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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9/A
(Amendment No. 1)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
TYLAN GENERAL, INC.
(Name of Subject Company)
TYLAN GENERAL, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $.001 PAR VALUE
(Title of Class of Securities)
902 169 101
(CUSIP Number of Class of Securities)
DAVID J. FERRAN
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TYLAN GENERAL, INC.
15330 AVENUE OF SCIENCE
SAN DIEGO, CALIFORNIA 92128
(619) 618-1990
(Name, address, and telephone number of person
authorized to receive notice and communications
on behalf of person(s) filing statement)
Copies to:
<TABLE>
<S> <C>
EDWARD S. ROSENTHAL, ESQ. D. BRADLEY PECK, ESQ.
Fried, Frank, Harris, Shriver & Jacobson LANCE W. BRIDGES, ESQ.
350 South Grand Avenue, 32nd Floor Cooley Godward LLP
Los Angeles, California 90071 4365 Executive Drive, Suite 1100
(213) 473-2000 San Diego, California 92121
(619) 550-6000
</TABLE>
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1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Tylan General, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 15330 Avenue of Science, San Diego, California 92128.
The title of the class of equity securities to which this statement
relates is Common Stock, $.001 par value of the Company (the "Shares").
2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer (the "Offer") of Millipore
Corporation, a Massachusetts corporation ("Millipore" or the "Bidder") as
disclosed in the joint press release issued by the Company and the Bidder on
December 16, 1996, a copy of which is filed as Exhibit 99.1 hereto and is
incorporated herein by reference (the "Press Release"). The Offer is being made
by the Bidder pursuant to an Agreement and Plan of Merger (the "Agreement of
Merger") entered into on December 16, 1996 between the Company, Millipore and
MCTG Acquisition Corp. ("Bidder Sub"). The Bidder will commence the Offer within
five business days of December 16, 1996, under which Bidder Sub will offer to
purchase all of the outstanding Shares at a price of $16.00 per Share, net to
the seller in cash, subject to certain conditions therein.
The address of the principal executive offices of the Bidder is
80 Ashby Road, Bedford, Massachusetts 01730-9125.
3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) (i) ARRANGEMENTS WITH THE COMPANY'S EXECUTIVE OFFICERS, DIRECTORS
AND AFFILIATES.
(1) Certain contracts, agreements, arrangements and
understandings between the Company and certain of its directors, executive
officers and affiliates, including a description of certain of the Company's
severance arrangements with certain of its executive officers, are described in
the Company's Proxy Statement in connection with the Company's 1996 Annual
Meeting of Stockholders under the Sections therein entitled "Executive
Compensation" and "Certain Transactions." The Proxy Statement is filed as
Exhibit 99.2 hereto and is incorporated by reference herein. A copy of relevant
portions of pages 14, 17 and 31 of the Proxy Statement, which are incorporated
by reference herein, are submitted with this statement as part of Exhibit 99.2.
In addition, a copy of the Company's 1989 Employment Agreement with
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David J. Ferran, the Company's Chief Executive Officer and President, is filed
as Exhibit 99.3 hereto and is incorporated by reference herein.
(2) The Company also maintains an Annual Incentive Bonus
Program ("AIBP") for its executive officers based on the achievement of annual
financial performance targets and other management objectives which are
established annually, but which are subject to adjustment by the Compensation
Committee of the Board of Directors of the Company (the "Board") as it deems
appropriate. Qualitative subjective performance criteria are utilized in the
determination of a variable portion of each executive officer's annual incentive
bonus, and the remainder of such bonus is determined based upon quantitative
objective performance criteria. The objective criteria utilized include
actual-versus-target sales, actual-versus-target earnings and other specified
management objectives. Target sales and target earnings established for the
purpose of determining bonus payments are based on the annual business plans and
operating budgets of the Company and each of its subsidiaries. The Company
accrues for these bonus payments currently throughout the year.
(3) In July 1996, the Board approved a bonus under the AIBP
in respect of the first six months of the Company's fiscal year ended October
27, 1996, calculated based on performance targets satisfied through April 30,
1996. A participant must be employed on the first business day of January 1997
(the "Payment Date") to receive payment of the first portion of the annual
bonus; provided, however, that in accordance with the Company's practice
regarding the payment of accrued bonuses, if the participant's employment is
terminated by the Company for any reason prior to the Payment Date, he or she
shall receive such bonus upon termination. The Board further decided that new
performance targets be established for the second half of fiscal 1996. Each
participant who is employed on the Payment Date shall receive payment of both
six-month bonuses in respect of the current fiscal year in a single distribution
on the Payment Date.
(4) In July 1996, the Board also approved certain amendments
to the AIBP. The amendments include the following:
a. Each participant in the AIBP who remains employed
through the first business day in the January following the end of the fiscal
year during which a change in control occurs (a "CIC Year") will receive a bonus
in respect of such CIC Year equal to (i) the bonus that would have been payable
in respect of such CIC Year assuming that all performance goals have been
satisfied, less (ii) any bonus in respect of a portion of such CIC Year that the
participant has already received;
b. Each participant in the AIBP whose employment is
terminated (a) by the Company for any reason, by the participant for "good
reason" (as defined in the AIBP) or, in the case of the Chief Executive Officer
of the Company, by
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the Chief Executive Officer for any reason during the "window period" (as
defined in the Severance Protection Agreement between the Chief Executive
Officer and the Company), (b) either after a change in control or prior to a
change in control at the request of a potential acquiror, and (c) prior to the
date on which bonuses are paid with respect to a CIC Year, will receive a bonus
in respect of the CIC Year in an amount equal to (i) the bonus that would have
been payable in respect of such CIC Year assuming that all performance goals
have been satisfied multiplied by a fraction, the numerator of which is the
number of days that have elapsed since the end of the fiscal year immediately
preceding the CIC Year through the date of such participant's termination (not
later than the end of the CIC Year) and the denominator of which is 365, less
(ii) any bonus in respect of a portion of the CIC Year which the participant has
already received.
(5) In July 1996, the Company entered into an employment
agreement with Don E. Whitson. The agreement provides that Mr. Whitson will
serve as the Company's Vice Chairman and Chief Administrative Officer at an
annual salary of $250,000. Mr. Whitson will also be eligible for an annual bonus
of up to 25% of his annual salary. The Company may terminate Mr. Whitson's
employment at any time for any reason, and in the event his employment is
terminated for cause, all compensation and benefits will cease. In the event Mr.
Whitson resigns from the Company for good reason or his employment is terminated
without cause, the Company shall continue to pay Mr. Whitson his salary (a)
until January 3, 1998, and (b) for twelve months following the later of (i) the
date of his actual termination of employment and (ii) January 3, 1998. A copy of
Mr. Whitson's employment agreement is attached hereto as Exhibit 99.4.
(6) In July 1996, the Company and Span Instruments, Inc., a
Texas corporation and wholly owned subsidiary of the Company ("Span"), entered
into an employment agreement with George A. Yurch, Jr. The agreement provides
that Mr. Yurch will serve as President of Span at an annual salary of $198,000.
Mr. Yurch will also be eligible to participate in Span's employee benefit plans
and incentive compensation programs. The term of the employment agreement is 18
months, provided that either party may terminate the agreement at any time for
any reason. In the event Mr. Yurch elects to resign from Span, he shall continue
to receive his salary for a period of six months, provided that he provides four
hours of consulting services to the Company each month. In the event Mr. Yurch's
employment is terminated for cause, Span shall continue to pay to Mr. Yurch his
salary for six months following the termination of his employment. In the event
Mr. Yurch's employment is terminated without cause, Span will continue to pay
his salary (1) until July 3, 1997, and (2) for six months following the later of
(a) the date of his actual termination of employment, and (b) July 3, 1997. A
copy of the employment agreement with Mr. Yurch is attached hereto as Exhibit
99.5.
(7) In July 1996, the Company entered into an Employment
Agreement with David L. Stone, the Company's Chief Financial Officer, which
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superseded any and all prior agreements between the parties. The agreement will
continue in effect until terminated by either party in accordance with its
terms. The agreement provides that Mr. Stone shall continue to receive such
salary as was then in effect, subject to review and possible revision at least
annually. Under the agreement, Mr. Stone is eligible to participate in the AIBP
and the Company's other employee benefit plans. The Company may terminate Mr.
Stone's employment at any time for any reason. In the event Mr. Stone resigns
from the Company for good reason (as defined in the employment agreement) or his
employment is terminated by the Company without cause (as defined in the
employment agreement), the Company shall pay Mr. Stone 18 months' base salary
and 100% of the bonus he actually received for the Company's most recently
completed fiscal year. In the event Mr. Stone resigns upon mutual agreement with
the Company and upon six months' notice, (a) the Company shall pay Mr. Stone his
base salary for six months following such notice and Mr. Stone shall continue to
serve as Chief Financial Officer or as an advisor to the Company, if required,
during such period; (b) Mr. Stone shall be eligible to receive a bonus of up to
50% of the maximum bonus for which he would have been eligible had he remained
an employee for the entire fiscal year in which his resignation occurred; and
(c) at the end of the six-month notice period and in addition to the bonus
payments, Mr. Stone shall receive a payment equal to (i) his base salary for six
months and (ii) an amount equal to 50% of the annual bonus Mr. Stone actually
received for the Company's most recently completed fiscal year. In the event Mr.
Stone is terminated for cause or he resigns without good reason, the Company
shall pay him six months' base salary and an amount equal to 50% of the bonus he
actually received for the Company's most recently completed fiscal year. A copy
of Mr. Stone's employment agreement is attached hereto as Exhibit 99.6.
(8) In July 1996, the Company entered into a Severance
Protection Agreement with David J. Ferran, the Company's Chief Executive Officer
and President. The agreement continues in effect until December 31, 1998,
subject to automatic renewals for additional one year periods unless either
party elects not to extend the term of the agreement. The agreement provides
that in the event (a) Mr. Ferran's employment is terminated without cause (as
defined in the agreement), or Mr. Ferran terminates his employment for good
reason (as defined in the agreement), within 15 months following a change in
control of the Company, or (b) Mr. Ferran terminates his employment for any
reason within 90 days following a change in control, he will receive a cash
severance payment equal to 2-1/2 times the greater of (a) the sum of base salary
and annual bonus at the rate in effect immediately prior to a change in control
and (b) the sum of his base salary at the rate in effect on his date of
termination, reduced by any amounts paid to Mr. Ferran pursuant to the
consulting agreement provision of his employment agreement. Mr. Ferran will also
receive health benefits at the Company's expense for a period of 30 months
following his termination. In July 1996, Mr. Ferran and the Company also entered
into an amendment to the Employment Agreement between the Company and Mr. Ferran
dated October 5, 1989. The amendment provides that (a) in the event that within
15 months of a change of control of the Company (i) Mr. Ferran's
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employment is terminated by the Company for cause (as defined in the employment
agreement) or (ii) Mr. Ferran resigns for other than good reasons (as defined in
the employment agreement) and (b) the Company elects to have Mr. Ferran provide
certain consulting services as specified in the employment agreement, the
Company shall pay Mr. Ferran at the time of such election in one lump sum an
amount equal to five times the sum of (x) his annual salary then in effect and
(y) the maximum bonus Mr. Ferran would have been entitled to receive through the
date of termination. Such lump sum payment shall be in addition to the other
consideration due Mr. Ferran under the employment agreement for such services as
well as the amounts payable to him under his Severance Protection Agreement. A
copy of the Severance Protection Agreement is attached hereto as Exhibit 99.7,
and a copy of the Amendment to Employment Agreement is attached hereto as
Exhibit 99.8.
(9) In July 1996, the Company entered into individual
Severance Protection Agreements with each of the following five executive
officers of the Company: Timothy R. Brown, Scott A. Cronk, David W. Dedman,
Michael A. Grandinetti and George A. Yurch, Jr. Each agreement remains in effect
until December 31, 1998, subject to automatic renewals for additional one year
periods unless either party shall elect not to extend the term of the agreement.
The agreement provides that if, within 15 months following a change in control
of the Company, (a) the executive officer's employment is terminated without
cause (as defined in the agreement) or (b) the executive officer terminates his
employment for good reason (as defined in the agreement), he will be entitled to
receive a cash severance payment equal to the greater of (a) the sum of his base
salary and annual bonus at the rate in effect immediately prior to a change in
control and (b) the sum of his base salary and annual bonus at the rate in
effect on his date of termination. The executive officer will also receive
Company-paid health benefits for a period of 12 months following termination. A
copy of the form of Severance Protection Agreement is attached hereto as Exhibit
99.9.
(10) On July 11, 1996, at a special meeting of the
subcommittee of the Compensation Committee of the Board, Messrs. Whitson and
Yurch were granted nonstatutory stock options to purchase 75,000 and 30,000
shares, respectively, of the Company's Common Stock at an exercise price of
$11.25 per share. The options were granted under the Company's 1994 Stock Option
Plan, as amended to date, and are subject to the following vesting schedule: 20%
of the shares subject to the options will vest on July 11, 1997, and thereafter,
on the first day of each October, January, April and July, the right to exercise
an additional 5% of the Options will vest, such that the options will be
completely vested on July 1, 2001.
(11) On October 3, 1996, at a meeting of a subcommittee of
the Compensation Committee of the Board, John Kizer, the Company's Vice
President and Corporate Controller, was granted an incentive stock option to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$11.25 per share. The option was
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granted under the Company's 1994 Stock Option Plan, as amended to date, and is
subject to the following vesting schedule: 20% of the shares subject to the
option will vest on July 11, 1997, and thereafter, on the first day of each
October, January, April and July, the right to exercise an additional 5% of the
shares will vest, such that the options will be completely vested on July 1,
2001. In December 1996, the Company entered into a Severance Protection
Agreement with Mr. Kizer. The agreement remains in effect until December 31,
1998, subject to automatic renewal for additional one year periods unless either
party shall elect not to extend the term of the agreement. The agreement
provides that in the event within 15 months following a change in control of the
Company, (a) Mr. Kizer's employment is terminated without cause or (b)
terminates his employment for good reason, he will be entitled to receive his
current salary, bonus and health benefits for a period of six months following
termination. Salary and bonus will be paid in a single lump sum payment; health
benefits will continue for the stated period. A copy of the Severance Protection
Agreement between the Company and Mr. Kizer is attached hereto as Exhibit 99.10.
(ii) ARRANGEMENTS WITH THE BIDDER, ITS EXECUTIVE OFFICERS,
DIRECTORS AND AFFILIATES.
(1) On December 16, 1996, the Company entered into the
Merger Agreement with the Bidder and Bidder Sub. The following summary of the
Merger Agreement is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Exhibit 99.11. The Merger
Agreement should be read in its entirety for a more complete description of the
matters summarized below.
THE OFFER. Pursuant to the Merger Agreement, Bidder Sub will make an
offer to purchase all the outstanding Shares at a price of $16.00 per Share in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer Documents.
THE MERGER. The Merger Agreement provides that, upon the terms and
subject to the conditions of the Merger Agreement, and in accordance with
Delaware Law, Bidder Sub will be merged with and into the Company. Following the
effective time of the merger (the "Effective Time"), the separate corporate
existence of Bidder Sub will cease and the Company will continue as the
Surviving Corporation (sometimes referred to hereinafter as the "Surviving
Corporation"), and will succeed to and assume all the rights and obligations of
Bidder Sub in accordance with Delaware Law. The Certificate of Incorporation of
Bidder Sub (the "Certificate"), in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof, and the DGCL; provided, however, that at the
Effective Time, the Certificate shall be amended to change the name of the
Surviving Corporation to "Tylan General, Inc." The Bylaws of Bidder Sub in
effect at the Effective Time shall be the Bylaws of the Surviving Corporation,
until duly amended in accordance with the terms of DGCL.
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CONVERSION OF SHARES. At the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
the Bidder, Bidder Sub or any other subsidiary of the Bidder) or Shares which
are held by stockholders ("Dissenting Stockholders") exercising appraisal rights
pursuant to Section 262 of the DGCL shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right to
receive, without interest, an amount in cash equal to $16.00 or such greater
amount which may be paid pursuant to the Offer (the "Merger Consideration").
CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger
is subject to the satisfaction of the following conditions: (a) if approval of
the Merger by the holders of Shares is required by applicable law, the Merger
shall have been approved by the requisite vote of such holders; (b) no
injunction or other order shall have been issued or any law enacted which
prohibits the consummation of the Merger or makes such consummation illegal;
provided, however, that prior to either party invoking this provision, such
party shall have used its reasonable best efforts to have any such injunction
lifted; and (c) the waiting period applicable to the consummation of the Merger
under the Hart-Scott-Rodino Act shall have expired or been terminated and all
consents, approvals and authorizations required to be obtained prior to the
Effective Time by the Company from any governmental entity in connection with
the execution and delivery of this Agreement by the Company and the consummation
of the transactions contemplated thereby by the Company, the Bidder and Bidder
Sub shall have been made or obtained (as the case may be) except where the
failure to obtain the same would not have a material adverse effect on the
financial condition, properties, businesses or results of operations of the
company and its subsidiaries taken as a whole.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to the Bidder relating
to the Company and each of its subsidiaries, including, among other things, with
respect to, organization and qualification, certificates of incorporation and
bylaws, capitalization, authority relative to the Merger Agreement, consents and
approvals, filings with the Securities and Exchange Commission (the
"Commission"), financial statements, absence of certain changes or events,
absence of litigation, employee benefit plans, taxes, proprietary rights,
opinions of financial advisors, brokers, compliance with environmental laws, and
the Rights Agreement.
The Bidder and Bidder Sub have also made customary representations and
warranties to the Company relating to the Bidder and Bidder Sub, including,
among other things, with respect to organization and qualification, authority
relative to the Merger Agreement, consents and approvals, filings with the
Commission, brokers, financing for the Offer and the Merger, and prior
activities.
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CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that,
prior to the Effective Time (unless the Bidder shall otherwise agree in writing
and except as otherwise contemplated by this Agreement): (a) the business of the
Company and its subsidiaries shall be conducted only in the ordinary and usual
course and, to the extent consistent therewith, each of the Company and its
subsidiaries shall use its reasonable best efforts to preserve its business
organization intact and maintain satisfactory relations with customers,
suppliers, employees and business associates, in each case in all material
respects; (b) the Company shall not (i) sell, pledge, dispose of or encumber or
agree to sell or pledge any stock owned by it in any of its subsidiaries; (ii)
amend its Certificate or Bylaws or increase or propose to increase the number of
directors of the Company; (iii) split, combine or reclassify the outstanding
Shares; or (iv) declare, set aside or pay any dividend payable in cash, stock or
property with respect to the Shares; (c) neither the Company nor any of its
subsidiaries shall (i) issue, sell, pledge, dispose of or encumber any
additional shares, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of its
capital stock other than, in the case of the Company, Shares issuable pursuant
to options outstanding on the date of the Merger Agreement under any employee
stock option plan; (ii) transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any assets or incur or modify any indebtedness or
other liability involving an amount in excess of $100,000 in the aggregate other
than in the ordinary and usual course of business; (iii) acquire directly or
indirectly by redemption or otherwise any shares of the capital stock of the
Company; (iv) incur any indebtedness for borrowed money (except for working
capital under the Company's existing credit facilities and refinancing of
existing debt that permit prepayment of such debt without penalty) involving an
amount in excess of $100,000 in the aggregate or assume or endorse the
obligations of any other person or entity; (v) make any acquisition of, or
investment in, assets or stock of any other person or entity involving an amount
in excess of $100,000 in the aggregate other than in the ordinary course of
business or (vi) make or authorize any capital expenditure in excess of $500,000
in the aggregate; (d) except for normal increases in the ordinary course of
business that are consistent with past practices and that, in the aggregate, do
not result in a material increase in benefits or compensation expense, adopt or
amend (except as may be required by law or as provided in the Merger Agreement)
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any existing plan or arrangement (including, without limitation, the
granting of stock options, stock appreciation rights, shares of restricted stock
or performance units) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; (e) neither the Company nor any of its
subsidiaries shall, except in the ordinary and usual course of business, enter
into any material agreement or modify, amend or terminate any
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of its material agreements or waive, release or assign any material rights or
claims thereunder; and (f) neither the Company nor any of its subsidiaries will
authorize or enter into an agreement to do any of the foregoing.
ACQUISITION PROPOSALS. Pursuant to Merger Agreement, the Company has
agreed that neither the Company nor any of its subsidiaries nor any of the
respective officers and directors of the Company or its subsidiaries shall, and
the Company shall direct and use its best efforts to cause its employees, agents
and representatives (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its subsidiaries) not
to, initiate, continue, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to stockholders of the Company), or furnish any nonpublic
information to any third party, with respect to a merger, consolidation,
business combinations or similar transaction involving, or any tender offer,
exchange offer or other purchase of all or any significant portion of the assets
or any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or, unless the Board receives an unsolicited written offer with respect to a
merger, consolidation or sale of all or substantially all of the Company's
assets or an unsolicited tender or exchange offer for the Shares is commenced,
which the Board determines in good faith (after receiving advice of independent
legal counsel that such action is required for the discharge of their fiduciary
duties) is more favorable to the stockholders of the Company than the Offer (an
"Alternative Transaction"), engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company will as promptly as reasonably practicable
(and in any event within 24 hours) notify the Bidder (i) if any such inquiries
or proposals are received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated with the Company,
(ii) of its receipt of an Acquisition Proposal or (iii) of the existence of an
Alternative Transaction. Prior to furnishing nonpublic information to, or
entering into discussions or negotiations with, any other persons or entities,
the Company shall obtain from such person or entity an executed confidentiality
agreement with terms no less favorable, taken as a whole, to the Company than
those contained in the Confidentiality Agreement, but which confidentiality
agreement shall not include any provision calling for an exclusive right to
negotiate with the Company, and the Company shall advise purchaser of all such
nonpublic information delivered to such person concurrently with its delivery to
the requesting party.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated at any time prior to the Effective Time of the Merger, whether before
or after the approval of the terms of the Merger Agreement by the shareholders
of the Company:
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(1) by mutual consent of the Bidder and the Company, by action of their
respective Board of Directors;
(2) by either the Bidder or the Company, if (a) without fault of the
terminating party, the Merger shall not have been consummated by June 30, 1997
whether or not such date is before or after the approval by holders of Shares;
or (b) any court of competent jurisdiction or other governmental body located or
having jurisdiction within the United States or any country or economic region
in which the Company or any of its subsidiaries or the Bidder or any of its
affiliates, directly or indirectly, has material assets or operations, shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Offer or the Merger and such order,
decree, ruling or other action shall have become final and non-appealable;
(3) by the Bidder if the Company shall have failed to comply in any
material respect with the convenants or agreements contained this Agreement to
be complied with or performed by the Company at or prior to such date of
termination and, with respect to any such failure that can be remedied, the
failure is not remedied within fifteen days after the Bidder has furnished the
Company with written notice of such failure;
(4) by the Company if the Bidder or Bidder Sub (or another bidder) (i)
shall have failed to comply in any material respect with the covenants or
agreements contained in this Agreement to be complied with or performed by the
Bidder or Bidder Sub at or prior to such date of termination and, with respect
to any such failure that can be remedied, the failure is not remedied within
fifteen days after the Company has furnished the Bidder with written notice of
such failure, (ii) shall have failed to commence the Offer within the time
required or (iii) shall have terminated or withdrawn the Offer or amended the
Offer in any manner not expressly permitted by this Agreement; or
(5) (a) by either the Bidder or the Company, if that entity is not in
material breach of any of the terms of the Merger Agreement, not sooner than the
third business day after the Company's notice to the Bidder (or the Bidder's
becoming aware) that the Company has entered into an agreement providing for an
alternative Transaction; or (b) by the Bidder, if the Board shall have withdrawn
or modified in any manner adverse to the Bidder or Bidder Sub its approval of
the Offer, the Merger Agreement and the Merger or its recommendation that the
Company's stockholders accept the Offer.
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In the event of termination and abandonment, the Agreement shall
forthwith become void and have no further effect, other than certain limited
provisions. No such termination and abandonment and nothing contained in this
section shall relieve any party from liability for any breach of this Agreement,
and, if this Agreement is terminated pursuant to clause (5) above, the Company
will be obligated to pay the Bidder a non-refundable fee of $5,000,000. In
addition, if the Company shall have failed to provide the Bidder, prior
to the termination of the Offer, with audited fiscal 1996 financial statements
which are the same in all material respects as the fiscal 1996 financial
statements (without notes) previously provided to the Bidder, accompanied by an
unqualified audit opinion by the Company's auditors and containing notes that do
not include any information that is different from that previously provided to
the Purchaser pursuant to the Merger Agreement to the extent that such
difference constitutes a material adverse effect on the Company (except where
the failure to meet such standards results solely from facts or circumstances
arising after October 31, 1996 reflected in the audited 1996 financial
statements in a manner that results in a difference from the fiscal 1996
financial statements previously provided to the Bidder that constitutes a
material adverse effect on the financial condition, properties, businesses or
results of operations of the Company and its subsidiaries taken as a whole), the
Company will be obligated to pay the Bidder a non-refundable fee of $75,000.
EXPENSES. Whether or not the Merger is consummated, each party shall
pay its own expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the Merger.
BOARD OF DIRECTORS. The Merger Agreement provides that if requested by
the Bidder, the Company will, subject to compliance with applicable law and
immediately following the purchase by Bidder Sub of more than 50% of the
outstanding Shares pursuant to the Offer, take all actions necessary to cause
persons designated by the Bidder to become directors of the Company so that the
total number of such persons equals that number of directors, rounded up to the
next whole number, which represents the product of (x) the total number of
directors on the Board of Directors multiplied by (y) the percentage that the
number of Shares so purchased plus any Shares beneficially owned by the Bidder
or its Affiliates on the date hereof bears to the number of shares outstanding
at the time of such purchase; provided, however, that in no event shall the
Bidder be entitled to designate a majority of the Board of Directors unless it
is the beneficial owner of Shares entitling it to exercise at least a majority
of the voting power of the Company's outstanding shares entitled to vote
generally in the election of directors. In furtherance thereof, the Company will
use its reasonable best efforts to secure the resignation of all but three
directors, or will increase the size of the Board, or both, as is necessary to
permit the Bidder's designees to be elected to the Company's Board of Directors;
provided, however, that prior to the Effective Time, the Company's Board of
Directors shall always have at least three Continuing Directors. Immediately
following the purchase by Bidder Sub of more than 50% of the outstanding shares
pursuant to the Offer, the Company, if so requested, will use its reasonable
efforts to cause persons designated by the Bidder to constitute the same
percentage of each committee of such board, each board of directors of each
subsidiary of the Company and each committee of each such board (in each case to
the extent of the Company's ability to elect such persons). The Company's
obligations to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall
promptly take all actions required in order to fulfill these obligations. The
Bidder will supply to the Company in writing and be solely responsible for any
information with respect to the Bidder and its subsidiaries and the nominees,
directors
12.
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and affiliates thereof required by Section 14(f) and Rule 14f-1 to be included
in Schedule 14D-9.
Following the election or appointment of the Bidder's designees, and
prior to the Effective Time, the approval of a majority of the Continuing
Directors shall be required to authorize (and such authorization shall
constitute the authorization of the Board and no other action on the part of the
Company, including any action by any other director of the Company, shall be
required to authorize) any termination of this Agreement by the Company, any
amendment of this Agreement requiring action by the Board, any extension of time
for the performance of any of the obligations or other acts of the Bidder or
Bidder Sub, any waiver of compliance with any of the agreements or conditions
contained herein for the benefit of the Company or any other rights of the
Company hereunder, and any amendment or withdrawal by the Board of its
recommendation of the Merger.
STOCK OPTIONS. Pursuant to the Merger Agreement, the Bidder and the
Company have agreed that not later than the Effective Time and continuing for a
period of at least 120 days after the Effective Time, the Bidder shall offer in
writing to each holder of a Company Stock Option (whether or not such Company
Stock Option terminates effective as of the Effective Time by virtue of the
Merger or would have terminated thereafter) the opportunity to have such Company
Stock Option canceled and to receive an amount in cash equal to the excess of
the Merger Consideration over the exercise price per Share of such Company Stock
Option multiplied by the number of Shares previously subject to such Company
Stock Option, less all applicable withholding taxes. Any Company Stock Options
not tendered for cancellation pursuant to such offer shall continue to be
governed by the terms of such Company Stock Option and the applicable Company
Stock Option Plan.
EMPLOYEE BENEFITS. Pursuant to the Merger Agreement, the Bidder shall
(i) cause the Surviving Corporation to provide to employees of the Company and
its subsidiaries, who are employed by the Surviving Corporation or its
subsidiaries following the Effective Time ("Company Employees"), employee
benefits which in the aggregate are equal to benefits substantially comparable
to those currently provided by the Company to such employees, (ii) in the event
that Company Employees are or become eligible to participate in any plans
maintained by the Bidder or its subsidiaries (the "Bidder Benefit Plans"), the
Bidder or its subsidiaries shall grant such eligible employees credit for
purposes of eligibility, vesting and benefit accrual, for all service credited
for such purposes under comparable Company Benefit Plans, provided, however,
that, with respect to the Bidder's Retirement Plan, such service with the
Company shall be credited with respect to eligibility and vesting only, and
shall not be recognized for purposes of determining the amount of retirement
benefits, if any, under the Bidder's Retirement Plan, and (iii) with regard to
any pre-existing condition exclusion under any Bidder Benefit Plan, the
exclusion providing medical or dental benefits shall be no more
13.
<PAGE> 14
restrictive for any Company Employee who, immediately prior to commencing
participation in such Bidder Benefit Plan, was participating in a Company
Benefit Plan providing medical or dental benefits and had satisfied any
pre-existing condition provision under such Company Benefit Plan. Any expenses
that were taken into account under a Company Benefit Plan providing medical or
dental benefits in which the Company Employee participated immediately prior to
commencing participation in a Bidder Benefit Plan providing medical or dental
benefits shall be taken into account to the same extent under such Bidder
Benefit Plan, in accordance with the terms of such the Bidder Benefit Plan, for
purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions and lifetime benefit limits.
INDEMNIFICATION AND INSURANCE. In the Merger Agreement, the Bidder and
the Company have agreed that (i) the Certificate of Incorporation of the
Surviving Corporation shall contain provisions with respect to indemnification
not less favorable to the directors and officers then those set forth in the
Certificate of Incorporation of the Company on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by Law,
(ii) the Bidder shall cause the Surviving Corporation to use its reasonable best
efforts to maintain in effect for six years from the Effective Time, if
available, the coverage provided by the current directors' and officers'
liability insurance policies maintained (provided that the Surviving Corporation
may substitute therefor policies of at least the same coverage containing terms
and conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that Surviving
Corporation is not required to incur any annual premium in excess of 200% of the
last annual aggregate premium paid prior to the date of this Agreement for all
current directors' and officers' liability insurance policies maintained by the
Company, which the Company represents and warrants to be $150,000 (the "Current
Premium"); and provided further that if premiums for such insurance would at any
time exceed 200% of the Current Premium, then the Surviving Corporation shall
cause to be maintained policies of insurance which, in the Surviving
Corporation's good faith determination, provide the maximum coverage available
at an annual premium equal to 200% of the Current Premium, and (iii) the
indemnification shall survive the Effective Time, and is intended to be for the
benefit of, and shall be enforceable by, the Indemnified Parties and shall be
binding on the Bidder and Bidder Sub and the Surviving Corporation and their
respective successors and assigns. The Bidder shall guarantee the
indemnification obligations of the Surviving Corporation under the Merger
Agreement.
CONDITIONS TO THE OFFER. The Merger Agreement provides that Bidder Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations
14.
<PAGE> 15
of the Commission, including Rule 14e-1(c) promulgated under the Securities
Exchange Act (relating to the Bidder's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, or may
delay the acceptance for payment of or payment for, any tendered Shares, or may,
in its sole discretion, terminate or amend the Offer as to any Shares not then
paid for if a majority of the total Shares outstanding on a fully diluted basis
and as will permit Bidder Sub to effect the Merger without the vote of any
person other than Bidder Sub shall not have been properly and validly tendered
pursuant to the Offer and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition"), or, if on or after the date of the Agreement, and at
or before the time of payment for any of such Shares (whether or not any of such
Shares have theretofore been accepted for payment), any of the following events
shall occur; (a) there shall have occurred (i) any general suspension of, or
limitation on trading in securities on the NYSE or in the over-the-counter
market (other than a shortening of trading hours or any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index), (ii) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States or (iii) a commencement of a war or
armed hostilities involving the United States and continuing for at least three
business days and which has a material adverse effect on the financial
condition, properties, businesses or results of operations of the Company and
its subsidiaries taken as a whole (a "Company Material Adverse Effect"); (b) the
Company shall have breached or failed to perform in any material respect its
obligations, covenants or agreements under the Agreement and, with respect to
any such failure that can be remedied, the failure is not remedied on or before
the Closing Date, or any representation or warranty of the Company set forth in
the Agreement shall have been inaccurate or incomplete in any respect except as
would not have a Company Material Adverse Effect; (c) there shall be instituted
or pending any action, litigation, proceeding, investigation or other
application (hereinafter, an "Action") before any court of competent
jurisdiction or other governmental entity by any governmental entity that is
reasonably likely to: (i) result in a restriction or prohibition on the
consummation of the transactions contemplated by the Offer or the Merger; (ii)
prohibit, or impose any material limitations on the Bidder's or Bidder Sub's
ownership or operation of all or a material portion of their or the Company's
business or assets, or to compel the Bidder or Bidder Sub to dispose of or hold
separate all or a material portion of the Bidder's or Bidder Sub's or the
Company's business or assets; (iii) make the acceptance for payment of, purchase
of, or payment for, some or all of the Shares illegal or rendering the Bidder or
Bidder Sub unable to, or restricting or prohibiting, the ability of the Bidder
or Bidder Sub to accept for payment, purchase or pay for some or all of the
Shares; or (iv) impose material limitations on the ability of the Bidder or
Bidder Sub effectively to acquire or hold or to exercise full rights of
ownership of the Shares including, without limitation, the right to vote the
Shares purchase by them on an equal basis with all other Shares on all matters
properly presented to the stockholders of the Company; (d) any statute, rule,
regulation, order or injunction shall be enacted, promulgated, entered, enforced
or deemed to or become
15.
<PAGE> 16
applicable to the Offer or the Merger that results in any of the consequences
referred to in clauses (i) through (iv) of paragraph (c) above; (e) any person,
entity or group shall have entered into a definitive agreement or an agreement
in principal with the company with respect to a tender offer or exchange offer
for some portion or all of the Shares or a merger, consolidation or other
business combination with or involving the Company; (f) the Board shall have
withdrawn or amended, or modified in a manner materially adverse to the Bidder
or Bidder Sub, its recommendation of the Offer or the Merger, or shall have
approved or recommended any other Acquisition Proposal; or (g) the Merger
Agreement shall have been terminated by the Company or the Bidder or Bidder Sub
in accordance with its terms or the Bidder or Bidder Sub shall have reached an
agreement or understanding in writing with the Company providing for termination
or amendment of the Offer or delay in payment for the Shares.
(2) On December 16, 1996, David J. Ferran, Don E. Whitson and certain
other Stockholders of the Company (each individually, a "Securityholder" and
collectively, the "Securityholders") and Bidder and Bidder Sub entered into a
Voting and Securities Purchase Agreement (the "Voting Agreement"). A copy of the
Voting Agreement is filed as Exhibit 99.12 hereto and is incorporated herein by
reference. Messrs. Ferran and Whitson own 189,309 and 734,103 Shares,
respectively, and options to purchase an additional 120,312 and 75,000 Shares,
respectively. The other Securityholders own an aggregate of 405,649 Shares and
options to purchase an additional 20,000 Shares. The Voting Agreement shall
terminate upon the earlier to occur of (i) the mutual consent of Bidder, Bidder
Sub and each of the Securityholders, (ii) the termination of the Merger
Agreement, or (iii) the Effective Time of the Merger.
Pursuant to the Voting Agreement, each Securityholder agreed
that: (i) it would validly tender (and not withdraw) pursuant to and in
accordance with the terms of the Offer, all Shares owned by such Securityholder;
(ii) subject to the fiduciary duty of any Securityholder serving as a director
or officer of the Company, in its capacity as such, it shall assist and
cooperate with the parties to the Merger Agreement in doing all things
necessary, proper or advisable under applicable laws as promptly as practicable
to consummate and make effective the Offer and the Merger and the other
transactions contemplated by the Merger Agreement; and (iii) it shall not,
directly or indirectly, solicit, initiate or continue or encourage or take other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, an Acquisition Proposal or
an Alternative Transaction from any person other than Bidder or Bidder Sub, or
engage in any discussions or negotiations relating thereto or in furtherance
thereof or accept or enter into any agreement with respect to any Acquisition
Proposal; provided, however, that notwithstanding any other provision of the
Voting Agreement, if such Securityholder is a director or officer of the
Company, such Securityholder may take any action, including casting a vote or
signing a written consent, in such person's capacity as a director or officer
that the Board would be permitted to take under the Merger Agreement with
respect to an Acquisition Proposal; (iv) it shall not, except
16.
<PAGE> 17
pursuant to the Merger Agreement or the Voting Agreement, sell, transfer,
pledge, hypothecate, encumber or otherwise dispose of (or enter into an
agreement to do the foregoing) any of or any of its interest in its Shares; and
(v) except pursuant to the Voting Agreement, it shall not grant any proxies,
deposit any Shares into a voting trust or enter into any voting agreement with
respect to any Shares.
Each Securityholder further agreed that, during the term of
the Voting Agreement, at any meeting of stockholders of the Company, and in any
action by written consent of the stockholders of the Company, to: (i) vote all
Shares then owned by such Securityholder in favor of adoption of the Merger
Agreement and each of the other transactions contemplated thereby and any action
required in furtherance thereof; (ii) vote such Shares against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement; and (iii) vote such Shares against any Acquisition Proposal,
Alternative Transaction or any other action or agreement that, directly or
indirectly, is inconsistent with or that would, or is reasonably likely to,
directly or indirectly, impede, interfere with or attempt to discourage the
Offer or the Merger or any other transaction contemplated by the Merger
Agreement; provided, however, that if such Securityholder is a director or
officer of the Company, nothing in the Voting Agreement shall be construed to
obligate such Securityholder to act, in such Securityholder's capacity as a
director or officer, in any manner which conflicts with such person's fiduciary
duties as a director of the Company. In furtherance of the foregoing, each
Securityholder appointed Bidder and the officer of Bidder, and each of them,
with full power or substitution in the premises, its proxies to vote all such
Securityholder's Shares at any meeting, general or special, of the stockholders
of the Company, and to execute one or more written consents or other instruments
from time to time in order to take such action without the necessity of a
meeting of the stockholders of the Company, in accordance with the provisions of
this paragraph.
(3) On December 13, 1996, the Bidder entered into a letter agreement
with David J. Ferran (the "Letter Agreement"). The following summary of the
Letter Agreement is qualified in its entirety by reference to the Letter
Agreement, a copy of which is attached hereto as Exhibit 99.13. Pursuant to the
Letter Agreement, the Bidder has agreed to pay Mr. Ferran a lump sum payment of
$851,425 and certain medical benefits following the consummation of the Merger.
The Bidder has also agreed to enter into a Consulting Agreement with Mr. Ferran
upon the termination of his employment following the Merger. Such Consulting
Agreement will require the Bidder to pay Mr. Ferran a lump sum amount of
$1,702,850 for his services thereunder at the termination of the Consulting
Agreement. Mr. Ferran has agreed that upon payment of the $851,425 and execution
of the Consulting Agreement, all prior agreements between the Company and Mr.
Ferran relating to his employment or the termination of his employment will be
of no further force and effect.
17.
<PAGE> 18
4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION. On December 16, 1996, the Board, based on the unanimous
recommendation of the Special Committee, voted by a unanimous vote of the
directors present to recommend acceptance of the Offer by the holders of Shares
and of the Merger Agreement and authorization of the Merger by the stockholders
of the Company. The Board (i) approved the Offer, the purchase of Shares
pursuant to the Offer and the Merger in accordance with Section 203 of the
Delaware General Corporation Law and (ii) determined that the Offer is a
"Permitted Offer," as that term is defined in the Rights Agreement, as defined
below. The Board, based on the unanimous recommendation of the Special
Committee, by a unanimous vote of the directors present determined that the
Offer and the Merger Agreement are in the best interests of the Company and its
stockholders.
The press release announcing the Board's recommendation is filed as
Exhibit 99.1, and is incorporated herein by reference. The form of letter to
the Company's stockholders communicating the Board's recommendation is filed as
Exhibit 99.15 hereto and is incorporated herein by reference.
(b) BACKGROUND. On June 27, 1996, Danaher Corporation ("Danaher") filed
a Schedule 13D disclosing beneficial ownership of 678,400 shares of the
Company's Common Stock (approximately 10.4% of such then outstanding shares). In
its Schedule 13D, Danaher also disclosed that it "may consider seeking control
of the Issuer (the Company)." Shortly after filing its Schedule 13D, Danaher
requested a meeting with senior management of the Company, which request was
rejected.
On June 30, 1996, the Board met to consider its response to the filing
by Danaher of its Schedule 13D. The Board heard reports from the Company's
management concerning the financial condition of the Company and from the
Company's legal advisors concerning the Board's legal obligations with respect
to the filing of the Schedule 13D by Danaher. The Board also considered
Danaher's history and pattern of conduct in acquiring companies by both
negotiated and hostile means. The Board heard preliminary reports on the
advisability of certain measures to preserve stockholder value, including the
possible adoption of a stockholders rights plan.
On July 2, 1996, the Board met to consider the adoption of a
stockholder rights plan. The Board received reports from the Company's legal and
financial advisors, following which the Board approved the rights plan, and the
Company and The First National Bank of Boston entered into a Rights Agreement
(the "Rights Agreement"), under which preferred share purchase rights were
issued to the Company's stockholders. This rights plan was designed to protect
shareholders from various abusive takeover tactics, including attempts to
acquire control of the Company at an inadequate price.
18.
<PAGE> 19
In July 1996, the Company entered into severance agreements with
certain executive officers. See Item 3, "Arrangements with the Company's
Executive Officers, Directors and Affiliates."
In early August 1996, David Ferran indicated that he was considering
the possibility of making a proposal to acquire the Company, and the Company
received expressions of interest from potential industry buyers regarding an
acquisition of the Company. In response, on August 15, 1996, the Board
established a Special Committee to supervise the exploration of strategic
alternatives for the Company, including the solicitation of proposals to acquire
the Company ("Acquisition Proposals") and the negotiation and evaluation of any
Acquisition Proposals, and to make recommendations to the Board with respect to
any Acquisition Proposals. The Special Committee originally consisted of Larry
Hansen, Arthur C. Spinner and Wade Woodson. In September 1996, Mr. Woodson
resigned as a member of the Special Committee, and Bruce Rhine was appointed to
the Special Committee to replace Mr. Woodson. Mr. Spinner acted as Chairman of
the Special Committee.
On August 15, 1996, the Special Committee retained Fried, Frank,
Harris, Shriver & Jacobson ("Fried Frank") as its legal counsel and retained
Goldman, Sachs & Co. ("Goldman Sachs") as its financial advisor.
On August 19, 1996, Derrick N. Key, a member of the Board, resigned
from the Board.
On August 20, 1996, the Company issued a press release announcing that
it was exploring the possible sale of the Company.
On August 20, 1996, David J. Ferran, Don E. Whitson, Michael Khougaz, a
director of the Company, and certain other persons, including other members of
management of the Company (the "Management Group"), filed an amendment to Mr.
Whitson's Schedule 13D indicating that they had formed a group that was
exploring the possibility of making an Acquisition Proposal. On October 23,
1996, the Company and the Rights Agent executed an Amendment to the Rights
Agreement which amended the definition of an Acquiring Person under the Rights
Agreement solely for the purpose of allowing the Management Group and Equinox
Investment Partners, LLC ("Equinox") to form a group for the purpose of making
an Acquisition Proposal pursuant to the procedures established by the Special
Committee. On October 23, 1996, the Management Group filed an amendment to their
Schedule 13D indicating that Equinox and certain related entities were
contemplating joining the Management Group with respect to a possible
Acquisition Proposal.
Commencing in September 1996, Goldman Sachs contacted 58 parties with
respect to the possibility of such parties making an Acquisition Proposal.
Commencing in September 1996, Goldman Sachs distributed a Confidential Offering
Memorandum to 16
19.
<PAGE> 20
potentially interested industry and financial parties (including the Bidder)
that had entered into Confidentiality Agreements with the Company. The
opportunity to enter into a Confidentiality Agreement and to review a
Confidential Offering Memorandum had been offered to all parties who contacted
the Company or Goldman Sachs following the announcement by the Company that it
was considering a possible sale, as well as parties who the management and
Goldman Sachs thought might be interested in making an Acquisition Proposal.
Each of the potentially interested industry and financial parties were orally
contacted following distribution of the Confidential Offering Memorandum to
ascertain the degree of their interest in acquiring the Company and their
preliminary view as to form and amount of consideration, sources of financing
and contingencies, if any, as well as other relevant issues. Such participants
were also invited to make non-binding Acquisition Proposals. As a result of
this process, four parties (including the Bidder and the Management Group) were
invited into the "second stage" of the process, thereby entitling them to
perform extensive due diligence, document review, facility visitation and
management interviews.
After its organizational meeting on August 15, 1996 and a meeting on
August 16, 1996 to address guidelines for a possible management proposal to
acquire the Company, the Special Committee held meetings on September 3,
September 18, October 3, October 11, October 18, November 11, November 19,
November 27, December 5 and December 13, 1996, at each of which the Special
Committee reviewed with its financial and legal advisors the status of matters
at that point and the process going forward.
On November 12, 1996, the four remaining participants were invited to
submit definitive Acquisition Proposals on November 26, 1996. The deadline for
submitting Acquisition Proposals was extended through December 12, 1996.
In accordance with procedures established by the Special Committee for
the submission of definitive Acquisition Proposals, the Committee received
definitive Acquisition Proposals from two participants (including the Bidder).
On December 13, 1996, the Special Committee reviewed and considered analyses
prepared by its financial and legal advisors regarding the proposals. Based on
this review and in light of the factors set forth below, the Special Committee
decided to recommend that the Board proceed to a definitive agreement with the
Bidder based on its proposal. Following the meeting of the Special Committee,
the Board met to hear a report from the Special Committee and consider what
action to take with respect to the Acquisition Proposals that had been received.
At the Board's meeting, the Special Committee provided its recommendation with
respect to, and analysis of, the Acquisition Proposals, followed by a report by
Goldman Sachs and Fried Frank regarding their respective analyses. During the
meetings of the Special Committee and the Board, the financial and legal
advisors sought clarification from the Bidder and its advisors as to certain
aspects of the Bidder's Acquisition Proposal. The Board then determined that it
was in the best interests of the Company and its stockholders to seek to
negotiate a definitive merger agreement with the
20.
<PAGE> 21
Bidder. On December 13, 14, 15 and 16, the Company and its advisors and
representatives engaged in negotiations with the Bidder and its advisors and
representatives with respect to a prospective definitive merger agreement.
On December 15, 1996, the Board met to receive reports from management
and the Company's financial and legal advisors on the status of negotiations
with the Bidder.
On December 16, 1996, in response to reports of increased market
activity, the Company issued a press release announcing (i) that it was in
active negotiations with a third party regarding an acquisition of the Company
at $16.00 per Share, and (ii) that there could be no assurance that such a
transaction would, in fact, occur.
On December 16, 1996, the Board met to consider the results of that
negotiation process and, after considering reports from management and the
Company's financial and legal advisors (including Goldman Sachs' opinion that
the $16.00 in cash to be received by the holders of shares in the Offer and
Merger, taken as a unitary transaction, is fair to such holders), voted to enter
into the Merger Agreement and to recommend that stockholders accept the Offer.
(c) REASONS FOR RECOMMENDATION. Prior to reaching their conclusions,
the Special Committee and the Board received presentations from, and reviewed
the Offer with, the financial and legal advisors to the Special Committee and
the Company. In reaching their conclusions with respect to the Offer, the
Special Committee and the Board principally considered the following factors:
(i) The Per Share Price of $16.00 represents a premium over
recent and historical market prices for the Shares. On December 13, 1996, the
last trading day before announcement of the Merger Agreement and the Offer, the
closing price of the Common Stock on the NASDAQ National Market was $11.50. On
June 26, 1996, the last trading day prior to the initial filing by Danaher of
its Schedule 13D, the closing price of the Common Stock on the NASDAQ National
Market was $9.875. On August 19, 1996, the last trading day prior to the
Company's announcement that it was exploring the possible sale of the Company,
the closing price of the Common Stock on the NASDAQ National Market was $10.25.
(ii) The Offer resulted from a comprehensive auction process
that the Board and the Special Committee believe was conducted in a manner
calculated to result in the most attractive financial alternative available to
the Company's stockholders. See "Background" above. In particular, the Special
Committee and the Board noted that the auction process had been conducted over a
period of several months under the active oversight of the Special Committee
assisted by the Special Committee's legal and financial advisors, that the
auction process had been publicly announced and that the Special Committee's
legal and financial advisors had reported to the Special Committee on the
fairness of the process. The Special Committee and Board also considered the
fact
21.
<PAGE> 22
that Goldman Sachs had had preliminary conversations with 58 potentially
interested parties, of whom 16 had entered into Confidentiality Agreements with
the Company, and that four of such parties performed significant due diligence
in anticipation of submitting bids. It was the judgment of the Special Committee
and the Board that there was not a significant likelihood of receiving a more
attractive offer from any other party.
(iii) In light of the directors' familiarity with the
Company's business, short-term and long-term prospects, financial condition,
results of operation, current business strategy, and the nature of its industry
position, as well as current economic and market conditions and the directors'
recognition that the near-term trading price for the Shares, if neither the
Merger Agreement with the Bidder nor any similar transaction is consummated,
might be lower than both $16.00 and the current market price of the Common Stock
on the NASDAQ National Market, the Special Committee and the Board believe that
the Offer and the Merger reflect the best alternative currently available to the
Company. In this connection, the Board and the Special Committee took into
account the speculative nature of any effort to predict the Company's operating
performance over the next several years.
(iv) The Offer is not contingent on obtaining financing and
contains no other terms or conditions that, in the view of the Special Committee
and the Board, could materially impair the consummation of the Offer or Merger.
(v) The fact that, to the extent the Board receives an
unsolicited written offer with respect to a merger, consolidation or sale of all
or substantially all of the Company's assets or an unsolicited tender or
exchange offer for the Shares is commenced, which the Board determines in good
faith (after receiving advice of independent legal counsel that such action is
required for the discharge of their fiduciary duties) is more favorable to the
stockholders of the Company than the Offer, the Board may amend or withdraw its
recommendation or pursue a transaction with respect to such an unsolicited offer
(subject to payment of a $5 million termination fee to the Bidder) without
breaching the Merger Agreement.
(vi) The presentation of Goldman Sachs to the Special
Committee and the Board at the December 16, 1996 Board meeting and the oral
opinion of Goldman Sachs to the effect that, as of December 16, 1996, the $16.00
per Share in cash to be received by the holders of Shares in the Offer and
Merger, taken as a unitary transaction, is fair to such holders. Goldman Sachs
delivered a written opinion to the Board and Special Committee confirming its
oral opinion, which set forth the respective assumptions made, matters
considered and limits of their review. A copy of the Goldman Sachs opinion is
set forth as Exhibit 99.14 to this Schedule 14D-9 and is incorporated herein by
reference. Stockholders are urged to read the Goldman Sachs opinion in its
entirety. Goldman Sachs will receive certain fees in connection with its
engagement by the
22.
<PAGE> 23
Company and the Special Committee. See "Item 5. Persons Retained, Employed or to
be Compensated."
9. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT DESCRIPTION
99.1 Joint Press Release issued by the Company and the Bidder,
dated December 16, 1996. *
99.2 Notice of Annual Meeting and Proxy Statement of the Company
issued in connection with the Company's 1996 Annual Meeting
of Stockholders held on April 8, 1996.(1) *
99.3 Employment Agreement, dated October 5, 1989, between the
Company and David J. Ferran. *
99.4 Employment Agreement, dated July 3, 1996, between the Company
and Don E. Whitson. *
99.5 Employment Agreement, dated July 3, 1996, between the
Company, Span and George A. Yurch, Jr. *
99.6 Employment Agreement, dated July 2, 1996, between the Company
and David L. Stone. *
99.7 Severance Protection Agreement, dated July 22, 1996, between
the Company and David J. Ferran. *
23.
<PAGE> 24
99.8 Amendment to Employment Agreement, dated July 22, 1996,
between the Company and David J. Ferran. *
99.9 Form of Severance Protection Agreement between the Company
and Tim Brown, Scott Cronk, David Dedman, Mike Grandinetti
and George A. Yurch, Jr. *
99.10 Severance Protection Agreement, dated December 13, 1996,
between the Company and John Kizer. *
99.11 Agreement and Plan of Merger, dated December 16, 1996,
between the Company, the Bidder and Bidder Sub. *
99.12 Voting and Securities Purchase Agreement, dated December 16,
1996, between the Company, the Bidder, Bidder Sub and Certain
Stockholders of the Company. *
99.13 Letter Agreement, dated December 16, 1996, between the Bidder
and David J. Ferran. *
99.14 Opinion Letter of Goldman Sachs, dated December 16, 1996.
99.15 Form of letter to stockholders of the Company, dated
December 20, 1996.
- --------------------
* Filed as an exhibit to the Schedule 14D-9 as originally filed with the
Commission on December 17, 1996.
(1) Incorporated by reference to the Company's definitive proxy materials
filed with the Commission on February 26, 1996 pursuant to Rule 14a-6
under the Securities Exchange Act of 1934, as amended, in connection
with the Company's 1996 Annual Meeting of Stockholders. With respect
thereto, copies of relevant portions of pages 14 and 17, set forth
under the caption "Executive Compensation," and relevant portions of
page 31, set forth under the caption "Certain Transactions," are
submitted with this statement as part of Exhibit 99.2.
24.
<PAGE> 25
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
TYLAN GENERAL, INC.
Date: December 20, 1996 /s/ DAVID J. FERRAN
------------------------------------
David J. Ferran
Chairman of the Board, President
and Chief Executive Officer
25.
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGES
------- ----------- --------------
<S> <C> <C>
99.1 Joint Press Release issued by the Company and the Bidder,
dated December 16, 1996. *
99.2 Notice of Annual Meeting and Proxy Statement of the Company
issued in connection with the Company's 1996 Annual Meeting
of Stockholders held on April 8, 1996.(1) *
99.3 Employment Agreement, dated October 5, 1989, between the
Company and David J. Ferran. *
99.4 Employment Agreement, dated July 3, 1996, between the Company
and Don E. Whitson. *
99.5 Employment Agreement, dated July 3, 1996, between the
Company, Span and George A. Yurch, Jr. *
99.6 Employment Agreement, dated July 2, 1996, between the Company
and David L. Stone. *
99.7 Severance Protection Agreement, dated July 22, 1996, between
the Company and David J. Ferran. *
99.8 Amendment to Employment Agreement, dated July 22, 1996,
between the Company and David J. Ferran. *
99.9 Form of Severance Protection Agreement between the Company
and Tim Brown, Scott Cronk, David Dedman, Mike Grandinetti
and George A. Yurch, Jr. *
99.10 Severance Protection Agreement, dated December 13, 1996,
between the Company and John Kizer. *
99.11 Agreement and Plan of Merger, dated December 16, 1996,
between the Company, the Bidder and Bidder Sub. *
99.12 Voting and Securities Purchase Agreement, dated December 16,
1996, between the Company, the Bidder, Bidder Sub and Certain
Stockholders of the Company. *
</TABLE>
<PAGE> 27
99.13 Letter Agreement, dated December 16, 1996, between the Bidder
and David J. Ferran. *
99.14 Opinion Letter of Goldman Sachs, dated December 16, 1996.
99.15 Form of letter to stockholders of the Company, dated
December 20, 1996.
- --------------------
* Filed as an exhibit to the Schedule 14D-9 as originally filed with the
Commission on December 17, 1996.
(1) Incorporated by reference to the Company's definitive proxy materials
filed with the Commission on February 26, 1996 pursuant to Rule 14a-6
under the Securities Exchange Act of 1934, as amended, in connection
with the Company's 1996 Annual Meeting of Stockholders. With respect
thereto, copies of relevant portions of pages 14 and 17, set forth
under the caption "Executive Compensation," and relevant portions of
page 31, set forth under the caption "Certain Transactions," are
submitted with this statement as part of Exhibit 99.2.
<PAGE> 1
Exhibit 99.14
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
- -------------------------
December 16, 1996
Board of Directors
Tylan General, Inc.
15330 Avenue of Science
San Diego, California 92128
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.001 per share (the "Shares"),
of Tylan General, Inc. (the "Company") of the $16.00 per Share in cash proposed
to be paid by Millipore Corporation ("Millipore") in the Tender Offer and the
Merger (as defined below) pursuant to the Agreement and Plan of Merger dated as
of December 16, 1996 among Millipore, MCTG Acquisition Corp. ("MCTG"), a
wholly-owned subsidiary of Millipore, and the Company (the "Agreement").
The Agreement provides for a tender offer for all of the Shares (the "Tender
Offer") pursuant to which MCTG will pay $16.00 per Share in cash for each Share
accepted. The Agreement further provides that following completion of the
Tender Offer, MCTG will be merged into the Company (the "Merger") and each
outstanding Share (other than Shares already owned by Millipore) will be
converted into the right to receive $16.00 in cash.
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 negotiations leading to, the Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; audited financial statements and other financial data of the Company
for the fiscal years ended October 31, 1993 and October 31, 1994; Annual
Reports to Stockholders and Annual Reports on Form 10-K of the Company for the
fiscal year ended October 31, 1995; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q; certain other communications from the Company
to its stockholders; and certain internal financial analyses and forecasts for
the Company prepared by its management. We also have held discussions with
members of the senior management of the Company regarding its past and current
business operations, financial condition and future prospects. In addition, we
have reviewed the reported price and trading activity for the Shares, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of
<PAGE> 2
Tylan General, Inc.
December 16, 1996
Page Two
certain recent business combinations in the industrial process controls and
semiconductor equipment manufacturing industries 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. For purposes of our analysis, and with your consent,
we have taken into account the risks and uncertainties associated with the
Company achieving management's projections in the amounts and at the times
indicated therein. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries and we have not been furnished with any such evaluation or
appraisal. Our advisory services and the opinion expressed herein are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement.
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 $16.00 in
cash to be received by the holders of Shares in the Tender Offer and the
Merger, taken as a unitary transaction, is fair to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ------------------------
GOLDMAN, SACHS & CO
<PAGE> 1
EXHIBIT 99.15
[On Tylan Letterhead]
December 20, 1996
To Our Stockholders:
I am pleased to inform you that Tylan General, Inc. ("Tylan General"),
Millipore Corporation ("Millipore") and MCTG Acquisition Corp. ("Purchaser"), a
wholly owned subsidiary of Millipore, have entered into an Agreement and Plan of
Merger dated as of December 16, 1996 (the "Merger Agreement") pursuant to which
Purchaser has commenced a cash tender offer (the "Offer") to purchase all of the
outstanding shares of Tylan General common stock (the "Shares") for $16.00 per
share. Under the Merger Agreement, the Offer will be followed by a merger of
Purchaser into Tylan General (the "Merger") in which any remaining Shares of
Tylan General common stock (other than Shares as to which appraisal rights have
been properly exercised and perfected) will be converted into the right to
receive $16.00 per share in cash, without interest.
Your Board of Directors has unanimously determined (by vote of directors
present) that the Offer and the Merger are fair to and in the best interests of
Tylan General's stockholders, as a group, and recommends that stockholders
accept the Offer and tender their Shares pursuant to the Offer. You are
encouraged to consult with your financial or tax adviser regarding the impact
thereof on you prior to tendering your Shares in the Offer or voting to approve
the Merger.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that has been filed with the Securities and Exchange Commission, including,
among other things, the opinion of Goldman Sachs & Co., the financial adviser
retained by a Special Committee of the Board of Directors, to the effect that
the $16.00 in cash to be received by the holders of Shares in the Offer and
Merger, taken as a unitary transaction, is fair to such holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated December 20, 1996, of Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. We urge you to read the enclosed material carefully.
Sincerely,
David J. Ferran, Chairman of the Board,
President and Chief Executive Officer
