surrender the option for cancellation, in lieu of exercising it, and receive in
exchange for such surrender a payment in cash and/or shares equal to the
difference between the option price of the shares covered by the option
surrendered for cancellation and the fair market value of such shares on the
date on which the optionee's notice of exercise is received by ATL.
Stock Appreciation Rights. Under the ATL Option Plan, the Compensation
Committee is authorized to grant stock appreciation rights ("SARs") to eligible
employees, consultants and independent contractors of ATL and its subsidiaries.
A SAR is an incentive award that permits the holder to receive (per share
covered thereby) an amount equal to the amount by which the fair market value
of a share of ATL Common Stock on the date of exercise exceeds the fair market
value of such share on the date the SAR was granted (the "base price").
The Compensation Committee may grant a SAR separately or in tandem with a
related option and may grant both "general" and "limited" SARs. A general SAR
granted in tandem with a related option will generally have the same terms and
provisions as the related option with respect to exercisability, and the base
price of such a SAR will generally be equal to the option price under the
related option. Upon the exercise of a tandem SAR, the related option will be
deemed to be exercised for all purposes of the ATL Option Plan and vice versa.
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A general SAR granted separately and not in tandem with any option will have
such terms as the Compensation Committee may determine, subject to the
provisions of the ATL Option Plan. Under the ATL Option Plan, the base price of
a stand-alone SAR may not be less than the fair market value of the shares of
ATL Common Stock determined as in the case of a Nonqualified Stock Option; the
term of a stand-alone SAR may not be greater than 10 years from the date it was
granted.
A limited SAR may be exercised only during the 90 days immediately following
a Change of Control (as defined herein). For the purpose of determining the
amount payable upon exercise of a limited SAR, the fair market value of a share
of ATL Common Stock will be equal to the higher of (x) the highest fair market
value of the ATL Common Stock during the 90-day period ending on the date the
limited SAR is exercised, determined as in the case of an option, and (y)
whichever of the following is applicable:
(i) the highest per share price paid in any tender or exchange offer that
is in effect at any time during the 90 days preceding the exercise of the
limited SAR;
(ii) the fixed or formula price for the acquisition of shares of ATL
Common Stock in a merger or similar agreement approved by the shareholders
or the ATL Board, if such price is determinable on the date of exercise; or
(iii) the highest price per share paid to any ATL shareholder in a
transaction or group of transactions giving rise to the exercisability of
the limited SAR.
General SARs granted in tandem with a related option are payable in cash, ATL
Common Stock or any combination thereof as determined in the sole discretion of
the Compensation Committee. Limited SARs are payable only in cash. General
stand-alone SARs are also payable only in cash, unless the Compensation
Committee provides otherwise at the time of grant.
Unless otherwise provided by the Compensation Committee at the time of grant,
the provisions of the ATL Option Plan relating to the termination of employment
of a holder of a stock option will apply equally, to the extent applicable, to
the holder of an SAR.
No SARs have been granted under the ATL Option Plan.
Restricted Stock Awards. The Compensation Committee is authorized under the
ATL Option Plan to issue shares of ATL Common Stock to eligible employees,
consultants and independent contractors of ATL and its subsidiaries, such
shares to be restricted, as hereinafter described. The consideration received
for such shares by ATL is the payment in cash of an amount equal to the par
value thereof and past services of the participant. The recipient of restricted
stock will be recorded as an ATL shareholder and will have, subject to the
restrictions described below, all the rights of a shareholder with respect to
such shares and will receive all dividends or other distributions made or paid
with respect to such shares; provided, however, that the shares themselves and
any new, additional or different shares or securities that the recipient may be
entitled to receive with respect to such shares by virtue of a stock split or
stock dividend or any other change in the corporate or capital structure of ATL
will be subject to the restrictions described below.
During a period of years following the date of grant, as determined by the
Compensation Committee, which will in no event be less than one year (the
"Restricted Period"), the restricted stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by
the recipient, except in the event of death or the transfer of the restricted
stock to ATL upon termination of the holder's employment. In the event of the
normal retirement or death of the recipient during the Restricted Period, the
restrictions on the shares will immediately lapse. In the event of the early
retirement of the recipient during the Restricted Period, the restrictions on
the shares will continue until they lapse in accordance with the terms of the
grant. If the employment of the recipient by ATL or any of its subsidiaries
terminates during the Restricted Period for any reason other than the
retirement or death of the employee, the shares of restricted stock held by the
employee will be forfeited to ATL and the employee must immediately transfer
and return the certificates for the restricted stock to ATL.
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Stock Grant Awards. The ATL Option Plan authorizes the Compensation Committee
to issue shares of ATL Common Stock to nonofficer employees of ATL and its
subsidiaries. The consideration received for such shares by ATL is the payment
in cash of an amount equal to the par value thereof and past services. Each
recipient of a stock grant may receive a cash award at the time of grant in an
amount sufficient to offset the recipient's estimated tax liabilities arising
from the grant.
Performance Unit Awards. Performance units awarded under the ATL Option Plan
will have a base value, expressed in dollars, determined by the Compensation
Committee on the day the award is granted, which generally will be the fair
market value of the ATL Common Stock on such day. This value is the "unit base
value." The actual amount paid to the employee, consultant or independent
contractor, as the case may be, by ATL when the award matures at the end of the
award cycle will depend on the achievement of cumulative performance measures.
These measures will be determined by the Compensation Committee at the time the
award is made and may include, but are not limited to, cumulative targets with
respect to earnings per share or pretax profits, return on shareholders'
equity, asset management, cash flow or return on capital employed of ATL and/or
one of its subsidiaries, divisions or departments. The Compensation Committee
will also determine the length of the award cycle (which may not be less than
three years), a payment schedule and whether the payment will be made in cash,
ATL Common Stock or a combination of cash and ATL Common Stock. The payment
schedule will provide a range of percentages of the unit base value that will
be payable to the participant in the event that cumulative targets, of varying
amounts, are achieved.
In instances where performance measures are not achieved, no award will be
payable. The Compensation Committee has discretion under the ATL Option Plan to
apply performance measures on an absolute basis or relative to industry indices
and conclusively determine whether the measures have been achieved, as well as
to revise the payment schedules and performance measure formerly determined by
it if, in its judgment, significant economic or other changes have occurred
that were not foreseeable by the Compensation Committee when it set the initial
measures.
A performance unit award will terminate if the participant does not remain in
the employ of ATL or one of its subsidiaries during the award cycle, except as
the Compensation Committee otherwise determines, and except in the case of
death, normal or early retirement or disability occurring after the first
anniversary of the award's date of grant, in which event, if the performance
measure is met, a pro rata portion of the award will be paid based on the
elapsed time of the award cycle prior to death, retirement or disability.
No payment of a performance unit award will be made prior to the end of an
award cycle, except as the Compensation Committee otherwise determines and
except in the case of death, in which event the participant's beneficiary or
legal representative may elect, subject to the approval of the Compensation
Committee, to have the participant's pro rata portion of the award paid at the
end of the year in which death occurred.
No performance units have been awarded under the ATL Option Plan.
Transferability. The recipient's rights to the options, SARs, restricted
stock and performance units may not be assigned or transferred except by will
or the applicable laws of descent or distribution or to a designated
beneficiary.
Capital Adjustments. In the event of any changes in ATL's outstanding stock
by reason of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, split-ups, split-offs,
spin-offs, liquidations or other similar changes in capitalization, or any
distribution to shareholders other than cash dividends, the Compensation
Committee in its sole discretion may make any adjustments it determines to be
appropriate in the outstanding options, SARs, restricted stock or performance
units granted under the ATL Option Plan and in the total number and class of
shares as to which awards may be made under the ATL Option Plan.
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Change of Control. Under the ATL Option Plan, upon a Change of Control, each
outstanding option and SAR will automatically become exercisable in full for
the total remaining number of shares covered thereby. In addition, during the
90-day period following a Change of Control an optionee may choose to receive
cash equal to the difference between the exercise price of the option and the
fair market value of a share of ATL Common Stock determined as described above
for a limited SAR, in lieu of exercising the option and paying the option
price. Also, all restrictions on shares of restricted stock will lapse upon a
Change of Control, and performance units will be paid pro rata to the date of a
Change of Control and all amounts otherwise deferred by ATL and any employee in
connection with performance units will be distributed. A "Change of Control" is
defined in the ATL Option Plan as (i) a change in the ATL Board such that a
majority of the seats on the ATL Board are occupied by individuals who were
neither nominated by a majority of the Incumbent Directors (as defined herein)
of ATL then in office nor appointed by directors so nominated, (ii) the
acquisition by any person (other than ATL or an ATL employee benefit plan) of,
in the case of transactions not approved by a majority of the directors of ATL
who were either nominated by a majority of the directors of ATL then in office
or appointed by directors so nominated ("Incumbent Directors"), 20% or more of
the combined general voting power of the ATL Common Stock and any other voting
securities of ATL and, in the case of other transactions, 33% or more of such
combined voting power, or (iii) the approval by the ATL shareholders of a
complete liquidation or dissolution of ATL or a merger, consolidation or sale
of substantially all the assets of ATL (collectively, a "Business
Combination"), other than a Business Combination in which all or substantially
all the ATL shareholders receive 60% or more of the stock of the corporation
resulting from the Business Combination in substantially the same proportions
as their ownership before the Business Combination, no holder has more than 20%
of the combined voting power of the capital stock of the resulting corporation
and at least a majority of the board of directors of the resulting corporation
are Incumbent Directors.
Administration. The Compensation Committee will be authorized to administer
the ATL Option Plan and will consist of at least three members of the ATL Board
who have not been eligible to receive awards under the ATL Option Plan or any
other discretionary plans of ATL or its affiliates for one year prior to their
service on the Compensation Committee.
Amendment and Termination. The ATL Option Plan may be terminated, modified or
amended by the ATL shareholders. The ATL Board may also terminate the ATL
Option Plan, or modify or amend it in certain respects as set forth in the ATL
Option Plan. No options or awards may be granted under the ATL Option Plan
after June 26, 2002.
Federal Income Tax Consequences--Option Plans. The federal income tax
consequences under the existing applicable provisions of the Code and the
regulations thereunder to ATL and to any person granted an award under the ATL
Option Plan are substantially as follows.
Under present law and regulations, no income will be recognized by a
participant upon the grant of stock options, SARs, restricted stock (except as
described below) or performance units.
On the exercise of a Nonqualified Stock Option, the optionee will recognize
taxable ordinary income in an amount equal to the excess of the fair market
value of the shares acquired over the option price. Upon a later sale of those
shares, the optionee will have short-term or long-term capital gain or loss, as
the case may be, in an amount equal to the difference between the amount
realized on such sale and the tax basis of the shares sold. If payment of the
option price is made entirely in cash, the tax basis of the shares will be
equal to their fair market value on the date of exercise (but not less than the
option price), and their holding period will begin on the day after the
exercise date.
If the optionee uses previously owned shares to exercise an option in whole
or in part, the transaction will not be considered to be a taxable disposition
of the previously owned shares. The optionee's tax basis and holding period of
the previously owned shares will be carried over to the equivalent number of
shares
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received on exercise. The tax basis of the additional shares received on
exercise will be the fair market value of the shares on the exercise date (but
not less than the amount of cash, if any, used in payment), and the holding
period for such additional shares will begin on the day after the exercise
date.
The same rules apply to an Incentive Stock Option that is exercised more than
three months after the optionee's termination of employment (or more than 12
months thereafter in the case of permanent and total disability as defined in
the Code).
On the exercise of an Incentive Stock Option during employment or within
three months after the employee's termination of employment (12 months in the
case of permanent and total disability as defined in the Code), for regular tax
purposes the optionee will recognize no income at the time of exercise
(although the employee will have income for alternative minimum income tax
purposes at that time as if the option were a Nonqualified Stock Option) and no
deduction will be allowed to ATL for federal income tax purposes in connection
with the grant or exercise of the option. If the acquired shares are sold or
exchanged after the later of (i) one year from the date of exercise of the
option and (ii) two years from the date of grant of the option (the "Holding
Period"), the difference between the amount realized by the holder on that sale
or exchange and the option price will be taxed to the holder as a long-term
capital gain or loss. If the shares are disposed of before the Holding Period
requirements are satisfied, then the holder will recognize taxable ordinary
income in the year of disposition in an amount equal to the excess, on the
option's exercise date, of the fair market value of the shares received over
the option price paid (or generally, if less, the excess of the amount realized
on the sale of the shares over the option price), and the holder will have
capital gain or loss, long-term or short-term as the case may be, in an amount
equal to the difference between (x) the amount realized by the holder upon that
disposition of the shares and (y) the option price paid by the holder increased
by the amount of ordinary income, if any, so recognized by the holder.
Upon the receipt of restricted stock, the employee will generally recognize
taxable ordinary income when the shares cease to be subject to restrictions
under the ATL Option Plan equal to the excess of the fair market value of the
shares at that time over the amount, if any, paid for such shares. However,
within 30 days after the date the shares are received, the employee may elect
under Section 83(b) of the Code to recognize taxable ordinary income at the
time of transfer in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for such shares. In that
case no additional income will be recognized by the employee upon the lapse of
restrictions on the shares, but if the stock is subsequently forfeited, the
employee may not deduct the income recognized at the time of receipt of the
shares and the employee will have a capital loss equal to the amount, if any,
paid for such shares. The recipient's Holding Period for the shares will begin
at the time taxable income is recognized under these rules, and the tax basis
in the shares will be the amount of ordinary income so recognized plus the
amount, if any, paid for the shares. Any dividends received on the restricted
stock prior to the date the employee recognizes income as described above will
be taxable compensation income when received.
Upon payment to a participant in settlement of a stock option or pursuant to
the exercise of SARs or pursuant to a performance unit award, the participant
will recognize taxable ordinary income in an amount equal to the cash and the
fair market value of the ATL Common Stock received. Upon the issuance of a
stock bonus award the recipient will recognize taxable ordinary income in an
amount equal to the fair market value of the ATL Common Stock received and the
amount of any tax offset cash award made together with the issuance of such
stock.
Special rules apply to a director or officer subject to liability under
Section 16(b) of the Exchange Act.
In all the foregoing cases, ATL will generally be entitled to a deduction at
the same time and in the same amount as the optionee recognizes ordinary
income. It is possible, however, that the amount of ATL's deduction will be
limited under the $1 million limitation discussed above under "Proposed
Amendment."
74
<PAGE>
EXECUTIVE OFFICERS OF ATL
The following are executive officers of ATL who will serve in the capacities
noted until their successors are duly appointed and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES WITH ATL
---- --- ---------------------------------------
<S> <C> <C>
Dennis C. Fill................. 64 Chairman of the Board and Chief
Executive Officer
David M. Perozek............... 51 President and Chief Operating Officer
Harvey N. Gillis............... 48 Senior Vice President, Finance and
Administration, Chief Financial
Officer and Treasurer
Castor F. Diaz................. 55 Senior Vice President, ATL Europe
Donald D. Blem................. 50 Senior Vice President, Operations
Jacques Souquet................ 46 Senior Vice President, Product
Generation
</TABLE>
For biographical information for Messrs. Fill and Perozek, see "ELECTION OF
ATL DIRECTORS."
Mr. Gillis has served as Senior Vice President, Finance and Administration,
Chief Financial Officer and Treasurer since September 1992. He served as Senior
Vice President, Finance and Administration and Chief Financial Officer for
NeoPath, Inc. from 1991 to 1992. He served as Chief Operating Manager of Samuel
Stroum Enterprises from 1985 to 1991.
Mr. Diaz has served as Senior Vice President, ATL Europe since October 1993
and as Vice President, ATL Europe since October 1988. He also held various
international sales and marketing positions with ATL from May 1987 to October
1988.
Mr. Blem has served as Senior Vice President, Operations since October 1993.
He served as Vice President, Operations from February 1988 to October 1993.
Dr. Souquet has served as Senior Vice President, Product Generation since
October 1993. He served as Vice President, Product Generation from October 1992
to October 1993, as Vice President, Strategic Marketing and Product Planning
from July 1990 to October 1992 and as Director of Strategic Marketing and
Product Planning from March 1989 to June 1990.
75
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth the compensation for services rendered during
the fiscal years ended December 31, 1993 and 1992 and December 27, 1991, for
ATL's Chief Executive Officer and its four other most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------- ----------------------------
SHARES ALL OTHER
RESTRICTED STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARDS ($)(2)(3) OPTIONS (#) ($)(4)(5)
--------------------------- ---- ---------- ------------ ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill 1993 370,107 236,120 328,880 75,000 3,935
Chairman and Chief Executive 1992 442,083 427,678 581,875 75,000 3,818
Officer 1991 437,500 500,000 0 15,000 --
David M. Perozek 1993 266,538 100,040 204,960 40,000 3,489
President and Chief Operating 1992 190,384 614,271(6) 581,175 115,000 0
Officer
Harvey N. Gillis 1993 193,846 76,120 108,880 25,000 1,090
Sr. Vice President, Finance and 1992 48,461 82,838(7) 234,375 25,000 0
Administration, and Chief Fi-
nancial Officer
Castor F. Diaz 1993 155,063 52,200 12,800 17,000 32,622(8)
Sr. Vice President, ATL Europe 1992 161,886 69,622 116,375 9,000 97,849(9)
Donald D. Blem 1993 155,076 56,240 13,760 12,000 554
Sr. Vice President, Operations 1992 149,615 79,568 149,625 10,000 2,182
</TABLE>
- - - --------
(1) Includes bonus awards earned during the fiscal year covered under ATL's
Management Incentive Compensation Plan (the "MIC Plan").
(2) Restricted stock awards generally have a vesting period of four years with
25% of the award amount of said shares vesting each year on the anniversary
date of the award. The amounts reported in this table represent the market
value of the shares at the date of grant based upon the closing price of
the ATL Common Stock as reported on the Nasdaq National Market on such
date. At December 31, 1993, Messrs. Fill, Perozek, Gillis, Diaz and Blem
held 43,750, 36,250, 16,250, 5,250 and 7,750 shares of restricted stock
having a market value of $732,812, $607,187, $272,188, $87,938 and
$129,813, respectively, based upon the closing price of the ATL Common
Stock as reported on the Nasdaq National Market on December 31, 1993.
(3) Includes bonus awards of restricted stock on February 18, 1994, which
represent 20% of the cash value of an award under the MIC Plan for the
fiscal year covered. Under these MIC Plan awards, Messrs. Fill, Perozek,
Gillis, Diaz and Blem received 3,680, 1,560, 1,180, 800 and 860 shares
having a market value of $58,880, $24,960, $18,880, $12,800 and $13,760,
respectively. The restricted shares granted have a two-year vesting period
with 50% of the award amount vesting each year on the anniversary date of
the award.
(4) Disclosure for 1991 is not required by applicable rules of the Commission.
(5) Includes employer-matching contributions made to the ATL Incentive Savings
and Stock Ownership Plan (the "ISSOP/401(k)").
(6) Mr. Perozek joined ATL on April 13, 1992. This amount represents a $480,000
bonus paid under his employment agreement when Mr. Perozek became President
of ATL in April 1992 and $134,271 as a 1992 bonus under the MIC Plan.
(7) Mr. Gillis joined ATL on September 24, 1992. This amount represents a
$53,000 bonus paid upon employment and $29,838 as a 1992 bonus under the
MIC Plan. Mr. Gillis was guaranteed a $50,000 bonus for his initial 12
months with ATL under its offer of employment of August 28, 1992.
76
<PAGE>
(8) Includes $21,000 in expatriate benefits.
(9) Includes $63,086 in relocation expenses and $33,356 in expatriate benefits.
OPTION GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1993, to ATL's Chief Executive
Officer and its four other most highly compensated executive officers.
OPTION GRANTS IN FISCAL 1993
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERM(2)(3)
- - - ----------------------------------------------------------------------------- -------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
- - - ---- -------------- -------------- --------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dennis C. Fill.......... 75,000 13.9% 17.75 May 5, 2004 $837,223 $2,121,613
David M. Perozek........ 40,000 7.4% 17.75 May 5, 2004 446,519 1,131,527
Harvey N. Gillis........ 25,000 4.6% 17.75 May 5, 2004 279,074 707,204
Castor F. Diaz.......... 17,000 3.2% 16.75 June 4, 2004 179,079 453,806
Donald D. Blem.......... 12,000 2.2% 16.75 June 4, 2004 126,409 320,333
</TABLE>
- - - --------
(1) Options are granted at the fair market value on the date of grant and
generally vest over four years with 25% of each grant exercisable on the
successive anniversary date of grant. Certain changes in control of ATL can
trigger accelerated vesting of stock options and rights to related
payments.
(2) The dollar amounts under these columns are the result of calculations at
assumed rates of 5% and 10% and are not intended to forecast future
appreciation. No value will be realized if the stock price does not exceed
the exercise price of the options.
(3) The appreciation realized by all ATL shareholders on all 10,507,627 shares
of ATL Common Stock outstanding on December 31, 1993, starting from a base
value of $17.03 per share, which represents the average grant price for
stock options granted under the ATL Option Plan during 1993, would be
$112,538,440 and $285,184,468 at assumed annual rates of stock price
appreciation of 5% and 10%, respectively.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information as of December 31, 1993,
regarding options held by ATL's Chief Executive Officer and its four other most
highly compensated executive officers. None of such individuals exercised any
options during the fiscal year ended December 31, 1993.
AGGREGATED FISCAL 1993 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dennis C. Fill.............. 91,158 158,750 $266,679 $89,156
David M. Perozek............ 28,750 126,250 2,813 8,438
Harvey N. Gillis............ 6,250 43,750 7,031 21,094
Castor F. Diaz.............. 2,250 23,750 281 844
Donald D. Blem.............. 2,500 19,500 313 938
</TABLE>
- - - --------
(1) This amount is the aggregate number of the outstanding options multiplied
by the difference between the closing price of the ATL Common Stock as
reported on the Nasdaq National Market on December 31, 1993, minus the
exercise price of such options.
77
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policies. The Compensation Committee has developed and directs a
comprehensive program of compensation policies that aligns the compensation of
all employees, including senior management, in accordance with goals and
objectives that are consistent with ATL's business strategies. These business
strategies are designed to enhance business financial performance and customer
satisfaction and are thereby aligned with the overall corporate objective of
enhancing shareholder value. ATL's compensation policies are designed to
attract and retain key employees, including executive officers, in competition
with other high-technology companies that endeavor to attract such employees.
Compensation for all management personnel is based upon corporate performance
as measured by the criteria discussed below, as well as individual performance
as measured by individually tailored sets of goals and objectives that are
directed toward achieving ATL's business strategies for the year.
To qualify compensation for deductibility under Section 162(m) of the Code,
it is ATL's policy with respect to performance-based compensation to meet the
requirements for exclusion from the limit imposed by Section 162(m) and, with
respect to nonperformance-based compensation, to not award compensation in
excess of the limit.
The Compensation Committee regularly receives reports and briefings from
outside compensation consultants who advise the Compensation Committee on all
aspects of compensation, including base salaries, bonus awards and incentives,
including restricted stock, stock options and long-term incentive awards.
Incentive awards payable to those engaged in sales activities are based upon
performance as measured by objective standards.
Compensation Programs. The Compensation Committee and the ATL shareholders
have adopted incentive programs that reach all areas of ATL. Under the ATL
Option Plan and the MIC Plan, awards may be granted to any officer or manager
of ATL. Under the 1992 Nonofficer Employee Stock Option Plan (the "NOE Plan"),
awards may be made under prescribed circumstances to any employee who is not
eligible for awards under the MIC Plan. In 1993, the ATL Board adopted a Long
Term Incentive Plan pursuant to which designated employees of ATL may earn cash
incentives over a period of years, which are premised on objective measures of
company performance. All individual awards to executive officers under these
plans must be reviewed and approved by the Compensation Committee. In addition,
all employees are eligible to participate in the ISSOP/401(k) plan following
the initial year of employment with ATL.
Salaries. Base salaries for all employees are reviewed on an annual basis.
Salary increases generally are based on a subjective evaluation of the
employee's performance, and in the case of management personnel, against the
individual goals and objectives established for each of them. Base salaries are
also set using the results of surveys of similar positions in high technology
companies and in other local companies as well as internal equity
considerations.
Bonuses. Traditionally, a portion of ATL's total compensation is paid in the
form of bonuses. Annual bonuses for all managers, including executive officers,
may be awarded by the Compensation Committee from an award pool established
under the MIC Plan. The size of the award pool is based on ATL's corporate
performance measured by identified factors. In 1992, those factors were company
revenue and earnings. In 1993, when market conditions made achievement of the
objectives based on those criteria unattainable, the Compensation Committee
broadened the basis of the award pool to include the additional criteria of
market share performance and ATL's response to major market changes. The MIC
Plan award pool for 1993 was 16% less than the award pool in 1992. Individual
awards from the award pool were made by the Compensation Committee in
consideration of a recipient's managerial level, the impact of the recipient's
position on the achievement of ATL's goals, and the recipient's individual
performance as measured by the corporate objectives set for the recipient and
the effectiveness of the recipient in achieving those objectives.
Equity Awards. From time to time the Compensation Committee grants awards of
restricted stock and stock options under the ATL Option Plan and the NOE Plan.
The objectives of these grants are to recognize, reward and retain individuals
in key positions who have exhibited high performance and have high potential
78
<PAGE>
for advancement with ATL. Every recommendation for an award is individually
brought before the Compensation Committee by management. There are at present
no awards or contracts outstanding for SARs or performance unit awards under
the ATL Option Plan.
Compensation of Executive Officers. The total compensation program for
executive officers in 1993, including the Chief Executive Officer, was balanced
between base salary, an annual bonus, and restricted stock and stock option
grants vesting over a four-year period. The Compensation Committee considered
the reports and advice of outside consultants in the area of executive
compensation in determining each element of compensation and each individual's
total incentive compensation.
Base Salaries. In determining the base salaries of executive officers, the
Compensation Committee takes into account the results of surveys and other
measures of comparable corporate compensation in general, and that of
executives in high-technology companies in particular. The comparable companies
include some, but not all, of the companies included in the Peer Group Index
used in the stock performance graph below, along with other comparably sized
public companies. Following the August 1993 restructuring of ATL's operations,
the salaries of all executive officers were reduced by 10% for the last four
months of the
year. Only one of ATL's executive officers for whom compensation is reported in
this Joint Proxy Statement/Prospectus received an increase in base salary in
1993.
Bonuses. Bonuses awarded were determined in accordance with the criteria of
the MIC Plan award pool described above. Only 80% of the bonuses granted to
executive officers for 1993 were paid in cash; the balance will be received in
restricted stock vesting over a two-year period.
Long-Term Incentive Awards. The Compensation Committee made cash awards to
certain executive officers under the Long Term Incentive Plan in 1993. These
awards are to be earned over a three-year term as determined by predetermined
objective criteria of corporate performance and will not mature until the end
of fiscal 1995, at which time they may or may not have value. The long-term
incentive award for each recipient is premised on a fraction of the recipient's
base salary and is limited to a maximum percentage of salary.
Equity Awards. Equity awards granted by the Compensation Committee to
executive officers were made in consideration of advice and recommendations
from outside compensation consultants as to levels of awards appropriate for
companies, particularly high-technology companies, that are similarly situated
to ATL. The companies considered by such compensation consultants included
some, but not all, of the companies included in the Peer Group Index used in
the stock performance graph below. Individual equity awards were based upon the
job responsibility of a recipient, past performance and present job
responsibilities, the importance of a recipient to ATL's future progress and
the recipient's prior award amounts. These awards all vest in equal annual
installments over a four-year period beginning one year after the grant date.
The Compensation Committee does not utilize individual targets for equity
awards but follows a philosophy of issuing equity grants as broadly throughout
ATL as is reasonable, with consideration given to the impact of particular
positions on ATL's future success. In granting individual equity awards for
executive officers, the Compensation Committee takes into account the long-term
incentive plan award given to each of such officers and considers the equity
and long-term incentive awards in the aggregate. This aggregate view had the
effect of reducing equity awards for these individuals to levels below what
might have been considered in the absence of the long-term awards.
Compensation of the Chief Executive Officer. In determining the compensation
of the Chief Executive Officer, the Compensation Committee considered such
factors as ATL's revenue and earnings, gains in market share achieved during
1993, and ATL's response to market changes. The Chief Executive Officer's base
salary was decreased in 1993 by a 10% reduction at the time of the August 1993
corporate restructuring and extending through the last four months of the year.
The Chief Executive Officer received a bonus for 1993, in consideration of the
foregoing factors, of $295,000, of which $236,120 was received in cash and the
balance in restricted stock vesting over a two-year period. This compares with
a cash award of $427,678 in 1992. The
79
<PAGE>
Chief Executive Officer received one award of restricted stock in the amount of
15,000 shares and stock options for 75,000 shares in 1993 that vest in equal
annual installments over a four-year period beginning one year after the grant
date. Awards in the same amounts were made to the Chief Executive Officer in
1992. This award was made together with like awards to the Chief Operating
Officer and the Chief Financial Officer as incentives for continued progress
toward ATL's long-range strategic financial and business objectives.
COMPENSATION COMMITTEE
Mr. Ralph M. Barford, Chairman
Dr. Harry Woolf
Mr. Kirby L. Cramer
Mr. John R. Miller
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The graph set forth below represents the five-year cumulative total return on
shares of ATL Common Stock, the S&P 500 Stock Index, and a Peer Group Index
resulting from an initial assumed investment of $100 in each. The Peer Group
Index is a representative grouping of 86 companies from SIC Code 3845--
Electromedical Equipment--which had five years of reportable stock performance
and includes the reinvestment of both cash and stock dividends. The graph has
been prepared by an outside consulting firm to ATL. The ATL cumulative return
is computed as required by the rules of the Commission to comprise the
cumulative total return on Westmark common stock (including both SpaceLabs and
ATL subsidiaries) prior to June 29, 1992, and to thereafter comprise the
cumulative return of shares of ATL Common Stock with a dividend reinvestment of
the 1992 Distribution. By reason of this computation, the separate value of
shares of ATL Common Stock on a stand-alone basis cannot be distinguished in
the graph.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG ADVANCED TECHNOLOGY LABORATORIES, INC., S&P 500 STOCK INDEX AND PEER
GROUP INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period PEER GROUP S&P 500
(Fiscal Year Covered) ATL INDEX INDEX
- - - ------------------- ------- ---------- -------
<S> <C> <C> <C>
Measurement Pt-
12/31/88 $100 $100 $100
FYE 12/31/89 $170.37 $130.65 $131.68
FYE 12/31/90 $ 90.74 $151.30 $127.58
FYE 12/31/91 $196.30 $289.99 $166.47
FYE 12/31/92 $128.35 $259.50 $179.20
FYE 12/31/93 $122.85 $225.07 $197.26
</TABLE>
80
<PAGE>
RETIREMENT PLAN
The following tabulation sets forth the estimated annual benefits for an
employee, assuming retirement on January 1, 1994 at age 65 after selected
periods of service under the ATL Retirement Plan (the "Retirement Plan"), and
including amounts to be paid pursuant to the ATL Supplemental Benefit Plan (the
"Supplemental Plan"), if applicable.
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFIT FOR CREDITABLE SERVICE
----------------------------------------------------
AVERAGE ANNUAL EARNINGS 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- - - ----------------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000................ $ 5,000 $10,000 $ 15,000 $ 20,000 $ 25,000 $ 30,000
200,000................ 10,000 20,000 30,000 40,000 50,000 60,000
300,000................ 15,000 30,000 45,000 60,000 75,000 90,000
400,000................ 20,000 40,000 60,000 80,000 100,000 120,000
500,000................ 25,000 50,000 75,000 100,000 125,000 150,000
600,000................ 30,000 60,000 90,000 120,000 150,000 180,000
700,000................ 35,000 70,000 105,000 140,000 175,000 210,000
800,000................ 40,000 80,000 120,000 160,000 200,000 240,000
</TABLE>
Amounts shown in the above table will be reduced by the actuarial equivalent
value of amounts distributed from the Discretionary Contribution Plan, which
was terminated in 1989, but in no event will they be less than zero. Retirement
benefits are not offset for Social Security benefits. ERISA, the Tax Equity and
Fiscal Responsibility Act of 1982 and the Tax Reform Act of 1986 generally
limit the amount of annual pension that may be paid from a federal income tax
qualified plan to varying amounts (currently $118,800) and the annual earnings
that may be taken into account for purposes of calculating benefits under a
federal income tax qualified plan (currently $235,840). The actual amounts paid
under the Retirement Plan will be limited to comply with such legislation.
As of December 31, 1993, the number of years of credited service under the
Retirement Plan for Messrs. Fill, Perozek, Gillis, Diaz and Blem were
approximately 7, 1, 1, 6 and 6, respectively. The 1993 earnings for purposes of
calculating benefits under the Retirement Plan for Messrs. Fill, Perozek,
Gillis, Diaz and Blem are $551,161, $399,807, $223,684, $217,717 and $232,614,
respectively. Subject to the limitations imposed by the Code, as stated above,
1993 annual earnings in excess of $235,840 will be disregarded.
The Supplemental Plan is an unfunded plan, not qualified for federal income
tax purposes, that covers any employee whose benefit under the Retirement Plan
is limited by certain provisions of the Code. Based on earnings as defined in
the Retirement Plan, Messrs. Fill and Perozek would be eligible for benefits
under the Supplemental Plan.
CHANGE IN CONTROL AGREEMENTS
Messrs. Fill, Perozek and Gillis have each entered into a Change in Control
Employment Agreement with ATL that provides for continued employment terms
equivalent to those immediately prior to a Change of Control (as defined in
"AMENDMENT OF THE ATL OPTION PLAN") for the three years following a Change of
Control. A lump-sum payment equal to three years of salary and bonus is
immediately triggered if, following a Change of Control, employment is
terminated by (i) the employee for "good cause" or during the 30-day window
period one year after the Change of Control or (ii) the employer "without
cause." A Change of Control, with or without termination of employment, also
triggers an acceleration of vesting of restricted stock and stock options and
payment of the "spread" between the exercise price of options and the fair
market value of the underlying ATL Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1992, pursuant to a relocation agreement with ATL, ATL loaned
Mr. Perozek $200,000 toward the purchase of a residence in the Seattle area.
The loan is secured by a first mortgage on Mr. Perozek's residence, which is
held by ATL, and provides that the loan is to be repaid without interest over a
81
<PAGE>
four-year period in annual payments of the lesser of (i) $100,000 and (ii) the
cash amount of his MIC Plan bonus award. In March 1994, Mr. Perozek made a
second payment on the loan that retired the loan by repaying the principal
amount in its entirety.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires ATL's officers and directors, and
persons who own more than 10% of a registered class of ATL's equity securities,
to file reports of ownership and changes in ownership with the Commission.
Officers, directors and greater than 10% shareholders are required by
Commission regulations to furnish ATL with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5s were
required for those persons, ATL believes that during calendar year 1993 all
filing requirements applicable to its officers, directors and greater than 10%
shareholders were complied with, with the exception that John R. Miller and
Richard S. Totorica (Corporate Controller), in their initial Form 3 filings,
omitted their disclosure of ownership of 300 shares and 103 shares,
respectively, of ATL Common Stock. Amendments to both of their initial Form 3
disclosures were subsequently filed.
82
<PAGE>
PRINCIPAL ATL SHAREHOLDERS
The following table sets forth, as of February 25, 1994, certain information
with respect to the beneficial ownership of shares of ATL Common Stock by (i)
each person known by ATL to own beneficially more than 5% of the shares of ATL
Common Stock, (ii) each director and director nominee of ATL, (iii) each of
ATL's executive officers for whom compensation is reported in this Joint Proxy
Statement/Prospectus, and (iv) all directors and executive officers of ATL as a
group. Except as otherwise noted, ATL believes that the beneficial owners of
the shares of ATL Common Stock listed below, based on information furnished by
such owners, have sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
NAME AND AMOUNT AND
ADDRESS OF NATURE OF PERCENT OF CLASS
BENEFICIAL BENEFICIAL FOLLOWING
OWNER OWNERSHIP PERCENT OF CLASS MERGER(1)
---------- ---------- ---------------- ----------------
<S> <C> <C> <C>
5% OWNERS:
The State of Wisconsin........... 965,000(2) 9.2% 7.4%
Investment Board
P.O. Box 7842
Madison, WI 53707
Wellington Mangement Company..... 818,250(3) 7.8% 6.2%
75 State Street
Boston, MA 02109
Trimark Investment Management, 620,000(4) 5.9% 4.7%
Inc.............................
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, ON M5X 1E5
DIRECTORS AND EXECUTIVE OFFICERS:
Dennis C. Fill................... 81,802(5) * *
David M. Perozek................. 46,744(5) * *
Harvey N. Gillis................. 21,243(5) * *
Eugene A. Larson................. 20,600 * *
Kirby L. Cramer.................. 10,000 * *
Donald D. Blem................... 9,023(5) * *
Castor F. Diaz................... 8,399(5) * *
Harry Woolf...................... 5,500 * *
Ralph M. Barford................. 5,000 * *
Harvey Feigenbaum................ 463(6) * *
John R. Miller................... 300 * *
All directors and executive
officers as a group (12
persons)........................ 216,844(5) 2.1% 1.7%
</TABLE>
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*Under one percent.
(1) Based upon the Exchange Ratio of 0.413 and the number of Interspec Common
Shares outstanding as of March 29, 1994.
(2) Sole power to vote and sole power to dispose of 965,000 shares, based upon
publicly available information reported as of December 31, 1993.
(3) Shared power to vote 134,250 shares and sole power to dispose of 818,250
shares, based upon publicly available information reported as of December
31, 1993. 661,200 shares held through Wellington Management Company are
beneficially owned by Vanguard Specialized Portfolios, Inc.--Health Care
Portfolios ("Vanguard"), P.O. Box 2600, Valley Forge, PA 19482. Vanguard
has sole power to vote and shared power to dispose of 661,200 shares, based
upon publicly available information reported as of December 31, 1993.
(4) Sole power to vote and to dispose of 620,000 shares, based upon
notification of beneficial ownership by Trimark Investment Management Inc.
on March 23, 1994.
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(5) Includes shares held by the Trustee of the ISSOP/401(k) for each such
officer who is a participant in the ISSOP/401(k). Does not include shares
purchased by the Trustee of the ISSOP/401(k) after December 31, 1993, which
shares have not yet been allocated by the Trustee to the beneficiaries.
(6) Includes 163 shares owned by Dr. Feigenbaum's wife. Dr. Feigenbaum
disclaims beneficial ownership of such shares.
LEGAL OPINION
The legality of the shares of ATL Common Stock to be issued in connection
with the Merger is being passed upon for ATL by Perkins Coie.
TAX OPINION
Certain of the tax consequences of the Merger to Interspec shareholders will
be passed upon at the Effective Time, as a condition to the Merger, by Cravath,
Swaine & Moore, counsel to ATL, and by Duane, Morris & Heckscher, counsel to
Interspec. See "THE MERGER--Certain Federal Income Tax Consequences."
EXPERTS
The consolidated financial statements and schedules of ATL and its
subsidiaries included in ATL's Annual Report on Form 10-K as of December 31,
1993 and 1992 and for each of the fiscal years in the three-year period ended
December 31, 1993 and incorporated by reference in this Joint Proxy
Statement/Prospectus are incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, independent auditors, and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Interspec and its
subsidiaries included in Interspec's Annual Report on Form 10-K as of November
30, 1993 and 1992 and for each of the fiscal years in the three-year period
ended November 30, 1993 and incorporated by reference in this Joint Proxy
Statement/Prospectus are incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, independent auditors, and upon the authority of
said firm as experts in accounting and auditing.
RATIFICATION OF APPOINTMENT OF AUDITORS
Unless instructed to the contrary, it is intended that votes be cast pursuant
to the accompanying proxy for the ratification of the appointment of KPMG Peat
Marwick as independent auditors of ATL for the year 1994. KMPG Peat Marwick has
audited the accounts of ATL and Westmark and its major subsidiaries from 1987
through 1993, and for the units of Squibb Corporation that now comprise ATL
since 1982. Representatives of KPMG Peat Marwick are expected to attend the ATL
Annual Meeting and will have an opportunity to make a statement and/or to
respond to appropriate questions from shareholders.
In the event the ratification of the appointment of auditors is not made by a
majority of the shares present in person or by proxy and entitled to vote
thereon, the selection of other auditors will be considered and determined by
the ATL Board.
The ATL Board has unanimously approved the appointment of KPMG Peat Marwick
as auditors for ATL for 1994 and recommends a vote "FOR" ratification of the
appointment of KPMG Peat Marwick.
PROPOSALS BY ATL SHAREHOLDERS
Shareholder proposals intended to be presented at ATL's 1995 Annual General
Meeting of Shareholders must be received by ATL not later than December 19,
1994 for inclusion in the proxy materials for such meeting.
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ANNUAL REPORT AND FORM 10-K
A copy of ATL's 1993 Annual Report is being mailed with this Proxy Statement
to each shareholder of record. ATL shareholders not receiving a copy of such
Annual Report may obtain one without charge by writing or calling Investor
Relations, Advanced Technology Laboratories, Inc., 22100 Bothell Everett
Highway, P.O. Box 3003, Bothell, WA 98041-3003, (206) 487-7000.
A copy of ATL's Annual Report on Form 10-K for the year ended December 31,
1993, as filed with the Commission, will be provided without charge to each
shareholder of record who submits a written request therefor addressed to
Investor Relations, Advanced Technology Laboratories, Inc., 22100 Bothell
Everett Highway, P.O. Box 3003, Bothell, WA 98041-3003, (206) 487-7000.
85
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APPENDIX I
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 10, 1994,
AMONG
ADVANCED TECHNOLOGY LABORATORIES, INC.
ATL SUB ACQUISITION CORP.
AND
INTERSPEC, INC.
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<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I The Merger.......................... 1
Section 1.01 The Merger.................. 1
Section 1.02 Closing..................... 1
Section 1.03 Effective Time.............. 2
Section 1.04 Effects of the Merger....... 2
Section 1.05 Articles of Incorporation
and By-laws................. 2
Section 1.06 Directors................... 2
Section 1.07 Officers.................... 2
ARTICLE II Effect of the Merger on the
Capital Stock of the
Constituent Corporations;
Exchange of Certificates........... 2
Section 2.01 Effect on Capital Stock..... 2
Section 2.02 Exchange of Certificates.... 3
ARTICLE III Representations and
Warranties........................ 6
Section 3.01 Representations and
Warranties of the Company... 6
Section 3.02 Representations and
Warranties of Parent and
Sub......................... 15
ARTICLE IV Covenants Relating to Conduct
of Business........................ 20
Section 4.01 Conduct of Business......... 20
Section 4.02 No Solicitation............. 22
ARTICLE V Additional Agreements............... 23
Section 5.01 Preparation of Form S-4 and
the Joint Proxy Statement;
Stockholders Meetings....... 23
Section 5.02 Letter of the Company's
Accountants................. 24
Section 5.03 Letter of Parent's
Accountants................. 24
Section 5.04 Access to Information;
Confidentiality............. 24
Section 5.05 Best Efforts; Notification.. 25
Section 5.06 Stock Options............... 26
Section 5.07 Benefit Plans............... 26
Section 5.08 Indemnification and
Insurance................... 27
Section 5.09 Fees and Expenses........... 27
Section 5.10 Public Announcements........ 28
Section 5.11 Affiliates and Certain
Stockholders................ 28
Section 5.12 National Market System
Trading..................... 29
Section 5.13 Stockholder Litigation...... 29
Section 5.14 Tax Representation Letters
of the Company and Parent... 29
Section 5.15 Directorship................ 29
Section 5.16 Employment Agreements....... 29
ARTICLE VI Conditions Precedent............... 29
Section 6.01 Conditions to Each Party's
Obligation to Effect the
Merger...................... 29
Section 6.02 Conditions to Obligations
of Parent and Sub........... 30
Section 6.03 Conditions to Obligation of
the Company................. 31
Section 6.04 Frustration of Closing
Conditions.................. 32
ARTICLE VII Termination, Amendment and
Waiver........................ 32
Section 7.01 Termination................. 32
Section 7.02 Effect of Termination....... 33
Section 7.03 Amendment................... 33
Section 7.04 Extension; Waiver........... 33
Section 7.05 Procedure for Termination,
Amendment, Extension or
Waiver...................... 34
ARTICLE VIII General Provisions............... 34
Section 8.01 Nonsurvival of
Representations and
Warranties.................. 34
Section 8.02 Notices..................... 34
Section 8.03 Definitions................. 35
Section 8.04 Interpretation.............. 35
Section 8.05 Counterparts................ 35
Section 8.06 Entire Agreement; No Third-
Party Beneficiaries......... 36
Section 8.07 Governing Law............... 36
Section 8.08 Assignment.................. 36
Section 8.09 Enforcement................. 36
</TABLE>
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of February 10,
1994, among ADVANCED TECHNOLOGY LABORATORIES, INC., a Delaware corporation
("Parent"), ATL SUB ACQUISITION CORP., a Delaware corporation ("Sub"), and a
wholly owned subsidiary of Parent, and INTERSPEC, INC., a Pennsylvania
corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement, whereby each issued
and outstanding share of common stock, par value $.001 per share, of the
Company ("Company Common Stock"), other than shares owned directly or
indirectly by Parent or the Company and Dissenting Shares (as defined in
Section 2.01(d)), will be converted into the right to receive common stock, par
value $.01 per share, of Parent ("Parent Common Stock");
WHEREAS the Merger requires the approval of a majority of votes cast by the
holders of shares of the Company Common Stock entitled to vote thereon at the
meeting of holders of Company Common Stock to be called therefor (the "Company
Stockholder Approval");
WHEREAS each of (x) the issuance of shares of Parent Common Stock in the
Merger and (y) the Stock Plan Amendment (as defined in Section 5.01(b))
requires the approval by an affirmative vote of the holders of a majority of
the shares of the Parent Common Stock present, or represented, and entitled to
vote thereon at the meeting of holders of Parent Common Stock to be called
therefor (the "Parent Stockholder Approval");
WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests"; and
WHEREAS, the parties desire to amend and restate the Agreement pursuant to
Agreement dated as of February 10, 1994, among Parent, Sub and the Company.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER
Upon the terms and subject to the conditions set forth in this Agreement, and
in accordance with the Pennsylvania Business Corporation Law of 1988 (the
"PBCL") and the Delaware General Corporation Law (the "DGCL"), Sub shall be
merged with and into the Company at the Effective Time of the Merger (as
defined in Section 1.03). Following the Effective Time of the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the PBCL
and the DGCL.
SECTION 1.02 CLOSING
The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date to be specified by the parties (the "Closing Date"), which (subject to
satisfaction or waiver of the conditions set forth in Sections 6.02 and 6.03)
shall be no earlier than May 3, 1994, and no later than the second business day
after satisfaction
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of the conditions set forth in Section 6.01, at the offices of Cravath, Swaine
& Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 1.03 EFFECTIVE TIME
Subject to the provisions of this Agreement, as soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
parties shall file a certificate of merger, articles of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the PBCL and the DGCL and shall
make all other filings or recordings required under the PBCL and the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the Commonwealth of Pennsylvania and the
State of Delaware, or at such other time as Sub and the Company shall agree
should be specified in the Certificate of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time of the Merger").
SECTION 1.04 EFFECTS OF THE MERGER
The Merger shall have the effects set forth in Section 1929 of the PBCL and
Section 259 of the DGCL.
SECTION 1.05 ARTICLES OF INCORPORATION AND BY-LAWS
(a) The articles of incorporation of the Company, as in effect immediately
prior to the Effective Time of the Merger, shall be amended as of the Effective
Time of the Merger so that Article 5 of such articles of incorporation reads in
its entirety as follows: "The total number of shares of all classes of stock
which the corporation shall have authority to issue is 100 shares of Common
Stock, par value $1.00 per share." and, as so amended, such articles of
incorporation shall be the articles of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The by-laws of the Company as in effect at the Effective Time of the
Merger shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 1.06 DIRECTORS
The directors of Sub at the Effective Time of the Merger shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
SECTION 1.07 OFFICERS
The officers of the Company at the Effective Time of the Merger shall be the
officers of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01 EFFECT ON CAPITAL STOCK
As of the Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holder of any shares of Company Common Stock or
any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital stock
of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $1.00 per share, of the Surviving Corporation.
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(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any subsidiary (as
defined in Section 8.03) of the Company and each share of Company Common Stock
that is owned by Parent, Sub or any other subsidiary of Parent shall
automatically be cancelled and retired and shall cease to exist, and no Parent
Common Stock or other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.02(e), each
issued and outstanding share of Company Common Stock (other than shares to be
cancelled in accordance with Section 2.01(b)) shall be converted into the right
to receive 0.413 of a fully paid and nonassessable share of Parent Common Stock
(the "Exchange Ratio"). Pursuant to the Rights Agreement (as defined in Section
3.02(b)), one Right (as defined in the Rights Agreement) will be attached to
each share of Parent Common Stock issued in connection with the Merger upon
conversion of Company Common Stock. As of the Effective Time of the Merger, all
such shares of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Company Common Stock
shall cease to have any rights with respect thereto, except the right to
receive the shares of Parent Common Stock and any cash in lieu of fractional
shares of Parent Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.02, without
interest.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock outstanding immediately prior to the
Effective Time of the Merger held by a holder (if any) who is entitled to
demand, and who properly demands, appraisal for such shares in accordance with
Section 1571 of the PBCL ("Dissenting Shares") shall not be converted into a
right to receive Parent Common Stock and any cash in lieu of fractional shares
of Parent Common Stock unless such holder fails to perfect or otherwise loses
such holder's right to appraisal, if any. If, after the Effective Time of the
Merger, such holder fails to perfect or loses any such right to appraisal, such
shares shall be treated as if they had been converted as of the Effective Time
of the Merger into the right to receive Parent Common Stock pursuant to Section
2.01(c) and the cash in lieu of fractional shares of Parent Common Stock
specified in Section 2.02(e). The Company shall give prompt notice to Parent of
any demands received by the Company for appraisal of shares of Company Common
Stock, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 2.02 EXCHANGE OF CERTIFICATES
(a) Exchange Agent. As of the Effective Time of the Merger, Parent shall
deposit with First Chicago Trust Company of New York or such other bank or
trust company as may be designated by Parent (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
2.01 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time of the Merger represented outstanding shares of Company Common
Stock (the "Certificates") whose shares were converted into the right to
receive shares of Parent Common Stock pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
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<PAGE>
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II and cash in lieu of fractional shares of Parent
Common Stock as contemplated by this Section 2.02, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time of the Merger to represent only the right to receive
upon such surrender the certificate representing shares of Parent Common Stock
and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 2.02. No interest will be paid or will accrue on
any cash payable in lieu of any fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time of the Merger shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e), in each case until the surrender of
such Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section
2.02(e) and the amount of dividends or other distributions with a record date
after the Effective Time of the Merger theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time of the Merger but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.02(c) or 2.02(e)) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the shares of Company Common
Stock theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time of the Merger
which may have been declared or made by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Effective Time of the
Merger, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger, Certificates are presented
to the Surviving Corporation or the Exchange Agent for any reason, they shall
be cancelled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time of the
Merger, the Exchange Agent shall determine the excess of (x) the number of
shares of Parent Common Stock delivered to the
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Exchange Agent by Parent pursuant to Section 2.02(a) over (y) the aggregate
number of whole shares of Parent Common Stock to be distributed to holders
of the Certificates pursuant to Section 2.02(b) (such excess being
hereinafter referred to as the "Excess Shares"). As soon after the
Effective Time of the Merger as practicable, the Exchange Agent, as agent
for the holders of the Certificates, shall sell the Excess Shares at then
prevailing prices on the National Association of Securities Dealers, Inc.
Automated Quotations National Market System ("NASDAQ/NMS"), all in the
manner provided in paragraph (iii) of this Section 2.02(e).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NASDAQ/NMS through one or more member firms of the National
Association of Securities Dealers, Inc. and shall be executed in round lots
to the extent practicable. Until the net proceeds of such sale or sales
have been distributed to the holders of the Certificates, the Exchange
Agent will hold such proceeds in trust for the holders of the Certificates
(the "Common Shares Trust"). Parent shall pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale
of the Excess Shares. The Exchange Agent shall determine the portion of the
Common Shares Trust to which each holder of a Certificate shall be
entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of which is
the amount of the fractional share interest to which such holder of a
Certificate is entitled and the denominator of which is the aggregate
amount of fractional share interests to which all holders of the
Certificates are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of the Certificates in lieu of any
fractional share interests, the Exchange Agent shall make available such
amounts, without interest, to such holders of the Certificates.
(f) Termination of Exchange Fund and Common Shares Trust. Any portion of the
Exchange Fund and Common Shares Trust which remains undistributed to the
holders of the Certificates for six months after the Effective Time of the
Merger shall be delivered to Parent, upon demand, and any holders of the
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund or the Common Shares Trust delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered prior to seven years after the Effective Time
of the Merger (or immediately prior to such earlier date on which any shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock or any dividends or distributions with respect to Parent Common Stock in
respect of such Certificate would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 3.01(d)), any such shares,
cash, dividends or distributions in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) Investment of Exchange Fund and Common Shares Trust. The Exchange Agent
shall invest any cash included in the Exchange Fund and the Common Shares
Trust, as directed by Parent, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Parent.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and each
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on its business as
now being conducted. Each of the Company and each of its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate would not have a material adverse effect on
the Company. The Company has delivered to Parent complete and correct copies of
its articles of incorporation and by-laws and the certificates of incorporation
and by-laws of its subsidiaries, in each case as amended to the date hereof.
(b) Subsidiaries. Exhibit 22 to the Company's Form 10-K for the fiscal year
ended November 30, 1992, lists each subsidiary of the Company. All the
outstanding shares of capital stock of each such subsidiary have been validly
issued and are fully paid and nonassessable and are owned by the Company, free
and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"). Except for
the capital stock of its subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company consists
of 10,000,000 shares of Company Common Stock and 400,000 shares of preferred
stock, par value $.01 per share. At the close of business on February 8, 1994,
(i) 6,274,877 shares of Company Common Stock and no shares of preferred stock
were issued and outstanding, (ii) 10,390 shares of Company Common Stock were
held by the Company in its treasury, (iii) 580,168 shares of Company Common
Stock were reserved for issuance pursuant to the Stock Plans (as defined in
Section 5.06) and (iv) 928,571 shares of Company Common Stock were reserved for
issuance upon conversion of the Company's 11% Convertible Subordinated Notes
(the "Convertible Notes"). At the close of business on February 8, 1994, there
was $6,500,000 aggregate principal amount outstanding of the Convertible Notes,
which are convertible into shares of Company Common Stock at the option of the
holder thereof at an exchange price of $7 per share of Company Common Stock.
Except as set forth above, at the close of business on February 8, 1994, no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. All outstanding shares of capital stock
of the Company are, and all shares which may be issued pursuant to the Stock
Plans will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or, except for the Convertible Notes, convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
the Company may vote. Except as set forth above, as of the date hereof, there
are no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or
any of its subsidiaries is a party or by which any of them is bound obligating
the Company or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
voting securities of the Company or of any of its subsidiaries or obligating
the Company or any of its subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are not any
outstanding contractual obligations of the Company or any of its
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subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its subsidiaries. There are not any outstanding
contractual obligations of the Company to vote or to dispose of any shares of
the capital stock of any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to the Company
Stockholder Approval with respect to the Merger, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the
Merger, to the Company Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the articles of incorporation or by-laws of the Company
or the comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or any of its subsidiaries or their respective properties or assets, other
than, in the case of clause (ii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
material adverse effect on the Company, (y) impair the ability of the Company
to perform its obligations under this Agreement or (z) prevent the consummation
of any of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Federal, state, local or foreign government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect
to the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (2) the filing with
the Securities and Exchange Commission (the "SEC") of (A) a proxy statement
relating to the Company Stockholder Approval (such proxy statement, together
with the proxy statement relating to the Parent Stockholder Approval, in each
case as amended or supplemented from time to time, the "Joint Proxy
Statement"), and (B) such reports under Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (3) the filing of the Certificate of Merger with the Secretary of
State of the Commonwealth of Pennsylvania and the State of Delaware and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (4) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under the laws of any foreign country in which the Company, Parent or any of
their respective subsidiaries conducts any business or owns any property or
assets or (5) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate (A) have a material adverse effect on the Company, (B) impair the
ability of the Company to perform its obligations under this Agreement or (C)
prevent the consummation of any of the transactions contemplated by this
Agreement.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the SEC
since December 1, 1992 (the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the
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rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded
by a later Filed SEC Document (as defined in Section 3.01(g)), none of the SEC
Documents contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows (or changes in financial position prior to the
approval of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 95) for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Other than with
respect to ERISA (as defined in Section 3.01(j) below) and tax matters, which
are addressed by Sections 3.01(j) and 3.01(k), respectively, except as set
forth in the Filed SEC Documents, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise and whether or not required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the notes
thereto) which individually or in the aggregate could reasonably be expected to
have a material adverse effect on the Company.
(f) Information Supplied. None of the information supplied or to be supplied
by the Company specifically for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger (the "Form S-
4") will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Joint Proxy Statement will, at
the date it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 5.01(b)), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference in the
Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except as disclosed on the Company
Disclosure Schedule or in the SEC Documents filed and publicly available prior
to the date of this Agreement (the "Filed SEC Documents"), since the date of
the most recent audited financial statements included in the Filed SEC
Documents, the Company has conducted its business only in the ordinary course,
and there has not been (i) any material adverse change in the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (x) any granting by the Company or any of its subsidiaries
to any executive officer or other employee of the Company or any of its
subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents, (y) any granting by the Company
or any of its subsidiaries to any such executive officer of any increase in
severance or
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termination pay, except as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents or (z) any entry by
the Company or any of its subsidiaries into any employment, severance or
termination agreement with any such executive officer, (v) any damage,
destruction or loss, whether or not covered by insurance, that has or could
reasonably be expected to have a material adverse effect on the Company or (vi)
any change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed SEC Documents, there is no
suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries (and the
Company is not aware of any basis for any such suit, action or proceeding) that
individually or in the aggregate could reasonably be expected to (i) have a
material adverse effect on the Company, (ii) impair the ability of the Company
to perform its obligations under this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its subsidiaries
having, or which is reasonably likely to have, any effect referred to in clause
(i), (ii) or (iii) above.
(i) Absence of Changes in Benefit Plans. Except as disclosed in the Filed SEC
Documents, since the date of the most recent audited financial statements
included in the Filed SEC Documents, there has not been any adoption or
amendment in any material respect by the Company or any of its subsidiaries of
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries. Except
as disclosed in the Filed SEC Documents, there exist no employment, consulting,
severance, termination or indemnification agreements, arrangements or
understandings between the Company or any of its subsidiaries and any current
or former employee, officer or director of the Company or any of its
subsidiaries.
(j) ERISA Compliance.
(i) The Company Disclosure Schedule contains a list and brief description
of each "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
(sometimes referred to herein as a "Welfare Plan"), each stock option,
stock purchase, deferred compensation plan or arrangement and each other
employee fringe benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company, any of its
subsidiaries or any other person or entity that, together with the Company,
is treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code (each, a "Commonly Controlled Entity") for the benefit of any
current or former employees, officers, directors or independent contractors
of the Company or any of its subsidiaries (collectively, "Benefit Plans").
The Company has delivered to Parent true, complete and correct copies of
(w) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (x) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any
such report was required), (y) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required and
(z) each currently effective trust agreement and insurance or group annuity
contract relating to any Benefit Plan.
(ii) Each Benefit Plan has been administered in all material respects in
accordance with its terms. The Company, its subsidiaries and all the
Benefit Plans are in compliance in all material respects with the
applicable provisions of ERISA and the Code. All reports, returns and
similar documents with respect to the Benefit Plans required to be filed
with any governmental agency or distributed to any Benefit Plan participant
have been duly and timely filed or distributed. To the knowledge of the
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Company, there are no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable
in the normal operation of the Benefit Plans), suits or proceedings against
or involving any Benefit Plan or asserting any rights or claims to benefits
under any Benefit Plan that could give rise to any material liability, and,
to the knowledge of the Company, there are not any facts that could give
rise to any material liability in the event of any such investigation,
claim, suit or proceeding.
(iii) (1) All contributions to, and payments from, the Benefit Plans that
may have been required to be made in accordance with the terms of the
Benefit Plans, any applicable collective bargaining agreement and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been
timely made, (2) there has been no application for or waiver of the minimum
funding standards imposed by Section 412 of the Code with respect to any
Benefit Plan that is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) (sometimes referred to herein as a "Pension Plan")
and (3) no Pension Plan had an "accumulated funding deficiency" within the
meaning of Section 412(a) of the Code as of the end of the most recently
completed plan year.
(iv) Each Pension Plan has been the subject of a determination letter
from the Internal Revenue Service to the effect that such Pension Plan is
qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code; no such determination letter has been
revoked, and, to the knowledge of the Company, revocation has not been
threatened; and such Pension Plan has not been amended since the effective
date of its most recent determination letter in any respect that would
adversely affect its qualification, materially increase its costs or
require security under Section 307 of ERISA. The Company has delivered to
Parent a copy of the most recent determination letter received with respect
to each Pension Plan for which such a letter has been issued, as well as a
copy of any pending application for a determination letter. The Company has
also provided to Parent a list of all Pension Plan amendments as to which a
favorable determination letter has not yet been received. To the knowledge
of the Company, no event has occurred that could subject any Pension Plan
to tax under Section 511 of the Code.
(v) To the knowledge of the Company, (1) no "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA) has occurred
that involves the assets of any Benefit Plan; (2) no prohibited transaction
has occurred that could subject the Company, any of its subsidiaries, any
employee of the Company or its subsidiaries or, to the knowledge of the
Company, a trustee, administrator or other fiduciary of any trust created
under any Benefit Plan to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or the sanctions imposed under Title I
of ERISA; (3) no Pension Plan has been terminated or has been the subject
of a "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder); and (4) none of the Company or any trustee,
administrator or other fiduciary of any Benefit Plan or any agent of any of
the foregoing has engaged in any transaction or acted in a manner that
could, or failed to act so as to, subject the Company or any trustee,
administrator or other fiduciary to any liability for breach of fiduciary
duty under ERISA or any other applicable law.
(vi) As of the most recent valuation date for each Pension Plan that is a
"defined benefit pension plan" (as defined in Section 3(35) of ERISA) (a
"Defined Benefit Plan"), there was not any amount of "unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA) under such
Defined Benefit Plan, and the Company is not aware of any facts or
circumstances that would materially change the funded status of any such
Defined Benefit Plan. The Company has furnished to Parent the most recent
actuarial report or valuation with respect to each Defined Benefit Plan.
The information supplied to the actuary by the Company and any of its
subsidiaries for use in preparing those reports or valuations was complete
and accurate in all material respects and the Company has no reason to
believe that the conclusions expressed in those reports or valuations are
incorrect.
(vii) No Commonly Controlled Entity has incurred any liability to an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA)
(other than for contributions not yet due) or to the Pension
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Benefit Guaranty Corporation (other than for the payment of premiums not
yet due), which liability has not been fully paid as of the date hereof.
(viii) No Commonly Controlled Entity has (a) engaged in a transaction
described in Section 4069 of ERISA that could subject the Company to
liability at any time after the date hereof or (b) acted in a manner that
could, or failed to act so as to, result in fines, penalties, taxes or
related charges under (x) Section 502(c)(i) or (l) of ERISA, (y) Section
4071 of ERISA or (z) Chapter 43 of the Code.
(ix) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (as defined in Section 4201 of
ERISA) that has not been fully paid.
(x) The list of Welfare Plans on the Company Disclosure Schedule
discloses whether each Welfare Plan is (i) unfunded, (ii) funded through a
"welfare benefit fund", as such term is defined in Section 419(e) of the
Code, or other funding mechanism or (iii) insured. Each such Welfare Plan
may be amended or terminated without material liability to the Company at
any time after the Effective Time of the Merger. The Company and its
subsidiaries comply in all material respects with the applicable
requirements of Section 4980B(f) of the Code with respect to each Benefit
Plan that is a group health plan, as such term is defined in Section
5000(b)(1) of the Code.
(xi) Except as disclosed on the Company Disclosure Schedule, no employee
of the Company will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under any
Benefit Plan as a result of the transactions contemplated by this
Agreement.
(k) Taxes.
(i) Each of the Company and its subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to file
such returns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file or to have
extensions granted that remain in effect individually and in the aggregate
would not have a material adverse effect on the Company. All returns filed
by the Company and each of its subsidiaries are complete and accurate in
all material respects to the knowledge of the Company. The Company and each
of its subsidiaries has paid (or the Company has paid on its behalf) all
taxes shown as due on such returns, and the most recent financial
statements contained in the Filed SEC Documents reflect an adequate reserve
for all taxes payable by the Company and its subsidiaries for all taxable
periods and portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or in
the aggregate would not have a material adverse effect on the Company, and
no requests for waivers of the time to assess any such taxes have been
granted or are pending. None of the Federal income tax returns of the
Company and each of its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service.
The statute of limitations on assessment or collection of any taxes due
from the Company or any of its subsidiaries has expired for all taxable
years of the Company or any of its subsidiaries through November 30, 1989.
(iii) Neither the Company nor any of its subsidiaries has taken any
action or has any knowledge of any fact or circumstance that is reasonably
likely to prevent the transactions contemplated hereby, including the
Merger, from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(iv) No real estate transfer tax or real estate gains tax will be imposed
by the Commonwealth of Pennsylvania or any political subdivision thereof as
a consequence of the Merger or any other transaction contemplated by this
Agreement.
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(v) As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise and other taxes, tariffs
or governmental charges of any nature whatsoever.
(l) No Excess Parachute Payments; Section 162(m) of the Code.
(i) Any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any
of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Benefit Plan currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
(ii) The disallowance of a deduction under Section 162(m) of the Code for
employee renumeration will not apply to any amount paid or payable by the
Company or any subsidiary of the Company under any contract, plan, program,
arrangement or understanding.
(m) Voting Requirements. The affirmative vote of a majority of the votes cast
by the holders of the shares of Company Common Stock entitled to vote thereon
at the Stockholders Meeting with respect to the approval of the Merger is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated by this
Agreement.
(n) State Takeover Statutes. The Board of Directors of the Company has
approved the execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated by this Agreement, and such
approval is sufficient to render inapplicable to this Agreement, the Merger and
the other transactions contemplated by this Agreement the provisions of
Subchapter 25F of the PBCL. To the best of the Company's knowledge, no other
state takeover statute or similar statute or regulation applies or purports to
apply to the Merger, this Agreement or any of the transactions contemplated by
this Agreement and no provision of the articles of incorporation, by-laws or
other governing instruments of the Company or any of its subsidiaries would,
directly or indirectly, restrict or impair the ability of Parent to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of
the Company and its subsidiaries that may be acquired or controlled by Parent.
(o) Labor Matters. There are no collective bargaining or other labor union
agreements to which the Company or any of its subsidiaries is a party or by
which any of them is bound. To the best knowledge of the Company, since
December 1, 1992, neither the Company nor any of its subsidiaries has
encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
(p) Brokers; Schedule of Fees and Expenses. No broker, investment banker,
financial advisor or other person, other than Merrill Lynch & Co. ("Merrill
Lynch"), the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The estimated fees
and expenses incurred and to be incurred by the Company in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees of the Company's legal counsel) are set forth on the Company Disclosure
Schedule.
(q) Opinion of Financial Advisor. The Company has received the oral opinion
of Merrill Lynch to the effect that, based upon and subject to assumptions made
by Merrill Lynch in rendering such opinion and based upon such other matters as
they consider relevant, as of the date of this Agreement, the Exchange Ratio is
fair to the Company's stockholders from a financial point of view.
(r) Accounting Matters. Neither the Company nor, to its best knowledge, any
of its affiliates has taken or agreed to take any action that (without giving
effect to any action taken or agreed to be taken by Parent or any of its
affiliates) would prevent Parent from accounting for the business combination
to be effected by the Merger as a pooling of interests.
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(s) Compliance with Applicable Laws.
(i) Each of the Company and its subsidiaries has in effect all Federal,
state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has
occurred no default under any such Permit, except for the lack of Permits
and for defaults under Permits which lack or default individually or in the
aggregate would not have a material adverse effect on the Company. Except
as disclosed in the Filed SEC Documents, the Company and its subsidiaries
are in compliance with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity, except for possible
noncompliance which individually or in the aggregate would not have a
material adverse effect on the Company.
(ii) To the best of the Company's knowledge, each of the Company and its
subsidiaries is, and has been, and each of the Company's former
subsidiaries, while subsidiaries of the Company, was in compliance with all
applicable Environmental Laws, except for possible noncompliance which
individually or in the aggregate would not have a material adverse effect
on the Company. The term "Environmental Laws" means any Federal, state,
local or foreign statute, code, ordinance, rule, regulation, policy,
guideline, permit, consent, approval, license, judgment, order, writ,
decree, directive, injunction or other authorization, including the
requirement to register underground storage tanks, relating to: (A)
emissions, discharges, Releases (as defined below) or threatened Releases
of Hazardous Material (as defined below) into the environment, including
into ambient air, soil, sediments, land surface or subsurface, buildings or
facilities, surface water, groundwater, publicly-owned treatment works,
septic systems or land; (B) the generation, treatment, storage, disposal,
use, handling, manufacturing, transportation or shipment of Hazardous
Material; or (C) pollution of the environment or the protection of human
health or safety.
(iii) During the period of ownership or operation by the Company and its
subsidiaries of any of their respective current or previously-owned
properties, there have been no Releases of Hazardous Material in, on, under
or affecting such properties or, to the knowledge of the Company, any
surrounding site, except in each case for those which individually or in
the aggregate would not have a material adverse effect on the Company.
Prior to the period of ownership or operation by the Company and its
subsidiaries of any of their respective current or previously-owned
properties, to the knowledge of the Company, no Hazardous Material was
generated, treated, stored, disposed of, used, handled or manufactured at,
or transported, shipped or disposed of from, such current or previously-
owned properties, and there were no Releases of Hazardous Material in, on,
under or affecting any such property or any surrounding site, except in
each case for those which individually or in the aggregate would not have a
material adverse effect on the Company. The term "Release" has the meaning
set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous Material" means
(1) hazardous materials, pollutants, contaminants, constituents, medical
wastes, hazardous or infectious wastes and hazardous substances as those
terms are defined in the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et
seq., the Comprehensive Environmental Response, Compensation and Liability
Act, as amended by the Superfund Amendments and Reauthorization Act, 42
U.S.C. (S) 9601 et seq., the Occupational Safety and Health Act, 29 U.S.C.
(S) 651 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq. and the Clean Air Act,
42 U.S.C. (S) 7401 et seq., (2) petroleum, including crude oil and any
fractions thereof, (3) natural gas, synthetic gas and any mixtures thereof,
(4) asbestos and/or asbestos-containing material and (5) PCBs, or materials
or fluids containing PCBs.
(t) Contracts; Debt Instruments.
(i) Except as disclosed in the Filed SEC Documents or on the Company
Disclosure Schedule, there are no contracts or agreements that are material
to the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries
taken as a whole.
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Neither the Company nor any of its subsidiaries is in violation of or in
default under (nor does there exist any condition which upon the passage of
time or the giving of notice would cause such a violation of or default
under) any loan or credit agreement, note, bond, mortgage, indenture,
lease, permit, concession, franchise, license or any other contract,
agreement, arrangement or understanding to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that individually or in the aggregate would not have a material
adverse effect on the Company.
(ii) Set forth on the Company Disclosure Schedule is (x) a list of all
loan or credit agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any indebtedness of the
Company or any of its subsidiaries in an aggregate principal amount in
excess of $25,000 is outstanding or may be incurred and (y) the respective
principal amounts currently outstanding thereunder. For purposes of this
Agreement, "indebtedness" shall mean, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges
are customarily paid, (D) all obligations of such person under conditional
sale or other title retention agreements relating to property purchased by
such person, (E) all obligations of such person issued or assumed as the
deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such person's business), (F)
all capitalized lease obligations of such person, (G) all obligations of
others secured by any lien on property or assets owned or acquired by such
person, whether or not the obligations secured thereby have been assumed,
(H) all obligations of such person under interest rate or currency hedging
transactions (valued at the termination value thereof), (I) all letters of
credit issued for the account of such person and (J) all guarantees and
arrangements having the economic effect of a guarantee of such person of
any indebtedness of any other person.
(u) Title to Properties.
(i) Each of the Company and each of its subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful in
the conduct of its businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements, restrictive
covenants and similar encumbrances or impediments that individually or in
the aggregate would not materially interfere with its ability to conduct
its business as currently conducted. All such material assets and
properties, other than assets and properties in which the Company or any of
its subsidiaries has leasehold interests, are free and clear of all Liens,
except for Liens that individually or in the aggregate would not materially
interfere with the ability of the Company and its subsidiaries to conduct
business as currently conducted.
(ii) Each of the Company and each of its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full
force and effect. Each of the Company and each of its subsidiaries enjoys
peaceful and undisturbed possession under all such material leases.
(v) Intellectual Property. To the best of the Company's knowledge, the
Company and its subsidiaries own, or are validly licensed or otherwise have the
right to use, all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights and computer programs
(collectively, "Intellectual Property Rights") which are material to the
conduct of the business of the Company and its subsidiaries taken as a whole.
The Company Disclosure Schedule sets forth a description of all Intellectual
Property Rights which are material to the conduct of the business of the
Company and its subsidiaries taken as a whole. Except as set forth on the
Company Disclosure Schedule, no claims are pending or, to the knowledge of the
Company, threatened that the Company or any of its subsidiaries is infringing
or otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right. To the knowledge of the Company, except as set
forth on the Company Disclosure Schedule, no person is infringing the rights of
the Company or any of its subsidiaries with respect to any Intellectual
Property Right.
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SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as set forth on the Disclosure Schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Sub is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed individually or in the
aggregate would not have a material adverse effect on Parent. Parent has
delivered to the Company complete and correct copies of its certificate of
incorporation and by-laws and the certificate of incorporation and by-laws
of Sub, in each case as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Parent consists of
50,000,000 shares of Parent Common Stock and 6,000,000 shares of preferred
stock, par value $1 per share. At the close of business on February 8,
1994, (i) 10,491,489 shares of Parent Common Stock and no shares of
preferred stock, par value $1 per share, were issued and outstanding, (ii)
760,457 shares of Parent Common Stock were held by Parent in its treasury,
(iii) 1,601,983 shares of Parent Common Stock were reserved for issuance
pursuant to the Company's 1986 Amended and Restated Option, Restricted
Stock, Stock Appreciation Right and Performance Unit Plan, the Amended
Westmark International Incorporated Incentive Savings and Stock Ownership
Plan and Trust, the Amended and Restated Retirement Plan, the Management
Incentive Compensation Plan, the 1992 Option, Stock Appreciation Right,
Restricted Stock, Stock Grant and Performance Unit Plan (the "1992 Option
Plan"), the Amended and Restated Nonofficer Employee Option, Restricted
Stock and Stock Grant Plan, the 1992 Nonofficer Employee Stock Option Plan
and the Stock Option Plan for Nonemployee Directors (the "Parent Stock
Plans") and (iv) 500,000 shares of Series A Participating Cumulative
Preferred Stock ("Parent Preferred Stock") (subject to increase and
adjustment as set forth in the Rights Agreement and the Certificate of
Designations attached as an exhibit thereto) were reserved for issuance in
connection with the rights (the "Rights") to purchase shares of Parent
Preferred Stock pursuant to the Amended and Restated Rights Agreement dated
as of June 26, 1992, between Parent and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agreement"). Except as set forth above,
at the close of business on February 8, 1994, no shares of capital stock or
other voting securities of Parent were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Parent are, and all
shares which may be issued pursuant to this Agreement will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or
other indebtedness of Parent having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of Parent may vote. Except as set forth above or as
otherwise contemplated by this Agreement, as of the date of this Agreement,
there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Parent or any
of its subsidiaries is a party or by which any of them is bound obligating
Parent or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of Parent or obligating Parent or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. As of the
date of this Agreement, there are no outstanding contractual obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of Parent or any of its subsidiaries.
As of the date of this Agreement, the authorized capital stock of Sub
consists of 100 shares of common stock, par value $1.00 per share, all of
which have been validly issued, are fully paid and nonassessable and are
owned by Parent free and clear of any Lien.
(c) Authority; Noncontravention. Parent and Sub have all requisite
corporate power and authority to enter into this Agreement and, subject to
the Parent Stockholder Approval with respect to the issuance
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of Parent Common Stock in the Merger and the Stock Plan Amendment, to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of Parent and
Sub, subject, in the case of the issuance of Parent Common Stock in the
Merger and the Stock Plan Amendment, to the Parent Stockholder Approval.
This Agreement has been duly executed and delivered by Parent and Sub and
constitutes a valid and binding obligation of each such party, enforceable
against such party in accordance with its terms. The execution and delivery
of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of
Parent or Sub or the comparable charter or organizational documents of any
other subsidiary of Parent, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent, Sub or any other
subsidiary of Parent or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent, Sub or any other subsidiary of
Parent or their respective properties or assets, other than, in the case of
clause (ii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a material adverse
effect on Parent, (y) impair the ability of Parent and Sub to perform their
respective obligations under this Agreement or (z) prevent the consummation
of any of the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent, Sub
or any other subsidiary of Parent in connection with the execution and
delivery of this Agreement or the consummation by Parent or Sub, as the
case may be, of any of the transactions contemplated by this Agreement,
except for (1) the filing of a premerger notification and report form under
the HSR Act, (2) the filing with the SEC of the Form S-4, the Joint Proxy
Statement relating to the Parent Stockholder Approval and such reports
under Section 13(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement,
(3) the filing of the Certificate of Merger with the Secretary of State of
the Commonwealth of Pennsylvania and the State of Delaware and appropriate
documents with the relevant authorities of other states in which Parent is
qualified to do business, (4) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under the "takeover" or "blue sky" laws of various states or the laws of
any foreign country in which the Company, Parent or any of their respective
subsidiaries conducts any business or owns any property or assets and (5)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as would not individually or in the aggregate (A)
have a material adverse effect on Parent, (B) impair the ability of Parent
and Sub to perform their respective obligations under this Agreement or (C)
prevent the consummation of any of the transactions contemplated by this
Agreement.
(d) SEC Documents; Undisclosed Liabilities. Parent has filed all required
reports, schedules, forms, statements and other documents with the SEC
since January 1, 1993 (the "Parent SEC Documents"). As of their respective
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable
to such Parent SEC Documents, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in
any Parent SEC Document has been revised or superseded by a later Filed
Parent SEC Document (as defined in Section 3.02(f)), none of the Parent SEC
Documents contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary
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in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
Parent included in the Parent SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash
flows (or changes in financial position prior to the approval of Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
95) for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Other than with respect
to ERISA and tax matters, which are addressed by Sections 3.02(n) and
3.02(o), respectively, except as set forth in the Filed Parent SEC
Documents, neither Parent nor any of its subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise and whether or not required by generally accepted accounting
principles to be recognized or disclosed on a consolidated balance sheet of
Parent and its consolidated subsidiaries or in the notes thereto) which
individually or in the aggregate could reasonably be expected to have a
material adverse effect on Parent.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
the Joint Proxy Statement will, at the date the Joint Proxy Statement is
first mailed to Parent's stockholders or at the time of the Parent
Stockholders Meeting (as defined in Section 5.01(b)), contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Form S-4 will comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations
promulgated thereunder and the Joint Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation
or warranty is made by Parent or Sub with respect to statements made or
incorporated by reference in either the Form S-4 or the Joint Proxy
Statement based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Parent SEC Documents"), since the date of the most
recent audited financial statements included in the Filed Parent SEC
Documents, Parent has conducted its business only in the ordinary course,
and there has not been (i) any material adverse change in Parent, (ii) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) with respect to any of Parent's
capital stock, (iii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (iv) any damage, destruction or loss, whether
or not covered by insurance that has or could reasonably be expected to
have a material adverse effect on Parent or (v) any change in accounting
methods, principles or practices by Parent materially affecting its assets,
liabilities or business, except insofar as may have been disclosed in the
Filed Parent SEC Documents or required by a change in generally accepted
accounting principles.
(g) Litigation. Except as disclosed in the Filed Parent SEC Documents,
there is no suit, action or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or any of its subsidiaries
(and Parent is not aware of any basis for any such suit, action or
proceeding) that individually or in the aggregate could reasonably be
expected to (i) have a material adverse effect on
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Parent, (ii) impair the ability of Parent and Sub to perform their
obligations under this Agreement or (iii) prevent the consummation of any
of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any of its subsidiaries having, or
which is reasonably likely to have, any effect referred to in clause (i),
(ii) or (iii) above.
(h) Voting Requirements. The affirmative vote of the holders of a
majority of the shares of Parent Common Stock present, or represented, and
entitled to vote thereon at the Parent Stockholders Meeting with respect to
each of (i) the issuance of shares of Parent Common Stock in the Merger and
(ii) the Stock Plan Amendment are the only votes of the holders of any
class or series of Parent's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
(i) Labor Matters. There are no collective bargaining or other labor
union agreements to which Parent or any of its subsidiaries is a party or
by which any of them is bound. To the best knowledge of Parent, since
January 1, 1993, neither Parent nor any of its subsidiaries has encountered
any labor union organizing activity, or had any actual or threatened
employee strikes, work stoppages, slowdowns or lockouts.
(j) Brokers. No broker, investment banker, financial advisor or other
person, other than Goldman, Sachs & Co., the fees and expenses of which
will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub.
(k) Opinion of Financial Advisor. Parent has received the oral opinion of
Goldman, Sachs & Co. to the effect that, based upon and subject to
assumptions made by Goldman, Sachs & Co. in rendering such opinion and
based upon such other matters as they consider relevant, as of the date of
this Agreement, the Exchange Ratio is fair to Parent.
(l) Accounting Matters. Neither Parent nor, to its best knowledge, any of
its affiliates has taken or agreed to take any action that (without giving
effect to any action taken or agreed to be taken by the Company or any of
its affiliates) would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests.
(m) Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(n) Benefit Plans. Parent and its subsidiaries are in compliance in all
material respects with the applicable provisions of ERISA and the Code with
respect to each material "employee benefit plan" (as defined in Section
3(3) of ERISA) maintained, contributed to or required to be maintained or
contributed to by Parent or its subsidiaries for the benefit of any present
officers, employees or directors of Parent or any of its subsidiaries in
the United States.
(o) Taxes.
(i) Each of Parent and its subsidiaries has filed all tax returns and
reports required to be filed by it or requests for extensions to file
such returns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file or to have
extensions granted that remain in effect individually or in the
aggregate would not have a material adverse effect on Parent. All
returns filed by Parent and each of its subsidiaries are complete and
accurate in all material respects to the knowledge of Parent. Parent
and each of its subsidiaries has paid (or Parent has paid on its
behalf) all taxes shown as due on such returns, and the most recent
financial statements contained in the Filed Parent SEC Documents
reflect an adequate reserve for all taxes payable by Parent and its
subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Parent or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually
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or in the aggregate would not have a material adverse effect on Parent,
and no requests for waivers of the time to assess any such taxes have
been granted or are pending. The Federal income tax returns of Parent
and each of its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal Revenue Service
for all years through 1990. The statute of limitations on assessment or
collection of any taxes due from Parent or any of its subsidiaries has
expired for all taxable years of Parent or such subsidiaries through
1990.
(iii) Neither Parent nor any of its subsidiaries has taken any action
or has any knowledge of any fact or circumstance that is reasonably
likely to prevent the transactions contemplated hereby, including the
Merger, from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(p) Rights Agreement. The execution and delivery of this Agreement by
Parent and Sub and consummation of the Merger and other transactions
contemplated hereby will not result in the grant or distribution of any
Rights to any person under the Rights Agreement (except for the Rights
attached to the Parent Common Stock issuable in the Merger or pursuant to
this Agreement) or enable or require any Rights to be exercised or
triggered.
(q) Compliance with Applicable Laws.
(i) Each of Parent and its subsidiaries has in effect all Permits
necessary for it to own, lease or operate its properties and assets and
to carry on its business as now conducted, and there has occurred no
default under any such Permit, except for the lack of Permits and for
defaults under Permits which lack or default individually or in the
aggregate would not have a material adverse effect on Parent. Except as
disclosed in the Filed Parent SEC Documents, Parent and its
subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity,
except for possible noncompliance which individually or in the
aggregate would not have a material adverse effect on Parent.
(ii) Each of Parent and its subsidiaries is, and has been, in
compliance with all applicable Environmental Laws, except for possible
noncompliance which individually or in the aggregate would not have a
material adverse effect on Parent.
(r) Contracts; Debt Instruments. Except as disclosed in the Filed Parent
SEC Documents or on the Parent Disclosure Schedule, there are no contracts
or agreements that are material to the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of
Parent and its subsidiaries taken as a whole. Neither Parent nor any of its
subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice would
cause such a violation of or default under) any loan or credit agreement,
note, bond, mortgage, indenture, lease, permit, concession, franchise,
license or any other contract, agreement, arrangement or understanding to
which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that individually or in the
aggregate would not have a material adverse effect on Parent.
(s) Title to Properties.
(i) Each of Parent and each of its subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that
individually or in the aggregate would not materially interfere with
its ability to conduct its business as currently conducted. All such
material properties and assets, other than properties and assets in
which Parent or any of its subsidiaries has leasehold interests, are
free and clear of all Liens, except for Liens that individually or in
the aggregate would not materially interfere with the ability of Parent
and its subsidiaries to conduct business as current conducted.
(ii) Each of Parent and each of its subsidiaries has complied in all
material respects with the terms of all material leases to which it is
a party and under which it is in occupancy, and all such
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leases are in full force and effect. Each of Parent and each of its
subsidiaries enjoys peaceful and undisturbed possession under all such
material leases.
(t) Intellectual Property. Parent and its subsidiaries own, or are
validly licensed or otherwise have the right to use, all Intellectual
Property Rights which are material to the conduct of the business of Parent
and its subsidiaries taken as a whole. The Parent Disclosure Schedule sets
forth a description of all Intellectual Property Rights which are material
to the conduct of the business of Parent and its subsidiaries taken as a
whole. Except as set forth on the Parent Disclosure Schedule, no claims are
pending or, to the knowledge of Parent, threatened that Parent or any of
its subsidiaries is infringing or otherwise adversely affecting the rights
of any person with regard to any Intellectual Property Right. To the
knowledge of Parent, except as set forth on the Parent Disclosure Schedule,
no person is infringing the rights of Parent or any of its subsidiaries
with respect to any Intellectual Property Right.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01 CONDUCT OF BUSINESS
(a) Conduct of Business by the Company. During the period from the date of
this Agreement to the Effective Time of the Merger, the Company shall, and
shall cause its subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that
their goodwill and ongoing businesses shall be unimpaired at the Effective Time
of the Merger. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time of the Merger, the
Company shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent, (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (z)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than (x) the issuance of
Company Common Stock upon the exercise of Employee Stock Options (as
defined in Section 5.06) outstanding on the date of this Agreement and in
accordance with their present terms and (y) the issuance of Company Common
Stock upon conversion of the Convertible Notes by the holders thereof in
accordance with their present terms);
(iii) amend its articles of incorporation, by-laws or other comparable
charter or organizational documents;
(iv) acquire or agree to acquire (x) 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 or (y) any
assets that individually or in the aggregate are material to the Company
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except
sales in the ordinary course of business consistent with past practice of
inventory or of furniture, fixtures and equipment that are no longer used
by or useful to the Company or its subsidiaries;
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(vi) (x) incur any indebtedness, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice
and except for intercompany indebtedness between the Company and any of its
subsidiaries or between such subsidiaries, or (y) make any loans, advances
or capital contributions to, or investments in, any other person, other
than to the Company or any direct or indirect wholly owned subsidiary of
the Company;
(vii) make or agree to make any new capital expenditure or capital
expenditures which individually is in excess of $50,000 or in the aggregate
are in excess of $300,000;
(viii) make any tax election that could reasonably be expected to have a
material adverse effect on the Company or settle or compromise any income
tax liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents or
incurred since the date of such financial statements in the ordinary course
of business consistent with past practice;
(x) except in the ordinary course of business, modify, amend or terminate
any material contract or agreement to which the Company or any subsidiary
is a party or waive, release or assign any material rights or claims
thereunder;
(xi) take any action that (without giving effect to any action taken or
agreed to be taken by Parent or any of its affiliates) would prevent Parent
from accounting for the business combination to be effected by the Merger
as a pooling of interests or from treating the Merger as a "reorganization"
under Section 368(a) of the Code; or
(xii) authorize any of, or commit or agree to take any of, the foregoing
actions.
(b) Conduct of Business by Parent. During the period from the date of this
Agreement to the Effective Time of the Merger, Parent shall, and shall cause
its subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and, to the extent consistent therewith, use all reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time of the Merger; provided
that the foregoing shall not prevent Parent or any of its subsidiaries from
discontinuing or disposing of any part of its assets or business if such action
is, in the judgment of Parent, desirable in the conduct of the business of
Parent and its subsidiaries or if such action would not result in either of the
effects referred to in clause (ii) below. Without limiting the generality of
the foregoing, during the period from the date of this Agreement to the
Effective Time of the Merger, Parent shall not, and shall not permit any of its
subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any capital stock of Parent or (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of Parent's capital stock (other than exchanges in
the ordinary course under Parent's employee stock plans);
(ii) take any action that (without giving effect to any action taken or
agreed to be taken by the Company or any of its affiliates) would prevent
Parent from accounting for the business combination to be effected by the
Merger as a pooling of interests or from treating the Merger as a
"reorganization" under Section 368(a) of the Code;
(iii) amend the Rights Agreement in any manner adverse to the holders of
Company Common Stock;
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(iv) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities, in each case if any such
action could reasonably be expected to (A) delay materially the date of
mailing of the Joint Proxy Statement or, (B) if it were to occur after such
date of mailing, require an amendment of the Joint Proxy Statement;
(v) acquire or agree to acquire (x) 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 or (y) any
assets that individually or in the aggregate are material to the Company
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice, in each case if
any such action could reasonably be expected to (A) delay materially the
date of mailing of the Joint Proxy Statement or, (B) if it were to occur
after such date of mailing, require an amendment of the Joint Proxy
Statement; or
(vi) authorize any of, or commit or agree to take any of, the foregoing
actions.
(c) Other Actions. The Company and Parent shall not, and shall not permit any
of their respective subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii)
except as otherwise permitted by Section 4.02, any of the conditions to the
Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. The Company and Parent shall promptly advise the other
party orally and in writing of any change or event having, or which, insofar as
can reasonably be foreseen, would have, a material adverse effect on such party
or on the truth of their respective representations and warranties.
SECTION 4.02 NO SOLICITATION
(a) The Company shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or 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, directly or indirectly, (i) solicit, initiate or
encourage the submission of, any takeover proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any takeover proposal; provided, however, that prior to the Stockholders
Meeting, to the extent required by the fiduciary obligations of the Board of
Directors of the Company, as determined in good faith by the Board of Directors
based on the advice of outside counsel, the Company may, (A) in response to an
unsolicited request therefor, furnish information with respect to the Company
to any person pursuant to a customary confidentiality agreement (as determined
by the Company's outside counsel) and discuss such information (but not the
terms of any possible takeover proposal) with such person and (B) upon receipt
by the Company of a takeover proposal, following delivery to Parent of the
notice required pursuant to Section 4.02(c), participate in negotiations
regarding such takeover proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its subsidiaries
or otherwise, shall be deemed to be a breach of this Section 4.02(a) by the
Company. For purposes of this Agreement, "takeover proposal" means any proposal
for a merger or other business combination involving the Company or any of its
subsidiaries or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of the Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Sub, the approval or
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recommendation by such Board of Directors or any such committee of this
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, in the event the Board
of Directors of the Company receives a takeover proposal that, in the exercise
of its fiduciary obligations (as determined in good faith by the Board of
Directors based on the advice of outside counsel), it determines to be a
superior proposal, the Board of Directors may (subject to the following
sentences) withdraw or modify its approval or recommendation of this Agreement
and the Merger, approve or recommend any such superior proposal, enter into an
agreement with respect to such superior proposal or terminate this Agreement,
in each case at any time after the second business day following Parent's
receipt of written notice (a "Notice of Superior Proposal") advising Parent
that the Board of Directors has received a superior proposal, specifying the
material terms and conditions of such superior proposal and identifying the
person making such superior proposal. In the event the Board of Directors of
the Company takes any of the foregoing actions with respect to such superior
proposal, the Company shall, concurrently with the taking of any such action,
pay to Parent the Termination Fee plus all Expenses pursuant to Section
5.09(b). For purposes of this Agreement, "superior proposal" means a bona fide
takeover proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the shares of Company
Common Stock then outstanding or all or substantially all the assets of the
Company, and otherwise on terms which the Board of Directors of the Company
determines in its good faith reasonable judgment to be more favorable to the
Company's stockholders than the Merger (based on the written opinion, with only
customary qualifications, of 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 Merger) and for which financing,
to the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors, is reasonably capable of being
financed by such third party.
(c) In addition to the obligations of the Company set forth in paragraph (b)
above, the Company promptly shall advise Parent orally and in writing of any
request for information or of any takeover proposal or any inquiry with respect
to or which could lead to any takeover proposal, the identity of the person
making any such takeover proposal or inquiry and the material terms and
conditions thereof. The Company will keep Parent generally informed of the
status and details of any such request, takeover proposal or inquiry.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 PREPARATION OF FORM S-4 AND THE JOINT PROXY STATEMENT;
STOCKHOLDERS MEETINGS
(a) As soon as practicable following the date of this Agreement, the Company
and Parent shall prepare and file with the SEC the Joint Proxy Statement and
Parent shall prepare and file with the SEC the Form S-4, in which the Joint
Proxy Statement will be included as a prospectus. Each of the Company and
Parent shall use its best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. The Company
will use its best efforts to cause the Joint Proxy Statement to be mailed to
the Company's stockholders, and Parent will use its best efforts to cause the
Joint Proxy Statement to be mailed to Parent's stockholders, in each case as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and under the Stock Plans and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock and rights to acquire Company Common Stock pursuant to
the Stock Plans as may be reasonably requested in connection with any such
action.
(b) The Company will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders Meeting") for the purpose of approving the
Merger. Parent will, as promptly as practicable following the date of this
Agreement, duly call, give notice
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of, convene and hold a meeting of its stockholders (the "Parent Stockholders
Meeting") for the purpose of approving (i) the issuance of Parent Common Stock
in the Merger and (ii) the amendment of the 1992 Option Plan to increase the
number of shares of Parent Common Stock that are authorized for issuance
thereunder by 450,000 shares (the "Stock Plan Amendment"). The Company and
Parent will, through their respective Boards of Directors, recommend to their
respective stockholders approval of the foregoing matters, except to the extent
that the Board of Directors of the Company shall have withdrawn or modified its
approval or recommendation of this Agreement or the Merger as permitted by
Section 4.02(b). Without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to the first sentence of this Section
5.01(b) shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any takeover proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company of its
approval or recommendation of this Agreement or the Merger. Parent and the
Company will use reasonable efforts to hold the Stockholders Meeting and the
Parent Stockholders Meeting on the same day and use their best efforts to hold
such Meetings as soon as practicable after the date hereof.
(c) The Company shall use its best efforts to obtain the opinion of Merrill
Lynch, dated on or about the date that is two business days prior to the
mailing of the Joint Proxy Statement, to the effect that, as of such date, the
Exchange Ratio is fair to the Company's stockholders from a financial point of
view, and shall cause a signed copy of such opinion to be delivered to Parent.
(d) Parent shall use its best efforts to obtain the opinion of Goldman, Sachs
& Co., dated on or about the date that is two business days prior to the
mailing of the Joint Proxy Statement, to the effect that, as of such date, the
Exchange Ratio is fair to Parent, and shall cause a signed copy of such opinion
to be delivered to the Company.
SECTION 5.02 LETTER OF THE COMPANY'S ACCOUNTANTS
The Company shall use its best efforts to cause to be delivered to Parent a
letter of KPMG Peat Marwick, the Company's independent public accountants,
dated a date within two business days before the date on which the Form S-4
shall become effective and a letter of KPMG Peat Marwick, dated a date within
two business days before the Closing Date, each addressed to Parent, in form
and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
SECTION 5.03 LETTER OF PARENT'S ACCOUNTANTS
Parent shall use its best efforts to cause to be delivered to the Company a
letter of KPMG Peat Marwick, Parent's independent public accountants, dated a
date within two business days before the date on which the Form S-4 shall
become effective and a letter of KPMG Peat Marwick, dated a date within two
business days before the Closing Date, each addressed to the Company, in form
and substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
SECTION 5.04 ACCESS TO INFORMATION; CONFIDENTIALITY
(a) Each of the Company and Parent shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives
of such other party, reasonable access during normal business hours during the
period prior to the Effective Time of the Merger to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, each of the Company and Parent shall, and shall cause each of its
respective subsidiaries to, furnish promptly to the other party (i) a copy of
each report, schedule,
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registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (ii) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Except as required by law, each of the
Company and Parent will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information in confidence until such time
as such information becomes publicly available (otherwise than through the
wrongful act of any such person) and shall use its best efforts to ensure that
such persons do not disclose such information to others without the prior
written consent of the Company or Parent, as the case may be. In the event of
the termination of this Agreement for any reason, the Company and Parent shall
promptly return or destroy all documents containing nonpublic information so
obtained from the other party or any of its subsidiaries and any copies made of
such documents. In addition, Parent and the Company shall not, and shall cause
their respective advisors and agents not to, use any such nonpublic information
for any purpose except in furtherance of the transactions contemplated by this
Agreement.
(b) Neither Parent nor any of its subsidiaries will solicit or employ any
employees of the Company or any of its subsidiaries as long as they are
employed by the Company or such subsidiary during the period prior to the
Effective Time of the Merger (except as contemplated by this Agreement) and, in
the event of termination of this Agreement for any reason, for a period of two
years after the date of termination.
SECTION 5.05 BEST EFFORTS; NOTIFICATION
(a) Upon the terms and subject to the conditions set forth in this Agreement,
unless, to the extent permitted by Section 4.02(b), the Board of Directors of
the Company approves or recommends a superior proposal, each of the parties
agrees to use its best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties
and (iii) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. In connection with and without limiting the
foregoing, the Company and its Board of Directors shall (A) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement or any of the
other transactions contemplated by this Agreement and (B) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger, this
Agreement or any other transaction contemplated by this Agreement, take all
action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the Merger and the other transactions
contemplated by this Agreement. Notwithstanding the foregoing, the Board of
Directors of the Company shall not be prohibited from taking any action
permitted by Section 4.02(b).
(b) The Company shall give prompt notice to Parent, and Parent or Sub shall
give prompt notice to the Company, of (i) any representation or warranty made
by it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
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SECTION 5.06 STOCK OPTIONS
(a) As soon as practicable following the date of this Agreement, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Stock Plans) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding employee stock options to
purchase shares of Company Common Stock ("Employee Stock Options") granted
under the Company's 1982 Incentive Stock Option Plan, the 1985 Incentive
Stock Option Plan, the 1986 Non-Qualified Stock Option Plan, the 1988 Non-
Qualified Stock Option Plan and the 1991 Non-Qualified Stock Option Plan
and any other stock option plan, program or arrangement of the Company
(collectively, the "Stock Plans"), whether vested or unvested, as necessary
to provide that, at the Effective Time of the Merger, each Employee Stock
Option outstanding immediately prior to the Effective Time of the Merger
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Employee Stock Option, including
vesting, the same number of shares of Parent Common Stock as the holder of
such Employee Stock Option would have been entitled to receive pursuant to
the Merger had such holder exercised such Employee Stock Option in full
immediately prior to the Effective Time of the Merger, at a price per share
equal to (A) the aggregate exercise price for the shares of Company Common
Stock otherwise purchasable pursuant to such Employee Stock Option divided
by (B) the aggregate number of shares of Parent Common Stock deemed
purchasable pursuant to such Employee Stock Option (each, as so adjusted,
an "Adjusted Option"); provided, however, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
any of Sections 422 through 424 of the Code ("qualified stock options"),
the option price, the number of shares purchasable pursuant to such option
and the terms and conditions of exercise of such option shall be determined
in order to comply with Section 424 of the Code; and
(ii) make such other changes to the Stock Plans as it deems appropriate
to give effect to the Merger (subject to the approval of Parent, which
shall not be unreasonably withheld).
(b) As soon as practicable after the Effective Time of the Merger, Parent
shall deliver to the holders of Employee Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Stock Plans and
the agreements evidencing the grants of such Employee Stock Options shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 5.06 after giving effect to the Merger). Parent shall
comply with the terms of the Stock Plans and ensure, to the extent required by,
and subject to the provisions of, such Stock Plans, that the Employee Stock
Options which qualified as qualified stock options prior to the Effective Time
of the Merger continue to qualify as qualified stock options after the
Effective Time of the Merger.
(c) Parent agrees to use reasonable efforts to take such actions as are
necessary for the conversion of the Employee Stock Options of the Company
pursuant to Section 5.06(a), including the reservation, issuance and listing of
Common Stock of Parent as is necessary to effectuate the transactions
contemplated by Section 5.06(a).
(d) A holder of an Adjusted Option may exercise such Adjusted Option in whole
or in part in accordance with its terms by delivering a properly executed
notice of exercise to Parent, together with the consideration therefor and the
Federal withholding tax information, if any, required in accordance with the
related Stock Plan.
SECTION 5.07 BENEFIT PLANS
(a) Except as provided in Section 5.06 and subject to the provisions of ERISA
and the Code, Parent agrees to cause the Surviving Corporation to maintain for
a period of at least two years after the Effective Time of the Merger the
Benefit Plans of the Company and its subsidiaries in effect on the date of this
Agreement or to provide benefits to employees of the Company and its
subsidiaries that are comparable in
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the aggregate to those in effect on the date of this Agreement, and thereafter
Parent will cause the employees of the Surviving Corporation to have benefit
plans that are at least comparable to those provided to the employees of
Parent. Parent will cause each employee benefit plan of the Surviving
Corporation or Parent covering such employees of the Company and its
subsidiaries to recognize the service of such employees with the Company and
its subsidiaries prior to the Closing Date, but only for purposes of
eligibility to participate and vesting under any such plan.
(b) After the Effective Time of the Merger, Parent intends to grant to key
employees of the Surviving Corporation options to purchase Parent Common Stock
and restricted stock awards commensurate with those granted to key employees of
Parent.
SECTION 5.08 INDEMNIFICATION AND INSURANCE
(a) Parent and Sub agree that all rights to indemnification for acts or
omissions occurring at or prior to the Effective Time of the Merger now
existing in favor of the current or former directors or officers of the Company
and its subsidiaries as provided in their respective certificates of
incorporation or by-laws shall survive the Merger and shall continue in full
force and effect in accordance with their terms for a period of not less than
six years from the Effective Time of the Merger. Parent will cause to be
maintained for a period of not less than five years from the Effective Time of
the Merger the Company's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time of the Merger (the "D&O Insurance") for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of
150% of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"); provided, however, that Parent may, in lieu of maintaining
such existing D&O Insurance as provided above, cause comparable coverage to be
provided under any policy maintained for the benefit of Parent or any of its
subsidiaries, so long as the material terms thereof are no less advantageous
that the existing D&O Insurance. If the existing D&O Insurance expires, is
terminated or cancelled during such five-year period, Parent will use all
reasonable efforts to cause to be obtained as much D&O Insurance as can be
obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium, on terms and conditions no less advantageous
than the existing D&O Insurance. The Company represents to Parent that the
Maximum Premium is $72,500.
(b) In the event Parent, the Surviving Corporation or any of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 5.08.
(c) This Section 5.08 shall survive the consummation of the Merger at the
Effective Time of the Merger, is intended to benefit the Company, Parent, the
Surviving Corporation and the persons indemnified pursuant to Section 5.08(a),
and shall be binding on all successors and assigns of Parent and the Surviving
Corporation.
SECTION 5.09 FEES AND EXPENSES
(a) Except as provided below in this Section 5.09, all fees and expenses
incurred in connection with the Merger, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated, except that expenses
incurred in connection with printing and mailing the Joint Proxy Statement and
the Form S-4 shall be shared equally by Parent and the Company.
(b) The Company shall pay to Parent upon demand a fee of $1,000,000 (the
"Termination Fee"), payable in same day funds, plus all Expenses not exceeding
$500,000 (as defined below), if a takeover proposal is commenced, publicly
proposed, publicly disclosed or communicated to the Company (or the willingness
of
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any person to make a takeover proposal is publicly disclosed or communicated to
the Company) and (i) the Board of Directors of the Company withdraws or
modifies its approval or recommendation of this Agreement or the Merger,
approves or recommends such other takeover proposal, enters into an agreement
with respect to such other takeover proposal or terminates this Agreement
(other than as a result of a willful and material breach of this Agreement by
Parent or Sub (which breach shall not have been cured within five business days
following Parent's receipt of written notice of such breach from the Company)),
(ii) the requisite approval of the Company's stockholders for the Merger is not
obtained at the Stockholders Meeting or (iii) the Stockholders Meeting does not
occur prior to the termination of this Agreement pursuant to Section
7.01(b)(ii). For purposes of this paragraph, "Expenses" shall mean all out-of-
pocket fees and expenses incurred or paid by or on behalf of Parent in
connection with the Merger or the consummation of any of the transactions
contemplated by this Agreement, including all fees and expenses of counsel,
investment banking firms, accountants, experts and consultants to Parent.
SECTION 5.10 PUBLIC ANNOUNCEMENTS
Parent and Sub, on the one hand, and the Company, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national market system. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by
this Agreement is set forth in Exhibit A to this Agreement.
SECTION 5.11 AFFILIATES AND CERTAIN STOCKHOLDERS
(a) Prior to the Closing Date, the Company shall deliver to Parent a letter
identifying all persons who are, at the time the Merger is submitted for
approval to the stockholders of the Company, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act and for purposes of applicable
interpretations regarding the pooling-of-interests method of accounting. The
Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit B hereto. If the Merger would otherwise qualify for
pooling-of-interests accounting treatment, shares of Parent Common Stock issued
to such affiliates of the Company in exchange for shares of Company Common
Stock shall not be transferable until such time as financial results covering
at least 30 days of combined operations of Parent and the Company have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such affiliate has
provided the written agreement referred to in this Section 5.11, except to the
extent permitted by, and in accordance with, Accounting Series Release 135 and
Staff Accounting Bulletins 65 and 76. Any shares of Company Common Stock held
by such affiliates shall not be transferable, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 5.11,
if such transfer, either alone or in the aggregate with other transfers by
affiliates, would preclude Parent's ability to account for the business
combination to be effected by the Merger as a pooling of interests. The Company
shall not register the transfer of any certificate representing Company Common
Stock, unless such transfer is made in compliance with the foregoing. Parent
shall not be required to maintain the effectiveness of the Form S-4 or any
other registration statement under the Securities Act for the purposes of
resale of Parent Common Stock by such affiliates and the certificates
representing Parent Common Stock received by such affiliates in the Merger
shall bear a customary legend regarding applicable Securities Act restrictions
and the provisions of this Section 5.11.
(b) The Company shall deliver to Parent on the date of the Joint Proxy
Statement and on the Closing Date letters, in each case dated as of such
respective dates and identifying all persons who are, as of such respective
dates, beneficial owners of five percent or more of the Company Common Stock.
The Company shall use its best efforts to cause each such person to deliver to
counsel to Parent and to the Company on the date of the Joint Proxy Statement
and on the Closing Date written agreements, in each case dated as of such
respective dates and substantially in the form attached as Exhibit C hereto.
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SECTION 5.12 NATIONAL MARKET SYSTEM TRADING
Parent shall use its best efforts to cause the shares of Parent Common Stock
to be issued in the Merger and under the Stock Plans to be approved for trading
on the NASDAQ/NMS, subject to official notice of issuance, prior to the Closing
Date.
SECTION 5.13 STOCKHOLDER LITIGATION
The Company shall give Parent the opportunity to participate in the defense
or settlement of any stockholder litigation against the Company and its
directors relating to the transactions contemplated by this Agreement;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which consent shall not be unreasonably withheld.
SECTION 5.14 TAX REPRESENTATION LETTERS OF THE COMPANY AND PARENT
(i) The Company will sign and deliver to Duane, Morris & Heckscher, counsel
to the Company, and to Cravath, Swaine & Moore, counsel to Parent, on the date
of the Joint Proxy Statement and on the Closing Date representation letters, in
each case dated as of such respective dates and substantially in the form of
Exhibit D hereto, for the purpose of the reliance of such counsel in delivering
the opinions described in Section 6.01(g).
(ii) Parent will sign and deliver to Duane, Morris & Heckscher, counsel to
the Company, and to Cravath, Swaine & Moore, counsel to Parent, on the date of
the Joint Proxy Statement and on the Closing Date representation letters, in
each case dated as of such respective dates and substantially in the form of
Exhibit E hereto, for the purpose of the reliance of such counsel delivering
the opinions described in Section 6.01(g).
SECTION 5.15 DIRECTORSHIP
Promptly following the Effective Time of the Merger, Parent's Board of
Directors will elect Edward Ray to be a director of Parent.
SECTION 5.16 EMPLOYMENT AGREEMENTS
Promptly following the Effective Time of the Merger, Parent shall, or shall
cause the Surviving Corporation to, enter into an employment contract with
Edward Ray, Michael J. Wassil and Patrick J. Faivre on substantially the terms
set forth in Exhibits F-1, F-2 and F-3, respectively.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. Each of the Company Stockholder Approval and
the Parent Stockholder Approval (with respect to both the issuance of
Parent Common Stock in the Merger and the Stock Plan Amendment) shall have
been obtained.
(b) National Market System Trading. The shares of Parent Company Stock
issuable to the Company's stockholders pursuant to this Agreement and under
the Stock Plans shall have been approved for trading on the NASDAQ/NMS,
subject to official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have
expired.
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(d) No Injunctions or Restraints. No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued
by any court of competent jurisdiction or other Governmental Entity or
other legal restraint or prohibition preventing the consummation of the
Merger shall be in effect.
(e) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) Pooling. Parent and the Company shall have received from KPMG Peat
Marwick, as independent auditors of both Parent and the Company, on the
date of the Joint Proxy Statement and on the Closing Date letters, in each
case dated as of such respective dates, addressed to Parent and the
Company, in form and substance reasonably acceptable to Parent and the
Company and stating that the business combination to be effected by the
Merger may be accounted for as a pooling of interests by Parent for
purposes of its consolidated financial statements under generally accepted
accounting principles and applicable SEC rules and regulations. No action
shall have been taken by any Governmental Entity or any statute, rule,
regulation or order enacted, promulgated or issued by any Governmental
Entity, or any proposal made for any such action by any Governmental Entity
which is reasonably likely to be put into effect, that would prevent Parent
from accounting for the business combination to be effected by the Merger
as a pooling of interests.
(g) Tax Opinions. Parent shall have received from Cravath, Swaine &
Moore, counsel to Parent, and the Company shall have received from Duane,
Morris & Heckscher, counsel to the Company, on the date of the Joint Proxy
Statement and on the Closing Date opinions, in each case based on the
representations of Parent and the Company provided to such counsel pursuant
to Section 5.14, dated as of such respective dates and stating that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that Parent, Sub and
the Company will each be a party to that reorganization within the meaning
of Section 368(b) of the Code.
(h) Dissenters. No more than 5% of the outstanding shares of Company
Common Stock immediately prior to the Merger shall constitute Dissenting
Shares in accordance with Section 2.01(d).
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB
The obligations of Parent and Sub to effect the Merger are further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations
and warranties speak as of an earlier date, and Parent shall have received
a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) Certificates; Letters from Company Affiliates. The Company shall have
delivered to Parent certified copies of resolutions duly adopted by the
Company's Board of Directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Parent and its
counsel shall reasonably request prior to the date of the Stockholders
Meeting. In addition, Parent shall have received from each affiliate named
in the letter referred to in Section 5.11(a) an executed copy of an
agreement substantially in the form of Exhibit B hereto.
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(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding and there shall not be
pending by any other person any suit, action or proceeding which has a
reasonable likelihood of success, in each case (i) challenging the
acquisition by Parent or Sub of any shares of Company Common Stock, seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, Parent or Sub any damages that are material in relation to the
Company and its subsidiaries taken as a whole or Parent and its
subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit or
limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of any material portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, or to
compel the Company, Parent or any of their respective subsidiaries to
dispose of or hold separate any material portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, as a result
of the Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock or common stock of the Surviving Corporation,
including the right to vote the Company Common Stock, or Common Stock of
the Surviving Corporation, on all matters properly presented to the
stockholders of the Company or the Surviving Corporation, respectively,
(iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company or its subsidiaries or (v) which otherwise could reasonably be
expected to have a material adverse effect on the Company or Parent. In
addition, there shall not be any statute, rule, regulation, judgment or
order enacted, entered, enforced or promulgated that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (ii) through (iv) above.
(e) Approval of Company Board of Directors. The Board of Directors of the
Company or any committee thereof shall not have withdrawn or modified in a
manner adverse to Parent or Sub its approval or recommendation of the
Merger or this Agreement, or approved or recommended any takeover proposal,
(ii) the Company shall not have entered into any agreement with respect to
any superior proposal in accordance with Section 4.02(b) of this Agreement,
(iii) Parent shall not have received a Notice of Superior Proposal from the
Company or two business days shall not have elapsed from the date of such
receipt or (iv) the Board of Directors of the Company or any committee
thereof shall not have resolved to take any of the foregoing actions
referred to in clause (i) or (ii) above.
(f) Fairness Opinion. The Company shall have received the opinion of
Merrill Lynch, dated on or about the date that is two business days prior
to the mailing of the Joint Proxy Statement, to the effect that, as of such
date, the Exchange Ratio is fair to the Company's stockholders from a
financial point of view, a signed copy of which opinion shall have been
delivered to Parent.
SECTION 6.03 CONDITIONS TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent and Sub set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except to the extent such representations
speak as of an earlier date, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer and
the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by
the chief executive officer and the chief financial officer of Parent to
such effect.
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(c) Certificates. Parent shall have delivered to the Company certified
copies of resolutions duly adopted by Parent's and Sub's respective Board
of Directors and stockholders of Parent evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as the Company and its
counsel shall reasonably request prior to the date of the Parent
Stockholders Meeting.
(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding and there shall not be
pending by any other person any suit, action or proceeding which has a
reasonable likelihood of success, in each case (i) challenging the
acquisition by Parent or Sub of any shares of Company Common Stock, seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, Parent or Sub any damages that are material in relation to the
Company and its subsidiaries taken as a whole or Parent and its
subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit or
limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of any material portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, or to
compel the Company, Parent or any of their respective subsidiaries to
dispose of or hold separate any material portion of the business or assets
of the Company, Parent or any of their respective subsidiaries, as a result
of the Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock or common stock of the Surviving Corporation,
including the right to vote the Company Common Stock, or Common Stock of
the Surviving Corporation, on all matters properly presented to the
stockholders of the Company or the Surviving Corporation, respectively,
(iv) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company or its subsidiaries or (v) which otherwise could reasonably be
expected to have a material adverse effect on the Company or Parent. In
addition, there shall not be any statute, rule, regulation, judgment or
order enacted, entered, enforced or promulgated that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (ii) through (iv) above.
(e) Fairness Opinion. Parent shall have received the opinion of Goldman,
Sachs & Co., dated on or about the date that is two business days prior to
the mailing of the Joint Proxy Statement, to the effect that, as of such
date, the Exchange Ratio is fair to Parent, a signed copy of which opinion
shall have been delivered to the Company.
SECTION 6.04 FRUSTRATION OF CLOSING CONDITIONS
None of the Company, Parent and Sub may rely on the failure of any condition
set forth in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if
such failure was caused by such party's failure to act in good faith or to use
its best efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by Section 5.05.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 TERMINATION
This Agreement may be terminated at any time prior to the Effective Time of
the Merger, whether before or after approval of matters presented in connection
with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if, upon a vote at a duly held Stockholders Meeting or Parent
Stockholders Meeting or any adjournment thereof, any required approval
of the stockholders of the Company or Parent, as the case may be, shall
not have been obtained;
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(ii) if the Merger shall not have been consummated on or before the
date 180 calendar days following the date of this Agreement, unless the
failure to consummate the Merger is the result of a willful and
material breach of this Agreement by the party seeking to terminate
this Agreement; provided, however, that the passage of such period
shall be tolled for any part thereof (but not exceeding 60 calendar
days in the aggregate) during which any party shall be subject to a
nonfinal order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the consummation of the Merger or the calling or
holding of the Stockholders Meeting or the Parent Stockholders Meeting;
(iii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; or
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 6.02(a) or (b) or Section 6.03(a) or (b), as
applicable, and (B) cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such
breach (a "Material Breach") (provided that the terminating party is
not then in Material Breach of any representation, warranty, covenant
or other agreement contained in this Agreement);
(c) by the Company in accordance with the provisions of Section 4.02(b);
or
(d) by Parent on February 28, 1994, if on or prior to such date (i) the
Company shall not have caused a representation agreement in the form of
Exhibit G hereto to be executed and delivered by the Company and each of
the persons named in Schedule I thereto or (ii) the Company shall not have
caused an amendment to the Convertible Notes and the Note Purchase
Agreement dated as of May 31, 1989, among the Company and the holders of
the Convertible Notes, in generally the form of Exhibit H hereto to be
executed and delivered by the Company and those holders of the Convertible
Notes necessary for such amendment to be effective against all holders
(other than as a result of the failure by Parent to execute and deliver a
guarantee in substantially the form of an exhibit to the form of amendment
attached as Exhibit H hereto).
SECTION 7.02 EFFECT OF TERMINATION
In the event of termination of this Agreement by either the Company or Parent
as provided in Section 7.01, this Agreement shall forthwith become void and
have no effect, without any liability or obligation on the part of Parent, Sub
or the Company, other than the provisions of Section 3.01(p), Section 3.02(j),
the last two sentences of Section 5.04, Section 5.09, this Section 7.02 and
Article VIII and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.03 AMENDMENT
This Agreement may be amended by the parties at any time before or after any
required approval of matters presented in connection with the Merger by the
stockholders of the Company and at any time before or after any required
approval of matters presented in connection with the issuance of shares of
Parent Common Stock in the Merger and the Stock Plan Amendment by the
stockholders of Parent; provided, however, that after any such approval, there
shall be made no amendment that by law requires further approval by such
stockholders without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
SECTION 7.04 EXTENSION; WAIVER
At any time prior to the Effective Time of the Merger, the parties may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered
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pursuant to this Agreement or (c) subject to the proviso of Section 7.03, waive
compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.05 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER
A termination of this Agreement pursuant to Section 7.01, an amendment of
this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require in the case of Parent,
Sub or the Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time of the Merger. This Section 8.01 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time of the Merger.
SECTION 8.02 NOTICES
All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, WA 98041-3003
Telecopy No. (206) 485-3680
Attention: Harvey N. Gillis, Senior Vice
President, Chief Financial
Officer and Treasurer
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopy No. (212) 474-3700
Attention: Allen Finkelson, Esq.; and
(b) if to the Company, to
Interspec, Inc.
110 West Butler Avenue
Ambler, PA 19002-5795
Telecopy No. (215) 540-9707
Attention: Edward Ray, Chairman,
President and Chief Executive Officer
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<PAGE>
with a copy to:
Duane, Morris & Heckscher
One Liberty Place (37th Floor)
Philadelphia, PA 19103-7396
Telecopy No. (215) 979-1020
Attention: Kathleen Shay, Esq.
SECTION 8.03 DEFINITIONS
For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "indebtedness" has the meaning assigned thereto in Section
3.01(t)(ii);
(c) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect that is
materially adverse to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of such party
and its subsidiaries taken as a whole;
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
(f) "superior proposal" has the meaning assigned thereto in Section 4.02;
(g) "takeover proposal" has the meaning assigned thereto in Section 4.02;
and
(h) "taxes" has the meaning assigned thereto in Section 3.01(k).
SECTION 8.04 INTERPRETATION
When a reference is made in this Agreement to an Article, Section, Exhibit or
Schedule, such reference shall be to an Article or Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 8.05 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
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SECTION 8.06 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
II, Section 5.06, Section 5.07 and Section 5.08, are not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 8.07 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 8.08 ASSIGNMENT
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion, any of or all its
rights, interests and obligations under this Agreement to Parent or to any
direct or indirect wholly owned subsidiary of Parent, but no such assignment
shall relieve Sub of any of its obligations under this Agreement. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
SECTION 8.09 ENFORCEMENT
The parties agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the Commonwealth of
Pennsylvania or the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the Commonwealth of
Pennsylvania or the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than a Federal court sitting in the Commonwealth of Pennsylvania or
the State of Delaware or a Delaware state court.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
Advanced Technology Laboratories,
Inc.,
/s/ Dennis C. Fill
by __________________________________
Name:Dennis C. Fill
Title: Chairman of the Board and
Chief Executive Officer
Attest:
/s/ W. Brinton Yorks, Jr.
- - - -------------------------------------
Name:W. Brinton Yorks, Jr.
Title:Secretary
ATL Sub Acquisition Corp.,
/s/ Dennis C. Fill
by _____________________________
Name:Dennis C. Fill
Title: Chairman of the Board and
Chief Executive Officer
Attest:
/s/ W. Brinton Yorks, Jr.
- - - -------------------------------------
Name:W. Brinton Yorks, Jr.
Title:Secretary
Interspec, Inc.,
/s/ Edward Ray
by _____________________________
Name:Edward Ray
Title: President and Chief
Executive Officer
Attest:
/s/ Michael J. Wassil
- - - -------------------------------------
Name:Michael J. Wassil
Title:Vice President
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[Letterhead of Goldman, Sachs & Co.] APPENDIX II
April 18, 1994
Board of Directors
Advanced Technology Laboratories, Inc.
22100 Bothell-Everett Highway
Bothell, WA 98041-3003
Gentlemen:
You have requested our opinion as to the fairness to Advanced Technology
Laboratories, Inc. (the "Company") of the exchange ratio (the "Exchange Ratio")
of 0.413 shares of Common Stock, par value $0.01 per share ("Common Stock"), of
the Company to be paid by the Company for each share of Common Stock, par value
$0.001 per share ("Interspec Common Stock"), of Interspec, Inc. ("Interspec")
pursuant to the Agreement and Plan of Merger dated as of February 10, 1994 (the
"Agreement"), among the Company and Interspec.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company (including its predecessor Westmark International Incorporated) for
the six years ended December 31, 1993; Annual Reports to Stockholders and
Annual Reports on Form 10-K of Interspec for the six fiscal years ended
November 30, 1993; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company and Interspec; certain other communications
from the Company and Interspec to their respective stockholders; and certain
internal analyses and forecasts for the Company and Interspec prepared by their
respective managements. We also have held discussions with members of the
senior management of the Company and Interspec regarding the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the Company's Common Stock and Interspec Common Stock,
compared certain financial and stock market information for the Company and for
Interspec with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the medical device industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or
Interspec and we have not been furnished with any such evaluation or appraisal.
We have also relied without independent
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verification upon the accuracy and completeness of the assumptions of the
management of the Company, regarding the amount and timing of realization of
the benefits expected to occur following completion of the transaction
including, but not limited to, increased revenues, increased market share,
increased earnings performance, potential cost savings and other operating and
financial synergistic benefits. In that regard, we have assumed, with your
consent, that the financial forecasts prepared by the management of the Company
relating to the benefits expected to occur following completion of the
transaction contemplated by the Agreement, have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of the
Company and that such forecasts will be realized in the amounts and at the
times contemplated thereby. In reaching our opinion as to the fairness of the
Exchange Ratio described in the first paragraph of this letter we have also
assumed with your consent that the merger pursuant to the Agreement will be
accounted for as a pooling of interests under generally accepted accounting
principles.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the Company.
Very truly yours,
Goldman, Sachs & Co.
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APPENDIX III
[LETTERHEAD OF MERRILL LYNCH & CO.]
April 6, 1994
Board of Directors
Interspec, Inc.
110 West Butler Avenue
Ambler, PA 19002-5795
Gentlemen:
Interspec, Inc. (the "Company"), Advanced Technology Laboratories, Inc. (the
"Acquiror") and ATL Sub Acquisition Corp., a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), proposed to enter into an agreement dated as
of February 10, 1994 (the "Agreement") pursuant to which the Acquisition Sub
will be merged with and into the Company in a transaction (the "Merger") in
which each outstanding share of the Company's common stock, par value $.001 per
share (the "Shares"), will be converted into the right to receive 0.413 shares
of common stock, par value $.01 per share, of the Acquiror (the "Acquiror
Shares")
You have asked us whether, in our opinion, the proposed exchange ratio in the
Merger is fair to the holders of the Shares from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the six fiscal years ended November 30, 1993 and the
Company's Forms 10-Q and related unaudited financial information for
the quarterly periods ended February 28, 1993, May 31, 1993 and August
31, 1993;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the two fiscal years ended December 31, 1993
and the Acquiror's Forms 10-Q and related unaudited financial
information for the quarterly periods ended April 2, 1993, July 2, 1993
and October 1, 1993;
(3) Reviewed the Annual Reports, Forms 10-K and related financial
information of the Acquiror's predecessor for the three fiscal years
ended December 29, 1991;
(4) Reviewed the proxy statement dated April 16, 1992 relating to the
distribution of SpaceLabs Medical, Inc. to Westmark International
Incorporated's shareholders;
(5) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company and the Acquiror, furnished to us by the Company and the
Acquiror;
(6) Conducted discussions with members of senior management of the Company
and the Acquiror concerning their respective businesses and prospects;
(7) Reviewed the historical market prices and trading activity for the
Shares and the Acquiror Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to
the Company and the Acquiror, respectively;
(8) Compared the results of operations of the Company and the Acquiror with
that of certain companies which we deemed to be reasonably similar to
the Company and the Acquiror, respectively;
(9) Compared the proposed financial terms of the Merger with the financial
terms of certain other mergers and acquisitions which we deemed to be
relevant;
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(10) Reviewed the Agreement; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company and
the Acquiror, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company or the
Acquiror. With respect to the financial forecasts furnished by the Company and
the Acquiror, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the managements
of the Company and the Acquiror as to the expected future financial performance
of the Company and the Acquiror, as the case may be. We have also assumed that
the Merger will qualify for pooling-of-interests accounting treatment and as a
tax free transaction for the shareholders of the Company.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
We have, in the past, provided financing services to the Company and have
received fees for the rendering of such services. In addition, as of February
9, 1994 we owned 3,521 Shares and 4,071 Acquiror Shares. In the ordinary course
of our business, we actively trade securities for our own account and for the
account of our customers and, accordingly, may at any time hold a long or short
position in securities of the Company and the Acquiror.
On the basis of, and subject to the foregoing, we are of the opinion that the
proposed exchange ratio in the Merger is fair to the holders of the Shares from
a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
/s/ Jeffrey D. Pribor
By __________________________________
Director
Investment Banking Group
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APPENDIX IV
DISSENTERS RIGHTS PROVISIONS OF THE
PENNSYLVANIA BUSINESS CORPORATION LAW
(S) 1930. DISSENTERS RIGHTS.
(a) General rule. If any shareholder of a domestic business corporation that
is to be a party to a merger or consolation pursuant to a plan of merger or
consolidation objects to the plan of merger or consolidation and complies with
the provisions of Subchapter D of Chapter 15 (relating to dissenters rights),
the shareholder shall be entitled to the rights and remedies of dissenting
shareholders therein provided, if any. See also section 1906(c) (relating to
dissenters rights upon special treatment).
(b) Plans adopted by directors only. Except as otherwise provided pursuant to
section 1571(c) (relating to grant of optional dissenters rights), Subchapter D
of Chapter 15 shall not apply to any of the shares of a corporation that is a
party to a merger or consolidation pursuant to section 1924(1)(i) (relating to
adoption by board of directors).
(c) Cross references. See sections 1571(b) (relating to exceptions) and 1904
(relating to de facto transaction doctrine abolished).
SUBCHAPTER D
DISSENTERS RIGHTS
(S) 1571. APPLICATION AND EFFECT OF SUBCHAPTER.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any
corporate action, or to otherwise obtain fair value for his shares, where this
part expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324(relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
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shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in
the case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles,
the plan or the terms of the transaction entitle all shareholders of
the class to vote thereon and require for the adoption of the plan or
the effectuation of the transaction the affirmative vote of a majority
of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on equitable
relief), 1904 (relating to de facto transaction doctrine abolished) and 2512
(relating to dissenters rights procedure).
(S) 1572. DEFINITIONS.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter before
the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have the sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
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"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation of
the corporate action to which the dissenter objects taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans.
(S) 1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of
the same class or series beneficially owned by any one person and discloses the
name and address of the person or persons on whose behalf he dissents. In that
event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner,
whether or not the shares so owned by him are registered in his name.
(S) 1574. NOTICE OF INTENTION TO DISSENT.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed
corporate action shall constitute the written notice required by this section.
(S) 1575. NOTICE TO DEMAND PAYMENT.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the corporation
shall send to all shareholders who are entitled to dissent and demand payment
of the fair value of their shares a notice of the adoption of the plan or other
corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
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(b) Time for receipt of demand for payment. The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
(S) 1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
(S) 1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.
(a) Failure to effectuate corporate action. Within 60 days after the date set
for demanding payment and depositing certificates, if the business corporation
has not effectuated the proposed corporate action, it shall return any
certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares have been
released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance
under this section will be made. The remittance or notice shall be accompanied
by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair market value of
the shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(d) Failure to make payment. If the corporation does not remit the amount of
its estimate of the fair value of the shares as provided by subsection (c), it
shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had
after making demand for payment of their fair value.
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(S) 1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.
(a) General rule. If the business corporation gives notice of its estimate of
the fair value of the shares, without remitting such amount, or remits payment
of its estimate of the fair value of a dissenter's shares as permitted by
section 1577(c) (relating to payment of fair value of shares) and the dissenter
believes that the amount stated or remitted is less than the fair value of his
shares, he may send to the corporation his own estimate of the fair value of
the shares, which shall be deemed a demand for payment of the amount or the
deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not file his
own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
(S) 1579. VALUATION PROCEEDINGS GENERALLY.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demand for payment under section 1575 (relating
to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing, whose
demands have not been settled shall be made parties to the proceeding as in an
action against their shares. A copy of the application shall be served on each
such dissenter. If a dissenter is a nonresident, the copy may be served on him
in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be plenary
and exclusive. The court may appoint an appraiser to receive evidence and
recommend a decision on the issue of fair value. The appraiser shall have such
power and authority as may be specified in the order of appointment or in any
amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be entitled
to recover the amount by which the fair value of his shares is found to exceed
the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the corporation
may do so in the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an application
within the 30-day period, each dissenter entitled to file an application shall
be paid the corporation's estimate of the fair value of the shares and no more,
and may bring an action to recover any amount not previously remitted.
(S) 1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS.
(a) General rule. The costs and expenses of any proceeding under section 1579
(relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some
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of the dissenters who are parties and whose action in demanding supplemental
payment under section 1578 (relating to estimate by dissenter of fair value of
shares) the court finds to be dilatory, obdurate, arbitrary, vexatious or in
bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefited.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Sixth of the registrant's Restated Certificate of
Incorporation (the "Certificate") provides that directors of the registrant
shall not be liable to the registrant or its stockholders for monetary
damages for their conduct as directors to the full extent permitted by the
General Corporation Law of Delaware ("Delaware Law") as it existed at the
time the Certificate was adopted, and as it may thereafter be amended.
Article Sixth may be amended or repealed only on the affirmative vote of
the holders of not less than two-thirds of the voting stock, and any such
amendment or repeal shall apply only to acts or omissions of directors
occurring after such amendment or repeal.
The registrant's Amended and Restated By-Laws (the "By-Laws") provide
that the registrant shall indemnify and hold harmless its directors and
officers to the fullest extent permitted under Delaware Law or by any other
applicable law against all litigation expenses, judgments, fines and
settlement amounts incurred in connection with their service or status as
directors and officers. Such indemnification also extends to liabilities
arising from actions taken by directors or officers when serving at the
request of the registrant as a director or an officer of another
corporation, or as its representative in a partnership, joint venture,
trust or other enterprise.
The By-Laws provide that expenses incurred by a director or an officer
in defending a civil or criminal lawsuit or proceeding arising out of
actions taken in his or her official capacity, or in certain other
capacities, will be paid by the registrant in advance of the final
disposition of the matter upon receipt of an undertaking from the director
or officer to repay the sum advanced if it is ultimately determined by
final judicial decision that he or she is not entitled to be indemnified by
the registrant, if such an undertaking is required by law at the time of
such advance.
Section 145 of Delaware Law, as currently in effect, sets forth the
indemnification rights of directors and officers of Delaware corporations.
Under such provision, a director or an officer of a corporation (i)` shall
be indemnified by the corporation for all expenses of litigation or other
legal proceedings when he or she is successful on the merits or otherwise,
(ii) may be indemnified by the corporation for the expenses, judgments,
fines and amounts paid in settlement of such litigation (other than a
derivative suit), even if he or she is not successful on the merits, if he
or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation (and, in the
case of a criminal proceeding, had no reason to believe his or her conduct
was unlawful), and (iii) may be indemnified by the corporation for expenses
of a derivative suit (a suit by a stockholder alleging a breach by a
director or an officer of a duty owed to the corporation), even if he or
she is not successful on the merits, if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, provided that no such indemnification
may be made in accordance with this clause (iii) if the director or officer
is adjudged liable to the corporation, unless a court determines that,
despite such adjudication but in view of all the circumstances, he or she
is fairly and reasonably entitled to indemnification of such expenses. The
indemnification described in clauses (ii) and (iii) above shall be made
only upon a determination by (A) a majority of a quorum of disinterested
directors, (B) independent legal counsel in a written opinion, or (C) the
stockholders, that indemnification is proper because the applicable
standard of conduct has been met.
The effect of the indemnification provisions contained in the By-Laws
is to require the registrant to indemnify its directors and officers under
circumstances where such indemnification would otherwise be discretionary
and to extend to the registrant's directors and officers the benefits of
Delaware Law dealing with director and officer indemnification, as well as
any future changes which might occur under Delaware Law in this area.
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The By-Laws state that the indemnification rights granted thereunder
are not exclusive of any other indemnification rights to which the director
or officer may otherwise be entitled. As permitted by Section 145(g) of
Delaware Law, the By-Laws also authorize the registrant to purchase
directors and officers insurance for the benefit of its directors and
officers, irrespective of whether the registrant has the power to indemnify
such persons under Delaware Law. The registrant currently maintains such
insurance as allowed by these provisions.
Pursuant to the Merger Agreement, the provisions of the Certificate
and By-Laws relating to indemnification of directors and officers shall
survive the Merger and shall continue in full force and effect for a period
of not less than six years from the effective time of the merger (the
"Effective Time"). In addition, the registrant had agreed to cause to be
maintained in effect for a period of not less than five years from the
Effective Time the current directors and officers liability insurance
policies maintained by Interspec with respect to matters occurring prior to
the Effective Time, provided that the registrant will not be required to
expend more than an amount per year equal to 150% of current annual
premiums paid by Interspec for such insurance.
<TABLE>
<CAPTION>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<S> <C>
(a) Exhibits
--------
2.1 Amended and Restated Agreement and Plan
of Merger, dated as of February 10,
1994 (included as Appendix I to the
Joint Proxy Statement/Prospectus)
4.1 Amended and Restated Rights Agreement
between Advanced Technology
Laboratories, Inc. and First Chicago
Trust Company of New York dated as of
June 26, 1992. (A)
5.1 Opinion of Perkins Coie as to the
legality of the securities being
registered.
8.1 Opinion of Cravath, Swaine & Moore as
to certain federal income tax
consequences
8.2 Opinion of Duane, Morris & Heckscher as
to certain federal income tax
consequences
10.1 Form of Employment Agreement with
Edward Ray
10.2 Form of Employment Agreement (Michael
J. Wassil and Patrick J. Faivre) (B)
23.1 Consent of KPMG Peat Marwick regarding
ATL
23.2 Consent of KPMG Peat Marwick regarding
Interspec
23.3 Consent of Perkins Coie (contained in
the opinion filed as Exhibit 5.1 hereto)
23.4 Consent of Goldman, Sachs & Co.
23.5 Consent of Merrill Lynch & Co.
23.6 Consent of Cravath, Swaine & Moore
(contained in the opinion filed as
Exhibit 8.1 hereto)
23.7 Consent of Duane, Morris & Heckscher
(contained in the opinion filed as
Exhibit 8.2 hereto)
24.1 Power of Attorney (contained on
signature page)
99.1 Form of Proxy for annual meeting to be
mailed to ATL stockholders
99.2 Form of Proxy for special meeting to be
mailed to Interspec shareholders
-------------
</TABLE>
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(A) Incorporated by reference to exhibit filed with Westmark's
Amendment to Application on Form 8, filed on June 25, 1992.
(B) Incorporated by reference to exhibit filed with Advanced
Technology Laboratories, Inc.'s Current Report on Form 8-K,
filed on February 17, 1994.
ITEM 22. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
B. (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), ATL undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(2) The undersigned registrant hereby undertakes that every
prospectus (i) that is filed pursuant to the paragraph immediately
preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415 of the Securities Act of 1933, will be filed
as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
C. The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form S-4, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
D. The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the Registration Statement when it became effective.
E. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
2-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bothell,
State of Washington, on April 14, 1994.
ADVANCED TECHNOLOGY LABORATORIES, INC.
By /s/ DENNIS C. FILL
----------------------------------
Dennis C. Fill
Chairman of the Board
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Dennis
C. Fill, Harvey N. Gillis and W. Brinton Yorks, Jr., and each of them, as true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, to sign in the name and on behalf of such person, individually
and in each capacity stated below, any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
following capacities on April 14, 1994.
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/s/ DENNIS C. FILL Chairman of the Board, Chief Executive
- - - --------------------------- Officer and Director
Dennis C. Fill
/s/ HARVEY N. GILLIS Senior Vice President, Chief Financial
- - - --------------------------- Officer and Treasurer
Harvey N. Gillis
/s/ DAVID M. PEROZEK President, Chief Operating Officer and
- - - --------------------------- Director
David M. Perozek
/s/ RALPH M. BARFORD Director
- - - ---------------------------
Ralph M. Barford
/s/ KIRBY L. CRAMER Director
- - - ---------------------------
Kirby L. Cramer
/s/ HARVEY FEIGENBAUM, M.D. Director
- - - ---------------------------
Harvey Feigenbaum, M.D.
/s/ EUGENE A. LARSON Director
- - - ---------------------------
Eugene A. Larson
</TABLE>
2-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/s/ JOHN R. MILLER Director
- - - ---------------------------
John R. Miller
/s/ HARRY WOOLF, PH.D. Director
- - - ---------------------------
Harry Woolf, Ph.D.
/s/ RICHARD S. TOTORICA Corporate Controller
- - - --------------------------- (Chief Accounting Officer)
Richard S. Totorica
</TABLE>
2-5
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Advanced Technology Laboratories, Inc.
We consent to the use of our report regarding Advanced Technology
Laboratories, Inc. incorporated by reference herein and to the reference to our
firm under the heading "Experts" in the Joint Proxy Statement/Prospectus.
KPMG PEAT MARWICK
Seattle, Washington
April 14, 1994
2-6
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Interspec, Inc.
We consent to the use of our report regarding Interspec, Inc. incorporated
by reference herein and to the reference to our firm under the heading "Experts"
in the Joint Proxy Statement/Prospectus.
KPMG PEAT MARWICK
Philadelphia, Pennsylvania
April 14, 1994
2-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
<S> <C>
2.1 Amended and Restated Agreement and Plan
of Merger, dated as of February 10, 1994
(included as Appendix I to the Joint
Proxy Statement/Prospectus)
4.1 Amended and Restated Rights Agreement
between Advanced Technology
Laboratories, Inc. and First Chicago
Trust Company of New York dated as of
June 26, 1992. (A)
5.1 Opinion of Perkins Coie as to the
legality of the securities being
registered.
8.1 Opinion of Cravath, Swaine & Moore as
to certain federal income tax
consequences
8.2 Opinion of Duane, Morris & Heckscher as
to certain federal income tax
consequences
10.1 Form of Employment Agreement with
Edward Ray
10.2 Form of Employment Agreement (Michael
J. Wassil and Patrick J. Faivre) (B)
23.1 Consent of KPMG Peat Marwick regarding
ATL (included in Part II, page 2-6)
23.2 Consent of KPMG Peat Marwick regarding
Interspec (included in Part II, page 2-7)
23.3 Consent of Perkins Coie (contained in
the opinion filed as Exhibit 5.1 hereto)
23.4 Consent of Goldman, Sachs & Co.
23.5 Consent of Merrill Lynch & Co.
23.6 Consent of Cravath, Swaine & Moore
(contained in the opinion filed as
Exhibit 8.1 hereto)
23.7 Consent of Duane, Morris & Heckscher
(contained in the opinion filed as
Exhibit 8.2 hereto)
24.1 Power of Attorney (contained on
signature page)
99.1 Form of Proxy for annual meeting to be
mailed to ATL stockholders
99.2 Form of Proxy for special meeting to be
mailed to Interspec shareholders
</TABLE>
- - - ---------------
(A) Incorporated by reference to exhibit filed with Westmark International
Incorporated's Amendment to Application Form 8, filed on June 25, 1992.
(B) Incorporated by reference to exhibit with Advanced Technology
Laboratories, Inc.'s Current Report on Form 8-K, filed on February 17,
1994.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF PERKINS COIE]
April 14, 1994
Advanced Technology Laboratories, Inc.
22100 Bothell-Everett Highway
Bothell, WA 98041-3003
Ladies and Gentlemen:
We have acted as counsel to you in connection with the proceedings for (i)
the authorization and issuance by Advanced Technology Laboratories, Inc. (the
"Company") of up to 2,714,058 shares of the Company's Common Stock, par value
$.01 per share (the "Shares"), in connection with the merger of a wholly owned
subsidiary of the Company with and into Interspec, Inc., and (ii) the
preparation of a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
which you are filing with the Securities and Exchange Commission with respect to
the Shares. We have examined the Registration Statement and such documents and
records of the Company and other documents as we have deemed necessary for the
purpose of this opinion.
Based upon the foregoing, we are of the opinion that upon the happening of
the following events:
(a) the filing of the Registration Statement and any amendments thereto
and the becoming effective of the Registration Statement; and
(b) due execution by the Company and registration by its registrar of the
Shares and the issuance and sale of the Shares as contemplated by the
Registration Statement and in accordance with the aforesaid corporate
and governmental authorizations;
the Shares will be duly authorized, validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference to us under the heading "Legal Opinion." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act
Very truly yours,
PERKINS COIE
<PAGE>
Exhibit 8.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
(212) 474-1110
April 18, 1994
Amended and Restated Agreement and
Plan of Merger Dated as of February 10, 1994,
Among Advanced Technology Laboratories, Inc.,
ATL Sub Acquisition Corp. and Interspec, Inc.
Dear Sirs:
We have acted as counsel for Advanced Technology Laboratories, Inc., a
Delaware corporation ("ATL") in connection with the proposed merger (the
"Merger") of ATL Sub Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of ATL ("Sub"), into Interspec, Inc., a Pennsylvania
corporation ("Interspec"), pursuant to an Amended and Restated Agreement and
Plan of Merger dated as of February 10, 1994 (as so amended and restated, the
"Merger Agreement"), among ATL, Sub and Interspec under which each issued and
outstanding share of common stock, par value $0.001 per share, of Interspec
("Interspec Common Stock") (other than shares owned by Interspec and Dissenting
Shares (as defined in the Merger Agreement)) will be exchanged for 0.413 of a
share of common stock, par value $0.01 per share, of ATL ("ATL Common Stock") as
provided in the Merger Agreement.
In that connection, you have requested our opinion regarding the material
Federal income tax consequences of the Merger. In providing our opinion, we have
examined the Merger Agreement, the Joint Proxy Statement/Prospectus of ATL and
Interspec dated as of April 18, 1994 (the "Proxy Statement"), and such other
documents and corporate records as we have deemed necessary or appropriate for
purposes of our opinion. In addition, we have assumed (i) the Merger will be
consummated in the manner contemplated by the Proxy
<PAGE>
Statement and in accordance with the provisions of the Merger Agreement, (ii)
the statements concerning the Merger set forth in the Proxy Statement
(including the purpose of the parties for consummating the Merger) are accurate
and complete and (iii) the representations made to us by ATL, Sub, Interspec and
certain Interspec shareholders in their respective letters to us dated April ,
1994, and delivered to us for purposes of this opinion are accurate and
complete.
Based upon the foregoing, in our opinion, for Federal income tax purposes:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and ATL, Sub and Interspec will each be a party to such
reorganization within the meaning of Section 368(b) of the Code:
(ii) no gain or loss will be recognized by ATL, Sub or Interspec in the
Merger;
(iii) no gain or loss will be recognized by the shareholders of Interspec
upon their receipt of ATL Common Stock in exchange for their Interspec
Common Stock, except that holders of Interspec Common Stock who receive cash
upon exercise of any available dissenters; rights or cash in lieu of
fractional shares of ATL Common Stock will recognize gain or loss equal to
the difference between such cash and tax basis in their shares subject to
dissenters' rights or the tax basis allocated to their fractional shares of
ATL Common Stock, and such gain or loss will constitute capital gain or loss
if their shares of Interspec Common Stock are held, or, in the case of an
Interspec shareholder that receives cash in lieu of fractional shares of ATL
Common Stock, if such fractional shares would have been held, as a capital
asset at the effective time of the Merger;
(iv) the tax basis of the shares of ATL Common Stock (including fractional
shares of ATL Common Stock) received by the shareholders of Interspec will
be the same as the tax basis of their Interspec Common Stock exchanged
thereafter; and
<PAGE>
3
(v) the holding period of the ATL Common Stock in the hands of the
Interspec shareholders will include the holding period of their Interspec
Common Stock exchanged therefor, provided such Interspec Common Stock is
held as a capital asset at the effective time of the Merger.
The opinions expressed herein are based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinions are based solely on the documents that we have
examined, the additional information that we have obtained, and the statements
contained in the letters from ATL, Sub, Interspec and certain Interspec
shareholders referred to above, which we have assumed are true on the date
hereof and will be true on the date on which the Merger is consummated. Our
opinions cannot be relied upon if any of the facts pertinent to the Federal
income tax treatment of the Merger stated in such documents or in such
additional information is, or later becomes, inaccurate, or if any of the
statements contained in the letters from ATL, Sub, Interspec and certain
Interspec shareholders referred to above are, or later become, inaccurate. Our
opinions are limited to the tax matters specifically covered hereby, and we have
not been asked to address, nor have we addressed, any other tax consequences of
the Merger.
This opinion is being provided solely for the benefit of ATL, Sub and ATL
shareholders. No other person or party shall be entitled to rely on this
opinion.
We hereby consent to the filing of this opinion as Exhibit 8.1 to the
Registration Statement on Form S-4 of which the Proxy Statement is a part and to
the use of our
<PAGE>
4
name in the sections entitled "The Merger--Certain Federal Income Tax
Consequences" and "Tax Opinion" in the Proxy Statement.
Very truly yours,
CRAVATH, SWAINE & MOORE
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, WA 98041-3003
<PAGE>
EXHIBIT 8.2
[Letterhead of]
DUANE, MORRIS & HECKSCHER
(215) 979-1000
April 18, 1994
Amended and Restated Agreement and
Plan of Merger Dated as of February 10, 1994,
Among Advanced Technology Laboratories, Inc.,
ATL Sub Acquisition Corp. and Interspec, Inc.
Dear Sirs:
We have acted as counsel for Interspec, Inc., a Pennsylvania corporation
("Interspec") in connection with the proposed merger (the "Merger") of ATL Sub
Acquisition Corp., a Delaware corporation ("Sub") and a wholly owned subsidiary
of Advanced Technology Laboratories, Inc., a Delaware corporation ("ATL"), into
Interspec, pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of February 10, 1994 (as so amended and restated, the "Merger
Agreement"), among ATL, Sub and Interspec under which each issued and
outstanding share of common stock, par value $0.001 per share, of Interspec
("Interspec Common Stock") (other than shares owned by Interspec and Dissenting
Shares (as defined in the Merger Agreement)) will be exchanged for 0.413 of a
share of common stock, par value $0.01 per share, of ATL ("ATL Common Stock") as
provided in the Merger Agreement.
In that connection, you have requested our opinion regarding the material
Federal income tax consequences of the Merger. In providing our opinion, we have
examined the Merger Agreement, the Joint Proxy Statement/Prospectus of ATL and
Interspec dated as of April , 1994 (the "Proxy Statement"), and such other
documents and corporate records as we have deemed necessary or appropriate for
purposes of our opinion. In addition, we have assumed (i) the Merger will be
consummated in the manner contemplated by the Proxy Statement and in accordance
with the provisions of the Merger Agreement, (ii) the statements concerning the
Merger set forth in the Proxy Statement (including the purposes of the
parties for consummating the Merger) are
<PAGE>
April 18, 1994
Page 2
accurate and complete and (iii) the representations made to us by ATL, Sub,
Interspec and certain Interspec shareholders in their respective letters to us
dated April , 1994, and delivered to us for purposes of this opinion are
accurate and complete.
Based upon the foregoing, in our opinion, for Federal income tax purposes:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and ATL, Sub and Interspec will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by ATL, Sub or Interspec in
the Merger;
(iii) no gain or loss will be recognized by the shareholders of
Interspec upon their receipt of ATL Common Stock in exchange for their
Interspec Common Stock, except that holders of Interspec Common Stock who
receive cash upon exercise of any available dissenters' rights or cash in
lieu of fractional shares of ATL Common Stock will recognize gain or loss
equal to the difference between such cash and the tax basis in their shares
subject to dissenters' rights or the tax basis allocated to their
fractional shares of ATL Common Stock,and such gain or loss will constitute
capital gain or loss if their shares of Interspec Common Stock are held,
or, in the case of an Interspec shareholder that receives cash in lieu of
fractional shares of ATL Common Stock, if such fractional shares would have
been held, as a capital asset at the effective time of the Merger;
(iv) the tax basis of the shares of ATL Common Stock (including
fractional shares of ATL Common Stock) received by the shareholders of
Interspec will be the same as the tax basis of their Interspec Common Stock
exchanged therefor; and
(v) the holding period of the ATL Common Stock in the hands of the
Interspec shareholders will include the holding period of their Interspec
Common Stock exchanged therefor, provided such Interspec Common
<PAGE>
April 18, 1994
Page 3
Stock is held as a capital asset at the effective time of the Merger.
The opinions expressed herein are based upon existing statutory, regulatory
and judicial authority, any of which may be changed at any time with retroactive
effect. In addition, our opinions are based solely on the documents that we have
examined, the additional information that we have obtained, and the statements
contained in the letters from ATL, Sub, Interspec and certain Interspec
shareholders referred to above, which we have assumed are true on the date
hereof and will be true on the date on which the Merger is consummated. Our
opinions cannot be relied upon if any of the facts pertinent to the Federal
income tax treatment of the Merger stated in such documents or in such
additional information is, or later becomes, inaccurate, or if any of the
statements contained in the letters from ATL, Sub, Interspec and certain
Interspec shareholders referred to above are, or later become, inaccurate. Our
opinions are limited to the tax matters specifically covered hereby, and we have
not been asked to address, nor have we addressed, any other tax consequences of
the Merger.
This opinion is being provided solely for the benefit of Interspec and the
shareholders of Interspec. No other person or party shall be entitled to rely on
this opinion.
We hereby consent to the filing of this opinion as Exhibit 8.2 to the
Registration Statement on Forms S-4 of which the Proxy Statement is a part and
to the use of our name in the sections entitled "The Merger--Certain Federal
Income Tax Consequences" and "Tax Opinion" in the Proxy Statement.
Very truly yours,
DUANE MORRIS & HECKSCHER
Interspec, Inc.
110 West Butler Avenue
Ambler, PA 19002-5795
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the _____ day of
______________, 1994, and is by and between Advanced Technology Laboratories,
Inc., a corporation of the State of Washington (hereinafter, "ATL"), and Edward
Ray, an individual residing in Villanova, Pennsylvania (hereinafter,
"Employee").
RECITAL:
-------
WHEREAS, the Employee is presently an employee of Interspec, Inc.
("Interspec") and holds the position of President and Chief Executive Officer
and as such has been and is expected to be a significant factor in the future
growth and success of Interspec; and
WHEREAS, ATL desires to induce the Employee to become employed by ATL
in an executive capacity for a term certain commencing on the day of the
"Effective Time of the Merger" as defined in the Agreement and Plan of Merger,
dated February 10, 1994, among Advanced Technology Laboratories, Inc., ATL Sub
Acquisition Corp., and Interspec (hereinafter referred to as the "Merger
Agreement"), and based on the inducements hereinafter provided by ATL, the
Employee desires to be employed by ATL on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein, and intending to be legally bound, the parties have agreed as
follows:
1. Duties. ATL agrees to employ Employee, and Employee agrees to
enter the employment of ATL. During the term of this agreement, Employee shall
be employed by ATL in the capacity as the President and Chief Operating Officer
of Interspec, reporting to the Chairman and Chief Executive Officer of ATL, and
responsible for, among other things, the business affairs of Interspec and such
other duties and responsibilities as are not inconsistent with the terms and
conditions in this Agreement. Employee shall devote reasonable attention and
time during normal business hours to the business and affairs of Interspec, and,
to the extent necessary, to use reasonable best efforts to perform faithfully
and efficiently those responsibilities.
2. Term. Subject to Sections 4 and 5 hereof, the employment of
Employee by ATL shall commence on the day of the "Effective Time of the Merger"
as defined in the Merger Agreement (hereinafter referred to as the "Effective
Date"),
<PAGE>
-2-
and shall continue through April 14, 1997 unless terminated earlier in
accordance with the provisions of this Agreement.
3. Compensation.
------------
(a) Base Salary. During the period of his employment during the term
of this agreement, Employee shall receive an annual base salary of not less than
Three Hundred Thousand Dollars ($300,000) (the "Base Salary") which shall be
paid in equal installments in accordance with ATL's regular payroll practices.
The Base Salary may be increased from time to time by the Compensation Committee
of ATL's Board of Directors (the "Compensation Committee"). The Compensation
Committee shall review the Base Salary at least annually. Any increase in Base
Salary shall not serve to limit or reduce any other obligation to Employee under
this Agreement. Base Salary shall not be reduced after any such increase and
the term Base Salary as utilized in this Agreement shall refer to Base Salary as
so increased.
(b) Bonuses. Employee shall receive an annual bonus of not less than
$140,000 for each fiscal year at the time bonuses to other officers of ATL are
paid or payable for such fiscal year as determined by the Compensation Committee
of the Board of Directors of ATL; provided however, that each annual bonus shall
be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless Employee
shall elect to defer the receipt of such Annual Bonus, and provided further that
such Annual Bonus shall be pro rated for the fiscal year in which this Agreement
expires or otherwise terminates. For purposes of this Agreement, the portion of
the Employee's annual bonus equal to $140,000 shall hereinafter be referred to
as the "Annual Bonus" and the portion, if any, of the Employee's annual bonus in
excess of $140,000 shall hereinafter be referred to as the "Additional Bonus".
(c) Fringe Benefits. The Employee shall be entitled to participate
in the same insurance, vacation and other fringe benefit programs of ATL as are
provided to ATL's other executive officers. Nothing in this Agreement shall be
construed to prevent ATL from amending its benefit programs from time to time,
including an amendment to eliminate all or any portion of its programs. The
Employee shall also be entitled to continue to participate in Interspec's
Supplemental Executive Retirement Plan (the "SERP") which is incorporated into
the Merger Agreement; however, the portion, if any, of the benefit accrued by
the Employee under the SERP at his termination of employment which is in excess
of his benefit accrued on the Effective Date shall be reduced (but not below
zero) by the benefits
<PAGE>
-3-
accrued by the Employee after the Effective Date as a beneficiary under ATL's
retirement plans. In addition, ATL shall provide to Employee a term life
insurance policy in the face amount of $1,000,000 payable to such beneficiary or
beneficiaries as shall be designated by Employee, and a long-term disability
insurance policy providing annual benefits to the Employee equal to 60% of the
Employee's Base Salary in the event of the long-term disability of the Employee.
ATL shall also provide to Employee the full-time use of an automobile of a type
satisfactory to Employee and substantially similar to the automobile provided to
Employee under his December 23, 1993 employment agreement with Interspec.
(d) Equity Compensation. The Employee shall be eligible to receive
options to purchase ATL common stock and to receive restricted stock awards of
ATL common stock commensurate with those granted to the key employees of ATL.
(e) Reimbursement of Expenses. Employee shall be entitled to incur
reasonable business expenses in the performance of services for ATL. ATL will
reimburse Employee for such expenses provided Employee shall complete an
itemized expense report on forms provided by ATL, and furnish the report
together with related receipts to ATL. If at any time ATL makes advances to
Employee for any purpose, including advances for business expenses or for
personal purposes, Employee hereby authorizes ATL to deduct, withhold, or divert
from his compensation an amount equal to such advances outstanding on his last
day of employment. If any outstanding advances relate to business expenses
incurred in accordance with this Section of this Agreement, upon submission of a
properly completed and substantiated expense report, ATL will release any
amounts so deducted to Employee.
(f) Entire Compensation. The compensation provided for in this
Agreement is in full payment of the services to be rendered by the Employee to
ATL hereunder.
4. Death or Total Disability of the Employee.
-----------------------------------------
(a) Death. In the event of the death of the Employee, this Agreement
shall terminate effective as of the date of the Employee's death, ATL shall not
have any further obligation or liability under this Agreement except that ATL
shall pay to the Employee's estate: (i) the portion of the Base Salary earned
by Employee but unpaid for the current or any prior year, prior to the date of
death; and (ii) the pro rata portion of any Annual Bonus and Additional Bonus
which Employee had earned for the current or any prior year, but not received
prior to the date of death; and (iii) any other
<PAGE>
-4-
payments or benefits that the Employee is eligible to receive under any benefit
or retirement plans or other arrangements that would, by their terms, apply.
(b) Total Disability. In the event of the Total Disability (as that
term is hereinafter defined) of the Employee for a period of 90 consecutive
days, ATL shall have the right to terminate the Employee's employment hereunder
by giving the Employee 20 days' written notice thereof, and upon expiration of
such 20-day period, ATL shall not have any further obligation or liability under
this agreement, except that ATL shall pay to the Employee: (i) the portion of
the Base Salary earned by Employee but unpaid prior to the date of termination;
and (ii) the pro rata portion of any Annual Bonus and Additional Bonus which
Employee had earned for the current or any prior year, but not received prior to
the date of termination; and (iii) any other payments or benefits that the
Employee is eligible to receive under any benefit or retirement plans or other
arrangements that would, by their terms, apply. Notwithstanding anything to the
contrary set forth in this Section 4(b), the Employee shall continue to be paid
his Base Salary until he becomes eligible to receive benefits under the long-
term disability insurance policy referred to in Section 3(c) hereof. The term
"Total Disability," when used herein, shall mean a mental or physical condition
which in the reasonable opinion of the Compensation Committee renders the
Employee unable or incompetent to carry out the job responsibilities held or
tasks assigned at the time the condition was incurred, and which entitles
Employee to receive payments under the long-term disability insurance policy
referred to in Section 3(c) hereof.
5. Discharge by ATL.
----------------
(a) Discharge for Cause. ATL may discharge the Employee and thereby
terminate his employment hereunder for the following reasons (hereinafter
referred to as a "discharge for cause"): (i) the demonstrably willful and
deliberate failure by Employee substantially to perform his material duties and
obligations to ATL under this Agreement (other than a failure resulting from any
illness, sickness, or physical or mental incapacity) which failure continues
after ATL has given notice of the failure to Employee; or, (ii) the demonstrably
willful and deliberate engaging by Employee in misconduct which materially is
injurious to ATL. In the event that ATL shall discharge the Employee pursuant
to this Section 5(a), ATL shall not have any further obligation or liability
under this agreement, except that ATL shall pay to the Employee: (i) the
portion of the Base Salary earned by Employee but unpaid prior to the date of
termination; and (ii) the pro rata portion of any Annual
<PAGE>
-5-
Bonus and Additional Bonus which Employee had earned for the current or any
prior year, but not received prior to the date of termination; and (iii) any
other payments or benefits that the Employee is eligible to receive under any
benefit or retirement plans or other arrangements that would, by their terms,
apply. Notwithstanding the foregoing, the Employee shall have the notice period
provided for in Section 5(e) hereof within which to cure the stated reason for
the discharge for cause to the reasonable satisfaction of ATL.
(b) Other Discharge by ATL. If ATL shall discharge the Employee for
any reason other than one specified in Section 5(a) above (hereinafter referred
to as a "discharge without cause"), the Employee shall be entitled to receive:
(i) the portion of the Base Salary earned by Employee but unpaid prior to the
date of termination; and (ii) the pro rata portion of any Annual Bonus and
Additional Bonus which Employee had earned for the current or any prior year,
but not received prior to the date of termination; and (iii) any other payments
or benefits that the Employee is eligible to receive under any benefit or
retirement plans or other arrangements that would, by their terms, apply; and
(iv) a termination payment equal to the Base Salary and Annual and Additional
Bonuses that Employee would have been entitled to receive hereunder after the
date of termination had this Agreement remained in effect through the end of the
term specified in Section 2 above. At the election of Employee, such amount
shall be payable either in a lump sum or in substantially equal monthly
installments through April 14, 1997. During the balance of the period ending
April 14, 1997 Employee shall also be entitled to continue to receive fringe and
welfare benefits, described in Section 3(c) above, which are at least comparable
to those to which he was entitled immediately prior to the termination of his
employment, and shall continue to receive service credit for purposes of the
SERP. If the terms of any welfare benefit plan of ATL does not permit continued
participation by the Employee, then ATL shall arrange to provide to the Employee
a benefit substantially similar to and materially no less favorable than the
benefit he was entitled to receive under such plan at the end of the period of
coverage. Finally, ATL will permit the Employee during a period of three months
following his termination, upon written request, to execute a cashless exercise
of all outstanding stock options previously granted to the Employee under any
stock option plan maintained by ATL, whether or not such options are then
exercisable, and to have all restricted stock grants and other forms of equity
compensation, whether or not vested, vest immediately.
<PAGE>
-6-
(c) Termination for Good Reason. The Employee may terminate his
employment hereunder for Good Reason (as defined below). Upon any such
termination, the Employee shall receive from ATL the same salary, bonus and
other payments and employee fringe and welfare benefits that would be payable to
the Employee pursuant to Section 5(b) hereof upon a discharge of the Employee
without cause. For purposes of this Agreement, the term "Good Reason" shall
mean the occurrence of any of the following events without the Employee's
express written consent: (i) any failure by ATL to comply with any of the
provisions of Section 3, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by ATL promptly after
receipt of notice thereof given by Employee; or (ii) ATL's requiring the
Employee to be based at any office or location other than the location where
Employee was employed immediately preceding the Effective Date or any office
which is less than 30 miles from such location; or (iii) the assignment to the
Employee of any duties materially inconsistent in any respect with the
Employee's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
1 or any other action by ATL which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee; or (iv) any purported termination by ATL of Employee's employment
otherwise than as expressly permitted by this Agreement; or (v) any failure by
ATL to comply with and satisfy Section 9; provided that such successor has
received at least ten days prior written notice from ATL or Employee of the
requirements of Section 9. For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by Employee shall be conclusive.
(d) No Mitigation Required. Upon a termination of the Employee's
employment by ATL without cause or by Employee for Good Reason, the Employee
shall have no obligation to seek other employment but shall not be prohibited
from doing so, and no compensation paid to the Employee as the result of any
other employment shall reduce any payment required to be made by ATL hereunder.
(e) Notice of Termination. Any termination of the Employee's
employment by ATL or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 10 hereof. A
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and
<PAGE>
-7-
circumstances claimed to provide a basis for termination of
the Employee's employment. The Notice of Termination shall also specify a date
of termination which shall be no earlier than 30 days after the Notice of
Termination is given.
(f) No Set-Off. ATL's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which ATL may have against Employee or others.
6. Expense Reimbursement; Payment of Disputed Amounts.
--------------------------------------------------
(a) Expense Reimbursement. In the event that any person asserts the
invalidity of all or any part of this agreement and the Employee incurs legal
fees or expenses in connection with defending the validity of all or a portion
of this Agreement, ATL shall reimburse the Employee for all legal fees and costs
the Employee so incurs.
(b) Payment of Disputed Amounts. If there shall be any dispute
between ATL and Employee (i) in the event of any termination of Employee's
employment by ATL, whether such termination was for Cause, or (ii) in the event
of any termination of employment by Employee, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by Employee of the existence of Good Reason was not made in good
faith, ATL shall pay all amounts, and provide all benefits, to Employee and/or
Employee's family or other beneficiaries, as the case may be, that ATL would be
required to pay or provide pursuant to Section 3 as though such termination were
by ATL without Cause or by Employee with Good Reason; provided however, that ATL
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of Employee to repay all
such amounts to which Employee is ultimately adjudged by such court not to be
entitled.
7. Assignment Prohibited. This Agreement is personal to Employee and
may not be assigned by Employee either directly or indirectly or by operation of
law without the prior written consent of ATL.
8. Binding Effect. This Agreement inures to the benefit of the
parties and is binding upon the parties, their heirs, personal representatives,
successors and assigns. If the Employee should die while any amount would still
be payable to the Employee hereunder if the Employee
<PAGE>
-8-
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this agreement to the Employee's
devisee, legatee or other designee or, if there is no such designee, to the
Employee's estate.
9. Successors. ATL will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of ATL to expressly assume and agree
to perform this agreement in the same manner and to the same extent that ATL
would be required to perform it if no such succession had taken place. Failure
of ATL to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this agreement and shall entitle the
Employee to compensation from ATL in the same amount and on the same terms as
the Employee would be entitled hereunder if the Employee terminated his
employment for Good Reason.
10. Notices. Any notices required or permitted under this Agreement
may be delivered in person or may be sent to the parties at the addresses set
forth below by certified or registered U.S. mail, postage prepaid, or by
personal delivery to the party.
If to the Employee:
Edward Ray
c/o Interspec, Inc.
110 West Butler Avenue
Ambler, PA 19002-5795
If to ATL:
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
P.O. Box 3003
Bothell, Washington 98041-3003
Attn: General Counsel
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.
11. Enforceability. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, then such provision shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed
<PAGE>
-9-
excised from this agreement, as the case may require, and this agreement shall
be construed and enforced to the maximum extent permitted by law, as if such
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be.
12. Entire Agreement. This agreement together with ATL's Employment
Agreement Relating to Inventions, Patents, and Confidential Information
constitutes the entire understanding and agreement by and between the parties
with respect to Employee's employment, and supersedes any other agreements or
understandings between the parties either written or oral.
13. Amendments. Any amendment to this Agreement, including any
extension or renewal of the term of employment of the Employee, shall be made in
writing and signed by the parties hereto.
14. Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Washington, and shall be enforced in
the State of Washington.
15. Waiver. No claim or right arising out of a breach or default
under this agreement shall be discharged in whole or in part by a waiver of that
claim or right unless the waiver is in writing and executed by the aggrieved
party hereto or his or its duly authorized agent. A waiver by any party hereto
of a breach or default by the other party hereto of any provision of this
agreement shall not be deemed a waiver of future compliance therewith, and such
provisions shall remain in full force and effect.
<PAGE>
-10-
16. Counterparts. This agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
Executed by the parties as of the day and year first above written.
Advanced Technology ____________________________
Laboratories, Inc. Edward Ray
By: ________________________
Title: _____________________
<PAGE>
EXHIBIT 23.4
(Goldman Sachs Letterhead)
April 15, 1994
Board of Directors
Advanced Technology Laboratories, Inc.
22100 Bothell Everett Highway
Bothell, Washington 98041-3003
Re: Registration Statement on Form S-4 of Advanced Technology
Laboratories, Inc.
Gentlemen:
Reference is made to our opinion letter, dated April 18, 1994, with respect of
the fairness to Advanced Technology Laboratories, Inc. (the "Company") of the
exchange ratio of .413 shares of Common Stock, par value $0.01 per share
("Common Stock"), of the Company to be paid by the Company for each share of
Common Stock, par value $0.001 per share ("Interspec Common Stock"), of
Interspec, Inc. ("Interspec") pursuant to the Agreement and Plan of Merger dated
as of February 10, 1994 (the "Agreement"), among the Company and Interspec.
The foregoing opinion letter is solely for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "SUMMARY--The Merger--Opinions of Financial Advisors",
"BACKGROUND OF THE MERGER--Background--Consideration of a Business Combination",
"BACKGROUND OF THE MERGER--Reasons for the Merger; Recommendations of the Boards
of Directors--ATL", and "BACKGROUND OF AND REASONS FOR THE MERGER--Opinion of
Financial Advisor to the ATL Board" and to the inclusion of the foregoing
opinion in the Proxy Statement/Prospectus included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1993 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
Exhibit 23.5
Investment Banking Group
World Financial Center
North Tower
New York, New York 10281-1324
212 449 1000
[LOGO OF MERRILL LYNCH]
We hereby consent to the use of our opinion letter dated April 14, 1994 to the
Board of Directors of Interspec, Inc., included as Appendix III to the Proxy
Statement/Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of ATL Sub Acquisition Corp., a wholly owned
subsidiary of Advanced Technology Laboratories, Inc., with and into Interspec,
Inc., and to the references to such opinion in such Proxy Statement/Prospectus
under the captions "SUMMARY -- The Merger -- Opinions of Financial Advisors",
"BACKGROUND OF AND REASONS FOR THE MERGER -- Background -- Consideration of a
Business Combination", "BACKGROUND OF AND REASONS FOR THE MERGER -- Reasons for
the Merger; Recommendations of the Boards of Directors -- Interspec", and
"BACKGROUND OF AND REASONS FOR THE MERGER -- Opinion of Financial Advisor to the
Interspec Board." In giving such consent, we do not admit and we hereby disclaim
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ K.E. Coffey
---------------------------------
Vice President
Investment Banking Group
April 15, 1994
<PAGE>
EXHIBIT 99.1
P R O X Y
ADVANCED TECHNOLOGY LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints DENNIS C. FILL, RALPH M. BARFORD and HARRY WOOLF,
Ph.D., or any one of them, Proxies with full power of substitution, to vote the
shares of Advanced Technology Laboratories, Inc. which the undersigned is enti-
tled to vote at the Annual General Meeting of Stockholders of Advanced Technol-
ogy Laboratories, Inc., to be held on Monday, May 16, 1994, at 10:30 a.m. at
the Four Seasons Olympic Hotel, 411 University Street, Seattle, Washington, and
at any adjournment thereof, on the matters set forth on the reverse side.
THE MATTERS TO BE VOTED UPON, THE INSTRUCTIONS AND A SPACE FOR YOUR VOTE AND
SIGNATURE ARE SET FORTH ON THE REVERSE SIDE.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-----------
SEE REVERSE
SIDE
-----------
- - - --------------------------------------------------------------------------------
[X] Please mark your votes as in this example. |9868
-----
THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER(S); IF NOT OTHERWISE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4, AND IN THE
DISCRETION OF THE PROXIES UPON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE MEETING.
- - - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 AND 4:
- - - --------------------------------------------------------------------------------
1. MERGER PROPOSAL. Approve the issuance of shares of common stock to the
shareholders of Interspec, Inc. in connection with an Agreement and Plan of
Merger among Interspec, ATL, and a subsidiary of ATL.
FOR [_] AGAINST [_] ABSTAIN [_]
2. AMENDMENT OF ATL OPTION PLAN. Approve an amendment to the 1992 Stock Option
Plan to increase the number of shares available for issuance, and to impose
an annual limit on individual option grants thereunder. Approval is
considered by the Company to be a critical requirement to ensure the
retention of key employees of Interspec.
FOR [_] AGAINST [_] ABSTAIN [_]
3. ELECTION OF DIRECTORS. Nominees: Ralph M. Barford, Kirby L. Cramer, Harvey
Feigenbaum, Dennis C. Fill, Eugene A. Larson, John R. Miller,
David M. Perozek and Harry Woolf.
FOR [_] WITHHELD [_]
For, except vote withheld from the following nominee(s):
- - - --------------------------------------------------------------------------------
4. RATIFICATION OF AUDITORS. Ratification of KPMG Peat Marwick as auditors
for the year ending December 31, 1994.
FOR [_] AGAINST [_] ABSTAIN [_]
SIGNATURE(S) _______________________________________DATE ______________________
Please date and sign your name(s) exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as it appears hereon.
*Second signature if stock jointly held.
1
<PAGE>
P R O X Y
INSTRUCTIONS FOR ANNUAL GENERAL MEETING OF STOCKHOLDERS, MAY 16, 1994
Shares of Advanced Technology Laboratories, Inc. ("ATL") Common Stock in which
you have an interest as a member of the ATL Incentive Savings and Stock
Ownership Plan are held by First Interstate Bank of Washington, N.A., as
Trustee of the Plan, and will be voted by the Trustee at the Annual General
Meeting of Stockholders on May 16, 1994, pursuant to instructions received from
Plan participants. You may participate in the voting, in proportion to your
interest in such shares, by using this form to instruct the Trustee how to vote
the shares allocated to your account.
IN ORDER FOR YOUR INSTRUCTIONS TO BE VOTED BY THE TRUSTEE,
THIS FORM MUST BE RECEIVED BY FIRST CHICAGO TRUST COMPANY OF NEW YORK
NO LATER THAN THE CLOSE OF BUSINESS DAY ON MAY 9, 1994.
If you do not indicate otherwise, these instructions will authorize the Trustee
to vote for the issuance of common stock in conjunction with the Agreement and
Plan of Merger, for the election of directors, for the Amendment of the 1992
Stock Option Plan, and for the ratification of auditors for 1994, as described
in the April, 1994 ATL Proxy Statement. These instructions will also authorize
the Trustee to vote at its discretion on such matters as may come before the
meeting.
First Interstate Bank of Washington, N.A.
Trust Division, P. O. Box 21927
Seattle, WA 98111
INSTRUCTIONS TO TRUSTEE
THESE INSTRUCTIONS ARE BEING GIVEN IN CONJUNCTION WITH THE
BOARD OF DIRECTORS' SOLICITATION OF PROXIES FROM THE TRUSTEE
You are hereby authorized and instructed to vote at the Annual General Meeting
of Stockholders of ATL on May 16, 1994, and at any adjournment thereof, either
in person or by proxy, all of the shares of Common Stock of ATL allocated to my
account under the ATL Incentive Savings and Stock Ownership Plan.
THESE INSTRUCTIONS ARE CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
-----------
SEE REVERSE
SIDE
-----------
- - - --------------------------------------------------------------------------------
[X] Please mark your votes as in this example.
|9943
-----
THE INTEREST IN SHARES SUBJECT TO THESE INSTRUCTIONS WILL BE VOTED AS DIRECTED
BY THE PLAN PARTICIPANT. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED
INSTRUCTIONS ARE RETURNED, SUCH INTEREST WILL BE VOTED "FOR" AUTHORITY ON ITEMS
1, 2, 3 AND 4.
- - - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AUTHORITY ON ITEMS 1, 2, 3 AND 4:
- - - --------------------------------------------------------------------------------
1. MERGER PROPOSAL. Authority to vote "FOR" the proposed issuance of shares of
common stock to the shareholders of Interspec, Inc. in connection with an
Agreement and Plan of Merger among Interspec, ATL, and a subsidiary of ATL.
FOR [_] AGAINST [_] ABSTAIN [_]
2. AMENDMENT OF ATL OPTION PLAN. Authority to vote "FOR" the proposed amendment
to the 1992 Stock Option Plan to increase the number of shares available for
issuance, and to impose an annual limit on individual option grants thereun-
der. Approval is considered by the Company to be a critical requirement to
ensure the retention of key employees of Interspec.
FOR [_] AGAINST [_] ABSTAIN [_]
3. ELECTION OF DIRECTORS. Authority to vote "FOR" the following nominees: Ralph
M. Barford, Kirby L. Cramer, Harvey Feigenbaum, Dennis C. Fill, Eugene A.
Larson, John R. Miller, David M. Perozek and Harry Woolf.
FOR [_] WITHHELD [_]
For, except vote withheld from the following nominee(s):
- - - --------------------------------------------------------------------------------
4. RATIFICATION OF AUDITORS.
Authority to vote "FOR" the ratification of KPMG Peat Marwick as auditors for
the year ending December 31, 1994.
FOR [_] AGAINST [_] ABSTAIN [_]
PARTICIPANT _______________________________________ DATE ______________________
Please date and sign your name exactly as it appears above, and return in the
enclosed envelope to First Chicago Trust Company of New York, which will tabu-
late and report your instructions to the Plan's Trustee for voting.
2
<PAGE>
P R O X Y
INSTRUCTIONS FOR ANNUAL GENERAL MEETING OF STOCKHOLDERS, MAY 16, 1994
Shares of Advanced Technology Laboratories, Inc. ("ATL") Common Stock in which
you have an interest as a member of the SpaceLabs Medical, Inc. Incentive
Savings and Stock Ownership Plan are held by First Interstate Bank of
Washington, N.A., as Trustee of the Plan, and will be voted by the Trustee at
the Annual General Meeting of Shareholders on May 16, 1994, pursuant to
instructions received from Plan participants. You may participate in the
voting, in proportion to your interest in such shares, by using this form to
instruct the Trustee how to vote the shares allocated to your account.
IN ORDER FOR YOUR INSTRUCTIONS TO BE VOTED BY THE TRUSTEE,
THIS FORM MUST BE RECEIVED BY FIRST CHICAGO TRUST COMPANY OF NEW YORK
NO LATER THAN THE CLOSE OF BUSINESS DAY ON MAY 9, 1994.
If you do not indicate otherwise, these instructions will authorize the Trustee
to vote for the issuance of common stock in conjunction with the Agreement and
Plan of Merger, for the election of directors, for the Amendment of the 1992
Stock Option Plan, and for the ratification of auditors for 1994, as described
in the April, 1994 ATL Proxy Statement. These instructions will also authorize
the Trustee to vote at its discretion on such matters as may come before the
meeting.
First Interstate Bank of Washington, N.A.
Trust Division, P. O. Box 21927
Seattle, WA 98111
INSTRUCTIONS TO TRUSTEE
THESE INSTRUCTIONS ARE BEING GIVEN IN CONJUNCTION WITH THE
BOARD OF DIRECTORS' SOLICITATION OF PROXIES FROM THE TRUSTEE
You are hereby authorized and instructed to vote at the Annual General Meeting
of Stockholders of ATL on May 16, 1994, and at any adjournment thereof, either
in person or by proxy, all of the shares of Common Stock of ATL allocated to my
account under the ATL Incentive Savings and Stock Ownership Plan.
THESE INSTRUCTIONS ARE CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
------------
SEE REVERSE
SIDE
------------
- - - ----------------------------------------------------------------------------
[X] Please mark your votes as in this example.
| 6363
----
THE INTEREST IN SHARES SUBJECT TO THESE INSTRUCTIONS WILL BE VOTED AS DIRECTED
BY THE PLAN PARTICIPANT. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED
INSTRUCTIONS ARE RETURNED, SUCH INTEREST WILL BE VOTED "FOR" AUTHORITY ON ITEMS
1, 2, 3 AND 4.
- - - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AUTHORITY ON ITEMS 1, 2, 3 AND 4:
- - - --------------------------------------------------------------------------------
1. MERGER PROPOSAL. Authority to vote "FOR" the proposed issuance of shares of
common stock to the shareholders of Interspec, Inc. in connection with an
Agreement and Plan of Merger among Interspec, ATL, and a subsidiary of ATL.
FOR [_] AGAINST [_] ABSTAIN [_]
2. AMENDMENT OF ATL OPTION PLAN. Authority to vote "FOR" the proposed amendment
to the 1992 Stock Option Plan to increase the number of shares available for
issuance, and to impose an annual limit on individual option grants
thereunder. Approval is considered by the Company to be a critical
requirement to ensure the retention of key employees of Interspec.
FOR [_] AGAINST [_] ABSTAIN [_]
3. ELECTION OF DIRECTORS. Authority to vote "FOR" the following nominees: Ralph
M. Barford, Kirby L. Cramer, Harvey Feigenbaum, Dennis C. Fill, Eugene A.
Larson, John R. Miller, David M. Perozek and Harry Woolf.
FOR [_] WITHHELD [_]
For, except vote withheld from
the following nominee(s):
- - - --------------------------------------------------------------------------------
4. RATIFICATION OF AUDITORS.
Authority to vote "FOR" the ratification of KPMG Peat Marwick as auditors for
the year ending December 31, 1994.
FOR [_] AGAINST [_] ABSTAIN [_]
PARTICIPANT ________________________________________DATE ______________________
Please date and sign your name exactly as it appears above, and return in the
enclosed envelope to First Chicago Trust Company of New York, which will tabu-
late and report your instructions to the Plan's Trustee for voting.
3
<PAGE>
EXHIBIT 99.2
INTERSPEC, INC.
PROXY
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY.
The undersigned hereby constitutes and appoints Edward Ray and Michael J.
Wassil, and each or either of them, proxies of the undersigned, with full power
of substitution, to vote all of the shares of Interspec, Inc. (the "Company")
which the undersigned may be entitled to vote at the Special Meeting of
Shareholders of the Company, to be held at the offices of Duane, Morris &
Heckscher, One Liberty Place, 42nd Floor, Philadelphia, Pennsylvania 19103 on
Monday, May 16, 1994, at 10 a.m., local time, and at any adjournment thereof, as
follows:
(continued on other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
1. PROPOSAL TO APPROVE AND ADOPT THE AMENDED AND RESTATED AGREEMENT AND PLAN
OF MERGER DATED AS OF FEBRUARY 10, 1994 (THE "MERGER AGREEMENT"), AMONG THE
COMPANY, ADVANCED TECHNOLOGY LABORATORIES, INC. AND ATL SUB ACQUISITION
CORP. ("ATL SUB") AND THE MERGER OF ATL SUB INTO THE COMPANY UPON THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT. The Board of Directors recommends a
vote FOR this proposal.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion the proxies are authorized to vote upon such business
as may properly come before the meeting and any adjournment thereof.
If shares are listed in a joint account,
both signatures are required. When signing
as attorney, administrator, trustee or
corporate officer, please so indicate.
This Proxy should then be dated and
returned promptly to Mellon Securities
Trust Company, c/o Mellon Securities
Transfer Services, 85 Challenger Road,
Overpeck Centre, Ridgefield Park, NJ
07660.
Dated: __________________, 1994
- - - ------------------------------------------
- - - ------------------------------------------
Signature(s)
-------------------------------------------
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES
-------------------------------------------
